United Engineers Limited

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Q1 2014 Financial Statement Announcement

Financials Archive

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Income Statement

Profit and loss

Comprehensive Income Statement

Comprehensive Income Statement

Statement of Financial Position

Balance Sheet

Review of Performance

The Group's major businesses comprise Property Development, Property Rental & Services, Engineering & Construction and the businesses of WBL, namely Automotive, China Property, Technology and Engineering, Manufacturing & Distribution (EMD). WBL became a subsidiary of the Group on 29 May 2013 and the Group's shareholdings in WBL increased to 67.5% as at 31 March 2014.

Q1 2014 compared with Q1 2013

Revenue increased 442% to $739.9 million in Q1 2014 from $136.6 million in Q1 2013, mainly due to the consolidation of WBL Group's revenue contribution of approximately $504.2 million. The higher revenue was also attributable to the progressive revenue recognition from the property sales at Eight Riversuites. In line with the increase in revenue, gross profit increased 91% to $79.1 million in Q1 2014. Gross profit margin declined to 10.7% in Q1 2014 as compared with 30.3% in Q1 2013 mainly due to gross losses of $16.5 million incurred by the Group's 43.1% effective listed subsidiary, Multi-Fineline Electronix, Inc. (MFLEX).

Other income increased 795% to $25.0 million in Q1 2014 from $2.8 million in Q1 2013. This was mainly due to the divestment and re-measurement gain of approximately $21.8 million from the disposal of a subsidiary, Suzhou Industrial Park Jian Wu Heng Ye Property Development Co., Ltd (JWHY) in China.

Distribution costs increased 841% to $30.4 million in Q1 2014 from $3.2 million in Q1 2013 mainly due to the inclusion of WBL Group's distribution costs of approximately $26.8 million.

Administrative expenses increased 83% to $46.9 million in Q1 2014 from $25.6 million in Q1 2013 mainly due to the inclusion of WBL Group's administrative expenses of approximately $21.8 million.

Finance costs increased 144% to $11.4 million in Q1 2014 from $4.7 million in Q1 2013 mainly due to the inclusion of WBL Group's finance costs of approximately $2.1 million, as well as costs incurred on borrowings to finance the acquisition of WBL and the acquisition of investment properties in Singapore in FY2013.

Other expenses increased 231% to $6.1 million in Q1 2014 from $1.9 million in Q1 2013 mainly due to the inclusion of WBL Group's other expenses of approximately $4.4 million which comprised mainly research and development expenses.

Income tax expense increased 718% to $20.8 million in Q1 2014 from $2.5 million in Q1 2013 mainly due to higher operating profit subject to tax, non-availability for group relief of losses incurred by certain overseas subsidiaries as well as a tax charge from the revaluation of the deferred tax assets recorded by certain overseas subsidiaries.

The Group's attributable profit increased 3% to $7.7 million in Q1 2014 from $7.4 million in Q1 2013.

Earnings per ordinary stock unit (EPS) was 1.2 cents in Q1 2014 compared with 2.0 cents (restated*) in Q1 2013.

Net asset per ordinary stock unit stood at $2.79 as at 31 March 2014 compared with $2.84 as at 31 December 2013.

Financial position review

  • Current trade and other receivables declined by $121 million mainly due to decrease in trade receivables largely driven by WBL's Technology businesses.
  • Properties held for sale decreased by $182 million mainly due to the divestment of the residential housing development project in Suzhou, China. The project was held through JWHY which was partially divested in Q1 2014 and the remaining assets of JWHY were reclassified to disposal group held for sale. The decline was also partly attributable to the progressive billing proceeds received on the sale of private residential development projects in Singapore.
  • Assets of disposal group classified as held for sale1 increased by $94 million relates mainly to the reclassification of the assets of JWHY to assets of disposal group held for sale. As previously announced, the full divestment of JWHY is expected to be completed by Q3 2014.
  • Current trade and other payables declined by $169 million mainly due to decline in trade payables which was largely driven by WBL's Technology businesses.

* Restated for the effect of the Rights Issue by the Company which was completed in September 2013.

1 Under Financial Reporting Standard 105 (FRS105), re-classification of the carrying value of assets and liabilities of disposal group as held for sale is required if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Such sale should be expected to qualify for recognition as a completed sale within 12 months from the date of such classification.

Segment review

Property Development

Revenue recorded in Q1 2014 of $97.5 million related to the progressive revenue recognition from the property sales at Eight Riversuites. The executive condominium development project currently undertaken by the Group, Austville Residences is accounted for based on completion of construction (COC) method. This project has obtained temporary occupation permit in April 2014. Operating profit before interest increased to $5.9 million in Q1 2014 from $0.03 million in Q1 2013 mainly due to the recognition of development profits from Eight Riversuites.

Property Rental & Services

Revenue increased 18% to $56.1 million in Q1 2014 from $47.4 million in Q1 2013 mainly due to rental contribution from UE BizHub EAST, Park Avenue Changi, UE BizHub TOWER and UE BizHub WEST. Operating profit before interest increased 54% to $20.3 million in Q1 2014 from $13.2 million in Q1 2013 mainly due to higher revenue.

Engineering & Construction

Revenue decreased 7% to $91.8 million in Q1 2014 from $98.6 million in Q1 2013 mainly due to lower contribution from the Group's listed subsidiary UE E&C Ltd. Operating profit before interest decreased 70% to $1.1 million in Q1 2014 from $3.7 million in Q1 2013 mainly due to lower margin contribution from completion of projects.

WBL Group

Revenue contribution for Q1 2014 was primarily from WBL Group's Automotive and Technology businesses. Operating loss before interest was mainly due to gross losses arising from excess manufacturing capacity by MFLEX and as a result of lower net sales. These losses were partially offset by profits from its other business divisions.

Contribution by the various business divisions within WBL Group is as follows:

Review

Cash flow review

As at 31 March 2014, the Group had cash and cash equivalents of $787 million. In Q1 2014, the Group incurred total development expenditure of $67 million mainly for orchardgateway, Austville Residences, Eight Riversuites and WBL's China development projects. The Group also utilised $146 million for investing activities of which $130 million was utilised for the delisting offers for WBL Group. Apart from the above, the Group's components of cash flow and changes in these components from 31 December 2013 to 31 March 2014 were the result of the Group's other ongoing operations.

Commentary

The on-going cooling measures implemented by the Singapore and Chinese Governments continue to weigh on the sentiment of home buyers. The progress of property development projects of the Group are on track. However, the accounting treatment on revenue recognition for certain projects using the completion-ofconstruction method has resulted in an uneven recognition of revenues and profits. The Group's expanded portfolio of investment properties will smoothen out the volatility associated with the accounting treatment in recognising the property development profits.

The Group's executive condominium project, Austville Residences has obtained temporary occupation permit in April 2014 and thus the Group will recognise the development profits in Q2 2014. In addition, the Group also expects to finalise the divestment of the special purpose vehicles which undertake the orchardgateway development project to Oversea-Chinese Banking Corporation Limited during the year.

The Group remains optimistic about its engineering and construction businesses as the construction demand in Singapore for 2014 is expected to remain relatively strong. With the tight foreign labour policies implemented by the Singapore Government, the Group will continue to strive to raise productivity through improving its work processes and introducing new technology in its operations and project execution.

Against a backdrop of the impact of policy changes in the automotive industry in Singapore, the Group is cautiously optimistic that there will be sustained demand for WBL's luxury and premium marques across its diverse portfolio of brands. At the same time, the Group will continue to focus on growing its automotive businesses and building its position as a leading premium car distributor in the Asia-Pacific region.

On 1 May 2014, the Group's subsidiary, MFLEX (which the Group has an effective interest of 43.1%) has announced that the expected cost savings from the restructuring plan was on track and the improved cost structure will support sustainable profitability and improved competitiveness.

As part of the Group's on-going strategic review of its operations and portfolio of businesses, the Group will continue to explore and capitalise on opportunities to further enhance and unlock shareholder value.