United Engineers Limited

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Q3 2017 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

Overview

Q3 2017 compared with Q3 2016

Revenue increased 41% to $143.0 million in Q3 2017 from $101.7 million in Q3 2016. This was mainly due to revenue recognition from The Manhattan in Malaysia following project completion in Q3 2017 and higher revenue from sales of property units in Singapore. As a result, gross profit increased 9% to $48.8 million in Q3 2017.

Interest income decreased 16% to $0.6 million in Q3 2017 from $0.8 million in Q3 2016 mainly due to lower interest income from fixed deposits.

Other income decreased 70% to $3.3 million in Q3 2017 from $11.1 million in Q3 2016 mainly due to the absence of $5.0 million fidelity insurance compensation and $5.0 million write back in the provision for development charge in relation to the divestment of the Group's Automotive business taken up in Q3 2016.

Distribution costs increased 20% to $8.8 million in Q3 2017 from $7.4 million in Q3 2016 mainly due to higher selling and marketing expenses for property development project in Malaysia.

Finance costs decreased 53% to $4.1 million in Q3 2017 from $8.9 million in Q3 2016 mainly due to lower borrowings.

Other expenses increased 38% to $1.4 million in Q3 2017 from $1.0 million in Q3 2016 mainly due to impairment loss in relation to Shenyang Orchard Summer Palace project.

In Q3 2017, the Group recorded share of loss from equity-accounted associates and joint ventures of $0.8 million compared to share of profit of $0.7 million in Q3 2016. Share of loss in Q3 2017 was mainly due to lower contribution from a joint venture in Singapore arising from revaluation deficit from its investment property.

Income tax expense decreased 26% to $2.7 million in Q3 2017 from $3.6 million in Q3 2016 mainly due to lower taxable profit.

9 months 2017 (9M 2017) compared with 9 months 2016 (9M 2016)

Revenue increased 2% to $366.2 million in 9M 2017 from $358.2 million in 9M 2016 mainly due to higher revenue from property development, which was partially offset by lower revenue from other business divisions. Gross profit decreased 1% to $140.8 million in 9M 2017.

Interest income increased 55% to $2.3 million in 9M 2017 from $1.5 million in 9M 2016 mainly due to higher interest income from fixed deposits.

Other income increased 190% to $50.3 million in 9M 2017 from $17.4 million in 9M 2016 mainly due to revaluation gains of $45.4 million from the Group's investment properties, which was partially offset by the absence of the following taken up in 9M 2016:

  • a gain of $3.9 million in relation to the disposal of an available-for-sale financial asset;
  • $5.0 million fidelity insurance compensation; and
  • $5.0 million reduction in the provision for development charge in relation to the divestment of the Group's Automotive business.

Finance costs decreased 43% to $15.8 million in 9M 2017 from $27.9 million in 9M 2016 mainly due to lower borrowings.

Other expenses increased 222% to $12.5 million in 9M 2017 from $3.9 million in 9M 2016 mainly due to impairment loss in relation to Shenyang Orchard Summer Palace project.

Share of profit from equity-accounted associates and joint ventures decreased 61% to $1.4 million in 9M 2017 from $3.7 million in 9M 2016 mainly due to lower contribution from a joint venture in Singapore arising from revaluation deficit from its investment property.

Income tax expense increased 94% to $10.2 million in 9M 2017 from $5.2 million in 9M 2016. The higher income tax expense in 9M 2017 was mainly due to higher losses incurred by certain overseas subsidiaries which were not available for group relief. The lower income tax expense in 9M 2016 was mainly due to the write-back of over provision of prior years' income tax.

The Group's attributable profit from continuing operations decreased 9% to $10.6 million in Q3 2017 from $11.7 million in Q3 2016. For 9M 2017, attributable profit from continuing operations increased 99% to $64.2 million in 9M 2017 from $32.3 million in 9M 2016.

Financial position review

  • Current trade and other receivables decreased by $132 million mainly due to the collection of balance receivables from Eight Riversuites project upon obtaining the Certificate of Statutory Completion.
  • Total borrowings decreased by $346 million mainly due to:
    • the repayment of the $250 million 4.2% p.a. fixed rate notes previously issued pursuant to the $500 million Multicurrency Medium Term Note Programme; and
    • the partial repayment of bank loans by certain subsidiaries.

Cash flow review

As at 30 September 2017, the Group had cash and cash equivalents of $359 million. In 9M 2017, the Group received approximately $116 million mainly from the collection of remaining receivables upon obtaining the Certificate of Statutory Completion for Eight Riversuites project. Separately, the Group utilised $74 million for dividend payments and $538 million for the repayment of external borrowings. Apart from the above, the Group's components of cash flow and changes in these components from 31 December 2016 to 30 September 2017 were mainly due to the Group's other ongoing operations.

Operation review

Property Rental & Hospitality

Revenue decreased 6% to $32.7 million in Q3 2017 from $34.7 million in Q3 2016 and 4% to $98.3 million in 9M 2017 from $101.9 million in 9M 2016. Operating profit before interest decreased 30% to $16.2 million in Q3 2017 from $23.1 million in Q3 2016 in the absence of $5.0 million fidelity insurance compensation recorded in Q3 2016 as well as lower contribution from UE Bizhub West in Q3 2017. Operating profit before interest increased 48% to $93.1 million in 9M 2017 from $62.8 million in 9M 2016 mainly due to revaluation gains of $45.4 million from the Group's investment properties. The higher operating profit was partially offset by the absence of a gain of $3.9 million in relation to the disposal of an available-for-sale financial asset, $5.0 million fidelity insurance compensation recorded in 9M 2016 as well as lower contribution from UE Bizhub Tower and UE Bizhub West in 9M 2017.

Property Development

Revenue increased to $55.1 million in Q3 2017 from $4.5 million in Q3 2016 mainly due to revenue recognition from The Manhattan in Malaysia following project completion in Q3 2017 and higher revenue from the property sales at Eight Riversuites and Chengdu Orchard Villa. Revenue increased 47% to $81.8 million in 9M 2017 from $55.8 million in 9M 2016 mainly due to revenue recognition from The Manhattan in Malaysia, higher revenue from the property sales at Chengdu Orchard Villa and Shenyang Orchard Summer Palace. The increase was partially offset by lower revenue from the property sales at Eight Riversuites in 9M 2017 as compared to 9M 2016. Operating profit before interest was $3.6 million in Q3 2017 compared with operating loss of $3.2 million in Q3 2016. Operating loss before interest increased 42% to $10.2 million in 9M 2017 from $7.2 million in 9M 2016 mainly due to impairment loss in relation to Shenyang Orchard Summer Palace project.

Engineering & Distribution

Revenue decreased 17% to $29.4 million in Q3 2017 from $35.5 million in Q3 2016 and 8% to $92.3 million in 9M 2017 from $100.0 million in 9M 2016 mainly due to lower revenue from distribution businesses. Operating profit before interest decreased 89% to $0.1 million in Q3 2017 from $0.9 million in Q3 2016 and 59% to $2.3 million in 9M 2017 from $5.6 million in 9M 2016 mainly due to lower profit contribution from the Distribution division.

Manufacturing

Revenue decreased 2% to $19.9 million in Q3 2017 from $20.3 million in Q3 2016 and 4% to $62.2 million in 9M 2017 from $64.7 million in 9M 2016. Operating profit before interest decreased 31% to $0.9 million in Q3 2017 from $1.3 million in Q3 2016 and 38% to $3.1 million in 9M 2017 from $5.0 million in 9M 2016 mainly due to lower revenue and profit margin as well as foreign exchange loss.

Commentary

Although regional geopolitical uncertainties continue to persist, Singapore property market seemed to have stabilised with improved overall sentiments and strengthening global economic conditions. In China, the property cooling measures have brought about a relative slowdown in activity but the property market may continue to see sustainable growth in the longer term.