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Thursday, January 28, 2021-9: 57 PM
Keppel Corporation said Thursday that it will restructure its Keppel Offshore & Marine (Keppel O&M) subsidiary into a thinner and less-active one, with Keppel O&M to exit the offshore rig construction business after completing existing rigs under construction.
This was announced along with Keppel’s fiscal 2020 second half results, where it posted a net profit of S $ 31.3 million for the second half ended December 31, 2020, 91.1% less than a year ago. year due to the decrease in contributions in all segments, with Energy and the environment, especially affected.
The group said the decision to transform its O&M business reflects its “commitment to sustainability and climate change.” The results for fiscal year 2020 also reflected that the O&M arm was the most affected by the recession, with impairments of S $ 952 million mainly attributed to O&M.
Keppel O&M will not undertake any new projects that require large initial capex or no milestone payments, the group said. It will also phase out of low-value-added repairs and other activities with a low contribution to results, and focus on higher-value-added jobs.
Loh Chin Hua, CEO of Keppel Corporation, said: “In the meantime, we are also exploring inorganic options for the O&M business, but there is no guarantee that any transaction will materialize.”
“We believe that our organic restructuring of Keppel O&M will not only improve its competitiveness, but also its attractiveness, if we were to take any inorganic action,” he added.
For Keppel’s results for the second half of 2020, revenues were 20.5 percent lower at S $ 3.39 billion, again due to lower contributions from the Energy and Environment and Connectivity segments.
Earnings per share for the second half of 2020 were 1.7 Singapore cents, down 91 percent from 19.3 cents for the same period a year ago.
For the full year, Keppel posted a net loss of S $ 505.9 million for fiscal year 2020, reversing from a net gain of S $ 707 million a year ago, due to impairments of S $ 952 million mainly due to the business of O&M, most of which was recognized in the second quarter of 2020.
Revenues for the full year were down 13.3 percent to S $ 6.57 billion, primarily due to lower contributions from the Energy & Environment, Urban Development and Asset Management segments, offset by higher Connectivity revenues.
For the full year, loss per share was 27.8 Singapore cents, compared to earnings per share of 38.9 Singapore cents in FY19.
A final cash dividend of seven Singapore cents was declared for fiscal year 2020, down from 12 Singapore cents previously.
If approved at the annual general meeting scheduled for April 23, 2021, the proposed final dividend will be paid on May 11, 2021.
The group’s net leverage was less than 0.91x as of December 31, 2020, compared to 0.96x at the end of September 2020, due to divestment income received during the quarter, as well as a higher capital base. Free cash inflow was S $ 497 million in fiscal 2020, compared to an outflow of S $ 653 million in fiscal 2019.
On the latest results, Loh noted: “Despite the impact of Covid-19, all the key business units of the group remained profitable, except Keppel O&M, which had been severely affected by the pandemic and the drop in global demand. of oil. “
He noted that Keppel returned to profitability in the second half of 2020, but it was not enough to cover full-year losses due to impairments of S $ 952 million mainly from the O&M business.
But Keppel’s plans are still underway, according to Loh. “Last September, we announced our plan to monetize S $ 3-5 billion of identified assets over the next three years to fund growth initiatives. Since then, we have announced over S $ 1.2 billion in divestments and we are on track to achieve our goal, ”he said.
Regarding the logistics business, Keppel has decided to sharpen its focus and sell its logistics and channel management business to a third party, which can provide a better ecosystem to expand this business, he said.
Keppel T&T has appointed a financial advisor who is now engaging potential buyers, he added.
Keppel’s shares closed at 5.46 Singapore dollars, 12 Singapore cents or 2.15 percent before the announcement.
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