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Keppel Corporation Limited (Keppel) reported a net loss of S$506 million for FY 2020, compared to a net profit of S$707 million a year ago, after impairments of S$952 million mainly due to the offshore & marine (O&M) business, the bulk of which was recognised in 2Q 2020. Excluding impairments in both years, the Group would have registered a net profit of S$446 million for FY 2020, as compared to the net profit of S$828 million for FY 2019. Apart from Keppel O&M, all key business units of the Group remained profitable in FY 2020.
The Group’s revenue was S$6,574 million for FY 2020, 13% lower year-on-year, mainly due to lower contributions from the Energy & Environment, Urban Development and Asset Management segments, offset by higher revenue from Connectivity.
The Group’s net gearing was lower at 0.91x as at 31 December 2020, compared to 0.96x as at end-September 2020, due to divestment proceeds received during the quarter, as well as a higher equity base. Free cash inflow was S$497 million in FY 2020, compared to an outflow of S$653 million in FY 2019.
For 2H 2020, the Group reported a net profit of S$31 million, a turnaround from the net loss of S$537 million in 1H 2020. Net profit for 2H 2020 was significantly lower year-on-year, compared to S$351 million for 2H 2019. This was due to decreased contributions from across segments, particularly Energy & Environment, which had recorded a net loss of S$223 million as a result of severe disruptions to yard activities from COVID-19, as well as higher net interest expense.
Group revenue for 2H 2020 was S$3,392 million, 20% lower year-on-year, due to decreased contributions from Energy & Environment and Connectivity, which were offset by increased revenues from Urban Development and Asset Management.
Mr Loh Chin Hua, CEO of Keppel Corporation, said, “Despite the impact of COVID-19, all key business units in the Group remained profitable, except for Keppel O&M, which had been severely affected by the pandemic and the fall in global demand for oil. In 2H 2020, Keppel returned to profitability with a net profit of S$31 million, but we remained loss making for the full year due to impairments of S$952 million mainly from the O&M business.”
Keppel’s business units made creditable progress during the year, expanding their businesses and entering new growth areas. Keppel O&M secured approximately S$1.0 billion of new orders, of which gas and renewables made up 65%. Keppel Infrastructure secured S$2.1 billion worth of Waste-to-Energy (WTE) and district cooling contracts across Singapore, India and Thailand. M1 was awarded one of Singapore’s 5G network licenses jointly with StarHub, and also grew its market share to have the second largest postpaid base in Singapore, in terms of both number of customers and revenue[1]. Meanwhile, Keppel Capital raised about S$4.5 billion in capital through new private funds for data centres, education, infrastructure, logistics and real estate assets, and Keppel Land acquired a stake in a co-living solutions provider as well as new projects in China and India.
Mr Loh also said, “While 2020 was a tumultuous year, it was also one of transformation and new beginnings for Keppel as we unveiled Vision 2030, our long-term strategy to guide the Group’s growth. Last September, we announced our plan to monetise 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 are well on our way to achieving our target.”
On the strategic reviews of Keppel’s O&M and logistics businesses, Mr Loh said, “In line with the Group’s ambitions to seize opportunities in the energy transition, we have decided to embark on a bold organic transformation of our O&M business. A key goal of the transformation is to create a more competitive, asset-light and people-light Keppel O&M focused on seizing higher value-adding opportunities as a developer and integrator of offshore energy and infrastructure assets.
“The restructuring will ring-fence Keppel O&M’s non-core rig assets, contain any further capital outflow beyond the initial funding, and work towards resolving this legacy issue. Through these changes, we aim to create a nimble industry leader that is well-positioned for the global energy transition and who can be a strong contributor to Keppel’s target ROE of 15% as we progress towards Vision 2030.
“In the meantime, we are also exploring inorganic options for the O&M business, but there is no assurance that any transaction will materialise. We believe that our organic restructuring of Keppel O&M will not only enhance its competitiveness, but also its attractiveness, if we were to undertake any inorganic action.
“As for the logistics business, e-commerce has been growing rapidly in recent years and was given a further boost by the pandemic. Our logistics business under Keppel T&T benefited from the increased demand for e-commerce and urban logistics over the past year, with last mile deliveries, gross merchandise value, and channel management orders growing significantly. Nevertheless, we have decided to sharpen our focus and divest our logistics and channel management business to a third party, who may be able to provide a better eco-system to scale up this business. Keppel T&T has appointed a financial adviser who is now engaging potential buyers.”
The Directors of Keppel Corporation will be proposing a final cash dividend of 7.0 cents per share for FY 2020. Including the interim cash dividend of 3.0 cents per share paid to shareholders in August 2020, the total distribution for FY 2020 will be 10.0 cents per share.
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ADDENDUM
Financial Highlights
Note: n.m.f denotes no meaningful figure.
Energy & Environment
The Energy & Environment segment registered a net loss of S$1,181 million for FY 2020 compared to a net loss of S$101 million for FY 2019, mainly due to losses in the O&M business, which were offset by higher contributions from the energy infrastructure and environmental infrastructure businesses.
Keppel O&M’s net loss was S$1,194 million for FY 2020. In 2020, Keppel O&M secured approximately S$1.0 billion of new contracts, with gas and renewables making up 65% of the new orders. Keppel O&M’s net orderbook was S$3.3 billion as at year-end. Work had resumed at all yards by the end of 2020, and in Singapore, about 19,500 persons had returned to work with safe management measures in place.
Keppel Infrastructure’s net contribution[2] grew by about 12% to S$144 million for FY 2020. During the year, Keppel Infrastructure secured S$2.1 billion worth of WTE and district cooling contracts across Singapore, India and Thailand.
The newly established Keppel Renewable Energy announced its first solar farm project in Australia.
Urban Development
The Urban Development segment recorded a net profit of S$438 million for FY 2020, lower than the S$483 million for the whole of 2019. This was due mainly to the absence of tax writebacks at Keppel Land whose net contribution2 was 10% lower year-on-year at S$406 million for FY 2020.
In 2020, Keppel Land sold about 3,340 homes, compared to 5,150 homes sold in 2019. During the year, Keppel Land also announced about S$1.3 billion of divestments comprising stakes in four residential projects across China and Vietnam, which are equivalent to about 8,200 units sold en-bloc.
Meanwhile, the Sino-Singapore Tianjin Eco-City contributed a profit of S$67 million to the Group in 2020 from the sale of two residential land plots and the handover of completed homes.
Connectivity
The Connectivity segment recorded a net profit of S$13 million for FY 2020, compared to $136 million in FY 2019, mainly due to the absence of a fair value gain from the remeasurement of previously held interest in M1 at acquisition date, as well as lower contributions from M1.
Keppel Data Centres reported a net loss of S$12 million for FY 2020, compared to a net profit of S$11 million, with the segmentalisation of S$74 million in data centre REIT and private fund contributions to Asset Management. During the year, Keppel Data Centres added two new data centre development projects in Singapore and China to its portfolio.
During the year, M1 contributed S$65 million to the Group, which was 11% lower year-on-year due mainly to the impact of the pandemic on roaming and prepaid revenues. In the first nine months of 2020, M1 increased its market share to have the second largest postpaid base in Singapore, based on both the number of customers and revenue.
Asset Management
The Asset Management segment’s net profit grew 31% to S$280 million for FY 2020, bolstered by gains from the reclassification of Keppel Infrastructure Trust, as well as Keppel Capital’s improved contribution[3] of S$85 million to the Group.
During the year, Keppel Capital raised about S$4.5 billion in capital through new private funds for data centres, education, infrastructure, logistics and real estate assets. As at end-2020, assets under management grew 12% to S$37 billion.
[1] Based on data available as at 9M 2020.
[2] Does not include contributions from REITs/Trust and private funds.
[3] Includes 100% contribution from the manager of Keppel DC REIT​.
