Keppel : posts FY 2017 net profit of S$217m compared to S$784m a year ago following one-off penalty

• FY 2016 (S$ m)Excluding Keppel Offshore & Marine's (Keppel O&M) one-off financial penalty and related costs of S$619 million, Group net profit for FY 2017 would have been S$836 million.
• The proposed final cash dividend of 14.0 cents per share will bring the total cash distribution for FY 2017 to 22.0 cents per share, representing a payout ratio of about 48% on the Group's net profit of S$836 million, excluding Keppel O&M's one-off financial penalty and related costs.

Keppel Corporation Limited (Keppel) reported a net profit of S$217 million for the 12 months ended 31 December 2017. This was 72% lower than the S$784 million net profit for FY 2016, due mainly to the one-off financial penalty arising from Keppel O&M's global resolution with criminal authorities in the United States, Brazil and Singapore, and related legal, accounting and forensics costs amounting to S$619 million.

Excluding the one-off financial penalty and related costs, the Group would have turned in a net profit S$836 million for FY 2017, 7% higher compared to S$784 million a year ago.

On a quarterly basis, the Group registered a net loss of S$495 million in 4Q 2017, compared to a net profit of S$143 million for 4Q 2016. The net loss mainly arose from the one-off financial penalty and related costs as well as the weaker operating results of the Offshore & Marine Division, which were partially offset by higher profits from Singapore property trading, as well as fair value gains from assets recognised during the quarter.

Excluding the one-off global resolution and related costs of S$619 million, the Group would have attained a net profit of S$124 million for 4Q 2017, 13% below that of 4Q 2016.

The Group achieved revenue of S$5,964 million for FY 2017, which was S$803 million or 12% lower than that for 2016. In 4Q 2017, Group revenue of S$1,545 million was 20% lower than the S$1,940 million a year ago.

Mr Loh Chin Hua, CEO of Keppel Corporation, said, 'The global resolution reached by Keppel O&M brings to an end what has been a painful chapter for Keppel. We have put in place effective compliance controls to ensure that this does not happen again. With the issue now behind us, we look forward to continuing on our growth trajectory and building a more disciplined and sustainable business - a Keppel that will remain trusted and admired by all our stakeholders.'

During the year, the Group's non-Offshore & Marine business divisions continued to register strong earnings growth. The Property Division, which recorded a 10% year on year increase in net profit to S$685 million, remained the largest contributor to the Group's FY 2017 net profit. This increase was due mainly to higher fair value gains on investment properties and higher contribution from Singapore and Vietnam property trading and the en-bloc divestment of development projects, partly offset by a lower share of associated companies' profits.

The Infrastructure Division saw a 33% increase in net profit to S$132 million, due mainly to higher contribution from the Energy Infrastructure business, the gain on divestment of interests in GE Keppel Energy Services Pte Ltd, as well as fair value gain from an investment. Contribution from the data centre business was lower following the injection of Keppel DC Singapore 3 into Keppel DC REIT in January 2017.

The Investments Division achieved a net profit of S$235 million, representing an increase of over 500% compared to FY 2016, due mainly to a higher share of profit from the Sino-Singapore Tianjin Eco-City and k1 Ventures, higher contributions from Keppel Capital, gains from the sale of investments and the write-back of provision for impairment of investments. These were partly offset by the share of loss in KrisEnergy and the recognition of fair value loss on KrisEnergy warrants.

The Offshore & Marine Division incurred a net loss of S$835 million for FY 2017, compared to a net profit of S$29 million for FY 2016. This was mainly due to the one-off financial penalty and related costs, lower revenue, an additional S$81 million provision for losses on the Sete Brasil rig contracts, an impairment of S$54 million made to other assets, and a lower share of associated companies' profits. In 2017, the Division secured new contracts of about S$1.2 billion, mainly for LNG-related vessels, the conversion of Floating Production Storage Offloading units and newbuild dredgers.

In FY 2017, the Group achieved a return on equity of 1.9%. Net gearing was at 0.46x as at end-December 2017, compared to 0.56x as at end-December 2016. Free cash inflow of S$1,802 million in FY 2017 was a substantial improvement over the inflow of S$540 million in FY 2016.

Mr Loh said, 'For 2017, Keppel's multi-business strategy has steadied the Group amidst the challenges. We also entered into new markets, seized opportunities and created new engines of growth. The global economy is experiencing a broad based upturn, and we are excited about the many opportunities presented by strong urbanisation trends across the businesses that we are in.

'Today, Keppel is not just a group of diverse companies that share a common name, but an eco-system of companies working closely together with a common mission, as OneKeppel, to provide compelling solutions for sustainable urbanisation. We are confident of harnessing the Group's considerable strengths and diverse solutions to seize opportunities that will create and capture long term value.'

The Directors of Keppel Corporation will be proposing a final cash dividend of 14.0 cents per share for FY 2017, taking into account the Group's improved performance, excluding Keppel O&M's one-off financial penalty and related costs, the stronger cash flow position and the lower gearing. Including the interim cash dividend of 8.0 cents per share paid to shareholders in August 2017, the total distribution for FY 2017 will be 22.0 cents per share, compared to the 20.0 cents per share paid out for FY 2016. The total distribution proposed for FY 2017 represents a payout ratio of about 48% on the Group's net profit of S$836 million, excluding the one-off financial penalty and related costs.

Financial Highlights

				Excld. global resolution & related costs
	FY 2017 (S$ m)	FY 2016 (S$ m)	Change (%)	FY 2017 (S$ m)	FY 2016 (S$ m)	Change (%)
Revenue	5,964	6,767	(12)	5,964	6,767	(12)
Operating Profit	776	795	(2)	776	795	(2)
Net Profit	217	784	(72)	836	784	7
Earnings per Share	11.9 cents	43.2 cents	(72)	46.0 cents	43.2 cents	6

				Excld. global resolution & related costs
	FY 2017 (S$ m)	FY 2016 (S$ m)	Change (%)	FY 2017 (S$ m)	FY 2016 (S$ m)	Change (%)
Revenue	1,545	1,940	(20)	1,545	1,940	(20)
Operating Profit	126	98	29	126	98	29
Net Profit	(495)	143	n.m.	124	143	(13)
Earnings per Share	(27.3) cents	7.9 cents	n.m.	6.8 cents	7.9 cents	(14)

• ROE was 1.9% for FY 2017
• Net Gearing was 0.46x at end-December 2017
• Free cash inflow improved significantly to S$1,802m in FY 2017 from S$540m in FY 2016
• A final cash dividend of 14.0 cents per share will be proposed for FY 2017

Attachments:
Download - KCL 4Q2017 - Financial results
Download - KCL 4Q2017 - Presentation slides
Download - KCL 4Q2017 - Management speeches

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For more information, please contact:

Media Relations Teri Liew (Ms) Deputy General Manager Group Corporate Communications Keppel Corporation Limited DID: (65) 6413 6425 Email: [e-mail]

Investor Relations Ivana Chua (Ms) Assistant General Manager Group Corporate Communications Keppel Corporation Limited DID: (65) 6413 6436 Email: [e-mail]