Homegrown building construction and property development company Lian Beng Group has reported earnings of $14.9 million in the 1HFY2022 ended Nov 30, 2021, 15.5% lower than earnings of $17.6 million during the same period the year before.
The lower results were in line with the group’s profit guidance posted on Jan 6, 2022.
On the other hand, the group’s subsidiary, SLB Development, more than doubled its earnings to $12.0 million in the 1HFY2022 due to several reasons, including a stronger pick-up of INSPACE units.
During the 1HFY2022, Lian Beng Group’s earnings per share (EPS) fell 15.5% y-o-y to 2.98 cents on a fully diluted basis.
Revenue for the period, however, surged 91.0% y-o-y to $377.3 million mainly due to higher contributions from the construction and property development segments.
Revenue from the construction segment climbed 98.7% y-o-y to $310.1 million from the low base in the 1HFY2021. The pace of work resumption had been slow after the lifting of the government’s circuit breaker measures that took place during the group’s 1HFY2021. This was due to manpower disruption from the workers’ movement control and stringent safe management measures.
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The growth in 1HFY2022 reflects a y-o-y improvement in the level of construction activity and progress made in various construction projects, says the group.
Revenue from the property development segment spiked 109.5% y-o-y to $39.9 million in the 1HFY2022 mainly due to the higher number of INSPACE units sold, along with the higher revenue recognition in line with the progress made in construction. The higher revenue was partly offset by the absence of revenue recognised from Mactaggart Foodlink, as the project obtained its temporary occupation limit (TOP) in March 2021.
Revenue from the investment holding segment grew by 41.3% y-o-y to $17.0 million in the 1HFY2022 due to contribution from its investment property, BreadTalk IHQ. The acquisition of the property was completed in April 2021.
In line with the higher business activity, the group’s cost of sales surged by 99.1% y-o-y to $343.8 million.
Accordingly, gross profit for the half-year period increased by 35.2% y-o-y to $33.5 million, although gross profit margin (GPM) fell 4 percentage points to 9% in 1HFY2022 mainly due to the higher cost of sales recognised by the construction segment on the back of the ongoing Covid-19 situation.
Other operating income fell 52.4% to $10.0 million due to lower grants and incentives from the Singapore government and the absence of net unrealised net exchange gain recognised in 1HFY2022.
Distribution expenses rose 109.0% y-o-y to $2.5 million due to the marketing expenses for INSPACE.
Other operating expenses increased by $2.3 million to $7.3 million mainly due to a net unrealised exchange loss of $2.1 million in the 1HFY2022. The unrealised exchange loss mainly arose from the revaluation of the group’s British pound (GBP) and Australian dollar (AUD) denominated assets following the depreciation of these currencies against the Singapore dollar (SGD), as well as the US dollar (USD) bank denominated loans as a result of the appreciation of USD against the SGD.
Finance cost increased 23.9% to $7.0 million in 1HFY2022, mainly due to the increase in interest expense on bank loans drawn down for development property Thye Hong Centre and investment property BreadTalk IHQ.
Share of profit from associates increased from $4.6 million in 1HFY2021 to $12.7 million in 1HFY2022, on the back of higher development profits from the sale of units in Affinity @ Serangoon, Riverfront Residences and Rezi 24, along with progress made in the construction of these projects.
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Despite higher profit contribution from the property development segment, only 77.6% of the segment’s profit, representing the effective interest held by the group in SLB and excluding non-controlling interest, was recognised as attributable to owners of the company.
As at Nov 30, 2021, cash and cash equivalents stood at $204.7 million. An interim dividend of 1.0 cent per share has been declared for the 1HFY2022. The dividend will be paid out on Jan 31.
As at Jan 14, the group’s order book stood at $1.3 billion, which should “support its construction activities through to FY2026”.
“The group will closely monitor the delivery of these projects, while selectively tendering for public and private sector contracts as opportunities arise,” says Lian Beng Group in a statement on Jan 14.
The group also expects to face manpower challenges that may impact the completion of some projects under its property development segment. Barring any unforeseen circumstances, Lian Beng Group expects its dormitory and investment holding segments to continue generating stable recurring income in the following months.
Looking ahead, Ong Pang Aik, chairman and managing director of Lian Beng Group, warns, “The construction industry continues to be plagued by rising cost and manpower issues. The group expects the construction sector’s operating conditions to remain difficult in the year ahead, amid continued manpower shortage and deployment challenges.”
Shares in Lian Beng Group closed 0.5 cent lower or 0.92% down at 54 cents on Jan 14.
