Failed M1 deal plunges Keppel profits down by whopping 59%

SINGAPORE: Keppel’s first-half earnings were weighed down by losses linked to its legacy rig assets and the collapse of its planned M1 divestment, even as the group’s underlying businesses delivered stronger performance and cash generation improved significantly.

The company reported a 59% year-on-year decline in net profit to $155 million for the six months ended June, according to its latest financial results. The sharp drop was largely driven by losses within its non-core portfolio, which widened substantially during the period.

Keppel said its non-core portfolio recorded a net loss of $375 million in the first half, compared with a loss of $46 million in the corresponding period last year. The deterioration stemmed mainly from impairments relating to its legacy rig assets, including the recycling of foreign currency translation losses after accounting for write-backs in cost provisions, amounting to $165 million. The losses also reflected interest costs tied to the legacy rigs, as well as depreciation and amortisation adjustments following the termination of the proposed M1 divestment.

Despite the headline decline, the group’s core operations posted stronger results. Excluding the non-core portfolio earmarked for divestment, Keppel’s net profit rose 25% to $530 million.

The company attributed the improvement to significantly higher earnings from SSCI, alongside stronger recurring income generated by its asset management business and operating platform.

SSCI contributed $175 million to earnings during the first half, a substantial increase from the $18 million recorded in the same period a year earlier.

Across its business segments, Infrastructure and Connectivity both delivered robust earnings growth, with net profit rising 55% and 54%, respectively, from the previous year. These gains helped offset weaker performance in the Real Estate segment. Infrastructure remained Keppel’s largest earnings contributor during the period.

Keppel also reported an improved financial position, supported by stronger cash inflows from both its operating and investing activities.

The group generated free cash inflow of $570 million during the first half, marking a sharp turnaround from the $48 million outflow recorded a year ago.

Chief executive officer Loh Chin Hua said the company had continued to strengthen its business despite the impact of legacy assets.

“We have strengthened the quality of our earnings, grown our Funds under Management to $106b, delivered landmark assets such as the Sakra Cogen Plant and Bifrost, and announced about $1.7b of asset monetisation this year,” he said.

Loh added that Keppel had also unveiled a solution for its legacy rigs that is expected to generate cash while creating a new fund that could capitalise on improving conditions in the offshore market and provide an additional source of fee income for the company.

Meanwhile, Keppel’s board declared an interim cash dividend of 15 cents per share for the first half of the year, unchanged from the previous year. The dividend will be paid to shareholders on Aug 21.