Financials
Full Year Results Financial Statement And Related Announcement
Financials Archive
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Full Year Financial Statement and Dividend Announcement for the year ended 31 December 2011
Income Statement
Consolidated Statement of comprehensive income
Balance Sheet
Revenue of Performance
Our Business
OKP Holdings Limited is a home-grown infrastructure and civil engineering company in the region. It specialises in the construction of urban and arterial roads, expressways, vehicular bridges, flyovers, airport infrastructure and oil and gas-related infrastructure for petrochemical plants and oil storage terminals as well as the maintenance of roads and roadrelated facilities and building construction-related works.
We have two core business segments: Construction and Maintenance.
Income Statement Review (Current financial year ended 31 December 2011 vs previous financial year ended 31 December 2010)
Revenue
Our Group registered a revenue of $109.8 million for FY2011 compared to $139.9 million recorded in the previous corresponding year ("FY2010").
The decrease in revenue from both construction and maintenance segments was due mainly to the higher degree of completion of existing projects, coupled with a lower percentage of revenue recognised from a few newly-awarded projects in FY2011.
The construction segment continued to be the major contributor to our Group’s revenue. On a segmental basis, our construction segment and maintenance segment accounted for 82.2% (2010: 82.9%) and 17.8% (2010: 17.1%) of our Group’s revenue respectively for FY2011.
Gross profit and gross profit margin
Despite recording lower revenue, our gross profit increased by $13.7 million, or 46.5%, from $29.5 million for FY2010 to $43.2 million for FY2011.
Our gross profit margin improved from 21.1% in FY2010 to 39.3% in FY2011.
The increase in our gross profit was due mainly to cost savings in certain construction projects which yielded higher gross profit margins. These were mainly due to better project management such as proper site planning, detailed planning in the construction processes, effective site management, and tighter cost controls, including minimising construction material wastage at site and employing effective methodologies in every stage of construction. In addition, certain design-and-build projects that gave us the autonomy and flexibility in design, project management and labour management helped to boost margins further.
Other income
Other income increased by $0.1 million or 14.7% from $0.9 million in FY2010 to $1.0 million in FY2011. The increase was due mainly to the increase in interest from bank deposits arising from higher interest rates earned (2011: 0.10% per annum to 0.30% per annum vs 2010: 0.06% per annum to 0.20% per annum), interest earned from current account, interest earned from financial assets and gain on disposal of property, plant and equipment during FY2011.
Administrative expenses
Administrative expenses increased by $2.3 million or 23.8% from $9.6 million for FY2010 to $11.9 million for FY2011. The increase was largely attributable to higher directors’ remuneration (including profit sharing) and staff costs accrued as a result of the strong financial performance of the Group for FY2011.
Other expenses
Other expenses of $37,000 related to fixed assets written off during FY2011.
Finance expenses
Finance expenses decreased marginally by $37,000 due mainly to repayment of finance leases during FY2011.
Profit before income tax
Profit before income tax increased by $11.7 million or 57.3% from $20.4 million for FY2010 to $32.1 million for FY2011. The increase was due mainly to an increase in gross profit of $13.7 million, increase in other income of $0.1 million, decrease in other expenses of $0.1 million and decrease in finance expenses of $0.1 million, which were partially offset by an increase in administrative expenses of $2.3 million, as explained above.
Income tax expense
Income tax expense increased by $2.1 million or 58.5% from $3.5 million for FY2010 to $5.6 million for FY2011. The higher income tax expense was in line with higher profit before income tax, as explained above.
The effective tax rates for FY2010 of 17.4% and FY2011 of 17.5% were comparable to the statutory tax rate of 17.0%.
Non-controlling interests
Non-controlling interests arose from the losses incurred by some subsidiaries for FY2011.
Net profit
Our Group reported a record high net profit of $26.5 million for FY2011. Net profit increased by $9.6 million or 57.0% from $16.9 million for FY2010 to $26.5 million for FY2011 following the increase in profit before income tax of $11.7 million which was partially offset by an increase in income tax expense of approximately $2.1 million, as explained above.
Our net profit margin increased from 12.1% for FY2010 to 24.1% for FY2011.
Income Statement Review (Fourth Quarter ended 31 December 2011 vs Fourth Quarter ended 31 December 2010)
Revenue
Our Group’s revenue was $23.2 million in the fourth quarter ended 31 December 2011 compared to $29.6 million in the fourth quarter ended 31 December 2010.
The decrease in revenue from both segments was due mainly to the higher degree of completion of existing projects, coupled with a lower percentage of revenue recognised from a few newly-awarded projects in the fourth quarter ended 31 December 2011.
Gross profit and gross profit margin
Despite the lower revenue, our gross profit for the fourth quarter ended 31 December 2011 increased by $5.0 million or 50.2% from $10.0 million for the fourth quarter ended 31 December 2010 to $15.0 million for the fourth quarter ended 31 December 2011.
Our gross profit margin increased from 33.8% in the fourth quarter ended 31 December 2010 to 64.8% in the fourth quarter ended 31 December 2011.
Variation orders on a few projects, as well as some existing design-and-build projects that gave us the autonomy and flexibility in design, project management and labour management, helped to boost our gross profit margin in the fourth quarter ended 31 December 2011 as compared to the previous corresponding period. The relatively high profit margin also reflected the success of our continuous cost control efforts in the fourth quarter ended 31 December 2011. These include proper site planning, detailed planning in the construction processes, effective site management, and tighter cost controls including minimising construction material wastage at site and employing effective methodologies in every stage of construction.
Other income
Other income decreased by $0.2 million or 38.9% in the fourth quarter ended 31 December 2011. The decrease was due mainly to decrease in the fair value gain on an investment property in the fourth quarter ended 31 December 2011.
Administrative expenses
Administrative expenses decreased by $1.2 million or 24.8% from $4.9 million for the fourth quarter ended 31 December 2010 to $3.7 million for the fourth quarter ended 31 December 2011. The decrease was largely attributable to lower directors’ remuneration (including profit sharing) accrued for the fourth quarter ended 31 December 2011. In financial year ended 31 December 2010, the total profit sharing amount was only accrued in the fourth quarter ended 31 December 2010.
Other expenses
Other expenses of $31,000 related to fixed assets written off during the fourth quarter ended 31 December 2011.
Finance expenses
Finance expenses decreased marginally by $11,000 due to repayment of finance leases in the fourth quarter ended 31 December 2011.
Profit before income tax
Profit before income tax increased by $6.1 million or 111.0% from $5.5 million in the fourth quarter ended 31 December 2010 to $11.6 million in the fourth quarter ended 31 December 2011. The increase was due mainly to an increase in gross profit of $5.0 million, decrease in administrative expenses of $1.2 million, decrease in other expenses of $33,000 and decrease in finance expenses of $11,000, which were partially offset by increase in other income of $0.2 million, as explained above.
Income tax expense
The $1.2 million increase in income tax expense from $0.9 million for the fourth quarter ended 31 December 2010 to $2.1 million for the fourth quarter ended 31 December 2011 was due to higher profit before income tax in the fourth quarter ended 31 December 2011, as explained above.
The statutory tax rate as at 31 December 2011 and 31 December 2010 was 17%. The higher effective tax rate of 17.8% for the fourth quarter ended 31 December 2011 was due mainly to under-provision in respect of prior years’ taxation and non-deductible expenses including depreciation of non-qualifying fixed assets. The effective tax rate of 16.5% for the fourth quarter ended 31 December 2010 was below the statutory tax rate as a result of certain income not being subjected to tax, including the gain on disposal of non-qualifying fixed assets and fair value gain on an investment property.
Non-controlling interests
Non-controlling interests arose from the losses incurred by some subsidiaries during the fourth quarter ended 31 December 2011.
Net profit
Overall, for the fourth quarter ended 31 December 2011, net profit increased by $4.9 million or 107.7% to $9.5 million as compared to the fourth quarter ended 31 December 2010 following the increase in profit before income tax of $6.1 million which was partially offset by an increase in income tax expense of $1.2 million, as explained above.
Our net profit margin increased from 15.5% for the fourth quarter ended 31 December 2010 to 41.0% for the fourth quarter ended 31 December 2011.
Commentary on current year prospects
The Ministry of Trade and Industry has projected a lower overall GDP growth of between 1 and 3 per cent for 2012. Still, the Building and Construction Authority expects the overall construction demand to remain strong at between $21 billion and $27 billion for 2012. Public sector construction demand is expected to contribute between $13 billion and $15 billion worth of construction orders. The support is likely to come from the continued strong public housing development demand as well as construction demand for institutional buildings and civil engineering projects. A few road-related projects likely to be awarded in 2012 include: (1) Expansion of Kallang Paya Lebar Expressway (KPE)/ Tampines Expressway (TPE) Interchange; (2) Extension and reconstruction of Newton Flyover; and (3) Construction of New Lornie Road.
On 30 January 2012, the Public Utilities Board ("PUB") announced that it would spend $750 million over the next five years on 20 drainage projects. It will deepen and widen six other major canals, in places such as Bukit Timah, Geylang and Bedok, to increase their capacity by 30% to 45%. OKP has prior experience in drainage improvement works. Our latest contract awarded by the PUB was to improve Alexandra Canal between Zion Road and Kim Seng Road ($46.8 million) in September 2011. Other drainage improvement projects that we had undertaken in the past include: a $13.9 million project around Chin Bee Road and Gul Circle, a $15.4 million project in Opera and East View Garden Estates; a $3.4 million project around Ang Mo Kio Ave 3, Tembeling Road and Ewe Boon Road and a $2.5 million project at Jalan Ma’mor, Hua Guan Avenue and Outram Road. As such, we will continue to tender actively for upcoming drainage projects.
Based on the fairly healthy outlook of the construction industry over the next three years, it should follow that the outlook for OKP would be optimistic. However, with the expected slowdown in the economy, we also anticipate that the competition will become more intense.
Since the start of 2011, we have secured seven public sector projects totalling approximately $152.0 million. These include two projects from the Land Transport Authority, namely, a design-and-build project involving the interchange at Tampines Expressway(TPE)/Sengkang West Road/Seletar Aerospace Way worth $61.7 million and one that involves the widening of Old Choa Chu Kang Road from Sungei Tengah Road to Lim Chu Kang Road worth $28.5 million. There are four projects from the Public Utilities Board, namely improvement to Alexandra Canal (Between Zion Road and Kim Seng Road) worth $46.8 million, sewer extension works in Admiralty Road West, Andrew Avenue, Tung Po Avenue, Punggol Road and Cranwell Road worth $4.2 million, improvement to roadside drains at Ang Mo Kio Avenue 3, Tembeling Road and Ewe Boon Road areas worth $3.4 million and improvement to roadside drains at Jalan Ma’mor, Hua Guan Avenue and Outram Road areas worth $2.5 million. One project is from the JTC Corporation, namely the proposed sewers from Tuas South Avenue 14 to Tuas South Avenue 12 worth $4.9 million.
As at the date of this announcement, our order book based on secured contracts stands at approximately $248.6 million (2010: $309.9 million), with some projects completing in 2014. The decrease in our order book was due mainly to the higher degree of completion of existing projects.
We have visibly strengthened our market position in public sector infrastructure projects over the past several years. We will continue to build market leadership in this market segment and increase market share by leveraging our strong track record in public sector works and existing client relationships to win new projects. A sturdy track record and strong client relationships are two of our key strengths.
Should the opportunity arise, we would also expand our business through acquisitions, joint ventures and/or strategic alliances that we believe can complement our construction and maintenance business. These can potentially provide us access to new markets and prospective clients.
While we actively prospect for growth opportunities, we remain committed to prudent cost management and improving operational efficiency.