Tiong Seng posts 1H18 net profit dropped 34 percent amid net decrease in work

Singapore two-dollar bills

Construction and property-development player Tiong Seng reported its first half net profit fell 34.1 percent on-year to S$6.05 million, amid a net decrease in work and revenue recognition stages.

“Attributable mainly to the differences in stages of various construction contracts and a net decrease in work done, where older projects were completed and contributions from new ones were not as significant, the group recorded a 43.0 percent decrease in revenue to S$196.7 million for the first half of 2018,” the company said in a filing to SGX after the market close on Monday.

Revenue from construction contracts fell 43.1 percent on-year in the first half to S$181.06 million, attributed to a “cautious and selective approach in bidding for construction contracts prior to fiscal 2018, it said.

Revenue from the sale of development properties declined 43.9 percent on-year to S$14.69 million, mainly on the timing of revenue recognition, with around S$60.2 million of gross development value sold but yet to be recognized as of 30 June, it said.

“While we continue to experience persistent headwinds from an increasingly competitive construction sector, we believe that our healthy order book size amounting S$620.9 million is able to tide us through to a potentially stronger outlook in the second half of fiscal year 2018,” Pek Lian Guan, CEO of Tiong Seng Holdings, said in the press release. “In a bid to safeguard our profit margins, it is imperative that we bid
cautiously for prospective projects to maintain profitability for the long term. In the face of ongoing macroeconomic uncertainties, we will also continue to optimise our capital structure and adopt prudent cost controls as we navigate this challenging period.”

In its outlook statement, Tiong Seng noted that industry observers expect a boost in construction activity in the second half of 2018 or in 2019.

“In light of the en-bloc frenzy in the second half of 2017, other industry observers have pointed out that the market is poised to see a marked increase in construction activity in the near to long term. This would potentially translate into a pick up for the construction sector as well,” it said.

“In a bid to support the industry, the Singapore government has stated that it will continue to monitor and adjust the pace of public sector projects to curb excessive price competition while also placing a greater weightage on quality,” Tiong Seng added.

For the second quarter, net profit fell 86.4 percent on-year to S$1.113 million, while revenue declined 68.8 percent on-year to S$55.93 million, it said.

 

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