Chip Eng Seng’s net profit plunges 29% to $123.7m in 2011

As its completed projects in property development didn’t do so well last year.

The Group’s total revenue decreased by 58.0% to $57.5 million for 4Q2011 compared to the restated revenue of $136.8 million for 4Q2010, according to a financial statement.

Construction revenue decreased by 25.5% to $52.2 million for 4 contributions from completed projects such as The Parc Condominium , CityVista Residences, Grange Infinite and Sengkang N4C3, as well as lower contributions from Queenstown RC25 and Punggol West C25 which were completed or near completion in 4Q2011. Revenue contribution was therefore derived mainly from new construction projects such as Hougang N9C12, Hougang N4C17, Privé and Belysa.

Property Development revenue was $4.4 million for the quarter, compared to $66.1 million a year ago, due mainly to the absence of significant contribution from Oasis@Elias which was completed in September 2011. There was also no significant revenue contribution from My Manhattan (43% sold) as the project has not reached an active stage of construction progress for profit recognition to be significant.

Lower profits from property development were offset by the increase in profit contribution from the construction division, which benefited from cost savings from past projects. As a result, Group gross profit decreased by 12.1% to $31.5 million.

Share of losses in the results of associates was $2.7 million in 4Q2011 compared to share of profits of associates of $12.0 million in 4Q2010. The losses were mainly attributed to the Group’s interest in new joint-venture executive condominium projects, namely Belysa and Privé where marketing and selling expenses had been incurred while no revenue was recognised yet, as well as losses at its associates in Vietnam.

Consequently, Group pretax profit decreased from a restated $42.2 million to $29.4 million in 4Q2011.

FY 2011 Performance
FY2011 Group’s total revenue decreased by 24.5% to $360.0 million, compared to the restated revenue of $477 million in FY2010.

Construction revenue decreased by 32.5% to $205.9 million in the absence of contributions from completed projects such as The Parc Condominium and CityVista Residences, and lower contributions from Grange Infinite and Sengkang N4C3, both of which were completed in 1Q2011. Both Queentown RC25 and Punggol West C25 which were completed or near completion also contributed to the decrease. Revenue contribution from new projects such as Hougang N9C12, Hougang N4C17, Privé and Belysa contributed to the revenue for the current year.

Property Development revenue decreased by 10.4% to $152.0 million due to lesser progressive recognition of revenue from 100%-owned Oasis@Elias as the project was completed in 3Q2011, but compensated by maiden contributions from recognition of sales in My Manhattan.

Gross profit increased by 138.4% to $139.7 million, due mainly to higher construction earnings and progressive profit recognition of sales of units in Oasis@Elias and My Manhattan. The higher construction earnings were due to substantial cost savings realised on projects completed in 2011, as a result of value-added engineering and better project management.

Share of results of associates decreased from $143.6 million to $23.8 million in FY2011. This was due to the absence of contributions from The Parc Condominium and CityVista Residences which were completed in 2010. The contribution in FY2011 was mainly from Grange Infinite which was completed in 2011.

Group pre-tax profit decreased from a restated $177.1 million to $141.9 million. Income tax expenses however rose from $2.8 million to $18.2 million, comprising of tax on development profits on whollyowned projects and profits on construction projects. The lower tax expenses in the previous year were due to the share of results of associates which was presented net of tax.