http://www.straitstimes.com/archive/...ls-24-20130727

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Net profit for Lian Beng falls 24%

Construction group hit by smaller profit margins

Published on Jul 27, 2013

By Dennis Chan Deputy Money Editor


FALLING margins have dealt a blow to construction powerhouse Lian Beng Group, which yesterday reported a 24.3 per cent drop in net profit to $39.4 million.

This was despite a 13.6 per cent rise in revenue to $505.6 million for the year ended May 31.

Gross profit slipped by 11.6 per cent to $65 million, resulting in a 3.6 percentage point fall in gross profit margin to 12.9 per cent.

Construction projects suffered from lower gross margin.

Although revenue contribution of ready-mixed concrete increased, its gross margin was generally lower than construction margin.

The drop in net profit can also be attributed to the absence this year of a one-off gain that netted $7.9 million for the group last year.

Investment properties increased from $66.2 million to $136.6 million as at May 31, mainly due to the purchase of two Emerald Hill residential units, progressive payment for long-term investment in residential units, and development cost on a workers' dormitory in Mandai.

The value of development properties also increased - from $96.7 million to $162.4 million - largely due to the increase in costs incurred for Lincoln Suites, M Space, Spottiswoode Suites and The Midtown @ Hougang.

Lian Beng's cash and cash equivalents remained strong at $170.9 million.

Earnings per share fell to 7.45 cents from 9.83 cents previously while net asset value per share firmed by 5.51 cents to 49.2 cents.

The company has proposed a final payout of 1.25 cents a share, down from two cents last year.

Looking ahead, Lian Beng is cautiously optimistic about the outlook for the construction industry in the next 12 months.

It will continue to leverage on its core business of construction and on its record to tender for more public and private sector projects.

As at May 31, Lian Beng's orderbook stood at $1.3 billion. This should provide it with a constant flow of activities through financial year 2016.

While the group has sold fully its 55-per-cent owned industrial development project known as M Space at Mandai Estate, it will only recognise the revenue and related costs of development when the project receives its temporary occupation permit next year.

Lian Beng shares eased half a cent to 58 cents yesterday. The results were announced after the market closed.

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