Management Discussion & Analysis
Free Cash Inflow
$1,802m

As compared to $540m in FY 2016.

Earnings Per Share
11.9cts

Includes one‑off financial penalty from the global resolution and related costs.

Group Overview

Group net profit for 2017 was $217 million, down 72% from $784 million for 2016, due largely to the one‑off financial penalty arising from Keppel Offshore & Marine’s (Keppel O&M) global resolution with criminal authorities in the US, Brazil and Singapore, and related legal, accounting and forensics costs amounting to $619 million. This was partly offset by earnings growth registered by the Property, Infrastructure and Investments divisions.

Earnings Per Share (EPS) was 11.9 cents, down 72% from 43.2 cents for 2016. Return On Equity (ROE) was 1.9%, compared to 6.9% for 2016. Economic Value Added (EVA) was negative $834 million for 2017, compared to negative $140 million for 2016.

Free cash inflow for 2017 was $1,802 million, compared to $540 million for 2016. Meanwhile, net gearing for 2017 was 0.46 times, compared to 0.56 times for 2016.

Total cash dividend for 2017 will be 22.0 cents per share. This comprises a proposed final cash dividend of 14.0 cents per share and the interim cash dividend of 8.0 cents per share paid in the third quarter of 2017.

Key Performance Indicators
2017
$ million
17 vs 16
% +/(-)
2016
$ million
16 vs 15
% +/(-)
2015
$ million
Revenue 5,964 -12 6,767 -34 10,296
Net profit 217^ -72 784 -49 1,525
Earnings Per Share 11.9 cts^ -72 43.2 cts -49 84.0 cts
Return on Equity 1.9%^ -73 6.9% -51 14.2%
Economic Value Added (834)^ +496 (140) n.m. 648
Operating cash flow 1,377 +368 294 n.m. (785)
Free cash flow* 1,802 +234 540 n.m. (694)
Total cash dividend per share 22.0 cts +10 20.0 cts -41 34.0 cts
^ Includes the one‑off financial penalty from the global resolution and related costs of $619 million.
* Free cash flow excludes expansionary acquisitions and capital expenditure, and major divestments.

Segment Operations

Group revenue of $5,964 million for 2017 was $803 million or 12% below that of 2016. Revenue from the O&M Division declined by $1,052 million to $1,802 million due to lower volume of work and deferment of some projects. Major jobs completed and delivered in 2017 include a semisubmersible, a subsea construction vessel, a Floating Production Storage and Offloading (FPSO) vessel conversion, an FPSO topsides installation/integration, a module fabrication & integration, a floating liquefaction vessel conversion and an ice‑class multi‑purpose vessel. Revenue from the Property Division decreased by $253 million to $1,782 million due mainly to lower revenue from China and Singapore, partly offset by higher revenue from Vietnam. Revenue from the Infrastructure Division grew by $463 million to $2,207 million as a result of increased sales in the power and gas businesses and progressive revenue recognition from the Keppel Marina East Desalination Plant project.

Group net profit of $217 million was $567 million or 72% lower than the previous year. Loss from the O&M Division was $835 million as compared to net profit of $29 million in the prior year. This was mainly due to the one‑off financial penalty from the global resolution and related costs of $619 million, lower operating results arising from lower revenue and lower share of associated companies’ profits. The negative variance was partly offset by lower impairment provisions and lower net interest expense.

Profit from the Property Division of $685 million increased by $65 million due largely to higher fair value gains on investment properties and higher contribution from Singapore and Vietnam property trading and en bloc sales of development projects, partly offset by lower share of associated companies’ profits.

Profit from the Infrastructure Division of $132 million increased by $33 million due largely to higher contribution from Energy Infrastructure, the gain on divestment of its interest in GE Keppel Energy Services, as well as the recognition of fair value gain on investment. These were partly offset by lower contribution from the data centre business, due mainly to the absence of contribution from Keppel DC Singapore 3, which was injected into Keppel DC REIT in January 2017.

Profit from the Investments Division of $235 million increased by $199 million due mainly to higher share of profits from Sino‑Singapore Tianjin Eco‑City and k1 Ventures, higher contribution from the asset management business, write‑back of provision for impairment of investments and profit on sale of investments. These were partly offset by the share of loss in KrisEnergy and recognition of fair value loss on KrisEnergy warrants.

Excluding the one‑off financial penalty from the global resolution and related costs, the Property Division was the largest contributor to Group net profit with an 82% share. This was followed by the Investments Division at 28% and the Infrastructure Division at 16% while the O&M Division contributed negative 26% to the Group’s net profit.

^ Includes the one-off financial penalty from the global resolution and related costs of $619 million.