• Booked gains of S$3.3 billion from disposal of O&M business in 1H23.
  
  
• Excluding discontinued O&M operations, recurring income surged 62% yoy to S$340 million in 1H23, making up 76% of S$445 million 1H23 net profit.
  
  
• Delivered Total Shareholder Returns of 118.0% from 1 Jan 2022 to 30 Jun 2023, outperforming STI’s 9.62% by over 12x.
  
  
• Rewarding shareholders with strong dividends:
  
  
  • 1H23 interim cash dividend:
    Declares 15.0 cts/share to be paid on 18 Aug 2023.
    
    Including FY22 final cash dividend of 18.0 cts/share paid in May 2023, shareholders will receive total cash dividends of 33.0 cts/share in 2023, representing 4.7% yield^[1].
    
    
  • 55^th anniversary special dividend in-specie:
    Proposes distribution of 1 Keppel REIT unit^[2], for every 5 Keppel Corporation shares held.
    
    

Keppel Corporation Limited (Keppel) reported a net profit of over S$3.6 billion for the half year ended 30 June 2023, the highest profit on record in the Company’s 55-year history. 1H23’s net profit was significantly higher than the S$498 million reported in 1H22, underpinned by a S$3.3 billion disposal gain from the divestment of the offshore and marine (O&M) business. Annualised Return on Equity (ROE) was 36.8% in 1H23, compared to 8.4% in 1H22.

Excluding the discontinued O&M operations in both periods, Keppel delivered a robust net profit of S$445 million in 1H23, which was about 3% higher year on year (yoy), bolstered by stronger performance by the Infrastructure and Connectivity segments. About 76% of 1H23’s net profit from continuing operations comprised recurring income, which surged 62% yoy to S$340 million from S$210 million in 1H22.

The Company’s revenue from continuing operations in 1H23 grew 11% to S$3,716 million from S$3,356 million in 1H22, underpinned by higher contributions from the Infrastructure and Connectivity segments.

Amid inflation and a high interest rate environment, Keppel continued to strengthen its business resilience. As at end-June 2023, about 65% of Keppel’s borrowings were on fixed rates, with an average interest cost of 3.53% and weighted tenor of about three years, while the Company’s Adjusted Net Debt to EBITDA^[3] was 4.7x.

Mr Loh Chin Hua, CEO of Keppel Corporation, said, “The first six months of 2023 were transformational and productive for Keppel. Following the successful divestment of the O&M business, we embarked on a monumental shift to remove our conglomerate structure and become a global alternative real asset manager, with deep operating capabilities in Infrastructure, Real Estate and Connectivity. The strong execution of our transformation plans has allowed us to create superior, tangible value for shareholders. Over the 18-month period from 1 January 2022 to 30 June 2023, Keppel’s total shareholder return reached 118.0%, outperforming STI’s 9.62% by more than 12 times.”

In 1H23, Keppel achieved asset management fees of S$116 million^[4], translating into an annualised Fee-to-FUM ratio of 50 basis points^[5]. Over this period, the Company raised about S$1.0 billion in equity, completed S$1.1 billion in acquisitions and divested S$0.5 billion of assets. As at end-June 2023, Keppel’s Assets Under Management^[6] (AUM) was S$65.6 billion, which included about S$12.4 billion of real assets on Keppel’s balance sheet that can be potentially converted into fee-bearing Funds Under Management (FUM) over time. FUM as at the end of June 2023, was about S$53.2 billion, which Keppel aims to grow to S$100 billion by 2026, and S$200 billion by 2030.

Mr Loh, said, “Looking ahead, we believe that 2H23 will present more interesting investment opportunities as the market adjusts to the new pricing paradigm, which better reflects the tighter credit markets, higher interest rates and more subdued economic growth outlook. Amidst the volatile environment, we will continue working with our limited partners to provide differentiated products that capitalise on Keppel’s strong operating capabilities, including our proprietary assets, which can produce strong inflation-protected cash flows.”

Notwithstanding more cautious investor sentiments, Keppel announced the monetisation of about S$420 million of assets in the year to date, raising its cumulative total to over S$4.8 billion, and releasing S$3.8 billion^[7] in cash, since the asset monetisation programme began in October 2020. Proceeds from asset monetisation are being invested in new growth engines, leveraging Keppel’s asset-light model, and also used to reward shareholders.

As an appreciation of the support and confidence of Keppel shareholders, the Board of Keppel Corporation has approved an interim cash dividend of 15.0 cents per share for 1H23. This interim dividend, which will be paid to shareholders on 18 August 2023, is comparable to last year’s interim dividend of 15.0 cents.

With the latest interim cash dividend of 15.0 cents for 1H23, coupled with the FY22 final cash dividend of 18.0 cents per share paid in May 2023, shareholders will be receiving a total cash dividend of 33.0 cents in 2023 for every Keppel share held. This translates into a cash dividend yield of 4.7% based on Keppel’s closing share price of S$6.99 on 26 July 2023. 

In addition to the interim cash dividend, the Board of Keppel Corporation has also proposed the distribution of a special dividend in-specie of Keppel REIT (KREIT) units to commemorate Keppel’s 55^th anniversary. For every five Keppel Corporation shares held, Keppel’s shareholders will receive one KREIT unit^[8]. Keppel REIT traded at S$0.915 per unit on its closing on 26 July 2023.

The proposed dividend in-specie is a part of Keppel’s capital management initiatives, and will further allow shareholders to own a stable investment with steady yield. The proposed dividend in-specie will be subject to Keppel shareholders’ approval at an Extraordinary General Meeting (EGM) to be held later this year. Further details on the EGM will be announced in due course.

Post distribution, Keppel will remain the largest unitholder of KREIT with an interest of about 37.1%, and remains committed to drive KREIT’s growth in alignment with the interests of unitholders. Keppel’s proposed distribution will further increase KREIT’s public float, allowing it to widen its investor base and enjoy higher liquidity which are beneficial to KREIT unitholders in the longer run.

For more details on the proposed special dividend in-specie, please refer to the separate announcement released today.

Financial Highlights

• Annualised ROE was 36.8% in 1H23 compared to 8.4% in 1H22.
• Net gearing was 0.86x, while Adjusted Net Debt to EBITDA^[9] was 4.7x as at end-June 2023.
• Free cash outflow was S$732 million^[10] in 1H23 compared to S$127 million in 1H22.
• Declared interim cash dividend of 15.0 cents per share for 1H23 and proposed special anniversary dividend in-specie of 1 Keppel REIT unit for every 5 Keppel Corporation shares held.

– END –

Business Segments

Infrastructure

The Infrastructure segment’s net profit more than doubled to S$291 million in 1H23, compared to S$139 million in 1H22, driven by stronger contributions from the integrated power business. More than 99% of customers are locked in on fixed or indexed electricity price plans, providing a cushion against power price fluctuations.

Keppel also expanded its end-to-end Energy-as-a-Service (EaaS) offerings in Singapore and into new geographies, securing S$1.2 billion of EaaS subscriptions in the year to date, including those in Thailand and Vietnam. As at end-June 2023, Keppel’s long-term contracts, comprising EaaS and Operations and Maintenance, reached S$4.1 billion, and will provide income visibility for the next 10-15 years.

In 1H23, Keppel’s renewable energy portfolio grew to 3.0 GW, making up over 60% of its total energy portfolio of 4.9 GW^[11], with projects across the spectrum of solar, wind and hydro power.

Real Estate

The Real Estate segment reported a net profit of S$186 million, which was S$76 million lower yoy, due mainly to lower revaluation gains from investment properties and lower operating income. This was offset by higher asset management fee income, development profits and gains from capital recycling.

In China, home sales in China increased 2.5x yoy to 1,200 units in 1H23. In the Sino-Singapore Tianjin Eco-City, Keppel’s master developer sold two residential plots in 1H23, underscoring the continuing demand for quality land parcels despite the broader economic slowdown.

In line with Keppel’s pivot away from lumpy development profits to more recurring income, the Real Estate Division has monetised over S$3 billion of assets in China since 2017, and recognised a profit of more than S$1 billion. Some of the unlocked capital is being reallocated to opportunities in different countries, such as India and Vietnam, as well as different asset classes, leveraging Keppel’s asset-light model.

Meanwhile, the Real Estate segment continues to expand its sustainable urban renewal (SUR) solutions across Asia Pacific and is also working with Keppel’s private funds to offer SUR capabilities as part of asset enhancement initiatives.

Connectivity

The Connectivity segment’s net profit of S$37 million was higher yoy, compared to S$33 million in 1H22, due mainly to higher operating income from M1, offset by lower contributions from the Data Centres and Networks Division due to costs of entering into new markets and initiatives.

In 1H23, Keppel achieved financial close for the Bifrost project, with Keppel’s co-investors holding a 60% stake in Keppel’s share of the fibre pairs. Keppel will earn operating and maintenance fees in a span of over 25 years once the system is completed in 2024. The Data Centres and Networks Division has secured over S$400 million in long-term operating and maintenance fees for the first two committed fibre pairs. Meanwhile, the first two buildings of the Keppel Data Centre Campus at Genting Lane have been fully contracted.

M1 continued to expand its solutions and services to both business and consumers. Revenue from the enterprise business grew 50% yoy to S$222 million in 1H23, making up about 37% of M1’s revenue for this period, compared to 28% in 1H22. In the consumer business, M1’s mobile customer base grew 12.5% yoy. Its consumer migration to its new cloud native connectivity platform, to be completed in 2H23, is expected to contribute further profits with better customer acquisition and lower costs to serve.

^[1] _{Based on Keppel’s closing share price of S$6.99 on 26 July 2023.}

^[2] _{The final value of the dividend in-specie will be based on the price of Keppel REIT units on the date the Proposed Distribution is completed, which is subject to the approval of Keppel Corporation’s shareholders at an EGM to be held in due course.}

^[3] _{Adjusted net debt is defined as net debt less carrying value of non-income producing undeveloped land and properties held for sale (completed and under development). EBITDA is defined as annualised profit before depreciation, amortisation, net interest expense and tax.}

^[4] _{Includes 100% fees from subsidiary managers, joint ventures and associated entities, as well as share of fees based on shareholding stake in associate with which Keppel has strategic alliance.}

^[5] _{1H23 Fee-to-FUM ratio is on a run-rate basis. The ratio is computed based on average FUM for the year.}

^[6] _{Includes carrying values of identified assets on the balance sheet, as well as gross asset values of certain identified underlying assets held in joint ventures, that can be potentially converted into fee-bearing Funds Under Management (FUM). Notes receivables (vendor notes issued by Asset Co) amounting to c.S$4.3 billion is included.}

^[7] _{Includes S$0.3 billion which was received from the sale of 1 Borr rig which has gone to Asset Co to form its initial working capital, and from the sale of the 55 Gul Road facility which has been transferred to SCM.}

^[8] _{The final value of the dividend in-specie will be based on the price of Keppel REIT units on the date the Proposed Distribution is completed, which is subject to the approval of Keppel Corporation’s shareholders at an EGM to be held in due course.}

^[9] _{Adjusted net debt is defined as net debt less carrying value of non-income producing undeveloped land and properties held for sale (completed and under development). EBITDA is defined as annualised profit before depreciation, amortisation, net interest expense and tax.}

^[10] _{Includes S$500 million cash component realised as part of the divestment of discontinued operations, which will be presented as cash inflow from financing activities in the financial statements. The inclusion herein is for better comparability and understanding of the free cash flow.}

^[11] _{On a gross basis and includes projects under development; 64% of capacity is operational while 36% under development.}