Hiap Seng profit up 143% to $31.5mln

Record net profit due to better margins and absence of any provision for doubtful debts.

Hiap Seng Engineering Ltd, a specialist integrated engineering group for the global oil- and-gas, petrochemical and pharmaceutical industries, on Monday announced a 142.9% surge in net profit attributable to shareholders to S$31.5 million for the full year ended March 31, 2010 (FY2010). This was achieved on the back of a 12.4% increase in revenue to S$252.1 million, according to a Hiap Seng report.

Apart from a positive impact from higher revenue, the net profit increase was also due to better margins and the absence of any provision for doubtful debts for FY2010. Share of associated companies profit of S$0.8 million for FY2010 as compared to share of associated companies loss of S$1.2 million for FY2009, has also contributed to the Group’s net profit for FY2010.

For 4QFY2010, net profit attributable to shareholders rose 98.4% to S$8.1 million on the back of a 11.7% increase in revenue to S$57.4 million, resulting from the completion of numerous projects as well as higher profit margins from cost efficiencies and improved productivity.

Said Mr. Frankie Tan, Chairman and CEO of Hiap Seng, "We are heartened by the strong set of results that we have delivered. This, we believe, is a testimony to the resilience of our core business. As the economy picks up, we will continue to control costs and improve productivity. At the same time, we look to enhance shareholder value by exploring new and viable business opportunities."

The Group’s order book as at today stands at S$207.0 million.

Review of performance
In terms of gross profit margin, for 4QFY2010, it was up at 22.5% as compared to 22.0% for the same corresponding period. As for FY2010, gross profit margin increased to 22.0% from 15.2% in FY2009. This is attributed to savings from the Group’s continued efforts in cost controls and improved productivity.

Segmentally, the Group’s core business segment, Plant Construction and Maintenance segment, which makes up about 87.1% of total sales in FY2010, continued to perform well. Revenue from this segment increased significantly by 43.9% to S$219.6 million in FY2010 from S$152.7 million in FY2009. This increase was mainly due to the completion of numerous projects during FY2010.

The Group’s Compression and Process Equipment Fabrication segment, which makes up the remaining 12.9% of total revenue in FY2010, experienced a 54.7% decline in revenue to S$32.5 million as major projects were completed in FY2009. As at March 31 2010, the Group was in a net cash position with cash and cash equivalents of S$17.7 million (S$25.7 million as at March 31, 2009). However, a substantial amount of the trade receivables had been received subsequent to the financial year end.

Outlook
The outlook for the oil-and-gas, petrochemical and pharmaceutical industries, which the Group serves, remains positive. Barring any unforeseen circumstances, the Directors are optimistic about the Group’s performance for FY2011. The Group will continue with its efforts to control costs, improve productivity and explore new business opportunities in order to enhance shareholder value.

Proposed final dividend
To reward its loyal shareholders, Hiap Seng is proposing a final dividend of 3.0 cents per share, which, if approved by shareholders at the Annual General Meeting to be held on July 28, 2010, will be paid on August 27, 2010.

Together with the interim dividend of 1.0 cent per share paid on January 18, 2010, the total dividend payout for the year amounts to S$12.2 million.