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1Q 2002 Results Announcement

1Q 2002 Results Announcement. 18 April, 2002. Scope of Briefing. Group Financial Highlights 1Q Business Review and 2Q Outlook Strategic & Corporate Review. 1. Group Financial Highlights. Financial Highlights in 1Q. 1Q PATMI was S$82m, 47% higher than last year

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1Q 2002 Results Announcement

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  1. 1Q 2002 Results Announcement 18 April, 2002

  2. Scope of Briefing • Group Financial Highlights • 1Q Business Review and 2Q Outlook • Strategic & Corporate Review

  3. 1. Group Financial Highlights

  4. Financial Highlights in 1Q • 1Q PATMI was S$82m, 47% higher than last year • Offshore and Marine contributed 48% • Investments contributed 29% • Annualised ROE surpassed 12%, an increase from 10.1% in year 2001 • Current order book is about S$3.5 billion

  5. Financial Highlights – P/L % Change ($m) 1Q 2001* 1Q 2002 1,163.6 1,540.0 Turnover (24) 155.9 236.1 (34) EBITDA 113.6 184.3 (38) Operating Profit Profit Before Tax 131.1 187.0 (30) PATMI before EI 82.1 55.9 47 EPS before EI (cents) 10.7 7.3 47 Higher PATMI and EPS are due to the net effect of divesting KCH and privatising KFEI and KHZ. * Include Keppel Capital Holdings (KCH) contributions

  6. Financial Highlights – B/S As at 31 Mar 2002 As at 31 Dec 2001 ($m) % Change Shareholders’ Fund 2,743 2,658 3 Capital Employed 4,057 4,114 (1) 4,737 4,525 5 Net Debt Net Gearing 1.17x 1.10x 6 ROE (Before EI) 12.2%* 10.1% 21 Balance sheet remains strong. Annualised ROE improved by 21% to reach 12.2% * Annualised

  7. Turnover by Segments ($m) 1Q 2001 % % Change 1Q 2002 % Offshore & Marine 261.7 24 385.1 33 47 113.5 10 Infrastructure 135.2 19 12 68.0 Property 93.3 8 6 37 653.6 60 Investments 549.9 47 (16) Total 1,096.8 100 1,163.6 100 6 443.2 Keppel Capital 0 na Turnover of core businesses* increased by 38% * Core businesses are Offshore & Marine, Infrastructure and Property

  8. EBITDA by Segments ($m) 1Q 2001 % % Change 1Q 2002 % Offshore & Marine 22.4 20 61.4 39 174 35.9 33 Infrastructure 15.1 (58) 10 38.8 Property 36.4 23 36 (6) 11.9 11 Investments 43.1 28 262 Total 108.9 100 155.9 100 43 127.2 Keppel Capital 0 na Strong cash generation from core businesses* * Core businesses are Offshore & Marine, Infrastructure and Property

  9. PATMI by Segments ($m) 1Q 2001 % % Change 1Q 2002 % Offshore & Marine 5.6 24 38.9 48 595 16.3 70 Infrastructure 5.7 (65) 7 12.4 Property 13.2 16 54 6 (11.1) (48) Investments 24.2 29 na Total 23.2 100 82.1 100 254 32.7 Keppel Capital 0 na PATMI of core businesses* grew by 69% to S$58m from S$34m * Core businesses are Offshore & Marine, Infrastructure and Property

  10. Result By Segments

  11. Growth of Core Businesses PATMI (before EI) 57.8 69% growth 34.3 (S$m)

  12. 1Q Business Review and 2Q Outlook

  13. 1Q Group Business Highlights • O&M had 2 project completions • Privatisation of KHZ completed • Clinched US$400m electricity supply contract in Brazil • Network Engineering Division completed S$37.1m* worth of projects • Strong take-up rates for recently launched properties * Exclude Network Engineering projects from associates

  14. Financial Highlights – Offshore & Marine ($m) 1Q 2001 % Change 1Q 2002 385.1 261.7 Turnover 47 61.4 22.4 174 EBITDA 48.5 8.7 457 Operating Profit Profit Before Tax 54.2 11.9 355 PATMI 38.9 5.6 595 Annualised ROE 14.1% 4.3% 228

  15. Offshore & Marine Review • Strong order book resulted in higher turnover in 1Q 2002 • Increase in operating profit because of: • lower unit overheads from higher capacity utilisation rates • higher value-added jobs • 100% profit recognition at Group level

  16. Offshore & Marine Review • Early completion of the US$60m upgrading of semi-submersible ‘Ocean Baroness’ for Diamond Offshore • Awarded cash bonus for early completion • Clinched repeat contract for upgrading of “Ocean Rover” • Completion of US$110m Chiles Discovery jack up rig • Awarded cash bonus for early completion • Integration of KHZ and KFELS on track • synergies of at least S$10m will be achieved in 2H2002 • Major jobs in progress are on schedule and within budget

  17. Offshore & Marine Review • Accolades received: • Keppel FELS • first major shipyard in Singapore to receive re-certification under ISO 9001:2000 • Keppel Shipyard • distinction given by Singapore’s Productivity and Standards Boards in implementing National Skills Recognition System • Recognition for Outstanding Management: • Choo Chiau Beng, Chairman and Managing Director of KFEI awarded “Outstanding CEO of the Year 2001”

  18. Offshore & Marine Outlook • Strong Orderbook of S$2.2b for delivery between 2002 – 2004 • Continue to receive enquiries on new rigs, upgrades, conversions, repairs and new-builds of specialised vessels • Overall market outlook is positive • demand for conversions and upgrades expected to be buoyant due to: • high oil and gas prices • increased activity in deep water production and exploration • shiprepair market likely to remain competitive

  19. Financial Highlights – Infrastructure Network Engineering ($m) 1Q 2001 % Change 1Q 2002 37.1 27.3 Turnover 36 4.5 2.6 73 EBITDA 3.8 2.1 81 Operating Profit Profit Before Tax 5.3 6.5 (18) PATMI before EI 1.3 2.7 (52) ROE na na na

  20. Infrastructure Review Network Engineering • Lower Q1 PATMI due to • increased marketing activity in existing and new markets • infrastructure set-up costs for global operations • Current jobs progressing on time and budget • Making headway in new markets • S$400k initial contract secured from Nokia for Zhejiang province, with potential for S$10m follow-on contract • market development work in Japan, Spain, Luxembourg, France, Italy and the Netherlands

  21. Infrastructure Outlook Network Engineering • Order book of $530m for delivery between 2002 and 2004 • Wireless S$170m • Wireline S$360m • Pursuing orders in excess of S$300m • Better PATMI in 2Q 2002 expected • Current contracts in Malaysia and Germany will be key earnings contributor • Outsourcing of Network Engineering projects by Telcos, Cable Operators and Equipment vendors will continue to fuel growth

  22. Financial Highlights – Infrastructure Utilities Engineering ($m) 1Q 2001 % Change 1Q 2002 98.1 86.1 Turnover 14 10.6 33.3 (68) EBITDA 4.5 29.9 (85) Operating Profit Profit Before Tax 4.9 30.7 (84) PATMI 4.4 13.7 (68) ROE na na na

  23. Infrastructure Review Utilities Engineering • Electricity marketing business contributed to increase in turnover • Lower Q1 PATMI due to realisation of toll-road investment in 1H 2001 • Secured US$400m contract to supply electricity in Brazil between June 2002 - Dec 2004 • Power generation projects are in start-up phase

  24. Infrastructure Outlook Utilities Engineering • Earnings from Brazil power barges project expected to kick in from 2H 2002 onwards • Performance of power generation assets expected to be maintained in 2Q 2002 • Participating in the PUB desalination bid in May 2002 • Any delay of genco privatisation in Singapore will not impact projected earnings for 2002

  25. ROE 5.0% 3.6% 39 Financial Highlights - Property ($m) 1Q 2001 % Change 1Q 2002 93.3 68.0 Turnover 37 36.4 38.8 (6) EBITDA 30.8 32.3 (5) Operating Profit Profit Before Tax 31.1 25.3 23 PATMI 13.2 12.4 6 *Property Segment includes all property related businesses of KCL

  26. Property Review • Strong take-up rates for recently launched properties resulted in higher turnover: • The Edgewater – 100% sold • Amaranda Gardens – 98% sold • Butterworth 8 - 100% sold • Appointed HypoVereinsbank for securitisation of more than S$300m worth of receivables from above 3 projects • Completed US$800m multi-currency medium-term note (MTN) programme • Pursuing various options to divest investment buildings

  27. Property Outlook • Two residential launches expected in 2Q 2002 • 22-26 Mar Thoma Road • 6 Mar Thoma Road • One Park Avenue in Shanghai to be launched in 2H 2002 • Possible residential launches / re-launches in 2H 2002 • Duchess Park, Parc Devon, The Linc, Norfolk Gardens, Cluny Hill, Freesia Woods and Caribbean • Maintain business development efforts for residential development projects overseas including China, Thailand and Vietnam 127 units

  28. Financial Highlights - Investments ($m) 1Q 2001 % Change 1Q 2002 549.9 653.6 Turnover (16) 43.1 11.9 262 EBITDA 26.1 (9.1) na Operating Profit Profit Before Tax* 35.6 (9.2) na PATMI* 24.2 (11.1) na * Before EI

  29. Investments Review • Higher profitability due to • Higher PATMI of S$13m from SPC due partly to higher product prices in SPC • gains of about S$11m from sale of quoted investments • M1 contributed $6m to Q1 PATMI • customer base crossed the 1 million-mark • Accolades received: • Keppel Logistics awarded ISO 9001, ISO 14001 and OHSAS 18001 simultaneously

  30. Investments Outlook • Singapore refining margins remain challenging • Actively drive divestment of non-core assets: • currently investigating a number of initiatives • expect to announce one major divestment in 2002

  31. Group Outlook for 2Q 2002 Performance for 2Q expected to be maintained

  32. PATMI (1997 – Present) 273 237 220 180 124 83 56

  33. ROE (1997 – Present) * Annualised ROE

  34. Strategic & Corporate Review

  35. Strategic Review Financial Targets - On Track • 15% - 20% CAGR earnings growth through 2003 • ROE of 12% - 15% by end 2003 • Net gearing of 0.6x - 0.8x by end 2003 • EVA focused

  36. Strategic Review Our Roadmap • Focus resources on core businesses • Divest non-core businesses • Strong corporate governance process • Disciplined investment and divestment management • Implement ROE and EVA based performance measures • Revamp reward system to be more individual performance linked • Effective and timely communication for greater market transparency • Widen global reach: markets, facilities, partners and alliances.

  37. Corporate Review Code of Corporate Governance (Ministry of Finance) • Code issued 21 Mar ‘01 • KCL Corporate Governance Committee formed May ‘01 • Corporate Governance Implementation Plan approved by KCL Board Aug ‘01

  38. Corporate Review Strengthening Corporate Governance Increasing accountability of: • Management to Board • Board to Shareholders • Having only independent Directors on Audit, Nominating and Remuneration Committees • Put in place processes for: • Board appraisal of senior management • Board peer appraisal: • of each Director • of Board as a Team • Board appraisal of Chairman

  39. Corporate Review Strengthening Corporate Governance • 2 new independent Directors appointed on 16 April • Board comprises 11 Directors of whom 7 are independent • Appointed 6-member EXCO, comprising 3 independent directors and 3 executive directors

  40. Corporate Governance Structure Shareholders REMUNERATION COMMITTEE AUDIT COMMITTEE KCL BOARD NOMINATING COMMITTEE KCL EXCO Group Risk Management & Internal Audit MDC: Strategic HR Issues KCL MANAGEMENT Offshore & Marine Infrastructure Property Investments

  41. Corporate Review Recognition for corporate transparency • Keppel Land – eighth Grand Award at the 28th Annual Report Awards Competition; • Keppel Corp, Keppel Hitachi Zosen and Keppel Telecommunications & Transportation – Special Commendation • Awards organised by SGX, ICPAS, SIM, SID and BT • Grand Award: Company eligible to be considered for Grand Award only after receiving Best Annual Report for 3 consecutive years

  42. Corporate Review Human Resource Development • Implemented vigorous performance appraisal process: • Completed 1st annual performance ranking • Identified high potential performers • Management of under performers • Implemented performance differentiated variable bonus payment for Y2001’s performance • Initiated succession planning for key positions

  43. Corporate Review Human Resource Development (…contd) • Reviewing Total Remuneration Compensation Structure across the Group • Integrating processes & systems to ensure smooth and efficient 2 - way information flow globally. • Instituted a structured training program with emphasis on key competencies and leverage on the group size.

  44. Corporate Review Improving Investor Relations • Investor road shows: • Hong Kong in Jan 2002 • Europe and USA in Feb 2002 • Initiated quarterly reporting; 1 year ahead of SGX requirements

  45. Growth Strategy • Leverage relationships with strategic partners • Gain greater access to key overseas markets • Focus on growing intellectual capital • Continue to streamline and restructure organisation to improve efficiency and to support growth

  46. Keppel Corporation Q1 2002 Results Thank You

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