Hiap Seng profit up 7.4% to $8mln

Despite 19.8% revenue growth, strict competition makes group cautiously optimistic about performance for current financial year.

Hiap Seng Engineering Ltd (Hiap Seng or the Group), a specialist integrated engineering group for the global oil-and-gas, petrochemical and pharmaceutical industries, on Friday reported a revenue increase of 19.8% to S$67.9 million for the first quarter ended June 30, 2010 (1QFY2011) from S$56.6 million in 1QFY2010.

The Group’s net profit attributable to shareholders for 1QFY2011 increased by 7.4% from S$7.5 million to S$8.0 million as compared to 1QFY2010 mainly due to the Group’s improved revenue and gross profit. The increase was reduced by the share of loss of associated companies of S$0.1 million as compared to the share of profit of S$0.8 million for the previous corresponding period, as stated in a Hiap Seng report.

Said Mr Frankie Tan, Chairman and CEO of Hiap Seng: “We are pleased to have grown from strength to strength, and achieved another strong quarter. The oil-and-gas, petrochemical and pharmaceutical industries which we serve remain positive and it bodes well for us as we endeavour to push for more contracts in these industries.”

As at August 6, 2010, the Group's outstanding order book stands at S$166.0 million.

Review of performance
Due to a higher percentage of completion in a number of projects in 1QFY2011 and higher revenue, the gross profit for the period under review also increased from S$12.5 million to S$13.8 million. Notwithstanding this, gross profit margin decreased marginally to 20.4% from 22.1% for the period under review due to higher cost in executing some projects.

The decrease of S$24.5 million in trade and other receivables as at June 30, 2010 as compared to March 31, 2010 was due to more collections of the receivables in 1QFY2011. The decrease of S$14.3 million in contract work-in-progress as at June 30, 2010 as compared to March 31, 2010 was due to the completion of major projects in 1QFY2011.

The Group’s cash and cash equivalents stood at S$52.7 million as at June 30, 2010 (S$17.7 million as at 31 March 2010). The increase of S$35.0 million was mainly due to the decrease in trade and other receivables and contract work-in-progress during the financial period under review.

Outlook
The outlook for the oil-and-gas, petrochemical and pharmaceutical industries that the Group serves remains positive. However, in view of keen competition, the Directors of the Company are cautiously optimistic about the Group’s performance for the current financial year ending 31 March 2011.

The Group will continue with its efforts to control costs and improve productivity and with a strong financial position, it will continue to explore new business opportunities to enhance shareholder value.