Down but still strong: BBR posts lower revenues, but profit still up

The construction company's revenue for the first nine months of 2010 might have contracted due to lower revenue contribution from general construction, but gross profit expanded 49%, thanks to specialised engineering projects.

Group revenue was S$146.2 million for the period ending in 30 September 2010 compared to S$166.7 million previously. Although revenue was lower, gross profit expanded 49% or S$6.7 million to S$20.3 million from S$13.7 million a year ago. This was due to higher contribution from Specialised Engineering and General Construction. Also, there was additional revenue recognition from finalisation of billings for various projects completed in 2009, of which costs were already accounted for in 2009.

Along with higher gross profit for the period, margins increased to 14% from 8% previously. Earnings per share for the nine months ended 30 September 2010 was 3.47 Singapore cents against 2.60 Singapore cents a year ago.

Revenue contracted due to lower revenue contribution from general construction projects during the period under review. Although work had commenced for a number of general construction projects since 2Q10, these have not reached the minimum percentage of completion required for revenue recognition in accordance to the Group’s accounting policy.

Share of results of associates was S$4.9 million for the period under review compared to S$5.7 million in the previous corresponding period as the development at 8 Nassim Hill has achieved temporary occupation permit status and is in the finalisation stage compared to a year before when it was in an active stage of construction.

On a quarterly basis, Group revenue exceeded last year’s figure by 50% to reach S$77.4 million compared to S$51.7 million. This was due to higher revenue being recognised from construction activities for both general and specialised engineering projects during the quarter. Accordingly, gross profit grew by S$0.8 million or 14% to S$7.1 million. Gross profit margin was 9% compared to 12% previously as a result of lower margins from certain specialised engineering projects. Profit after tax attributable to shareholders grew 19% during the quarter to S$3.5 million.

With solid earnings growth for the period, BBR maintained its strong financial position backed by total assets of S$225.3 million. Equity attributable to equity holders of the company was S$70.8 million, growing 15% over the S$61.7 million registered on 31 December 2009. Net asset value per share was 23.31 Singapore cents as at 30 September 2010. Market capitalisation came to approximately S$76.9 million based on the 8 November 2010 closing share price of 25.0 Singapore cents.

The Group has net cash generated from operating activities of S$2.8 million for the nine months ended 30 September 2010. Net current assets were S$90.6 million with cash and fixed deposits of S$44.1 million at 30 September 2010.

BBR Chief Executive Officer Andrew Tan said of the overall results, "Our strong third quarter performance, coupled with a positive liquidity position and an increasing domestic market presence in civil engineering and building construction, form a solid foundation for the continued growth of the Group.

“Our results also serve to show that a steady base of projects, a proven track record, a sound financial base and a strong commitment to service delivery provide the company with an edge in a highly competitive market."

The Group’s order book was a good S$520 million to date with projects going until 2014, comprising mainly civil engineering and building contracts in Singapore and Malaysia. With this order book and strong financials, the Group expects to remain profitable for financial year 2010.

Quoting the Ministry of Trade and Industry’s estimates, Mr Tan said construction outlook for the next 12 months looks optimistic, particularly with Singapore’s Gross Domestic Product forecasted to grow at 13% to 15% in 2010 and an ongoing flow of government projects.

Furthermore, the Building and Construction Authority has projected total construction demand in 2010 to reach S$21.0–S$27.0 billion with the greater part - about 65% - coming from the public sector. This will mainly be made up of building construction and civil engineering projects from the Land Transport Authority such as the MRT projects for Downtown Line Stage 3 and other large-scale road projects.

In the months ahead, Tan said the Group will remain focused on its core building construction and civil engineering business as it rides on the economic recovery wave and takes advantage of the pipeline of projects coming on stream, while at the same time manage its cost structure and enhance operational efficiencies in all ongoing and upcoming projects. On the property front, the Group will continue to conduct feasibility studies on new property development projects.