Written by The Edge
Koon Holdings, one of Singapore’s largest civil engineering, reclamation and shore protection specialists, says it posted a 30.9% increase in net profit to $6.1 million for the six months ended 30 June 2010 (1H2010) from $4.7 million in 1H2009.
Koon Holdings says this was backed by improvements in gross margins for its Construction division and negative goodwill arising from the acquisition of the Precast division.
Revenue declined 43.5% to $39.6 million in 1H2010 from $70.0 million in 1H2009. This was mainly due to a drop in revenues from its Construction and Marine Logistics divisions, which were affected by the substantial completion of major projects and slowdown in demand for marine transportation services respectively.
However, the decline was partially mitigated by increasing contributions from its Land-based Rental and newly acquired Precast division. The Precast division had maiden sales of $3.7 million in the three months since its acquisition in March 2010.
Contributions from the Precast division together with higher gross margins from the Construction division helped push gross profits up 16.7% from $7.3 million in 1H2009 to $8.5 million in 1H2010.
The Construction division experienced higher margins as it reversed provisions for foreseeable loss of $3.4 million from various cost control measures to reduce costs over the life of a project. These include centralised sourcing & procurement, standardisation of procurement requirements, increasing the pool of subcontractors and suppliers, as well as employing more innovative methods towards resolving project or cost issues.
The group’s Marine Logistics division saw a decrease in gross margin contributions due to lower charter and utilisation rates for tugboats and barges, which paralleled the lower demand for such vessels generally. The need to rent more third party equipment and higher fuel costs resulted in marginally lower gross margins from its Land-based Rental division.
With the strong operational performance over the past six months, the group has further increased its cash reserves and reduced its gearing. The group’s cash and cash equivalent was $31.5 million as at 30 June 2010. The sizable cash reserves grants the group the flexibility and ability to seize potential opportunities to grow through both business and geographical expansion.
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