King Wan Corporation (554) H1 2023 earnings summary

Executive summary

• 1H2023 revenue rose to S$41.2m from S$35.6m as construction activity increased, but the period ended in a S$5.1m net loss versus S$0.4m profit in 1H2022.

• Higher material and manpower costs on pre-pandemic projects drove gross margin from 10.1% profit to a 0.4% gross loss; total comprehensive loss was S$7.1m, including a S$2.2m FVTOCI investment loss.

Financial highlights

• Revenue increased S$5.5m to S$41.2m; gross loss was S$0.2m versus gross profit of S$3.6m in 1H2022.

• Operating expenses included S$5.3m of administrative expenses, up S$2.8m, and S$60k of other operating expenses; finance costs rose 28% to S$471k.

• Net loss was S$5.067m versus net profit of S$435k; income tax credit was S$280k versus expense of S$149k.

• Basic and diluted EPS was a loss of 0.73 cents versus earnings of 0.12 cents in 1H2022.

Outlook and guidance

• Approximately S$166.8m of M&E engineering contracts were on hand; M&E remains the core business, with M&E and portable lavatory rentals expected to continue generating income.

• Management expects M&E engineering to remain challenging over the next 12 months due to labour shortages, rising material costs and challenging economic conditions; liquidity will be monitored.