Keppel’s profit quadruples to historic high of $4.1 billion

SINGAPORE - Keppel reported its highest profit in history on the back of rising recurring income and gains from the disposal of its offshore marine unit.

The group posted full-year net profit of $4.1 billion for the 12 months to Dec 31, 2023, bolstered by some $3.3 billion in net profit from the divestment of Keppel Offshore & Marine and another $996 million from continuing operations.

This marks a quadrupling from financial year 2022’s profit of $927 million.

Return on equity was 37.9 per cent, compared with 8.1 per cent in financial year 2022.

Second-half earnings from operations for the July to December 2023 period rose 36 per cent to $551 million.

Topline revenue rose 5 per cent to $6.97 billion, underpinned by higher contributions from infrastructure and connectivity segments.

The company-proposed final cash dividend of 19 cents per share brings the total cash dividend to 34 cents per share for financial year 2023.

Total financial year 2023 distribution reached about $2.70 per Keppel share, comprising cash and in-specie distributions of then Sembcorp Marine shares and Keppel Reit units.

Accelerating its transformation into a global asset manager and operator, Keppel delivered total shareholder returns (TSR) of 61.1 per cent for 2023 and 49.3 per cent for 2022, far exceeding the Straits Times Index’s TSR in both years.

All of Keppel’s three engines – infrastructure, real estate and connectivity – fired during the year.

Infrastructure’s net profit rose sharply by 135 per cent year on year to $699 million for financial year 2023, bolstered by higher net generation and margins from the integrated power business.

Speaking at a results conference on Feb 1, chief executive Loh Chin Hua said Keppel’s earnings have become more recurring and should attract valuations based on growth multiples, rather than at a conglomerate discount.

“2023 has been one of the most transformational years in Keppel’s history,” Mr Loh said.

“Amid the volatile global environment, we took pivotal steps to transform Keppel, starting with the successful divestment of the offshore & marine business, which allows us to realise some $9.4 billion in value over time.

“We then unveiled the next phase of our Vision 2030 transformation, shedding our conglomerate structure to become a global asset manager and operator,” he said.

In November 2023, the group announced the acquisition of a 50 per cent stake in European asset manager Aermont Capital for $517 million.

Keppel believes Aermont – ranked the highest among European real estate firms in terms of funds raised in the last five years – will bolster its recurring income and funds under management (FUM), which is projected to grow to more than $77 billion from $53 billion currently.

Keppel also plans to purchase the remaining 50 per cent in the European company in the future.

On a pro forma basis, the Aermont acquisition boosted Keppel’s FUM by $24 billion to $79 billion.

Mr Loh reckons the FUM total will rise to $200 billion by 2030 as Aermont’s FUM grows 2.5 times to $60 billion.

As at end-2023, the company had raised $2.3 billion in equity, spent $2.5 billion on acquisitions, divested $500 million of assets and is pursuing deal flows worth $14 billion.

Meanwhile, Keppel said its real estate segment continued to perform creditably and contributed a significant $426 million to the net profit of financial year 2023, despite challenging conditions in markets like China.

Going into 2024, Mr Loh said Keppel’s recurring income growth would be on track as it moves forward as a nimble global asset manager.

“We expect our fund management and deal-making volume to expand this year,” Mr Loh added.

“The external environment is quite challenging, but our business is in areas of demand and growth, such as digitalisation, connectivity and infrastructure.”

Keppel shares closed trading down one cent at $7.15 on Feb 1.