KS Energy's 3Q Earnings Rise 7%
KS Energy Services has announced a 6.9% increase in net profit on the back of an 8.1% rise in revenue for the quarter ended September 30, 2008 (3Q FY08) compared to the quarter ended September 30, 2007 (“3Q FY07”).
Contributing to the Group's performance this quarter are higher revenue from its Distribution Business and increased charter revenue from its Drilling Services Business, as one more land rig commenced drilling operation in this quarter. At the close of 3Q FY08, the Group's revenue rose from $122.7 million to $132.6 million.
Non operating income, comprising primarily the gain on sale of available-for-sale equity securities, rose by 191.0%, rising from $1.9 million in 3Q FY07 to $5.4 million in 3Q FY08.
Excluding minority interests, net profit after tax in 3Q FY08 amounted to $11.4 million, representing an increase of 6.9% from the $10.6 million reported in 3Q FY07. This brings the net profit for the nine months ended September 30, 2008 (YTD FY08) to $42.8 million compared to $67.1 million for the nine months ended September 30, 2007 (YTD FY07). Excluding the gain on sale of available-for-sale equity securities (net of tax) of $9.3 million in YTD FY08 and $35.2 million in YTD FY07, operating net profit for the nine months ended September 30, 2008 increased by $1.6 million or 5% from $31.9 million in YTD FY07 to $33.6 million in YTD FY08 .
By business segments, revenue contribution from the Distribution Business rose by 26% to $102.0 million, accounting for approximately 70% of the Group's total revenue. The balance of 30% represents $30.8 million revenue contribution from Drilling Services Business. In 3Q FY08, Drilling Services recognised 3 months revenue contribution from Atlantic Oilfield Services Ltd compared to 4 months contribution in 3Q FY07
due to the acquisition of AOS in May 2007.
Total operating expenses of this quarter were higher due mainly to increased distribution costs and other operating expenses. The increase in total operating expenses was due to higher business activities, increased depreciation charges arising from the acquisition of capital equipment and a foreign exchange loss due to the appreciation of the US Dollar against the Singapore Dollar.
For the nine months ended 30 September 2008, the Group reported a 61.7% increase in revenue, which rose from $275.7 million to $445.7 million. Revenue contribution from Distribution Business accounted for approximately 60.6% of the YTD FY08 revenue with the balance of 39.4% being contribution from the Drilling Services Business. Finance costs for 3Q FY08 rose by 9.3% from $6.2 million to $6.8 million. For the nine months ended 30 September 2008, the Group’s finance costs rose by approximately 114.0% from $8.9 million (YTD FY07) to $19.1 million. The higher finance costs were attributable to the interest incurred for the acquisition of AOS, the KS MedStar-1 and imputed interest for the convertible bonds that were issued in August 2007.
YTD FY08 saw an improvement of the Group's net gearing from 1.41 times to 0.81 imes due to the rights issue, which raised a total of $153.9 million. Operating activities generated a cash inflow of $73.0 million compared to $92.9 million used in the same period last year. As at 30 September 2008, cash and cash equivalents stood at $235.5 million, an improvement from the $132.2 million in YTD FY07 due to the proceeds from the rights issue.
"The demand for our capital equipment and drilling services remains strong as evidenced by the better rates commanded by the recent contract extensions for two of the jackup rigs that we are chartering and operating in the North Sea," said Kris Wiluan, Chairman and CEO. "KS Energy has transformed from an asset trading company to an operating company within a relatively short period of time. Today, we have the skills and experience to manage and operate rigs. With many new rigs coming on stream without contracts, we are well-positioned to capitalise on this opportunity to charter them at good rates and provide services to oil majors. This is in line with the Group’s asset-light strategy, " Wiluan added when commenting on the outlook for the Group's business.
"With regards to the KS Titan 1 lift boat, we are in discussions with our customer to substitute a similar type sister-ship for the contract that was awarded to KS Titan 1. We will keep the market posted on further developments. Notwithstanding the uncertainties in the global economic landscape and the disruptions
caused by KS Titan-1, the Group expects that it will be profitable in FY2008," he said.