• Strong progress in Vision 2030 transformation:
  • Asset Management, the largest contributor in FY 2022, reported earnings of S$311 million, representing over a third of the Group’s net profit.
  • Energy & Environment reported S$260 million net profit, reversing S$414 million net loss in FY 2021.
  • Recurring income more than doubled to S$560 million in FY 2022, excluding discontinued operations.
    
    
• Proposed combination of Keppel Offshore & Marine and Sembcorp Marine (SCM) in final stages of execution:
  • Had proposed O&M combination been completed at end-2022, it would have resulted in a pro forma disposal gain of about S$3.4 billion or S$1.94 per Keppel share in FY 2022^[1].
  • Due to the substantial disposal gain, impact to the Group’s pro forma Net Tangible Assets (NTA) in FY 2022 would be marginal post distribution in specie^[2].
    
    
• Advancing asset-light model: Keppel announced ~S$2.8 billion worth of joint investments with Keppel Capital-managed private funds/business trust in 2022.
  
  
• Continuing asset monetisation: Over S$4.6 billion announced to date, well on track to exceed S$5 billion target by end-2023.
  
  
• Strong dividends: Proposed final cash dividend of 18.0 cents per share brings FY 2022 total cash dividend to 33.0 cents per share.

Keppel Corporation Limited (Keppel) reported a robust net profit of S$927 million for the full year ended 31 December 2022, bolstered by stronger results in the Asset Management and Energy & Environment segments. With a net profit of S$311 million, Asset Management was the largest contributor to the Group’s earnings, followed by Urban Development, Energy & Environment and Connectivity.

Compared to FY 2021, net profit was 9% lower yoy, mainly due to a decrease in Urban Development earnings, provisions for certain projects at Keppel Offshore & Marine (O&M)’s yard in the US, and lower fair value gains from Keppel’s investment in Envision AESC. These were partly offset by a S$293 million partial reversal of impairments made in 2020 for Keppel O&M’s legacy rig assets, when oil price had fallen sharply following the COVID-19 outbreak. Arising from the partial reversal of impairments, the Asset Co Vendor Notes, which are part of the proposed O&M transactions, will also increase by an equivalent amount, bringing the total realisable value to Keppel from the O&M transactions from S$9.05 billion^[3],[4] to S$9.35 billion^[4],[5],[6].

Excluding the discontinued operations^[7], the Group’s net profit for FY 2022 was S$839 million, 67% of which was derived from recurring income, which had more than doubled yoy to S$560 million.

The Group’s FY 2022 revenue from continuing operations of S$6.62 billion was comparable yoy, underpinned by higher contributions from Asset Management, Energy & Environment and Connectivity, which offset a decline in Urban Development’s revenue.

In FY 2022, the Group achieved a return on equity of 8.1%, compared to 9.1% in FY 2021. Free cash outflow was S$408 million, compared to an inflow of S$1.76 billion for FY 2021, due mainly to lower divestment proceeds. The Group’s net gearing was 0.78x as at end-December 2022, compared to 0.68x as at end-December 2021, mainly due to a higher level of investments, the payment of dividends, as well as the S$500 million share buyback programme which was completed within 2022.

In 2022, the Group made strong progress with the acceleration of its Vision 2030 transformation, simplifying and focusing its business, while executing its asset-light strategy. During the year, Keppel successfully divested Keppel Logistics^[8], and is currently in the final stages of executing the proposed O&M transactions, having received Keppel shareholders’ approval at the Company’s Extraordinary General Meeting in December 2022.

As part of its pivot towards an asset-light model, Keppel has announced over S$4.6 billion in asset monetisation since October 2020, and has collected S$3.6 billion of this in cash. During the year, the Group announced about S$2.8 billion worth of energy & environment and sustainable urban renewal-related investments, jointly undertaken by Keppel together with the private funds and/or business trust managed by Keppel Capital.

Mr Loh Chin Hua, CEO of Keppel Corporation, said, “Keppel continued to deliver a robust set of results amidst a difficult environment in 2022 whilst accelerating the execution of our Vision 2030 strategy. Today, Asset Management led by Keppel Capital and our growing Energy & Environment segment led by Keppel Infrastructure are key pillars of the Group’s earnings. The Group’s recurring income more than doubled year on year, contributing to 67% of our net profit for FY 2022, excluding discontinued operations.

“Working together with our private funds and business trust, we announced about S$2.8 billion of joint investments during the year. Through tapping third-party funds, we can scale up in our growth areas swiftly without raising our gearing significantly. 2023 will be an important year for Keppel, as we take the next leap forward in our Vision 2030 trajectory to be a global asset manager and operator, creating solutions for a sustainable future.”

In appreciation of the support and confidence of Keppel shareholders, the Board of Keppel Corporation will be proposing a final cash dividend of 18.0 cents per share for FY 2022. Including the interim dividend of 15.0 cents per share paid to shareholders in August 2022, the total cash dividend for FY 2022 is 33.0 cents per share, which is the same as the 33.0 cents per share in FY 2021. The proposed final dividend, if approved at the annual general meeting to be held on 21 April 2023, will be paid on 10 May 2023.

In addition, should the acquisition of Keppel O&M be approved by SCM’s shareholders at the Extraordinary General Meeting on 16 February 2023, Keppel shareholders will receive approximately 19.1 SCM shares^[9] with an implied value of S$2.33^[1] for every Keppel share held on completion of the proposed O&M transactions. This distribution in specie to Keppel shareholders will trade “ex-dividend” on such date to be announced by Keppel Corporation in due course, and it is currently anticipated that Keppel shareholders will be credited their entitlement of the share distribution within a week or so of the ex-dividend date.

Had the proposed O&M transactions been completed at the end of FY 2022, the Group would have booked a pro forma disposal gain of approximately S$3.4 billion or S$1.94 per Keppel Corporation share from the SCM shares received^[1]. On the same pro forma basis, Keppel Corporation’s NTA per share would have increased from the reported S$5.51 to S$7.56 post transactions^[4]. Following the distribution in specie, Keppel Corporation’s pro forma NTA would be reduced from S$7.56 to S$5.23 per share^[2], which is close to the reported NTA of S$5.51 per share at the end of FY 2022.

Mr Loh said, “Keppel’s distribution in specie is backed by the substantial disposal gain that will be booked. Post distribution, our NTA will only be marginally reduced. Including the new shares that we will receive based on an implied value of S$0.122 per SCM share^[1], as well as the vendor notes from the sale of the legacy rigs to Asset Co and the out-of-scope assets, we will in total unlock close to S$9.7 billion^{[4],[5],[6],[10]} from the transactions. This is equivalent to approximately S$5.52 per share in value. Based on SCM’s closing share price of S$0.141 last evening, the implied value of our distribution in specie would be even higher at S$2.69 per Keppel Corporation share.”

Financial Highlights

n.m.f. denotes No Meaningful Figure

• Return on Equity was 8.1% in FY 2022 compared to 9.1% in FY 2021
• Net gearing was 0.78x as at end-2022 compared to 0.68x as at end-2021
• Free cash outflow was S$408 million in FY 2022 compared to an inflow of S$1.76 billion in FY 2021
• A final cash dividend of 18.0 cents per share will be proposed for FY 2022

Addendum

Asset Management

The Asset Management segment was the largest contributor to the Group’s FY 2022 earnings, with net profit of at S$311 million in FY 2022, up from S$301 million in FY 2021. Keppel Capital’s asset management fees rose 15% yoy to S$267 million , attributed to higher management fees from completion of new acquisitions and new funds raised, and higher acquisition fees across its REITs, Trust and private funds. In FY 2022, Keppel Capital completed more than S$7.7 billion in acquisitions and divestments.

During the year, Keppel Capital launched its new flagship funds, Keppel Core Infrastructure Fund and the Keppel Sustainable Urban Renewal Fund, which are attracting positive interest from global investors. Keppel Capital grew its AUM to S$50 billion by end-2022, and will work towards a target of S$200 billion moving forward.

Energy & Environment

The Energy & Environment segment, including discontinued operations, recorded a net profit of S$260 million for FY 2022, a turnaround from the net loss of S$414 million in FY 2021.

Keppel Infrastructure’s net profit more than doubled yoy to S$241 million^[12], driven by higher electricity and gas sales and contributions from Keppel Seghers’ projects abroad, and an associated company in Europe. During the year, it geared up for the low-carbon economy, actively expanding into sustainability-related developments and investments, from power & renewables to environment to new energy solutions.

Keppel Infrastructure’s key milestones included commencing Singapore’s first renewable energy import, developing Singapore’s first hydrogen-ready advanced combined-cycle gas turbine power plant, partnering Swiss-based MET Group to pursue Western European renewables opportunities, acquiring a stake in Eco Management Korea in South Korea, as well as exploring carbon capture, utilisation, and sequestration solutions with industry partners in Singapore and abroad. Keppel Infrastructure @ Changi, Singapore’s first Green Mark Platinum Positive Energy building under the new Green Mark scheme, was opened during the year, and is a step towards bolstering Keppel’s scaleable and sustainable Energy-as-a-Service offerings for commercial and industrial customers.

The Group’s announced portfolio of renewable energy assets has more than doubled from 1.1 GW at the start of 2022 to 2.6 GW^[13] at end-2022, and is on track towards achieving its target of 7.0 GW by 2030.

Meanwhile, discontinued operations recorded a net profit of S$88 million in FY 2022, reversing the FY 2021 net loss of S$225 million, amid improving O&M market conditions. In FY 2022, Keppel O&M secured S$8.1 billion of new orders, bringing its net orderbook to S$11.0 billion as at end-December 2022, the highest level since 2007. Keppel O&M also made good progress in putting its legacy rigs to use. All available KFELS B Class jackup rigs have secured bareboat charters, while the remaining legacy rigs continue to attract active enquiries.

Urban Development

In the Urban Development segment, FY 2022 net profit was lower yoy at S$282 million, mainly due to lower contributions from China trading projects, lower fair value gains on investment properties and lower enbloc sales gains. Despite headwinds in Keppel Land’s key markets, particularly China, asset monetisation remained healthy with the divestment of two projects in Shanghai.

Looking ahead, market conditions in China are expected to ease up, with stronger domestic demand and higher growth expected post the zero-COVID policy and as the real estate sector benefits from the constructive policies announced. Keppel Land will continue focusing on growing recurring income, with a pivot towards Real estate-as-a-Service that will enhance its relevance in a world of flexible work arrangements, climate action and growing digitalisation. Keppel Land is seizing opportunities in sustainable urban renewal and senior living, with the respective acquisitions of an office tower in Seoul and a senior living facility in Nanjing in 2022.

Connectivity

The Connectivity segment recorded a net profit of S$37 million, lower yoy mainly due to absence of gains from disposal of interests in Keppel Logistics (Foshan) and Wuhu Sanshan Port Company Limited in FY 2021.

M1’s earnings contribution grew 32% yoy to S$75 million. M1 continued to expand its enterprise solutions and 5G business applications to capture new profit pools. The enterprise business has been growing steadily, making up about 33% of M1’s revenue in 2022, up from 20% in 2020.

On the 5G front, M1 achieved more than 95% outdoor coverage in its 5G standalone network rollout in Singapore as at end-2022, as well as progressively launched various 5G solutions providing fast-speed connectivity, immersive metaverse experiences and edge computing solutions in various public attractions and venues. M1 expects profit contributions to improve in the coming years as it migrates customers to its new cloud native digital platform, improves customer acquisition and lowers its cost to serve.

The Group’s OneDC business, comprising Keppel Data Centres working in collaboration with the private funds and Keppel DC REIT managed by Keppel Capital, contributed total earnings of about S$66 million^[14]. During the year, the Group also continued to expand its data centre portfolio with acquisitions in China and the UK. In line with the Group’s commitment to make data centre operations more sustainable, Keppel Data Centres achieved Singapore’s BCA Green Mark Platinum Award for its Genting Lane data centre.

^[1] _{Based on (a) the assumption that 36,848,072,918 SCM Shares will be issued by Sembcorp Marine to the Company representing 54% of total number of SCM Shares on a fully diluted basis immediately after Closing, (b) the SCM Shareholders holding 31,389,099,152 SCM Shares, representing 46% of the total number of SCM Shares on a fully diluted basis immediately after Closing which, for the purpose of this computation, is the same number of SCM Shares held by the SCM Shareholders as at the last market day (26 April 2022) preceding the original announcement of the Proposed Transaction (“Last Market Day”), and (c) an issue price of S$0.122, being the volume weighted average price of SCM Shares for the last 10 trading days up to and including the Last Market Day. The number of DIS Shares to be distributed for every one (1) KCL Share held by an Eligible Shareholder is calculated based on the assumption that Company’s issued and paid-up share capital on Closing would be 1,751,959,918 KCL Shares (excluding treasury shares) which is the number of KCL Shares (excluding treasury shares) of the Company as at 31 December 2022, and on the further assumption that 33,436,214,314 DIS Shares will be distributed to Eligible Shareholders.}

_{The actual issue price for the SCM Shares will be determined by SCM and the actual consideration used to derive the disposal gain arising from the Proposed Transaction and the actual value of the Proposed Distribution on completion of the Proposed Transaction and Proposed Distribution will depend on the last traded price of the SCM Shares on the first Market Day immediately following the date of Closing and the actual number of SCM Shares to be issued to the Company on such Closing.}

^[2] _{The pro forma value of the proposed distribution is calculated based on the proposed issue price of S$0.122, being the VWAP of SCM shares for the last 10 trading days up to and including the Last Market Day, per new SCM share and assuming a total of 36,848,072,918 new SCM shares to be issued to Keppel on completion of the Proposed Transaction. In this regard, the actual value of the proposed distribution on completion will depend on the last traded price of SCM shares on the first market day immediately following the date of such completion and the actual number of SCM shares to be issued on Closing.}

^[3] _{Based on the carrying value of the Identified Asset Co Assets in the unaudited pro forma consolidated financial statements of KOM Group for the half year ended 30 June 2022. The Asset Co Consideration will be adjusted as at completion of the Asset Co Transfer based on the pro forma balance sheet as at the date of completion of the Asset Co Transfer.}

 ^[4] _{Pro forma estimate of the value attributable to the KOM Consideration Shares, calculated based on (a) the assumption that 36,848,072,918 new SCM Shares will be issued by Sembcorp Marine to the Company representing 54% of the issued and paid-up share capital of Sembcorp Marine on a fully diluted basis immediately after Closing, (b) the SCM Shareholders holding 31,389,099,152 SCM Shares, representing 46% of the issued and paid-up share capital of Sembcorp Marine on a fully diluted basis immediately after Closing which, for the purpose of this computation, is the same number of SCM Shares held by the SCM Shareholders as at the Last Market Day, and (c) an issue price of S$0.122, being the Volume Weighted Average Price of SCM Shares for the last 10 trading days up to and including the Last Market Day. For the purpose of determining the aggregate value attributable to the KOM Consideration Shares on Closing, the Company will account for the actual value of the 54% equity interest in Sembcorp Marine based on the last traded price of the shares of Sembcorp Marine on the first trading day immediately following Closing and the actual number of SCM Shares to be issued on Closing.} 

^[5] _{Based on the carrying value of the Identified Asset Co Assets in the unaudited pro forma consolidated financial statements of KOM Group for the full year ended 31 December 2022. The Asset Co Consideration will be adjusted as at completion of the Asset Co Transfer based on the pro forma balance sheet as at the date of completion of the Asset Co Transfer.}

^[6] _{Also includes other adjustments from 30 June 2022 to 31 December 2022.} 

^[7] _{Discontinued operations comprise the results of Keppel O&M, excluding certain out-of-scope assets, and other group adjustments.}

^[8] _{Includes Keppel Logistics’ businesses in Singapore, Malaysia, Vietnam and Australia, as well as UrbanFox.}

^[9] _{The number of DIS Shares to be distributed to the Shareholders for every one (1) KCL Share held by an Eligible Shareholder is calculated based on the assumption that the Company’s issued and paid-up share capital on Closing would be 1,751,959,918 KCL Shares (excluding treasury shares) which is the number of KCL Shares (excluding treasury shares) of the Company as at 31 December 2022, and on the further assumption that 33,436,214,314 DIS Shares will be distributed to Eligible Shareholders.}

^[10] _{Based on the carrying values of the Out-of-Scope Assets in the unaudited consolidated financial statements of KOM group as at 30 June 2022 or 31 December 2022 (as applicable).}

^[11]_{Includes 100% fees from subsidiary managers, joint ventures and associated entities, as well as share of fees based on shareholding stake in associate with which Keppel has strategic alliance.}

^[12] _{Does not include contribution from business trust.}

^[13] _{On a gross basis and includes projects under development.}

^[14] _{Recognised across the Connectivity and Asset Management segments​.}