SINGAPORE (Oct 12): Lian Beng Group reported a 38.9% drop earnings to $7 million in 1Q19 earnings ended August from $11.4 million in 1Q18 due to a change in reporting standards.

In 1Q19, the group’s 74.41%-owned property development arm, SLB Development (SLB), implemented the adoption of new SFRS reporting standards (SFRS(I)15), where revenue and cost of units sold for development properties are now recognised progressively according to the progress of construction work.

SLB was listed on the Catalist Board in April.

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Prior to June 1, SLB had recognised revenue from industrial development properties based on a completion of contracts basis, where revenue was recognised upon obtaining TOP and handing over of units to purchasers.

Based on the completion of contracts basis, Lian Beng would have recorded earnings of $36.4 million in 1Q19, which is more than tripled the earnings of $8.9 million in 1Q18.

1Q19 revenue increased 15.9% to $83 million from 1Q18 mainly due to an increase in revenue from the construction and investment holdings segments, offset by the decrease in revenue from property development segment.

In line with the increase in revenue, the group reported a gross profit of $24.4 million, a 26.8% increase from the $19.2 million reported in 1Q18.

Likewise, before the adoption of the new SFRS(I)15 reporting standards, the group would have recorded a revenue of $276.4 million in revenue, a more than sixfold increase from the $37.2 million in 1Q18.

Other operating income saw a drop from $10.5 million in 1Q18 to $2.2 million in 1Q19 mainly due to gain of disposal of investment property at 247 & 249 Collins Street, Melbourne, Australia by Lian Beng Ventures (Melbourne) in 1Q18.

Total operating expenses in 1Q19, which include Distribution expenses, Administrative expenses, and Other operating expenses, amounted to $11.5 million, an 8.4% increase from the $10.6 million recorded in 1Q18.

As at Aug the 31, the group’s total orderbook stood at $1.25 billion which will provide a steady flow of activities through to FY2022.

The Building and Construction Authority (BCA) estimated that up to $26 billion to $31 billion in construction contracts was awarded in 2018, up from the $24.5 billion estimated to have been awarded in 2017.

Looking ahead, Lian Beng expects its investment properties portfolio, which includes newly acquired properties such as Wilkie Edge and Sembawang Shopping Centre, and also two dormitory properties in Mandai and Papan, to generate recurring income.

Ong Pang Aik, Lian Beng’s Executive Chairman, says, “Despite the impact of the change of accounting treatment reflected in this quarter, the overall performance of the Group has been encouraging and we look forward to the contributions from the Property Development and Construction segments.”

Year to date, shares in Lian Beng are down 37% to 48 cents.