3 Things to Know About Nordic Group Ltd’s Second Quarter Earnings

Nordic Group Ltd (SGX: MR7) is a supplier of automation system integration solutions, precision engineering, scaffolding and insulation services, among others. It largely serves the marine, offshore oil and gas, petrochemical and pharmaceutical sectors.

Last week, the firm announced its second quarter earnings for 2017 (2Q 2017). The reporting period was from 1 April 2017 to 30 June 2017.

Here are three quick takeaways from the corporate presentation slides that were released yesterday.

Financial Results for the Quarter

Source: Nordic Group Ltd Presentation Slides

For 2Q2017, revenue increased 10% year-on-year to S$24 million while net profit grew 22% to S$3.7 million.

The growth in revenue was mainly due to additional revenue source from Ensure Engineering Pte Ltd, which was acquired in April 2017. Ensure Engineering comes under the firm’s Maintenance Services business segment. The other business segment is Project Services.

Meanwhile, the increase in net profit for the quarter was largely due to higher gross profit, which went up by 17%.

Revenue and Net Profit Margin Growth Over the Years

Source: Nordic Group Ltd Presentation Slides

Nordic Group has been seeing revenue growth every single year since FY2011. This is despite the slowdown in the oil and gas sector from 2015. As many may know, the oil price had plunged from a high of US$110 per barrel in 2014 to below US$40 per barrel in 2015. Now, the price is languishing below US$60 per barrel. The precipitous drop in price has caused many companies in the sector to go kaput.

On top of revenue growth, the net profit margin has also grown over the years. In FY2011, the net margin was just 4% but it had increased consistently to stand at 16% in FY2016.

In 2Q 2017, the company registered a net profit margin of 16%.

Order Book Summary

Source: Nordic Group Ltd Presentation Slides

Nordic Group’s outstanding order book was at around S$111.5 million, including maintenance contracts, as of 30 June 2017. The acquisition of Ensure Engineering has helped to shore up its order book.

Ensure Engineering helps the firm to diversify its exposure away from the offshore marine, and oil and gas sectors, adding customers such as Public Utility Board (PUB) and National Environment Agency (NEA). It also provides recurring income as majority of Ensure’s business revolves around maintenance services type of contracts.

In closing, here’s what Chang Yeh Hong, Executive Chairman of Nordic, said of his firm’s performance:

“Our Group is extremely delighted to be able to consistently deliver positive revenue and earnings growth while maintaining a cautious outlook in the key sectors which we operate in.

Our Group has benefited immensely from our strong balance sheet, net operating cash flow position and prudent risk management culture in challenging times. As such, our Group was able to capitalize on opportunities like the recent acquisition of Ensure.

Barring any unforeseen circumstances, our Group expects to maintain our profitability going forward as we focus on enhancing returns for our valued shareholders.”

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.