DRB-Hicom earnings soar

Net profit jumps 1,306% due to recognition from Proton acquisition
PETALING JAYA: Conglomerate DRB-Hicom Bhd's
net profit jumped a whopping 1,306% to RM1.02bil for the fourth quarter
ended March 31 compared with the same quarter a year ago.
This was mostly due to recognition of negative goodwill of RM971.52mil arising from the acquisition of Proton Holdings Bhd.
Negative
goodwill refers to income, perhaps even a profit, that comes from the
sale of an asset at less than its fair market value.
Revenue rose 6.32% to RM2.12bil.
Earlier
this year, DRB-Hicom extended a mandatory takeover offer (MGO) to
acquire all the remaining shares in Proton for cash consideration of
RM5.50 per share for a total of about RM3.02bil. Presently, DRB-Hicom
holds about 99.08% equity interest in Proton.
The negative
goodwill skyrocketed DRB-Hicom's earnings per share up to 52.66 sen
from 3.75 sen. For the period, the company declared a dividend of 4 sen
per share.
For its full year, DRB-Hicom's net profit was up
173.67% to RM1.29bil on the back of a 1.09% increase in revenue to
RM6.88bil. Hence, earnings per share rose to 66.88 sen from 24.44 sen.
In
notes accompanying its results, DRB-Hicom said the initial accounting
has resulted in a negative goodwill amounting to about RM971.52mil,
which had been recognised as other income (non-cash item) in its
consolidated statement of comprehensive income.
Upon the
acquisition of Proton becoming unconditional, the MGO was triggered
whereby the company was required to offer to the non-controlling
interest shareholders of Proton to sell their shares at an offer price
of RM5.50 per share.
Under the requirement of FRS 127, both the
acquisition and the MGO are inter-linked and hence is accounted for as
a single transaction. The amount payable under the MGO of RM1.51bil has
been reflected as current liability in the statement of financial
position as at March 31.
In the financial year ended March 31,
2011, the group had recognised a one-off negative goodwill of
RM71.22mil arising from accretion of interest in a subsidiary company
which was shown under other income.
Meanwhile, not taking the
negative goodwill into account, DRB-Hicom's operating profits dropped
by 12.8% to RM549.58mil from RM630.31mil.
This was mainly due to
lower share of results from an associated company which was affected by
the automotive components supply constraints arising from the flood in
Thailand.
It was also due to the one-off financing costs incurred on borrowings to finance the acquisitions of Pos Malaysia Bhd and Proton. The acquisition of Proton was completed on March 16.
DRB-Hicom
now has cash of RM7.21bil compared with RM7.74bil previously. It has
short-term borrowings of RM1.88bil and long-term borrowings of
RM3.48bil.
For the full year, DRB-Hicom has given out total
gross dividends of 6 sen, which is similar to what it paid in the
previous financial year.

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