After completing the divestment from its two subsidiaries including FPT Retail and FPT Trading Co., where will FPT’s growth momentum in 2018 come from when targeting to get VND 21,900 billion in revenue and VND 3,484 billion in profit before tax?
It took nearly 10 years for FPT to restructure its retail system before divesting in order to focus on technology. Specifically, the ownership ratio of FPT Trading Company with 100% chartered capital was reduced to 48% and the ownership ratio of FPT Digital Company was reduced from 85% to 55%. It is expected that the ratio will continue to fall below 50% Truong Gia Binh FPT President said: “We will use the money to continue investing in software and in M & A deals. After the deal in Germany in 2014, we will focus on M & A deals in the US and Japan.”
The divestment from the retail sector can bring a dramatic return to FPT in 2017, however, will the business results be significantly affected as this segment is contributing 30% of revenue, 10% of profit in the first 6 months of the company?
Dramatic growth thanks to … “selling subsidiaries”
According to the financial statement of FPT on 18/12/2017, the company has reduced its stake in FPT Retail and FPT Trading to below 50%.
FPT owns 47% at FRT Retail and 48% at FPT Trading. Now that these two companies officially became affiliated companies instead of FPT’s subsidiaries and from 2018 onwards, FPT will only focus on three main business fields including technology, telecom, and education.
Successful divestment from these two companies made FPT’s business results in 2017 sharply increase with consolidated revenue of VND 43,845 billion, up 8% y/y; pre-tax profit reached VND 4,249 billion, up 41%; Net profit after tax reached VND 3,522 billion, up 37% y/y.
According to FPT, besides generating income from the divestment, business activities in 2017 grew impressively with technologies and telecommunications.
Specifically, the technology segment earned revenue and pretax profit of VND 11,083 billion and VND 1,131 billion respectively, up 11% and 3% respectively in comparison with 2016. Meanwhile, the telecom segment also saw FPT revenue increase 15% y/y to VND 7,651 billion and VND 1,222 billion in pre-tax profit, up slightly by 2% y/y (comes from the deduction of the public telecommunications service fee and trademark fee)
In addition, the main activity of FPT Software in foreign markets continued to be FPT’s growth momentum last year (mainly from software export).
Specifically, FPT’s overseas sales increased 18%, reached VND 7,199 billion and VND 1,207 billion in pre-tax profit, up 29% y/y. In particular, 2017 is also a special year when FPT successfully signed a contract worth USD 36.5 million with a Japanese customer…
These results helped FPT to have a 47% increase in net profit to VND 2,927 billion and an EPS of VND 5,122, up 50% y/y.
In fact, the divestment from FPT Retail and FPT Trading will certainly affect FPT’s business results in 2018. However, according to the analysis of securities companies, FPT’s revenue is likely to be affected more than profit.
FPT Retail, which accounts for 30% of FPT’s revenue, owns less than 50% of ownership interest. FPT Retail will only be an associate and its revenue will not be included in FPT’s report. However, FPT’s profit will be less affected due to the low-profit-margin (only 9.88% of consolidated pretax profit). After the divestment, FPT still receives profit from FPT Retail at the rate of ownership Practices in joint ventures, affiliates.
So why can FPT expect revenue in 2018 to increase 11% reaching VND 21,900 billion, as FPT is no longer integrating business results from FPT Retail and FPT Trading?
Where will growth motivation come from in 2018?
According to FPT, the profit from the divestment from FPT Retail and FPT Trading can be used to develop new technology infrastructure and telecommunication services. This is also the basis for FPT to develop these two core businesses when the size of the markets are still very large.
In 2017, FPT’s revenue reached VND 43,845 billion, while IT and telecom contributed VND 11,083 billion and VND 7,651 billion respectively, up 11% and 15% respectively compared to 2016. These are the two biggest contributors to FPT’s business performance in the past year.
Not to mention, at the beginning of 2018, FPT Software just broke the record after more than 20 years when successfully signed a contract worth USD 100 million to provide telecommunication technology services to foreign countries. This is also the basis for FPT to develop and complete the targets for 2018.
Talking about its development, FPT emphasizes that software exports will play an important role in the globalization strategy and the company will also promote services related to digital conversion, software solutions, telecommunications, digital content, system integration. FPT will also promote research and development of smart solutions to catch up with technology trends and seek M & A opportunities to generate growth momentum from outside.Education will also be promoted as a multi-disciplinary, multidisciplinary, multidisciplinary education system.