LETTER TO SHAREHOLDERS BALANCED DEBT PROFILE Post-TransCore acquisition, our balance sheet remained strong, with Aaa and AA+ ratings by Moody’s and S&P respectively. 2022 operating cash flow decreased compared to 2021 due to higher net working capital to support growth in revenues as business recovery continues. We issued US$700m in 5-year bonds and US$300m in 10-year bonds in May 2022 to partially term out the bridge financing for the TransCore acquisition. Looking at our debt interest rate profile, 53% of our debt is based on fixed rates while 47% is based on floating rates as of end 2022. We believe this is a balanced ratio, and this approach allows us to reduce interest expense volatility in both rising and falling interest rate environments. The Group’s weighted average cost of borrowing for FY2022 was 2.4%, a marginal increase compared to 2.3% in 2021. The weighted average borrowing cost of our existing fixed rate borrowings, comprising mainly bonds, lease obligations and fixed rate loans, is around mid-2%. We continue to work towards reducing capital employed in our Group as appropriate, undertaking measures such as net working capital optimisation, portfolio rationalisation, and asset securitisation of our Aviation Asset Management business. ENHANCING ESG EFFORTS In 2022, we made substantial headway in our sustainability aspirations. In our 2022 Sustainability Report, we published our inaugural Task Force on Climate-related Financial Disclosures (TCFD) report. We also expanded the proportion of sustainability metrics linked to employee performance and developed a mandatory sustainability training module for all employees. We strengthened our Supplier Code of Conduct and increased our engagement with suppliers on ESG considerations. ST Engineering has also been included as a constituent of the Dow Jones Sustainability Index Asia Pacific, representing the top 20% of the 600 largest ESGfocused companies in the region. As well as the value delivered to shareholders, we made significant contributions to the communities where we operate. We serve our communities through a combination of volunteer work, skills-based contributions, as well as in-kind and monetary support to build an inclusive, resilient and vibrant society. We actively promote a purpose-driven giving culture through corporate initiatives and volunteerism among our employees. We are honoured to be recipients of the National Awards (COVID-19) for our Group’s contributions to Singapore’s fight against COVID-19. The awards recognise the great teamwork and solidarity that our people demonstrated as they helped our customers and the community respond quickly to pandemic-related challenges. A special mention goes to our respiratory protection team for their tremendous efforts and ‘can do’ spirit in establishing local medical-grade surgical mask manufacturing capabilities from the ground up, helping to steer Singapore towards greater selfreliance in respiratory masks. BOARD RENEWAL In 2022, we made various changes to the Board. In April, Joseph Leong Weng Keong resigned. He had been a non-independent and non-executive director since June 2019. Teo Ming Kian was appointed as deputy chairman of the Board. Kevin Kwok, who was a member of the Audit Committee (AC), assumed the role of AC chairman in place of Quek See Tiat who relinquished his AC membership. In July, Quek See Tiat was re-designated as a nonindependent and non-executive director following his nine-year tenure on the Board. Read our 2022 Sustainability Report 10 ST ENGINEERING ANNUAL REPORT 2022
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