ST Engineering Annual Report 2020

/ ST ENG I NEER I NG 04 LETTER TO SHAREHOLDERS T his past year has been challenging for the world, as the COVID-19 pandemic brought about unprecedented impact on global economies, supply chains, community health and livelihoods. At the time of writing, over 110 million people have been infected and the global death toll stood at about 2.6 million. On the bright side, more than 100 countries have begun their vaccination campaigns. In response to the pandemic outbreak in early 2020, we took immediate steps in our workplaces to keep our employees and contractors safe. We implemented a slew of measures including telecommuting and split teams, and put in enhanced health and safety protocols. At the same time, we worked hard to keep our commitments to our customers as best as we could under the circumstances. To mitigate the impact of the economic slowdown, we focused on increasing operational efficiencies and implementing cost reduction measures, which included deferring discretionary capital expenditure (capex) and tightening operating expenditure. Pandemic impact mitigated by business portfolio diversity The COVID-19 pandemic impacted each of the Group’s four business sectors differently. In the Aerospace sector, the aviation industry was badly affected as travel restrictions were imposed around the world. Consequently, demand for aircraft maintenance, repair and overhaul (MRO) services dipped and engine nacelle manufacturing volume dropped. The silver lining was our passenger-to- freighter (PTF) conversion business. The grounding of passenger aircraft meant that their bellyhold cargo capacity was largely removed, while a spike in e-commerce created strong demand for all-cargo freighters. These factors, coupled with the availability of older passenger aircraft (many of which had been retired), meant that our PTF business received many enquiries as well as new orders. At the Electronics sector, our Satellite Communications business in the aviation and maritime segments were similarly hit by COVID-19 as passenger aircraft and cruise ships ground to a halt, resulting in lower demand for our solutions. Nevertheless, having fully integrated our acquired businesses in Europe and the U.S., we added the defence, broadcast and enterprise broadband segments, which are more resilient, to our customer base and this diversity helped to mitigate the slowdown. The enlarged Satellite Communications group was also better positioned to capture opportunities emerging from new non- geosynchronous orbit satellite constellations including Low Earth Orbit (LEO) and Medium Earth Orbit (MEO) satellites. The pace of digitalisation hastened by the pandemic also led to higher demand for other business areas such as cybersecurity and secured digital solutions. (L) Kwa Chong Seng Chairman Non-Executive Independent Director (R) Vincent Chong Sy Feng Group President & CEO Executive Director