ST Engineering Annual Report 2020

05 ANNUAL REPORT 2 020 / In contrast to the impact on our commercial business, our defence business provided much needed stability. Our Land Systems sector rolled out the production of the Hunter Armoured Fighting Vehicles, while our Marine business in the U.S. commenced design work on the Polar Security Cutter vessel. Meanwhile, our Singapore yard was focused on building Fast Patrol Boats for the Singapore Police Coast Guard. The diversity of our business portfolio has enabled us to weather the pandemic better than it would have been possible otherwise. In addition, savings derived from our cost reduction initiatives as well as government support we received from various countries helped to keep the Group’s financial results on an even keel. 2020 financial results in line with updates For financial year 2020, the Group reported revenue of $7.2b, which was a 9% drop compared to the year before. This was in line with the guidance that we had provided in our quarterly updates. At $534.4m, profit before tax (PBT) was 23% lower year-on-year (y-o-y) because of the impairment of intangible assets, and also losses recorded in several U.S. shipbuilding projects. The PBT drop was also impacted by lower Group revenue, though this was buffered by savings from our cost reduction initiatives and government support. Profit attributable to shareholders (Net Profit) was 10% lower y-o-y at $521.8m. The drop was alleviated by non-taxability of a wage support scheme termed Job Support Scheme provided by Singapore government. At the business sector level, the Aerospace sector delivered $2.7b in revenue, down 21% y-o-y while Net Profit was $192.9m, a 28% drop compared to the same period last year. This was mainly due to lower volume of MRO activities, asset impairments and absence of a favourable impact from end-of-programme reviews. The decline was offset by savings from cost reduction measures and government support. Excluding government support, the Aerospace sector would remain profitable in FY2020. The Electronics sector posted revenue of $2.3b, down 2% y-o-y mainly due to the rescheduling of projects affected by COVID-19. However, Net Profit grew 11% y-o-y to $203.9m, largely helped by savings from cost reduction measures and government support. The Land Systems sector’s revenue at $1.4b came in 1% lower than the year before, due to lower specialty vehicles sales partially offset by stronger defence sales. Net Profit was 31% higher y-o-y at $101.4m, helped by savings from cost reduction measures and government support, though this was partially offset by asset impairments. Revenue for the Marine sector was 10% higher y-o-y at $710m. This was driven mainly by higher contribution from U.S. Shipbuilding, which offset the decline in business from Singapore as yard activities were disrupted by COVID-19. However, Net Profit dropped 45% y-o-y to $28.3m because U.S. operations incurred losses in the construction of some vessels that were contracted and priced low at the trough of the marine industry in 2018. The sector also incurred higher operating costs due to COVID-19 disruptions on operations and workforce. Overall, the Aerospace sector contributed 38% to Group revenue, followed by the Electronics sector at 32%, Land Systems sector at 19% and Marine sector at 10%. About 53% of Group revenue was derived from customers in Asia, compared to 24% and 17% from customers in the U.S. and Europe respectively. Commercial and defence sales accounted for $4.6b and $2.6b respectively to Group revenue, with the latter providing revenue stability to the Group as it registered growth amid the COVID-19 pandemic. We announced about $5.7b worth of new orders in 2020. Together with other unannounced contracts and after accounting for revenue delivery adjustments and COVID-19 related CORPORATE OVERVI EW PERFORMANCE REVI EW SUSTAINABI L ITY CORPORATE GOVERNANCE F INANCIAL REPORT "We ended the year with an order book $15.4b, slightly higher than the 2019 year-end order book despite the challenges we faced in 2020."