ST Engineering Annual Report 2020

FINANCIAL REVIEW / ST ENG I NEER I NG 66 INTEREST COVER RATIO The Group’s interest cover ratio decreased to 11.2 times in FY2020 (2019: 15.7 times). The lower interest cover was due mainly to lower profits while interest expense increased due to the full year effect of acquisitions made in FY2019 partially offset by the effect of lower interest rates. The Group ended the year with cash and cash equivalents of $729m, an increase of $277m from FY2019. Operating Activities The Group generated net cash of $$1,533m from operating activities in FY2020, as compared to $590m in FY2019. The increase was largely due to favourable working capital movements from contract liabilities due mainly to advances received from customers as well as lower trade receivables and contract asset balances. Investing Activities Net cash used in investing activities in FY2020 of $295m was mainly attributable to the Group’s investment in property, plant and equipment by Aerospace ($92m), Electronics ($35m), Land Systems ($24m), Marine ($30m) sectors and Others ($19m), additions to other intangible assets ($87m), and loan to associates and joint ventures ($19m). Financing Activities Net cash used in financing activities of $959m in FY2020 was mainly attributable to net repayment of commercial papers ($1,046m) and bank loans ($373m), the payment of FY2019 final dividend and FY2020 interim dividend ($468m), repayment of lease liabilities ($61m) and interest paid ($58m), partially offset by proceeds from issuance of MTN ($1,058m). TAX The Group’s effective tax rate for 2020 was 2% (2019: 15%). The lower effective tax rate was largely due to non-taxable payouts under the Jobs Support Scheme received from the Singapore government as well as tax adjustments in respect of prior years. FY2019 FY2020 Gross Debt ($m) 2,444 2,062 Gross Debt / Equity Ratio 1.0 0.8 Net Debt ($m) 1,992 1,333 Net Debt / Equity Ratio 0.8 0.5 2019 2020 16X 12X 4X 8X 1,000 554 44.8 49.6 0 0X INTEREST COVER RATIO PBT before Associates / Joint Ventures and Interest Expenses Interest Expenses Interest Cover 701 CASH FLOW The Group generated strong operating cash flow of $1,533m in FY2020. Gross debt/equity ratio decreased from 1.0 time in FY2019 to 0.8 times in FY2020 as the Group reduced its borrowings during the year. ($m) 15.7X 11.2X