Letter to Shareholders

Letter to Shareholders

Letter to Shareholders

"Our efforts have translated into the achievement of significant financial milestones in 2023, with Group revenue exceeding the $10b mark, and key metrics such as EBITDA, EBIT and Net Profit reaching new levels."

Teo Ming Kian, Chairman
Vincent Chong Sy Feng, Group President and CEO

Dear Shareholders

As we reflect on the past year, ST Engineering’s quest for productivity, innovation and resilience has always been central to what we do. These qualities have underpinned our growth strategy from the day we first presented our five-year plan to you in November 2021 at Investor Day.

Our commitment to this growth strategy remains steadfast, as we confidently navigated through the challenges of 2023, which presented a dynamic and competitive operating landscape, evolving macroeconomic challenges, continuing technology changes and geopolitical tensions.

Fundamental to ST Engineering’s success to date is a well-thoughtout strategy, sound decision-making, nimble execution, adept adaptation and a consistent focus on investing for the longer term.

In addition, our dedicated employees, the heartbeat of our organisation, have been pivotal in shaping our business and impact on a global scale. At our core lies our corporate purpose: harnessing technology and innovation to enable a more secure and sustainable world, all while consistently delivering value to our shareholders.

Our efforts have translated into the achievement of significant financial milestones in 2023, with Group revenue exceeding the $10b mark...


In driving our organic and acquisition growth in the last few years, we have achieved positive outcomes, evident in the expansion of both Group revenue and earnings despite the significant negative impact of the COVID-19 pandemic. Our efforts have translated into the achievement of significant financial milestones in 2023, with Group revenue exceeding the $10b mark, and key metrics such as EBITDA, EBIT and Net Profit reaching new levels. The Defence & Public Security segment, supported by its strategic Singapore defence business, contributed 42% to Group revenue.

In driving our organic and acquisition growth in the last few years, we have achieved positive outcomes, evident in the expansion of both Group revenue and earnings...

As we further solidify our role as the strategic partner in the Singapore defence ecosystem, our continuous investments in technology and engineering capabilities are producing favourable outcomes. In the digital domain, we have harnessed AI, video and data analytics and 5G capabilities to enhance our defence electronics solutions. We have developed hybrid electric capabilities for our next-generation military platforms. Additionally, we have advanced our unmanned capabilities, particularly in Unmanned Surface Vessels. These initiatives underscore our efforts to actively contribute to the ongoing modernisation of Singapore’s defence capabilities.

Furthermore, our decision to invest in the Commercial Aerospace business for capacity expansion during the COVID-19 pandemic downturn has paid off significantly as the aviation industry rebounds. The opening of the second of four airframe maintenance hangars in Pensacola, Florida in February 2023 has given us the necessary capacity to better serve our North America customers. The extension of the segment’s passenger-to-freighter (P2F) conversion capability to additional global sites has proven to be far-sighted, strategically placing us to address the increasing demand for Airbus freighter conversions. While this expansion impacted the segment’s near-term earnings, the ongoing improvement in the learning curve at these new sites puts us in good stead for the longer-term profitability of our Airbus P2F conversion programme.

Our commitment to growth is underscored by the acquisition of TransCore, which has effectively enhanced our Smart Mobility business. This move addressed a previously identified gap in the congestion pricing segment and is aligned with our overarching Smart Mobility strategy.

In recent years, we have leveraged our proven track record in executing large-scale projects within the Smart Mobility rail and road sectors. Our ability to climb the value chain is exemplified by significant turnkey rail contract wins in Kaohsiung, Taiwan where we lead consortia in project management and systems integration. These successes solidify our position in the Smart Mobility space and bring us closer to achieving our Smart City growth ambitions.


Our commitment to technological excellence is reflected in our increased R&D investments in cutting-edge digital technologies. Over time, these digital technologies have become an integral component of our defence electronics solutions, and in our broad array of commercial products and solutions. This integration extends beyond enhancing the functionality and performance of our offerings – it serves as a testament to our commitment to innovation, continually honing our competitive edge.

This dedication to innovation and deep technology was prominently displayed at the Singapore Airshow in February 2024. The ST Engineering Pavilion – which was organised around the aviation, defence, and smart city clusters – took centre stage at the show. We showcased cutting-edge products and innovations and also demonstrated the real-world application of our commitment to digital technologies. The synergy between our R&D endeavours and the showcased solutions underscores our journey towards excellence and innovation, making a resounding statement about our capabilities to our global stakeholders who visited the show.

Our commitment to technological excellence is reflected in our increased R&D investments in cutting-edge digital technologies.

Since the setup of the Group Engineering Centre in 2021, the team has been pursuing continuous innovation, translating technologies and IP on hand into tangible products. Noteworthy applications include leveraging data analytics and AI in various MRO operations, such as predictive maintenance to monitor engine health in patrol vessels to minimise downtime. AI is seamlessly integrated into our Video Analytics Suite platform, serving as a foundational capability for many of our products and solutions. Generative AI stands at the heart of many of our processes, products and solutions, with a recent innovation being AGIL Vision, a generative AI standalone solution enabling contextualised video query, search and retrieval when connected to any video feed.

The Cybersecurity Strategic Technology Centre, housed within our Group Technology Office, spearheads developing groundbreaking solutions in threat detection, advanced cyber forensics and AI-based cybersecurity. Trusted by customers, these capabilities have reinforced our credentials and expanded our influence in the cyber defence domain.

Continuing our focus on long-horizon innovation, the Group Technology Office leads the charge across new frontiers. This includes exploring the early application of quantum computing, addressing complex optimisation problems and enhancing the speed and accuracy of cyber threat detection, that surpasses the capability of classical computing. These strategic initiatives reinforce our dedication to deepening our technology and engineering core, ensuring that we stay ahead of evolving technological shifts.


In the dynamic landscape of 2023, we continued to pursue initiatives with the future in mind.

Our ongoing investments in Commercial Aerospace, focused on the expansion of aircraft maintenance capacity in both existing facilities and new locations, will underpin the growth of our airframe MRO business. Our engine MRO business received a boost from our newly formed CFM Branded Service Agreement (CBSA) partnership for LEAP-1A and LEAP-1B engines as this broadens our LEAP capabilities within the CFM MRO global network. This pivotal move enables us to deliver comprehensive LEAP MRO solutions to operators worldwide, particularly in anticipation of the expected surge in demand for MRO services from the LEAP engine family, in service since 2016.

As we further solidify our role as the strategic partner in the Singapore defence ecosystem, our continuous investments in technology and engineering capabilities are producing favourable outcomes.

Our decision to restructure and transform our Satcom business, despite the near-term negative impact it presents, reflects how we took decisive action to overcome operational and market challenges and to drive the business to growth and profitability.

In our commitment to strengthen our Cyber business, we completed a bolt-on acquisition of D’Crypt in February 2024, incorporating cryptographic and quantum capabilities, while bolstering our talent pool in cryptography and cybersecurity. Along with the initiatives led by our Group Technology Office, this move signals our commitment to building and advancing competencies in this critical domain.

In the international defence business segment, we forged new partnerships within the global defence ecosystems, facilitating our entry into new markets and segments. The signing of partnership agreements with defence companies in Australia, Italy, UAE and the UK, signifies progress in establishing a strong presence in strategically targeted markets, setting the stage for future growth.

In the past year, we allocated $542m in capital expenditures to drive capacity expansion and capability enhancement across businesses. A significant portion of this investment was directed towards the Gul yard for the shiprepair business, and constructing airframe maintenance hangars in Changi Creek, both located in Singapore.

The cumulative impact of these diverse initiatives and strategic investments across businesses and technological innovation have positioned us well for the future. In line with our five-year (2022- 2026) plan, this underscores our management’s foresight and commitment to achieving sustainable, long-term growth, persisting in initiatives that demand time for full realisation.

The success of this positioning is reflected by our robust order book, which stood at $27.4b at the end of 2023. Beyond indicating a healthy increase in business activities across the Group and reflecting the confidence that our customers place in us, it also serves as a leading indicator of continued growth.


In 2023, Group revenue grew 12% year-on-year (y-o-y) to $10.1b from $9b. Group EBIT reached $915m, marking a 24% y-o-y increase from $735m, while Group PBT rose by 18% y-o-y to $704m from $597m. Group Net Profit also saw a 10% increase to $586m compared to the previous year’s $535m.

On a base operating performance (BOP) basis excluding TransCore transaction and integration expenses, SatixFy1 divestment loss and Satcom severance costs, as well as the $72m pension restructuring gain in 2022, Group EBIT would be 40% higher y-o-y and Net Profit would be 24% higher y-o-y, despite higher finance costs.

These positive results were driven by the strong performance of our Commercial Aerospace and Defence & Public Security segments and a high-graded portfolio. Our investments in TransCore became accretive in 2023, ahead of plan. This strong set of results was also supported by our focus on productivity and cost saving measures and investments made during the COVID-19 downturn as highlighted previously.

By geography, customers from Asia, including Singapore accounted for 49% of revenue while customers from the U.S. and Europe constituted 24% and 20% of revenue respectively. The remaining 7% was contributed by customers from the rest of the world. By products and services type, Commercial revenue was $7.1b and Defence revenue stood at $3b. These figures provide a clear snapshot of our diversified customer and revenue base, showcasing our global presence and balanced portfolio.

At the business segment level, the Commercial Aerospace segment recorded a revenue of $3.91b, up 31% y-o-y from $2.99b surpassing its pre-COVID levels. Importantly, this performance exceeded our 2026 revenue target of over $3.5b. EBIT grew 12% y-o-y to $337m from $301m, despite the absence of the one-off pension restructuring gain which positively impacted the segment’s results in 2022.

Given the strong recovery in air travel, the segment secured a number of multi-year MRO contracts spanning the airframe, engine and component segments. Among the more significant wins was a five-year contract to provide LEAP-1B MRO solutions for Lion Air Group’s fleet of Boeing 737 MAX aircraft. This was the LEAP MRO contract we won after joining the CBSA LEAP MRO network in March 2023. Our original equipment (OE) manufacturing business also benefited from the strengthening demand for air travel and increased its nacelle and floor panel output in tandem with the aircraft OEM’s production rate.

The success of this positioning is reflected by our robust order book, which stood at $27.4b at the end of 2023.

The Defence & Public Security segment posted a steady revenue of $4.25b but would have been 6% higher after excluding the revenue from the divested U.S. Marine business in the prior year. The segment’s growth was largely driven by its Digital Systems & Cyber subsegment. The segment’s EBIT rose 40% y-o-y to $567m from $405m, which was attributed to several factors, including the absence of losses from the divested U.S. Marine business, a favourable margin mix, cost savings initiatives and expansion in its core business.

In Singapore, the Ministry of Defence awarded a contract to us for the detailed design and construction of six Multi-role Combat Vessels for the Republic of Singapore Navy (RSN), and another contract for the mid-life upgrade of the Formidable-class Frigates for RSN.

Our international defence segment made much headway. The 40mm ammunition business secured new orders from across Europe, Asia and the Middle East. We have also been engaged by the Tunisian Air Force for the upgrade and maintenance of two C-130 aircraft. Beyond contributing to revenue growth, these new wins are testament to the value and appeal of our defence solutions.

The Urban Solutions & Satcom segment saw a 10% y-o-y increase in revenue to $1.94b from $1.77b, due to increased revenue from Urban Solutions, though this was offset by lower revenue from Satcom. The segment’s EBIT was $10m compared to $29m the year before, impacted by the weakness in Satcom, and severance cost incurred as part of Satcom’s restructuring, and a one-off divestment loss related to SatixFy shares.

Our Smart Mobility business continued its upward growth trajectory, achieving success in securing significant rail and road transport projects globally in Abu Dhabi, Bangkok, Chennai, Kaohsiung, Singapore, Sydney and Toronto. These successes underscore the robustness of our advanced solutions, competitive differentiators and overall capabilities. TransCore delivered a robust performance throughout the year, securing contracts for tolling and backoffice systems, customer service operations and RFID products in both the U.S. and the Middle East.

Our Satcom business, historically profitable until the onset of COVID-19 pandemic, actively responded to transformative shifts in the satcom industry fueled by industry consolidation, technological advancements and disruptions from the emergence of new satellite constellations. We have undertaken to restructure and transform the business, while maintaining a focus on streamlining its best-in-class technology onto a single next-generation platform. This will position us to meet the evolving needs of customers in a dynamic and competitive industry, ensuring sustainable growth in the longer run.

Our business updates and outlook are covered in greater detail in the Operating Review and Outlook section on pages 28 to 51.

 1 SatixFy – a company we invested in 2014-2015 and divested when it de-SPAC in October 2022.


Despite inflationary pressures, we managed to reduce our unit operating expenses (per unit revenue) from 12.1% in 2022 to 11.4% in 2023. This is due to the Group’s ongoing focus on implementing structural cost reductions and enhancing operational efficiencies.

Key initiatives include demand aggregation of global logistics spend, and the deployment of AI and data analytics to optimise costs through measures like changing freighting modes and flow patterns. With data transparency, we were able to work with selected suppliers to create a win-win scenario. Creative re-engineering of work processes have also resulted in faster turnaround time and improved outcomes.

As we execute our strategic plan to achieve our 2026 targets, our proven track record positions us well to deliver enduring shareholder value through diverse business cycles.

Another significant initiative was the setup of a Competency Centre in Vietnam. Currently staffed by about 90 employees specialising in IT and finance backend operations, this move underscores our goal of establishing specific shared services roles to be performed in locations which are well-placed to host and carry out such roles. Importantly, we continue to maintain strict oversight to uphold rigorous quality, security and operational standards, ensuring the robustness and consistency of our processes.


Our balance sheet remained strong, with Aaa and AA+ ratings by Moody’s and S&P respectively.

Our debt interest rate profile of 62% fixed rates and 38% floating rates as of end 2023 remained balanced, allowing us to reduce interest expense volatility in both rising and falling interest rate environments. The Group’s weighted average borrowing cost for 2023 was 3.3%, compared to 2.4% in 2022.

We are reducing capital employed through initiatives such as optimisation of net working capital, portfolio rationalisation and asset securitisation in our Aviation Asset Management business.


In 2023, global sustainability efforts were driven by a heightened focus on aligning with the European Union Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive. To strengthen our commitment to stakeholders, we have bolstered sustainability initiatives across our international business units, with a notable emphasis on Europe and the U.S.

We also intensified our efforts to reduce greenhouse gas emissions, targeting a 50% reduction by 2030 while sustaining business growth. Progress towards achieving net-zero emissions is well underway, and a formal pledge will be made in due course.

Throughout the year, our commitment to community impact was evident through volunteer work by employees, in-kind support and financial contributions. Nurturing a purpose-driven giving culture, we actively promote corporate initiatives and employee volunteerism, exemplified by the annual ST Engineering MOVEment, a month-long global initiative encouraging employees to stay healthy, keep fit and do good. With participation from over 6,300 employees across 22 locations, the movement saw collective efforts to walk, run and cycle for charity, covering an impressive 670,000 kilometres and raising about $600,000 for underserved groups. Additionally, our inaugural Green Day marked the start of a five-year commitment to contribute $1m to tree-planting initiatives in Singapore, reflecting our dedication to environmental stewardship and community support.

Beyond regulatory compliance, we are dedicated to embedding sustainability at the core of our operations for the benefit of future generations. Read about our ESG efforts in our Sustainability Report for more details.


In April 2023, Kwa Chong Seng stepped down as our Board Chairman. We acknowledge with deep appreciation, his strong chairmanship and his many contributions to ST Engineering.

In June 2023, VADM Aaron Beng joined as a non-independent and non-executive Director, with COL Chong Shi Hao appointed as his Alternate Director. Concurrently, COL Cai Dexian stepped down as Alternate Director to Ong Su Kiat Melvyn. In February 2024, Neo Gim Huay joined as a non-independent and non-executive Director. Additionally, in July 2023, Chua Kee Lock, the CEO of Vertex Venture Holdings Ltd, was co-opted as a member of the Research, Innovation, Technology and Enterprise Committee (RITE).


The Board of Directors has proposed a final dividend of four cents per share. Combined with the quarterly interim dividends of 12 cents per share paid in 2023, the total dividend for 2023 will be 16 cents per share. This translates to a dividend yield of 4.4% computed using the average closing share price of the last trading days of 2023 and 2022.

Our commitment to shareholders is evident in our dedication to distributing profits through steady and ratable dividends across business cycles. In ensuring that the best interests of our shareholders are at the forefront of our financial decisions, we will continue to make well-considered and prudent decisions regarding fund allocation, whether for shareholder dividends, strategic investments for profitable growth or debt reduction.

As we execute our strategic plan to achieve our 2026 targets, our proven track record positions us well to deliver enduring shareholder value through diverse business cycles.

In closing, we extend our heartfelt gratitude to all our stakeholders, with special appreciation to our shareholders. We would also like to thank our employees, whose unwavering dedication remains the cornerstone of our success. With their continued support, we are resolute in our ambition to shape ST Engineering into a global technology, defence and engineering powerhouse.

29 February 2024

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