|Financial Highlights for the first half-year ended 30 June 2020||2020
|Earnings before interest and tax (EBIT) ($m)||299.2||309.8||(3%)|
|Other income, net ($m)||6.6||7.5||(12%)|
|Finance costs, net ($m)||(33.1)||(9.3)||257%|
|Profit before tax (PBT) ($m)||286.4||329.6||(13%)|
|Profit attributable to shareholders (Net Profit) ($m)||257.4||269.3||(4%)|
|Earnings per share (cents)||8.26||8.63||(4%)|
1) All currencies are in Singapore dollars
2) Government grants in the prior year were reclassified from other income to underlying expenses in cost of sales and operating expenses in conformance with current year classification.
ST Engineering 1H2020 Financial Statements and ST Engineering 1H2020 Results Presentation
Singapore, 14 August 2020 - Singapore Technologies Engineering Ltd (ST Engineering) today reported its first half-year financial results ended 30 June 2020 (1H2020). Group revenue in the first six months was $3.57b, up 2% from $3.51b a year ago in the same period. Compared to the same period last year, its first-half Profit before Tax (PBT) was $286.4m, down 13% from $329.6m, and its first-half Profit attributable to shareholders (Net Profit) was $257.4m, down 4% from $269.3m.
The Marine sector revenue performance and acquisitions by the Aerospace and Electronics sectors in 2019 (i.e. MRAS in April and Newtec in October) resulted in revenue growth for 1H2020. However, this was largely offset by the impact of COVID-19 (namely, reduction in customer demand, supply chain challenges, and workforce disruption), especially on the Aerospace and Electronics sectors. Excluding the effects of these acquisitions, revenue was 7% lower than 1H2019.
GROUP NET PROFIT
The Group’s Net Profit was impacted negatively by impairment of intangible assets, receivables, and fair value changes as the business outlook for some lines of business was forecasted to be poorer as a result of COVID-19. Further, its U.S. shipbuilding business experienced some project losses. Net Profit contribution (excluding the effects of impairment and shipbuilding) was impacted by COVID-19 but aided by cost reduction initiatives and Government support.
GOVERNMENT SUPPORT SCHEMES
The Singapore government Jobs Support Scheme (JSS) provides a 10-month wage subsidy for 2020, and is applied against a monthly salary cap of $4,600 per month per local employee.
Other than the two circuit-breaker months of April and May 2020 where all companies are provided with 75% subsidy, the Aerospace sector’s JSS benefit was classified as Tier-1 at 75% subsidy compared to Tier-2 at 50% for Marine sector, and Tier 3 at 25% for Electronics and Land Systems sectors for the remaining eight months.
About half of the 10-month subsidy was accrued in 1H2020, of which about 40% was for the Aerospace sector. The accrual policy adopted, consistent with ISCA‘s recommendations, is to recognise the JSS from April to December 2020.
Including financial stimulus packages provided by governments in locations where the Group’s locally incorporated businesses operate in, the Group expects to receive more than $300m in government support for full year 2020.
BUSINESS SECTORS: REVENUE AND NET PROFIT
“We entered the COVID-19 pandemic from a position of strength. Our technology and engineering foundation built up over the years, our strong balance sheet, our diverse business mix and robust order book helped us weather the impact of COVID-19 and maintain even-keel for our first half results.
We are cognisant of the ‘tail wind’ afforded us through the various government support schemes (especially the Singapore government’s JSS) for 2020. We do not expect such support beyond this year. We are working to position the Group to come out of the pandemic stronger and more competitive. This means focusing on cost reduction, productivity and talent acquisition, organising for growth and serving our customers better. We are also alert to opportunities that have emerged or been accentuated as a result of COVID-19. We are well positioned to benefit from areas like Passenger-to-Freighter conversion and smart city solutions, including safe access control management.
We are maintaining our guidance for FY2020 revenue to come in between 5% and 15% lower versus FY2019.”
Vincent Chong, President & CEO, ST Engineering
In the first half, commercial sales and defence sales accounted for $2.4b and $1.2b respectively of Group revenue. The Group has a strong operating cash flow of $1.0b (resulting from strong customer advances) and as at 30 June 2020, it held $342m in cash and cash equivalents.
New Contract Wins in 2Q2020 and Order Book
The Group’s Aerospace and Electronics sectors collectively secured new contracts of about $1.1b in the second quarter of 2020, bringing total contract wins in the first half for these two sectors to $2.7b. The Aerospace sector was awarded new contracts worth about $586m in 2Q2020 for a spectrum of its aviation manufacturing and MRO businesses, including MRO contracts from new customers such as a Chinese cargo airline. The Electronics sector won $517m of new contracts in 2Q2020 for products and solutions in smart mobility, cybersecurity and public safety and security. Its mobility business extended footprint across Asia, and won a contract to deploy its next-generation Perimeter Intrusion Detection System for its first airport project in the U.S. The sector also won various contracts in cybersecurity, and public safety and security in Singapore, including contracts for the building and deployment of a Security Operations Centre, the provision of cybersecurity services, and secured communications equipment for customers in defence and other government sectors.
These new contracts, together with other contracts won but not disclosed, and after adjustments of revenue delivery and project cancellations, bring the Group’s order book to $15.9b as at 30 June 2020. The Group expects to deliver about $3.2b from the order book in the remaining months of 2020.
The Board of Director has approved an Interim Dividend of 5.0 cents per share. Shareholders will receive the payment on 2 September 2020.
ST Engineering is a global technology, defence and engineering group specialising in the aerospace, electronics, land systems and marine sectors. The Group employs about 23,000 people across offices in Asia, Europe, the Middle East and the U.S., serving customers in the defence, government and commercial segments in more than 100 countries. With more than 700 smart city projects across 130 cities in its track record, the Group continues to help transform cities through its suite of Smart Mobility, Smart Security and Smart Environment solutions. Headquartered in Singapore, ST Engineering reported revenue of $7.9b in FY2019 and it ranks among the largest companies listed on the Singapore Exchange. It is a component stock of the FTSE Straits Times Index, MSCI Singapore, iEdge SG ESG Transparency Index and iEdge SG ESG Leaders Index.
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