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ST Engineering Posts Higher Y-o-Y Revenue and EBIT For FY2022 Despite $203m Reduction in Government Support
- Order book was $23.0b as at end December 2022, of which about $7.2b is expected to be delivered in 2023
- Commercial sales and defence sales constituted $6.0b and $3.0b respectively
- Cash and cash equivalents of $602m
- N.B. All currencies are in Singapore dollars
ST Engineering FY2022 Financial Statements, ST Engineering Results Presentation FY2022
Singapore, 24 February 2023 - Singapore Technologies Engineering Ltd (ST Engineering) today reported its full-year (FY) financial results ended 31 December 2022.
FY2022 versus FY2021 Group Performance
ST Engineering posted a 17% year-on-year (y-o-y) increase in Group revenue to $9.0b from $7.7b, contributed by all its business segments. Group EBIT improved 9% y-o-y to $735.1m from $673.6m despite a reduction of $203m in government support1. On a base operating performance (BOP) basis excluding government support, energy inflation impact and TransCore transaction and integration (T&I) expenses, as well as the positive impact of pension cost savings, Group EBIT increased by 55% y-o-y to $727m. This result was achieved through cost saving initiatives and business growth.
Group Profit attributable to shareholders (Net Profit) was $535m, down 6% y-o-y from $571m. If government support, energy inflation, TransCore T&I expenses, and tax-exempt effect of JSS2, as well as the positive impact of pension cost savings were excluded, Group Net Profit on a BOP basis would be 39% higher y-o-y at $549m.
FY2022 versus FY2021 Segment Performance Review
- Commercial Aerospace (CA): Revenue was $2.99b, up 21% from $2.46b even as the aviation industry has yet to recover to pre-COVID level. EBIT grew 65% y-o-y to $301m from $182m, despite a $150m reduction in government support y-o-y, due to cost savings initiatives (including pension cost savings) and business recovery.
- Urban Solutions & Satcom (USS): Revenue grew 49% y-o-y to $1.77b from $1.19b. The acquisition of TransCore was completed in March 2022 and this contributed to the revenue growth. USS EBIT was $29m, up 13% y-o-y from $26m despite TransCore T&I expenses, and Satcom’s weakness due to impact of chip shortages and its higher investment in product development.
- Defence & Public Security (DPS): Revenue grew 6% y-o-y to $4.27b from $4.04b with contribution from all its sub-segments of Digital Systems & Cyber, Defence Aerospace, Land Systems and Marine. Digital business comprising Cloud, AI Analytics and Cyber businesses, posted an annual revenue of $385m, on track to well exceed its $500m target by 2026. DPS EBIT was down 13% y-o-y to $405m from $466m in the absence of $51m government support received in the prior year and a $23m impact from energy inflation. If these factors were excluded, DPS EBIT would be 3% stronger y-o-y.
“Our Group revenue grew strongly, and our underlying operating performance improved significantly by 55% y-o-y. Notwithstanding the dip in Group Net profit y-o-y, we made good progress in 2022 to deliver against our five-year plan (Investor Day targets for 2022-2026).
Firstly, our Commercial Aerospace segment has benefited from the recovery in aviation and will see further improvement, especially in the Asia Pacific region and with the re-opening of China.
Secondly, for Urban Solutions & Satcom segment, the transitioning of TransCore is smooth and it has demonstrated good contract win momentum (including the New Jersey tolling contracts). As planned, TransCore is now cash flow positive, and we expect it to be earnings accretive from the second year of acquisition. We see abundant opportunities to derive synergies from this strategic acquisition.
Thirdly, for Defence & Public Security segment, the losses relating to the U.S. Marine business have been eliminated post divestment. This was a result of our continued focus to high-grade our business portfolio.
Finally, all segments won sizeable new contracts culminating in a robust order book of $23b, which is a leading indicator of future growth.
All factors considered, we are well positioned and are optimistic about our future to deliver strong shareholder value.”
- Vincent Chong, Group President & CEO
In terms of Group revenue breakdown, Commercial Aerospace, Urban Solutions & Satcom and Defence & Public Security accounted for 33%, 20% and 47% respectively. Commercial sales3 was $6b and defence sales3 was $3b. The Group held $602m in cash and cash equivalents as at end December 2022.
2H2022 versus 2H2021 Performance Discussion
In 2H2022, Group revenue grew 18% y-o-y to $4.8b from $4.0b because of higher contribution from all its business segments. Group EBIT increased 10% y-o-y to $351m from $319m through both cost savings initiatives and business growth, which more than offset the reduction of $78m in government support. Group Net Profit was $255m, down 7% y-o-y from $274.4m, impacted by reduction in government support of $67m (net of tax), energy inflation, TransCore T&I expenses, and tax-exempt effect of JSS, but significantly mitigated by cost savings and business growth.
2H2022 versus 2H2021 Segment Performance Review
- Commercial Aerospace (CA): Revenue was 19% higher y-o-y at $1.59b from $1.33b. Its EBIT was $118m, up 49% y-o-y from $79m driven by continued business recovery, which more than offset the reduction of $63m in government support.
- Urban Solutions & Satcom (USS): Revenue grew 53% y-o-y to $1.01b from $0.66b, with contribution from TransCore. EBIT was $41m from $15m, up 176% y-o-y even after accounting for TransCore T&I expenses and the weakness in Satcom performance.
- Defence & Public Security (DPS): Revenue grew 5% y-o-y to $2.16b from $2.05b. EBIT was $191m, down 15% y-o-y from $224m due to energy inflation impact and a $16m reduction in government support y-o-y.
New Contract Wins in 4Q2022 and Order Book
In 4Q2022, the Group secured new contracts of about $2.8b, comprising $680m from Commercial Aerospace, $1.39b from Urban Solutions & Satcom, and $737m from Defence & Public Security. This brings the total new contract value for 2022 to $13.1b, compared to $11.7b in 2021.
- Commercial Aerospace clinched new contracts across its aviation manufacturing and MRO businesses. These include PTF conversion orders for A330P2F and A321P2F units, CFM56-7B engine heavy maintenance contracts from established airlines based in Asia, and a multi-year component MBHTM contract to support an Asian airline’s A320 fleet.
- Urban Solutions & Satcom secured contracts from global customers across its business segments. Key wins from Urban Solutions include TransCore’s turnkey tolling system contracts to modernise tolling infrastructure in New Jersey, other tolling and O&M contracts for the states of Houston, Pennsylvania and Oklahoma; its first Passenger Information System contract in Canada for the Valley Line West in Edmonton; as well as Smart Utilities and Smart Security contracts for water metering solutions in the U.S. and integrated smart security management solutions in Singapore. Satcom business secured various contracts to provide connectivity to enterprises, governments and defence forces in Europe, U.S., Canada and Middle East.
- The Digital Systems and Cyber business, which is part of Defence & Public Security, secured new contracts for digital solutions and services, ranging from AI-enabled Mission Critical Command and Control systems to cybersecurity products and cloud managed services. Land Systems secured new orders for munitions from international customers and commercial specialty vehicles in the U.S. while Marine continued to secure contracts for ship repair in Singapore.
With these new contracts, and after adjustments of revenue delivery, ST Engineering ended 2022 with a strong order book of $23b, 50% higher than 2019 pre-COVID level. The Group expects to deliver about $7.2b from the order book in 2023.
Final and Total Dividend
The Board of Directors has proposed a final dividend of 4.0 cents per ordinary share. Together with the three quarterly interim dividends of 4.0 cents per ordinary share each paid in June, September and December 2022, the total dividend for the financial year 2022 will be 16.0 cents per ordinary share. This translates to a dividend yield of 4.5%, computed using the average closing share price of the last trading day of 2022 and 2021.
Notes
1Refers to COVID-19 related government support only
2Refers to Jobs Support Scheme
3Refers to Group revenue by products and services type
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ST Engineering is a global technology, defence and engineering group with a diverse portfolio of businesses across the aerospace, smart city, defence and public security segments. The Group harnesses technology and innovation to solve real-world problems, enabling a more secure and sustainable world. Headquartered in Singapore, it has operations spanning Asia, Europe, the Middle East and the U.S., serving customers in more than 100 countries. The Group reported revenue of $9b in FY2022 and ranks among the largest companies listed on the Singapore Exchange. It is a component stock of the FTSE Straits Times Index, Dow Jones Sustainability Asia Pacific Index, iEdge SG ESG Transparency Index and iEdge SG ESG Leaders Index.
For further enquiries, please contact:
Lina Poa
Head Investor Relations
ST Engineering
Email: linapoa@stengg.com