Forty Is an Important Number. at Forty You've Taken Some Risks, Had Some
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Forty is an important number. At forty you’ve taken some risks, had some knocks and gained wisdom in the process. You know who you are and where you’re going. You’ve honed your strengths, and you’re raring to go. The best is yet to come. life begins at f rty Annual Report 2007 at forty Singapore Technologies Engineering Ltd 1 Annual Report 2007 foresight originality responsibility teamwork young The growth of Singapore is buttressed by its engineering achievements, of which ST Engineering has played no small role. ST Engineering celebrated its 40th Anniversary in 2007 with aplomb and gratitude, and looks forward to the next 40 years. A fervent supporter of the arts and community, ST Engineering is showcasing the rich illustrative styles of local artists in this annual report, which is printed entirely on recycled paper. Contents 01 Life Begins at Forty 12 Letter to Shareholders 18 Financial Highlights 24 Board of Directors 28 Senior Management 32 Organisation Chart 34 Corporate Governance 45 40th Anniversary 48 Community and Environment 50 Investor Relations 50 – Investor Relations Calendar 51 – Share Price Performance 52 Awards and Commendations 55 Operating Financial Review 62 – ST Engineering at a Glance 89 Financial Report 2 forty foresight ST Engineering’s visionary approach drives its success. Over the past 40 years, it has anticipated changes and adapted its business focus to serve the global market. Singapore Technologies Engineering Ltd 3 Annual Report 2007 Illustrated by Michael Ng (Mindflyer) 4 forty originality ST Engineering values originality above all things. It spurs the Group to create novel solutions that transcend the ordinary and enhance our competitiveness. Singapore Technologies Engineering Ltd 5 Annual Report 2007 Illustrated by Michael Ng (Mindflyer) 6 forty responsibility Success in the business arena is not ST Engineering’s sole focus. Ever mindful of its responsibility to society, it proactively reaches out to the less fortunate, promotes the arts and education, engages local communities, and helps preserve the environment. Singapore Technologies Engineering Ltd 7 Annual Report 2007 Illustrated by Adeline Tan 8 forty teamwork ST Engineering’s success is dependent on the combined effort of its stakeholders – staff, business partners and customers – working together in a synergistic relationship to create value for all. Singapore Technologies Engineering Ltd 9 Annual Report 2007 Illustrated by Andrew Tan (Drewscape) 10 forty young At 40 years young, life is just beginning for ST Engineering. Youthfulness is a state of mind; and the energy and enthusiasm this produces are exhibited at all levels within the Group. Singapore Technologies Engineering Ltd 11 Annual Report 2007 Illustrated by Lee Wai Leng (Fleecircus) 12 Illustrated by Kristal Melson Singapore Technologies Engineering Ltd 13 Annual Report 2007 The Group registered double digit growth for the third consecutive year in 2007. Our net profi t rose by 13% to $503.5m on the strength of all sectors. Group turnover crossed the $5b mark with an increase of 13% to $5.05b, while profi t before tax increased 13% to $638.1m. Our earnings per share was 16.95 cents, an increase of 12%. Economic Value Added grew 19% to $388.8m. Return on equity was a respectable 30.8%, higher than the 28.4% in 2006. Cash and cash equivalents, including funds under management, remained a healthy $1.5b. Dear Shareholders on a second customer and STARCO, our MRO facility The ST Engineering Group celebrated its 40th Anniversary in in Shanghai, is adding hangar capacity to cater to the 2007. While our history may not be long compared to many increasing demand. China continues to be a key market MNCs in the US and Europe, it marks a history that is filled for the Group, with the Aerospace, Electronics and Land with pride, pioneering achievements and record-breaking Systems sectors gaining a stronger foothold in the fast milestones. Since the amalgamation of the Aerospace, expanding market. Electronics, Land Systems and Marine sectors in 1997 to form the ST Engineering Group, we have enjoyed synergies Today, Group revenue from outside of Asia has grown to and an enlarged critical mass that allow us to compete in the 51%, reflecting the results of our globalisation efforts. global marketplace. Recent acquisitions have added to our revenue and bottom line and also re-shaped our geographical business profile The ST Engineering Group delivered a stellar performance in to one with a global customer base. While commercial 2007. For the third consecutive year, the Group registered business is growing at a faster pace than defence double digit growth with net profit growing by 13% to business, the ability of the Group to harness dual use $503.5m. This is despite the fact that the world economy technology is benefiting both business groups, enhancing faced a number of challenges in 2007 with oil prices close our competitiveness in the market place. Flexibility in to US$100 a barrel, cost of doing business escalating, a leveraging on the interplay between our defence and weakening USD and the sub-prime problem in the US and commercial businesses remains a key advantage of the Europe. Group. Evolving technologies also provide fodder for new ideas and solutions. We continually challenge the traditional Continuing the Journey of Globalisation and innovate cost effective solutions to meet customers’ The Group’s sterling performance amidst a changing and requirements. Our global customer base now covers more evolving economic landscape reaffirms its decision to than 70 countries. globalise. Leveraging on the globalisation and acquisition strategy of prior years, the Group continues to build on Globalisation continues to drive our growth strategy as it the new operations and synergise the complementary helps diversify our geographical and economic exposure, capabilities in the Group. Today, with a staff strength of over thereby hedging the interests of the Group. We are 18,000 spanning five continents, 21 countries and 35 cities, selective and stringent with our acquisition and joint the ST Engineering Group is well poised to seize global venture processes. Every new acquisition or partnership is opportunities and diversify our earnings stream. intended to add value to our existing businesses, expand our technologies and capabilities, address new markets, enlarge 2007 was a landmark year for the Group’s US operations our customer base, and/or infuse fresh talents into our as VT Systems and its operating units in the US reached global workforce. the US$1b revenue mark. This makes the US the single largest market for the Group outside of Asia. Elsewhere, During the year, the Aerospace sector signed agreements our Aerospace sector’s Panama MRO facility signed to set up ST Aviation Training Academy, a commercial pilot 14 training academy in Singapore, as well as an engines MRO 2007, the Company will have declared a total of 16.88 cents facility in Xiamen, China. The sector also acquired Sydney- per share in dividends for FY2007, giving a dividend yield of based Pacific Flight Services Pty Ltd (PFS) to complement 4.94%. our charter and training business. Winning Customers and Engaging Partners The Electronics sector entered into an agreement to The Group registered a strong order book of $9.49b in purchase Telematics Wireless Ltd, a key player in the high 2007. Significant contracts were clinched from existing and growth Machine-to-Machine industry in which machine new customers throughout the year. assets are connected through wireless infocommunication infrastructures to allow wireless transmission of information Some of the significant contracts, secured during the for remote monitoring and control. The acquisition was year included the FedEx Express’ Passenger-to-Freighter completed in January 2008. The sector divested its stake (PTF) conversion agreement for its B757-200 aircraft; in ECS Holdings Limited (ECS), a marketing and distribution Boeing’s contract to perform PTF conversions under the channel for the group’s information technology solutions 767-300 Boeing Converted Freighter (BCF) programme to customers in Singapore and other regional markets for ($208m); Delta Air Lines’ contracts for MRO work ($232m); the last three years. The sale of ECS’ shares presented an comprehensive engines maintenance and engineering opportunity to maximise shareholder value. support for Xiamen Airlines ($248m); MINDEF’s shared services and e-government services contract ($255m); The Land Systems sector further invested in Guizhou an integrated solutions commuter rail project in Turkey Jonyang Kinetics Co., Ltd. (GJK) to expand our facilities and ($123m); a weapons maintenance contract from the add new capabilities to strengthen our foothold in specialty Singapore Army ($78m); a contract from the Republic of vehicles in China. Singapore Navy to design, build, operate and maintain a 2008 is expected to be a year of uncertainties. The state of the US economy will affect world economic growth, which in turn will affect the Group’s global businesses. However, given our diversifi ed earnings stream and excellent business portfolio, we are cautiously optimistic that we will deliver in the year. Celebrating another Year of Double Digit Growth ship and submarine rescue system ($400m); and a contract The Group registered double digit growth for the third to build 330,000-barrel tank barges for Crowley Maritime consecutive year in 2007. Our net profit rose by 13% to Corporation ($381m). $503.5m on the strength of all sectors. Group turnover crossed the $5b mark with an increase of 13% to $5.05b, The Marine sector successfully entered the Roll-on/Roll-off while profit before tax increased 13% to $638.1m. Our Passenger (Ropax) ferry newbuilding market with a contract earnings per share was 16.95 cents, an increase of 12%. from Louis Dreyfus Armateurs of France. This is a first for Economic Value Added grew 19% to $388.8m. Return on Singapore’s shipbuilding history.