St-Engineering-Annual-Report-2017

St-Engineering-Annual-Report-2017

ENGINEERING YOUR FUTURE ST ENGINEERING GROUP OVERVIEW ST Engineering is a global technology, defence and engineering group specialising in the aerospace, electronics, land systems and marine sectors. Incorporated in 1997 and headquartered in Singapore, we rank among the largest companies listed on the Singapore Exchange, and are one of Asia’s leading engineering groups. Our global network of subsidiaries and associated companies, supported by a workforce of about 22,000, allow us to serve customers in Asia, the NORTH AMERICA Americas, Europe, and Oceania. A leader in each of our core businesses, ST Engineering brings innovation and technology together to create multi-disciplinary smart engineering solutions for customers in the defence, government and commercial segments. Our Aerospace sector offers a wide spectrum of aircraft maintenance, engineering and training services for both military and commercial aircraft operators. These services include airframe, component and engine maintenance, repair and overhaul, engineering design and development, materials support, asset management and pilot training. Our Electronics sector specialises in the design, development and integration of advanced electronics and communications systems across all industries and SOUTH AMERICA segments. Aerospace Our Land Systems sector delivers customised land Electronics systems, security solutions and their related through- Land Systems life support for defence, homeland security and Marine commercial applications. Our Marine sector provides turnkey and sustainable For our complete Group structure, defence and commercial solutions in the marine, please refer to www.stengg.com. offshore and environmental engineering industries. contents Financial Highlights / 2 Letter to Shareholders / 4 Board of Directors / 14 Senior Management / 20 Group Highlights / 22 ABOUT Operating Review & Outlook / 32 Investor Relations / 66 Awards / 68 22,000 Corporate Information / 70 Sustainability Report / 71 EMPLOYEES Corporate Governance / 88 Financial Report / 117 ANNUAL REPORT 2017 EUROPE ASIA MIDDLE EAST AFRICA SINGAPORE AUSTRALIA ACROSS IN 44 22 CITIES COUNTRIES 1 ST ENGINEERING FINANCIAL HIGHLIGHTS GROUP REVENUE ($b) $6.62b OPERATING CASH FLOW ORDER BOOK -1.0% 6.68 6.63 6.62 $0.76b $13.2b 6.54 6.34 +0.6% +14.0% EARNINGS PER SHARE DIVIDEND PER SHARE '13 '14 '15 '16 '17 16.43¢ 15.0¢ PBT ($m) +5.3% $623.3m +5.5% RETURN ON EQUITY RETURN ON SALES 729.7 650.7 623.3 630.3 22.9% 8.1% 590.6 +0.7% PTS +0.7% PTS FY2017 vs FY2016 '13 '14 '15 '16 '17 NET PROFIT ($m) REVENUE BREAKDOWN $511.9m 35% +5.6% Defence 21% USA BY BY 580.8 532.0 529.0 511.9 CUSTOMER LOCATION OF 11% 484.5 TYPE CUSTOMERS Europe 61% Asia 7% Others 65% Commercial '13 '14 '15 '16 '17 2 ANNUAL REPORT 2017 AEROSPACE ELECTRONICS LAND SYSTEMS MARINE REVENUE ($b) REVENUE ($b) REVENUE ($b) REVENUE ($b) $2.54b $2.11b $1.24b $0.64b +2.0% +11.8% -10.5% -24.2% 1.34 2.11 1.55 2.54 2.48 1.47 1.46 1.24 1.88 1.39 2.08 2.09 2.06 1.71 1.24 1.65 1.58 0.96 0.84 0.64 '13 '14 '15 '16 '17 '13 '14 '15 '16 '17 '13 '14 '15 '16 '17 '13 '14 '15 '16 '17 PBT ($m) PBT ($m) PBT ($m) PBT ($m) $317.8m $212.3m $85.0m $22.4m +5.8% +2.2% +119.4% -70.2% 319.4 317.8 212.3 146.3 103.0 207.8 300.3 290.6 191.0 283.0 85.0 184.0 122.8 170.3 73.3 88.3 57.8 75.1 22.4 38.8 '13 '14 '15 '16 '17 '13 '14 '15 '16 '17 '13 '14 '15 '16 '17 '13 '14 '15 '16 '17 NET PROFIT ($m) NET PROFIT ($m) NET PROFIT ($m) NET PROFIT ($m) $244.1m $178.8m $87.4m $27.0m +4.1% +2.4% +243.3% -60.1% 87.4 84.9 110.0 259.2 178.8 108.1 174.5 244.1 234.4 163.0 226.7 152.1 220.1 85.7 137.1 62.6 67.8 51.5 25.5 27.0 '13 '14 '15 '16 '17 '13 '14 '15 '16 '17 '13 '14 '15 '16 '17 '13 '14 '15 '16 '17 3 ST ENGINEERING LETTER TO SHAREHOLDERS Kwa Chong Seng Vincent Chong Chairman President & CEO Dear Shareholders, revenue lowered by 11% to $1.24b, its PBT was up 119% to $85.0m Global GDP growth increased in 2017 due to the absence of the prior to over 3%, but business recovery was year’s impairment of asset carrying not uniform across sectors. In a year values and the provision of closure that presented both opportunities costs for its subsidiaries in China. and challenges, we closed 2017 with Consequently, its Net Profit improved a Group revenue of $6.62b, broadly 243% to $87.4m, also contributed by comparable to the $6.68b posted in the positive impact of the tax reform 2016. With a continued focus on cost, effects in the US. The Marine sector's we fared better in profits. Both Profit revenue was 24% lower at $637m, Before Tax (PBT) of $623.3m and and its PBT was down 70% at $22.4m, Profit Attributable to Shareholders due mainly to the weak industry (Net Profit) of $511.9m were 6% conditions and its US operations. higher compared to 2016. As a result, its Net Profit came down 60% lower at $27.0m from the year At the business sector level, the before. Aerospace sector’s revenue was 2% higher at $2.54b, its PBT was $317.8m The Group’s revenue mix by business and Net Profit was $244.1m, up sector shifted slightly. While the 6% and 4% respectively from 2016. Aerospace sector was still the largest Revenue for the Electronics sector contributor at 38%, the Electronics was 12% higher at $2.11b, its PBT and sector’s contribution increased to Net Profit were $212.3m and $178.8m 32%. The Land Systems and the respectively, both up 2% from 2016. Marine sectors contributed 19% and At the Land Systems sector, while its 10% respectively, with the remainder 4 ANNUAL REPORT 2017 under “Others”. Geographically, share paid in August 2017, the total business units in Asia including dividend for the full year will be 15 Singapore, contributed 72% to Group cents per share, representing a total revenue, while our business units payout of $468m to our shareholders. “ in the US and Europe generated The dividend yield for 2017 is 4.6% OUR FOUR SECTORS 18% and 8% of Group revenue compared to 4.8% for 2016. REMAIN STRONG, WITH respectively. Revenue split between Commercial and Defence remained ESTABLISHED MARKET stable at 65%:35%. Pursuing growth through POSITIONS THAT HELP innovation The Group’s return on equity was US MEET THE CHALLENGES 22.9% and our earnings per share As a technology, defence and AND“ GROW THE BUSINESS. amounted to 16.43 cents. engineering Group, we need to keep pace with the speed of technology The Group’s revenue pipeline remains and market changes to develop new healthy, with an order book of $13.2b, and innovative solutions for our about 14% higher than the year customers. This is why ST Engineering before. We expect to deliver about has consistently been making $3.8b of the order book in 2018. strategic R&D investments in key disciplines and technologies within Our capital expenditure was our core business sectors. $273m compared to $252m in FY2016. A significant portion of this However, we want to raise our expenditure was deployed in the innovation quotient even further. To investment in Janus Technologies, Aerospace sector. We expanded our that end, we have actively promoted a US-based endpoint cybersecurity facility in Dresden, Germany with a greater innovative culture especially provider, which helped ST Electronics a new single-bay wide-body hangar among engineers to experiment launch its Black Computer, an to take on an expanding A330- and venture beyond their comfort industry-first hardware-based 300 Passenger-to-Freighter (P2F) zones. We have also adopted open cybersecurity solution. conversion programme for DHL innovation by providing a dynamic Express. We also invested in a innovation platform and springboard Separately, we acquired Aethon, a new facility for composite panels for collaboration in new and US-based provider of autonomous production in Kodersdorf, Saxony. disruptive technologies. mobile robots (AMRs) which has This facility will manufacture deployed its AMRs in more than lightweight components, mainly In 2017, we launched an Open 200 sites globally, including in 140 floor panels and cargo linings, to Innovation Lab (Open Lab), an hospitals in the US. The acquisition meet the needs of Airbus' growing engineering-based incubator that has since allowed us to develop production of single-aisle aircraft. is first of its kind in Singapore. The new applications based on a Open Lab has participation from our proven robotic solution for indoor We generated a strong cash flow of own engineers as well as individuals applications for the healthcare, $764m from operations and ended and start-ups from outside the industrial and hospitality sectors. the year with $1.3b of cash and cash Group. They come together to co- equivalents, including funds under create and innovate while receiving It is still early days, but the creation management. We are committed to funding support, access to advanced of the Open Lab and investments maximising cash flow, maintaining lab equipment, and go-to-market in Janus, Aethon and the likes capital discipline and improving facilitation etc. have already value-added and value and returns. strengthened the larger Group’s We also set up a Corporate Venture core technological and engineering Your Board of Directors proposes a Capital unit with US$150m open- capabilities by complementing final dividend of 10 cents per share ended fund to invest in promising existing R&D efforts in our sectors for this financial year.

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