Singapore Technologies Engineering Ltd’s Latest Earnings: What Investors Should Know

Singapore Technologies Engineering Limited (SGX: S63) – also known as ST Engineering – reported its fiscal first-quarter earnings this morning. The reporting period was for 1 January 2015 to 31 March 2015.

As a conglomerate, ST Engineering has its fingers in many pies. Its major business segments include Aerospace, Electronics, Land Systems and Marine. This puts the conglomerate into a variety of sectors including defense, information communication technologies (ICT), and global maintenance, repair, and operation (MRO).

You can read more about ST Engineering here and its subsidiaries in here and here. You can also catch up with the conglomerate’s earnings for the previous quarter here.

Financial highlights

Here’s a rundown on ST Engineering’s latest set of financial figures:

  1. Overall revenue for the first quarter was $1.51 billion, down 3% when pitted against the same quarter a year ago.
  2. Quarterly profit attributable to shareholders had slipped by 5% year on year to $130 million.
  3. Consequently, earnings per share (EPS) for the first quarter also fell 5% from 4.41 cents in the first quarter of 2014 to 4.17 cents in the reporting quarter.
  4. On a positive note, cash flow from operations for the quarter came in at $303.6 million with capital expenditures clocking in at $47.4 million. The lower capex gave the conglomerate a fat $256.2 million in positive free cash flow. These are big improvements compared to a year ago when ST Engineering had $116.7 million in operating cash flow, $60.2 million in capital expenditures, and thus $56.5 million in free cash flow.
  5. ST Engineering’s balance sheet had taken a small step backwards compared to a year ago. As of 31 March 2015, the conglomerate had $1.68 billion in cash and equivalents and $1.08 billion in total borrowings; the selfsame figures at end-March 2014 were $1.73 billion and $1.03 billion, respectively.

In all, ST Engineering had a sluggish quarter with a slight decline in revenue and profit. On the other hand, the conglomerate had experienced a strong increase in its free cash flow and was able to maintain a solid balance sheet (albeit a slightly weaker as compared to March 2014).

Operational highlights

For the quarter, ST Engineering’s Aerospace business segment recorded a 2% decline in revenue to $489 million. Although the segment had a lower top-line, this compares favorably with rival SIA Engineering Company Limited’s  (SGX: S59) 11.3% decrease in revenue over the same timeframe.

Elsewhere, revenue for ST Engineering’s Electronics business segment slipped by 3% to end the quarter at $356 million. The Marine business segment was also not spared with its revenue falling a sizable 13% from a year ago to $279 million.

On the flipside, the Land Systems segment saw a 6% year on year rise in revenue to $346 million.

ST Engineering’s order book can be an important metric to track for insights into the company’s business and on that note, the conglomerate ended the first quarter of 2015 with an orderbook of $12.2 billion, of which $3 billion of orders are expected to be delivered within this year. For some perspective, ST Engineering’s order book at end-March 2014 was at $13.4 billion.

Tan Pheng Hock, ST Engineering’s President and Chief Executive Officer, rounded up the quarter with the comments seen below. He also gave a short outlook on the company’s revenue and profit goals for the current financial year:

“For the first quarter of 2015, the Group reported comparable Revenue with a lower PBT compared to the same quarter last year. The difficulties faced by our US shipbuilding operations affected the Group’s overall performance. Our order book is healthy and cash and cash equivalents including funds under management remain high at $1.9 billion.

Barring unforeseen circumstances, the Group expects to achieve comparable Revenue and PBT [profit before tax] for FY2015 when compared to FY2014.”

Foolish take away

ST Engineering opened at $3.61 today and at that price, it traded at around 21.5 times its latest trailing earnings with a dividend yield of 4.2% (thanks to its annual dividend of $0.15 per share in 2014). As a note, the dividend of $0.15 per share included a special dividend of $0.07.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.