Singapore Technologies Engineering Ltd’s Latest Earnings

Singapore Technologies Engineering Ltd (SGX: S63) reported its earnings for the year ended 31 December 2015 this morning.

As a brief background for some context later, the engineering firm, known as ST Engineering for short, has its fingers in many pies, thus making it a conglomerate. Its major business segments include Aerospace, Electronics, Land Systems, and Marine. Within those segments, the company is in a variety of sectors including defense, information communication technologies (ICT), and global maintenance, repair, and operations (MRO).

You can read more about ST Engineering in here and its various subsidiaries in here and here. If you’d like, you can catch up with the results from its previous quarter  here.

Financial highlights

The following’s a quick rundown on ST Engineering’s latest financial figures:

  1. Overall revenue for 2015 was $6.33 billion, a 3% decrease compared to 2014.
  2. Profit attributable to shareholders receded by 1% to $529 million.
  3. Consequently, ST Engineering’s earnings per share (EPS) for 2015 was 17.05 cents, a touch below the 17.06 cents recorded in 2014.
  4. For the full year, ST Engineering’s cash flow from operations came in at $465 million while capital expenditure was $273 million. This gave the conglomerate free cash flow of $192 million for the year. This is a big step back from a year ago, when ST Engineering had $400 million in free cash flow ($624 million in cash flow from operations and $224 million in capex).
  5. As of 31 December 2015, ST Engineering had $951 million in cash and equivalents and borrowings of about $1.19 billion. This was a decline from a year ago, when it had $1.47 billion in cash and equivalents and borrowings of $1.02 billion.

Additionally, the company’s board of directors had proposed a final dividend of $0.10 per share, consisting of a $0.05 per share ordinary dividend and a $0.05 per share special dividend. Together with the interim dividend of $0.05 per share, ST Engineering will pay out $0.15 per share in dividend for 2015, unchanged from 2014.

Operational highlights

For 2015, ST Engineering’s Aerospace business segment experienced a 1.4% increase to its topline to end the year with $2.09 billion in sales.

Elsewhere, ST Engineering’s Electronics business segment had a strong showing, with sales increasing 8% to $1.71 billion. There were higher value project milestone completions from the segment’s Software Systems Group and Communication & Sensor Systems Group. The latter also benefited from increased product sales.

The Marine business segment had a severe 29% decline in sales during the year to $958 million. The segment had suffered from lower revenue recognition from shipbuilding contracts. Elsewhere, the Land Systems’ revenue was relatively unchanged at $1.4 billion.

In terms of the segments’ profitability, it was a similar story. Marine was the only one which saw a decline, as shown in the table below:

ST Engineering segment profit
Source: ST Engineering’s earnings release

The conglomerate ended the year with an orderbook of $11.7 billion, of which $3.8 billion is expected to be delivered in 2016. For perspective, ST Engineering had ended 2014 with an orderbook of $12.5 billion, which is in turn, lower than the selfsame figure of $13.2 billion seen at end-2013. As the orderbook represents future revenue, this may be something worth keeping an eye on by investors.

Tan Pheng Hock, ST Engineering’s president and chief executive, rounded off the year with the following comments in the earnings release:

“For FY2015, the Group reported comparable year-on-year Revenue, Profit Before Tax and Net Profit, of $6.3b, $630.3m and $529.0m respectively.

We made history with the successful launch of Singapore’s first Commercial Earth Observation Satellite in December 2015. Strong performance from the Electronics sector, as well as the stronger US dollar, cushioned the weak results from our shipbuilding business. We ended the year with an order book of $11.7b. Our cash and cash equivalents including funds under management was $1.4b at the end of FY2015.

Barring unforeseen circumstances, the Group expects FY2016 Revenue to be higher, but PBT [profit before tax] to be comparable to FY2015.”

Foolish take away

At its opening price today of $2.83, ST Engineering traded at 16.6 times trailing earnings with a trailing dividend yield of 5.3%.

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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.