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Singapore Technologies Engineering Ltd’s Latest Earnings: Higher Sales, But Lower Profits

Singapore Technologies Engineering Ltd (SGX: S63) reported its fiscal first-quarter earnings this morning. The reporting period was for 1 January 2016 to 31 March 2016.

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. This puts the conglomerate into a variety of sectors including defense, information communication technologies (ICT), and global maintenance, repair and overhaul (MRO).

You can read more about ST Engineering in here, here, and here. You can also catch up with the results from the firm’s previous quarter here.

Financial highlights

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

  1. For the reporting quarter, ST Engineering’s revenue was $1.6 billion, an 8% increase compared to the same quarter a year ago.
  2. But, profit attributable to shareholders receded to $110 million, down 15% year–on-year.
  3. Earnings per share (EPS) also fell 15% as a result, slipping from 4.17 cents in the first-quarter of 2015 to 3.53 cents in the latest quarter.
  4. ST Engineering’s cash flow from operations came in at $120.6 million while capital expenditure was $54.7 million. This gave the conglomerate free cash flow of $65.9 million for the reporting quarter. This is a step back from a year ago, when ST Engineering had $256.2 million in free cash flow ($303.6 million in cash flow from operations and $47.4 million in capex).
  5. As of 31 March 2016, ST Engineering had $1.04 billion in cash and equivalents and borrowings of $1.18 billion. This is a slight improvement from the previous sequential quarter when it had $944 million in cash and equivalents and borrowings of about $1.19 billion.

In all, ST Engineering experienced solid growth in revenue but was not able to turn it into profit growth. The group’s balance sheet remains in a net debt position and its free cash flow was also down substantially compared to a year ago.

Operational highlights

For the first-quarter of 2016, ST Engineering’s Aerospace business segment was one of the stars of the quarter, posting a 27% increase in revenue to $662 million. The Electronics business segment also had a strong showing, with sales increasing 28% year-on-year. The Electronics business segment ended the quarter with $457 million in revenue.

Elsewhere, the Marine and Land Systems business segments suffered revenue declines. The former saw sales fall by 24% to $213 million. For the latter, its revenue was $284 million for the reporting quarter, down 18% year-on-year.

ST Engineering ended March 2016 with an orderbook of $11.5 billion, of which $3.0 billion is expected to be delivered in the remaining months of 2016. For perspective, the engineering conglomerate had an orderbook of $12.2 billion at end-March 2015.

Tan Pheng Hock, ST Engineering’s president and chief executive, rounded off the quarter with the following comments, giving investors an idea of the drivers of the business and what to expect:

”For the first quarter of 2016, the Group reported higher Revenue, but lower PBT compared to the same quarter last year. Our business operations, including shipbuilding, continue to face industry headwinds, the impact of slow-down in China and overall, an uncertain global economic outlook.

Notwithstanding the economic conditions, the quarter ended with an order book of $11.5b, and we continue to hold cash and cash equivalents, including funds under management, at a healthy level of $1.5b.

Against a weakening global economic environment, the Group adopts a cautious approach to its businesses. Barring unforeseen circumstances, the Group expects FY2016 Revenue to be higher, and PBT to be comparable to FY2015. We continue to monitor the situation closely and will provide an update at mid-year.”

At its opening price today of $3.07, ST Engineering traded at around 18.7 times trailing earnings with a trailing dividend yield of 4.9%.

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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.