Singapore Technologies Engineering Ltd’s Latest Earnings: A Sluggish Start to 2017

Last Friday, Singapore Technologies Engineering Ltd (SGX: S63) reported its 2017 first quarter earnings. The reporting period was for 1 January 2017 to 31 March 2017.

As a quick background, ST Engineering is a conglomerate with four major business segments: Aerospace, Electronics, Land Systems, and Marine. These segments are in a variety of sectors including defense, information communication technologies (ICT), and aircraft maintenance, repair, and overhaul (MRO).

You can catch up with the results from the company’s previous quarter earnings here.

Financial highlights

The following’s a quick rundown on some of the latest numbers for the first quarter:

1. Revenue was $1.54 billion, a 5.4% year-on-year decrease.

2. Profit attributable to shareholders was down 6.1% to $103.4 million compared to a year ago.

3. Earnings per share (EPS) fell 5.7% to 3.33 cents.

4. Cash flow from operations was $399.5 million and capital expenditure was $56.7 million. The conglomerate thus had free cash flow of $342.8 million. A year ago, ST Engineering had produced just $65.9 million in free cash flow.

5. As of 31 March 2017, ST Engineering had $1.27 billion in cash and equivalents and borrowings of $1 billion. This is an improvement from a year ago when it had $1.04 billion in cash and equivalents and borrowings of $1.18 billion.

In all, ST Engineering experienced declines in revenue and profit during the reporting quarter. But, the company’s balance sheet moved to a net cash position and its free cash flow was strong.

Operational highlights and what lies ahead

Revenue was down for all of ST Engineering’s business segments except for Electronics. The segment recorded a healthy 14% year-on-year revenue increase to $523 million for the first quarter of 2017.

Meanwhile, Aerospace revenue fell 12% to $549 million, while the Marine and Land Systems segments suffered revenue declines of 14% and 16%, respectively. The Marine segment’s revenue was $179 million while Land Systems’ revenue was $273 million.

ST Engineering ended the year with an orderbook of $13.3 billion, of which $3.0 billion is expected to be delivered in 2017. This was up from the orderbook of $11.6 billion recorded at the end of 2016, and up from the $11.5 billion seen in March 2016.

In its earnings release, ST Engineering provided this outlook:

”Barring unforeseen circumstances, the Group’s Revenue and PBT for 1H2017 are expected to be comparable to 1H2016. For FY2017, the Group’s Revenue is expected to be comparable to, while PBT is expected to be higher than that of FY2016.”

ST Engineering’s shares closed at $3.71 each today. At that price, ST Engineering has a price-to-earnings (PE) ratio of 24 and a dividend yield of 4%.

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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.