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The Good And The Bad: Important Takeaways From Singapore Technologies Engineering Ltd’s Latest Earnings

Singapore Technologies Engineering Ltd (SGX: S63) is a large engineering conglomerate with four main business segments, namely, Aerospace, Electronics, Land Systems, and Marine.

The company recently reported its 2017 first quarter results. There are both positive and negative takeaways from the announcement that investors may want to learn about. Let’s take a look, starting with an overview of the numbers:

1. The overall result

Here’s a table showing some of the important items from ST Engineering’s income statement for the first quarters of 2017 and 2016:


Source: ST Engineering 2017 first quarter earnings release

We can see that the company experienced a decline in revenue as well as earnings per share during the reporting quarter.

2. The negatives

Firstly, ST Engineering’s overall revenue was down by 5% year-on-year, driven by lower revenues from its Aerospace, Land Systems, and Marine segments. Only its Electronics segment clocked in higher revenue. In other words, there was broad-based revenue-weakness in ST Engineering’s various businesses.

Secondly, the Aerospace and Marine segments managed to deliver growth in pre-tax profit despite their lower revenue. The Land Systems segment, unfortunately, couldn’t.

3. The positives

Firstly, ST Engineering’s operating profit margin (EBIT divided by revenue) expanded in the first quarter of 2017, up from 6.0% a year ago to 7.6%.

Secondly, the company ended the first quarter of 2017 with a stronger balance sheet compared to the first quarter of 2016. 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.

Thirdly, ST Engineering increased its order book during the reporting quarter, both on a sequential as well as year-on-year basis. The company ended the reporting quarter with an order book of S$13.3 billion, of which it expects to deliver S$3.0 billion in the remaining months of 2017. ST Engineering’s order book at end-2016 and the first quarter of 2016 were S$11.6 billion and S$11.5 billion, respectively.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.