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What Investors Should Know About Singapore Technologies Engineering Ltd’s 2018 Third-Quarter Earnings

Singapore Technologies Engineering Ltd (SGX: S63) is an engineering group with four main business sectors, namely, aerospace, electronics, land systems, and marine. This morning, the conglomerate released its financial results for the third quarter ended 30 September 2018. Let’s take a look at the key takeaways from the announcement.

1. Revenue for the reporting quarter inched up by 1% year-on-year to S$1.63 billion. The main drivers of growth were the aerospace and electronics sectors; revenue from those sectors rose 13% and 2% respectively. Land systems and marine segments saw lower revenue for the quarter. The marine segment’s top-line fell 16% to S$137 million.

2. Profit from operations came down by 1.3% to S$143.6 million mainly due to higher administrative expenses, and distribution and selling expenses.

3. Net profit rose 5.3% to S$134.6 million. The aerospace, electronics, and land systems sectors saw higher profitability while the marine sector posted a 35% fall in net profit.

4. ST Engineering’s balance sheet strengthened for the latest period. As of 30 September 2018, the group had S$352.6 million in cash and cash equivalents, with S$370.7 million in total borrowings. In comparison, at the end of 2017, it had S$999.0 million in cash and cash equivalents, and total debt of S$1.12 billion.

5. Cash flow from operations for the quarter plunged 61.3% to S$43.3 million. With capital expenditure at S$49.0 million, ST Engineering posted negative free cash flow of S$5.7 million for the 2018 third-quarter. In the 2017 third-quarter, the conglomerate had S$15.2 million in free cash flow.

6. ST Engineering entered the quarter with an order book of S$13.3 billion. Around 12% of the amount is expected to be delivered in the remaining period of this year.

7. Looking ahead, the conglomerate said:

“A key highlight of the third quarter was the Group’s proposed acquisition of MRAS. This business will scale up its aerospace capabilities by moving the Group upstream into the OEM business of high-value components. The Group is excited by the role it will play in the growth of its Aerospace sector, and look forward to closing the transaction in the first quarter of 2019.

The Group continues to be well placed to deliver long-term sustainable growth. The Group’s innovative and differentiated Smart City solutions are gaining traction outside of its traditional markets as more cities embrace technology for development and modernisation.”

In September, ST Engineering announced that it is looking to acquire MRA Systems (MRAS), a firm that makes aircraft engine parts. The acquisition should enable the aerospace sector, which contributes the bulk of overall revenue, to grow further. The addition should also help ST Engineering to differentiate itself from its counterparts.

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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 Sudhan P doesn’t own shares in any companies mentioned.