Singapore Technologies Engineering (ST Engineering) has reported a 14% drop in earnings of $264.4 million for the 2HFY2020 ended December, compared to earnings of $308.6 million from the corresponding period the year before.

This brings the group’s FY2020 earnings to $521.8 million, a 9.7% decline from earnings of $577.9 million in FY2019, due to lower revenue and profit before tax (PBT). According to the group, the lower earnings were slightly mitigated by the “non-taxability of the government’s jobs support scheme (JSS)”.

Earnings per share (EPS) for FY2020 stood at 16.64 cents compared to FY2019’s EPS of 18.42 cents.

Group revenue in 2HFY2020 fell 18% y-o-y to $3.59 billion, mainly due to a 38% y-o-y drop in revenue for the group’s Aerospace sector to $1.24 billion.

Electronics and Land Systems fell 2% and grew 2% y-o-y to $1.22 billion and $767 million respectively, while the Marine sector fell 9% y-o-y to $325 million. Other revenue stood at $33 million, up from $2 million the year before.

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FY2020 group revenue fell 9% y-o-y to $7.19 billion, mainly due to lower customer demand, supply chain challenges and workforce disruption amid Covid-19, which caused declines across the group’s Aerospace, Electronics and Land Systems sectors. The Aerospace sector, in particular, was impacted the most due to a weak aviation sector on the back of a near-halt in passenger air travel.

The lower revenue, says the group, came in line with the revenue guidance posted in its market update for the 3QFY2020.

The Aerospace sector reported 21% y-o-y lower earnings at $2.7 billion with 28% lower y-o-y net profit of $192.9 million mainly attributable to lower volume of maintenance, repair and overhaul (MRO) activities, asset impairments and absence of favourable impact of end-of-programme reviews. Excluding support from the government, the group says the sector’s earnings would have remained in the black.

In Electronics, revenue came in 2% y-o-y lower at $2.3 billion mainly due to the rescheduling of projects, which were affected by Covid-19. Its net profit grew 11% y-o-y to $203.9 million largely bolstered by cost reduction measures and government support.

Land Systems reported 1% lower revenue y-o-y at $1.4 billion due to lower specialty vehicle sales, and offset by higher defence sales. Its net profit stood 31% y-o-y higher due to higher cost savings and government support.

Revenue for the Marine sector grew 10% y-o-y to $710 million mainly due to higher contribution from US Shipbuilding, and offset by lower revenue contribution from Singapore. Its net profit fell 45% y-o-y to $28.3 million due largely to a weaker performance from US Shipbuilding and higher operating costs incurred owing to the Covid-19 outbreak.

FY2020 profit before tax (PBT) fell 23% y-o-y to $534.4 million due to lower group revenue, the impairment of intangible assets and fair value changes of associates in line with the poorer business outlook for certain lines of businesses due to Covid-19.

ST Engineering’s US shipbuilding business also registered losses as it executed several projects that were “contracted and priced at the trough of the marine industry”.

The group’s Aerospace and Electronics sectors announced new contracts amounting to some $5.7 billion for the FY2020, of which $1.3 billion were secured in 4QFY2020.

Of the $1.3 billion, the Aerospace sector clinched $821 million worth of contracts, while the Electronics sector won $516 million worth of contracts.

SEE: ST Engineering tops sector again, reorganises for better agility in capturing new growth

During the year, the group saw cancellations and adjustments of some $1 billion, while certain contracts slated for 4QFY2020 were deferred to January.

The group’s order book, which stands at $15.4 billion as at end-December 2020, is slightly higher than its order book at year-end 2019.

It says that it expects to deliver some $5.3 billion from the order book in 2021.

As at end-December 2020, cash and cash equivalents stood at $729.5 million.

The group is proposing a final dividend of 10 cents per share. Together with the interim dividend of 5 cents per share distributed in September 2020, shareholders will receive a total dividend of 15 cents per share for FY2020, unchanged from FY2019 and FY2018.

This translates to a dividend yield of 4%, against the average closing share price of the last trading day of 2020 and 2019.

“Going into 2021, we expect recovery to be uneven across the industries we participate in. The aviation industry remains subdued and is unlikely to recover to pre-pandemic levels in 2021. Nevertheless, we are focusing on delivering our order book, seizing new opportunities in areas like freighter conversions and cybersecurity. With partial revenue recovery, when combined with savings from our cost reduction initiatives, we target to offset the effects of lower government support in 2021,” says Vincent Chong, group president and CEO of ST Engineering.

“With our new organisation structure, we are well positioned to better serve our customers, respond nimbly to macro-economic changes and achieve long-term sustainable growth,” he adds.

Shares in ST Engineering closed 3 cents lower or 0.8% down at $3.74 on Feb 18.