SINGAPORE (Aug 14): ST Engineering, the technology, defence and engineering conglomerate, powered to earnings of $138.2 million, or 4.43 cents per share, for the 2Q19 ended June, some 18% higher than earnings of $117.5 million a year ago.
The increase was on the back of contribution from the newly-acquired MRA Systems (MRAS) as well as the absence of MTN redemption related costs incurred last year.
This brings earnings for 1H19 up 14% year-on-year to $269.3 million.
2Q19 revenue climbed 8% to $1.78 billion, led by contributions from MRAS, which was consolidated under its Aerospace sector’s Engineering & Material Services business group from mid-April.
Revenue for the Aerospace sector was up 17% to $836 million, with MRAS revenue contribution partially offset by the absence of engine sales and Jet Airways revenue.
Revenue for the Land Systems sector was up 10% to $296 million, driven by broad-based growth across its business groups.
Revenue from its Others segment was up 75% to $14 million, mainly contributed by higher sales from Miltope, its ruggedised computer business.
Meanwhile, revenue from the Electronics and Marine sectors dipped by 3% and 6%, respectively.
As at end June, ST Engineering’s order book stood at a record high of $15.6 billion, with some $3.8 billion of this expected to be delivered over the rest of 2019.
The group says the record order book comes on the back of contract wins across all four of its sectors.
In 2Q19, the group had announced about $2.5 billion worth of new contracts. These included the $1 billion contract for the first Polar Security Cutter, as well as $809 million worth of contracts from the Aerospace sector and $702 million from the Electronics sector.
See: ST Engineering wins another $1.5 bil worth of new aerospace, electronics contracts in 2Q
As at end June, cash and cash equivalents stood at $321.1 million.
“If you look at the fundamentals of the aerospace business, it’s certainly stronger now. This business continues to be robust, I think that’s important. You have good visibility in terms of our contract wins. We are well-positioned for future growth,” says Vincent Chong, president and CEO of ST Engineering, at the company’s results briefing on Wednesday morning.
“If you strip off all the one-offs… the core business, bottomline-wise, actually improved by close to 20%,” adds Lim Serh Ghee, president of ST Engineering's Aerospace sector, which accounted for close to half of ST Engineering’s total revenue in 2Q19.
With the addition of MRAS, the group is also seeing a higher proportion of its revenue coming from customers in US and Europe.
The group says this is in line with its strategy of expanding outside of Singapore.
Europe-based customers accounted for 21% of 2Q19 revenue, up by 9 percentage points compared to the previous quarter, while US-based customers rose 4 percentage points q-o-q to 24%.
Meanwhile, Chong reveals that the group is expected to incur integration costs for MRAS of less than $10 million this year, starting in the second half. Another close to $10 million is expected to be spent in integration costs in FY20, before tapering down significantly thereafter.
“[MRAS] has been accretive to our earnings and its integration into the group is progressing well,” says Chong. He adds that MRAS is expected to continue to be earnings accretive in FY19, despite the projected integration costs.
The board has declared an interim dividend of 5.0 cents per share – the same as a year ago – to be paid on Sept 3.
As at 3.45pm, shares in ST Engineering are trading 7 cents, or 1.6%, lower at $4.20.
