Harness technology and innovation to enable a more secure and sustainable world It is the unifying purpose that aligns everything we do. Become a global technology, defence and engineering powerhouse GROUP ASPIRATION CORPORATE PURPOSE Our Core Values guide every aspect of our business and are embedded in our culture – from the people we hire, to the way we work with one another and how we engage our partners and customers. CORE VALUES Commitment Integrity Value Creation Compassion Courage It is the singular winning long-term goal that all our businesses follow. Read more on our website CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
ST Engineering is a global technology, defence and engineering group with a diverse portfolio of businesses across the aerospace, smart city, defence and public security segments. Driven by technology and innovation, we create people-centric, multidisciplinary and smart engineering solutions for our customers in the commercial, government and defence segments. Headquartered in Singapore, we employ about 23,000 people across our network of subsidiaries and associated companies in Asia, Europe, the Middle East and the U.S. We rank among the largest companies listed on the Singapore Exchange and are a component stock of the FTSE Straits Times Index, MSCI Singapore, iEdge SG ESG Transparency Index and iEdge SG ESG Leaders Index. WHERE YOU SEE THESE ICONS This directs you to further information online This points to related information in the report This directs you to an external video Contents CORPORATE OVERVIEW Financial Highlights 02 Letter to Shareholders 04 Corporate Information 17 Board of Directors 18 Directors Seeking Re-election 25 Group Executive Committee 28 PERFORMANCE REVIEW Technology and Innovation 30 Operating Review & Outlook → Commercial Aerospace 34 → Urban Solutions & Satcom 40 → Defence & Public Security 46 Financial Review 52 Investor Relations 62 Awards 64 SUSTAINABILITY Board Statement 66 Environment 74 Social 80 Governance 95 → Corporate Governance Report 96 FINANCIAL REPORT Directors' Statement 122 Independent Auditor’s Report 137 Consolidated Income Statement 144 Consolidated Statement of Comprehensive Income 145 Consolidated Statement of Financial Position 146 Consolidated Statement of Changes in Equity 148 Consolidated Statement of Cash Flows 152 Notes to the Consolidated Financial Statements 154 Statement of Financial Position of the Company 274 Notes to the Statement of Financial Position of the Company 275 Shareholding Statistics 279 SGX Listing Rules Requirement 281 01 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
FINANCIAL HIGHLIGHTS → EVA → DIVIDEND PER SHARE → EBITDA → ORDER BOOK → REVENUE → EARNINGS PER SHARE → RETURN ON EQUITY → TOTAL SHAREHOLDERS RETURN $19.3b $1,071.7m 18.30¢ 2.4% $7.7b $313.0m 15.0¢ 23.6% 2020: $15.4b 2020: $7.2b 2020: $975.0m 2020: $286.4m 2020: 16.74¢ 2020: 15.0¢ 2020: 0.9% 2020: 22.8% 25% 7.5% 10% 9% 9% – 1.5pts 0.8pts → REVENUE BY CUSTOMER LOCATIONS 20% U.S. 16% Europe 6% Others 58% Asia Amounts may not add up due to rounding. 02 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
$637.6m 2020: $534.4m → PROFIT BEFORE TAX → REVENUE BY TYPE ($b) 2020: $521.8m → NET PROFIT $570.5m $7,693m → REVENUE BY SEGMENT (%) 2020 2021 ($m) ($m) Commercial Aerospace 2,332 2,465 Urban Solutions & Satcom 1,101 1,191 Defence & Public Security 3,725 4,038 $7,158m 32 15 2021 52 33 15 2020 53 → EBIT BY SEGMENT (%) $673.6m 2020 2021 ($m) ($m) Commercial Aerospace 80.9 181.9 Urban Solutions & Satcom 31.4 25.8 Defence & Public Security 484.0 466.0 $596.4m 27 4 69 2021 2020 81 14 5 19% 9% 2021 4.8 2020 4.6 2021 2.9 2020 2.6 Commercial Defence Refers to revenue by product and services type. FINANCIAL HIGHLIGHTS 03 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
→ KWA CHONG SENG Chairman Non-Executive Independent Director → VINCENT CHONG SY FENG Group President & CEO Executive Director LETTER TO SHAREHOLDERS Dear Shareholders As a result of the ongoing COVID-19 pandemic, 2021 was a challenging year for ST Engineering, as it was for most companies around the world. However, 2021 was also a year of opportunity for the Group. Our strategy was consistent and clear – we focused on creating long-term sustainable growth by investing in our people, our capabilities, and our business, both organically and by acquisition. Our commitment to invest across business cycles and to seek growth in select domains, as well as our strong balance sheet, afforded us the ability to evaluate M&As even in the midst of the pandemic. Nowhere is this clearer than in our proposed acquisition of TransCore for US$2.68b (S$3.62b) in cash in October 2021. This is the biggest acquisition in our history. It will accelerate growth in our Smart City business, especially in the Smart Mobility segment. The proposed TransCore acquisition illustrates the strength of our resources and our desire for growth. Well-considered acquisitions of strategic assets will help us emerge stronger in the post-pandemic world. Over time, the Group will achieve its aspiration of becoming a global technology, defence and engineering powerhouse, one that improves the lives of people around the world, supports sustainability, while at the same time ensuring our shareholders are rewarded. DELIVERING ON OUR PLAN: 2021 FINANCIAL RESULTS This year, we are presenting our financial results based on our new organisation structure. We previously highlighted that the goal of this new structure is to sharpen our focus on our customers through more effective organisation and deployment of resources. 04 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
While 2021 was the first year of operation for our new organisation, we already benefitted from how we are now structured to accelerate the development of deeper domain expertise and enhance the performance of our businesses. The diversity of our business portfolio and our focus on seizing growth opportunities, coupled with productivity and cost management measures, helped us to achieve this balanced set of results in 2021. Under this new structure, the three reportable business segments are: Commercial Aerospace, Urban Solutions & Satcom, and Defence & Public Security. We appreciate that shareholders may take some time to get used to this new reporting framework. However, we will ensure that we deliver meaningful reporting output to enable our shareholders to understand our performance better. While 2021 was the first year of operation for our new organisation, we already benefitted from how we are now structured to accelerate the development of deeper domain expertise and enhance the performance of our businesses. We are more focused than ever on turning ST Engineering into a sharper and more agile organisation that is highly attuned and responsive to evolving customers’ needs. In 2021, we delivered Group revenue of $7.7b, a 7.5% increase over the year before, contributed by all our business segments. Group EBIT grew 13% year-onyear (y-o-y) to $673.6m from $596.4m. This more than offsets the lower government support, which we had expected and guided for it to be lower than the $350m received in 2020. The reduction in government support for 2021 was $149m. Also consistent with our guidance, the combination of cost savings, net of reinvestments in growth areas and partial business recovery more than offset the reduction in government support. Excluding government support, Group EBIT for 2021 improved by 93% y-o-y, reflecting a strong underlying performance amid continuing pandemic challenges. With this, the Group generated earnings per share of 18.3 cents and a return on equity of 23.6%. The diversity of our business portfolio and our focus on seizing growth opportunities, coupled with productivity and cost management measures, helped us to achieve this balanced set of results. This performance was also lifted by the stronger underlying performance of our businesses and their resilience amid continued pandemic challenges. Strong Underlying Performance from Business Segments Revenue for the Commercial Aerospace segment was $2.46b, a 6% increase y-o-y from $2.33b, notwithstanding a strong 1Q2020 prior to the impact of COVID-19 being felt. This segment registered strong y-o-y quarterly revenue growth from the second quarter of 2021, and sequential quarterly revenue growth across 2021. The revenue growth was contributed by Aerostructures & Systems, while Aerospace MRO continued to be impacted by the subdued aviation sector. Aviation Asset Management’s AUM increased by 30% to US$1.05b (S$1.4b) as at end December 2021 from US$813m (S$1.1b) as at end December 2020. The Commercial Aerospace segment’s EBIT grew 125% y-o-y to $182m from $81m as a result of higher revenue and cost savings initiatives. Although the pandemic headwinds faced by our Commercial Aerospace business persist, we continued to invest in the business to position ourselves to thrive when recovery gets underway. This is why we went ahead with the expansion of our airframe MRO facility in Pensacola, U.S., which has an existing two-bay widebody hangar. When completed, the expansion will add three hangars and associated support shops. We also ramped up the production of A320neo nacelles, our biggest nacelle programme, to keep pace with Airbus’ production rate as the OEM had called on suppliers to prepare for the production of 64 aircraft The Group posted a Profit before tax (PBT) of $637.6m, 19% higher than the $534.4m the year before. Group Profit attributable to shareholders (Net Profit) grew 9% y-o-y to $570.5m from $521.8m. Net Profit growth was lower than PBT growth due to the unfavourable tax effect of lower non-taxable government grants received in 2021 compared to 2020. LETTER TO SHAREHOLDERS 05 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
LETTER TO SHAREHOLDERS per month by mid-2023. At the same time, we expanded our Airbus freighter conversion (P2F) facilities across our global network in view of the strong demand for converted freighters as e-commerce and air cargo volumes expand globally. Besides Dresden, Germany and Singapore, new conversion sites include San Antonio, U.S., which was set up in end-2021, and Mobile, U.S. and Shanghai, China that will be set up in 2022. Demand for P2F was also supported by reduced ‘belly capacity’ because there were fewer passenger planes in operation. To capture further growth, we entered into a new business in converted freighter aircraft leasing through a JV with Temasek. ST Engineering will provide the associated maintenance, repair and overhaul service options for these aircraft, and be the asset and lease manager to the JV, consistent with our Aviation Asset Management’s business model. The Urban Solutions & Satcom segment posted revenue of $1.19b, up 8% y-o-y from $1.10b, contributed by higher Smart City project deliveries, though partially offset by the impact of global semiconductor chip shortages on Smart City projects and Satcom product deliveries. Its EBIT was $26m, down 18% y-o-y from $31m largely due to $8m of TransCore-related M&A transaction expenses, lower government support and the impact of semiconductor chip shortages. This was partially offset by higher revenue and lower operating expenses. This segment continued to be impacted by the pandemic and project executions outside of Singapore were disrupted by travel restrictions. Nevertheless, our Urban Solutions business was able to make some headway in growing scale with our existing customers and with new market penetration. For example, our Mobility Rail business made inroads into cities like Brisbane, 10th of Ramadan in Greater Cairo, and Bucharest. Likewise, the growing demand for IoT, smart utilities and infrastructure expanded business opportunities, such as the deployment of our Smart Street Light control solution to connect more than 300,000 streetlights in Rio de Janeiro. Our Satcom business was affected by the global chip shortage, and its aviation and maritime cruise customer segments remained challenged from the COVID-19 impact. However, we continue to hold a positive long-term view of the satellite communications industry. As outlined previously, the launch of next-generation medium earth orbit (MEO) and low earth orbit (LEO) constellations presents numerous opportunities for us, and we will continue to push technological boundaries with our leading-edge satcom ground infrastructure solutions. Revenue for the Defence & Public Security segment was 8% higher at $4.04b, from $3.72b a year ago, with contribution from all its subsegments of Digital Systems & Cyber, Land Systems, Marine and Defence Aerospace. Its EBIT was down 4% y-o-y to $466m from $484m due to lower government support of $137m, but this was substantially offset by higher revenue and cost savings. Our defence business made good progress internationally. We collaborated extensively, leveraging partnerships — including with local defence champions of our target markets — to deliver defence solutions that enhance the operational readiness of our customers. Together with Oshkosh Defense, we were selected to build two Cold Weather All-Terrain Vehicle prototypes, based on the all-terrain capability of our Bronco family of vehicles for the U.S. Army. At the time of writing this letter, we had moved on from the successful prototype testing to the next phase of bidding for the production. We expect to know the outcome in mid-2022. Separately, we are contracted by Abu Dhabi Ship Building PJSC to design four Falaj 3-class Offshore Patrol Vessels for the UAE Navy, and to provide platform equipment and technical assistance in the vessel construction. Over in the U.S., we received a contract from the U.S. Navy to build the second Polar Security Cutter. In terms of Group revenue breakdown by business segment, Commercial Aerospace, Urban Solutions & Satcom and Defence & Public Security accounted for 32%, 15% and 53% respectively. By geography, customers from Asia (including Singapore) accounted for 58%, and customers from the U.S. and Europe accounted for 20% and 16% respectively, with the remaining 6% contributed by customers from the rest of the world. By products and services type, Commercial sales was $4.8b and Defence sales was $2.9b. Although the pandemic headwinds faced by our Commercial Aerospace business persist, we continued to invest in the business to position ourselves to thrive when recovery gets underway. 06 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
Healthy Operating Cash Flow In 2021, we increased capital expenditure to about $320m after pulling it back for a year (was $196m in 2020) to keep pace with business activities and to support growth demand. These included the expansion of our meltblown and mask production facilities, the purchase of two aircraft and two engines for our Aviation Asset Management business, as well as overall IT infrastructure enhancement. We generated a very healthy operating cash flow and do not expect any issues with our balance sheet strength in financing the proposed acquisition of TransCore. Our credit ratings remain high. Following our announcement of the TransCore acquisition, Moody’s and S&P continued to rate us highly at Aaa and AAA respectively. The Group held $816m in cash and cash equivalents as at end December 2021. Shareholder Returns The Board of Directors has recommended a final dividend of 10.0 cents per share to shareholders for approval at the forthcoming Annual General Meeting. Together with the interim dividend of 5.0 cents per share paid to you in August 2021, the total dividend for 2021 will be 15.0 cents per share. This translates to a dividend yield of 4.0%, computed using the average closing share price of the last trading day of 2021 and 2020. Recognising that returning value to shareholders is an important management objective, the Group has been distributing profits to shareholders by paying dividends based on sustainable business results. In keeping to this commitment, the Board of Directors has approved a dividend policy to declare dividends every quarter instead of twice a year previously. For FY2022, the plan is for dividends to be paid four times a year, at 4.0 cents per share each time, resulting in total dividends of 16.0 cents per share payable for FY2022 (compared to the 15.0 cents per share paid or payable for FY2021). Robust Order Book Driven by Strong Contract Win Momentum Complementing our results, we achieved strong contract wins and a record order book in 2021. We have enhanced the way we disclose contract values to include the values of confidential projects not previously released. This will provide investors with a more complete view of our new contract wins, without compromising project confidentiality. In 2021, we secured $11.7b in new contract value, compared to the new contract values of $8.2b for 2020 (previously reported as $5.7b) and $9.5b for 2019 (previously reported as $8b). This means that our businesses won more contracts in 2021 compared even to pre-COVID 2019, pointing to a good business recovery momentum. With these new contracts, and after adjustments of revenue delivery, the Group ended the year with a robust order book of $19.3b (was $15.4b at end-2020), providing a good pipeline of revenue visibility. In 2022, the Group expects to deliver about $6.6b from the order book. We expect the delivery of our strong order book, our various business initiatives and further business recovery to position us well for 2022 business performance. This is an important starting point, as 2022 is the first execution year and foundation for our next phase of growth, which we will discuss later in this letter. Disciplined Cost Management We have always taken a disciplined approach to cost management. This helped us build resilience over the years, allowing us to weather the business challenges brought about by COVID-19. Our operating expenses for 2021 were 4% lower than 2020 and 5% lower than 2019. Our unit operating expenses (per unit revenue) in 2021 declined by more than 10% compared to 2020 and was 3% lower than 2019. This performance was a result of the Group’s continued structural cost and operational efficiency capture. $11.7b $19.3b → TOTAL CONTRACT WINS → ORDER BOOK The Board of Directors has recommended a final dividend of 10.0 cents per share, bringing total dividend for 2021 to 15.0 cents per share, which represents a dividend yield of 4.0%. LETTER TO SHAREHOLDERS 07 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
LETTER TO SHAREHOLDERS This change from declaring dividends semiannually to quarterly will provide shareholders with a more frequent income stream. Notwithstanding the new dividend policy, we continue to have the financial strength and flexibility to invest in growth opportunities and to align with our strategic goals to achieve our 2026 targets, which we will touch on in the later part of this letter. ACCELERATING SMART CITY GROWTH We have been focused on driving growth in Smart City, across our targeted segments in Smart Mobility, Smart Environment and Smart Security. To accelerate growth, we are consistently on a lookout for potential acquisition targets that fit our strategy. In early 2021, we made a competing bid to acquire a U.S. company in the intelligent transportation solutions and payments industry, which is complementary to our Smart Mobility business. However, that did not come to fruition. As with any M&A transaction, there were many variables; the key was we had the discipline to know when to walk away. The discussion was terminated when the target company accepted another offer. Later in the year, when the TransCore opportunity came up, we evaluated it and decided that it fitted our strategy and was attractive on many fronts. At US$2.68b (S$3.62b), the acquisition translates to an EV/EBITDA multiple of 16.2 times after accounting for tax benefits. This is well within the range of both precedent transactions and the market valuation of comparable public listed companies in this space. We see TransCore as an excellent fit for our Smart Mobility business. Its road transportation solutions will enhance our suite of Smart Mobility solutions. In addition, its leading position in the end-to-end electronic toll collection and congestion pricing segments in North America represents a new business for ST Engineering. With TransCore, ST Engineering will also have access to an extensive Smart City channel in the North American market. We thank our shareholders for approving this acquisition. Meanwhile, as we write this letter, we are expecting this proposed acquisition to close by the first quarter of 2022. Our plan is for TransCore to be part of our Smart Mobility business line and for its financials to be subsumed under the Urban Solutions & Satcom business reporting segment. We expect TransCore to be cash flow positive from the first year and earnings accretive from the second year to the Group post acquisition. In time to come, we will provide updates on the transition of TransCore into the Group. We will continue to search for growth opportunities and are constantly on the lookout to acquire good companies that are a strategic fit at a reasonable price. We are cognisant that M&As need to be strategic, synergistic and value accretive. We see TransCore as an excellent fit for our Smart Mobility business. With TransCore, ST Engineering will have access to an extensive Smart City channel in the North American market and an enhanced suite of Smart Mobility solutions. We will continue to search for growth opportunities, including acquisitions that are a strategic fit at a reasonable price. Read our Operating Review & Outlook Learn more about TransCore 08 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
DRIVING OUR NEXT PHASE OF GROWTH: FIVE-YEAR PLAN (2022-2026) We are mindful of the short-term pressure to deliver results, yet at the same time, we will stay focused in the execution of our strategic plan for greatest impact in the long term. Recent trends and developments have reinforced, and indeed, accelerated the strategy that we first shared in 2018. In November, we presented our next five-year plan (2022-2026). Our strategy to achieve sustainable growth is built around these strategic areas: 1. Ride the recovery in Commercial Aerospace 2. Drive growth in Smart City 3. Expand International Defence business 4. Strengthen core businesses The business environment today, however, is dynamic and ever evolving. COVID-19 has brought about digital transformation and wider sustainability adoption. These are strategic business opportunities for the Group. As a result, we have overlaid our strategic objectives with our ambition to grow the digital business comprising Cloud, AI Analytics and Cyber — the value of which was demonstrated during the pandemic. We actively evaluated what ‘emerging stronger from the pandemic’ means to the Group, and we have set specific financial targets: By 2026 (from 2020 as the base year), we expect revenue for our Commercial Aerospace business to exceed $3.5b, and our Smart City businesses to more than double to $3.5b. In addition, we are driving growth in digital businesses and we expect the Cloud, AI Analytics and Cyber businesses to triple to more than $500m. Along with other core businesses, we expect to drive total Group revenue to more than $11b, growing at a CAGR of two to three times global GDP growth rate, with net profits growing in tandem with revenue. Note: 1 2020 Base Year; TransCore closes in 1Q2022. Commercial Aerospace to achieve >$3.5b1 in revenue Smart City revenue to more than double to $3.5b1 Digital business - Cloud, AI Analytics, Cyber revenue to triple to >$500m Grow other core businesses Five-year Targets (2022-2026) Net profits to grow in tandem with revenue Sustainability-linked revenue to grow to >$3b Annual revenue to grow at 2 to 3 times global GDP growth rate to >$11b1 Read about our five-year plan LETTER TO SHAREHOLDERS 09 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
Read our ESG Performance for FY2021 LETTER TO SHAREHOLDERS Undergirding this target is a greater emphasis on moving forward with our ESG agenda. We have targeted to grow sustainability-linked businesses. We will pursue businesses that contribute towards the reduction of GHG emission, that solve urban and city issues and contribute towards the circular economy. We will also look at new opportunities such as in novel materials, products and system solutions. We see the pursuit of this ESG agenda as both a business opportunity and as our responsibility as a corporate citizen. We are committed to a net zero economy and we will halve our absolute GHG emissions by 2030 (using 2010 as the base year). In addition, we are now a signatory to the UN Global Compact and we are committed to its Ten Principles. Furthermore, we have expanded our reporting, based on the Global Reporting Initiative (GRI), to start including disclosures against frameworks outlined by the Task Force on Climate-Related Financial Disclosures (TCFD) and Sustainability Accounting Standards Board (SASB). To sustain our technology and engineering core, we will continue to spend up to 5% of our annual revenue on R&D, of which up to 75% will be on digital technologies. Additionally, we continue to strengthen our competency framework for engineering and technology staff, to better develop relevant skills, abilities and support career progression. Our strategy execution sees continuous focus on disciplined capital allocation, as well as cost and efficiency drive. Consistent with our efforts in the last few years, we will continue to streamline and rationalise our business portfolio to sharpen our management focus, and reallocate capital to strategic and growth businesses that can yield us better returns. Concurrently, we will keep investing resources to strengthen our key assets and capabilities: our people and culture; and our global marketing and customer network. As you can see, we remained steadfast in advancing and meeting our strategic objectives. Our targets were developed based on vigorous reviews and assessments of how we can continue to deliver sustained, meaningful progress and results. We are intentional in the pursuit of our goals and therefore we have structured ourselves for success. We now have an organisation structure that will better serve our customers and that is also more agile to meet business challenges and to pursue the growth paths we have laid out. BOARD RENEWAL In 2021, we made changes to the Board as part of board renewal. In August, we welcomed Tan Peng Yam, as a non-independent, non-executive Director, and Teo Ming Kian as an independent, non-executive Director. In October, Kevin Kwok Khien joined as an independent, non-executive Director, and COL Cai Dexian was appointed as the Alternate Director to LG Ong Su Kiat Melvyn, in place of COL Xu Youfeng. Quek Gim Pew, a director since August 2016, resigned in August from the Board as a non-independent and non-executive Director. During his term, he served as Chairman of the Research, Development and Technology Committee, and as a member of the Risk and Sustainability Committee. We thank our directors for their invaluable contributions over the years and we welcome those who have just joined us. To sustain our technology and engineering core, we will continue to spend up to 5% of our annual revenue on R&D, of which up to 75% will be on digital technologies. We now have an organisation structure that will better serve our customers and that is also more agile to meet business challenges and to pursue the growth paths we have laid out. 10 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
KWA CHONG SENG Chairman Non-Executive Independent Director VINCENT CHONG SY FENG Group President & CEO Executive Director 28 February 2022 Yours sincerely, LEADERSHIP MOVEMENT In 2021, we had leadership changes at the Executive Committee (EXCO) level. We made several appointments and movements as part of renewal at the senior management level too. EXCO member Lim Serh Ghee retired from the Group in October. We are grateful for his contributions as an EXCO member and as Group Chief Operating Officer, as well as for his role in shaping and driving the growth of our aerospace business. We also welcomed Tan Lee Chew, who joined in September as a member of the EXCO, and took on the newly created role of President Commercial. OUR APPRECIATION As we continue to sharpen our focus, and grow in scale and scope, ST Engineering will continue to be a Group with global strengths across multiple industries – in aerospace, smart city, defence and public security. While our short-term goals have been impacted by the pandemic and cannot be realised sooner, we have the vision, the roadmap and the wherewithal to achieve long-term sustainable growth. Most of all, we have our people – our most valuable asset – who will continue to be key to our success. Despite the unprecedented challenges they faced during the pandemic, they rose above every single one of them. The Corporate Excellence & Resilience Award given out by the Singapore Corporate Award in 2021 was a recognition of the Group – for staying tenacious and committed to our roles despite the difficult circumstances that prevailed. This spirit will continue to drive the Group forward and shape ST Engineering to become a truly global technology, defence and engineering powerhouse. We thank all our shareholders, customers and employees for their unstinting support over the years and for continuing the exciting journey with the Group as we move towards a more sustainable, smarter and brighter future ahead. LETTER TO SHAREHOLDERS 11 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
致股东的信 尊敬的股东, 2021年新型冠状病毒肺炎的持续蔓延和变种造成全球经 济复苏屡次挫败，许多公司仍萎靡不振,对ST Engineering 来说也是颇具挑战的一年。然而，2021年对集团来说也是 充满机遇的一年 。 我们的战略维持一致且明确——专注于投资员工的技术与 思维提升，开展自身能力建设和业务发展，创造长期的可 持续增长,并通过收购提高我们的竞争优势。我们承诺为长 期增长进行投资，并在选定的领域里寻求增长而我们强大 的资产负债表将让集团在疫情期间继续提供评估并购的 能力。 这一点明确体现在我们2021年十月以26.8亿美元 (36.2亿 新元) 现金收购TransCore的提案中。这是我们有史以来最 大的一次收购。这项收购将加快我们智能城市业务的增长， 特别是在智能移动领域的增长。 TransCore收购提案证明了集团的资源实力和增长渴望。 深谋远虑的战略资产收购将助我们在后疫情世界中变得 更强大。未来，我们将实现集团的愿景: 成为一个全球 科技、国防与工程业的佼佼者。在过程中，我们将不断 投资，加强我们有效推动世界可持续发展的能力，利用科技 解决世界上最迫在眉睫的问题，从而帮助我们的客户应付 人口都市化、气候变化等问题带来的影响。与此同时， 我们将继续创造更高的股东价值。 我们专注于投资员工的技术与思维 提升，开展自身能力建设和业务发 展，创造长期的可持续增长,并通过 收购增大我们的市场占有率及提高 竞争优势。 落实我们的目标：2021年财务业绩 这一年，集团的财务业绩以重组后的架构来呈现。重组后 的三大主要业务包括：商业宇航、智慧城市和卫星通信 ， 以及国防与防卫。 2021年虽是集团新组织运作的第一年，我们已从新的架构 中得到收获不但深层专业领域得到加速的发展，业绩表现 也得到提高。领导团队现在更专注于将集团打造成一个更 敏锐、更灵活的组织，以高度适应且响应不断变化的客户 需求。 2021年，集团收入报77亿元，与前一年相比增长了7.5% ， 收入增长来自全体业务部门。集团息税前利润从5.96亿元 增长至 6.74亿元，年增长率达到13%，远远抵消了政府补 贴的锐减 (1.49亿元), 兑现了我们一年来給投资界的指引。 通过节约成本、增长领域的扣除再投资，以及部分业务 恢复，种种途径来抵消政府补贴减少带来的不利影响。 若不考虑政府补贴，2021年集团息税前利润年增长达到 93%，体现了集团在疫情的持续挑战下仍具有强劲的表现。 集团公布的税前利润为6.38亿元，比前一年的5.34亿元 高出19%。集团股东应得利润 (净利润) 同比增长9% ， 从5.22亿元增至5.71亿元。净利润增长低于税前利润增长， 原因是2021年收到的非税政府补贴比2020年少，产生了 不利的税收影响。 因此，集团的每股收益为18.30分，股本回报率达到23.6% 。 我们多样化的业务组合，聚焦于抓住成长机遇的方法，实施 生产力和成本管理措施，帮助自身实现均衡业绩。尽管疫情 挑战持续存在，集团的业务表现更加强劲，复原力也增强， 因此业绩也得到了提升。 强劲的部门业绩 商业宇航部门收入达到24.6亿元，比前一年的23.3亿元 相比，同比增长6%。尽管前一年第一季业绩因未受疫情影 响而表现强劲，该部门从2021年第二季度开始, 季度收入 同比持续增长 。 12 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
尽管商业宇航业务所面临的疫情不 利因素仍然存在, 该部门在2021年 一整年实现了连续的季度收入增长。 收入增长来源于航空结构和系统，而宇航维护、修理和 操作 (MRO) 市场则持续受到航空业低迷的影响。航空 资产管理部门的资产管理规模从2020年12月底的 8.13亿美元 (11亿新元) 增加到2021年12月底的10.5亿 美元 (14亿新元) ，增幅达到30%。由于收入提高且实施了 成本节约措施，商业宇航部门的息税前利润从8千100万 元增至1.82亿元，同比增长125%。 尽管商业宇航业务所面临的疫情不利因素仍然存在，我们 持续进行相关的业务投资，以便在业务反弹时抢占先机， 迅速应对。我们不仅继续扩充在美国彭萨科拉的MRO 产能及规模，也加快了A320neo短舱的生产能力，并在 美国莫比尔和中国上海成立新的客机改装基地。为了获得 进一步的增长，我们与淡马锡组成合资公司，开展了改装 货机租赁的新业务。改装货机提供相关的维护、修理和 大修服务，并成为合资公司的资产和租赁管理人。 智慧城市和卫星通信部门的收入为11.9亿元，比去年 同期的11亿元增长了8%，主要得益于更高的智能城市项 目交付量，但全球半导体芯片短缺对智能城市项目和卫星 通信产品交付的影响抵消了部分利好。息税前利润因 TransCore相关的并购交易费、较低的政府补贴且半导体 芯片短缺产生的影响而同比下降 18%至2千600万元 。 虽然面对疫情的挑战，该部门仍在拓展市场增长机会和 扩大客户规模方面取得了可观的进展。 卫星通信业务虽然受到疫情及全球芯片短缺的影响，我们 仍对此业务秉持积极乐观的态度并坚信下一代中地球 轨道 (Medium Earth Orbit) 和低地球轨道 (Low Earth Orbit) 卫星的发射将会带来众多商机。我们会继续利用 领先的卫星通信技术和解决方案推动该业务的发展。 国防与防卫部门的收入为40.4亿元，与前一年的37.2亿 元相比增长8%，收入增长来自数码系统和网络、陆路 系统、海事、国防宇航等所有子部门。因政府补贴减少 1.37亿元，该部门的息税前利润从4.84亿元下降到 4.66亿元，但收入增加和成本节约大大抵消了其带来的 不利影响。 我们的国防业务在国际上取得了良好进展，该部门 通过广泛建立合作关系，积极寻求目标市场增长从而为 客户提供高质量国防解决方案，确保最佳的战备状态。 该部门在2021也赢得了几项重要的新合同。 总体而言, 集团收入分类如按业务部门划分，商业宇航业 务收入占集团总收入的32%、城市方案和卫星通信以及 国防与治安分别占15%和53%。如以地域划分，来自亚洲 (包括新加坡）的客户占集团总收入约58%，来自美国和 欧洲的客户分别占20%和16%，其余6%来自世界其他 地区的客户。如以产品和服务类型划分，商业销售额为 48亿元，国防销售额为29亿元。 赢得合同势头迅猛，推动订单量稳步增长 为了让投资界对我们赢得的新合同有更全面的了解，集团 在2021年加强了披露方式，在不影响项目保密性的前提 下把前未公布的机密项目价值包括在新合同总价值里。 至此，2021年签署的新合同总值为117亿元，相较于 2020年的82亿元 (原先汇报价值为57亿元）及2019年 为95亿元 (原先汇报价值为80亿元)。这就意味着，即便 与2019年疫情爆发之前相比，我们的业务在2021年赢得 了更多合同，体现了业务恢复的趋势。集团2021财年末总 订单额为193亿元(2020年底为154亿元) 。我们预期在 2022年将从订单中交付约66亿元的收入，为2022年的 业务提供稳健的销售额。 我们在2021年共签署了总价值为 117亿元的新合同，建立了193亿元 总订单额。 致股东的信 13 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
致股东的信 严谨的成本管理 集团得益于多年严格的成本管理，运营费用有所减少。 2021的营业费用比2020降低了4% ，也低于2019约 5%。2021的单位营业费用 (单位收入) 比2020下降了 10%以上，比2019降低了3%。 充沛的运营现金流 2021年，我们在节约一年后将资本支出增加到约3.2亿元 (2020年为1.96亿元)，以便支持业务活动和增长需求。 这些支出包括设立熔喷和口罩生产工厂，为航空资产管理 部门购买两架飞机和两台引擎，以及加强集团整体IT基础 设施。 我们的运营现金流非常健康，且握有强劲的资产负债表 来应对收购TransCore的融资。在我们宣布收购TransCore 之后，穆迪和标普继续给予我们高评级，分别为Aaa和 AAA 。截至2021年12月底，集团持有8.16亿元的现金和 现金等价物。 股东回报 鉴于这些结果，董事会建议派发每股10分的末期股息 。 加上2021年8月派发的每股5分的中期股息，2021全年 的总股息将为每股15分，代表4%的股息收益率1 。 本着持续回馈股东的宗旨，董事会批准了一项股利政策， 从每年两次派发股息到每季度派发股息。针对2022财年， 这项政策计划每季度派发4分股息。2022财年的股息总额 将为每股16分(2021财年派发的总股息为每股15分)。尽管 制定了全新股利政策，我们仍然有足够的财务实力和灵活 性用于增长机会的投资，并与我们的战略目标保持一致， 以实现我们的2026年目标。 加快智能城市的增长 我们一直专注于推动智能城市的成长，包括智能交通、智能 环境和智能安全等目标领域。为加快成长，我们一直在寻 找符合我们战略的潜在收购目标。2021年初，我们意图 竞标收购一家位于美国的智能交通解决方案和支付行业 公司。这项收购方案能与我们的智能交通业务形成互补。 然而这笔收购交易最终没有达成。2021年后半段，我们对 TransCore的收购案进行了评估，判定它符合我们的战略后 开出26.8亿美元（36.2亿新元）的收购报价。考虑到税收优 惠后，折算成16.2倍企业价值倍数(EV/EBITDA)，远在先例 交易和该领域可比上市公司的市场估值范围之内。 我们认为TransCore与我们的智能交通业务互补性强。 它的道路交通解决方案将强化我们的智能交通解决方案。 此外，它在北美端到端电子收费和拥堵收费领域的领先地 位能让集团更有效地开拓新业务和市场。我们感谢股东批 准了这项收购。在我们撰写此函之时，我们预计这项拟议的 收购将在2022年第一季度完成。我们计划让TransCore 成为我们智能交通业务线的一部分，并将其财务数据归入 智慧城市和卫星通信业务的汇报部门。我们预计TransCore 将在第一年实现现金流正增长，并在第二年实现集团收购 后的收益增长。届时，我们将定期提供TransCore过渡到 集团的最新消息。 我们将继续寻找增长机会，包括具备战略性、协同性和 价值增加性的并购活动。 董事会提议派发每股10分的末期股 息来回馈股东。加上2021年8月支 付给股东的每股5分的中期股息， 2021全年的总股息将为每股15分， 代表4%的股息收益率。 1 股息收益率以2021年和2020年最后一个交易日的平均收盘价为基准。 参阅 运营回顾与展望 14 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
致股东的信 TransCore与我们的智能交通业务 互补性强。其道路交通解决方案 不但能强化我们的智能交通解决 方案，也能为集团争取进军广大北 美市场的机会。 推动下一阶段的增长：五年计划（2022年至2026年） 我们在11月向投资界提出了实现可持续增长的下一个五年 计划(2022-2026)。以下是我们的战略增长领域： 1. 充分利用商业宇航的复苏机遇 2. 推动智慧城市的发展 3. 拓展国际国防业务 4. 加强核心业务 迈向财务目标的同时，我们也拟定了推进环境、社会和治理 (ESG) 的议程。我们的目标是发展针对可持续发展的相关 业务，包括有助于减少温室气体排放、解决城市问题、促进 循环经济的业务。我们还将在新材料、新产品和新系统解决 方案等方面寻找新的机会。我们致力于实现净零经济，并将 在2030年前减半我们的温室气体绝对排放量 (以2010年 为基准年) 。此外，我们现在是《联合国全球契约》的签署方， 并承诺遵守十大原则。我们在全球报告倡议组织 (GRI) 的基础上扩大了我们的报告范围，开始按照气候相关的 财务披露工作组 (TCFD) 以及与可持续发展会计准则 委员会 (SASB) 制定的框架进行披露。 随着商业环境日新月异，疫情带来的数码化转型以及更广 泛的可持续性采纳让我们意识到云计算、人工智能分析和 网络在内的数码业务的商业价值。因此，我们设定了以下的 2026年财务目标： • 商业宇航业务的收入将增加超过35亿元 • 智能城市业务收入将增加一倍以上至35亿元 • 数码业务的增长，预计云计算、人工智能分析和网络业务 收入将增长两倍，超过5亿元 • 再加上其他核心业务，集团总收入将超过110亿元，达到 年复合增长率为全球GDP增长率的两到三倍 • 净利润与收入同步增长 我们将在战略执行过程中继续进行严格的资本分配，并提 高成本的使用效率。我们会像过去数年一样努力，继续精简 和优化业务组合，强化管理重点，释放价值，并将资本循 环用于战略性和成长性业务，为我们带来更高的回报。 同时，我们将继续投入资源，加强我们的关键资产和能力， 即员工和文化，以及全球营销和客户网络。 为了维持我们的科技和工程核心，我们将投入高达5% 的年收入为研发用途，其中高达75%将用于开发及延伸 数码科技。此外，我们将继续加强工程和科技人员的能力 框架，以更好地发展相关技能和能力，并支持职业发展。 正如你们所看到的，我们在推进和实现我们的战略目标 方面仍然坚定不移。我们的目标将推动持续、有意义的进展 和成果。我们的集团结构现在能更有效地追求我们制定的 增长路径。 为了维持我们的科技和工程核心， 我们将继续投入高达5%的年收入 为研发用途，其中高达75%将用于 开发及延伸数码科技。 参阅有关 TransCore 的公告 参阅 集团五年计划详情 参阅 ESG重点表现 15 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
致股东的信 柯宗盛 主席 钟思峰 总裁兼首席执行长 2022年二月二十八日 董事会更新 领导层变动 为了持续更新董事会的成员，我们做了一些人事更动。 我们2021年迎来了以下几位董事： • 陈炳炎担任非独立非执行董事 • 张铭坚担任独立非执行董事 • 郭騫先生担任独立非执行董事以及 • 蔡德贤上校代替徐友峰上校被任命为王赐吉中将的 候补董事 郭锦彪先生于七月退任非独立非执行董事一职。郭先生于 2016年加入董事会，并在其任期内担任研究、开发和技术 委员会的主席，以及风险和可持续发展委员会的成员。 我们在此向郭董事致上最深的谢意，感谢他的宝贵贡献， 并在此期许我们的新任董事能够为董事会带来新的气象。 2021年，在高级管理人员方面也有所更新和调整。执行 委员会成员林思義于十月退任执行委员会成员和集团首席 运营长一职。我们感谢林先生他在位期间的杰出贡献与 领导。我们在九月迎来陈丽洲女士加入执行委员会并担任 新设立的商业总裁职务。 衷心感谢 随着我们不断精准聚焦，扩大发展规模和范围， ST Engineering将继续成为一个在航空航天、智能城市、 国防或公共安全等多个行业具有全球优势的集团。 我们的短期目标因疫情影响不能如期完成，但我们有实现 长期可持续增长的愿景、路线和必要资金。最重要的是， 我们的员工没有畏惧疫情带来的挑战，勇往直前，超越了 每一个挑战极限。2021年度新加坡企业奖颁发的企业卓越 与弹性奖是对我们的认可，尽管在困难的情况下，我们仍然 坚持不懈地致力于我们的角色。这种精神将继续推动集团 向前发展，并塑造ST Engineering成为真正的全球科技、 国防和工程领导者。 我们感谢所有股东、客户和员工多年来的不懈支持，也期望 他们能继续与集团一起迈向更可持续、更智能、更光明的 未来。 此致， 16 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
CORPORATE INFORMATION AS AT 28 FEBRUARY 2022 BOARD OF DIRECTORS Kwa Chong Seng (Chairman) Vincent Chong Sy Feng (Group President & CEO) Kevin Kwok Khien Joseph Leong Weng Keong Lim Ah Doo Lim Chin Hu Lim Sim Seng Ng Bee Bee (May) Lieutenant-General Ong Su Kiat Melvyn Quek See Tiat Song Su-Min Tan Peng Yam Teo Ming Kian Colonel Cai Dexian (Alternate Director to Lieutenant-General Ong Su Kiat Melvyn) AUDIT COMMITTEE Quek See Tiat (Chairman) Kevin Kwok Khien Lim Ah Doo Song Su-Min EXECUTIVE RESOURCE AND COMPENSATION COMMITTEE Kwa Chong Seng (Chairman) Lim Chin Hu Lim Sim Seng Teo Ming Kian NOMINATING COMMITTEE Lim Chin Hu (Chairman) Kwa Chong Seng Lim Sim Seng Ng Bee Bee (May) Teo Ming Kian RESEARCH, DEVELOPMENT AND TECHNOLOGY COMMITTEE Tan Peng Yam (Chairman) Vincent Chong Sy Feng Lim Chin Hu Teo Ming Kian RISK AND SUSTAINABILITY COMMITTEE Quek See Tiat (Chairman) Vincent Chong Sy Feng Kevin Kwok Khien Lieutenant-General Ong Su Kiat Melvyn Song Su-Min STRATEGY AND FINANCE COMMITTEE Kwa Chong Seng (Chairman) Vincent Chong Sy Feng Lim Ah Doo Lim Chin Hu Lim Sim Seng Teo Ming Kian COMPANY SECRETARY/ JOINT COMPANY SECRETARY Low Meng Wai Tan Wan Hoon REGISTERED OFFICE ST Engineering Hub 1 Ang Mo Kio Electronics Park Road #07-01 Singapore 567710 Tel: (65) 6722 1818 www.stengg.com SHARE REGISTRAR M & C Services Private Limited 112 Robinson Road #05-01 Singapore 068902 AUDITORS PricewaterhouseCoopers LLP 7 Straits View #12-00 Marina One East Tower Singapore 018936 Lam Hock Choon (Partner-in-charge) Date of appointment: 15 May 2020 17 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
BOARD OF DIRECTORS AS AT 28 FEBRUARY 2022 Academic & Professional Qualification • Degree in Mechanical Engineering, former University of Singapore • Fellow of the Academy of Engineering Singapore Other Directorships/Appointments – Present • Defence Science & Technology Agency • Public Service Commission, Singapore (Deputy Chairman) • Singapore Exchange Limited* (Chairman) • Judicial Service Commission (Member) Other Directorships/Appointments – Past 5 years • SeaTown Holdings Pte. Ltd. Academic & Professional Qualification • Bachelor of Engineering (First Class Honours) (Mechanical Engineering), National University of Singapore • Executive leadership programmes, Thunderbird School of Global Management and the Columbia Business School • Fellow of the Academy of Engineering Singapore Other Directorships/Appointments# – Present • JTC Corporation (Board Member and Member of Development Committee) • Jurong Port Pte Ltd (Director and Member of Management, Development & Compensation Committee) • Mechanical Engineering Departmental Consultative Committee, NUS (Member) • Singapore’s Manufacturing, Trade and Connectivity Domain International Advisory Panel (Member) Other Directorships/Appointments# – Past 5 years • Committee on the Future Economy (Member) • Emerging Stronger Taskforce (Member) • Experia Events Pte. Ltd. • International Advisory Panel for Advanced Manufacturing & Engineering, Ministry of Trade & Industry (Member) • Singapore Airshow & Events Pte. Ltd. • Singapore Quality Award Governing Council (Member) • Temasek Defence Systems Institute (TDSI) Management Board, NUS (Member) * Listed company # Directorships excluded ST Engineering’s subsidiary(ies) Date of first appointment as a Director: 1 September 2012 Date of appointment as Chairman: 25 April 2013 Date of last re-election as a Director: 15 May 2020 Date of first appointment as a Director: 1 October 2016 Date of last re-election as a Director: 22 April 2021 KWA CHONG SENG Chairman Non-Executive & Independent Director VINCENT CHONG SY FENG Group President & CEO Executive & Non-Independent Director 18 ST ENGINEERING ANNUAL REPORT 2021 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
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