It was a good year for ST Engg, with the company achieving broader recognitionat an international level and its share prices hitting a record high. BOON SWAN FOO,ST Engg’s Deputy Chairman & CEO, surveys the company’s performance in 2000.GOING GLOBALD E A R S H A R E H O L D E R S,I am pleased to report that ST Engg hadanother year of record performance. Ourmarket capitalisation hit an all time high ofS$8.3 billion, before closing at S$8.0 billionon 29 December 2000, an improvement ofabout 8.8% over that of 30 December 1999.This is significantly higher than the S$2.0 billionmarket capitalisation, at the point when theamalgamation of our four subsidiaries wasannounced in August 1997. During the lastthree years, we have successfully consolidatedour businesses and reaped the benefits ofworking together as an integrated engineeringand systems house.BOON SWAN FOO: “Year 2000 will always be remembered as the year we positioned ourselvesfor the next lap. We are now ready to be truly global.”cover story • 35
OUR EFFORTS TO BREAK INTO NEW MARKETS ANDMET WITH A SIGNIFICANT DEGREERE-INVENT OURSELVESOF SUCCESS AND RAISED OUR PROFILE WORLDWIDEThe Bionix was among the four finalists selected for the US Army’s IAV programme.The acquisition and integration of the Founders group(ex-Chartered Industries of <strong>Singapore</strong>) proceeded smoothlyover the last year and this has helped to significantly boostour performance. Our overseas marketing and businessdevelopment drive continued relentlessly. One key projectwas our participation in the US Army’s Interim ArmouredVehicle (IAV) programme.This is a US$4 billion procurementcontract for the US Army’s rapid deployment forces.Although we did not win the contract, participation in thisprogramme has helped propel ST Engg into the top leagueof defence contractors in the world.We have also restructuredour US operations to prepare ourselves for our mediumterm goal of being accepted as a US company.On the home front, we survived the Y2K bug, whichemerged as the Technology, Multimedia and Telecoms(TMT) stock mania and the consequent adverse impacton the share prices of all non-TMT stocks. More importantly,it threatened to tear up all employment contractsbetween the companies and their in-house providers ofintellectual capital.We are indeed fortunate to havemany excellent yet loyal staff with us.We are a young company – this being only the thirdyear since our amalgamation.Year 2000 will alwaysbe remembered as the year that we positioned ourselvesfor the next lap.The challenge is great. A future ofopportunity lies ahead of us.We are nowready to be truly global.WORKING TOGETHERAS A GROUPOur business achievements are reflectedin the year’s outstanding set of results.Strong and steady growth in all sectorshas made 2000 another year of sterlingperformance by ST Engg. Groupturnover increased from S$1.76 billionin 1999 to S$2.26 billion in 2000, anincrease of S$495 million or 28% whilenet profit after tax grew from S$200.5million to S$288.1 million, a growth ofS$87.6 million or 44% over 1999.The star performer for the year wasthe Land Systems sector.This sector hadto manage on two major fronts – one ofintegrating the acquisition of theFounders group and operating its businesshere in <strong>Singapore</strong>, while at the sametime launching an aggressive bid for theUS Army’s IAV programme.The effort needed to strategise,organise, market, demonstrate and submit bids forthe programme was immense. In spite of this, the LandSystems sector has done very well. Its turnover and profitabilitygrew by a healthy S$229 million or 77% to S$526million, and S$37 million or 132% to S$64.9 millionrespectively.The Electronics sector also did extremely well, doublingits 1999 net profits after tax, in 2000, from S$15.3million to S$30.6 million, despite an increase in turnoverof only 16% from S$354 million to S$412 million. It isnow achieving better margins after many years of lowmargin performance.The synergies of working togetherG R O U P R E S U L T SYEAR END 1999:S$1.764BYEAR END 2000:$2.259BT U RNO VERNET 28%with the Group and adopting Group processes andphilosophies are showing results.The Aerospace sector continued to post growth inturnover of S$100 million or 12% reaching S$957million. Net profit after tax grew by 21% to S$151million. DalFort Aerospace, our subsidiary in the US,performed badly, moving from a profit of S$6 millionin 1999 to a loss of S$8 million in 2000.With the formationof Vision <strong>Technologies</strong> in the US and the postingof Chang Cheow Teck to manage our US operations, weare confident of turning around DalFort Aerospace thisyear.With the delivery of two Landing Ship Tanks (LSTs)to the Republic of <strong>Singapore</strong> Navy (RSN), the Marinesector’s turnover and profitability grew by S$102million or 40% and S$13 million or 41% respectively.Both turnover of S$358 million and net profit aftertax of S$43.8 million were record numbers since theinception of ST Marine. Improved margins for theMarine sector were mainly contributed by its shipbuildingand shiprepair business groups.Y2K VIRUSThe Y2K virus emerged late – some months after31 December 1999 – as the B2C/B2B Internet Stockand the TMT stock prices mania.This had an adverseimpact on our share price which fell to a year intra-daylow of S$1.79.We went on a road show to explain ourstrategies to the public and our shareholders. Fortunately,we had a core group of long-term investors who kepttheir faith in us and continued to support us. Eventuallytheir perseverance was rewarded when our share pricesregained its strength by the year-end.At home, IT engineers were leaving in droves tojoin the dot.coms.The economy was flushed withPRO FIT AFTER TAX44%YEAR END 1999:S$200.5MYEAR END 2000:$288.1M28% 44%liquidity and calls for start-ups and spin-offs wererampant. Many were throwing cash at the mad rush.Toquote Christopher Bartlett of Harvard University,“Throwing monies to attract/retain staff is Lazy Management.”We were glad we did not take that route. Ourstaff continued to remain loyal and the market rewardedthem and us alike through our innovative share options,share ownership and performance share schemes.We alsopaid out attractive bonuses to our staff upon confirmationof the excellent results for the year. Reward forperformance will continue to be our motto. Moreimportantly, our staff have been continually challengedby exciting programmes and demanding but enlightenedcustomers, and indeed our staff have risen up to thechallenge, without being unduly distracted by the “papergold rush.”TOTAL INNOVATIONInnovation and flexibility are vital for companies in today’sglobal markets. ST Engg has those qualities.They weremuch in evidence in the record of our four constituentgroups during the past year, when they achieved significantadvances in product development and in securingrecognition for the quality of their services.To give a fewnotable examples:■The Aerospace sector has developed a complete suite ofF-16 and C-130 upgrade work.This is a major move thatcould see it carve out market niches for itself.Aerospacehas also expanded its development work for the commercialarena.The strategic tie-up with Boeing on the B757Passenger-to-Freighter conversion is a highly significantmilestone in that process.■ Over the last couple of years, the Land Systems sectorhas advanced from being a vehicle maintenance andupgrade service provider to a designer and developerof sophisticated products. Such products include the AllTerrain Tracked Carrier (unveiled this year), Bionix IFV,SAR 21 rifle and 40mm High Velocity self-destruct rounds.■ Within the Electronics sector, the Communicationand Sensor Systems group was commissioned to providea traffic control management system for Suzhou City,China. Its Radio Frequency Identification technologywas also put into service by the National Library Boardin <strong>Singapore</strong>.When it won the contract to provide anintegrated communications system for the TuchengMRT line in Taipei,Taiwan, it was able to call upon theexperience and expertise of the Large-Scale Systemsgroup. Significant development work performed by the36 • visioncover story • 37
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