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SINGAPORE TECHNOLOGIES ENGINEERING SHARE PRICESAND TURNOVERREVIEW OF FINANCIAL PERFORMANCE – AEROSPACE SECTORTurnover(S$ million)80706050403020100JANFEB MAR APR MAY JUN JUL AUG SEP OCT NOV DECShare Prices(S$)3.02.52.01.51.00.50.01. FINANCIAL PERFORMANCE1.1 TURNOVERTurnover for 2000 increased 12% from $858 million to$959 million.The Commercial Business Group (CBG)registered higher turnover by $42 million due mainlyto increased capacities in both US and Singapore. STMobile Aerospace Engineering, Inc (MAE) added a SuperNose Dock in January 2000 while ST Aviation ServicesCo Pte Ltd (SASCO) commissioned its third wide-bodybay in Changi in February 2000. Military BusinessGroup (MBG) turnover was also higher by $59 milliondue to higher deliveries under maintenance contractsmainly in the component and engines division as wellas completion of project milestones.1.2 PROFITGross margin at 23.9% in 2000 was lower than the24.8% achieved in 1999 due mainly to sales mix andhigher provision for inventory. Other operating incomeincreased by $13.3 million due mainly to investmentincome of $4.4 million (as a result of fund maturity), again of $6.3 million (from the restructuring of UTSTAPte Ltd, formerly known as Turbine Overhaul ServicesPte Ltd) and higher interest income.The increase indistribution and selling expenses was a result of baddebts written off and higher exhibition costs (includingAsian Aerospace 2000) during the year. Higheradministration expenses for 2000 were due mainly toboth higher depreciation cost and higher staff and relatedcosts as a result of increase in salaries. Share of results ofassociated companies increased by 42% or $11.5 milliondue mainly to higher contribution from Turbine OverhaulServices Pte Ltd (TOS) and a $4.4 million contributionfrom the biennial Asian Aerospace 2000 exhibition. Profitbefore taxation at $219.0 million grew by 15% over1999.This translated to profit after taxation and minorityinterests of $151.0 million representing a growth of 21%or $25.8 million over 1999.The effective tax rate for2000 was 29.3%, whilst that for 1999 was 31.2%.Thiswas due to the lower proportion of the overseassubsidiaries’ profits (which are operating in a higher taxrate environment) and higher contributions from the taxincentivised TOS.1.3 CASH AND CASH EQUIVALENTSNet cash from operating activities for the year amountedto $179.4 million.The sector also paid dividends of$88.7 million and made a capital reduction of $149.3million during the year. At the end of the year, cash andcash equivalents amounted to $747.0 million.1.4 CAPITAL EXPENDITURETotal capital expenditure for the year amounted to $37.2million mainly for the purchase of plant and machinery,office equipment and the construction of added facilitiesin MAE and SASCO. $25.6 million was incurred fornew capabilities and the balance of the amount was spenton replacement of fixed assets.1.5 ECONOMIC VALUE ADDED (EVA)EVA for the full year 2000 was $110.1 million, anincrease of 19% or $17.5 million over 1999’s EVA.The weighted average cost of capital remained at 9.9%for both 1999 and 2000.2. REVIEW OF BUSINESS ACTIVITIES2.1 BUSINESS ENVIRONMENTAerospace sector continued to see increased demands forMRO services and engineering services from both thecommercial and military business groups in year 2000.In addition to the primary US and Asia sales, year 2000saw increased sales from both Europe and South Americaas a result of the Aerospace sector’s marketing efforts topenetrate these markets.The sector also continued toinvest in new maintenance capabilities and engineeringdevelopments to generate new services and products forthe future. Some, like the JT8D-200 and CFM56-3capabilities, have started to contribute revenue whilstthe B757 Passenger-to-Freighter (PTF) design will leadto conversions commencing February 2001.2.2 MAJOR PROJECTSThe first prototype of the B757 PTF conversionprogramme with Boeing is expected to be completedin January 2001. Production at MAE will commenceshortly thereafter. On the military side, the designdevelopment of the Turkish Air Force (TuAF) F5 upgradefleet is progressing well. MBG continues to manage thehelicopter and F16 Falcon One upgrade programmes.Hangar capacity will be increased in the first quarter of2001 with the addition of a two-bay B757-sized hangar inMobile, Alabama, and an extension to its military hangarin Singapore.The latter would free up space equivalentto a narrow-body bay for commercial aircraft work.182 • visionreview of financial performance • 183