View - Singapore Technologies Engineering

REVIEW OF FINANCIAL PERFORMANCE – ELECTRONICS SECTOR1. FINANCIAL PERFORMANCE1.1 TURNOVERTurnover for 2000 increased by 17% or $62 million to$424 million.The larger sales recognition in Large-ScaleSystems Group was due to milestone completion of theLand Transport Authority’s (LTA) Expressway Monitoring& Advisory System (EMAS) Phase II Project and MRTprojects for the North-East line. Communication &Sensor Systems Group’s sales came mainly from thesupply of communications equipment and milestonecompletion in the Ministry of Home Affair’s (MHA)communication project. In Software Systems Group,major sales were recognised from milestone completionof the MHA’s command and control project and a shipconsole project.1.2 PROFITThe sector’s profit after tax increased by 100% or $15.3million to $30.6 million. For the whole year, all threebusiness groups had performed well due to higher sales,higher interest income and better overall operationalefficiency. In Software Systems Group, the profit washigher partly due to provisions made in respect of aproject in 4Q1999.1.3 CASH AND CASH EQUIVALENTSNet cash from operating activities for the year amountedto $97.3 million. $19.0 million was paid out during theyear as net dividends to the parent company.1.4 CAPITAL EXPENDITURETotal capital expenditure amounted to $6.4 millionmainly incurred for the purchase of computers andoffice equipment of $5.3m. $0.96m was incurred forupgrading and replacing plants & machineries, testingequipment and tools.1.5 ECONOMIC VALUE ADDED (EVA)EVA for the full year 2000 was $23.0 million, an increaseof $10.4 million over 1999.The weighted average cost ofcapital was 9.9% for both 1999 & 2000.2. REVIEW OF BUSINESS ACTIVITIES2.1 BUSINESS ENVIRONMENTIn year 2000, the region continued in its recoveryfrom the effects of the 1997 Asian economic crisis. Newprospects unfolded and the sector was able to secure neworders from China, Hong Kong,Taiwan and Thailand.Wealso saw a gradual recovery in demand for the VSATproducts in Indonesia and other markets.Locally, our government continued to invest ininfrastructure.This has led to the sector securing anumber of new projects from the LTA, in addition tothose from the Ministry of Defence (MINDEF).2.2 MAJOR PROJECTSMajor projects executed in 2000 included the EMASPhase II Project; MRT projects for the North-East Line;Communications, Command & Control Systems for theMHA; and various defence electronic and communicationprojects for MINDEF.Major new orders secured included those from the LTA,a $87 million contract for the Marina Line, a $13 millioncontract for a Visual Passenger Information System anda $6 million contract to install the Junction-Eye Systemfor up to 100 traffic junctions with potential forextension to other major traffic junctions in the future;an Integrated Traffic Control Management System inSuzhou, China; Simulator projects for MINDEF andRoyal Thai Air Force; and various defence electronicand communication projects. Other significant orderswere those from Hughes Network and Comsat Lab forVSAT products.2.3 MAJOR ACQUISITIONThe sector acquired the following companies:(a) 19.8% stake in Metron CommunicationsCorporation, a US company specialising in developingGPRS chipset;(b) 12.5% stake in Redsonic, Inc., a US companyspecialising in real-time operating system based onLinux.3. PROSPECTSIn 2001, we expect to see completion of moremilestones for MHA’s communications and command& control projects, LTA’s LED Traffic Lights and MRTprojects.The sector will also begin to realise sales fromthe new orders recently secured. Overall, we expect toELECTRONICS SECTOR PROFIT AND LOSS ACCOUNTScontinue to improve our performance riding on a strongorder book.The momentum of growth will be fueled byresearch & development, international marketing andstrategic investments.Wireless Broadband applicationsand eBusiness related activities will provide exciting newbusiness opportunities.2000 1999$’000 $’000Turnover 423,533 361,991Cost of sales (326,591) (294,475)Gross profit 96,942 67,516Other operating income 8,394 5,719Distribution and selling expenses (12,983) (9,372)Administration expenses (32,305) (25,859)Other operating expenses (15,986) (12,219)Profit from operations 44,062 25,785Other income (expenses) 2,756 2,416Financial expenses (7) –Profit before taxation 46,811 28,201Share of results of associated companies and joint ventures (220) –46,591 28,201Taxation (16,293) (12,916)Profit after taxation 30,298 15,285Minority interests 282 15Profit after taxation and minority interests but before extraordinary items 30,580 15,300Extraordinary items – (2,093)Net profit for the year 30,580 13,207188 • visionreview of financial performance • 189