Presentation Slides - Singapore Technologies Engineering

ST EngineeringFY2006Results Briefing

FY2006 ResultsBetter OverallPerformance

Scope of Briefing• Financial Highlights• Year in Review– Key Contracts– Business Acquisitions– Global Operations & Customer Base– Sector Operations• Outlook3

Financial Highlightsfor the year ended 31 December 2006• Turnover up 34%, growth in all sectors• PBT and PATMI grew 12%; from all sectors except Marine• Return on Equity at 28.4% (FY2005 : 26.5%)• Proposed Dividend : 100% of earnings (2005 : 100%)• Dividend Yield : 5.09% (2005 : 5.24%)4

Financial Highlightsfor the year ended 31 December 2006• Commercial sales at 69% (FY2005 : 54%) or$3.1 billion of turnover• $7.37 billion order book; about $2.65 billion to bedelivered in 2007 (end 2005: $5.38 billion)• $1.4 billion of cash and cash equivalents and amountsunder fund management(FY2005 : $1.5 billion)5

Financial Highlightsfor the year ended 31 December 2006$ m FY2006 FY2005 ChangeTurnover 4,486 3,338 34%Investment, interest& other income 97.5 75.8 29%EBIT 457.6 389.5 17%PBT 564.3 503.2 12%PATMI 445.1 396.3 12%EVA 327.8 290.6 13%Dividend per share (Final) 15.11¢ 13.6¢ 11%*Ordinary 4.0¢ 4.0¢ -* Special 11.11¢ 9.6¢ 16%Growth in all areas6

Financial Highlightsfor the quarter ended 31 December 2006$ m 4Q2006 4Q2005 ChangeTurnover 1,256 998 26%EBIT 132.4 104.9 26%PBT 157.4 126.1 25%PATMI 131.9 102.3 29%Strong 4Q2006 performance7

Financial IndicatorsFY2006FY2005Earnings Per Share 15.2¢ 13.6¢Return on Sales 10.2% 12.3%Return on Equity 28.4% 26.5%8

AerospaceGood Performance in20069

Aerospace – PBT$255.4m20%$305.3mPBT increased by 20% or $49.9m to $305.3m‣ Improved profitability & higher turnover(AMM)‣ Partially offset by post-acquisitionbusiness alignment initiatives andclosure of Stavanger facility at SASC(CERO)FY2005FY200611

ElectronicsStrong Performance12

Electronics – Turnover$701m36%$951mTurnover higher by 36% or $250m to $951m‣ Milestone completions of LTA’s CircleLine project & MRT projects in GreaterChina (LSG)‣ Sales of satellite communicationproducts (CSG) & delivery of educationalmultimedia laboratory systems inKazakhstan (SSG)FY2005FY200613

Electronics – PBT38%$104.6m$76.0mPBT higher by 38% or $28.6m to $104.6m‣ Higher turnover in CSG (iDirect) &SSG‣ Higher investment & interest incomeFY2005FY200614

Land SystemsBetterPerformance15

Land Systems – Turnover$1,002m$600m67%Turnover increased by 67% or $402mto $1,002m‣ Specialty vehicles sales from GJK,VT SVC and VT LeeBoy‣ Higher delivery of Bionix IIFY2005FY200616

Land Systems – PBT$65.0m8%$70.0mPBT increased by 8% or $5.0m to $70.0m‣ Contribution from specialty vehiclesbusiness‣ But lower contribution from CityCabFY2005FY200617

MarineVT Halter Marine recorded its first profitable yearDelivery of two locally built frigates “RSS Intrepid” and “RSS Steadfast” to RSN18

Marine – Turnover$660m6%$702mTurnover higher by 6% or $42m to $702m‣ Higher Shipbuilding sales from USoperation‣ Higher Shiprepair sales arising froma more active shiprepair marketFY2005FY200619

Marine – PBT$87.9m10%$79.5mPBT lower by 10% or $8.4m to $79.5m‣ Lower gross profit as a result ofdifferent sales mixFY2005FY200620

ST EngineeringBetter OverallPerformance21

Group Turnover by sectors$3,338m66014134%$1,148mMarine 6%LandSystems 67%$4,486m1587021,002Higher turnoverfrom all sectors6007011,236Elect 36%Aero 35%9511,673FY2005FY200622

Profit Before Tax by sectorsFY2005FY2006LandSystems(13%)Marine(17%)$65.0m$87.9m$76.0mOthers(4%)$18.9mAero(51%)$255.4m8%LandSystems(12%)$70.0mMarine(14%)$104.6m10%$79.5mOthers(1%)$4.9mAero(54%)$305.3m20%Elect(15%)Elect(19%)38%$503.2m12%$61.1m$564.3mStrong growth from Aerospace and Electronics sectors23

EBITDA / EBIT - Group$ m FY2006 FY2005 %EBITDA 593.4 470.1 26Depreciation & amortisation (135.8) (80.6) (68)EBIT 457.6 389.5 17Investment, interest andother income 97.5 75.8 29Interest paid (42.3) (8.0) (431)Operating profit 512.8 457.3 12Associated companies 51.5 45.9 12Profit before tax 564.3 503.2 12Higher Higher turnover turnoverNew New subsidiaries ––mainly mainly SASC SASC•• Higher Higher investmentincome income (Aero (Aero& Elect) Elect)•• Higher Higher interest interest income incomeHigher Higher borrowings &interest interest rates ratesGood Good PBT PBT growth growth24

Investment Income$ m FY2006 FY2005 ChangeAerospace 28.3 71% 12.3 66% 129%Electronics 11.9 30% 3.2 17% 278%Land 0.4 1% 3.1 16% 87%Marine 0.7 2% 1.3 7% 45%Others (1.5) (4%) (1.1) (6%) 44%Group 39.8 100% 18.8 100% 111%• Aerospace – Income from fund under investment & dividend• Electronics – Gain from disposal of a long-term investment25

Interest and Other Income$ m FY2006 FY2005 ChangeAerospace 14.2 25% 11.2 20% 27%Electronics 5.8 10% 3.6 6% 64%Land Systems 13.3 23% 13.0 23% 2%Marine 13.6 23% 10.7 19% 28%Others 10.8 19% 18.5 32% 42%Group 57.7 100% 57.0 100% 1%• Higher interest income from higher deposit rate• Absence of income from settlement of legal suit in Miltope – happened in FY2005 (Others)26

Income from Associated Co / JV$ m FY2006 FY2005 ChangeAerospace 37.2 72% 38.2 83% 3%Electronics 4.7 9% (1.6) (3%) 392%Land Systems 4.3 8% 9.7 21% 56%Marine 0.3 1% - - NMOthers 5.0 10% (0.4) (1%) NMShare Share of of profits profitsfrom from AA2006 AA2006Group 51.5 100% 45.9 100% 12%Higher Higher profits profits from fromECS ECS & lower lower losses lossesfrom from TranSys TranSysLower Lower profits profits from fromCityCab CityCabdue due to toincreased competition27

PBT Margin by sectorsFY2006 FY2005% %Aerospace 18 21Electronics 11 11Land Systems 7 11Marine 11 13Group 13 15•• Newly Newly acquired acquired companies companies in in4Q2005 4Q2005 & 2006 2006 added addedsignificantly significantly to to the the revenue revenuebut but lower lower impact impact to to PBT PBT•• Business Business alignment alignmentinitiatives initiatives to to improve improve margins marginsin in progress progress28

Profit After Tax & Minority Interests$ m FY2006 FY2005 ChangeAerospace 255.0 57% 210.3 53% 21%Electronics 76.3 17% 58.0 15% 32%Land Systems 51.9 12% 49.0 12% 6%Marine 67.8 15% 70.3 18% 3%Others (5.9) (1%) 8.7 2% 168%Group 445.1 100% 396.3 100% 12%Improved PATMI performance except Marine29

Balance Sheet$ m 31 Dec 2006 31 Dec 2005Property, plant and equipment 952 475Associated companies andjoint ventures 294 282Investments 28 101Intangible assets 557 360Long-term receivables 5 15Deferred tax assets 118 96Net current assets 333 6172,287 1,946Non-current liabilities (579) (404)1,708 1,542Share capital and reserves 1,565 1,493Minority interests 143 491,708 1,542ComponentComponentassetsassetsofofSASCSASCDisposalDisposalofofinvestmentsinvestmentsGoodwillGoodwillononVTVTLeeBoyLeeBoy&&MÄKMÄKTechnologiesTechnologies••LowerLowernetnetcurrentcurrentassetsassets‣ IncreaseIncreaseininSTSTbankbankloansloans••HigherHighernon-currentnon-currentliabilitiesliabilities‣ SASCSASCLTLTbankbankloanloan30

Cash Flow Statement$ m FY2006 FY2005Cash flow from/(used in) :Operating activities 461 303Investing activities (369) (435)Financing activities (143) (184)Net decrease incash & cash equivalents (51) (316)Cash & cash equivalentsat beginning of year 1,198 1,516Exchange difference (12) (2)Cash & cash equivalentsat end of year 1,135 1,198StrongStrongoperatingoperatingcashcashflowsflowsfollowingfollowinghigherhigheroperatingoperatingprofitsprofitsandandimprovedimprovedworkingworkingcapitalcapitalmanagementmanagementAcquisitionAcquisitionofofsubsidiariessubsidiariesininEuropeEurope&&USUSandandpurchasepurchaseofoffixedfixedassetsassetsDividendDividendpaymentpaymentnetnetofofproceedsproceedsfromfrombankbankloansloans31

EVA by sectors$ m FY2006 FY2005 $ Change % ChangeAerospace 194.4 175.2 19.2 11%Electronics 67.3 47.4 19.9 42%Land Systems 33.0 34.1 1.1 3%Marine 49.9 49.1 0.8 2%Others (16.8) (15.2) 1.6 11%Group 327.8 290.6 37.2 13%GoodgrowthWACC 6.6% 6.1%• EVA increased by 13% to $327.8m• Increase in NOPAT ($91.7m) and additional capital charge ($63.8m)32

DividendsProposed Dividend – FY20062004 2005 2006cents $ m cents $ m cents $ mOrdinary (1-Tier tax exempt) 4.0 116.2 4.0 117.5 4.0 117.8Special (1-Tier tax exempt) 8.39 243.6 9.6 282.0 11.11 327.3Total 12.39 359.8 13.6 399.5 15.11 445.1No. of shares (‘000) 2,903,701 2,937,298 2,946,254100% 100% of ofearnings earningsAve Share Price $2.19 $2.60 $2.97Dividend Yield 5.67% 5.24% 5.09% ##Computed using the average closing share price of the last trading day of 2006 and 200533

Scope of Briefing• Financial Highlights• Year in Review– Key Contracts– Business Acquisitions– Global Operations & Customer Base– Sector Operations• Outlook34

Year in Review – Key ContractsKey contracts announced in 2006 included:A 12-year Total Aviation Support (TAS) contract worth US$635m withAirbus to support a new US budget carrier, SkyBus; will operate from2Q2007, with firm orders for up to 66 A319 aircraftSigned a 10-year MBH support agreement with Air Asia worth US$130mto support 130 of Air Asia’s new A320 aircraftContracted to provide Automatic Fare Collection (AFC) systems forGuangzhou Metro Line 2, 4 & 8 extensionsTraffic Command Centre System project for Beijing’s MRT networkSigning Ceremonyfor Guangzhou MetroLine Extensions35

Year in Review – Key ContractsKey contracts announced in 2006 included (cont’d):Development and supply contracts for military land platforms3-year agreement for emergency vehicles from Texas GovernmentSecured contracts to design and construct two Roll-on and Roll-off (RoRo)vessels for transportation of A380 components and sections (S$120m)Signed contract to construct four additional Articulated Tug Barge (ATB)units for Crowley Maritime Corporation’s subsidiary (US$240m)Contracted to construct a missile range instrumentation ship for the USNavy (US$199m)Crowley’s ATBContract signing for twoRoRo Vessels36

Year in Review – Business AcquisitionsAcquisitions in 2006 included : Acquired SAS Component A/S (SASC) (71.3%);specialised in MBH programmesAcquired PM-B (70%), a specialist in missioncriticalenvironment for command/data centres Acquired B. R. Lee Industries, Inc. (100%),(renamed as “VT LeeBoy’) in US, whichspecialises in Asphalt Pavers & BroomsAcquired MÄK Technologies (80%), a worldleader in simulation software tools forsophisticated simulation & digital mediasolutionsLeeBoy’s New Plant37

Year in Review – Updates on Key AcquisitionsSAA (2002)• Breakeven in 2004 and profitable thereafter• Building up strong blue chip customer base e.g.Northwest, UPS and US AirwaysSASC (2006)• Business alignment efforts inprogress – showingimprovements in operatingperformance• Target profitability in 2007STARCO (2005)• Achieved profitability in 2006• Awarded FAA and EASAcertifications and inducted 1stinternational customer• Building new hangars atPudong AirportPAE (2007)• To start operationsin 2Q2007• Launch customer –Copa Airlines38

Year in Review – Updates on Key AcquisitionsVT Halter Marine (2002)• Achieved profitability in 2006• Building up strong order book with newcustomers and repeat ordersiDirect (2005)• Profitable since acquisitionVT Miltope (2003)• Target global markets to taprising demand in end-to-endbroadband satellite solutions• Profitable since acquisition• Blue chip customers includeUS Army, US Air Force,Boeing, Lockheed Martin,Northrop Grumman,Raytheon and Airbus39MÄK Technologies (2006)• Newly acquired in December 2006• Augments Group's existingcapabilities to become a globalsimulation and digital media player

Year in Review – Updates on Key Acquisitions• All four specialty vehicles companies achieved profitability in 2006• Implementing strategies to improve profit margins and market shareBZK(2004) Beverage Trucks and MultitemperatureRefrigerated TruckBodies and Trailers, andEmergency VehiclesConstruction Dump Trucks, Cement Mixers andTerminal Prime MoversVT SVC(2005)VT LeeBoy(2006)GJK(2005)Construction Executors and EquipmentAsphalt Pavers and Brooms40

Year In Review – Global Presence• Headquartered in Singapore, the Group has expanded its global operating footprintsignificantly, via organic growth and acquisitionsSAAPolarSatIntelectMAEKinetics Drive SolutionsiDirectVT MiltopeVT Halter MarineMÄK TechnologiesVT LeeBoyVT SVCTimoneyARLSASCKaz-ST EngineeringBastauGJKBZKSTARCOST Electronics (Shanghai)STAR Automotive Centre (Zhejiang(Zhejiang)ST Electronics (Sichuan)ST Electronics (Taiwan)STAR Automotive Centre (Guang(Zhou)ST Electronics-PCIShanghai Elite Electric VehiclesST Electronics Software ServicesPAEGFM ElectronicsSINGAPORESEEL Electronics & EngineeringST Electronics (Botswana)Ripple SystemsAerospace Engineering ServicesCadmus Technology41

Year in Review – Global Customer Base• Global presence led to a balanced global customer base• Customer base that spreads over Asia (53%), USA (33%) and Europe (11%)[ 2002 : Asia (72%), USA (19%) and Europe (5%) ]Turnover By Location of Customers$ m20022003200420052006CAGRAsia1,89472%2,00971%1,97867%2,21666%2,36653%6%USA49119%59421%70424%83725%1,47933%32%Europe1295%1154%1264%1364%48111%39%Others1054%1014%1405%1495%1603%11%Total2,6192,8192,9483,3384,48614%42

Year in Review – Aerospace Operations• AMM• Celebrated redelivery of FedEx 2500 thaircraft• Set up Panama Aerospace Engineeringto commence operations by 2Q2007• SASCO new wide-body hangar in operation• CERO• Enhanced repair and overhaul capabilities for CFM56-3/-7Bparts• Concluded service centre and parts support agreement withseveral OEMs – Leiberr Aerospace, Hamilton Sunstrand, etc.FedEx 2500 th AC• EMS• Signed major TAS and MBH programmes with Airbus andAir AsiaB737 ConstantSpeed Drive Testing43

Year in Review – Electronics Operations• LSG• CSG• SSG• Recognised milestone completions in LTA’s CircleLine project and Kaoshiung MRT project• Commissioned communication system for TaipeiMRT Tucheng Line• Products launch‣ DigiSAFE DeskCrypt, a hard disk encryptor to protectPC data‣ 1.2 meter diameter stabilised Ext-C band antennasystem• Commissioned Crime & Criminal Recording Systemfor Botswana Police Service, Africa44

Year in Review – Land Systems Operations• Auto• Delivered Bionix II, Bronco,specialised truck bodies, roadconstruction equipment, off-roaddump trucks, excavators, etc.• M&W• Continued to integrate engineering,procurement and selling & distributionactivities for US, China and Singaporeoperations• Launched new products at BaumaChina 2006, e.g. Articulated DumpTruck, Terminal Prime Mover• Delivered SAR21, Primus, Pegasusand various munitions productsBionix IIVT SVC’sEmergency Vehicle45

Year in Review – Marine Operations• Shipbuilding• Local‣ Delivered two locally-built frigates, “RSS Intrepid” &“RSS Steadfast” and launched the last frigate “RSS• USSupreme”‣ Cut plate for the first of two RoRo Vessels‣ Laid the keel for 2 nd , 3 rd and 4 th feeder container vessels‣ Delivered two ATB units to Crowley MaritimeCorporation‣ Keel laid “Pisces”, 3rd of four Fisheries Survey Vesselfor National Oceanic and Atmospheric Administration(NOAA)Two frigates delivered to RSNPlate Cutting of 4 th Vessel• Shiprepair• Local‣ Secured three conversion / modification projectsCrowley’s Tug #2 Launch46

Scope of Briefing• Financial Highlights• Year in Review– Key Contracts– Business Acquisitions– Global Operations & Customer Base– Sector Operations• Outlook47

Group Outlook for FY2007Barring unforeseen circumstances, the Groupexpects to achieve a higher turnover and PBT inFY2007 compared to that of FY2006.FY2007 turnover and PBT are expected to behigher than that of FY2006 for Aerospace,Electronics and Land Systems sectors. However,for Marine sector, turnover for FY2007 is expectedto be comparable, while PBT is expected to belower than that of FY2006.48

OutlookAerospace• Focus on Airframe HMV and Modification work and implement FedExPTF programme• Set up capabilities to support operation of SkyBus• Build up CFM56 engine parts repair and extend customer base globallyfor commercial enginesElectronics• Sales recognition from LTA’s Circle Line project and MRT projects inGreater China• Sales recognition from sales of satellite communication products andelectro-optics equipment and the completion of milestones in the fleetmanagement system for Comfort taxis• Sales recognition from the completion of milestones in a command andcontrol system project49

OutlookLand Systems• Continue delivery of Bionix II, Bronco and specialty vehicles• Continue to expand sales & distribution network and specialty vehiclesbusiness• Continue contractual delivery of PegasusMarine• Expect to deliver two locally built frigates to Republic of Singapore Navy• Expect to deliver two ATB units to Crowley Maritime Corporation• Expect to complete three conversion / modification projects50

President & CEO’s Message“The Group continued to do well in FY2006. Turnover rose 34% to $4,486m. EBIT, PBT and PATMI were$457.6m, $564.3m and $445.1m, representing growth rates of 17%, 12% and 12% respectively. Order bookrose to a new high at $7.37b. Return on equity also improved from 26.5% for FY2005 to 28.4% for FY2006.The Board is proposing to pay 100% of FY2006 earnings to shareholders as dividends, which translates to15.11 cents per share or $151.1 per lot of shares, and plans to pay half-year interim ordinary dividendsstarting FY2007.During FY2006, the Group completed three strategic acquisitions, namely SAS Component, VT LeeBoy,and MÄK Technologies. These acquisitions extended the Group's global aerospace MRO network inEurope, expanded its commercial specialty vehicles presence and capabilities under the Land Systemssector, and augmented the Electronics sector's simulation capabilities and customer base. The Groupalso concluded an agreement to open an MRO facility in Panama and signed up the national carrier, CopaAirlines, as launch customer, supporting its fleet of 22 aircraft. The Group continued to clinch majorcontracts, such as the 12-year contract (about $1b) with Airbus to provide Total Aviation Support forSkyBus, a new US budget carrier, a third contract (about $25m) in Guangzhou bringing the total China railcontracts to $50m, and contracts from the US Navy to design and construct a missile rangeinstrumentation ship (about $315m) and to procure materials for the Egyptian Navy's Fast Missile Craftproject (about $263m).2007 is the 10th anniversary of the inception of ST Engineering as an amalgamation of the then separatelylisted four sectors. It also marks the 40th anniversary of the formation of the first companies that made upthe defence business in the Group. We are grateful and proud of our pioneer leaders and employees, whohad the vision and the commitment to lay the strong foundation that today form the cornerstone of whatST Engineering has become. We will build on the Group's solid foundation for more successes in theyears to come.In 2007, the Group will continue to step up its resources to deliver high standards of quality solutions,products and services that our customers expect. We are encouraged by the strength of the current stateof the world economy, and barring unforeseen circumstances, we expect to achieve a higher turnover andPBT for FY2007.”~ Tan Pheng Hock51

Key Contracts Announced in 2007Contracts announced to-date………Aerospace• Awarded a PTF conversion contract by FedEx for its Boeing 757-200 fleet of 87 aircraftat US$470 million, implementable in three blocks stretching over 7 years from 2007• Secured an aircraft engines MBH contract with Xiamen Airlines for its fleet of 11Boeing new generation 737-700 aircraft powered by CFM56-7B22 engines at US$160million for up to 15 yearsElectronics• Awarded a 10-year contract by the Ministry of Defence (MINDEF), worth $255 million, toprovide shared services to active personnel, regulars and NSmen of the SingaporeArmed Forces (SAF)• Awarded a contract worth approximately $68.5 million from Marubeni Corporation forTaiwan Taoyuan International Airport Access MRT Construction ProjectLand Systems• Awarded a 6-year turnkey contract with an option for another 6 years worth $78 million,to provide weapon maintenance and related services to the Singapore Army52

Interim Dividend – 2007The ST Engineering Board has resolved:• Adopt a dividend policy which is based on ahalf-yearly ordinary dividend payout• Plans to declare a first interim ordinary dividendpayout starting from the announcement of thehalf-year results ending 30 June 200753