ST Engineering Q4 profit drops 26% to S$124.5m after one-off charges

SINGAPORE Technologies (ST) Engineering reported a 26 per cent drop in net profit to S$124.5 million for its fourth quarter from S$168.1 million a year ago, after one-off pre-tax charges of S$25 million related to portfolio rationalisation and its acquisition of General Electric's MRA Systems.

Excluding the one-time charges, pre-tax profit would have been seven per cent higher at S$185.6 million and net profit would be up one per cent at S$149.1 million if the prior year's one-off favourable US tax adjustment of S$20 million was excluded as well, the company said in a regulatory filing before Thursday's market open.

Revenue for the three months to Dec 31 rose 5 per cent higher to S$1.77 billion.

For the full year, net profit dipped 1.7 per cent to S$494.2 million from S$502.6 million the year before. The decrease was due to weaker performance from its land systems sector, one-time costs incurred for early redemption of its medium-term notes and lower contribution from its Miltope computer business. Revenue for the year grew 3 per cent to S$6.7 billion from S$6.5 billion the year before.

Earnings per share (EPS) for the year worked out to 15.85 Singapore cents from 16.13 cents for 2017. ST Engineering shares closed at S$3.77 per share on Wednesday. Net asset value per share for the full year stood at 72 Singapore cents on a group level, up from 71.09 cents the year before.

A final dividend has been declared at 10 Singapore cents per share. An interim dividend of 5 Singapore cents per share paid on Aug 28, 2018, brings total payout for the year to 15.0 cents per share, unchanged from the preceding year.

Further breaking down its financials, ST Engineering said excluding one-off charges of S$32.6 million (after tax) in FY2018 and absence of prior year's one-off favourable US tax adjustment of S$20.3 million, net profit for the year would have been nine per cent higher at S$526.8 million.

The company's land systems sector's full-year net profit fell S$34.5 million or 39 per cent to $52.9 million, from S$87.4 million the year before. This was largely driven by one-off charges due to portfolio rationalisation, and absence of prior year's one off US tax adjustment. Other reasons include the divestment impact of its road construction business in India and full impairment charges for its road construction business and automotive maintenance repair and overhaul (MRO) business in Brazil.

For its aerospace sector, net profit was flat at S$244.6 million, compared with S$244.8 million the year before. Higher gross profit and net gain on divestments were offset by higher operating expenses largely from acquisition related expenses and higher tax expense.

Its electronics sector saw a record net profit of S$186.5 million, up 10 per cent or S$17.7 million from S$168.8 million the year prior. This was due to higher gross profit, in line with higher revenue, and lower operating expenses, partially offset by share of losses from associates and joint ventures.

Meanwhile, the company's marine sector recorded a net profit of S$45.2 million, up 67 per cent from S$27 million the year before from higher gross profits and lower operating expenses, partially offset by higher tax expense.

Vincent Chong, president and CEO, ST Engineering, said that excluding one-off charges mainly incurred to rationalise its portfolio, the underlying operating performance of the company's business sectors "remained strong".

"We continue to invest in growth initiatives and capabilities including data analytics and cybersecurity to drive long-term sustainable growth, backed by a healthy level of order book that provides revenue visibility for the next few years," he added.