Full Annual Report 2006 - Singapore Technologies Engineering

THE WINNING SPIRIT ST Engineering AR 2006 10
Letter to Shareholders
The Group recorded double digit growth for a second straight year in 2006.
Our net profit rose by 12% to $445.1m on the strength of the Aerospace
and Electronics sectors and higher contributions from our overseas
acquisitions. Group turnover was up 34% to $4.49b, while profit before tax
increased 12% to $564.3m. Our earnings per share were 15.2 cents, an
increase of 11%. Economic Value Added grew 13% to $327.8m. Return
on equity was a very respectable 28.4%, higher than the 26.5% in 2005.
Cash and cash equivalents, including funds under management, remained a
healthy $1.4b.
Dear Shareholders
Global markets continued their upward momentum in 2006,
with Singapore’s growth at a new high compared to recent
years. Higher interest rates and oil prices, however, threatened
to hinder economic activity and exerted pressure on bottom
lines for most industries. While higher oil prices have minimal
direct impact on the Group, they affected the aviation industry,
increasing the cost of operations for airlines already in a difficult
market compounded by heightened competition from low cost
carriers. China appears to have had some success in cooling
its economy and growth continued to be strong, aided in part
by the build up to the 2008 Olympics. India is another growing
market where the Group seeks to increase its presence.
Another area of opportunity is the booming Gulf States.
While various geographies pose different challenges,
they serve as opportunities for the Group as we grow our
presence globally.
Against this backdrop, the ST Engineering Group enjoyed
another good year in 2006 with net profit growing by 12%
to $445.1m.
Becoming a Global Entity
The Group today is a global entity operating in five continents,
spanning 20 countries and 35 cities.
With our recent acquisitions, the profile of our business mix
is increasingly global and commercial, due to the nature and
location of these new acquisitions. These new additions have
steadily increased their contributions to the Group, enabling
us to diversify our earnings stream. As a vital part of our total
business mix, the Group’s defence business continues to grow
with new solutions and product offerings. Customers are
increasingly focused on the total cost of ownership and market
best practices. Our flexibility to leverage on the interplay
between our defence and commercial businesses, and tapping
the strengths of each, helps strengthen the Group’s ability to
provide innovative and cost effective systems and solutions.
Group revenues outside of Asia has today grown to 47%
from 28% in 2002, reflecting our geographic spread and
global customer base which covers more than 60 countries.
Globalisation helps to diversify geographic-centric economic
and political factors, thereby hedging the interests of the Group.
Globalisation is the cornerstone of our strategy for growth and
to build leading businesses to add vigour to the Group. We