ST Engineering regains its momentum as it enters a new phase
SINGAPORE – After nearly six decades of growth, Singapore Technologies Engineering has entered a new phase of transformation.
This has involved divesting at least a dozen companies and investments, and refocusing on new core capabilities for a tech-driven and digital future.
It consolidated its countless business units – including aerospace engineering, defense, marine technology, and even pilot training – into a more closely linked, interconnected and focused organization comprising two main divisions – commercial as well as defense and public safety. .
These two divisions are supported by a common engineering technology platform, which in turn is supported by shared services and corporate functions common to the group. Instead of multiple boards of directors, the entire company reports to a single board of directors.
The chief executive of these changes is Vincent Chong, a former US-based senior executive of global energy giant Exxon, who took over in late 2016.
“We started this journey to build on the success of our pioneers,” he told The Straits Times in an exclusive interview. “He was motivated by the recognition that it is important to have a brand identity on the global stage and in a new global market. “
Mr. Chong added that the transformation has brought more resilience to the group.
“We have divested 12 business units over the past three years and made opportunistic acquisitions that align with our overall strategy,” he said. “As a result, we have strengthened our technological and digital capabilities, strengthened our brand image, streamlined our portfolio and delivered credible shareholder value despite the challenges of the past year. “
The company recently announced a 15% improvement in net income to $ 296.1 million for the first half of the fiscal year ended in late June. Revenue increased 2% to $ 3.65 billion.
It comes after a difficult 2020 when its aerospace and satellite communications business activities – which together account for nearly 40% of its revenue – were hit hard by the Covid-19 pandemic.
“We were actually going very well and on track for strong growth from 2019 before the arrival of Covid-19,” Mr Chong said.
Indeed, the company achieved a record net profit of some $ 577.9 million from record revenues of $ 7.87 billion at the end of fiscal 2019 in December 2019. But project delays, contract cancellations, workforce issues and the global supply chain crisis pushed revenues down 9 percent to $ 7.16 billion at the end of last year, with net profit down 10 percent to $ 521.8 million.
“Fortunately, the cost savings resulting from the rationalization and industry support measures deployed by the government mitigated the worst impact,” Chong added.
In the future, he believes that the company has regained its momentum.
While commercial aerospace will remain a key contributor, in particular its passenger-to-cargo conversion business, two particularly strong growth areas will be its smart city / smart mobility solutions and international defense activities.
ST Engineering has embarked on an acquisition campaign to develop these two activities.
In September, it announced the $ 2.68 billion (S $ 3.65 billion) purchase of U.S. company TransCore Partners, which provides electronic toll solutions, intelligent transportation systems and pricing of congestion. It will strengthen ST Engineering’s capabilities in global urban mobility and smart city solutions, such as its project in Rio de Janeiro, Brazil, where it has a 10-year smart street lighting solutions agreement, or its project $ 445 million rail transit facility in Kaohsiung, Taiwan. .
Many of these smart city and smart mobility projects rely on ST Engineering’s digital capabilities, which apply artificial intelligence analytics, cloud computing, cybersecurity capabilities, and communication technologies, says Chong. by satellite.
The company has spent an additional $ 1.3 billion over the past three years on various other acquisitions, including the purchase of US aircraft engine case specialist MRAS from General Electric; the Belgian satellite telecommunications company Newtec Group; and a US-based anti-jamming system, Glowlink Communications.
Mr. Chong believes that ST Engineering is well positioned to continue on an acquisition track to strengthen its capabilities and global presence, while developing its own internal capabilities.
“We maintain strong financial discipline and this gives us good access to finance,” he said.
Indeed, with net current assets exceeding $ 550 million, ST Engineering has sufficient financial firepower.
Meanwhile, the company’s order books had climbed to some $ 18.2 billion by the end of September, providing solid profit visibility for the next three years.
According to Chong, while smart city solutions are a rapidly growing business, ST Engineering’s more traditional businesses – aerospace and defense – continue to hold up well.
ST Engineering is the world’s largest independent player in the maintenance, repair and overhaul of commercial aircraft, and one of the largest players in the conversion of passenger aircraft to cargo aircraft.
On the defense side, the group’s prototypes of all-terrain vehicles for cold weather are currently being tested by the US military. It also won a contract for the construction of offshore patrol vessels for the United Arab Emirates Navy.
While traveling the world in search of acquisition opportunities, the company – which has 16,000 engineers and technical specialists worldwide – is also investing heavily in technology, both internally and externally.
In addition to allocating up to 5% of its income to technology and innovation, the group also maintains a US $ 150 million venture capital fund to opportunistically invest in various technology companies and start-ups. ups. These include corporate laboratories, joint laboratories and even partnerships with universities. ST Engineering also has offices in Tel Aviv, Israel and Silicon Valley, California to “stay engaged” with the technological ecosystems of those places.
With all the chess pieces slowly falling into place, Mr. Chong has a clear vision of what ST Engineering will look like in the near future.
“We want to be a global powerhouse in technology, engineering and defense, with revenue tripling to reach $ 11 billion by 2026,” he said.
The challenge, he added, is execution.
“We need to stay nimble and versatile and monitor megatrends as they unfold. We also need to develop our core strengths while riding the wave of technology and innovation. “