SINGAPORE Technologies Engineering' s cost savings measures and expected partial business recovery should help it offset the government grants that will drop off this year.

 

The mainboard-listed engineering conglomerate said in an earnings call on Friday that the cost savings measures initiated last year will see the full benefits amounting to about S$180 million flow into this year.

 

Cost savings will come from lower manpower expenses as a result of a reduction of contract labour and outsourced contractors, natural attrition, and less overtime costs, as well as higher productivity.

 

ST Engineering' s net profit for the half year ended Dec 31 slid 14 per cent to S$264.4 million from S$308.6 million a year ago. Top line declined by about 18 per cent to S$3.6 billion from S$4.4 billion, on lower customer demand, supply chain challenges and workforce disruption.

 

But the engineering conglomerate is anticipating partial business recovery and lower impairment this year, as the economy gradually picks up amid global vaccination roll-out.

 

Together with the cost savings and business improvements, ST Engineering aims to bridge the S$250 million gap left by the loss of government grants this year, as the state weans companies off its pandemic relief.

 

Group president and chief executive officer Vincent Chong said: " We are focusing on delivering our order book, seizing new opportunities in areas like freighter conversions and cyber security. With partial revenue recovery, when combined with savings from our cost reduction initiatives, we target to offset the effects of lower government support in 2021."

 

The bright spots ST Engineering is looking at include passenger-to-freighter conversions and cyber security, while its defence business is likely to continue to bring stability to the group.

 

For example, the company will be inducting 30 aircraft this year for passenger-to-freighter conversion amid persistent shortage of air cargo capacity due to passenger fleet largely grounded, and another 40 planes next year for induction - up from 10 jets last year.

 

Aerospace and electronics units together brought in over S$1.3 billion worth of new deals in the fourth quarter to December. These together with contracts from the land systems and marine sectors lifted order book value to S$15.4 billion as at end-December, slightly better than a year ago.

 

ST Engineering now sees delivery of about S$5.3 billion from the order book in 2021.

 

But aerospace' s net profit was 38 per cent lower year-on-year for the second half of the year, while marine earnings plunged 73 per cent. Electronics and land systems posted 14 per cent and 43 per cent higher bottom lines respectively.

 

Full-year' s bottom line dropped 10 per cent year-on-year to S$521.8 million from S$577.9 million, while revenue was down 9 per cent to S$7.2 billion from S$7.9 billion.

 

Earnings per share declined to 16.74 Singapore cents from 18.53 cents, while net asset value per share rose to 73.59 Singapore cents at the end of the year, from 71.32 cents a year ago.

 

A final dividend of 10 Singapore cents per share will be paid out on May 7 - subject to shareholders' approval. This brings the conglomerate' s dividends for the full year unchanged at 15 Singapore cents inclusive of an interim dividend.

 

Mr Chong reiterated ST Engineering' s dividend track record of paying total dividends of 15 Singapore cents per share, as it sees that as " an important lever for us to return value to our investors and shareholders&rdquo .