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&
ANNUAL REPORT 2014
ST ENGINEERING / ABOVE & BEYOND
VISION
BE A GLOBAL DEFENCE AND
ENGINEERING GROUP.
MISSION
BRING VALUE TO OUR CUSTOMERS AND
PARTNERS BY DELIVERING TOTAL INTEGRATED
QUALITY SOLUTIONS AND SUPPORT.
CORE VALUES
INTEGRITY, VALUE CREATION, COURAGE,
COMMITMENT AND COMPASSION
01
01
ANNUAL
ANNUAL
REPORT
REPORT
2014
2014
&
At ST Engineering, we rise above and beyond the ordinary in everything that we do. Our
engineering expertise is what sets us apart and underpins our relentless push for innovation.
We create solutions that excite the market and raise the bar to new highs. We consistently
think beyond the obvious, to generate smarter ideas that break new ground. We listen to our
customers and strive to help them achieve not just their immediate but also their greater goals.
Simply put, we aim higher, to benefit not just our company’s future, but your future too.
Above and beyond – that is the only way we go.
CONTENTS
8
10
16
Financial Highlights
Letter To Shareholders
Board Of Directors
22
24
60
Senior Management
Operating And Financial Review
Investor Relations
62
64
65
Awards
Corporate Information
Sustainability Report
106
123
Corporate Governance
Financial Report
02
03
CHRIS CHUA
ANNUAL
REPORT
2014
DARREN
LIM
JOAN WONG
Assistant Principal Engineer
ST AEROSPACE
ST ELECTRONICS
Senior Engineer
ST KINETICS
“ The Terrex is a remarkable vehicle. We are part of an
interdisciplinary team that gave the vehicle integrated
weapon, communications and UAV systems. ”
ABOVE & BEYOND
WE DON’T SELL PRODUCTS,
WE DEVELOP SOLUTIONS.
We are engineers and we solve problems. Our customers
depend on ST Engineering’s exceptional engineering expertise
to bridge their capability gaps. Thanks to our multi-sector
capabilities, we offer integrated, innovative, and highly
customised solutions. Coupled with our ability to think and
operate globally, we reward our customers with richer and
more insightful answers to their demands.
04
05
2014
GLADCHUN
ELVIN TAN ANNUAL REPORTGLENN
Engineer
ST ELECTRONICS
Principal Engineer
VT iDirect
“ Space is fascinating. It stretches the imagination
to the extreme and spurs us to push boundaries
with innovative solutions in satellite systems
and satellite communications. ”
ABOVE & BEYOND
WHERE OTHERS SEE FRONTIERS,
WE SEE OPPORTUNITIES.
Over the years, we have continually deepened our presence
in existing markets and sought new ones. On the engineering
front, we ceaselessly nurture our capabilities and develop
innovative solutions through extensive R&D and collaboration
with global partners.
06
07
ANNUAL
REPORT 2014
NG ZHENXIAN
ST KINETICS
“ While my daily work finds me designing automation controls
for weapon systems, I recently had a chance to apply my
engineering skills to preserving the Tembusu Tree at
the Botanic Gardens. ”
ABOVE & BEYOND
WE PUT PEOPLE AND
OUR PLANET FIRST.
We believe that our commitment to strong corporate
governance, staff development, ethical conduct and community
building can reap sustainable value for our shareholders,
employees and customers. Above all, we strive to rise above
and beyond the expectations of our workforce, and to build a
better planet and future for us all.
08
FINANCIAL HIGHLIGHTS
REVENUE
NET PROFIT
$6.54b
$532m
- 1.0%
- 8.0%
REVENUE BREAKDOWN
Defence
USA
39%
Asia
BY
CUSTOMER
TYPE
76%
23%
58%
BY
LOCATION
OF BUSINESS
ENTITY
BY
LOCATION OF
CUSTOMERS
5%
61%
Commercial
14%
Asia
22%
Europe
Others
USA
1% Others
Europe 1%
EARNINGS PER SHARE
DIVIDEND PER SHARE
RETURN ON EQUITY
17.06¢
15¢
24.9%
- 9.0%
- 2.5% pts
OPERATING CASH FLOW
ORDER BOOK
RETURN ON SALES
$624m
$12.5b
8.2%
- 33.0%
- 0.7% pts
09
ANNUAL REPORT 2014
32
REVENUE
%
BY SECTOR
%
24
%
21 1 %
2
$6.63B
3%
2%
$6.54B
31 %
%
25
%
22 %
9
1
2014
2013
EBITDA
%
18
%
BY SECTOR
42 %
24
16
%
29
%
19
%
$815.2M
-1 %
$725.5M
-2 %
11
%
44 %
2014
2013
NET PROFIT
42 %
BY SECTOR
%
%
%
%
16
20
23
$532.0M
19
%
-3 %
9%
29
45 %
2014
Aerospace
$580.8M
2013
Electronics
Land Systems
Marine
Others
10
LETTER TO SHAREHOLDERS
In 2014, our results were
impacted by the business
environment in Europe, the
weakness in our Specialty
Vehicles business in China as
well as poor performance of our
shipbuilding operations in the
US. Revenue for the year was
$6.54b, compared to $6.63b
reported for FY2013. Profit
before tax (PBT) was reduced by
11% to $650.7m, and net profit
attributable to shareholders
was 8% lower at $532.0m.
Kwa Chong Seng
Chairman
Tan Pheng Hock
President & CEO
“
Simply put, our job as leaders of ST Engineering
has one constant – that is, to rise above the
circumstances and volatility of the global marketplace
and be an outperformer over the long term.
”
DEAR SHAREHOLDERS,
As we close 2014 and face
a new year, ST Engineering
will have been serving its
customers and generating
long-term wealth for investors
for 17 years. Our business
operations, which were once
almost wholly circumscribed
within the shores of
Singapore, are now global in
extent. Through this 17-year
journey, the thresholds of our
customers’ expectations, the
complexity of technology, the
speed of change, as well as
the degree of market volatility
have risen significantly.
Effectively, the challenges
facing business organisations
today are continuous – each
year differing only in the
nature of the opportunities
seen and the uncertainties
faced. A business environment
in permanent flux is what we
see as the ‘new normal’ which
managers everywhere will have
to deal with.
Simply put, our job as leaders
of ST Engineering has one
constant – that is, to rise above
the circumstances and volatility
of the global marketplace
and be an outperformer over
the long term. The level and
consistency of the results we
deliver for our investors
Above and Beyond the long
term norms of the industries
we are in, along with the
manner in which we govern
our business, and how we
operate, will be the measure
of our competence.
At the business sector level,
only Marine saw improvements
in revenue with an 8% increase.
The Aerospace, Electronics,
and Land Systems sectors
came in with lower revenues
of between 1% and 5%. At the
PBT line, the Electronics sector
did well with 8% improvement,
while the other sectors
recorded falls in PBT: -11%
Aerospace, -50% Land Systems
and -16% Marine.
Revenue mix contribution to
the Group remained largely
the same as FY2013, with 32%
from the Aerospace sector, 24%
from the Electronics sector, 21%
from the Land Systems sector
and 21% from the Marine
sector. The division of revenue
between our Commercial and
Defence sales also remained
stable at 61%:39%.
By geography of our entities,
our US businesses contributed
22% to Group revenue, Europe
remained small at 1% while Asia
accounted for 76% of Group
revenue.
Your Board of Directors
proposes a Final Dividend of
11 cents per share, consisting
of an Ordinary Dividend of 4
cents per share, and a Special
Dividend of 7 cents per share.
Together with the Interim
Dividend of 4 cents per share
paid in September 2014, the
11
ANNUAL REPORT 2014
total dividend for the full year
will amount to 15 cents per
share or a total of $468.2m.
This translates to a higher
dividend yield of 4.08% for the
year compared to 3.86% in
2013.
We carried out a share buyback, repurchasing 13.48m
shares, out of our authorised
limit of 62.3m (2%) of the total
number of issued shares as
of end February 2015. The
repurchasing of shares helps
neutralise the impact of dilution
from future employee share
incentive plans and at the same
time provides shareholders with
the opportunity to realise cash
by selling their shares.
Through the year, our business
sectors had to overcome
divergent business conditions
across numerous markets.
There were specific factors that
led to the numbers before you.
In Europe, we faced a weak
economy and air transport
market which required us to
restructure our Aerospace
operations in that part of the
world. In the US, our Marine
yards had cost overruns on
two new build projects caused
by non-systemic design and
supply chain support issues. In
China, the slowing economy,
particularly in the infrastructure
construction sector impacted
our construction equipment
business.
fundamentals underpinning
each of our business operations
are also solid and strong.
We continue to take a long
term view in our business
decisions, while building on
our engineering expertise and
competencies.
We Made Tough Decisions
Europe disappointed us with
an expected recovery that
did not materialise and the
weak Eurozone impacted the
Aerospace sector. We therefore
had to take decisive action
to rationalise our operations
there. We took steps to close
our landing gear shops in Oslo,
Norway and Madrid, Spain
and relocated our landing
gear overhaul expertise to
Singapore. What we see now is
a leaner European operation - a
facility in Stockholm, Sweden to
build on our aerostructure and
mechanical component repair
capabilities, and a facility in
Copenhagen, Denmark to focus
on materials management.
At the Land Systems sector,
we divested our 50% stake in
our construction equipment
business in Beijing, China to our
Our Fundamentals Remain
Strong
The Group’s strengths can be
seen in several areas – we
have a strong balance sheet, a
solid cash and cash equivalent
position – including funds under
management – of $1.7b, a net
cash position of $686m and a
healthy order book of $12.5b
for FY2014 (order book: $13.2b
at end 2013). Shareholders
can take heart that the
local partner as part of ongoing
review to streamline our
Specialty Vehicles business.
We Pursue New Opportunities
In August 2014, our Electronics
sector opened the ST Electronics
Satellite Systems Centre, a
focal point in building the high
value-add satellite industry
in Singapore. In the larger
scheme of things, this Centre
represents our aspirations to
go into space and exploit the
economic opportunities that
space presents. The Electronics
sector also made inroads into
the healthcare sector, with
the launch of an integrated
hospital management system
that will enable hospitals to
manage their resources more
effectively and achieve greater
operating efficiencies, leading
to improved service quality to
their patients.
We Continued
To Invest For Growth
Our greenfield airframe facility
in Guangzhou, China started
operation in early 2014 and had
already completed heavy
15.0¢
4.08%
TOTAL DIVIDEND
PER SHARE
DIVIDEND
YIELD
“
Shareholders can take heart that the
fundamentals underpinning each of our business
operations are also solid and strong. We continue
to take a long term view in our business decisions,
while building on our engineering expertise and
competencies.
”
12
LETTER TO SHAREHOLDERS
maintenance checks for Chinese
and international air carriers.
Like all other facilities in the
ST Aerospace network, it
leverages the strength of its
network to offer an integrated
aviation solution to its
customers. In the US, we are
setting up an aircraft
maintenance, repair and
overhaul (MRO) facility at the
Pensacola International Airport
in Florida. When this starts
operation in late-2016, it will
operate as a satellite repair
station to our facility in Mobile,
Alabama giving us economies of
scale and shared resources.
Equally important is that the
satellite facility provides our
customers additional choice in
terms of MRO facility location.
Several other investments were
undertaken by us in the year to
expand capacities and
capabilities, resulting in a
capital expenditure of $240m
(FY2013: $326m) at the Group
level. Funds were deployed to
purchase aircraft component
rotables to support contracts
secured; the relocation of our
China facility for the
construction equipment
business; as well as the building
of data centres in Singapore as
part of our Electronics sector’s
growth in this area, and
enhancement works to the dry
dock facility for the US
shiprepair business.
We Go Where
Our Customers Are
Our Electronics sector, which
has already carried out rail
projects in Brazil, set up a
subsidiary there to be closer to
where the opportunities lie as
the country invests in
transportation infrastructure.
Our success as a leading
provider of urban intelligent
transport and metro rail
solutions will lend credibility as
we extend our suite of offerings
to the Brazilian market. At the
Land Systems sector, the
automotive MRO services
business we acquired in the
second half of 2013, based in
Brasilia, is on track in pursuing
local defence projects. One such
example is the modernisation
programme for the Brazilian
Army’s Urutu 6x6 Armoured
Personnel Carriers.
We Build On Our Strengths
Our Aerospace sector’s VIP
completion business, known as
AERIA is now an approved
Boeing Business Jet completion
centre, and a member of Airbus
Corporate Jet service centre. In
2014, it secured numerous
contracts, most notably a
nose-to-tail cabin completion
contract for a wide-body VIP
aircraft, and a green aircraft
completion project for a VIP
737 BBJ. This is good progress
for an operation that started
only two years ago. The
Electronics sector continued to
win rail electronics projects in
and outside of Singapore, as
well as deploy its solutions and
systems in the areas of
communications, platform
screen doors and passenger
information systems globally.
The Land Systems sector
strengthened its market leading
position in 40mm ammunition,
with its partnership with
General Dynamics-Ordnance
and Tactical Systems for the US
market.
We Move Up The Value Chain
To face the challenge of
competition from lower cost
yards in Malaysia and China for
smaller Platform Supply Vessels,
our Marine sector shifted its
focus to the higher-value
specialised offshore vessels
such as the large Anchor
Handling Tug Supply Vessels,
Dive Support Vessels, Seismic
Support Vessels and Deepwater
Support Construction Vessels. In
the US, we completed and
launched the largest vessel ever
to be built in Pascagoula – the
MV Marjorie C – a 692-feet long
container and Roll-On/Roll-Off
car truck carrier, which is the
second vessel we built for
owner Pasha Hawaii. At the
same yard, we started
construction of the first of two
LNG-powered combination
Container Roll-On/Roll-Off
vessel for Crowley Maritime
Corporation. The vessel, with a
cargo capacity of about 2,400
TEUs and additional space for
nearly 400 vehicles, will set a
new standard in shipping by
featuring the latest systems
technology for maximum safety,
reliability, and powered by
environmental-friendly LNG.
We Are Engineers
While we speak of continuously
shifting business conditions,
we are clear how we want to
respond – with innovation and
creativity. ST Engineering was
honoured to be the only
company in Singapore to be
listed in Forbes’ 2014 list of
The World’s Most Innovative
Companies. This premium can
only be made a reality through
people. Fundamentally,
ST Engineering’s future will
be shaped by our people. Our
engineers and technologists are
the source of all the innovation
and creativity. It is in
recognition of this that you will
see in this year’s Annual Report
that we feature some of our
young talents who will be
tomorrow’s leaders for our
Group. Read their stories on
the technical brainpower we
are developing.
We Are Committed To
Governance
Corporate governance, with its
checks and balances is an area
we do not compromise on and
13
ANNUAL REPORT 2014
we take a zero tolerance
approach to all forms of
corruption including fraud and
bribery. We regularly review our
system of processes to safeguard
against corruption, as well as to
protect the integrity of the
Group. We recognise that no
system can fully insulate us
from being affected by poor
judgement in decision-making,
human error, fraud or other
irregularities. This is why we
take a serious view of any
breaches of the ST Engineering
Code of Business Conduct &
Ethics.
We Are Aligned To Global
Sustainability
While ST Engineering has been
reporting on our sustainability
initiatives since 2003, this year
we are issuing our inaugural
sustainability report prepared in
accordance with the Global
Reporting Initiative guidelines.
In adopting the most globally
recognised sustainability
reporting guidelines, we are
acknowledging that to be a
truly global company, we must
be accountable to global
standards.
We Reach Out To Those
In Need
In terms of community
outreach, we want to focus our
giving to support the needs of
persons with disabilities, an
area in Singapore that is
underserved. We are supporting
and sponsoring iLAT@Enabling
Village, a project run by SG
Enable that is scheduled to
open in the third quarter of
2015. This will be a one-stop
consultancy and education
space within the Enabling
Village that will showcase how
assistive and information
technologies (AT/IT) can help
meet the needs of persons with
disabilities and their caregivers.
As an engineering group, we
believe that we can contribute
our engineering skillsets to AT/
IT to help make a difference in
the lives of this community.
Board and Management
Renewal
During the year, we welcomed
three non-executive directors to
our Board - MG (NS) Ng Chee
Khern, Ms Olivia Lum and Dr
Beh Swan Gin. Olivia and Swan
Gin are independent Directors.
We look forward to working
with them and benefitting from
their leadership and industry
perspectives.
Following Mr Chang Cheow
Teck’s resignation as President
of ST Aerospace, we appointed
Mr Lim Serh Ghee, formerly
Chief Operating Officer and
President, Defence Business of
ST Aerospace to be President of
this business.
To build up cross-sector
synergy and integration across
ST Engineering, we have
appointed Mr Lee Fook Sun
to the newly-created position
of Deputy CEO of the Group,
in addition to his roles as
President of ST Electronics
and President of the Group’s
Defence Business. At the same
time, Mr Vincent Chong,
previously President of Strategic
Plans & Business Development
of ST Aerospace, has taken on
the role of Deputy CEO
(Corporate Development) of
the Group, overseeing the
departments and functions
at the Corporate Office of
ST Engineering.
In March 2015, as this letter
was being written, another
leadership change for the Group
took place at ST Kinetics. Mr
Ravinder Singh, previously
Deputy President of Corporate
and Market Development of
ST Electronics, took over as
President of ST Kinetics from
Mr Sew Chee Jhuen. Mr Sew,
who held that role since 2006
has since taken on a new
position at the Corporate Office
of ST Engineering as President
for Special Projects.
This has been a year of
change and fresh thinking for
ST Engineering. The future is
exciting. We aim to make a
mark for ourselves globally by
thinking out of the ordinary,
reshaping ourselves and
working for the betterment of
those around us. The pace will
have no let up. We will have to
be bold and take calibrated risks
but the rewards will be great.
We thank all our 23,000
employees around the world
who are working hard with us
on this journey. We also thank
our customers, business
partners and shareholders for
their support through the year.
We will continue to apply all our
talents and energy to do better
for our customers, shareholders
and all our stakeholders.
Sincerely,
Kwa Chong Seng
Chairman
6 March 2015
Tan Pheng Hock
President & CEO
14
15
ANNUAL REPORT 2014
16
BOARD OF DIRECTORS
PROFILES OF DIRECTORS
The names of the directors holding
office at the date of this report are
set out below together with details
of their academic and professional
qualifications, age, date of first
appointment as Director, date of
last re-election as Director, as well
as other directorships and principal
commitments.
MR KWA CHONG SENG
(Chairman)
MR TAN PHENG HOCK
Mr Kwa Chong Seng, 68, was
appointed an independent nonexecutive Director on 1 September
2012. He was appointed Chairman
on 25 April 2013. Mr Kwa was last
re-elected Director on 24 April
2013. He retired as Chairman &
Managing Director of ExxonMobil
Asia Pacific Pte. Ltd. in October 2011.
A mechanical engineer by training,
Mr Kwa joined Esso Singapore in
1969 and had held various roles in
Logistics, Marketing, Supply, Trading
and Investment Planning. He also
spent several years in Exxon offices
in the US and Hong Kong. Mr Kwa
is currently the Chairman of
Neptune Orient Lines Limited* and
several of its key subsidiaries. He
is also Chairman of Fullerton Fund
Management Company Ltd, Deputy
Chairman of Olam International
Limited* and the Public Service
Commission, Singapore, and is on
the boards of Singapore Exchange
Limited*, SeaTown Holdings Pte.
Ltd., Delta Topco Limited and the
Defence Science & Technology Agency
(DSTA). Mr Kwa graduated from the
former University of Singapore with
a Mechanical Engineering degree.
He was awarded the Distinguished
Engineering Alumni Award by the
National University of Singapore
(NUS) in 1994 and is a Fellow of the
Academy of Engineering Singapore.
In 1999, Mr Kwa was conferred the
Honorary Ningbo Citizenship. He was
awarded the Singapore Public Service
Star in 2005.
Mr Tan Pheng Hock, 57, is the
President & CEO of ST Engineering
and an executive Director. He was
appointed Director on 1 May 2001
and was last re-elected Director on
24 April 2014. Mr Tan is Chairman
of the Singapore Workforce
Development Agency, Deputy
Chairman of the Singapore Quality
Award Governing Council, a board
member of the Singapore Economic
Development Board and a Fellow of
the Singapore Institute of Directors.
He was named Outstanding CEO of
the Year at the Singapore Business
Awards in 2014 as well as Asia
Business Leader of the Year at the
12th CNBC Asia Business Leaders
Awards in 2013. He was conferred
the esteemed Honorary Fellowship by
the ASEAN Federation of Engineering
Organisations for his contribution
to the engineering profession. In
2012, Mr Tan was honoured as the
Best Chief Executive Officer (for
companies with $1b and above
in market capitalisation) by the
Singapore Corporate Awards. He
received the Public Service Medal
in 2011. He began his career as an
engineer in ST Marine in 1981. Over
the last three decades, he has held
numerous senior appointments in the
Group including that of Executive Vice
President of ST Marine, President
of ST Kinetics, President and Chief
Operating Officer of ST Engineering
and ST Engineering Group President.
Mr Tan holds a Bachelor of Science
(First Class Honours) in Marine
Engineering from the University of
Surrey, UK and a Master of Science
in Management from Stanford
University, USA.
17
ANNUAL REPORT 2014
MR KOH BENG SENG
LIEUTENANT-GENERAL
NG CHEE MENG
MAJOR-GENERAL (NS)
NG CHEE KHERN
Mr Koh Beng Seng, 64, is the CEO of
Octagon Advisors Pte. Ltd. He was
2003 and is due for re-election at the
2015 AGM under Article 98 of the
Company’s Articles of Association.
Mr Koh was Deputy President of
United Overseas Bank Limited from
June 2000 to 31 January 2005. Prior
to this, Mr Koh was Senior Advisor
to Asia Pulp & Paper Company Ltd,
and Advisor to Bank of China and the
International Monetary Fund from
1998 to 2000. Mr Koh has extensive
experience in the financial services
sector. He was with the Monetary
Authority of Singapore from 1973
to 1998, where he served as Deputy
Managing Director from 1988 to
1998. Mr Koh is Chairman of Great
Eastern Holdings Limited* and
Director of Bank of China (Hong Kong)
Limited^, BOC Hong Kong (Holdings)
Limited, Sing-Han International
Financial Services Limited, Hon Sui
Sen Endowment CLG Limited and
United Engineers Limited*. Mr Koh
holds a Bachelor of Commerce (First
Class Honours) from the former
Nanyang University, Singapore, and
a Master of Business Administration
from Columbia University, USA.
LG Ng Chee Meng, 46, is the Chief
of Defence Force, Singapore Armed
Forces. He was appointed a nonexecutive Director on 25 April 2013
and was last re-elected as Director
on 24 April 2014. Prior to this, LG Ng
was the Chief of Air Force. He joined
the Ministry of Defence (MINDEF)
in 1986 and was awarded the SAF
Postgraduate Scholarship (Specialist
Development) in 2002 and the Public
Administration Medal (Gold) in 2011.
LG Ng was conferred the “Most
Exalted Order of Paduka Keberanian
Laila Terbilang – First Class” by the
Sultan of Brunei in 2013. In the
course of his military career, LG Ng
has held various command positions
in MINDEF since 1993, including
Director of Joint Operations. He
is Deputy Chairman of SRCC Pte
Ltd and a board member of DSTA
and JTC Corporation. LG Ng holds a
Bachelor of Science from the US Air
Force Academy, and a Master of Arts
from The Fletcher School of Law and
Diplomacy, Tufts University, USA.
MG (NS) Ng Chee Khern, 49, is the
Permanent Secretary (Defence
Development) in Singapore’s MINDEF
and Second Permanent Secretary
in Singapore’s Ministry of Health.
He was appointed a non-executive
Director on 20 May 2014 and is due
for re-election at the 2015 AGM
under Article 104 of the Company’s
Articles of Association. Prior to this,
MG (NS) Ng had held various senior
positions in the SAF, including as the
Chief of Air Force and as Director
of Joint Operations and Planning
Directorate. He is Chairman of DSTA,
DSO National Laboratories, SaverPremium Fund Board of Trustees
(Singapore) and the SAF Fund Care.
He is a Director of CapitaMall Trust
Management Ltd*, and a member
of the Public Utilities Board and
National Research Foundation, Prime
Minister’s Office. MG (NS) Ng holds
a Bachelor of Arts (Second Class
Honours (Upper)) (Arts & Social
Sciences) and Master of Arts (Arts &
Social Sciences) from the University
of Oxford, UK; and a Master of Public
Administration (Humanities & Social
Sciences) from Harvard University, USA.
* listed on the SGX-ST
^ listed on the Stock Exchange of Hong Kong
18
BOARD OF DIRECTORS
MR QUEK TONG BOON
MR QUEK POH HUAT
MR VENKATACHALAM
KRISHNAKUMAR
Mr Quek Tong Boon, 59, is Chief
Defence Scientist of Singapore’s
MINDEF. Prior to this, he had
concurrently held the position of
Chief Research & Technology Officer
until 1 July 2013. Mr Quek was
appointed a non-executive Director
on 1 March 2008 and was last
re-elected as Director on 24 April
2014. He joined the Defence Science
Organisation of MINDEF in 1980 and
in the course of his career, has held
various key appointments, including
that of Deputy Secretary (Technology
and Transformation) of MINDEF and
CEO of the DSO National Laboratories.
Mr Quek is a board member of the
Public Utilities Board and an Adjunct
Professor at the Department of
Electrical & Computer Engineering
in NUS. He holds a Bachelor of
Arts (Honours) (Engineering) from
the University of Cambridge, UK,
and a Master of Science (Electrical
Engineering) from NUS.
Mr Quek Poh Huat, 68, is Senior
Advisor of Singapore Power Limited
(SingPower). Prior to this, he was the
Group CEO of SingPower until his
retirement on 31 December 2011.
Mr Quek was appointed a nonexecutive Director on 15 April 2002
and will retire at the 2015 AGM. He is
Singapore’s non-resident Ambassador
to Sweden. Mr Quek also serves as
Chairman of Aetos Holdings Pte. Ltd.
and Director of Singapore Institute
of Power and Gas Pte. Ltd. He was
conferred the Public Service Star
Award by the Singapore Government
in 1994. In May 2012, Mr Quek
was awarded the May Day Medal
of Commendation (Gold) Award by
the National Trades Union Congress.
He obtained a Bachelor of Science
in Chemical Engineering from the
University of Leeds, UK, and a Master
of Science in Management from the
Naval Postgraduate School, USA.
Mr Venkatachalam Krishnakumar,
65, is Chairman of Oracle Financial
Services Software Pte. Ltd.
(Singapore). Prior to this, he had held
senior advisory roles at McKinsey and
Company, Barclays Bank PLC, Global
Retail and Commercial Banking and
DBS Bank. He was Chief Operating
Officer and Chief Financial Officer
for the Asia Pacific Consumer Bank
of Citigroup when he retired on
28 February 2005 (after a 31-year
career with the group). During
his career with Citigroup, he held
several senior appointments in India,
Singapore and New York. He was
appointed an independent nonexecutive Director on 15 April 2002
and is due for re-election at the
Company’s Articles of Association. He
is a Director of MediaCorp Pte. Ltd.,
Aspen Holdings Limited and CIMB
Bank Berhad. He holds a Bachelor of
Engineering and Master of Business
Administration from the Indian
Institute of Management, India.
19
ANNUAL REPORT 2014
MR DAVINDER SINGH
DR STANLEY LAI TZE CHANG
MR KHOO BOON HUI
Mr Davinder Singh, 57, is the CEO of
Drew & Napier LLC. He was appointed
an independent non-executive
Director on 1 August 2007 and is
due for re-election at the 2015 AGM
under Article 98 of the Company’s
Articles of Association. Mr Davinder
Singh has been in legal practice
for more than 30 years. He was in
the first batch of Senior Counsel
appointed in 1997. He is a Director
of the Petra Foods Limited* and PSA
International Pte Ltd. Mr Davinder
Singh is also a Member of the Board
of Trustees of NUS. He holds an
LLB (Honours) from the National
University of Singapore.
Dr Stanley Lai Tze Chang, 47, is Head
of Intellectual Property & Technology
Practice at Allen and Gledhill LLP.
He was appointed an independent
non-executive Director on 8 October
2009 and was last re-elected as
Director on 24 April 2013. Dr Lai
was appointed Senior Counsel at
the Opening of the Legal Year 2010.
He currently serves as Chairman
of the Intellectual Property Office
of Singapore (appointed on 1 April
2013). He obtained his law degree
from the University of Leicester (UK)
in 1992 and qualified to practise as
a Barrister in England and Wales in
1993. Dr Lai is a member of Lincoln’s
Inn. He was called to the Singapore
bar in 1995. Dr Lai also holds a
Masters in Law (LLM) and Doctorate
(Ph.D) in law from the University of
Cambridge, UK.
Mr Khoo Boon Hui, 60, is Senior Advisor
of the Ministry of Home Affairs (MHA),
Singapore and concurrently a Senior
Fellow of the Civil Service College. Prior
to this, he was Senior Deputy Secretary,
MHA until he relinquished his post on
20 January 2015. He was appointed an
independent non-executive Director
on 1 September 2010 and was last
re-elected as Director on 24 April 2014.
Mr Khoo was appointed Commissioner
of the Singapore Police Force (SPF) in
July 1997, and relinquished this post
in January 2010 after serving 32 years
in SPF. He was also the President of
INTERPOL from 2008 to 2012.
Mr Khoo is currently Honorary
Chairman of the Paris-based
Technology Against Crime Association,
Deputy Chairman of Singapore Island
Country Club and Singapore Quality
Award Governing Council and a
board member of Singapore Health
Services Pte Ltd, the Casino Regulatory
Authority and Temasek Foundation CLG
Limited. He also sits on the advisory
panels of the Singapore National
Cybersecurity R&D Programme, the
Qatar-based International Centre
for Sports Security, the Cambridge
University Police Executive Programme,
and the Oxford University Journal of
Policing. Mr Khoo is also an Advisor
for the Board Financial Crime Risk
Committee (Standard Chartered
PLC). He holds a Bachelor of Arts
(Engineering Science & Economics)
degree from Oxford University and
a Master in Public Administration
from the Harvard Kennedy School of
Government. Mr Khoo attended the
Advanced Management Program at
Wharton School of the University of
Pennsylvania in 2002.
20
BOARD OF DIRECTORS
MR QUEK SEE TIAT
MS OLIVIA LUM OOI LIN
DR BEH SWAN GIN
Mr Quek See Tiat, 60, is Chairman
of the Building and Construction
Authority, Singapore. He was
appointed an independent nonexecutive Director on 1 July 2013 and
was last re-elected as Director on
24 April 2014. He retired as Deputy
Chairman of PricewaterhouseCoopers
Singapore in 2012, after a career in
the firm that spanned 31 years. Mr
Quek is a board member of Singapore
Press Holdings Ltd*, Neptune Orient
Lines Limited*, the Energy Market
Authority and the Monetary Authority
of Singapore. He holds a Bachelor of
Science (Economics) Honours from
the London School of Economics and
Political Science, and is a Fellow of the
Institute of Chartered Accountants in
England and Wales and a member of
the Institute of Singapore Chartered
Accountants.
Ms Olivia Lum, 54, is Executive
Chairman and Group CEO of Hyflux
Ltd* (Hyflux). She was appointed an
independent non-executive Director
on 20 May 2014 and is due for
re-election at the 2015 AGM under
Article 104 of the Company’s Articles
of Association. Ms Lum started
her corporate life as a chemist in
GlaxoSmithKline plc. She is a board
member of International Enterprise
Singapore and Singapore Mediation
Centre, a Trustee Member of The
Chinese Development Assistance
Council and a Council Member of
the Singapore Business Federation.
Ms Lum is the first woman to win the
Ernst & Young World Entrepreneur Of
The Year 2011 award in recognition of
her Singapore-based water-treatment
company, Hyflux. Ms Lum holds an
Honours degree in Chemistry from
the National University of Singapore.
Dr Beh Swan Gin, 47, is Chairman of
the Singapore Economic Development
Board (EDB). Prior to this, he
was Permanent Secretary of the
Ministry of Law from 1 July 2012
to 30 November 2014. Dr Beh was
2014 and is due for re-election at the
Company’s Articles of Association.
He was previously Managing Director
of EDB from 2008 to 2012. Dr Beh
also serves as Chairman of EDBI Pte
Ltd and EDB Investments Pte Ltd and
is also a Director of Esplanade Co.
Ltd. He is a medical doctor by training
and graduated from the National
University of Singapore. Dr Beh is
also a Sloan Fellow with a Master
of Science in Management from
Stanford University’s Graduate School
of Business, and completed the
Advanced Management Program at
the Harvard Business School in 2012.
21
ANNUAL REPORT 2014
PAST DIRECTORSHIPS IN THE LAST THREE YEARS
Mr KWA Chong Seng
DBS Bank Ltd
DBS Group Holdings Ltd
ExxonMobil Oil Singapore Pte Ltd
Temasek Holdings (Private) Limited
Mr TAN Pheng Hock
Cradance Services Pte Ltd
Nanyang Polytechnic International Private Limited
VT Systems, Inc
Mr KOH Beng Seng
Fraser and Neave Limited
COLONEL ALAN GOH KIM HUA
COL Alan Goh Kim Hua, 38, is
Head Naval Plans in the Republic
of Singapore Navy (RSN). He was
appointed Alternate Director to LG
Ng Chee Meng on 25 April 2013. COL
Goh joined the Singapore Armed
Forces (SAF) in 1995 and has held
various command and staff positions
in MINDEF/SAF since 1999, including
as the Deputy Director, Defence
Policy Office, Head Naval Personnel
and as Commanding Officer of the
RSN’s Missile Corvette Squadron.
He was awarded the SAF Overseas
Scholarship in 1995, the SAF Overseas
Postgraduate Scholarship (General
Development) in 2011 and the Public
Administration Medal (Bronze) in
2013. COL Goh holds a Bachelor of
Arts (Honours) (Mathematics) from
the University of Cambridge, UK, and
a Master of Business Administration
(Sloan Fellow) from the Sloan School
of Management, Massachusetts
Institute of Technology, USA.
# listed on the Nasdaq Stock Market
Lieutenant-General NG Chee Meng
Experia Events Pte. Ltd.
Singapore Technologies Aerospace Ltd
Mr QUEK Poh Huat
Aetos Security Management Pte. Ltd.
Aircraft Capital Trust Management Pte. Ltd.
Enterprise Business Services (Australia) Pty Ltd
PowerGas Limited
Singapore Power Limited
SP PowerAssets Limited
SP PowerGrid Limited
SP Services Limited
SPI (Australia) Assets Pty Ltd
SPI Management Services Pty Ltd
Mr Venkatachalam KRISHNAKUMAR
Cypress Holdings Limited
HiSoft Technology International Ltd
Pactera Technology International Ltd#
Mr Davinder SINGH
Singapore Exchange Limited*
Mr KHOO Boon Hui
Home Team Academy Board of Governors
Institute of Leadership and Organisation Development, Civil Service College
Singapore Technologies Kinetics Ltd
Mr QUEK See Tiat
Pricewaterhousecoopers Advisory Services Pte. Ltd.
Pricewaterhousecoopers Asia Actuarial Services (Singapore) Pte. Ltd.
Pricewaterhousecoopers Corporate Finance Pte. Ltd.
Pricewaterhousecoopers LLP
Pricewaterhousecoopers Services LLP
Pricewaterhousecoopers WMS Holdings Pte. Ltd.
Pricewaterhousecoopers WMS Pte. Ltd.
PWC International Assignment Services Holdings Pte. Ltd.
PWC International Assignment Services LLP
PWC international Assignment Services (Singapore) Pte. Ltd.
Dr BEH Swan Gin
Agency for Science, Technology and Research
Economic Development Board
EDB Investments Pte Ltd
International Enterprise Singapore
Maxwell Arbitration Holdings Ltd
Singapore Israel Industrial Research and Development Foundation
22
SENIOR MANAGEMENT
Seated, left to right: ELEANA TAN AI CHING LEE FOOK SUN TAN PHENG HOCK VINCENT CHONG SY FENG
Standing, left to right: JOHN G COBURN LIM SERH GHEE SEW CHEE JHUEN NG SING CHAN
TAN PHENG HOCK
Mr TAN Pheng Hock is President & CEO
of ST Engineering and a Director of the
ST Engineering Board. (Mr Tan’s profile
is on page 16)
LEE FOOK SUN
Mr LEE Fook Sun, 58, was appointed
President of ST Electronics in
August 2009 and took on the role
of President, Defence Business of
ST Engineering in March 2013,
driving the strategic relationship
with the Group’s core defence
customers. In December 2014,
he was concurrently appointed
Deputy CEO of ST Engineering to
explore additional synergies across
the Group’s four business sectors.
Mr Lee joined ST Electronics in
2000 as President of Defence and
International Business and was
appointed the company’s Deputy
President (Operations) in 2005. Mr
Lee serves as Deputy Chairman of
Building and Construction Authority
and Director of DSO National
Laboratories. He holds a Bachelor
of Arts (Honours) and a Master of
Arts (Engineering Science) from the
University of Oxford, UK and attended
the Stanford University’s Executive
Program. Mr Lee is a Fellow of The
Institution of Engineers, Singapore.
VINCENT CHONG SY FENG
Mr Vincent CHONG Sy Feng, 45, was
appointed Deputy CEO (Corporate
Development) of ST Engineering
in December 2014 overseeing the
Group’s corporate functions. Prior
to this, he was President of Strategic
Plans & Business Development
at ST Aerospace since April 2014.
Mr Chong has a 20-year career in
the oil and gas industry holding a
variety of technical, operations and
management positions from product
marketing, refining & supply, to
corporate strategic planning. His
career has been global with postings
in Hong Kong, Japan, the United
Kingdom as well as the United States.
Mr Chong graduated with a First Class
Honours in Mechanical Engineering
from the National University of
Singapore. He has also attended
executive leadership programs at
the Thunderbird School of Global
Management and the Columbia
Business School.
23
ANNUAL REPORT 2014
LIM SERH GHEE
SEW CHEE JHUEN*
NG SING CHAN
Mr LIM Serh Ghee, 55, was appointed
President of ST Aerospace in
December 2014. Prior to this, he was
Chief Operating Officer from 2010
and the President, Defence Business,
where he was responsible for forging
strategic relationships with the group’s
core defence customers. Mr Lim also
served as Executive Vice President of
Aircraft Maintenance & Modification
(AMM), a business segment of
ST Aerospace. He began his career
with ST Aerospace as a mechanical
engineer in 1984 and has held many
senior management appointments
within the Group. Mr Lim holds a
Second Class Upper Honours degree
in Mechanical Engineering from the
National University of Singapore.
He was conferred with the Master
of Science in Aerospace Engineering
from the University of Michigan
and attended the Program for
Management Development at
Harvard Business School.
Mr SEW Chee Jhuen, 51, was
appointed President of ST Kinetics
in September 2006. Prior to this,
Mr Sew was Deputy President
(Operations) and President Defence
Business of ST Kinetics. He joined
ST Aerospace as an Aeronautical
Engineer in 1988, and had held many
senior management appointments
before becoming Deputy President
(Operations). Mr Sew serves
as a Member of the Board of
Governors of Singapore Polytechnic.
He was awarded the Medal of
Commendation in the May Day
Awards 2012 by the National Trades
Union Congress. He holds a Bachelor
of Science (High Distinction) in
Aeronautical Engineering and
Mechanics from the University of
Minnesota, and a Master in Business
Administration from Stanford
University, USA. Mr Sew is a Fellow
of The Institution of Engineers,
Singapore.
Mr NG Sing Chan, 54, was appointed
President of ST Marine in May 2010.
Prior to this, Mr Ng was Deputy
President and President, Defence
Business of ST Marine. He joined
ST Marine in 1987 as an engineer.
Mr Ng left in 1991 and later became
the Deputy General Manager of
Pan-United Shipyard Pte Ltd. He
subsequently took on the positions
of President of Changshu Xinghua
Changjiang Dev Co and Executive
Director of Pan-United Marine Ltd
(now known as DDW-PaxOcean
Shipyard Pte. Ltd.). Mr Ng re-joined
the Group in March 2008 as Executive
Vice President, Special Projects,
ST Engineering and moved to
ST Marine as Deputy President in
April 2009. Mr Ng holds a Master
of Business Administration (Finance
& Banking) from the Nanyang
Technological University, Singapore
and a Masters in Engineering from
the University of Hamburg, Germany.
JOHN G COBURN
ELEANA TAN AI CHING
RAVINDER SINGH*
General (Retired) John G COBURN,
73, was appointed Chairman and
CEO of ST Engineering’s US subsidiary,
VT Systems, in December 2001.
Gen (Ret) Coburn joined the Group
after an illustrious 39-year career
with the US Department of Defense,
where he commanded at all levels.
Prior to assuming this position, he
was Commanding General of the US
Army Materiel Command, one of the
largest commands in the US Army
with 60,000 employees and an annual
budget of more than US$50b with
activities in 42 states and 28 foreign
countries. Gen (Ret) Coburn is the
recipient of many medals, and is a
noted author and speaker. He holds
a Juris Doctor from the University
of Missouri, and a Doctor’s Degree
from Eastern Michigan University
and many other degrees. He is also a
member of the Supreme Court, State
of Kentucky; Supreme Court, State of
Michigan and the Supreme Court of
the United States.
Ms Eleana TAN Ai Ching, 52, was
appointed Chief Financial Officer
of ST Engineering in March 2008.
Ms Tan was previously Managing
Director, Finance, Temasek Holdings
(Private) Limited (Temasek). Prior
to that, she was Director Finance
at Singapore Technologies Pte
Ltd (STPL) from August 2003
until December 2004, when STPL
was restructured, and its assets
transferred to Temasek. Prior to
2003, Ms Tan had held various
key finance positions in the
ST Engineering Group over a period
of 13 years and last held the position
of Group Financial Controller of
ST Engineering. Ms Tan holds a
Bachelor of Accountancy (Honours)
from NUS and attended the Harvard
Business School’s Advanced
Management Program in 2013.
She is a member of the Institute of
Singapore Chartered Accountants.
Mr Ravinder SINGH (not in picture),
50, was appointed President of
ST Kinetics in March 2015. He joined
the Group in August 2014 as Deputy
President, Corporate and Market
Development at ST Electronics. He
joined the Group after a 30-year
career with MINDEF and the Singapore
Armed Forces (SAF) where he held
various senior command and staff
appointments. In his last appointment
in the SAF, he served as Chief of
Army. Before that, he was Deputy
Secretary (Technology) in the Ministry
of Defence. Mr Singh graduated with a
Bachelor of Arts in Engineering Science
(First Class Honours) in 1986 and a
Master of Arts in Engineering Science
in 1992, both from the University of
Oxford, UK. He also completed his
Master of Science in Management
from Massachusetts Institute of
Technology, USA in 1996 and the
Wharton Advanced Management
Program in 2014.
* New appointments effective 23 March 2015. Sew Chee Jhuen relinquished his role at ST Kinetics and was appointed President for Special Projects, ST Engineering.
Ravinder Singh relinquished his appointment as Deputy President at ST Electronics.
For organisational chart, please refer to www.stengg.com
24
O P E R AT I N G & F I N A N C I A L R E V I E W
GROUP OVERVIEW
ST Engineering is an integrated engineering group
that provides innovative solutions and services in the
aerospace, electronics, land systems and marine sectors.
Incorporated in 1997 and headquartered in Singapore, we
rank among the largest companies listed on the Singapore
Exchange, and are one of Asia’s leading engineering
groups.
Our global network of over 100 subsidiaries and
associated companies, supported by a workforce of
about 23,000 allows us to serve customers in the
Americas, Europe, Asia and Oceania. A leader in each
of our core businesses, ST Engineering leverages multisector capabilities to develop advanced solutions for
commercial and defence customers across industries.
Our aerospace arm offers a wide spectrum of aircraft
maintenance, engineering and training services for both
military and commercial aircraft operators. These services
include airframe, components and engine maintenance,
repair and overhaul, engineering design and development,
materials support, asset management and pilot training.
Our electronics arm specialises in the design,
development and integration of advanced electronics
and communications systems for government, defence,
commercial and industrial customers worldwide.
Our land systems arm delivers integrated land systems,
specialty vehicles and their related through-life support
for defence, homeland security and commercial
applications.
Our marine arm provides customised shipbuilding, repair
and conversion services to both naval and commercial
vessels, at our yards in Singapore and the US. We also
provide a host of environmental solutions through our
environmental engineering subsidiary.
NORTH AMERICA
“
We serve our customers
through a global network
of 100 subsidiaries and
associated companies in 46
cities across 24 countries.
”
SINGAPORE TECHNOLOGIES ENGINEERING LTD
100% Singapore Technologies Aerospace Ltd
100% Singapore Technologies Electronics Limited
100% Singapore Technologies Kinetics Ltd
100% Singapore Technologies Marine Ltd
100% Singapore Technologies Dynamics Pte Ltd
100% ST Synthesis Pte Ltd
100% Vision Technologies Systems, Inc.
For complete Group structure, please refer to www.stengg.com
SOUTH AMERICA
25
ANNUAL REPORT 2014
In 2014, ST Engineering was again the biggest exhibitor at the biennial Singapore Airshow, where we showcased our suite of
defence and aerospace solutions to a global audience.
EUROPE
ASIA
MIDDLE EAST
AFRICA
SINGAPORE
AUSTRALIA
Aerospace
Electronics
Land Systems
Marine
Others
26
O p e r a t i n g R e v i e w & O u t l o o k ( c o n t ’d )
P
rogressing up the
engineering value
chain, we continue
to strengthen our
support to customers through
a broadened global network
and integrated maintenance
and engineering support for
airframes, components
and engines.
2014 REVIEW
“
The Aerospace sector
remained resilient with
a strong emphasis on a
balanced services portfolio,
innovation and productivity
improvements.
”
The global aviation industry
continues to face intense
competition with industry
experts expecting the global
airline industry’s operating
profits to grow modestly in the
short term.
Notwithstanding the
challenging aviation
landscape, the Aerospace
sector remained resilient
with a strong emphasis on a
balanced services portfolio,
innovation and productivity
improvements. We secured a
steady stream of new orders
worth $1.74b in 2014, and
continued to build focus on the
following capability clusters
– aircraft maintenance and
modification; component total
support; engine total support;
aviation and training services;
and aerospace engineering and
manufacturing.
Aircraft Maintenance
& Modification (AMM)
The AMM business continued
to grow in capacity and
capability during the year.
The Aerospace sector also
redelivered 962 aircraft for
airframe maintenance and
modification work, including
freighter conversions.
As part of the business strategy
to grow our presence in the
Gulf Coast region in the US, an
agreement was signed with the
City of Pensacola to set up an
aircraft maintenance, repair
and overhaul (MRO) facility at
the Pensacola International
Airport in Pensacola, Florida.
Under the agreement, the City
of Pensacola will construct an
aircraft hangar complex on
18.66 acres of greenfield land
and lease it to our Mobilebased VT Mobile Aerospace
Engineering, Inc. for 30 years.
Growing our support for the
Embraer series of regional jets,
a five-year agreement was
secured with a regional US
airline for heavy maintenance
of 42 Embraer E-170 and
E-175 aircraft at VT San
Antonio Aerospace, Inc. This
came shortly after clinching a
two-year contract earlier in
27
ANNUAL REPORT 2014
the year for heavy maintenance
of 20 Embraer E-190 aircraft.
expanding its international
customer base in China.
Our VIP aircraft completions
business continues to gain
traction with the award of
several interior modification
contracts, including a nose-totail wide-body cabin completion
project and our first green
aircraft completion contract
from an undisclosed Europeanbased VIP 737 BBJ customer.
Growing the business capability,
AERIA Luxury Interiors acquired
a state-of-the-art 3D printer
for prototyping and small
production of non-structural
parts. AERIA’s facility will be
undergoing a 14,000 sq ft
expansion, which will see the
addition of a new cabinet and
upholstery shop as well as
an additional building for the
design, sales and marketing
teams in 2015.
The 757-200SF freighter
conversion programme
continues to be an important
platform for ST Aerospace.
The sector has redelivered 117
757-200SF converted freighters
since 2001, which are now
in service around the world.
Following the launch of the
15-pallet freighter conversion
solution as part of a 757-200SF
development programme in
2013, ST Aerospace secured
a contract for five 757-200SF
passenger-to-freighter
conversions in a 15-pallet
cargo configuration, with an
option for three additional
aircraft. This brings to 144
the total number of aircraft
contracted for the 757200SF freighter conversion
programme.
Additionally, our new end-oflifecycle aircraft part-out and
green harvesting business
commenced in Hondo, Texas
during the year. Plans are in
place to develop a framework
for the green harvesting
programme with best practices
guidelines being established for
implementation in 2015.
On the military side of
maintenance, the Republic
of Singapore Air Force (RSAF)
inaugurated the M346
Advanced Jet Trainer in the
year, following a Public-Private
Partnership programme the
air force incorporated with
ST Aerospace as prime
contractor. The RSAF has
received the full fleet of
12 M346 aircraft.
In China, our airframe facility in
Guangzhou started operations
with the induction of the first
two aircraft (an Airbus A320
and a Boeing 767) respectively
from a Chinese regional airline
and an international air carrier.
With this new node, the sector
is now able to provide line
maintenance support from key
airports in Singapore, Shanghai,
Guangzhou and San Antonio.
Additionally, our Shanghaibased airframe MRO joint
venture secured heavy
maintenance contracts from
two Russian airlines, which
entail a series of C-level
airframe maintenance checks
on a total of 16 aircraft
(Airbus A320 and Boeing 747),
Component Total
Support (CTS)
ST Aerospace continued to
invest in new capabilities,
expand our global footprint
and leverage existing OEM
relationships for our CTS
business.
While our component repair
and overhaul facilities
delivered a steady stream of
44,674 components and 217
landing gears, we continued
to provide support for nearly
900 aircraft around the world,
through our component
Maintenance-By-the-Hour
(MBHTM) programme.
CONTRIBUTION TO
THE GROUP’S REVENUE
32%
AEROSPACE
REVENUE
2014
2013
$2,061M
-0.9%
$2,079M
PROFIT BEFORE TAX
2014
2013
$283.0M
-11.4%
$319.4M
28
MRO scene as the largest
segment with the highest
growth rates over the next
decade, ST Aerospace has been
enhancing our ETS value chain
with an expansive range of
aftermarket services to stay
ahead of the competition.
VT MAE signed a 30-year lease agreement with the City of Pensacola to set up an aircraft MRO facility in
Pensacola in the US.
On the back of a persistently
weak European economy
which affected our landing gear
repair and overhaul businesses
in Europe, ST Aerospace
carried out a rationalisation
programme which saw to the
closure of our landing gear
MRO facilities in Oslo and
Madrid. Existing capabilities
were subsequently consolidated
back into Singapore as the
Centre of Excellence for landing
gear MRO.
engines, as well as Hamilton
Sundstrand’s components
installed on the Boeing 787.
Engine Total Support (ETS)
Recognising that engine MRO
will continue to lead the global
We continued to invest in
new MRO capabilities for
engine repair and overhaul,
eco engine wash and engine
leasing. We also grew our
focus on engine parts and
accessories repairs, on-wing
support and engine parts
trading, and at the same time,
added new capacity to build up
a larger spare pool of engines
to support our customers’
growing requirements.
The ETS business completed
170 engines and over 8,800
EcoPower® engine washes in
2014, supporting over 200
aircraft operators globally.
The engine leasing joint
venture received additional
capital injection in the year as
the business expanded market
On component capability
development, following the
signing of two long-term repair
licence agreements with UTC
Aerospace Systems for MRO
services on the Boeing 787,
ST Aerospace is setting up new
repair and overhaul capabilities
in Singapore, for the first batch
of UTC Aerospace Systems’
electrical and air management
system components installed
on the Boeing 787. As a
member of UTC Aerospace
Systems’ Boeing 787 MRO
supplier network, we will be
able to provide nose-to-tail
services on the nacelle systems
for both Rolls-Royce Trent 100
and General Electric GEnx
ST Aerospace is setting up new repair and overhaul capabilities for Boeing 787.
29
ANNUAL REPORT 2014
reach and grew its customer
footprint. On engine capability
development, the sector
injected additional capital into
our Xiamen-based engine MRO
joint venture in support of the
business growth in China.
On green engine aviation,
EcoServices celebrated
ten successful years of
environmentally friendly
engine wash with multiple
contract wins and the
completion of 50,000
EcoPower® green engine
washes.
In a continuation of the
close partnership with CFM
International, ST Aerospace
has renewed our TRUEngineTM
authorised MRO provider
licence for CFM56 engines,
demonstrating a further
commitment to OEM quality
engine maintenance.
Aviation & Training
Services (ATS)
The ATS business continued
to provide a wide spectrum
of aircraft charter, aircraft
leasing, technical and pilot
training services to customers
worldwide.
Additionally, Qatar Airways’
pioneer batch of cadets has
started its multi-crew pilot
licence programme, while
training for the second batch
of MPL cadet pilots from
Tigerair was completed during
the year.
In the area of air charter
capability development, we
injected additional capital
into our Sydney-based charter
subsidiary, to support the
expansion of flight and training
business in Australia.
In the US, the Aerospace
sector acquired 100% equity
interest in Aviation Academy
of America, a US Federal
Aviation Administration
(FAA) Part 141-approved
flight school, to grow the
sector’s pilot training business.
Upon receipt of FAA’s approval
to relocate the operations from
New Braunfels to Hondo in
Texas, US, the US pilot training
academy is ready to welcome
its first batch of students in
2015.
Aerospace Engineering
& Manufacturing (AEM)
The Aerospace sector continued
to grow our cabin retrofit
service offerings as a onestop cabin reconfiguration
solutions provider. Of the cabin
interior contracts secured for
37 aircraft, 17 have since been
redelivered.
As the sector extends into cabin
interior product engineering
design and manufacturing,
ST Aerospace introduced a
new range of economy-class
seats.
On unmanned aerial systems
engineering, we started the
development of the USTAR
series of vertical-take-offand-landing (VTOL) multirotor unmanned aerial vehicles.
USTAR-X and USTAR-Y were
launched at the Singapore
Airshow 2014.
In Burlington, VT Volant
Aerospace, which specialises
in the manufacturing of cabin
In Singapore, ST Aerospace
officially opened our new
aviation centre at Singapore’s
Seletar Aerospace Park (SAP),
housing a comprehensive suite
of air charter, ground training,
flight training and support
facilities. With an expanded
Seletar footprint occupying
over 75,000 sqm, ST Aerospace
becomes the second largest
tenant and the only integrated
aviation service provider in
SAP.
ST Aerospace’s commercial
pilot training business received
extension contracts to train
another 40 cadet pilots and
60 cadet pilots for Juneyao
Airlines and Xiamen Airlines
respectively.
AERIA’s VIP aircraft completions business continues to gain traction with multiple contract wins.
30
health scares and economic
growth prospects in China and
Europe. Nonetheless, economic
prospects are expected to
improve as the year progresses.
According to airframe OEM
Boeing, long-term confidence
in air traffic growth will remain,
with global commercial aircraft
fleet expected to increase at an
average rate of 3.6% annually
over the next 20 years.
ST Aerospace’s indigenous VTOL multi-rotor unmanned aerial vehicle, USTAR-Y.
“
We will continue to build
new capabilities as a total
aviation support provider,
and extend the scope
of our services in new
locations, to improve our
customer reach.
”
interior parts, has expanded its
capabilities for the Boeing 777
aircraft.
Leveraging new technologies,
ST Aerospace’s Singapore-based
investment casting foundry
started using 3D printing for
rapid prototyping and small
scale production of parts.
On the Airbus A330P2F
programme, ST Aerospace
has since started on the
engineering development
phase and completed the
critical design review for the
A330-300P2F. It also secured
NTO (No Technical Objection)
from Airbus.
INDUSTRY REVIEW
& OUTLOOK
The global airline industry
continues to operate in a
challenging environment
as experts expect airlines’
operating profits to improve
slightly in 2015, on the back
of slowed world trade and
fallen business confidence
with concerns over aviation
safety, geopolitical risks,
While global MRO spending
on aircraft maintenance and
modification is expected to
grow at a slower pace with the
newer generation of aircraft
requiring less maintenance, and
the prescribed maintenance
intervals further apart, MRO
work will continue to increase
due to the growing fleet size.
According to aviation
consultancy ICF International,
global MRO growth is expected
to maintain a 3.8% compound
annual growth rate (CAGR) to
US$90b by 2024.
Asia Pacific, including China,
will be leading the MRO
market, and is expected to
grow to US$29.2b over the
next two decades. With a
strong and expanded presence
in this region, ST Aerospace is
well-positioned to address this
growing market.
Growth prospects remain
stable for our aircraft
maintenance and modification
segment, driven by an
increase in demand for aircraft
modification services. Boeing
has forecasted that there
would be 2,200 freighter
aircraft deliveries over the next
20 years, out of which 60%
would be converted aircraft.
With many of the airfreight
operators’ fleets due for
renewal, ST Aerospace expects
growth in the freighter
conversion segment, notably
with the Boeing 757 as a choice
31
ANNUAL REPORT 2014
candidate for narrow-body
conversions due to its higher
payload and range capabilities,
while the A330 and Boeing 767
are expected to provide a good
solution for the medium-sized
freighter segment.
As the market evolves, demand
for cabin interior upgrades and
modifications will continue to
grow. Seizing the opportunity,
ST Aerospace will leverage our
existing strengths in aircraft
maintenance and continue to
build capabilities in highervalue modification activities
such as cabin retrofits, VIP
completions and freighter
conversions.
According to Boeing, aircraft
retirement will reach 1,000
annually in ten years’ time.
To this end, ST Aerospace is
establishing a robust green
harvesting framework for
our part-out business, and
at the same time, seeking
accreditation of our business
as a green process to
generate carbon credits that
will eventually benefit our
customers in the long term.
Engine MRO will drive market
growth while component MRO
is expected to grow as fast as
engine MRO in the next five
years.
On component MBHTM,
ST Aerospace currently supports
over 20 aircraft operators for
fleets operating in Asia Pacific,
Europe and the Middle East.
The Aerospace sector will
continue to invest and scale
our customised programme to
support our strong customer
fleet.
On engines total support,
ST Aerospace continues to
leverage our partnerships
with OEMs and airlines to
build new capabilities for
existing and other engine
types. We will also strengthen
technical capabilities to lower
costs for our customers, by
providing parts repairs and
engine leasing as an extended
service offering.
According to Boeing, the
aviation industry will need an
additional 533,000 pilots over
the next 20 years, to crew new
DUSTIN SCHLOSSER
Certification Engineer / VT DRB
“My job, generally, is to outline and execute a
plan to certify the modification of an aircraft.
What I like most about being an engineer?
Looking at the end product and knowing I am
part of a global team that has accomplished
something amazing.”
aircraft deliveries and cater
for pilot retirements. To this
end, ST Aerospace will build on
the success achieved for our
commercial pilot training in Asia
and the expanded footprint
now in the US to offer a
complete suite of pilot training
solutions to our customers.
Operating in a competitive
environment, compounded
by the continued economic
softness in Europe, the
Aerospace sector will continue
to review our operations
across the clusters to stay
ahead of the competition. As a
global ‘total aviation support’
provider, we will leverage our
strong geographic presence,
diverse customer base and
capabilities in both defence and
commercial arenas, broad MRO
and engineering development
capability offering, to enhance
our support to our customers
worldwide.
32
2014 REVIEW
ST Electronics continued
to expand its solutions in
the key areas of Intelligent
Transportation Systems,
Satellite Communications and
Information Communications
Technologies.
“
Rapid urbanisation and a
growing demand for public
transportation has led to
strong demand for safe and
reliable rail infrastructure.
”
Against a backdrop of a
fast-ageing population,
increasing healthcare costs
and a shortage of healthcare
workers, ST Electronics is
developing smart healthcare
solutions that offer a better
experience for patients and
greater operational efficiency
for healthcare providers.
Another exciting new
development is in the area
of Smart, Sustainable and
Safe City solutions, which
include an IOT (Internet
of Things) concept behind
a comprehensive suite of
solutions to address the needs
of a smart and connected
nation.
Participating in Singapore’s
Infocomm Development
Authority (IDA) Smart Nation
initiative, ST Electronics
secured a strategic win for the
Jurong Lake District testbed
which comprised pilots and
trials of various applications.
A key component to this
complex system is the
Smart Nation Platform that
encompasses the common
infrastructure and technical
architecture to support a
smart nation ecosystem.
An intelligent sensor grid
will be coupled with a video
management and analytics
system to provide real-time
urban situational awareness.
Data collected on the
behaviour and preferences of
the community will be used to
develop applications to give
residents in the test area a
better living experience.
Large-Scale Systems Group
Rapid urbanisation and a
growing demand for public
transportation has led to
strong demand for safe and
reliable rail infrastructure.
In Singapore, ST Electronics
secured several rail
electronics contracts,
including the provision
of the communications,
maintenance management
system, commercial radio,
platform screen door systems
and signaling installation for
the new Thomson-East Coast
Line; automatic fare collection
equipment and Long Term
Evolution (LTE) upgrade for the
facility commercial information
system of the Downtown Line;
passenger information systems
33
ANNUAL REPORT 2014
for the North-South Line and
Tuas West extensions; and the
communications system for
Jurong East.
Overseas, our passenger
information systems will be
deployed in Malaysia and
Brazil, on the Kelana Jaya Line
and Rio de Janeiro Line 4
respectively. In Taiwan, we
will be deploying our platform
screen door systems on the
Kaohsiung Red Line R11 Main
Station and Taipei Tucheng Line
BL36 Dingpu Station.
ST Electronics’ security
solutions have also been
selected to provide secure
access to several major
Singapore educational
institutions, namely the card
access system for various
premises within the National
University of Singapore
campus; and a pre-paid card
system for recently completed
residence halls (Crescent
Hall and Pioneer Hall) at
the Nanyang Technological
University. We are also
developing an integrated
security management system
for the Ministry of National
Development Office and total
access control systems for
various public institutions
under the ministry.
Another large-scale system
undertaken by ST Electronics
is an Automated Weather
Observing System & Low Level
Wind Shear Alert System for
the National Environment
Agency which will be deployed
at Seletar Airport.
Development of ST Electronics’
series of Unmanned Surface
Vehicles (USV) is on track.
Venus 16, our 16m USV, was
exhibited at the Singapore
Airshow 2014.
Communications &
Sensor Systems Group
In August, ST Electronics
opened its new state-of-the-
art Satellite Systems Centre
in Ang Mo Kio. Custombuilt for the design and
manufacturing of satellite
systems, it houses some 100
engineering professionals who
are developing Singapore’s first
commercial Earth observation
satellite, TeLEOS-1. Scheduled
for launch into space in late
2015 using the Indian Space
Research Organisation’s Polar
Satellite Launch Vehicle, the
400kg satellite is equipped
with an electro-optical camera
capable of one-metre ground
resolution imaging.
These images are expected
to be commercially available
in the first half of 2016.
ST Electronics will identify
partners to distribute the
images and will continue to
expand our reseller network to
satisfy our global customers’
needs. Concurrently, we
are partnering US satellite
manufacturer ATK to jointly
develop, manufacture and
market a new range of A150S,
150kg class microsatellites
to meet growing worldwide
demand for microsatellites.
Meanwhile, VT iDirect
(iDirect), the sector’s US
affiliate, continued to solidify
its position as a world
leader in satellite-based IP
communications technology.
As reported in the 13th Edition
of The VSAT Report, published
by UK-based market analyst
COMSYS, iDirect is now the
world’s largest enterprise
Very Small Aperture Terminal
(VSAT) systems manufacturer
with a 32% market share. iDirect
is also the world leader in hub
sales with 57% market share.
Our AgilFence Perimeter
Intrusion Detection System
(PIDS), which offers highly
reliable physical protection
for any premises, continued
to secure new projects. First
implemented at Changi Airport,
PIDS was implemented for
bus depots in Singapore and
CONTRIBUTION TO
24%
ELECTRONICS
REVENUE
2014
2013
$1,583M
-4.1%
$1,650M
PROFIT BEFORE TAX
2014
2013
$184.0M
+8.0%
$170.3M
34
Malaysia and will be installed
at Setia Eco Glades Cyberjaya
in Kuala Lumpur, Malaysia. In
China, ST Electronics clinched
a pilot project to supply the
AgilTrack Coastal Surveillance
System to monitor vessel
traffic along its southern
coast.
With the proliferation and
growing sophistication
of cyber attackers, the
importance of secure
operations in cyber space
has never been more critical.
To this end, ST Electronics
opened the DigiSAFE Cyber
Security Centre where cyber
professionals can be equipped
with hands-on
training in a real-world
environment.
ST Electronics also attained
success on more rugged
terrain. The sector’s
SuperneT™ Vehicular
Integrated Communication
System (VICS) ST6800 was
selected by the Singapore
Armed Forces for its combat
vehicles. VICS is an advanced,
compact Internet Protocolbased integrated voice
and data communication
system that integrates
various command, control,
communications, computers,
and intelligence systems,
enabling more operational
efficiency in high tempo and
harsh tactical environments.
On the roads, ST Electronics
will implement a unified
intelligent bus management
solution to enhance
operational control, fleet and
business management, and
passenger information for the
Land Transport Authority (LTA)
and two other public transport
operators. The sector also
implemented public carpark
facilities and systems for the
Housing Development Board
(HDB) in Choa Chu Kang and
Woodlands for more efficient
carpark management and
operations.
Software Systems Group
US-based VT MÄK (MÄK),
the sector’s US simulation
software company, clinched
contracts with aircraft
manufacturer Embraer to
continue extending their use
of MÄK’s VR-Forces in its
Super Tucano aircraft training.
It also secured projects
with the US Army Program
Executive Office - Simulation
Training & Instrumentation,
to provide support for DI-Guy
human characters within
their Close Combat Tactical
Trainer programme; and the
Cincinnati Children’s Hospital
Medical Center for MÄK’s
DI-Guy human simulation
software, to help create sportspecific scenarios for training
and evaluation.
In China, ST Electronics was
appointed by SembCorp
China to conduct onsite and
remote studies of water
plants to ascertain ITinfrastructure readiness and
integrated system design to
support centralised realtime monitoring, report
management, data analysis,
and simulation.
In Singapore, ST Electronics
is working with SMRT Buses
to co-design and co-develop
an Integrated Driving and
Service Control training
system specially designed to
meet the training needs of bus
drivers and service controllers.
The sector also secured a
contract to supply Singapore
Press Holdings with software,
subscription and support.
In the field of healthcare,
ST Electronics introduced
the Hospital C2 Operations
Centre solution, an integrated
hospital management system
designed to effectively
manage resources, improve
response times, and lower
costs, while providing better
service quality to patients. The
sector also launched mediCAP
- Casualty Management
ST Electronics’ new state-of-the-art Satellite Systems Centre in Ang Mo Kio is purpose-built to support the
design and manufacturing of satellite systems in Singapore.
35
ANNUAL REPORT 2014
System (CMS), a real-time
information management
system to support the
operational planning,
monitoring and execution
of mass casualty rescue
operations.
ST Electronics will design
and set up the Healthcare
Data Centre for staging and
hosting healthcare services for
Singapore’s public hospitals,
national specialty centres
and polyclinics, to ensure
a seamless transition of
healthcare services.
In the area of maritime
simulation, realism was
enhanced by incorporating
naval operation behaviour
into Computer Generated
Forces and 3D visuals for a
high fidelity synthetic training
experience.
Lastly, as a result of our
ongoing business review to
enhance capabilities, the
ownership of ST Electronics
(Digital Media) Pte Ltd
increased to 100% and was
renamed ST Electronics
(Enterprise 1) Pte Ltd. It is a
distributor and value-added
reseller, offering one-stop
enterprise system integration
solutions including hardware,
software and professional
services.
ST Electronics’ 16m Unmanned Surface Vehicle, Venus 16, was exhibited at the Singapore Airshow 2014.
scale electronics systems for
transport and metro rail.
technologies to make the
Smart City concept a reality.
Over in Mexico, ST Electronics
is seeking opportunities
through its subsidiary GFM
Electronics S.A. de C.V. in the
areas of public safety and
security as well as Smart City
projects.
Intelligent Transportation
ST Electronics has divested
Kazakhstan-based MERITS
Technologies as a result of
ongoing business reviews to
streamline capabilities and
optimise resources.
Acquisitions & Divestments
INDUSTRY REVIEW
& OUTLOOK
Looking abroad, ST Electronics
identified opportunities in the
emerging economy of Brazil
and set up a subsidiary,
ST Electronics do Brasil
Serviços e Soluções em
Sistemas Eletronicôs Ltda,
to facilitate entry into that
market. With a local presence,
ST Electronics will be able to
work more closely with incountry partners and respond
more quickly to opportunities,
such as in the area of large-
The convergence of data
analytics, mobility solutions
and social networking
technologies have created
opportunities for governments
and enterprises to deliver
goods and services that
meet the needs of citizens
and customers in a more
efficient and effective
way. ST Electronics has a
comprehensive portfolio of
capabilities, products and
solutions that harness these
The rapid growth and
urbanisation of cities around
the world have put a strain on
resources, infrastructure and
the environment. Cities are
looking to adopt sustainable
transportation solutions that
address economic, social and
environmental concerns.
ST Electronics is one
of a handful of global
players which can offer a
comprehensive suite of rail
electronics solutions that
include command, control
and communications;
automatic fare collection;
platform screen doors; and
passenger information and
maintenance management
systems. Our intelligent road
and rail transportation, and
traffic and fleet management
solutions offer cities
the ability to implement
efficient and safe modes
of transportation that give
residents better connectivity
and mobility.
36
Smart Utilities
Cities need to adopt more
efficient energy management
systems. Integrated utilities
infrastructure and smart
meters facilitate efficient
resource management,
monitor consumption
patterns, and offer a better
utilisation of essential services
such as electricity, water and
gas.
“
As more enterprise assets
are shifted into cyberspace,
cyber security will become
more important. Essential
services and critical
infrastructure depend on a
secure and robust infocomm
infrastructure.
”
Our Smart Utilities suite
supports multi-utility network
infrastructure for integrated
electricity, water and gas
management, enabling better
resource distribution and
consumption management by
utilities providers. Metering
and control systems also
provide utilities usage insights
that enable real-time updates,
giving building managers
better control over usage and
fault identification.
Cyber Security
As more enterprise assets are
shifted into cyberspace, cyber
security will become more
important. Essential services,
critical infrastructure such as
transport, communication and
financial systems depend on a
secure and robust infocomm
infrastructure. Meanwhile,
cyber threats are becoming
more pervasive and persistent
while organisations are
becoming more vulnerable to
cyber attacks as they expand
their internet connectivity.
These trends, combined
with a growing awareness of
cyber threats, have resulted
in strong demand for cyber
security infrastructure and
expertise.
ST Electronics started building
up information security
capabilities in 1999 and
today, we have a complete
suite of encryption products
and cyber security solutions
under the DigiSAFE brand.
Officially inaugurated in 2014,
our DigiSAFE Cyber Security
Centre offers advanced
cyber defence training that
emulates real-world attacks
on enterprise networks in a
controlled environment.
Satellite Communications
Better connectivity and
high-definition applications
on-the-go are pushing the
demand for more bandwidth
and higher quality of satcom
services. IP-based satellite
systems have made this
flexible and less expensive,
with carrier-class quality and
reliable connectivity that
supports multiple applications.
The emergence of HighThroughput Satellites (HTS),
a new breed of high
performance broadband
satellites, will transform the
satcom landscape. HTS offers
improved data speeds at lower
costs and higher reliability
with the use of technologies
such as DVB-S2 with adaptive
coding and modulation and
In Singapore, the sector continues to secure rail electronics contracts for new and existing lines such as
the Downtown Line (above), Thomson-East Coast Line and North-South Line.
37
ANNUAL REPORT 2014
adaptive return channels.
This is expected to accelerate
satcom adoption by
governments, enterprises,
energy and maritime users
worldwide.
Data Centres
The availability of large
data and proliferation of
mobile devices and mobile
applications have made
end-users more savvy and
sophisticated. As connectivity
and data grows, the need
for data centres grows too.
Data centres are no longer
mere information storage
depositories but now offer
virtualisation and cloud
computing. Increased
bandwidth, high data flow
from various devices, and a
growing emphasis on energy
efficiency, are turning data
centres into hubs for big data
management. Singapore aims
to be the data centre hub for
Asia Pacific, emphasising Green
Data Centres for improved
energy efficiency that mitigate
environmental impact.
The DigiSAFE Cyber Security Centre established in 2014 caters to the growing demand for cyber security
infrastructure and expertise.
With years of systems
integration experience and
technology development,
ST Electronics is able to
provide comprehensive
solutions and services
for Critical Operations
Environments (COEs) such
as data centres. Our COEs
are highly secure, threatvulnerability risk-assessment
compliant, highly survivable,
and employ green and
eco-friendly solutions.
For all the above trends,
ST Electronics is well
positioned to offer innovative
solutions that will enhance
connectivity, improve
efficiency, empower individuals
and realise customers’ visions.
NG HWEE PING
System Consultant / ST ELECTRONICS
“ What is exciting in my work is I get to
collaborate with many different people -engineers from other units of ST Engineering and
people from many countries. Apart from applying
my skills in IT projects, my work helps to broaden
my understanding of people. ”
38
2014 REVIEW
showcased forward-looking
defence solutions and further
extended our commercial
business footprint into
emerging markets.
Putting Warfighters Ahead
of their Game
“
The Land Systems
sector showcased
forward-looking defence
solutions and further
extended our commercial
business footprint into
emerging markets.
”
Combining industry-leading
innovations with proven
technologies, ST Kinetics
unveiled a range of advanced
defence innovations at the
Singapore Airshow 2014.
These solutions seek to
address the current and
future requirements of
global armed forces, in the
areas of soldiers’ weaponry,
soldiers’ survivability, power
management and unmanned
operations, to enable them to
stay ahead of evolving threats.
ST Kinetics’ new Bullpup
Multirole Combat Rifle (BMCR)
and Conventional Multirole
Combat Rifle (CMCR) are
designed for compactness,
minimum weight and full
ambidextrous operation in
a highly configurable multirole package. The rifles
possess multi-role flexibility
for assault, sharpshooter and
suppressive roles, putting
infantry sections ahead in
lethality and in achieving their
mission objectives.
On the soldiers’ survivability
front, ST Kinetics unveiled a
proof-of-concept Adaptive
Real-Time Core Temperature
Intelligent Cooler (ARCTIC),
which utilises both active
and passive cooling methods
to help soldiers achieve an
optimal core temperature
during operations. We
also unveiled a Power and
Energy Management System
(POEMS), which integrates
mini fuel cells and inductive
charging technologies.
POEMS enables soldiers to
be constantly ‘plugged in’
and ‘powered up’ in the
modern battlefield network.
For unmanned operations,
we launched the Terraton
unmanned ground vehicle,
designed for the autonomous
surveillance and protection of
critical infrastructure.
On the munitions front,
ST Kinetics continued to deliver
and secure new markets for
our 40mm solutions. Significant
deliveries included the 40mm
High Velocity ammunition
39
ANNUAL REPORT 2014
for the Canadian Armed
Forces’ Tactical Armoured
Patrol Vehicle programme,
secured in 2013. Furthering
our penetration into the North
American 40mm ammunition
market, ST Kinetics entered
into a strategic partnership
with General DynamicsOrdnance and Tactical Systems
to manufacture the 40mm Air
Bursting ammunition for the
US market.
Over in Brazil, Technicae
Projetos e Serviços
Automotivos Ltda.
(Technicae), ST Kinetics’
defence MRO subsidiary
in Brazil, was awarded a
modernisation contract
from the Brazilian Army for
their Urutu 6x6 Armoured
Personnel Carriers (APCs).
Delivering Productive
Specialty Vehicles
On the commercial front,
LeeBoy Brazil set up a
manufacturing facility in
Canaos to capitalise on local
demand for road construction
equipment (CE). The Brazilian
facility has already begun
localisation of US VT LeeBoy,
Inc. (VT LeeBoy) designs
– 1000F Track Paver and
SD1 Aggregate Distributor
– for the Brazilian and Latin
American markets.
LeeBoy India entered 2014
with an expanded portfolio
of products that included
motor graders, backhoe
loaders, crawler excavators
and concrete batching
plants. These products
were delivered to end-users
through an expanded dealer
network across the Indian
sub-continent, Africa and the
Middle East, and have been
deployed in key infrastructure
projects in these regions,
including the Al Batinah
Expressway and BidbidSur Road projects (Oman),
and Hawassa-Chuko and
Mega-Moyale road projects
(Ethiopia).
This year saw the US-based
VT Hackney, Inc. (VT Hackney)
expanding its international
presence and market
penetration into the Chinese,
Middle East, and Central and
South American markets.
In China, VT Hackney inked
a licensing and technology
agreement with a local partner
for refrigerated vehicles for
the Chinese cold chain market.
Over in the Middle East,
VT Hackney embarked on an
assembly partnership with
a Saudi Arabian partner for
its beverage bodies. The
Hackney brand also secured
multiple, large beverage
vehicle contracts in Latin
America. In North America,
VT Hackney launched its new
Express vending body to target
the micro-market and pre-kit
vending markets.
In China, Guizhou Jonyang
Kinetics Co., Ltd. (GJK)
strengthened its presence in
the Central Asian CE markets,
delivering its excavators
to Azerbaijan, as well as
securing a significant contract
for wheeled and tracked
excavators in Uzbekistan.
Another Chinese subsidiary,
Jiangsu Huatong Kinetics
Co., Ltd. (JHK), completed
partial relocation of existing
operations to its new
158,000 sqm manufacturing
complex in the Dantu
District in Zhenjiang, China.
JHK continued pursuing
research and development on
enhancing its product lines for
the Chinese road construction
segment. With more than 140
patents already under its belt,
JHK successfully launched new
products like the HM1300
Milling Machine and 31ton ZJY5311TFC Asphalt
Synchronous Chip Sealer.
CONTRIBUTION TO
21%
LAND SYSTEMS
REVENUE
2014
2013
$1,397M
-5.3%
$1,475M
PROFIT BEFORE TAX
2014
2013
$56.2M
-49.7%
$111.8M
40
At the Singapore Airshow 2014, ST Kinetics unveiled the Terraton Unmanned Ground Vehicle, designed for autonomous surveillance and protection
of critical infrastructure.
The LeeBoy 985 Motor Grader (above) has been deployed in key infrastructure projects in India, Africa and the Middle East.
41
ANNUAL REPORT 2014
For its customised ambulance
solutions, ST Kinetics
successfully delivered all 18
units to the Singapore Civil
Defence Force (SCDF). We
also successfully delivered
other specialty vehicles like
the Multi-Utility Vehicles
for Fire Fighting and Foam
Tenders to the SCDF.
Pioneering Green Transport
Solutions
Kinetics Drive Solutions Inc.
(KDS), ST Kinetics’ wholly
owned Canadian subsidiary,
extended the reach of its
InfiniDrive™ and NexDrive™
product lines. KDS partnered
with North American firm L-3
Combat Propulsion Systems
(L-3) for its InfiniDrive™ HMX
transmissions. With L-3, KDS
signed a manufacturing
licensing agreement for
the InfiniDrive™ HMX
transmissions. KDS also inked
a manufacturing agreement
with Woxin Power Train
of China to localise the
NexDrive™ EV3-850 electric
transmission for the Chinese
electric city bus market.
Furthermore, KDS embarked
on a collaboration with UQM
Technologies to offer an
integrated electric motor and
transmission solution to the
European electric bus market,
which Frost & Sullivan expects
to have a market size of
approximately 14,800 hybrid
and electric buses shipped
by 2020.
Providing Cross-Sector
Services
The MAN truck and bus
distribution business
performed strongly this
year, with several significant
contracts secured, like the
$100m contract from SMRT
Buses Ltd (SMRT Buses) for
322 MAN A22 buses and 40
MAN A24 articulated buses.
The contract for the MAN
A22 buses is a repeat order
and a strong testament to the
efficiency and reliability of
the MAN brand of city buses.
Another breakthrough order
was for MAN TGM refrigerated
trucks by the Sheng Siong
Group for their daily
distribution operations.
INDUSTRY REVIEW
& OUTLOOK
ST Kinetics furthered its penetration into the North American
40mm ammunition market by entering into a strategic
partnership with General Dynamics Ordnance and Tactical
Systems for the US market.
will continue to grow sales
in emerging markets while
innovating to differentiate
our offerings in niche product
segments.
Defence
ST Kinetics will continue to
pursue contracts globally, with
Brazil as a market of focus,
to grow the defence MRO
business there by delivering
on existing contracts with
the Brazilian Army, like the
Urutu 6x6 APC modernisation
contract, and to pursue new
contracts for other automotive
platforms.
Unveiled at the Singapore Airshow 2014, the BMCR (top)
and CMCR (bottom) are designed to give infantry soldiers
maximum lethality in a compact package.
For other export markets,
we will target the medium
protected armoured vehicles
segment with our Bronco and
Terrex platforms. In North
America, a key programme
that ST Kinetics will be
pursuing is the United States
Marine Corps’ ACV 1.1
programme. A collaborative
effort led by SAIC, ST Kinetics
plans to respond to the
United States Marine Corps’
Request for Proposals when
it is released in the first
half of 2015. For our 40mm
solutions, ST Kinetics will
continue to pursue both local
and overseas contracts in the
Asian, European and North
ST Kinetics’ Canadian subsidiary, Kinetics Drive Solutions,
has partnered L-3 Combat Propulsion Systems on a
manufacturing licensing agreement for its InfiniDrive™
HMX transmissions.
42
American defence markets
for our range of 40mm
solutions.
Local defence sales will
continue to constitute the
main bulk of ST Kinetics’
defence business and
ST Kinetics will continue to
innovate new solutions to
meet the requirements of
the Singapore Armed Forces.
Commercial
Despite the slow growth in
the global CE market, market
watchers have painted a
more optimistic picture for
the medium to longer term.
Off-Highway Research had
predicted a rise of 6.6% in
global CE sales by 2017 to
US$104.8b from US$97.8b
in 2012. The Land Systems
sector will put greater
emphasis on expanding
international sales in
emerging markets in the
African continent, Latin
America and Asia.
The LeeBoy brand of road CE
now has three manufacturing
bases globally (US, Brazil
and India) and will continue
ST Kinetics is now the only city bus provider in Singapore that offers the full suite
of single deck, double deck and articulated bus types.
to expand its customer base
to regions in Africa, Asia,
Latin America and the Middle
East. In the US, VT LeeBoy has
positioned itself to capitalise
on the demand for road
construction equipment in
the recovering housing and
infrastructure segments.
Further south, LeeBoy
Brazil will continue with the
localisation of LeeBoy road
construction equipment
models for the Brazilian
and Latin American market.
In India, LeeBoy India is
positioned to take advantage
of upbeat market sentiments
and will continue to pursue
opportunities opened up by
new infrastructure projects.
It will continue to target
export sales through Indian
infrastructure companies’
projects in Africa and the
Middle East.
For defence exports, the Land Systems sector will continue to target the medium protected armoured vehicles segments with platforms like the Bronco
New Gen (above) and Terrex.
43
ANNUAL REPORT 2014
In 2015, VT Hackney will
launch its next-generation
Kidron refrigerated truck
body in the US market. The
Hackney brand aims to further
its US market share gain and
capitalise on the US market’s
recovery by expanding its
distribution and market
coverage. VT Hackney will
continue to pursue orders in
export markets beyond North
America in the food services,
beverage, and cooler bodies
segments, and build on the
increased penetration of these
products in the Middle East
and Latin America.
With development in the
Western and Central parts of
China expected to herald the
next wave of large-scale
construction and development
activity in the country,
ST Kinetics’ Chinese CE
companies will continue to
customise and enhance their
existing earth-moving and
road-construction equipment
to meet these requirements.
They will continue to
mitigate the weak recovery
of the Chinese CE market by
bolstering sales in Central
Asia, Africa and Latin America.
The Land System sector’s
automotive sub-systems
business will continue to
commercialise the mature
technologies that we have
been developing over the
years. Tie-ups with Chinese,
North American and European
electric vehicle OEMs in
2014 on the NexDrive™ will
accord us better traction in
the global electric vehicles
market.
In Singapore, for our MAN
truck distribution business,
ST Kinetics will be seeing
potentially higher demand for
new trucks as a result of the
replacement of ageing trucks
by fleet owners to comply
with the Euro V emissions
standard. For buses, we
will continue to deliver the
MAN city buses as part of
the contract with SMRT Buses.
In Myanmar, MAN CLA and
TG truck bodies will be
launched to target the
logistics, tourism, construction
and mining sectors. ST Kinetics
aims to grow market share in
these sectors by offering the
MAN trucks and buses for
the premium segments in
these growth sectors.
MOHAMED RAJKAMAL
Head, Electronic Systems / ST KINETICS
“ So much in today’s tracked and wheeled military
vehicles are electronically controlled, and my
job, together with my team of 60 technicians and
engineers, is to manage these electronic systems
so our customers’ vehicles run reliably. We take
what we learn from our work in the field
and apply it to do better. ”
“
will continue to grow sales
in emerging markets while
innovating to differentiate
our offerings in niche product
segments.
”
44
2014 REVIEW
“
ST Marine differentiated
ourselves by strengthening
our long-term relationships
with key offshore vessel
owners and highly
specialised dredger
operators.
”
Three key factors weighed
on the offshore oil and gas
industry in 2014. First, major oil
companies around the world
were under pressure from
shareholders to cut budget
spending and return cash to
their shareholders. Second,
day rates for deepwater rigs and
semi-submersibles softened
amid a supply glut. Third, the
availability of shale gas and oil
resulted in reduced reliance of
the US on oil imports, leading
to a higher stockpile of oil and
depressed energy prices which
prompted more cutbacks in
investment on exploration and
production (E&P) in deepwater
oil and gas.
vessels such as the large AHTS,
Dive Support Vessel (DSV),
Seismic Support Vessel (SSV),
large Multi-Purpose Support
Vessel (MPSV) and Deepwater
Support Construction Vessel,
areas where the sector stands
out due to our commendable
track record.
The weak outlook led to a
quiet market, fewer enquiries
In the repair business,
conservative maintenance
budgets resulted in fewer
conversions and upgrades.
ST Marine differentiated
ourselves by strengthening
our long-term relationships
with key offshore vessel
owners and highly specialised
dredger operators. Through
years of interaction and cooperation, we have developed
customised solutions for
customers that have made
significant improvements
and a few shelved tenders by
cautious offshore ship owners.
Nevertheless, ST Marine
demonstrated the strength of
our capabilities with the timely
delivery of six Anchor Handling
Tug Supply (AHTS) vessels to
Swire Pacific Offshore (Pte) Ltd
(SPO). As the smaller Platform
Supply Vessels (PSVs) were
being commoditised and built in
countries such as Malaysia and
China, ST Marine directed our
focus on specialised offshore
to their highly complex
and specialised vessels.
We also continually trained
and upgraded our skilled
workforce to keep abreast of
the technologies adopted by
our partners and improved
our productivity levels. Our
partners in turn have become
our advocates in the industry,
which enabled us to secure
projects from new customers
such as Subsea 7 and
Hartmann Offshore in 2014.
45
ANNUAL REPORT 2014
In the defence arena,
ST Marine, with our proven
capabilities and competencies
in the building of Patrol Vessels
(PVs), continued to forge ahead
with current programmes to
build four PVs for the Royal
Navy of Oman (RNO) and eight
Littoral Mission Vessels (LMVs)
for the Republic of Singapore
Navy (RSN). We continued to
present our Operations and
Support services, including our
Engine Servicing capabilities to
overseas navies, expanded our
Total Naval Solutions services,
particularly to customers whose
platforms we built.
STSE Engineering Pte Ltd (STSE),
ST Marine’s environmental
engineering arm, built up
capabilities in Pneumatic Waste
Collection System (PWCS) and
Integrated Waste Management
System (IWMS), with the aim
to offer a full suite of waste
management solutions.
As part of an ongoing branding
exercise to position ourselves
globally as a provider of high
quality defence and commercial
vessels, ST Marine participated
in major exhibitions including
the Singapore Airshow,
Shipbuilding, Machinery and
Marine Technology (Hamburg,
Germany), Euronaval (Paris,
France), Marine Log Ferries
(Boston, Massachusetts),
International Workboat Show
(New Orleans, LA) and Offshore
Patrol Vessels (Toulon, France).
In the field of environmental
engineering, ST Marine,
through its environmental
engineering arm, showcased
its water treatment solutions
at the Singapore International
Water Week.
Ship Design And Build
On the commercial front, our
yards in Singapore executed
projects in a timely manner
according to plan, including
the delivery of several vessels.
The contracts with SPO, a
wholly owned subsidiary of
Swire Pacific Limited, to build
and outfit six 18,000bhp AHTS
vessels were successfully
completed. The first four
vessels, have since joined SPO’s
modern fleet in their support
of deepwater oil exploration
works, including Pacific Dove,
which was chartered to
Petrobras in early 2013 for a
period of four years.
CONTRIBUTION TO
21%
MARINE
In the defence sector,
our largest naval export
shipbuilding contract, awarded
by the Ministry of Defence of
the Sultanate of Oman in April
2012, is on track.
This contract included the
design and build of four PVs
as well as the provision of
associated logistics support for
the RNO. Designed based on
ST Marine’s proprietary Fearless
class Patrol Vessels, and with
its suite of modern sensors
and equipment, coupled with
good seakeeping abilities and
endurance, these vessels are
able to carry out a wide range
of missions including economic
protection and anti-piracy tasks.
The Naming Ceremony for the
first-in-class was officiated by
His Excellency Sayyed Bader
bin Saud bin Harib Al Busaidi,
Minister Responsible for
Defence Affairs of the Sultanate
of Oman. The PV has been
named RNOV Al Seeb and
is expected to be delivered
in 2Q2015. The second and
third vessels were successfully
launched this year, and the
project is expected to be
completed by 3Q2016.
Since the award of the contract
in 2013 to design and build
eight LMVs for the RSN,
ST Marine achieved the steel
cut and keel laying milestones
for the first vessel in the year.
It is expected to be delivered in
2H2016 and when completed,
it will enable RSN to carry out
maritime security operations
REVENUE
2014
2013
$1,341M
+8.3%
$1,238M
PROFIT BEFORE TAX
2014
2013
$122.8M
-16.1%
$146.3M
46
“
Notwithstanding
the difficult shipping
environment, ST Marine
continued to deliver on
various upgrading and
shiprepair projects with its
regular customers.
”
more effectively and
efficiently.
In the US, out of the ten
97.2m Offshore Supply
Vessels (OSVs) for Hornbeck
Offshore Services, LLC (HOS),
our US shipyard VT Halter
Marine delivered eight and is
expecting to deliver the ninth
and tenth in 1Q2015. The first
was delivered in 2013. VT
Halter Marine also delivered a
112-feet Articulated Tug Barge
(ATB), Denise A. Bouchard
to Bouchard Transportation
Co., Inc. This is the sister ship
to the Evening Star, which
was delivered in 2012. Upon
delivery, VT Halter Marine
was further engaged to build
two 130ft ATBs for use in
transporting liquid petroleum,
to be delivered in 2H2016.
Container and Roll-on/Roll-off
car truck carrier MV Marjorie
C, the largest vessel ever to
be built in Pascagoula, and
the second vessel built for
Honolulu-based Pasha
Hawaii was launched. The
first, MV Jean Anne, was put
into service in March 2005
and designated “Ship of
the Year” by American Ship
Review in the same year.
MV Marjorie C is the second
US flag vessel to join Pasha
Hawaii’s fleet and will sail
opposite MV Jean Anne,
enabling Pasha Hawaii to
provide weekly service to
Hawaii from mainland US.
Under the Foreign Military
Sales Programme, VT Halter
Marine delivered the third
and fourth of four Fast Missile
Crafts (FMC).
Shiprepair
Notwithstanding the difficult
shipping environment,
ST Marine continued to
deliver on various upgrading
and shiprepair projects for
its regular customers. This
included upgrading work for
the suction dredger Fairway,
diving support vessel Rockwater 2,
and semi-submersible pipe
laying barge Semac 1. ST Marine
also performed significant
repair works for the Stingray,
a pipe laying barge, Lincoln
Express, a livestock carrier,
Western Pride, a seismic survey
vessel, Petrochem Supplier, a
tanker, passenger vessels for
Leisure World and Amusement
World, Lewek Crusader, an
offshore construction support
vessel, and two 1,600 ton living
quarters for drilling rigs, as well
as other repairs and upgrades
of dredgers and OSVs.
For defence related repairs, our
competencies saw us engaged
in various upgrading, logistics
management and maintenance
programmes. With an
established track record in this
segment, we are optimistic and
confident of continued success.
In the US, with the
operationalisation of the
12,000MT lifting capacity
floating dock in 2013, VT Halter
Marine entered into ship repairs
for vessels operating in the Gulf
of Mexico. Shiprepair enquiries
were strong and VT Halter
Marine is in negotiation with
many potential clients including
Bouchard Transportation,
Crowley, and L&M Botruc.
Engineering and
Environmental Engineering
Since December 2013,
ST Marine bareboat-chartered
its Roll-on/Roll-off passenger
(Ropax) vessel to Nova Star
Cruisers (NSC), a Canadianbased company licensed to
operate the service between
Petrochem Supplier in VT Halter Marine for repair services.
47
ANNUAL REPORT 2014
The first Al-Ofouq class patrol vessel built for the Royal Navy of Oman.
Yarmouth, Nova Scotia and
Portland Maine. The service
commenced in May to positive
publicity. Ridership rose with
the temperature in the summer
and total passenger count was
just under 60,000 when the
season ended in mid October,
a credible performance for
a service in its first year.
ST Marine currently holds a
10% stake in Nova Star Cruises.
STSE Engineering Services
Pte Ltd (STSE) capabilities in
Pneumatic Waste Collection
System (PWCS) and Integrated
Waste Management System
(IWMS) were built up through
various projects in Singapore,
Middle East, India, Thailand,
China and Brunei. Innovative
development also contributed
to our capability build-up
and these efforts culminated
in the development of our
patent-pending Discharge
Extruder, designed to improve
the performance and costeffectiveness of our PWCS.
In the year, STSE also started
to expand our capability in the
management of solid waste
treatment, as well as water
and wastewater treatment,
to offer a full suite of waste
management solutions. STSE
also participated in WasteMET
Asia 2014, displaying its
technologies, products and
services in the area of municipal
waste management.
INDUSTRY REVIEW
& OUTLOOK
Commercial Market
The offshore oil and gas
industry continues to be an
important segment in sustaining
many maritime-related sectors,
spurred by continuing demands
from emerging economies
with their rising incomes
and population growth.
According to research firm
MarketsandMarkets, the market
for offshore support vessels is
expected to grow at a CAGR of
5.7% to US$91.2b by 2018, with
AHTS vessels and PSVs in the
lead to the value of US$33.8b
and US$21.8b respectively.
However, with oil prices sliding
and a deluge of new rigs
expected to hit the market next
year, there are concerns over
the outlook for offshore and
marine players. Lower oil prices
could lead to downside risks
for E&P which translate to a
more cautious view by offshore
drillers. Notwithstanding this,
the demand for larger, more
complex OSVs is expected to
48
Pacific Dragon, the sixth Anchor Handling Tug Supply (AHTS) vessel built for Swire Pacific Offshore (Pte) Ltd.
stay firm. As observed by many
industry players, larger and
higher-specification OSVs will
dominate the offshore vessels
sector to cater to demand
from an increasing number of
modern jack-up rigs entering
the market. We will continue to
be prudent in selecting projects
that we are confident of
executing well and earning the
best risk-adjusted returns.
continue to be the backbone of
the offshore industry, and
ST Marine will remain focused in
this segment. We will continue
to capitalise on our strengths
in the design, construction,
conversion and repairs of these
vessels. We are also seeking to
target and move into the higher
value end of this market with
designs focused on dive support
and heavy construction vessels.
The expectation that the
global oil and gas industry will
continue to spend more than
US$335b over the next few
years, dominated by production
services, remains. The recent
sharp decline in oil prices may
dampen the demand somewhat
in the number of offshore
platforms and production and
exploration activities, but the
market sentiment is that prices
will recover in the later part of
2015 and this will be one of the
key factors driving the growth
of the OSV market. With no
available substitutes, OSVs will
With our previous builds and
a dedicated team of designers
tasked with improving on our
current OSV designs, we will be
well poised to take advantage of
the demand when the market
recovers. Another focus is on
liftboats for the purpose of
servicing wind farms as well
as the oil and gas platforms in
shallow waters.
On the repair front, we will
continue to serve our existing
customers well while we seek
new customers with our proven
competencies, especially for
the offshore support segment.
Our newly introduced repair
capabilities in VT Halter Marine,
serving the larger Gulf of Mexico
region, spell strong potential
that we want to capitalise upon.
Defence Market
The global defence market
remains difficult with shrinking
budgets, and the budget
sequestration in the US will only
further add surplus capacity to
an already competitive market.
A preference for in-country
builds is also apparent and
this will further chip away
at our ability to compete in
this sphere. To overcome
this, ST Marine will continue
to emphasise on quality and
services, as we are cognisant
that our completed products
and services will be our best
advertisements. We are also
willing and able to provide
design and material packages
to cater to a segment of the
market that prefers local builds.
49
ANNUAL REPORT 2014
We will continue to build on
our proven range of Maritime
Security platforms as well as our
larger support ships, and their
entailing shore connectors that
are well suited for a range of
tasks, including Humanitarian
Assistance and Disaster Relief
operations. For the former,
besides our proven range of
Fearless Patrol Vessels, we
have embarked on designs for
larger Offshore Patrol Vessels,
Corvettes and Light Frigates.
This will position us well to
serve our customers as their
operational needs increase,
necessitating larger and more
sophisticated vessels.
Environmental Engineering
Our primary markets are in Asia,
where increased population
numbers and affluence has
led to an increase in per
capita waste generation and
a greater need for efficient
land utilisation. Municipal
governments are also becoming
increasingly stringent about
environmental pollution, leading
to the tightening of discharge
and emissions standards.
Modification and repair of trailing suction hopper dredger, the Queen of the Netherlands.
The “more waste, less space”
and co-mingled waste problems
are significant macro challenges.
At the same time, they spell
attractive opportunities for
STSE to integrate innovative
technologies in offering
an unparalleled waste and
wastewater management
solution specific to our target
market that balances effective
land space utilisation, cost
effectiveness, and excellent
discharge quality. STSE will also
continue to focus on wastewater
treatment facilities for both
municipal and industrial
wastewater, Mechanical
Biological Treatment, and
Waste-to-Energy plants utilising
technologies compatible with
wet and co-mingled waste.
JACK CHUA
Assistant Principal Engineer / ST MARINE
“ The diverse business nature of ST Marine allows my
team and I to have opportunities to work onboard
different types of vessels. This is both interesting and
challenging as we have to access the bowels of these
vessels to lay the miles of cables and to install huge and
complex electrical systems. We have recently delivered
the last of the six D-class AHTS with system safety as a
hallmark that we are all truly proud of. ”
50
Financial Review
FUNDAMENTALS REMAIN STRONG
THE GROUP REGISTERED COMPARABLE REVENUE OF
$6.54B WITH A LOWER PROFIT BEFORE TAX (PBT) AND
NET PROFIT OF $650.7M AND $532M RESPECTIVELY
FOR FY2014 COMPARED TO FY2013.
TOTAL ASSETS DEPLOYMENT ($M)
10,000
8,000
Trade
Receivables,
Deposits &
Prepayment
1,290
1,311
6,000
Bank Balances
and Other
Liquid Funds
& Funds under
Management
1,520
1,578
4,000
1,916
Intangibles
& Other
Assets
1,712
2,229
Property,
Plant &
Equipment
2014
2013
1,860
2,000
During the year, the Group
incurred capital expenditure
of $240m (2013: $326m).
About 81% or $194m of the
total capital expenditure
was investments in new
capacity and capability.
Additional capital expenditure
included purchases of
rotable components to
support the growth in MBH TM
programmes, investments
in a transfer bay, repair of a
dry dock and improvements
to facilities to support the
new shiprepair activities, as
well as relocation of a China
facility for the specialty
vehicles business.
0
CAPITAL EMPLOYED ($M)
2014
2013
1,374
1,545
Borrowings
*
2,384
2,228
Equity
As at 31 December 2014,
the Group’s total assets
of $8,319m was $388m or
4% lower than that of 31
December 2013. The lower
total assets were mainly due
to lower cash, but this was
partially offset by increases in
property, plant and equipment
and trade receivables.
CAPITAL EXPENDITURE
Inventories
& Work-inProgress
1,808
1,802
FINANCIAL POSITION
280
299
Others*
Others include adjustments for foreign currency translation, present value of leases, etc.
Capital employed as at end
2014 was $4,038m compared
to $4,072m at end 2013. The
marginal decrease over 2013
was mainly attributable to
lower borrowings, partially
offset by higher shareholders’
funds including non-controlling
interests.
51
ANNUAL REPORT 2014
TOTAL ASSETS
BY GEOGRAPHY
69
%
3%
2%
2014
Asia excluding China
China
USA
%
%
17
8%
3%
2%
8%
18
70
%
Europe
2013
Others
CAPITAL EXPENDITURE
BY SECTOR
%
27
2
35 %
%
19
%
%
17
2%
%
16
4%
18
35 %
7%
2014
Aerospace
Electronics
Land Systems
2013
Marine
Others
CAPITAL EXPENDITURE
BY GEOGRAPHY
Asia
Europe
USA
1%
3%
1%
0%
%
2014
%
%
22
74
%
78
21
2013
Others
52
F i n a n c i a l R e v i e w ( c o n t ’d )
TREASURY MANAGEMENT
Liquidity
ST Engineering has in place a
set of policies and procedures
to manage our treasury
activities, which are regularly
reviewed and updated. During
the year, more focus was placed
on the management of foreign
exchange exposure in view of
the increased market volatility
arising from improvements in
the US economy and ending of
Quantitative Easing in the US,
uncertainty in the Eurozone,
and sharp decline in oil prices.
The Group also continued to
look at better deployment of
liquid funds, and had repaid
some loans on maturity,
contributing to a reduction in
borrowing expenses of $6.4m.
The Group has $1.7b at the
end of 2014 (2013: $2.2b),
comprising $1.5b (2013: $1.9b)
cash and cash equivalents
and $0.2b (2013: $0.3b)
funds under management.
Working capital funds in
Singapore, denominated
in various currencies, are
managed through a daily cash
sweep arrangement whereby
funds are placed out as fixed
deposits with reputable banks
in varying maturities and
interest rate terms, with due
considerations to operating
cash flow requirements and
yield optimisation. Interest
income from fixed deposits
yielded an average of 0.87%
BORROWING PROFILE BY MATURITY ($M)
2014
2013
75
238
690
434
< 1 Year
16
231
2 to 3 Years
708
4 to 5 Years
63%
37%
55%
45%
Fixed
Floating
BORROWING PROFILE BY CURRENCY
2014
2013
USD
70%
24%
6%
70%
22%
8%
SGD
RMB
Foreign Exchange
The Group is exposed to
foreign exchange risk, which
arises from its subsidiaries
operating in foreign countries,
generating revenue and
incurring costs denominated
in foreign currencies, as well
as from operations of its
local subsidiaries which are
transacted in foreign currencies.
The Group’s foreign exchange
exposures, primarily from
USD and Euro, are managed
through netting across its
business units first, then with
external counter-parties. During
the year, $1.7b (2013: $1.3b)
equivalent of foreign currencies
were transacted with external
counter-parties. As at year end,
$1.0b (2013: $1.7b) remained
as outstanding foreign exchange
transactions.
Borrowings
> 5 Years
BORROWING BY FIXED AND FLOATING RATE
2014
2013
for 2014 (2013: 0.70%). Funds
under management, primarily
invested in fixed income
instruments, earned yields
ranging from 1.50% to 4.95%
per annum.
The Group seeks to minimise
its interest rate risk exposure
through tapping different
sources of funds to refinance
the debt instruments and/or
enter into interest rate swaps,
where appropriate. As at 31
December 2014, the Group has
borrowings amounting to $1.0b
(2013: $1.4b) comprising $0.6b
(2013: $0.6b) from bonds, $0.3b
(2013: $0.7b) short and long
term loans from banks, and the
remaining from lease obligations
and other loans. During the
year, the Group utilised excess
cash to repay bank loans
amounting to $392m. This
reduced the proportion of the
Group’s borrowings which were
payable within one year to 7.3%
(2013: 31.6%).
63% of the Group’s total
borrowings were on fixed
53
ANNUAL REPORT 2014
BANKING FACILITIES ($B)
interest rate at the end of
2014, as compared with
55% at the end of 2013. The
increase in proportion of
fixed rate liabilities was due
mainly to a higher proportion
of floating rate loans being
repaid in 2014. As at the
end of February 2015, the
proportion of fixed rate
liabilities increased further
to 70%.
16
14
12
Borrowings are predominately
in SGD, USD and RMB
to support the Group’s
operations in Singapore, USA
and China.
10
8
Banking Facilities
To support the Group’s
diversified business operations
globally, banking facilities
have been secured in regions
where the Group has its
footprints. At the end of 2014,
the Group has $14.7b (2013:
$14.3b) of banking facilities
comprising trade financing
facilities for performance
bonds, bankers guarantees
and letters of credit; foreign
exchange facilities; crosscurrency swap and interest
rate swap facilities; and short
term loan facilities; of which
$3.7b or 29% (2013: $6.3b or
44%) has been utilised. $9.0b
or 71% (2013: $8.0b or 56%)
remained available for use.
6
4
2
0
Available
2014
Trade Finance
Utilised
2014
Available
2013
Foreign Exchange
Utilised
2013
Interest Rates Swaps &
Cross Currency Swaps
BANKING FACILITIES
52 %
56 %
20
%
9%
15
%
%
%
20
8%
20
BY NATIONALITY OF BANKS
2014
2013
Asia
USA
Europe
Others
Loans
54
INTEREST COVER RATIO
The Group’s interest cover
reduced marginally to 16.7
times from 16.8 times in 2013.
The lower interest cover was
attributable to lower profits,
partially cushioned by $6.4m
reduction in interest expense.
The Group generated an
operating cash flow of $624m
in FY2014, and continued to
be in a net cash position as at
the end of 2014. Gross debt/
equity ratio improved to 0.4
times with repayment of bank
loans.
CASH FLOWS
Operating Activities
Net cash from operating
activities of $624m in FY2014
was lower than FY2013 by
2014
2013
2012
Gross Debt/
Equity Ratio
0.4
0.6
0.6
Operating
Cash Flow
($M)
624
930
1,041
Free Cash
Flow ($M)
467
672
868
Net Cash ($M)
686
856
791
$305m. This was mainly
due to lower profits, higher
income tax paid as well as
unfavourable working capital
movements arising mainly
from the unfavourable
variances in trade receivables,
advance payments to suppliers,
INTEREST COVER RATIO
16.7x
trade payables, advance
payments from customers,
other payables, accruals
and provisions and deferred
income, but these were
partially offset by positive
variance in progress billings in
excess of work-in-progress.
CASH FLOWS ($M)
16.8x
14.8x
$731.9M
$49.5M
$742.8M
$44.2M
Investing
Activities
$37.9M
$631.4M
Financing
Activities
2014
2013
2012
(925)
(470)
(157)
(257)
624
Operating
Activities
929
(1,000)
0
2014
PBT before Associates / Joint
Ventures and Interest Expense
Interest Expense
Interest Cover
1,200
2013
55
ANNUAL REPORT 2014
Investing Activities
The Group’s net cash used in
investing activities of $157m
in FY2014 was lower than that
of FY2013 by $100m. The
lower cash outflow was mainly
attributable to proceeds from
sale of an investment property
in prior year, higher proceeds
from sale and maturity of
investments, lower cash
outflow for acquisition of
property, plant and equipment
and other intangible assets as
well as deconsolidation of a
subsidiary.
Financing Activities
The Group’s net cash used in
financing activities of $925m
in FY2014 was higher than that
of FY2013 by $455m, mainly
attributable to repayment of
bank loans, net of $392m on
maturity and lower proceeds
from issue of shares.
The Group generated $467m
of free cashflow in FY2014.
TAX
In line with the Government’s
call in the 2014 Budget
supporting innovation and
skills to pervade the economy,
the Group continues to build
on our strengths to bring
engineering and technology
together to create solutions
that give our customers an edge
in what they do. In doing so,
the Group has benefited from
the Government’s Productivity
and Innovation Credit (PIC)
scheme and enjoyed 400% tax
deductions/allowances for the
investments in innovation and
productivity improvements
and in PIC qualifying activities.
The Group has also embarked
on the GST Assisted Compliance
Assurance Programme (ACAP),
a compliance initiative for
businesses that set up robust
GST Control Framework as part
of good corporate governance.
TOTAL SHAREHOLDER RETURN
It is a holistic risk-based
review initiative conducted
on a voluntary basis to endorse
the effectiveness of our GST
controls. This exercise
evaluates the functional
structure and impact of GST on
the business transactions that
ensure the completeness and
accuracy of GST reporting.
This allows our business
to benefit from improved
productivity.
The Group’s effective tax rate
for 2014 is 17% (2013: 19%).
SIGNIFICANT ACCOUNTING
POLICIES
The Group’s significant
accounting policies are
presented in Notes to the
Financial Statements, Note
3 (pages 149 to 172). The
Group has applied the same
accounting policies and
methods of computation
in the preparation of the
financial statements for the
current reporting period
compared with the audited
financial statements as at
31 December 2013 except
for the adoption of all the
new and revised Singapore
Financial Reporting Standards,
that are mandatory for
financial years beginning
on or after 1 January 2014
as indicated on page 168.
With strong cash flow generated
from operating activities, the
Group ended the year with $1.7b
of cash and cash equivalents
including funds under
management. Management will
continue to recommend return
of excess cash generated from its
operations to the shareholders.
ST Engineering paid an interim
ordinary dividend of 4 cents
per share to shareholders in
September 2014 and would
recommend to shareholders at
the forthcoming Annual General
Meeting a final dividend of
11 cents per share. The total
Dividend Per Share (DPS) for
FY2014 will amount to 15 cents.
Based on the average share price
of $3.68, the DPS of 15 cents
translates to a dividend yield of
4.08%.
ST Engineering share price
ended the year at $3.40, a 14.1%
decrease in the share price
compared to a year ago. Over
the same period, the STI Index
advanced by 6%. With dividend
yield at 4.08%, ST Engineering
shares generated a total
negative shareholder return of
10% for its shareholders. The
share price has since risen to
$3.51 as at end February 2015,
a 3% improvement over end
December 2014 closing price
of $3.40.
TOTAL SHAREHOLDER RETURN
47.2%
5.2%
4.1%
7.6% 3.9%
42.0%
3.7%
(14.1%)
4.4%
5.2%
(21.3%)
(10.0%)
2014
9.6%
5.1%
(16.2%)
2013
Capital Gain
2012
2011
Dividend Yield
2010
56
ECONOMIC VALUE ADDED (EVA)
The Group generated yet another year of positive EVA. Group’s FY2014 EVA attributable to ordinary shareholders
of $344.5m was 17% or $69.3m lower than that achieved in FY2013. The decreased EVA was mainly attributable to
lower Net Operating Profit After Tax (NOPAT) and a higher capital charge arising from an increase in the Weighted
Average Cost of Capital to 5.6% in 2014 from 5.2% in 2013.
EVA STATEMENT
Net profit before tax
Adjust for:
Share of results of associates and joint ventures, net of tax
Interest expense
Others
Adjusted profit before interest and tax
Cash operating taxes (Note 1)
NOPAT - (a)
Average capital employed (Note 2)
Weighted average cost of capital (Note 3) (%)
Capital charge - (b)
2014
$M
2013
$M
593.5
698.6
57.2
46.3
(18.5)
678.5
(113.0)
565.5
31.1
52.5
(5.4)
776.8
(149.7)
627.1
4,038.1
5.6
(226.1)
4,072.0
5.2
(211.8)
EVA - [(a) - (b)]
Non-controlling share of EVA
EVA attributable to ordinary shareholders
339.4
5.1
344.5
415.3
(1.5)
413.8
Unusual items (UI) losses/(gains) (Note 4)
EVA attributable to ordinary shareholders (exclude UI)
14.6
359.1
(0.1)
413.7
Note 1:
Note 2:
The reported current tax is adjusted for the statutory tax impact of interest expense.
Monthly average equity plus interest bearing liabilities, timing provision and present value of operating leases.
Major Capital Components:
Borrowings
Equity
Others
$M
1,373.6
2,384.6
279.9
4,038.1
Note 3:
The Weighted Average Cost of Capital is calculated in accordance to ST Engineering Group EVA Policy as follows:
i) Cost of Equity using Capital Asset Pricing Model with market risk premium at 5.0% (2013 @ 5.0%);
ii) Risk-free rate of 2.48% (2013 @ 1.55%) based on yield-to-maturity of Singapore Government 10 years Bonds;
iii) Ungeared beta at 0.74 (2013 @ 0.74) based on ST Engineering risk categorisation; and
iv) Cost of Debt at 3.07% (2013 @ 3.42%) using actual cost of debt of the borrowings in US, Europe, China and Singapore.
Note 4:
UI refer to divestment of investment properties, subsidiaries and associates, long term investments and disposal of major property,
plant and equipment.
57
ANNUAL REPORT 2014
VALUE ADDED
The Group’s total value added for FY2014 of $2,651m was comparable to that of FY2013.
VALUE ADDED STATEMENT
Value added from:
Revenue earned
Bought in materials and services
Other income
Finance income
Finance costs (exclude interest expenses)
Total value added
Distribution of total value added
To employees in wages, salaries and benefits
To government in taxes and levies
To providers of capital on:
• Interest paid on borrowings
• Dividends to shareholders
Balance retained in business
Depreciation and amortisation
Retained profits
Non-controlling interests
Non-production costs
Total distribution
2014
$M
2013
$M
6,539.4
(4,022.0)
2,517.4
6,633.2
(4,002.2)
2,631.0
40.2
43.5
(7.3)
57.2
34.2
68.9
(33.5)
31.1
2,651.0
2,731.7
1,739.2
136.5
1,783.6
157.3
37.9
498.8
2,412.4
44.2
521.3
2,506.4
170.5
48.2
5.0
223.7
142.0
62.8
10.7
215.5
14.9
9.8
2,651.0
2,731.7
58
5-YEAR KEY FINANCIAL DATA
2014
2013
2012
2011
2010
Income statement ($M)
Revenue
Profit
EBITDA
EBIT
PBT
Net Profit
6,539
6,633
6,380
5,991
5,985
725.5
555.0
650.7
532.0
815.2
673.2
729.7
580.8
795.0
658.0
715.4
576.2
742.7
607.7
655.2
527.5
718.7
586.7
627.5
491.0
Balance Sheet ($M)
Property, plant and equipment, and investment property
Intangible and other assets
Inventories and work-in-progress
Trade receivables, deposits and prepayment
Bank balances and other liquid funds and funds under management
Current liabilities
Non-current liabilities
1,578
1,311
1,802
1,916
1,712
3,716
2,339
1,520
1,290
1,808
1,860
2,229
4,094
2,353
1,213
1,049
1,922
1,777
2,070
3,890
2,128
1,358
1,027
1,594
1,659
1,769
3,479
2,052
1,303
1,059
1,471
1,645
1,790
3,551
1,990
Share capital
Treasury shares
Capital and other reserves
Retained earnings
889
(6)
24
1,225
132
853
71
1,192
144
782
(20)
1,133
118
723
10
1,033
110
678
(7)
951
105
Financial Indicators
Earnings per share (cents)
Net assets value per share (cents)
Return on sales (%)
Return on equitys (%)
Return on total assets (%)
Return on capital employed (%)
17.06
68.34
8.2
24.9
6.5
14.0
18.73
68.14
8.9
27.4
6.8
15.4
18.76
61.51
9.2
30.4
7.3
17.4
17.28
57.79
9.0
29.9
7.3
19.8
16.21
53.38
8.4
30.3
6.9
16.2
Dividend
Gross dividend per share (cents)
Dividend yield (%)
Dividend cover
15.00
4.08
1.14
15.00
3.86
1.25
16.80
5.16
1.11
15.50
5.07
1.11
14.55
4.36
1.11
Productivity Data
Average staff strength (numbers)
Revenue per employee ($)
Net profit per employee ($)
Employment costs ($m)
Employment costs per $ of revenue ($)
Economic Value Added ($m)
Economic Value Added spread (%)
Economic Value Added per employee($)
Value added ($m)
Value added per employee ($)
Value added per $ of employment costs ($)
Value added per $ of gross property, plant and equipment ($)
Value added per $ of revenue ($)
22,671
22,837
22,560
22,193
21,508
288,449 290,456 282,795 269,944 278,244
23,464
25,434
25,540
23,771
22,829
1,745.8 1,789.7 1,760.2 1,633.2 1,568.1
0.27
0.27
0.28
0.27
0.26
344.5
8.4
15,197
413.8
10.2
18,118
437.9
12.1
19,411
405.0
12.0
18,250
369.7
10.5
17,187
2,651.0 2,731.7 2,710.5 2,494.5 2,395.6
116,935 119,616 120,149 112,398 111.382
1.52
1.53
1.54
1.53
1.53
0.83
0.91
1.06
0.90
0.91
0.41
0.41
0.42
0.42
0.40
59
ANNUAL REPORT 2014
REVENUE ($M)
PROFIT BEFORE TAX ($M)
BY SECTOR
BY SECTOR
6,539 6,633
6,380
729.7
5,991
5,985
2014 2013 2012 2011 2010
Aerospace
Electronics
Land Systems
Marine
715.4
650.7
655.2
627.5
2014 2013 2012 2011 2010
Others
Aerospace
Electronics
NET PROFIT ($M)
Land Systems
Marine
Others
10-YEAR ORDER BOOK ($B)
BY SECTOR
580.8
532.0
Global
Financial
Crisis
14
576.2
527.5
491.0
12
$12.5b
$10.6b
10
8
6
4
2
0
2014 2013 2012 2011 2010
Aerospace
Electronics
Land Systems
Marine
Others
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
60
I N V E S TO R R E L AT I O N S
ST Engineering is committed to
corporate transparency as well
as fair and timely disclosure.
Our investor relations
programme continues to enable
the investment community to
have greater awareness of the
Group’s investment proposition,
allowing all stakeholders to
take an informed view and
decision on their investments
in us. We aim to exceed
minimum standards in our
communications – going beyond
obligatory financial disclosure
to voluntary activities to help
the investment community gain
a deeper understanding of our
business, governance, financial
performance and prospects.
Quarterly financial results are
presented at a briefing session
for analysts and the media led
by the President & CEO and the
Chief Financial Officer, together
with the Presidents of the
four business sectors. These
briefings are open to the public
via real-time webcasts with the
facility to post questions to the
management team.
In terms of communicating our
investment case, our corporate
website carries a depository
of SGX and marketing
announcements, presentation
materials and financial
statements, and recordings of
our results webcasts. Financial
data and highlights along with
investment-related content
are presented in the IR section
of the corporate website, in a
format that is easily digestible.
Those keen to follow the
Group’s developments on an
ongoing basis may subscribe to
our news alert service.
of the Group and our business
dynamics. These engagements
also provide for dialogue that
enable us to better understand
their perceptions of our
businesses. To achieve this, we
organise various programmes
and opportunities for dialogues
with them throughout the year.
In 2014, the investor relations
team held about 200 meetings
comprising one-on-one
discussions, post-results
meetings and conference calls,
and facility visits. In addition,
the team also participated
in a series of IR conferences
and non-deal roadshows in
Singapore and overseas.
We meet and engage our
investors and analysts regularly
to facilitate their understanding
2014 INVESTOR RELATIONS EVENTS
1st Quarter
FY2013 results briefing for media and analysts with live webcast
Post-results investor lunch
US & Canada Non-Deal Roadshow
Annual General Meeting
2nd Quarter
1Q2014 results briefing for media and analysts with live audio webcast
DB Access Asia Conference - Singapore
Investor visit to ST Aerospace with DB Access Asia
Citi ASEAN Conference - Singapore
2Q2014 results briefing for media and analysts with live webcast
3rd Quarter
Post-results investor lunch
DB Singapore Corporate Access Day - Singapore
Analysts’ visit to ST Marine
DBS Corporate Access Day - Kuala Lumpur
4th Quarter
3Q2014 results briefing for media and analysts with live audio webcast
Morgan Stanley Asia-Pacific Summit - Singapore
61
ANNUAL REPORT 2014
SHAREHOLDING
Temasek Holdings remained our
single largest shareholder, holding
about 50% of shares as at end 2014.
13
4%
1%
%
66
16
Excluding Temasek Holdings, other
institutional investors held about
30% of the Group’s shares, with retail
investors holding the rest.
%
%
2014
Asia (ex Singapore)
Europe
Others (including unidentified holdings
and holdings below analysis threshold)
Singapore
North America
Shareholders from Singapore held
66% of the shares, followed by
those from North America at 13%
and Europe at 4%.
(Based on Top 30 Share Register Analysis as at
31 December 2014).
SHARE PRICE & TRADING VOLUME
3.90
$
Share Price
millions
17.5
Trading Volume
3.80
15
3.70
12.5
3.60
10
3.50
7.5
3.40
5
3.30
2.5
2014
DEC
NOV
OCT
SEP
AUG
JUL
JUN
MAY
APR
MAR
FEB
0
JAN
3.20
ST Engineering’s market
capitalisation was $10.6b as at
31 December 2014. The average
share price for the year was
$3.68, with a daily trading volume
of 2.46m shares.
(Source: Bloomberg)
DIVIDEND
cents
2014
8.00
7.00
2013
7.00
8.00
2012
7.00
9.80
2011
7.00
8.50
2010
7.00
7.55
Ordinary
15.00
15.00
16.80
15.50
14.55
Special
For 2014, the Board has proposed
a final dividend of 11 cents per
share, consisting of ordinary
dividend of 4 cents per share and
special dividend of 7 cents per
share. Together with the interim
dividend of 4 cents per share paid
to shareholders in September 2014,
the total dividend for the full year
will amount to 15 cents per share.
This translates to a dividend yield
of 4.08%.
62
AWARDS
President & CEO, Tan Pheng Hock receiving the Outstanding CEO of the Year at the Singapore Business Awards 2014.
BUSINESS EXCELLENCE
Outstanding CEO of the Year
at the Singapore Business
Awards 2014
– ST Engineering’s President
& CEO, Mr Tan Pheng Hock
Best CFO for Singapore in
Asia’s Best Companies Poll
by FinanceAsia magazine
– ST Engineering’s CFO,
Eleana Tan
Ranked 87 out of 100
companies on list of
“The World’s Most
Innovative Companies”
by Forbes
– ST Engineering
Internal Audit Excellence
Award at the SIAS 15th
Investors’ Choice Awards 2014
– ST Engineering
QUALITY & PRODUCT
EXCELLENCE
ATE&M Asia Best Airframe
Service Provider of the Year
by Aircraft Technology
Engineering & Maintenance
(ATE&M)
– ST Aerospace
2014 Frost & Sullivan Asia
Pacific Military Fixed Wing
Customer Value Leadership
Award by Frost & Sullivan
– ST Aerospace
Singapore Aerospace Industry
Excellence Award (Gold)
by Association of Aerospace
Industries (Singapore)
– ST Aerospace
Singapore Aerospace Human
Capital Leadership Award (Gold)
– ST Aerospace
Singapore Aerospace
Innovation & Productivity
Leadership Award (Gold)
– ST Aerospace
Singapore Aerospace Safety
Leadership Award (Gold)
– ST Aerospace Systems
Singapore Aerospace Safety
Leadership Award - Silver
– ST Aerospace Supplies
Defence Technology Prize
2014 (Team Engineering)
by Ministry of Defence
– the Missile Corvette
Upgrade Team comprising
DSTA, ST Engineering and
the Republic of Singapore
Navy.
63
ANNUAL REPORT 2014
Land Transport Excellence
Awards 2014 - Best ICT
Solution Delivery Partner
(Merit)
– ST Electronics
(Info-Comm Systems)
Land Transport Excellence
Awards 2014 - Best Managed
E&M Systems - Project
Partner Award
– ST Electronics
Singapore Good Design
SG Mark Gold Award 2014
by Design Business Chamber
Singapore
– ST Electronics, for innovative
and exceptional design of
its Passenger Emergency
Communication Unit
Singapore Good Design
SG Mark Award 2014
by Design Business Chamber
Singapore
– ST Electronics and
subsidiary ST Electronics
(Info Security) for
exceptional and innovative
design of their Automatic
Fare Collection Gate and
DiskCrypt Mobile Onyx
respectively.
2013 Technology Company
of the Year & Social Media
Company of the Year
Excellence Award
by Via Satellite
– VT iDirect
VSAT Technology Innovation
of the Year award
by VSAT industry’s leading
analysts in conjunction
with the VSAT 2013 Global
Conference
– VT iDirect
WSQ Certified Productivity &
Innovation Manager (Gold)
by Singapore Manufacturers’
Federation and the Singapore
Workforce Development
Agency
– ST Marine
Top 50 Products of China
Construction Machinery
Award
by Chinese trade magazine,
Construction Equipment &
Maintenance
– for Jiangsu Huatong
Kinetics’ WTS95 Stabilised
Soil Paver
Zhenjiang City Annual Science
and Technology Progress
Award (3rd Prize)
– LSB2000 Asphalt Mixing
Plant
Zhenjiang City Enterprises
Patent Breakthrough Award
by Zhenjiang City Government
– Jiangsu Huatong Kinetics
SAFETY & HEALTH
Singapore HEALTH Award
by Health Promotion Board
– ST Aerospace Engines
WSH Innovations Awards
2014 (Gold)
by Singapore Manufacturers’
Federation (SMa)
– ST Aerospace Engineering
– ST Kinetics
– Advanced Pyrotechnic
Materials
Safety and Health Award
Recognition for Projects
(SHARP)
by Ministry of Manpower and
Workplace Safety & Health
Council (WSH Council) for
seven projects
– ST Electronics
BizSAFE Partner Certification
by WSH Council
– ST Marine
CORPORATE CITIZENSHIP
Ministry of Home Affairs
Awards 2014
Home Team National Service
Awards (Minister’s Honours
Roll, 2012-2016)
– ST Electronics (Satcom
& Sensor Systems)
MiDAs (Minister for Defence
Awards) League - Honorary
Member
– ST Aerospace Systems
Best New Responding
Company (for Hong Kong
and South East Asia)
by the Carbon Disclosure
Project (CDP)
– ST Engineering, for the
completeness, quality
and transparency of its
responses to CDP’s annual
climate change reporting
request.
Community in Bloom Awards
2014
by National Parks Board
Singapore
Diamond Award (Three
consecutive Platinum Awards)
– ST Kinetics
Platinum Award
– ST Kinetics
Gold Award
– SDDA
Silver Award
– Singapore Test Services
Plaque of Commendation
(Star) Award
by National Trades Union
Congress
– ST Marine
INVESTOR RELATIONS
Best In Sector (Industrials
including materials) at IR
Magazine Awards Southeast
Asia 2014
– ST Engineering
Bronze Award for Best Annual
Report for 2013 (companies
with $1 billion and above in
market capitalisation)
at the Singapore Corporate
Awards 2014
– ST Engineering
64
C O R P O R AT E I N F O R M AT I O N
BOARD OF DIRECTORS
COMPANY SECRETARIES
PRINCIPAL BANKERS
Mr KWA Chong Seng (Chairman)
Mrs CHUA Su Li
Mr TAN Pheng Hock (President & CEO)
Ms NG Kwee Lian (Karen)
Bank of America, N.A.
50 Collyer Quay
#14-01 OUE Bayfront
Singapore 049321
Mr KOH Beng Seng
Lieutenant-General NG Chee Meng
Major-General (NS) NG Chee Khern
Mr QUEK Tong Boon
Mr QUEK Poh Huat
REGISTERED OFFICE
ST Engineering Hub
1 Ang Mo Kio Electronics Park Road
#07-01
Singapore 567710
Tel: (65) 67221818
Fax: (65) 67202293
www.stengg.com
Mr Davinder SINGH s/o Amar Singh
SHARE REGISTRAR
Dr Stanley LAI Tze Chang
M & C Services Private Limited
112 Robinson Road
#05-01
Singapore 068902
Mr KHOO Boon Hui
Mr QUEK See Tiat
Ms Olivia LUM Ooi Lin
Dr BEH Swan Gin
Colonel Alan GOH Kim Hua
(Alternate Director to LieutenantGeneral NG Chee Meng)
AUDITORS
KPMG LLP
16 Raffles Quay #22-00
Hong Leong Building
Singapore 048581
Ms ANG Fung Fung
(Partner-in-charge)
(Date of Appointment: 24/04/2013)
Citibank N.A.
8 Marina View
#21-01 Asia Square Tower 1
Singapore 018960
DBS Bank Ltd
12 Marina Boulevard
Level 45, MBFC Tower 3
Singapore 018982
Oversea-Chinese Banking
Corporation Limited
65 Chulia Street
#10-00 OCBC Centre
Singapore 049513
65
ST ENGINEERING
ANNUAL REPORT
/ ABOVE2014
& BEYOND
MANAGING FOR SUSTAINABILITY
T
his is our inaugural
sustainability report,
addressing our material
sustainability issues.
This report covers data and
activities of our Singapore
operations, unless otherwise
stated. We aim to expand our
scope of reporting across our
operations progressively. The
report covers the period
1 January to 31 December 2014.
Our sustainability reports will be
prepared on an annual basis.
This report is prepared in
accordance with Global
Reporting Initiative (GRI) Core
Guidelines. Data measurements
are based on GRI G4 Guidelines.
The GRI Content Index can
be found in the Sustainability
section of our website at
www.stengg.com.
We aim to seek external
assurance in the future. Our
greenhouse gas emission data are
subject to internal and external
reviews as part of ISO 14064
verification. Specific greenhouse
gas emission factors used are
detailed in the GRI Content Index.
CONTENTS
66
70
94
104
Stakeholder
Engagement
Propelling
Sustainable Growth
Executing
Operations Responsibly
Supporting
Communities
70 / Sustainability Governance
77 / Enterprise Risk
Management & Materiality
84 / Sustainable Targets
& Performance
86 / Enablers: Innovation
& Productivity
90 / People Excellence
95 / Health & Safety
98 / Environment
102 / Sustainable Procurement
104 / Community
66
S TA K E H O L D E R E N G A G E M E N T
ENGAGING OUR STAKEHOLDERS ENABLES US TO
UNDERSTAND AND ADDRESS CONCERNS, STRENGTHENING
CRUCIAL RELATIONSHIPS FOR WHICH OUR BUSINESS
IS DEPENDENT ON.
KEY STAKEHOLDERS AND ISSUES
RAISED BY STAKEHOLDERS
CUSTOMERS
Value, Safety, Security
of Information and
Personnel, Quality,
Responsiveness
EMPLOYEES &
OTHER SUPERVISED
WORKERS
Compensation, Job Security,
Worker Health and Safety,
Respect, Work-life Balance,
Training and Development,
Career Progression
ST Engineering aims to
create sustainable value for
our stakeholders including
shareholders, customers,
employees and the community
at large.
Key stakeholders are identified
as part of the Enterprise Risk
Management process, based
on the magnitude of the
impact of parties who can
affect or be affected by the
Group’s business activities.
Information feeds up to the
Risk Management team and
Senior Management.
CUSTOMERS
Customer focus is one of
ST Engineering’s key strategic
thrusts. In fostering a
customer-centric culture, we
inculcate a ‘customer first’
mindset through building on a
1
REGULATORS
Compliance, Constructive
Consultations
SHAREHOLDERS
& INVESTORS
Profitability, Return on
Investment, Dividend
Income, Succession
Planning, Growth
robust customer engagement
process.
Employees are equipped with
the skills and knowledge to
maintain exemplary service
levels. Courses include, ‘Go
the Extra Mile for Service
(GEMS)’ training, Emotional
Quotient (EQ) workshops,
as well as Edward de Bono’s
lateral thinking courses to help
staff be creative in improving
service.
Learning and listening channels
help to develop insights into
our existing and potential
customers’ needs. These
channels include participation
in local and international
forums, exhibitions, trade
shows, conferences and other
touch points.
Dedicated account managers
are assigned to key customers
SUPPLIERS
Equitable Business
Opportunities
to ensure their needs are
addressed. These account
managers are contactable
24/7. Customer relationship
management activities
include regular project review
meetings, inviting existing
and potential customers to
technology seminars, company
visits to share our new
capabilities and innovative
products and services, and
dialogue sessions.
We carry out annual
customer surveys to seek
feedback from the customers
to determine their satisfaction
levels and develop action
plans to address their areas
of concern. Customers
rate the quality, delivery,
responsiveness, service levels
and value for money of our
products and services. In 2014,
the Group achieved above
95% customer satisfaction1.
The total number of survey questions which scored more than or equal to 6 points, out of a perfect score of 10, is divided by
the total number of questions responded by the customers to derive the satisfaction rate.
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ANNUAL REPORT 2014
Group-wide seminars are one of the platforms where employees are kept informed and updated of business policies and goals.
EMPLOYEES
Employee engagement allows
ST Engineering to develop our
people into creative, thinking
and innovative individuals
and team players working
to meet business objectives
and goals. The strategies
adopted to encourage
employee involvement and
commitment in teamwork
and innovation comprise:
leadership involvement;
effective communication
and facilitation; learning and
development; and rewards and
recognition.
The Business Excellence
Seminar is an annual groupwide event, targeted at middle
managers and above, where
senior management will
articulate the direction and
plans for the coming year.
Similarly, the annual Team
Excellence Convention is aimed
to motivate employees through
recognition of high performing
teams that have demonstrated
creativity, innovation and
continuous improvement. In
addition, the President of each
sector periodically organises
interaction sessions with the
employees in the form of
forums, briefings and meetthe-staff sessions to share the
sector’s performance, direction
and plans.
We conduct an Employee
Opinion Survey biennially.
Senior managers also chair
informal focus groups and
discussions to engage and
consult with employees.
Employees are encouraged
to provide their suggestions
through the Staff Suggestion
Scheme. The 24/7 one-stop
Enterprise Information Portal
(EIP) is the primary platform
for employees to access
important information. This is
complemented by quarterly
newsletters, which include
updates on key initiatives.
Grievance mechanisms are
established to provide a
trusted channel to voice and
resolve concerns. In 2014, four
cases were filed. One case is
still ongoing, with the other
three cases resolved amicably.
The annual performance
appraisal session serves as
a platform for employees to
discuss their current work
progress and career aspirations
with their supervisors. More
information can be found on
page 91.
68
S TA K E H O L D E R E N G A G E M E N T ( c o n t ’d )
SUSTAINABILITY-RELATED DISCLOSURES TO SHAREHOLDERS
ST Engineering approaches sustainability as part of business excellence. In our engagement with
investors, both mainstream and socially responsible investing arenas, we incorporate sustainability
efforts and articulate their linkages to our business performance. Examples include:
•
Recruitment and retention efforts to sustain a pipeline of competent engineers
•
Environment, health and safety track record as a competitive advantage
•
Productivity efforts to help mitigate wage increases
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ANNUAL REPORT 2014
At the operational level,
morning briefings and toolbox
meetings address day-to-day
issues that impact work, while
Safety and Quality Briefings
highlight important safety issues
and lessons. Details on how we
engage our employees on safety
can be found on pages 94-97.
Potential young employees
are also engaged through
scholarship fairs and the Young
Engineers Programme (YEP).
Details on our initiatives relating
to our people can be found on
page 90-92.
SHAREHOLDERS
We are committed to timely
and transparent communication
with analysts and all our
shareholders. We uphold
our responsibility to provide
timely, comprehensive and
balanced information on the
Group’s performance, business
developments and challenges.
Investor concerns are addressed
by enhancing disclosure on
these areas in our annual
reports and corporate website.
Announcements are made via
SGX at the earliest feasible time,
with our corporate website
archiving these announcements.
Throughout the cycle of a year,
we organise platforms to give
investors and analysts access
to our senior management
through one-on-one meetings,
conference calls, non-deal
roadshows, investor conferences
and facility visits. These
touch-points provide a deeper
understanding of our operations
and business landscape, while
at the same time allowing frank
feedback from our investors.
Over the course of 2014, our
Investor Relations team held
about 200 such meetings. Each
quarter, our senior management
team presents ST Engineering’s
financial performance and
outlook at combined analyst
and media briefings. These
briefings are open to the public
via real-time webcasts, and
viewers may pose questions to
our management team.
As part of our ongoing outreach
programme to retail investors,
ST Engineering is a sponsor
of the Securities Investors
Association of Singapore’s
Investor Education Programme.
In recognition of our investor
relations practices,
ST Engineering is in the
Securities Investors Association
of Singapore’s Hall of Fame for
Most Transparent Company.
More information, including our
Investor Relations Calendar, can
be found on page 60-61.
REGULATORS
We are committed to
complying with legal and
regulatory requirements.
We monitor developments
around regulations closely.
Key regulators include:
•
Singapore Exchange, and
Accounting and Corporate
Regulatory Authority (ACRA)
•
Industry regulators such
as the US Federal Aviation
Administration
•
Export control regulators,
due to the international
trading involved in our
business
Where regulators seek
consultation in reviewing
existing and emerging
policies, we are responsive
in providing our constructive
feedback. Through monitoring
and engaging regulators, we
incorporate trends and learning
points in our assessment of the
business environment.
SUPPLIERS
We recognise our dependency
on the timely delivery and
quality of key materials or
components, and quality
of performance by sub-
“
As part of our ongoing
outreach programme to
retail investors, ST Engineering
is a sponsor of the Securities
Investors Association
of Singapore’s Investor
Education Programme. In
recognition of our investor
relations practices,
ST Engineering is in
the Securities Investors
Association of Singapore’s
Hall of Fame for Most
Transparent Company.
”
contractors. This is a key risk
that we manage diligently, and
mitigate where possible.
Supplier milestones and
performance are reviewed
periodically by the respective
project teams. Each sector’s
procurement function is
responsible for establishing and
managing end-to-end integrated
supplier arrangements within
each of their respective sectors.
We communicate our
expectations through our Code
of Business Conduct and Ethics,
which applies to contractors,
consultants and agents.
ST Engineering is working
towards enhancing our
engagement with suppliers
on sustainability aspects.
In 2014, we engaged an
external consultant to work
with us to develop a sustainable
procurement strategy, which we
intend to progressively deploy
from 2015 onwards.
70
P R O P E L L I N G S U S TA I N A B L E G R O W T H
Sustainability Governance
ST Engineering holds the view
that creating sustainable value
for all of our stakeholders
is essential to our long
term success. Our business
processes should reflect
that long-term and multistakeholder considerations
are meaningful and effective.
This section articulates our
governance approach and
practices for long-term
sustainability. Our report
addressing the Code of
Corporate Governance in
Singapore can be found on
pages 106-122.
An engineering group like
ST Engineering exists to
create real world solutions.
These solutions could be for
urban rail networks, complex
aircraft conversions or meeting
security threats posed by
land, sea or air or in the cyber
space. These solutions could
be for today, or for the future.
We need to balance meeting
our customers’ needs for
today, while casting a keen eye
on long-term developments.
We are on a journey to
adapt and embed good
practices in sustainability.
We do so progressively and
systematically with evident
leadership involvement, to
ensure management and
employees understand
how different facets in
sustainability are relevant to
us. We define sustainability in
line with the United Nations’
Brundtland Commission:
the goal of sustainability is
to “meet the needs of the
present without compromising
the ability of future
generations to meet their own
needs.”
Our strategy is underpinned
by our values: Integrity,
Value Creation, Courage,
Commitment and Compassion.
Our values shape our
motivations as we approach
increasingly complex needs
in our business environment.
Stakeholder expectations
of business, government
and society are diverse and
changing, even as the world
gets more interconnected
through modern
communication technologies.
A successful business needs
to consider these varying
expectations to execute its
strategy smoothly.
We develop long-term
strategy across our businesses,
capturing both existing and
emerging trends.
We support our strategy
development and execution
with robust systems, including
our corporate governance and
enterprise risk management
system. Specific areas such as
innovation and environment
are addressed and driven
across businesses through
the structure of Business
Excellence component
committees. The overall
responsibility for sustainability
lies with the President & CEO.
Incentives are designed to
attract and retain talent, and to
encourage executives to adopt
strategies that are aligned to
the long-term interests of the
Group. Variable components of
compensation and performance
appraisals are tied to various
key business indicators, which
include non-financial indicators
such as safety.
We take a serious attitude
towards full compliance
with regulatory and legal
requirements.
Meeting legal and regulatory
requirements is a basic
expectation across all our
operations. In 2014, there were
no significant fines or sanctions
for non-compliance with laws
and regulations.
Beyond full compliance to
legal and regulatory
requirements, we align our
management systems to
international standards.
Accordingly, our processes
adopt a precautionary
approach. All of our operating
companies in Singapore
are OHSAS 18001 and ISO
14001 certified. In 2014,
our Singapore operations
have also implemented an
energy management system
towards achieving ISO 50001
certification.
Continuous improvement is
an integral element across
management approaches of
issues. This includes regular
evaluation against peers and
industry best practices.
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ANNUAL REPORT 2014
PROPELLING
SUSTAINABLE
GROWTH
EXECUTING
OPERATIONS
RESPONSIBLY
Sustainability
Governance
Health
& Safety
Innovation
& Productivity
Environment
People
Excellence
Responsible
Procurement
SUPPORTING
COMMUNITIES
Community
OUR VALUES
Integrity
We believe the foundation of our business success rests on unyielding honesty, trustworthiness and
responsibility for our actions, striving to do the right thing and to fulfill our promises to one another, our
customers, partners and stakeholders.
Value Creation
We are determined to add value in all that we do - in the best way possible and to the best of our ability.
We work together to grow our people, markets and businesses around the world, to consistently create
solutions that win in the marketplace and meet, or even exceed, our customers’ expectations.
Courage
We empower ourselves as an organisation, as teams and as individuals through small and large acts of
courage in our everyday work and at more challenging moments of uncertainty, without fear of failure
or the desire to stick with the status quo. Courage enables us to face the plain realities of our situation
(favourable and unfavourable), to address concerns over change, to promote out-of-box thinking and to
explore and commit to bold new possibilities for our business.
Commitment
We are determined and energised to achieve our shared vision, mission and strategic objectives
together. This dedication to a common purpose stands behind our commitments to customers, partners,
other stakeholders and one another, driving us to excellence in our results and in how we achieve them.
Compassion
Along with our passion to succeed and prosper as individuals, as teams and as a business, we also reach
out to express our genuine care and responsibility for one another, our communities and the broader
world community. We rally around those in difficulty to understand their troubles and actively help them
with our time, energy and money.
72
S u s t a i n a b i l i t y G o v e r n a n c e ( c o n t ’d )
Chairmen of the BEC Council Component committees addressing questions at the BE Seminar.
“
A ma jor objective of the
BE Council is to ensure
that the principles of high
performing organisations and
sustainability are incorporated
within business decisionmaking to achieve positive
and sustainable outcomes
for all stakeholders including
customers, businesses,
employees, unions, the
environment and the
community at large.
”
BUSINESS EXCELLENCE
(BE) FRAMEWORK
ST Engineering embraces
the Business Excellence (BE)
Framework as a roadmap
for its business excellence
journey and for achieving its
sustainability goals.
The BE Council was established
in early 2007 to provide
direction and oversight to
assess where we are on the
journey, review performance,
identify opportunities for
improvement and take
action for our sustainability
performance. The BE Council
also regularly reviews the
Framework to ensure its
relevance. The last review was
conducted in 2014.
The BE Council is chaired by
the Group’s President & CEO.
Supported by its six component
committees, and various
corporate departments, the
Council provides guidance,
decides on new projects, and
approves budgets. A major
objective of the BE Council is
to ensure that the principles of
high performing organisations
and sustainability are
incorporated within business
decision making to achieve
positive and sustainable
outcomes for all stakeholders
including customers,
businesses, employees, unions
and the community at large.
The BE Council meets at
least twice a year, while its
component committees meet
at least four times a year.
The committees are chaired
by members of the senior
management team, and involve
the relevant management
and operating staff from all
business areas.
The committees publish the
work and results of their
initiatives and performance,
and share them at the annual
Business Excellence Seminar.
The theme in 2014 was
‘Sustainable Development’
with the opening keynote
presentation by an invited
sustainability expert Professor
Kenneth Richards. The BE
Council’s leadership shared
what each committee had
achieved and what the plans
were for the coming year.
Employees who have made
outstanding contributions
in the areas of innovation,
productivity and EHS were also
recognised during this event.
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ANNUAL REPORT 2014
THE BUSINESS EXCELLENCE COUNCIL
CHAIRMAN
President & CEO
ST Engineering
BUSINESS EXCELLENCE
Secretariat
BUSINESS FORESIGHT COMMITTEE
1 Identify and analyse emerging
risks and opportunities (including
sustainability issues) that are
material to the Group
CUSTOMER EXCELLENCE COMMITTEE
1 Foster a customer centric culture
that inculcates a ‘customer first’
mindset
2 Review and update the Group’s
vision and mission statements
2 Establish and implement customer
excellence practices
TECHNOLOGY, IPR &
INNOVATION COMMITTEE
PEOPLE EXCELLENCE & LEARNING
ORGANISATION COMMITTEE
1 Identify key technological trends,
analyse their impact on sustainable
growth, and recommend new areas
for business growth
2 Promote and manage innovative and
creative efforts within the Group
3 Promote, manage and exploit IP
portfolio
ENVIRONMENT, HEALTH &
SAFETY COMMITTEE
1 Promote and share best practices in:
a) managing and enhancing
workplace safety and employees’
health and well-being;
b) managing and reducing the
environmental impact of our
activities, thereby minimising our
carbon and water footprints; and
c) assuring system safety of our
products and services
2 Establish common frameworks
to fully comply with all applicable
environmental, health and safety
regulatory requirements and meet
customers’ requirements and
applicable international standards
1 Foster a committed and engaged
workforce
2 Develop and maximise the potential
of our employees
3 Build a healthy pipeline of talent and
leaders for sustainable growth
CORPORATE SOCIAL
RESPONSIBILITY COMMITTEE
1 Review the impact of local and
international practices and
trends on the Group’s community
development programmes; and
make recommendations to the
Council regarding these matters
2 Promote awareness of the current
and future impact of our actions on
the communities where we operate
74
WE BELIEVE THAT FOR A POLICY TO BE EFFECTIVE, IT SHOULD BE UNDERSTOOD.
OUR CODE OF BUSINESS CONDUCT & ETHICS IS WRITTEN IN LANGUAGE THAT IS
CLEAR AND SIMPLE, GIVING GUIDANCE TO SITUATIONS WHEN IN DOUBT. IT
INDICATES APPROACHABLE AND ANONYMOUS LINES OF OUTREACH.
WORKPLACE AND BUSINESS CONDUCT INCLUDES RESPECT FOR PEOPLE,
NON-DISCRIMINATION, SAFETY FIRST, SECURITY OF INFORMATION, IDENTIFYING
AND AVOIDING BRIBERY, CARE FOR THE ENVIRONMENT, AND ENGAGING OUR
COMMUNITY. BESIDES EMPLOYEES, IT IS COMMUNICATED AND APPLICABLE TO
CONTRACTORS, CONSULTANTS AND AGENTS.
CODE OF BUSINESS
CONDUCT AND ETHICS
“
Our Code reflects our
expectations of responsible
behaviour towards our
material sustainability issues. It
sets out the guiding principles
and desired behaviour that
embody how our people
are expected to operate,
and embrace the business
practices and standards of
behaviour that support the
commitment to honest and
ethical business conduct. Many
standards set out in the Code
have also been embedded
in the various policies and
procedures.
”
To maintain an ethical
environment that encourages
and promotes professional
and ethical conduct of the
management and staff
members, a Code of Business
Conduct and Ethics (‘Code’)
has been promulgated.
Our Code applies to all
employees in ST Engineering
and in all subsidiary companies,
in which we have management
control. Contractors,
consultants and agents who
are working on our behalf will
be required to act consistently
with the Code when acting on
our behalf.
Our Code reflects our
expectations on responsible
behaviour towards our material
sustainability issues. It sets
out the guiding principles and
desired behaviour that embody
how our people are expected
to operate, and embrace
the business practices and
standards of behaviour that
support the commitment to
honest and ethical business
conduct. Many standards set
out in the Code have also
been embedded in the various
policies and procedures.
Our Workplace Conduct:
•
We are committed
to providing a work
environment that is free
from discrimination or
harassment of any type.
•
We always place safety and
occupational health above
other business priorities.
•
We observe all security and
access arrangements at our
premises and facilities, as
well as all security policies
and regulations.
•
We must protect company
assets from waste, loss,
damage, theft, unauthorised
disclosure, mis-use or
infringement.
•
We respect the rights
and assets of others,
including their proprietary
information and intellectual
property.
•
We will use company
information technology
facilities appropriately and
responsibly.
•
We are committed to
keeping employees’
personal information
confidential.
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ANNUAL REPORT 2014
•
•
We will handle Official
or Classified information
acquired in the course of
our work, in accordance
with company policies
and applicable laws and
regulations.
We must not buy or sell
the shares or securities
of a company (including
ST Engineering) either
directly or through family
members or other persons,
while we are aware of inside
information of the company.
Our Business Conduct:
•
•
•
•
•
We will ensure our
products are designed
and manufactured, and
our services provided,
in a manner that seeks
to reduce the risk of
hazard to operators, the
public, property and the
environment.
•
We must seek approval for
all gifts and hospitality to be
given by us on behalf of the
company.
•
We must declare all gifts
and hospitality received, in
accordance with policies
and procedures.
•
We must not contribute any
company funds or resources
to any political candidates,
political officials or political
parties for the purposes of
obtaining any business or to
influence any official action.
•
We will comply with
all applicable laws and
regulations when importing
and exporting products,
services, technology and
information.
•
We must refrain from any
practices or involvement
that could lead to, or be
perceived as, a conflict of
interest.
We conduct our business
in a fair, honest and ethical
manner, in all our dealings
with customers, suppliers,
partners and competitors.
•
We must not offer, give,
seek or accept any personal
payment, gift, favour or
other advantage in return
for any business advantage
or to influence a business
outcome.
We are committed to
conduct ourselves in an
environmentally responsible
manner in all aspects of our
work and business, and to
use resources efficiently.
•
We should ensure that third
party intermediaries are
evaluated and appointed
in accordance with policies
and procedures.
We must refrain from
‘facilitation payments’
made to government
officials or employees
to expedite or perform
a routine administrative
action as these are
prohibited and often
illegal under local anticorruption laws.
We will support, sponsor
and contribute to the wellbeing of our communities
through volunteerism,
charitable giving and civic
activities.
All employees are briefed on
the Code at least once every
two years.
ANTI-CORRUPTION AND
ANTI-FRAUD PROGRAMME
ST Engineering takes a zero
tolerance approach to fraud and
corrupt practices. The senior
management sets the tone and
promotes an anti-fraud culture
throughout the Group, through
its set of Core Values.
Briefings are also conducted on
specific anti-corruption related
policies and procedures, broken
down into specific topics.
Attendees are nominated based
on relevance of their job scope.
The Code is included as one
of the important documents
for the orientation of all
new Directors to the Board.
Contracts with independent
service providers (‘ISP’)
including agents, consultants
and advisers, must include
anti-corruption undertakings
and representations as well
as acknowledging the ISP Anti
Corruption Policy.
In 2014, an e-learning course on
anti-corruption was launched
for employees identified to be
exposed to corruption risks.
1,885 employees in Singapore
completed the course in
2014. The e-learning course
will be rolled out in phases
to all identified employees in
Singapore, with plans to extend
this to relevant employees in
the other countries from 2015.
ST Engineering conducted an
assessment for risks related
specifically to corruption and
fraud (‘Fraud Risk Assessments)
across Singapore operations
between 2013 and 2014.
The Fraud Risk Assessments
will be rolled out to overseas
operations from 2015 onwards.
Significant corruption risks
identified were:
•
Corruption by
intermediaries;
•
Corruption by employees;
•
Gifts and entertainment
to government officials
construed as kickbacks or
bribes.
Following the Fraud Risk
Assessments, the business
operations will review existing
76
“
The Risk Review
Committee has oversight
of the Anti-Corruption and
Anti-Fraud Programme.
”
policy and procedures against
significant corruption or fraud
risks identified to ensure
adequacy of the preventive and
detective anti-fraud controls.
At its quarterly meetings, the
Risk Review Committee reviews
the following:
1. Progress and results of the
Fraud Risk Assessments
against the annual work
plan;
2. Progress of the training
on the Code and other
anti corruption / anti fraud
training against the annual
training plan;
3. Substantiated fraud
and corruption related
incidents where lessons
learnt and actions taken
to strengthen the related
controls will be shared,
including updates, if
any, to the policies and
procedures;
4. Offset contracts.
Violations of the Code, as
well as violation of laws or
regulations, or any wrong
doings may be reported
through the whistle-blowing
channel. The whistle blowing
channel is published in
the employee intranet
portal. Employees can
report to the channel on an
anonymous basis. Subject
to applicable laws, the
identity of the employees
who raise any such reports
is kept in strict confidence
and they are protected
from any disciplinary or
retaliatory action arising
by reason of their having
made these reports. All
fraud and suspected fraud
cases received through the
whistle blowing channel will
be promptly notified to the
Audit Committee Chairman.
The Audit Committee has the
powers to take prompt
actions to inquire into the
concerns raised.
BRIEFING FOR COMPLETE ANTI-CORRUPTION POLICIES
AND PROCEDURES, DONE IN PHASES:
2012
2013
2014
Number of employees
1,637
1,424
3,043
Percentage of employees
11%
10%
21%
THE FOLLOWING WERE REPORTED IN 2014:
August
A former employee of a subsidiary of ST Electronics was convicted in the
Singapore Court for receiving a bribe of about $57,000 as a reward for
appointing an individual as an agent of the subsidiary. He has appealed
against the conviction and the outcome of the appeal is pending.
December
Three public cases against former employees of ST Marine for alleged
corruption in Singapore. Further information on these cases is available on
the Press Release section of our website.
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ANNUAL REPORT 2014
Enterprise Risk Management & Materiality
ST ENGINEERING BELIEVES THAT EFFECTIVE RISK MANAGEMENT
IS CRITICAL TO ACHIEVING THE GROUP’S STRATEGIC AND
SUSTAINABILITY GOALS. THE RISK REVIEW COMMITTEE AT BOARD
LEVEL PROVIDES LEADERSHIP AND DIRECTION IN THE ESTABLISHMENT
OF AN ENTERPRISE-WIDE RISK MANAGEMENT FRAMEWORK THAT IS
INSTRUMENTAL TO BUILDING ROBUST RISK MANAGEMENT
PROCESSES WITHIN THE GROUP.
ENTERPRISE RISK
MANAGEMENT (ERM)
FRAMEWORK
The ST Engineering ERM
Framework is a discipline which
the Group uses to identify,
assess, control and monitor
risks from six key areas:
1. Strategic
2. Operational
3. Financial
4. Integrity
5. Legal Compliance
6. Business Continuity
The ERM framework sets out
a consistent definition of risk
and risk tolerance limits to
ensure that business units have
a common understanding when
identifying and assessing risks.
To enable ERM practices
throughout the Group,
we invested in a software
application known as the
GRC system to capture risks
and controls in risk registers.
The risk and control owners
periodically review and update
the registers, regardless of
where the businesses are
located geographically.
As the Group diversifies further
across multiple industries,
sectors, geographies and
jurisdiction, it becomes more
important than ever for the
senior management team and
the Board to have visibility of
key business risks. The GRC
system therefore provides the
needed transparency on risks.
12. Product Obsolescence
The Group has identified the
following significant business
risks and has reviewed
them with the Risk Review
Committee and the Board.
Mitigating measures are in
place to manage these risks.
More information about the
business risks can be found in
pages 80-83.
1. Competition
13. Export Controls
14. Compliance with Laws and
Regulations
15. Business Interruption
Significant business risks are
also identified in all M&A and
new business projects and
reviewed with the Risk Review
Committee.
4. Foreign Exchange
Further details on the Group’s
risk governance, including
responsibilities of the Board,
Audit Committee and Risk
Review Committee, can be
found on pages 106-122.
5. Credit
MATERIALITY
6. Project Management
Materiality comprises
assessment of risks and
opportunities. Sustainability
considerations are fed into our
risk identification and pursuit
of opportunities, through
our stakeholder engagement
channels and Business Foresight
Committee. New and existing
opportunities are assessed
against the ERM framework,
with levels of risk defined by
both financial and non financial
impact descriptors.
2. Risk Inherent in Operating
in a Global Market
3. Merger and Acquisition
7. Human Capital
8. Occupational Health and
Safety
9. Subcontractor Performance
and Key Suppliers
10. Product Quality, Safety and
Reliability
11. Post-sales Support
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Enterprise Risk Management & Materiality
IMPACT CONSIDERATION
In 2013, led by the Risk
Management department, the
Group conducted a materiality
assessment of aspects in the
GRI G4 guidelines released in
the same year. Responsibilities
for management and reporting
were assigned for each
material aspect. The material
aspects were mapped onto the
key business risks of the Group
to ensure completeness and
a clear understanding of areas
of risks each material aspect
posed. Please refer to pages
80-83.
The diagram on page 79
illustrates the material aspects
by level of direct impacts
(x-axis) and level of influence
from key internal and external
stakeholders (y-axis).
IMPACT CONSIDERATION
Stakeholder
Shareholders & Investors
Financial
Quality, Health
& Safety
Compliance
ü
ü
Customers
ü
ü
Regulators & Government
ü
Employees & other workers
Suppliers
Reputation
ü
INFLUENCE AND ASSESSMENT
IMPACT OF MATERIAL
ASPECTS
The Group is satisfied that the
ERM framework is sufficiently
robust in capturing financial
and non-financial impact
arising from sustainability
issues. Notwithstanding,
ST Engineering recognises that
there is room for improvement
in strengthening our
capacity and practices in the
sustainability journey.
The Group worked with a
team of external sustainability
experts to develop a
sustainability roadmap, built
on a gap analysis of where
ST Engineering stood vis-à-vis
regional and industry peers.
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ANNUAL REPORT 2014
INFLUENCE AND ASSESSMENT IMPACT OF MATERIAL ASPECTS
High
Customer Health & Safety
Anti-Corruption
Labour Practices &
Grievances Mechanism
Occupational Health & Safety
Compliance
(Products & Services)
Energy &
Greenhouse Gas
Emissions
Medium
Training & Education
Employment
Freedom of Association
& Collective Bargaining
Non-Discrimination
Labour Management
Relations
Supplier Assessment
Procurement
Practice
Local Communities
Environmental Products
& Services
Low
STAKEHOLDER INFLUENCE
Economic Performance
Low
Medium
High
ECONOMIC, ENVIRONMENTAL & SOCIAL IMPACT
INHERENT RISKS
Competition
Risk inherent in operating
in a global market
Merger & Aquisition
Foreign Exchange
Credit
Project Management
Human Capital
Occupational Health
& Safety (OHS)
Subcontractor Performance
& Key Supplies
Product Quality, Safety
& Reliability
Post-sales Support
Product Obsolescence
Export Controls
Compliance with Laws
& Regulations
Business Interruption
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E n t e r p r i s e R i s k M a n a g e m e n t & M a t e r i a l i t y ( c o n t ’d )
The Group’s inherent top risks:
RISK AREA
INHERENT RISK
RELEVANT GRI
MATERIAL ASPECTS
Strategic
Competition
•
The Group’s businesses are subject to competition from national and
multi-national firms in the various markets it operates in, and many
contracts are obtained through a competitive bidding process.
Energy and GHG
emissions
•
and Services
Risks inherent in operating in a global market
•
The Group conducts business in a number of countries and, as a result,
assumes risks that are associated with operating in a global market.
Some of these risks include:
Energy and GHG
emissions
•
and Services
•
Non-discrimination
•
and Collective
Bargaining
•
Anti-Corruption
•
Procurement Practices
•
Supplier Assessments
(Environmental, Labour
Practices, Human Rights
and Impacts on Society)
The Group’s ability to compete for contracts depends to a large extent on
the effectiveness and innovation of the solutions it offers, as well as its
ability to offer better value-for-money solutions.
As the Group seeks to strengthen its commercial business, speed to
market becomes ever more critical to success.
The Group conscientiously monitors market conditions and continually
seeks to innovate its processes and systems to better position itself in
both local and overseas markets.
1. Changes to government regulations and administrative policies that
may result in greater costs and constraints but at the same time present
new business opportunities;
2. Political changes that could lead to changes in the business environment
in which the Group operates;
3. Economic downturns;
4. Political instability and civil disturbances that could disrupt the Group’s
business activities
The Group seeks to maintain a more balanced portfolio by spreading
its business operations across several markets. It continues to pursue
new emerging markets such as Africa, Central Asia and the Gulf region
to further expand and diversify its revenue streams. The Group also
keeps pace with government regulations and administrative policies, and
ensure that appropriate actions are taken in response to these changes.
Merger and Acquisition
One of the avenues through which the Group seeks to grow its
businesses is the acquisition of business entities and operating assets or
joint ventures. M&A risks include the under-performance or failure of
acquired entities.
M&A activities, ranging from the identification of targets to conducting
due diligence, are supported by a dedicated team of investment
professionals and augmented by external professionals for specialised
services. The business proposals are guided by a given set of internal
investment criteria, evaluated by senior management and endorsed by
a Business Investment and Divestment Committee before seeking final
Board of Directors’ approval.
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ANNUAL REPORT 2014
RISK AREA
INHERENT RISK
RELEVANT GRI
MATERIAL ASPECTS
Financial
Foreign Exchange
•
•
•
•
•
•
Training and Education
Employment
Labour/Management
Relations
Labour Practices
Grievances Mechanisms
Non-discrimination
and Collective
Bargaining
Local Communities
The Group’s foreign exchange risk arises both from its subsidiaries
operating in foreign countries, generating revenue and incurring cost
denominated in foreign currencies, and from operations of its local
subsidiaries which are transacted in foreign currencies.
The Group’s foreign exchange exposures are primarily from USD and
Euro, and the Group enters mainly into forward currency contracts
to hedge against its foreign exchange risk resulting from anticipated
sale and purchase transactions denominated in foreign currencies in
accordance with the Group’s hedging policy.
The Group also enters into cross currency swap to hedge the foreign
exchange risk of its loans denominated in foreign currencies.
Credit
Credit risk, or the risk of counterparties defaulting, is managed through
the application of credit approvals, credit limits and monitoring
procedures. Where appropriate, the Company or its subsidiaries obtain
collateral from customers or arrange master netting agreements. Cash
terms, advance payments and letters of credit or bankers’ guarantees are
required for customers of lower credit standing.
Operational
Project Management
The main business activity of the Group relates to management and
execution of projects for defence and commercial customers. Risks
relating to project management are therefore inherent in the business.
These may include issues relating to project costs and schedules, as well
as contractual and quality matters.
The Group has project review and quality assurance systems in place to
mitigate such risks.
All contracts of material value require review by legal counsel, and significant
deviations from pre-approved standard contract terms and conditions are to
be highlighted and presented to higher levels of management for review and
approval.
Human Capital
The recruitment and retention of qualified and experienced personnel
is critical to achieving the Group’s strategic objectives. ST Engineering
continues to work with local authorities in markets where it operates,
and leverages training, retention schemes, scholarships as well as
alternative sources for hire to sustain its growth. Talent management
programmes also help to create a pool of potential successors for key
positions.
•
•
•
•
82
E n t e r p r i s e R i s k M a n a g e m e n t & M a t e r i a l i t y ( c o n t ’d )
RISK AREA
INHERENT RISK
RELEVANT GRI
MATERIAL ASPECTS
Operational
Occupational Health and Safety (OHS)
•
Occupational Health
and Safety
Subcontractor Performance and Key Suppliers
•
Procurement Practices
The Group is dependent upon the delivery of key materials or
components by suppliers and the performance by its subcontractors in a
timely manner, and in accordance to specifications. The respective sector
procurement function is responsible for establishing and managing endto-end integrated supplier arrangements within each of their respective
sectors. Supplier milestones and performance are reviewed periodically
by the respective project teams.
•
Supplier Assessment
(Environmental, Labour
Practices, Human Rights
and Impacts on Society)
Product Quality, Safety and Reliability
•
Customer Health
and Safety
•
Compliance (Products
and Services)
•
Product Obsolescence
•
The Group is affected by changes to technology and industry business
structures and models.
•
& Services
To provide a safe working environment, ST Engineering has integrated
safety measures into key business activities with detailed OHS policies.
The Group also seeks continuous improvement through proactive hazard
and risk identification and constant monitoring of the safety targets.
The Group has also initiated various programmes and activities to raise
OHS awareness, and inculcate a safety culture and instil a responsibility
in all of the employees. This includes regular safety briefings & trainings,
health talks and recreational activities.
Customers expect products and services to perform their intended
functions satisfactorily, and not pose a risk to health and safety. The
Group recognises that as systems become increasingly more complex,
the impact on the surroundings increases. Efforts must be made to
protect the safety of those who use the products. Accordingly, the Group
has implemented system safety in all the products since the 1990s.
The Group embraces system safety with emphasis of safety at the design
stage, carrying through to safety in use, and all the way to disposal.
The Group actively promotes awareness and a culture of system safety
within its organisation and among its key suppliers.
In addition, the Group has a comprehensive insurance programme for
product and service liability.
Post-sales Support
Post-sales support is essential to the Group’s overall strategy in
promoting customer excellence. It is often complex, as it involves high
volume of work that is driven by intermittent and unpredictable events,
in the countries where the customers are located.
The Group makes investments into infrastructures, systems and
processes to support our customers in the use of the product or
service post sales. This is critical to our customer retention, operational
performance and competitive differentiation.
To keep pace with these developments, the Group, through analysis of
the key technological trends and their potential impact on sustainable
growth, constantly identifies new areas for business development and
growth, promotes and manages innovative and creative efforts and
invests in R&D efforts.
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ANNUAL REPORT 2014
RISK AREA
INHERENT RISK
RELEVANT GRI
MATERIAL ASPECTS
Legal
Compliance
Export Controls
•
Compliance
Compliance with Laws and Regulations
•
The Group, with its operations in several parts of the world, is subject to
applicable laws and regulations of various jurisdictions. These laws and
regulations include anti-corruption laws, aviation laws and regulations,
export controls, safety and environmental regulations, anti-competition
laws, etc.
Energy and GHG
emissions
•
Water
•
Occupational Health
and Safety
•
Compliance
Business Interruption
•
Compliance
The Group recognises that quick recovery and resumption of business
operations after a disruption are critical to minimising financial,
operational and reputational impact.
•
Exports of ordnance products, which constitute a portion of the Group’s
sales, are typically subject to export control regulations. Changes in
these regulations could have an impact on the Group’s sales, while noncompliance could result in financial penalties, suspension of projects
or even restrictions on future export business. The Group continues to
place great emphasis on this area and has formal systems in place and
designated personnel to ensure export control regulations are complied
with.
Failure by the Group to comply with these laws and regulations may
result in criminal liabilities such as fines and penalties, and / or the
suspension or debarment of the Group from government contracts.
The Group has in place a framework that proactively identifies applicable
laws and regulatory obligations, and embeds compliance into the
day-to-day business processes.
Business
Continuity
Accordingly, it has in place a Business Continuity Management
Framework (BCM Framework), which embodies enterprise-wide
planning and arrangements of key resources and procedures that enable
the Group to respond and continue to operate critical business functions
across a broad spectrum of interruptions to the business, arising from
internal or external events.
Besides incorporating force majeure clauses in all contracts to mitigate
risk from acts of God, the Group also has in place a comprehensive
insurance programme aimed at mitigating financial losses that might
arise from such risks.
84
S u s t a i n a b i l i t y Ta r g e t s & P e r f o r m a n c e
WHAT WE DID IN 2014
WHAT WE WILL DO IN 2015
PROPELLING SUSTAINABLE GROWTH
Sustainability
Governance
•
Commenced alignment of environmental management
approach of the US operations
•Start to include US operation
in sustainability report
progressively from 2015
Innovation
•
Met target spending on R&D
•
Meet target spending on R&D
Productivity
•
More than 75% employees are involved in productivity
initiatives
•
Involve at least 75%
employees in productivity
initiatives
People
Excellence
•
Reviewed annual Team Excellence Competition assessment
criteria
•
•
Organised Team Excellence Convention 2014 based on
enhanced assessment criteria
Review questions for
Employee Opinion Survey
2015
•
Organise Team Excellence
Convention 2015
•
Organise Business Excellence
Seminar 2015
•
Continue journey to reduce
greenhouse gas intensity by
16% on a business as usual
basis for Singapore operations
by 2025 with the base year as
2010
•
Achieve ISO 50001
certification for all Singapore
operations
•
Measure water efficiency for
Singapore operations
•
No significant fines or
sanctions for non-compliance
to environmental laws and
regulations
EXECUTING OPERATIONS RESPONSIBLY
Environment
• Implemented energy management system in line with ISO
50001
•
Participated in the Carbon Disclosure Project (CDP) report for
first time
•
Tracked water consumption
•
No significant fines or sanctions for non-compliance to
environmental laws and regulations
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ANNUAL REPORT 2014
WHAT WE DID IN 2014
WHAT WE WILL DO IN 2015
EXECUTING OPERATIONS RESPONSIBLY (CONT’D)
Health &
Safety
Sustainable
Procurement
•
Improved noise conservation programme for employees
indentified to be at risk for Early Noise Induced Deafness
(E-NID)
•
Achieved AFR and ASR below national benchmarks
•
No significant fines or sanctions for non-compliance to safety
laws and regulations
•
Engaged a consultant to help develop a group-wide
sustainable procurement strategy
•
Strengthen safety culture
and improve health and
safety performance through
continuous review of
programmes
•
No significant fines or sanctions
for non-compliance to safety
laws and regulations
•
Develop ST Engineering
Sustainable Procurement
Policy and Code of Conduct
for Suppliers
•
Continue community
initiatives, including strategic
and long-term partnerships
•
Improve reporting based on
LBG guidelines
SUPPORTING COMMUNITIES
Community
•
Adopted London Benchmarking Group (LBG) guidelines
•
Extended strategic community development partnership
that leverages on ST Engineering’s unique expertise
More information on targets, programmes, performance and activities in 2014 can be found under respective sections.
86
Enablers: Innovation & Productivity
“
INNOVATION
ST Engineering’s unrelenting
focus on innovation earned
us a place on Forbes’ list of
Companies 2014.
”
Innovation is central to
our value creation model.
Synthesising the most
advanced ideas with practical
needs, we continuously push
frontiers to maintain our
competitive edge. Where there
are opportunities, innovation
serves as a critical lever to
create products and services
that empower our customers
to operate in a sustainable and
resource-efficient manner.
Our Group Chief Technology
Officer chairs our Technology,
Intellectual Property and
Innovation (TII) Committee.
The TII Committee is tasked
to ensure there is a stream of
ideas and innovations in the
pipeline, with representatives
across our businesses to
facilitate innovation of
integrated solutions.
Working with the TII Committee
is the Technology Management
Committee, which also reports
to the Chief Technology Officer.
This committee focuses on the
execution aspect of projects
relating to innovation, and
discusses and identifies action
plans for the Group. The
committee also draws insights
from emerging technologies
and trends, and shares them
with the business units.
Each business sector
nurtures its research and
development projects, and
also works across businesses
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ANNUAL REPORT 2014
on collaborative research and
development projects. Inputs
from the Business Foresight
and Customer Excellence
committees are incorporated
into innovation project
development.
Employees with outstanding
ideas are given prizes and
the opportunity to develop
their ideas. In addition, the
ideas and achievements of
these employees are given
recognition at both Group and
business sector level at events
including the annual President’s
Forum.
ST Engineering’s unrelenting
focus on innovation earned
us a place on Forbes’ list of
Companies 2014, the only
Singapore company on the list.
Some platforms to encourage
innovation are as follows:
•
•
•
Our Advanced Engineering
Centre works closely with
inventors, innovative
firms and the academia,
to develop strategic
partnerships that have the
potential to develop new
business or product ideas
for the Group.
The Idea Competition is an
annual event for employees
to present their ideas
for innovative products,
services, new businesses
and environmentally
friendly solutions to senior
management. Winning
ideas are nurtured by the
relevant business units.
The quantity, quality and
geographical diversity of
entries received have grown
steadily over the years.
THINKOUT is our in-house
biennial event to bring
together entrepreneurial
and creative problem
solvers from across the
business sectors and
functions. The event is
structured to leverage on
the confluence of diverse
expertise and experiences
to generate new
perspectives to overcome
challenges facing our
customers.
In inculcating an innovative
culture, employees are
encouraged to constantly
challenge conventions,
explore new ideas and
implement innovative ideas.
PRODUCTIVITY
Productivity is about better use
of our resources: from facilities,
equipment and materials to the
skills, knowledge and teamwork
of our people. In doing so,
we improve our value
proposition to our customers.
At ST Engineering, productivity
is also a key strategy where
we engage our employees
collectively. We believe that
workforce productivity and
engagement is critical to the
success and resilience of the
Group.
The Group’s productivity
agenda focuses on six drivers of
productivity:
1. Enabling a productive work
environment;
2. Encouraging innovation and
leveraging technology;
3. Developing people and
enhancing skills;
4. Organising work systems
and reviewing work
processes;
5. Adopting best practices and
networking;
6. Measuring what matters.
Each business sector has
a Productivity / Economic
Value Added (EVA) Steering
Committee which identifies
critical initiatives to focus on
and determine the monitoring
and review process, based on
the nature of the initiatives.
Sources of productivity
initiatives include Kaizen
Projects, Quality Improvement
Teams, EVA projects, Idea and
Innovation Competitions, and
the Staff Suggestion Scheme.
More than 75% of employees
contributed to productivity
initiatives in 2014. We believe
that every employee is an
expert in their job and thus
best positioned to seek
improvements. We empower
employees through our
continuous learning approaches
to learn to spot and eliminate
wastage of resources in
business processes. Exemplary
contributions are acknowledged
through awards such as Top
Kaizen Awards, EVA Awards,
and the best teams and
individuals are recognised at
the annual Business Excellence
Seminar as well as best
practices and project sharing
sessions.
88
E n a b l e r s : I n n o v a t i o n & P r o d u c t i v i t y ( c o n t ’d )
AT ST ENGINEERING, OUR EMPLOYEES ARE ENCOURAGED AND
EMPOWERED TO COME UP WITH INNOVATIVE SOLUTIONS TO
IMPROVE OUR WORK PROCESSES. HERE ARE SOME EXAMPLES
OF OUR INITIATIVES:
Enhancing and improving
turnaround time
The jig that helps reduce manpower requirement.
In the offshore service industry,
the removal and retrofitting
of vessel propeller and shaft
is a labour intensive process
that involves certain levels of
risks. Such tasks are part of the
repair services that ST Marine
provides. ST Marine designed
and built an innovative jig that
comprised a propeller shaft
extractor, a supporting stand
with roller assembly and a
detachable track.
Besides reducing the crew size
required by 50% from six men
to three, the use of the jig also
prevents body injuries and
fatigue.
The project earned several
commendations from
customers for quality work
achieved within a shorter
turnaround time. This project
won the Star Award in the
ST Engineering Team
Excellence Convention
Innovation & Quality Circle 2014.
Increasing cost effectiveness,
reducing equipment required
A Kaizen project was initiated
to improve the productivity
of the hard chroming of
SAR21 and GPMG barrels.
After a detailed review of
the process, the cycle time
per batch was reduced
by 40% and the operating
manpower required was
reduced by 33%. An adaptor
was developed and fitted to
the GPMG barrel rotating
fixture, such that both types
of barrels can be chromed
in the same loading. This
results in greater production
flexibility and efficiency, and
cost savings from requiring
two different sets of rotating
fixtures.
ST Kinetics’ SAR21 assault rifle and GPMG gun
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ANNUAL REPORT 2014
Reducing labour time,
increasing quality of work
An important task in aircraft
maintenance, repair and
overhaul (MRO) is to detect
corrosion, remove it and
measure the remaining
aircraft skin thickness.
ST Aerospace worked with
an external party to develop
a dedicated testing platform
using Phase Array Ultrasonic
technology coupled with
automated data extraction to
carry out the measurements.
This innovative inspection
and measurement method
resulted in manhour savings,
reduced fatigue level of the
technician performing the task
and improved the turnaround
time for the maintenance of
the aircraft. The technology
is being incorporated into
Airbus’ Structure Repair
Manual for the A319, A320
and A321. Other airlines and
aircraft MRO companies are
similarly able to do so as the
SRMs are available to them.
Building on its success, we
are developing software
upgrades that will expand
the capabilities to perform
other inspections such as
delamination and porosity of
composite parts.
Improving turnaround time with the new inspection platform.
Leveraging Knowledge
Management
ST Electronics developed a
software programme that
allows its service engineers
to rectify network and system
failures more efficiently. Called
the System Maintenance
Management and Knowledge
Portal, it standardises the
historical data collected by
engineers, and provides a
more accurate fault analysis.
This makes it easier for the
engineer to review past
service records and be better
equipped to attend to the
problem. With the Portal, time
taken to restore a network and
system from failure on-site has
improved by 25%.
The System Maintenance Management and Knowledge Portal helps service engineers work more efficiently.
90
People Excellence
Investing in our people
is the key to our continued
success and delivery of strategic
advantage both locally and
globally.
HOW WE MANAGE
The People Excellence
and Learning Organisation
(PELO) committee drives our
human capital management
programmes.
Key indicators, such as turnover
rates and training utilisation,
are reported and analysed
monthly at business sector
level. Selected indicators are
also reported quarterly at
Group level.
Our Employee Value Proposition
articulates our commitments in:
•
•
•
•
Investing in high performing
teams by providing
continuous development
opportunities to our people,
and nurturing and grooming
leaders;
Providing continuous
learning and development
opportunities to strengthen
our technical and leadership
competencies;
Developing a workforce that
promotes innovation and
entrepreneurship, guided by
our core values;
Rewarding excellence and
encouraging work-life
harmony.
All business sectors have talent
management and development
programmes based on specific
industry needs.
Information on how we engage
our employees can be found on
page 67.
to outstanding students who
have demonstrated leadership
qualities. These students go
on to pursue undergraduate
and graduate studies in
courses relevant to the Group
in leading universities such
as Massachusetts Institute of
Technology, Imperial College
London and Tsinghua University.
18 scholarships were awarded
in 2014.
The Young Engineers
Programme (YEP) was
developed to promote
engineering as a career. Junior
college students interact with
our Chief Technology Officers,
and are assigned mentors
and buddies throughout the
programme. They are given
internship opportunities and
invited to visit our facilities.
22 students were selected for
the YEP in 2014.
Internships for tertiary
students are thoughtfully
designed to provide exposure
to various business and career
opportunities. ST Engineering
offered 665 internships this year.
At the business sector
level, ST Aerospace
signed Memorandum of
Understandings (MOUs) with
Singapore Polytechnic and
Republic Polytechnic to develop
skilled aviation talents, where
participating students will
be able to work on real-life
projects through industrial
attachments. 25 students
participated in 2014.
To attract individuals from
non-marine backgrounds,
ST Marine works with industry
and union partners to equip
these individuals with
knowledge and skills to progress
as marine technical associates,
supervisors and engineers in
the marine industry.
Nurturing a Talent Pool
Grooming Our Leaders
To identify and develop talent
early, scholarships are awarded
At ST Engineering, we believe
in grooming leadership at
all levels. The online selfassessment tool, Leadership
Enhancement Portal (LEAP),
provides a database of
learning resource items that
helps to develop a Personal
Development Action Plan based
on an employee’s preferred
learning style. In addition,
ST Engineering also engages
external consultants to facilitate
leadership competency
assessments.
Employees not only have
the opportunity to assume
managerial roles and move
up the general management
track, but the more technicallyinclined also have the option to
progress along the engineering
specialist path. These two
career tracks fulfil different
career aspirations. Employees
who are versatile may also
move between tracks to gain
more exposure.
We identify, groom and secure
a pipeline of leaders to take
up key positions in the Group.
Senior employees may be
selected for Senior Leadership
Development Programme
and Executive Education
Programmes in leading
universities such as Harvard,
Stanford and INSEAD.
Diversity and Inclusion
In demonstrating our
commitment to diversity and
inclusion, ST Engineering signed
the Employer’s Pledge of Fair
Employment Practices. There
were no reported incidences
of discrimination by employees
in 2014.
We regard our workers who
are past retirement age as a
valuable and stable resource.
Thus, we have also signed a
Memorandum of Understanding
to offer retirement planning and
reemployment opportunities
to all employees leading up
to and beyond the retirement
age. In 2014, there are 483
employees beyond the age of
91
ANNUAL REPORT 2014
Scholarships and internships
are also offered to students
studying at top universities in
China and India. In 2014, there
were 25 interns from China and
8 from India.
Career Development
Our training development
plan and performance
management system work in
tandem to support the career
progression of our employees.
All employees will have at least
one performance appraisal
session annually with their
supervisors, where they can
discuss their current work
progress and career aspirations.
It also serves as a platform to
identify skill gaps required for
the current and next level of job
requirements.
We continue to send
employees for professional
training and skills upgrading,
including undergraduate
and postgraduate studies. In
2014, 80 employees received
sponsorships for undergraduate
and graduate studies, including
9 who were sent for the
Master of Defence Technology
and Systems Programme.
We are committed to
developing our employees
for excellence, beyond
technical competencies.
Training programmes include
communication skills such
as business writing, and our
GLOBAL WORKFORCE PROFILE
TOTAL: 22,413
BY SECTOR
Rewarding Our People
%
32
%
27 9 %
2
8%
4%
We offer competitive
remuneration, and reward
individual contribution with
performance-based pay and
bonuses. Regular salary reviews
are conducted to ensure that
our annual remuneration
package remains competitive.
For example, we have revised
the entry pay of our engineers
to ensure that we remain
attractive as a career option
for young engineering talent.
Aerospace
Electronics
We grant eligible employees
performance shares with
KPIs that drive efficiency,
productivity and profitability.
The Group also gives out
awards to recognise deserving
employees.
Promoting Work-Life Harmony
We recognise that employees
increasingly seek a balance
between work and personal life.
We provide a supportive work
environment with a degree
of work schedule flexibility.
A formal framework for flexible
work arrangements has been
introduced.
Our Sports & Recreation Clubs
organise activities catering to
the needs of different employee
profiles. These activities include
sports like badminton, soccer
and bowling; customised
wellness programmes ranging
from talks and annual health
screenings to kickboxing,
shiatsu and cardio dance; and
social activities such as canteen
sales, prawn-catching and
karaoke contests.
Union Relations
ST Engineering recognises
that harmonious labour
management relations are
built on trust and fairness.
2014
Land Systems
Marine
Others
BY GEOGRAPHY
65
20
%
%
1 % 14 %
<1 %
As the Group expands its global
footprint, a conscious effort is
made to equip our employees
with the skills to operate
effectively in culturally diverse
business units through overseas
assignments, postings and
attachment programmes.
Building Interpersonal Skills
Programme, which covers a
range of topics such as active
listening strategies.
Singapore
Americas
2014
Asia Pacific
(Excl. Singapore)
Europe
Others
BY QUALIFICATIONS
34 %
24
%
1
16 8 %
8% %
62. ST Engineering also works
collaboratively with the union
to facilitate the re-employment
of older employees,
implementing processes and
systems ahead of the tripartite
guidelines announced in 2010.
2014
Degree & equivalent
Diploma & equivalent
Trade Certificates
‘O’ & ‘A’ levels & equivalent
Secondary level & lower
92
P e o p l e E x c e l l e n c e ( c o n t ’d )
“
We ensure our unions
maintain representations on
key committees such as safety
and welfare so that concerns
that affect daily activities are
better heard.
”
We respect all employees’
fundamental rights to freedom
of association, including the right
to be members of trade unions.
In Singapore, we take guidance
from the Industrial Relations Act.
The excellent relations between
the unions and management
have earned the Group several
awards from the National Trades
Union Congress.
In 2014, 33% of our employees
are covered under collective
bargaining agreements. We
ensure our unions maintain
representations on key
committees such as safety and
welfare so that concerns that
affect daily activities are better
heard. Union-Management
meetings are held at least
WORKFORCE PROFILE FOR
SINGAPORE OPERATIONS
EMPLOYEES VS SUPERVISED WORKERS
Supervised Workers*
Employees
Male
Female
Male
Female
11,650
2,978
2,284
93
50
,6
11
Full-time
80
%
%
2,98
7
EMPLOYEES BY EMPLOYMENT TYPE & GENDER
2014
Female
*
Female
Male
Female
11,635
2,958
15
20
Supervised workers refer to foreign workers whom we hire through
contractors. They work on our premises and are supervised by us.
EMPLOYEES
BY EMPLOYMENT CATEGORY
158
325
359
≥65
62+ - 65
4%
42
6,2
2
88
4,
60+ - 62
43 %
BY AGE GROUP
3,101
50+ - 60
33 %
3,651
40+ - 50
4,397
30+ - 40
2014
Executives
Part-time
Male
EMPLOYMENT
3,5
04
We have achieved zero
stoppage of work arising from
any industrial action to date.
BY GENDER
Male
Managers
The coverage of health
and safety topics in formal
agreements with unions can be
found on page 95.
EMPLOYMENT
20
2
twice a year. At these UnionManagement meetings, both
parties discuss and resolve
staff issues expeditiously,
clarify policies and seek buy-in
on new initiatives, improve
the management-employee
relationship and generally
enhance the working climate.
Monthly staff branch union
meetings are means to discuss,
clarify and resolve issues, and
seek buy-in on new initiatives.
2,631
20+ - 30
Non-Executives
18 -20
6
93
ANNUAL REPORT 2014
2014
TURNOVER
BREAKDOWN
BY GENDER
No. of turnover
BY AGE GROUP
No. of turnover
Male
890
Female
274
18 - 20
20+ - 30
30+ - 40
40+ - 50
0
318
507
201
50+ - 60
60+ - 62
62+ - 65
≥65
114
15
3
6
NEW HIRES
TRAINING HOURS
BY GENDER
No. of new hires
BY GENDER
No. of training hours
BREAKDOWN
BREAKDOWN
Male
Female
Male
Female
1,373
447
45.4
34.6
BY AGE GROUP
No. of new hires
BY EMPLOYEE CATEGORY
No. of training hours
18 - 20
20+ - 30
30+ - 40
40+ - 50
5
837
527
288
50+ - 60
60+ - 62
62+ - 65
≥65
129
14
12
8
Manager
Executive
Non-Exec
33.4
51.9
39.2
We continuously review our training and
development programmes to ensure a dynamic
workforce. The average training hours per employee
in 2014 is 43.2 hours.
94
E X E C U T I N G O P E R AT I O N S R E S P O N S I B LY
ST ENGINEERING IS COMMITTED TO PROTECTING THE
ENVIRONMENT AND THE HEALTH AND SAFETY OF
OUR EMPLOYEES, CUSTOMERS, AND THE
COMMUNITIES WHERE WE OPERATE.
The Environment, Health
and Safety (EHS) Committee
comprises 5 sub-committees,
namely: Environment, Energy,
Occupational Health, Workplace
Safety and System Safety.
The Committee meets quarterly
to set direction and review
the overall EHS performance
and progress of each of the
sub-committees. The subcommittees also meet regularly
to monitor and discuss
practices and initiatives to
enhance their respective areas.
Benchmarking exercises are
conducted externally to identify
opportunities for cross-learning.
To encourage individuals and
teams from business sectors
to find innovative solutions to
EHS challenges, our business
sectors compete for rewards
and recognition at the Group,
industry and national levels.
The ST Engineering BE EHS
Excellence Award recognises
outstanding efforts in EHS
innovation and helps raise the
profile of EHS issues among
our employees.
ST ENGINEERING ENVIRONMENT, HEALTH AND SAFETY (EHS) STATEMENT
We at ST Engineering are committed to protecting the environment for our future generations;
promoting the wellbeing and safeguarding the occupational health and safety of our employees;
and ensuring the safety of our products and services for our customers.
We fulfill this commitment by:
1. Complying fully with applicable EHS regulations.
2. Working with our business partners on their compliance with applicable EHS regulations and
our EHS requirements.
3. Integrating EHS best practices into our daily activities.
4. Permeating a positive EHS culture with a strong sense of individual and collective responsibility
among our employees and business partners working within our premises.
5. Improving our products and processes continually to reduce our environmental impact in the
areas of emissions, waste material generation, water utilisation and energy consumption.
6. Setting realistic annual targets and monitoring our performance to continually enhance the
effectiveness of our environmental, health and safety management systems towards both
minimising our carbon and water footprints, and achieving zero incident in workplace injury,
occupational disease and environmental pollution.
7. Ensuring our products and services are safe to produce, operate, support and service while
minimising environmental impact through the use of system safety principles.
95
ANNUAL REPORT 2014
Health & Safety
ST Engineering is committed
to ‘Safety Before Profit’.
The health and safety of
our employees and
contractors working on our
products and delivering our
services, as well as the health
and safety impact arising
from the use of our products
are very important to us.
We recognise the positive
impact of health and safety on
increasing work effectiveness,
raising employees’ morale
and enhancing our Group’s
reputation. At the same
time, we are cognizant of the
negative impact manifested
through lost time, higher costs
and schedule delays. Product
safety is a key criterion in our
product quality assessment.
Our system safety initiatives
ensure that safety implications
are thoroughly assessed and
managed throughout the
entire product life cycle.
HOW WE MANAGE
Through our monitoring and
continuous improvement
efforts, we aim to achieve
our goal of zero accidents.
We believe that ‘Safety
Starts With Me’ and strive
to build a culture whereby
all staff abide by all safety
rules and proactively stop
all unsafe practices they
see in the workplaces. The
Group’s duty of care extends
to all employees, visitors,
supervised workers and subcontractors working within
our premises.
The EHS Committee drives
our health and safety efforts.
The objectives are set out in
the EHS Statement in page
94 and the EHS Committee
ensures health and safety
management systems are
properly implemented and
improved upon, setting
performance indicators and
monitoring them. Programmes
such as sharing opportunities
and benchmarking projects
take place annually to drive
and sustain improvements.
The EHS Committee also
organises recognition events
to acknowledge efforts of
individuals and teams who
contribute ideas to improve
our health and safety
practices.
Each business sector monitors
leading and lagging health and
safety indicators on a monthly
basis, with Group-wide data
reviewed on a quarterly basis.
Data is analysed over the past
years, then presented and
discussed at management
review meetings.
Joint representation of
management and employees
supports a collaborative
safety conscious culture.
Representatives are selected
from the worker level up to
supervisory personnel, middle
management and higher
management in compliance
with Workplace Safety
and Health (WSH) Council
regulation. Our collective
agreements with our trade
unions cover among other
things, the following: personal
protective equipment; joint
management-employee
health and safety committees;
participation of worker
representatives in workplace
safety inspection, training
and education; complaints
mechanism; right to refuse
unsafe work; periodic
inspections; and clear
and large safety message
signboards at our facilities.
Occupational Health and Safety
All our local business units
are certified to OHSAS
18001:2008 standards by
established certification
bodies. Our operations in
Singapore also adhere to the
WSH Act.
All business sectors participate
in the national WSH Award,
“
We believe that ‘Safety
Starts With Me’ and strive to
build a culture whereby all
staff abide by all safety rules
and proactively stop all unsafe
practices they see in the
workplaces.
”
keeping abreast of best
practices. We also organise
induction briefings, health
talks and occupational health
seminars for our employees,
and toolbox briefings for
employees and contractors
where WSH issues are
discussed. Other initiatives
are sector-specific, such as
safety training for work-atheight workers, supervisors
and managers. In addition,
to better prepare ourselves
for business continuity, we
conduct emergency response
exercises such as fire drills
and chemical spill simulations.
Our business sectors also
share information with one
another on successful safety
initiatives and accident cases
so the rest can learn from the
experiences.
To raise awareness of
workplace safety to the wider
community, ST Engineering
partnered WSH Council to
organise the Safety@Work
Creative Awards for the tenth
year in 2014. The winning
posters and animation clips
by tertiary students were
subsequently reproduced and
made available to industrial
companies as resources for
training.
96
H e a l t h & S a f e t y ( c o n t ’d )
Accident Frequency Rate (AFR)
and Accident Severity Rate (ASR)
registered a slight increase
across other sectors as a
result of greater reporting
awareness within the
workforce. The increase in
AFR and ASR for Land Systems
is due to three injuries that
arose from use of machinery
and tools, that resulted in
recuperation periods over two
months. We will strengthen
training and communication to
ensure that our employees are
able to handle equipment in a
safe manner.
All sectors have implemented
the Behaviour-based Safety
ACCIDENT FREQUENCY RATE
(Number of incidents per million man hours)
3
2.5
2.7
2.5
MARINE
2
1.6
1.23
0.98
0
0.78
0.22
0.23
2012
2013
Aerospace
Land Systems
1.5
1.3
1.86
1
AFR and ASR figures across
sectors remain below national
industry averages.
ACCIDENT FREQUENCY RATE
MANUFACTURING
2
(BBS) programme. BBS aims to
eliminate substandard work
practices, a primary cause of
injury, by shaping mindsets
to achieve a safety focused
culture and environment.
1.38
1
0.71
1.26
0.62
0.53
0.34
2014
0
2012
Electronics
National Average (Manufacturing)*
2013
2014
National Average (Marine)*
Marine
ACCIDENT SEVERITY RATE
ACCIDENT SEVERITY RATE
MANUFACTURING
MARINE
150
500
130
469.9
400
99
100
300
69
48.33
43.79
50
31.59
1.88
24.17
11.44
5.91
2012
2013
2014
13.48
0
Aerospace
Land Systems
*
200
149
100
9.2
Electronics
National Average (Manufacturing)*
0
107
13.5
2012
2013
National Average (Marine)*
153
25.1
2014
Marine
2014 national average of manufacturing and marine sectors is an average of January to June only, as full year data is not yet available
as of date of report preparation.
97
ANNUAL REPORT 2014
PERFORMANCE INDICATORS
(2014)
AEROSPACE
ELECTRONICS
LAND SYSTEMS
MARINE
25
11
34
15
Audiometric Examination
(Percentage of staff attended out of those
identified at risk)
100%
100%
100%
100%
Respiratory Protection Training
(Percentage of staff attended out of those
identified at risk)
100%
100%
100%
100%
Number of Occupational Disease Cases
0
0
0
0
Number of Noise Induced Deafness Cases
0
0
1
0
No. of Occupational Health Activities
Organised (target>4)
Our occupational health
programmes focused on
risk assessment, hygiene
monitoring, medical
examination, noise induced
deafness management and
promotional activities. Our
occupational health risk
assessment programme
involves regular reviews and
surveillance inspections of
the work environment. All
employees identified to be
exposed to occupational
health hazards will undergo an
annual medical examination.
System Safety
categories of products and
services are assessed for
improvement.
ST Engineering steers all its
businesses towards a culture
of designing products that
are safe to produce, safe to
operate and safe to maintain
through its system safety
initiatives. It also strives to
continually improve its system
safety practices, especially in
the area of software safety
as more and more products
incorporate embedded smart
features. Health and safety
impact of all significant
We conducted inter-sector
studies and sharing and
engaged vendors to keep
abreast of best practices
in these focus areas. WSH
Each business sector
proactively identifies areas
for improvement and plan
new initiatives to promote
system safety.
We continue to participate
actively in the annual
International System Safety
Conference to learn and
share processes, methods
and techniques that advance
teams are formed to look
into innovative practices and
solutions to improve safety
and health in the workplace.
In 2014, the WSH teams also
won various WSH awards in
both industry and national
conventions. For a list of our
health and safety awards,
please refer to page 63.
objectives in the system
safety discipline. In 2014,
three papers were selected
for presentation at the
conference. In addition, each
business sector also presents
at least one topic for our
annual internal ST Engineering
System Safety Seminar, held in
October 2014.
98
Environment
Climate change, widely thought
by climate scientists to be caused
by an increase in greenhouse
gases in the atmosphere, is an
issue of increasing urgency.
Correspondingly, climate
change is an issue of increasing
importance to ST Engineering.
We believe that a low carbon
business strategy not only
enables us to better respond to
climate change regulations and
price volatility of hydrocarbon
resources, it also provides us
with opportunities to meet the
rising demand for energy efficient
products. Being energy efficient
also cuts our operating costs.
Water is a valuable natural
resource and ST Engineering
believes in conserving
it and ensuring that our
operations are conducted
in the most water efficient
manner. Likewise, pollution
is stringently controlled to
protect our employees, and the
communities where we operate.
HOW WE MANAGE
Environmental efforts are driven
by the EHS Committee. Our
objectives are set out in the EHS
Statement (see page 94).
•
Benchmarking efforts and
investing in technology
towards environmental
sustainability.
All ST Engineering’s local
business units are certified
to ISO 14001:2004, and are
audited by reputable third
party auditors on a yearly basis.
In addition, internal auditors
who are our employees trained
by external consultants also
carry out audits to assess
the implementation of our
environment management
system and standards. The
audits also assess business
units’ compliance with key
legislation.
Environmental issues are among
those periodically reviewed and
addressed by the Control SelfAssessment (CSA) Team and the
Regulatory Compliance Audit
(RCA) Team.
In 2014, there were no
significant fines or incidents
relating to non-compliance
of environmental laws and
regulations.
Environmental Management
Plan for Excellence
We take progressive
steps towards achieving
environmental sustainability
and environmental excellence.
Our challenge is to minimise
our environmental impact
across all our business sectors’
operations. Our commitments
to tackle the challenges include:
The environmental
management plan for
excellence shows how
ST Engineering will progress
through management
systems to leadership and
excellence, in alignment
with our vision, mission
and key strategic thrusts.
•
Analysing our energy
consumption profile and its
impact on climate change;
•
Taking initiatives
towards better resource
management through
conservation programmes;
•
Making continuous
effort on caring for the
environment and prevention
of environmental pollution;
and
Our first steps towards
environmental sustainability
focus on our processes that
minimise the use of resources
and environmental waste. The
next steps will be examining the
possibility of using renewable
resources and evaluating the
life cycle of ST Engineering’s
products and processes to help
us understand how they fit into
the natural cycle, meaning that
raw materials would come from
renewable sources and waste
would be assimilated into the
environment without causing
harm.
The Group sets annual
objectives and targets for its
performance relating to the
environment. These targets
are supported by a work plan,
which is an integral part of
the EHS Committee’s annual
plan. This work plan and EHS
Committee’s annual plan are
reviewed quarterly.
The business sectors conduct
a wide range of briefings and
training on environmental
compliance and related
management topics for their
employees in accordance to
their needs. Other means
of communication to raise
environmental awareness
include sharing of best practices,
study visits and articles relating
to the environment published in
our newsletters. The newsletters
are distributed to all employees
and some of our customers.
and Services
Cities and organisations are
increasingly looking to reduce
their environmental impact.
Our innovation and productivity
initiatives incorporate these
considerations into our product
development.
Energy efficiency, in particular,
is an area of focus. Besides
developing energy efficient
products, we also design midlife upgrades with state-of-theart technology to ensure that
products continue to perform
in an energy efficient manner.
This is important as most of our
products have a long service
life, and tend to consume
significantly more energy than
when first manufactured.
In 2014, our investments in
innovation resulted in energy
reductions from our products and
services, with estimated energy
savings of 5,200 terajoules.
99
ANNUAL REPORT 2014
ENERGY CONSUMPTION
Climate Change
An external consultant was
engaged in 2010 to map out
the carbon footprint of
ST Engineering’s operations in
Singapore. In 2011, the 2010
greenhouse gas emissions
computation was audited
and validated to ISO14064.
Operations in the USA had
begun their greenhouse gas
emissions computation
journey in 2014. All operations
in Singapore are planned to be
ISO 50001 certified in 2015.
We target to reduce
greenhouse gas intensity by
16% below 2025 business as
usual levels, with the base
year set at 2010.
2012
2013
2014
Direct Energy
Consumption (GJ)
410,356
578,560
362,749
Indirect Energy
Consumption (GJ)
511,396
527,996
527,061
Energy intensity*
(GJ/S$ m)
245.23
286.04
235.34
GREENHOUSE GAS INTENSITY*
(tCO 2e/S$ M)
30
We are continuously exploring
energy efficiency initiatives,
including technological
investments that provide a
reasonable rate of return.
These initiatives include:
29
•
Installation of data loggers;
26
•
Replacement of chillers
and lighting to energy
efficient models;
25
•
Installation of motion
sensors in toilets and
staircases;
•
•
28
27
The amount of energy
consumed is very dependent
on the product mix delivered
during the year. The
greenhouse gas intensity
remained at about the same
level since 2012. Scope 1, 2
and 3 emissions decreased
slightly in 2014.
25.94
26.76
2012
2013
2014
GREENHOUSE GAS EMISSIONS
(tCO 2e)
2014
Use of transparent
corrugated sheet to bring
natural daylight to the
production area in the
day; and
Implementation of
productivity work
measures such as more
efficient layout and
process flow.
28.52
2013
2012
29,598
39,454
32,223
Scope 1 emissions
*
8,775
59,719
9,231
61,650
59,979
Scope 2 emissions
8,379
Scope 3 emissions
Intensity figures are normalised using revenue from Asia, which Singapore is a significant
contributor.
In 2014, ST Engineering participated in the
Carbon Disclosure Project (CDP) for the first time,
and was named Best New Responding Company
(for Hong Kong and South East Asia).
100
E n v i r o n m e n t ( c o n t ’d )
Greenhouse Gas Inventory
ISO 14064-1:2006 specifies
principles and requirements
at the organisation level for
quantification and reporting
of greenhouse gas (GHG)
emissions and removals. The
GHG Protocol defines direct
and indirect emissions
as follows:
•
Direct GHG emissions are
emissions from sources that
are owned or controlled by
the reporting entity.
•
Indirect GHG emissions
are emissions that are
a consequence of the
activities of the reporting
entity, but occur at sources
owned or controlled by
another entity.
The GHG Protocol further
categorises these direct and
indirect emissions into three
broad scopes:
•
Scope 1: All direct GHG
emissions.
•
Scope 2: Indirect
GHG emissions from
consumption of purchased
electricity, heat or steam.
•
Scope 3: Other indirect
emissions, such as the
extraction and production
of purchased materials and
fuels, transport related
activities in vehicles not
owned or controlled by the
reporting entity, electricity
related activities (e.g. T&D
losses) not covered in Scope
2, outsourced activities,
waste disposal, etc.
101
ANNUAL REPORT 2014
Environment Protection
ST Engineering business sectors
use water in their facilities for
processes, products, cooling,
cleaning and general sanitation
uses. Our source of water is
solely from municipal water
supplies.
In 2014, our water consumption
increased by about 26%. Water
efficiency improvement efforts
were focused on Marine and
Land Systems sectors, which
accounted for 70% of total
water consumption. Initiatives
undertaken included installation
of digital water meters at
strategic locations within the
facilities, installation of watersaving devices such as water
thimbles and flow reducing
valves, and the use of NEWater
for certain processes. Water
conservation awareness was
promoted through toolbox
briefings, talks, productivity
projects and other campaigns
such as World Water Day. In
addition, the business sectors
aim to implement the Water
Efficiency Management Plan in
2015, so as to further improve
water conservation initiatives.
All ST Engineering business
sectors have introduced waste
minimisation and recycling
initiatives. We constantly
monitor our operations to
look out for opportunities to
reduce, recycle or reuse the
waste generated. This includes
the use of computer numerical
controlled (CNC) cutting
machines to minimise material
wastages and initiating doublesided printing for all working
documents.
Based on the Code of Practice
on Pollution Control, our
business units have taken
conscious efforts to reduce
pollutants generated as a result
of operations. This includes
•
Regular monitoring of waste
discharges, e.g. air, liquid,
solid;
•
Segregation of waste
through waste bin
management programme
which include heavy metals,
lead batteries, contaminated
oil and plastics etc;
•
Substituting the use of
environmentally friendly
degreaser and chemicals
for components and vehicle
washing/maintenance;
•
Centralising the storage,
monitoring and distribution
of chemicals for better
control; and
•
Introduction of wet abrasive
blasting to progressively
replace conventional
blasting.
WATER CONSUMPTION
(‘000 m3)
908
2014
2013
2012
More than 1,500 employees forming a water droplet in support of World Water Day.
721
818
102
Sustainable Procurement
ST ENGINEERING RECOGNISES OUR DEPENDENCY ON THE TIMELY
DELIVERY AND QUALITY OF KEY MATERIALS PROVIDED, AND QUALITY
OF PERFORMANCE BY SUB-CONTRACTORS AND SUPPLIERS. THESE
ARE RISKS THAT WE MANAGE DILIGENTLY AND MITIGATE WHERE
POSSIBLE. TO ENSURE ST ENGINEERING’S LONG TERM GROWTH AND
PROFITABILITY, WE MUST MANAGE THE SUPPLY CHAIN IN A MORE
EFFECTIVE AND SUSTAINABLE MANNER.
TOTAL PURCHASE VALUE
(S$M)
2,479
2014
1,797
2013
1,722
2012
0
2500
PURCHASE VALUE
BY SECTOR
4%
2%
36 %
%
25 33 %
Aerospace
Electronics
2014
Land Systems
Marine
Others
NUMBER OF SUPPLIERS BY LOCATION
Total number of suppliers: 15,675
%
9.5
7.4 %
5.4 %
0.9 %
%
0.4
%
.4
76
Singapore
USA/Canada
Europe
2014
Asia (excluding Singapore)
Australia/New Zealand
Others
In December 2013, we engaged
a consultant to assist in the
development of a procurement
sustainability strategy for the
Group.
Working with the consultant,
the Group mapped out our
supply chain and undertook a
supply chain sustainability risk
assessment, which included a
SWOT analysis, and assessing
the economic, social and
environmental impacts in the
supply chain.
The Group’s businesses
rely on a diverse range of
suppliers to deliver high
quality goods and services
to customers. Our suppliers
include Original Equipment
Manufacturers (OEMs),
Commercial Off-the-Shelf
(COTS) goods manufacturers
and suppliers, authorised
distributors, stockists and
agents, wholesalers and traders,
contractors, sub-contractors
and services providers. Across
our business sectors, we
purchase a wide variety of
goods and services as illustrated
on page 103.
The Group purchased more
than $2.47b worth of goods and
services in 2014 from a diverse
range of suppliers across our
businesses. Our supplier base
included 15,675 suppliers
located in 73 countries, of
which about 76.4% per cent of
these were suppliers based in
Singapore. In 2014, Singaporebased suppliers accounted
for 52.6% per cent of our
total purchase value at the
Group level. Less than 5% of
our suppliers were located in
developing countries. In other
words, a large majority of our
suppliers are in developed
countries where social and
environmental risks are
considered to be low.
The Group intends to develop
a sustainability vision, policy
and strategy, and a supply
chain monitoring and audit
framework which will be
progressively implemented
across the Group from 2015.
103
ANNUAL REPORT 2014
ST ENGINEERING GROUP SUPPLY CHAIN
An Overview
AEROSPACE
ELECTRONICS
LAND SYSTEMS
MARINE
TYPES OF GOODS AND SERVICES PROCURED
Aircraft engine, parts
and components.
Oil and lubricants and
chemicals.
Aviation fuel.
Engineering services and
on-wing support.
Electronic hardware,
parts, components and
equipment.
Communication
hardware, parts,
components and
equipment.
Tools and GSE Support.
Electrical hardware,
parts, components and
equipment.
Calibration.
IT Software.
Safety Equipment.
Miscellaneous industrial
tools and items.
Services,
sub-contractors.
Packaging material.
Safety equipment.
Services,
sub-contractors.
Engines, transmissions,
electronics, electrical,
tyres and other parts
and components of
vehicles.
Major marine
equipment
Materials: steel,
aluminum, titanium,
rubber, plastic,
chemicals etc
Navigational aid
and communication
equipment.
Casting, Forging,
Extrusion.
Vehicle fuel, oil and
lubricants.
Production equipment
and supply.
tools and items.
Measuring and testing
equipment.
Safety equipment.
Services,
sub-contractors.
IT Equipment and Services
Office supplies
Professional Services
Marine hardware and
automation.
Bulk material: Timber
and building material,
steel material,
Aluminum material,
rubber material
tools and items.
Marine fuel.
Furniture & fittings,
sanitation fittings.
Safety equipment
Services,
sub-contractors.
104
SUPPORTING COMMUNITIES
Community
Employees organised an outing to River Safari for the underprivileged.
Our engineering expertise provides us an opportunity to inspire students
to build a better future for themselves and others. In partnership with
Assumption Pathway School (APS), ST Engineering organised a project
where students build professional grade remote-controlled vehicles with
the support of our staff mentor. The project cumulated in an exciting
and memorable race event and the formation of the school’s RC (remote
control) Club where current and future students could join to learn more
about wireless control applications.
With the objective to inspire and motivate students to stay and do well
in school, ST Engineering aimed to forge a well-rounded partnership.
Students participated in student attachments, and are given opportunities
to visit our facilities and interact with our engineers and technicians. We
created academic awards for excellence and the most improved, and
funded an assistance scheme for needy students to support expenses
such as textbooks, transport, and school lunches.
At ST Engineering, supporting
communities where we
operate enables us to cultivate
employees with compassion,
one of our core values. We
are committed to be a good
corporate citizen, a firm that
our employees are proud to
belong to. We seek to leverage
on our unique expertise to
benefit lesser served segments
of society.
HOW WE MANAGE
We focus our efforts on the
less fortunate in society. Our
community contributions
operate both at a Group and
business sector level. In order
to assess our contributions
and impact on the community
systematically, we adopted
the London Benchmarking
Guidelines (LBG) in 2014.
In recent years, ST Engineering
has been exploring longterm partnerships where it
can contribute with its vast
engineering resources and
expertise. To this end, we
embarked on a partnership
with Assumption Pathway
School (APS) in 2013. APS is
an educational institution
that works to transform
and empower students who
have difficulty accessing
or completing mainstream
education. We have extended
it for the next three years with
the hope that the partnership
can develop in size and content
to benefit more students. Our
sponsorship amounts to an
annual commitment of $30,000.
We are working with SG Enable,
a unit of the Ministry of Social
and Family Development, to
support the Enabling Village.
When completed in third
quarter of 2015, the Enabling
Village will be a focal point
of services for Persons with
Disabilities (PWD) and their
caregivers. Within the Enabling
Village is a one-stop consultancy
105
ANNUAL REPORT 2014
COMMUNITY CONTRIBUTIONS
TOTALING $1.37M IN 2014
ISSUES ADDRESSED
%
ADDITIONALLY, $0.8M
WAS RAISED AND 5,375
HOURS WERE DEDICATED
BY OUR EMPLOYEES FOR
OUR CHARITY PARTNERS
IN 2014.
2014
Cash
Time
In-Kind
Management
and education centre to
showcase how assistive and
information technologies
(AT/IT) can help meet the
needs of PWD, as well as
educate caregivers, employers
and the public about AT/IT
equipment available.
The centre at the Enabling
Village will also allow our
engineers to put to good use
their expertise to help PWD.
We contribute financially
to various charities on a
regular basis. For example,
we continued our support for
the President’s Challenge in
2014 with a contribution of
$370,000. Our donations were
channelled to Community
36 %
%
20 24 %
2%
77
1
2% 1%
10
%
OUR CONTRIBUTIONS
Social Welfare
Environment
18
%
2014
Education
Health
Chest and Voluntary Welfare
Organisations by the organiser
of the President’s Challenge.
Our people also give their time.
Our employees organise visits,
outings and celebrations with
the less fortunate in society,
and also volunteered for the
International Coastal Cleanup
Singapore.
Employees and their families participated in the International Coastal Cleanup Singapore.
Arts & Culture
106
C O R P O R AT E G O V E R N A N C E
ST Engineering’s framework of
corporate governance reflects
an institutional mindset of
accountability and transparency
at all levels of the Group. We
believe that good corporate
governance is not only the
Board’s responsibility, but that
of the management and every
level of the organisation.
This Report sets out
ST Engineering’s corporate
governance processes, practices
and activities in 2014 with
specific reference to the
guidelines of the Singapore
Code of Corporate Governance
2012 (the Code).
BOARD MATTERS
Board’s Conduct of its Affairs
(Principle 1)
The Board is accountable to
shareholders for overseeing
the effective management of
the business. To this end, the
Board relies on the integrity
and due diligence of its
senior management and its
external advisors and auditors.
In addition to its statutory
responsibilities, the Board
reserves the following matters
for its decision:
•
approval of the Group’s
overall long term strategic
objectives and ensuring
that decisions made are
consistent with these
objectives;
•
approval of annual budgets,
major funding proposals,
investment and divestment
proposals in accordance
with the approved
delegation of authority
framework;
•
appointment of the
President & CEO, Board
changes and appointments
on Board committees;
•
review of the risk
management framework
through its Risk Committee
as set out in page 118; and
•
approval of the unaudited
quarterly, half yearly and
full year audited results
prior to their release.
Besides monitoring the
performance of the Group,
the Board also provides
guidance on sustainability
issues such as environmental
and social factors, as part
of the overall business
strategy. Board meetings may
include presentations by the
managements of its four key
subsidiaries to discuss growth
strategies relating to their
specific business sectors.
In the discharge of its functions,
the Board is supported by nine
Board committees to which
it delegates specific areas of
responsibilities for review
and decision making, and the
Executive Office. The Executive
Office comprises the President
& CEO, Deputy CEO, Deputy
CEO (Corporate Development)
and the Chief Financial
Officer (CFO). Board members
receive monthly consolidated
management reports on the
financial performance of
each business sector, capital
commitments and significant
operational highlights to keep
the Board apprised of business
and performance updates in
the Group.
A formal letter is sent to a
director upon his appointment
setting out his duties and
responsibilities. A new director
is also given a briefing by
the President & CEO on
the strategic direction and
performance of the Company
and its key subsidiaries as
well as his/her duties and
obligations.
Visits to the Group’s facilities
are also arranged for new
directors to enable them to
develop a good understanding
of the Group’s business and
operations and the respective
key managements. The
Board is routinely updated
on the relevant laws,
continuing listing obligations
and accounting standards
requiring compliance, and their
implications for the Group, so
as to enable each Director to
properly discharge his duties
as Board and Board committee
member.
Depending on their skillsets
and background, directors
are sponsored for relevant
courses, conferences and
seminars in order that they
can be better equipped to
fulfil their governance role
and to comply with directors’
obligations. Where there
are statutory and regulatory
changes that affect the
obligations of directors,
the Company will organise
briefings by external legal
counsel. During the year,
a briefing by external legal
counsel was conducted on
changes to the Companies
Act passed in Parliament on
8 October 2014. The changes
would likely be effective in
2Q2015. We also arranged
a session for our external
auditors to brief the Board
on impending changes to the
accounting standards relating
to revenue recognition which
would likely impact the way
ST Engineering recognises
its revenue and profit. These
changes would likely take
effect in 2017.
The Board convenes scheduled
meetings on a quarterly
basis to coincide with the
announcement of the Group’s
quarterly results. Special Board
meetings may be convened as
107
ANNUAL REPORT 2014
and when necessary to consider
urgent corporate actions, long
term strategies or specific
issues of importance.
To facilitate the Board’s
decision-making process,
the Company’s Articles of
Association provides for
Directors to participate in Board
meetings by teleconference or
video conference. Decisions
of the Board and Board
committees may also be
obtained via circulation.
The Board monitors the
performance of the Group
through its Board committees.
At the end of every Board
meeting, the Chairman allocates
time for its non-executive
Directors to meet without the
presence of Management.
The number of Board and Board committee meetings held during the year is tabulated below:
TYPE
Of MEETING
NO.
Of MEETINGS
ATTENDANCE
AVERAGE
Board
5
88%
Audit Committee
6
92%
Business Investment and Divestment
Committee
–
–
Executive Resource and Compensation
Committee
5
87%
Nominating Committee
3
100%
Senior Human Resource Committee
1
100%
Risk Review Committee
5
77%
Budget and Finance Committee
2
100%
Research, Development and Technology
Committee
3
89%
Tenders Committee
–
–
Minutes of the Board Committee meetings are made available to all Board members.
Board Composition
and Guidance
(Principle 2)
The Board comprises 14 directors
and an alternate director.
The Board, through the
(NC), reviews the size and
composition of the Board taking
into consideration the need to
balance the diversity of skillsets
and backgrounds with the
independence element. The
Board is also mindful of the need
for board rejuvenation.
During the year, the Board
was pleased to welcome the
following 3 new non-executive
directors:
•
MG (NS) Ng Chee Khern
joined the Board as nonindependent non-executive
Director and member of
the Budget and Finance
Committee on 20 May
2014. MG (NS) Ng is the
Permanent Secretary
(Defence Development)
(Ministry of Defence) and
2nd Permanent Secretary
(Ministry of Health).
•
Ms Olivia Lum Ooi Lin was
appointed independent
non-executive Director and
member of the Risk Review
Committee on 20 May
2014. She is the Executive
Chairman and Group CEO of
Hyflux Ltd.
•
Dr Beh Swan Gin joined the
Board as an independent
non-executive Director on
1 September 2014. He is the
Chairman of the Singapore
Economic Development
Board with effect from
1 December 2014.
108
The Board consists of members
with established track record
in defence, business, finance,
banking, technology, legal
and management. Each nonexecutive director brings to
the Board an independent
perspective based on his
training and expertise to make
balanced and well considered
decisions.
The Board has nine independent
directors who represent more
than 60% of the Board. The
Code requires the independent
directors to comprise at
least half of the Board.
The independence of each
director is determined upon
appointment and reviewed
annually by the NC.
The NC has affirmed that the
independent directors are
Mr Kwa Chong Seng, Mr Koh
Beng Seng, Mr Venkatachalam
Krishnakumar, Mr Davinder
Singh, Dr Stanley Lai, Mr Khoo
Boon Hui, Mr Quek See Tiat, Ms
Olivia Lum and Dr Beh Swan Gin.
The Board agrees with the NC’s
assessment.
Mr Koh Beng Seng was
appointed independent
non-executive Director on 15
September 2003. Mr Koh has
extensive experience in financial
services and knowledge of
financial regulations which
enables him to effectively
lead the Audit Committee in
providing oversight on internal
controls to support the Board.
He has also demonstrated
independence of character and
judgment in his deliberations
at the Audit Committee and
Board level. The Board has, on
the recommendation of the
NC, determined that Mr Koh is
independent notwithstanding
that he has served more than
nine years on the Board.
As Chairman of the Audit
Committee, Mr Koh continues to
express his independent views
and challenges management at
Audit Committee meetings.
Mr Quek Poh Huat was
appointed a non-executive
Director on 15 April 2002.
Mr Quek who will be retiring
at the coming AGM of the
Company in April 2015 has
decided not to seek re-election.
Mr Venkatachalam
Krishnakumar was appointed
independent non-executive
Director on 15 April 2002.
Mr Krishnakumar has
considerable financial and
operations experience having
served as Chief Operating
Officer and Chief Financial
Officer for the Asia Pacific
Consumer Bank of Citigroup
when he retired in February
2005. Mr Krishnakumar’s
knowledge of information
technology is an added
advantage and enables him
to contribute to various
aspects of financial and
operational issues. Although
Mr Krishnakumar has served
as an independent director on
the Board for more than nine
years, he continues to exercise
independence of judgment in
Board deliberations.
The Board has, at all times,
exercised independent judgment
in decision making, using its
collective wisdom and experience
to act in the best interests of the
Company. Any director who has
an interest that may conflict with
a subject under discussion by
the Board either recuses himself
from the information flow and
discussion of the subject matter
or declares his interest and
abstains from decision-making.
The Board, through the NC,
reviews its size and composition
from time to time to ensure it
has the right blend and diversity
of skills, expertise, experience
and perspectives to enable the
Board to effectively oversee
ST Engineering.
The Board held a total of five
meetings during the year to
consider, among other things,
the approval of the FY2013
results and release of the
1Q2014, 2Q2014 and 3Q2014
results. The Board reviewed the
Group’s strategy plans to ensure
that the work of the Group is
aligned with its charter and
corporate objectives taking into
account the major challenges in
the global environment in which
we operate.
Chairman &
Chief Executive Officer
(Principle 3)
The Chairman and President &
CEO roles and responsibilities
are kept separate in order to
maintain effective oversight.
No individual or small group
of individuals dominates
the Board’s decision making
process. The President &
CEO and senior management
regularly consult with
individual Board members and
seek the advice of members of
the Board committees through
meetings, telephone calls as
well as by electronic mail.
The Chairman is responsible
for leading the Board and
ensuring the effective
functioning of the Board to
act in the best interests of the
Company and its shareholders.
The Chairman facilitates the
relationship between the
Board, President & CEO and
management, engaging them
109
ANNUAL REPORT 2014
in constructive discussions
over various matters, including
strategic issues and business
planning processes. He
ensures that discussions at
the Board level are conducted
objectively and professionally
where all views are heard
and key issues are debated in
a fair and open manner. The
Chairman also ensures that
adequate time is provided for
strategic issues. He represents
the views of the Board to the
shareholders.
Mr Kwa is considered an
active Chairman on the basis
of, among other things, the
following considerations:
i.
ST Engineering, as a global
conglomerate, has reached
a point where rapid
changes in technology,
the consolidation of
the defence, aerospace
and engineering-related
industries and challenges
of the global economy have
thrown up many challenges.
Our ability to meet these
challenges and at the same
time, transform ourselves, is
vital to its sustainability;
ii. To achieve this, we need
an active and experienced
Chairman, with the right
background and global
experience; one who is
willing to devote time and
is committed to leading the
Board and engaging with and
guiding the management in
strategic issues; and
iii. Mr Kwa has spent and
continues to spend time in
the Company and has also
involved himself in senior
talent hires to strengthen
the Company and Group and
to manage succession.
The President & CEO is
Mr Tan Pheng Hock who is
an executive Director. He is
accountable to the Board for
the conduct and performance
of the Group. He sits on the
boards of its key subsidiaries
to ensure that decision-making
processes and information
flows are effectively channelled
in a timely manner to ensure
alignment with the
ST Engineering Group’s
policies. He has been delegated
authority to make decisions
within certain financial limits
authorised by the Board. He
is supported in his work by
Mr Lee Fook Sun, Deputy
CEO who is concurrently
President, Defence Business
and President of ST Electronics
and Mr Vincent Chong Sy
Feng, Deputy CEO (Corporate
Development). They took up
their new appointments on
1 December 2014. Mr Tan
continues to be supported
by the CFO, Ms Eleana Tan
Ai Ching and the respective
Presidents of the subsidiaries.
Board Membership &
Evaluation of Performance
(Principles 4 and 5)
Supporting the Board are the
following Board committees:
•
•
Audit Committee
•
Business Investment and
Divestment Committee
•
Executive Resource and
Compensation Committee
•
Budget and Finance
Committee
•
Research, Development and
Technology Committee
•
Senior Human Resource
Committee
•
•
Tenders Committee
The NC is responsible for
reviewing the composition
of the Board and identifying
and selecting suitable
candidates to the Board, in
particular, candidates with
the appropriate qualifications,
skillsets and experience who
are able to discharge their
responsibilities as directors.
Shortlisted candidates are
recommended to the Board
for approval. The NC is also
responsible for reviewing
annually and determining the
independence of non-executive
directors, conducting board
performance evaluation,
succession planning for CEO
and director training and
development.
The NC comprises three
non-executive independent
directors. Mr Venkatachalam
Krishnakumar is the Chairman
of the NC. The other members
are Mr Kwa Chong Seng and
Dr Stanley Lai.
During the year, the NC reviewed
and affirmed the independence
of the Company’s independent
directors and the composition
and profile of Board members in
relation to the needs of the
ST Engineering Board.
The NC does not make any
determination on the tenure of
an independent non-executive
director as the NC takes the
view that in ascertaining a
Director’s independence,
it is his ability to exercise
110
independence of mind and
judgment to act honestly and
in the best interests of the
Company that matters.
The NC also reviewed the
active chairmanship role and
the attributes of an active
chairman, as set out under
Principle 3 above.
The NC conducted a collective
assessment of the Board to
gauge the effectiveness of
the Board’s performance,
the adequacy of the blend
of skillsets and experience
of the Board, and the quality
and timeliness of board and
committee meeting agendas
and papers submitted by the
Management. The review was
internally undertaken with
each Director being asked to
complete a questionnaire.
Their feedback was collated
and shared with the Board.
The review indicated that the
Board continues to function
effectively.
The NC has also noted the
list of other directorships
held by our directors taking
into consideration their
principal commitments. The
NC is satisfied that each of the
directors is able to devote time
to his directorship role in the
Company.
The Board has considered and
agreed not to set guidelines
for maximum directorships in a
listed company that a director
can hold. Before a director
accepts an invitation to join the
Board, he is required to affirm
that he is able to commit
sufficient time to perform
his role effectively. Annually,
an incumbent director is
asked to affirm that he has
adequate time to devote to
his Board responsibilities.
The ST Engineering Board
members are selected on
the basis of their relevant
skillsets, experience, calibre
and willingness to contribute.
In addition, each Director is
required to provide an annual
affirmation of commitment
to his Board responsibilities.
With these considerations,
the Board is of the view that
setting a maximum number of
board representations on listed
companies for our directors is
not needed.
The NC is also responsible for
renewal and succession plans
to ensure Board continuity.
At each AGM, one third of
the directors with the longest
term in office since his last
re-election is required to retire.
A retiring director may submit
himself for re-election. Under
this provision, Messrs Koh
Beng Seng, Quek Poh Huat,
Venkatachalam Krishnakumar
and Davinder Singh will retire.
MG (NS) Ng Chee Khern,
Ms Olivia Lum and Dr Beh
Swan Gin, who are newly
appointed, will hold office
until the forthcoming AGM
of the Company. The retiring
directors, being eligible, have
offered themselves for reelection, save for Mr Quek Poh
Huat who has decided not to
seek re-election.
Except for MG (NS) Ng Chee
Khern who is the brother of
LG Ng Chee Meng, a Director
of the Company, each of the
retiring non-executive directors
has confirmed that he/she
does not have any relationship
with his/her fellow directors
nor with the Company and its
substantial shareholders.
The Board, acting on the
recommendation of the NC,
proposes that each of the
retiring Directors, save for
Mr Quek Poh Huat, be reelected at the Company’s
forthcoming AGM.
With the exception of Mr Tan
Pheng Hock, the remaining
thirteen directors are nonexecutive Directors.
111
ANNUAL REPORT 2014
M
C
M
M
C
M
M
M
M
C
M
M
M
M
C
M
M
M
M
M
C
M
C
M
M
Tenders Committee
(established on 5/1/1998)
M
Rolling list of any 3 Board Directors
Senior Human Resource Committee
M
Research, Development and Technology
Committee
C
Budget and Finance Committee
C
M
Executive Resource and Compensation
Committee
Business Investment and Divestment
Committee
BOARD MEMBER
Mr KWA Chong Seng
Mr TAN Pheng Hock
Mr KOH Beng Seng
LG NG Chee Meng
MG (NS) NG Chee Khern*
Mr QUEK Tong Boon
Mr QUEK Poh Huat
Mr Davinder SINGH
Mr KHOO Boon Hui
Mr QUEK See Tiat
Ms Olivia LUM Ooi Lin*
Dr BEH Swan Gin#
COL Alan GOH Kim Hua+
Audit Committee
The composition of the Board committees as at 31 December 2014 is tabulated below:
DENOTES:
C Chairman
M Member
*
Appointed Member on 20 May 2014
#
Appointed Member on 1 September 2014
+
Alternate Director to LG NG Chee Meng
Access to Information
(Principle 6)
The Management furnishes
Board members with monthly
management reports, providing
updates on key operational
activities and financial analysis.
The Board also has unrestricted
access to the President &
CEO, Deputy CEO, Deputy CEO
(Corporate Development), the
CFO, management and the
Company Secretary as well as the
internal and external auditors and
the risk management team. The
Board may also seek independent
professional advice, if necessary.
Board papers are sent to
directors at least three days prior
to meetings in order for directors
to be adequately prepared for
the meetings.
The Company Secretary
attends all Board meetings
and ensures that board
procedures are followed. The
Company Secretary advises
the Board on governance
matters including their timely
disclosure obligations. She also
assists with the co-ordination
of continuing training for
board members to keep the
Board up-to-date on corporate
governance matters. The
appointment and removal of
the Company Secretary is a
matter for the Board as
a whole to decide.
112
REMUNERATION MATTERS
Procedures for Developing
Remuneration Policies
(Principle 7)
Level and Mix of Remuneration
(Principle 8)
Disclosure on Remuneration
(Principle 9)
ROLE Of EXECUTIVE RESOURCE
AND COMPENSATION
COMMITTEE
The Executive Resource and
Compensation Committee
(ERCC) performs the role of the
remuneration committee. The
ERCC comprises Mr Kwa Chong
Seng as Chairman,
Mr Venkatachalam Krishnakumar
and Dr Stanley Lai. The members
of the ERCC have held senior
positions in large organisations
and are experienced in the
area of executive remuneration
policies and trends. All the ERCC
members are independent nonexecutive directors.
The ERCC met five times during
the year. All decisions at any
meeting of the ERCC are decided
by a majority of votes of the ERCC
members present and voting
(the decision of the ERCC shall
at all times exclude the vote,
approval or recommendation of
any member who has a conflict
of interest in the subject matter
under consideration).
The ERCC performs the following
duties and responsibilities:
Executive Remuneration
General Framework
•
Reviews and recommends
to the Board the Group’s
general framework for
determining executive
remuneration including the
remuneration of the Chief
Executive Officer (CEO),
top five key management
executives of the Group
Companies and other senior
management executives
(collectively referred to
as “Senior Management
Executives”).
Executive Director and Senior
Management Executives
•
•
Reviews and recommends to
the Board the entire specific
remuneration package and
service contract terms for
the CEO, who is also the
executive Director.
Considers, reviews,
approves and/or varies (if
necessary) the entire specific
remuneration packages and
service contract terms for
the Senior Management
Executives of the Group
Companies. For FY2014,
the Board reviewed and
approved the specific
remuneration packages and
service contract terms for the
key management executives.
Non-executive Director
Remuneration
•
Reviews and recommends
to the Board the
remuneration framework
(including directors’ fees)
for non-executive Directors
on the relevant Group
Boards.
Equity Based Plans
•
Approves the design of equity
based plans and reviews and
administers such plans.
Executive and Leadership
Development
•
•
Oversees the development of
management with the aim of
a continual build up of talent
and renewal of strong and
sound leadership to ensure
the continued success of the
Group and its businesses.
Approves appointments
to Senior Management
Executive positions in the
Group Companies and
reviews succession plans for
key positions in the Group
Companies.
The Senior Human Resource
Committee, chaired by
Mr Kwa Chong Seng, comprises
LG Ng Chee Meng and Mr Tan
Pheng Hock. The Committee
reviews the talent management
and leadership development
initiatives to build a leadership
pipeline for the Group.
By supporting and directing the
Group’s talent management
and leadership initiatives,
the Committee has helped
to enhance the process of
identification and development
of talents to be groomed for
senior positions.
For financial year 2014, Carrots
Consulting Pte Ltd was engaged
as remuneration consultant
(Remuneration Consultant) to
provide professional advice
on board and executive
remuneration matters.
Carrots Consulting and its
principal consultant, Mr Johan
Grundlingh, are independent
and are not related to the
Group or any of its Directors.
EXECUTIVE REMUNERATION
STRUCTURE
Remuneration for the Senior
Management Executives
comprises a fixed component,
variable cash component,
share-based component and
benefits.
A. Fixed Compensation:
The fixed component comprises
the base salary and compulsory
employer contribution to an
employee’s Central Provident
Fund (CPF).
B. Variable Cash Compensation:
The variable component
includes the Monthly
Performance Bonus (which is
1/12 of the 13th month salary),
Performance Target Bonus and
EVA-based Incentive Scheme.
Performance Target Bonus (PTB)
The PTB is a cash-based
incentive for Senior
Management Executives which
113
ANNUAL REPORT 2014
is linked to the achievement
of annual performance targets
that will vary depending on
their job requirements.
Individual performance
objectives are set at the
beginning of each financial year.
The objectives are aligned to the
overall strategic, financial and
operational goals of the Group
and Company, and are cascaded
down to a select group of key
executives using scorecards,
creating alignment between
the performance of the Group,
Company and the individual.
While the performance
objectives are different for each
executive, they are assessed on
the same principles across the
following four broad categories
of targets:
•
•
•
•
Core Business
People Development &
Teambuilding
Organisation Development
Self Development
The individual PTB payouts for
the CEO and key management
executives are determined
by the ERCC based on the
Group, Company and individual
performance at the end of the
financial year. The maximum
PTB payout is capped at 2.5
times of monthly base salary.
EVA-based Incentive Scheme
(EBIS)
The EBIS is established with
the objective of motivating and
rewarding employees to create
sustainable shareholder value
over the medium term achieved
by growing profits, deploying
capital efficiently and managing
the risk profile and risk time
horizon of the business. A portion
of the annual performancerelated bonus of the Senior
Management Executives is tied to
the EVA achieved by the Group in
the financial year.
Under the plan, one-third of the
accumulated EVA-based bonus,
comprising the EVA declared
for the financial year and the
balance of such bonus brought
forward from preceding years
(which comprises multiple years
of incentive dollars retained in
the EVA bank), is paid out in
cash each year. The remaining
two-thirds are carried forward
in the individual executive’s EVA
bank. Amounts in the EVA bank
are at risk because negative EVA
will result in a clawback of EVA
accumulated in previous years.
This mechanism encourages the
senior management to work for
sustained EVA growth and to
adopt strategies that are aligned
with the long-term interests of
the Group.
In addition, the Group has a
clawback facility with respect
to the EVA bank in the event of
a restatement of the financial
results of the Group subsequent
to an earlier misstatement and
provisions for the forfeiture
of the remaining EVA bank
balance on termination due to
misconduct or fraud resulting in
any financial loss to the Group.
Based on the ERCC’s assessment
that the actual performance
of the Group in financial year
2014 has partially met the predetermined targets, the resulting
annual EVA declared under EBIS
was adjusted accordingly.
C. Share-based Compensation:
Share awards which were
granted in financial year 2014
were based on the Singapore
Technologies Engineering
Performance Share Plan 2010
(PSP2010) and the Singapore
Technologies Engineering
Restricted Share Plan 2010
(RSP2010) approved and
adopted by shareholders of the
Company at the Extraordinary
General Meeting held on
21 April 2010. Yearly awards
under the PSP2010 and RSP2010
do not exceed the internal
annual limit of 1% of the total
number of issued shares of the
Company, set by the ERCC.
Details of the share plans and
awards granted are given in
the Share Plans section of the
Directors’ Report from pages
130 to 133.
PSP2010
The PSP2010 is established
with the objective of motivating
Senior Management Executives
to strive for sustained growth and
performance in the Group.
Pursuant to the PSP2010, the
ERCC has decided to grant
contingent awards on an annual
basis, conditional on meeting
targets set for a three-year
performance period. With effect
from financial year 2010, the
performance measures used in
PSP grants under PSP2010 are:
•
Absolute Total Shareholder
Return (TSR) against Cost of
Equity hurdles (i.e. measure
of absolute Wealth Added);
and
•
Relative TSR against
Defensive Stock Index, the
constituents of which are
selected “defensive stock”
companies that have similar
market risk as the Group and
are listed on the Singapore
Exchange Securities Trading
Limited (SGX).
A minimum threshold
performance is required for
any performance shares to be
released to the recipient at
the end of the performance
period. The actual number of
performance shares released will
depend on the achievement of
set targets over the performance
period, capped at 170% of the
conditional award.
The final PSP award is
conditional on the vesting
of the shares under the
RSP2010 which have the same
performance end period.
The Group has clawback
policies for the unvested
shares under PSP2010 in
the event of exceptional
circumstances of restatement
of the financial results of the
114
Group subsequent to an earlier
misstatement, or of misconduct
or fraud resulting in any
financial loss to the Group.
The Group has attained an
achievement factor which is
reflective of outperforming
the pre-determined target
performance level for PSP
awards granted based on the
performance period from
financial year 2012 to 2014.
RSP2010
The RSP2010 is established
with the objective of motivating
managers and above to strive
for sustained long-term growth
and superior performance in
the Group. It also aims to foster
a share ownership culture
among employees within the
Group and to better align
employees’ incentives with
shareholders’ interest.
Pursuant to the RSP2010, the
ERCC has decided to grant
contingent awards on an annual
basis, conditional on targets
set for a two-year performance
period. The performance
measures, set based on the
Group corporate objectives, are:
•
•
Group EVA Spread; and
Group EBITDA Margin.
A minimum threshold
performance is required for any
restricted shares to be released
to the recipient at the end of the
performance period. The actual
number of shares released will
depend on the achievement of
set targets over the performance
period, and will be determined
by the ERCC at the end of the
performance period, capped at
150% of the conditional award.
The shares will be released over
three consecutive years at the
rate of 50%, 25% and 25%.
The Group has clawback
policies for the unvested
shares under RSP2010 in
the event of exceptional
circumstances of restatement
of the financial results of the
Group subsequent to an earlier
misstatement, or of misconduct
or fraud resulting in any
financial loss to the Group.
The Group has attained an
achievement factor which is
reflective of partially meeting
the pre-determined target
performance level for RSP
awards granted based on the
performance period from
financial year 2013 to 2014.
D. Market-Related Benefits:
The benefits provided are
comparable with local market
practices.
period from financial year 2008
to financial year 2013.
Under the Code, the
compensation system shall
take into account the risk
policies of the Group, be
symmetric with risk outcomes
and be sensitive to the time
horizon of risks. The ERCC has
conducted a Compensation Risk
Assessment to review the various
compensation risks that may
arise, and introduced mitigating
policies to better manage risk
exposures identified. The ERCC
will undertake periodic reviews of
the compensation-related risks.
The Code requires a company
to disclose the names and
remuneration of the CEO
and at least the top five key
management personnel (who are
not also directors or the CEO).
Details of the remuneration
package for the CEO are provided
in the Summary Compensation
Table for Directors on pages
116 to 117. Details of the
remuneration packages for the
key management executives
are provided in the Summary
Compensation Table for Key
Management Executives on
page 117.
During financial year 2014, there
were no termination, retirement
and post-employment benefits
granted to Directors, CEO and key
management executives other
than in accordance with the
standard contractual agreement.
In performing the duties as
required under its Terms of
Reference, the ERCC ensures
that remuneration paid to the
Senior Management Executives
is strongly linked to the
achievement of business and
individual performance targets.
The performance targets as
determined by the ERCC are set
at realistic yet stretched levels
each year to motivate a high
degree of business performance
with emphasis on both short- and
long-term quantifiable objectives.
A Pay-for-Performance Alignment
study was conducted by the
Remuneration Consultant and
reviewed by the ERCC; it was
found that there was sufficient
evidence indicating Pay-forPerformance Alignment for the
Group in both absolute and
relative performance terms
against a peer group of large
listed companies for the six-year
Non-executive Directors (NEDs)
have remuneration packages
consisting of Directors’ fees
and attendance fees, which
are approved in arrears by
shareholders for services
rendered in the previous year.
The Directors’ fee policy is
divided into basic retainer fees
and additional fees for serving on
Board committees.
There were no employees
who were immediate family
members of a Director or the
CEO, and whose remuneration
exceeded S$50,000, during
financial year 2014.
NON-EXECUTIVE DIRECTOR
REMUNERATION
For services rendered in financial
year 2014, eligible NEDs
will receive 70% of the total
Directors’ fees in cash and 30%
of the total Directors’ fees in the
form of restricted shares which
are governed by the terms of
RSP2010, subject to shareholders’
approval at its AGM in April 2015.
As the restricted shares are
awarded in lieu of Directors’
compensation in cash, the shares
will be awarded outright as fully
115
ANNUAL REPORT 2014
paid shares with no performance
conditions attached and no
vesting periods imposed. To
encourage the alignment of
interests of the NEDs with the
interests of shareholders, the
share award has a moratorium
on selling. Each eligible NED is
required to hold shares in the
Group worth the lower of: (a)
the total number of shares in
the Group awarded to such
NED as payment of the shares’
component of the NEDs’ fees for
financial year 2011 and onwards;
or (b) the number of shares of
equivalent value to the prevailing
annual basic retainer fee for a
Director of the Group. An NED
can sell all his shares in the
Group a year after the end of
his Board tenure.
The Board recommends that
Mr Kwa Chong Seng be recognised
for his contributions with an all-in
fee of S$600,000 per annum
(Active Chairman fee) having
served as an Active Chairman for
the full financial year 2014, subject
to shareholders’ approval at the
forthcoming AGM in April 2015.
The Active Chairman fee is in lieu
of all Board and Board Committee
basic retainer fees and meeting
attendance fees. The fee will be
paid in a combination of cash
(70%) and shares (30%). The share
award, as part of the fee, will
consist of fully-paid shares with no
performance conditions attached
and no vesting period imposed.
However, the shares will have to
be held for at least two years from
the date of award, and the twoyear moratorium will apply even
in the event of retirement.
The NEDs’ compensation payable
in respect of financial year 2014
is proposed to be S$1,592,830
(FY 2013: S$1,198,660). Details
of the Directors’ remuneration
are provided in the Summary
Compensation Table for Directors
on pages 116 to 117.
The computation of NEDs’ compensation is based on current fee policy rates.
from Private Sector ($)
2014
Active Chairman Fee
600,000
Basic Retainer
Director
72,000
Additional/Committee Fees
Audit Committee:
– Chairman
– Member
Executive Resource and Compensation Committee and
Risk Review Committee:
– Chairman
– Member
Other Committee:
– Chairman
– Member
Attendance Fees
Per Board Meeting
Per Board Committee Meeting
52,000
29,000
35,000
18,000
29,000
14,000
2,000
1,000
Fees to directors who hold public sector appointments follow the Directorship & Consultancy Appointments
Council (DCAC)’s guidelines as set out below.
from Public Sector ($)
2014
Chairman
Deputy Chairman/Chairman Executive Committee/
Chairman Audit Committee
Member Executive Committee/Member Audit Committee/
Chairman of Other Board Committee(s)
Director/Other Committee Member
45,000
33,750
22,500
11,250
NEDs who hold public sector appointments follow DCAC guidelines and will not be eligible for the shares
component of the NEDs’ compensation. 100% of their compensation in cash is payable to DCAC, where applicable.
116
Summary compensation table for directors for the year ended 31 December 2014 (Group):
Name of Director
Executive Director:
TAN Pheng Hock
Name of Director
Non-Executive Directors:
KWA Chong Seng
KOH Beng Seng
LG NG Chee Meng
MG (NS) NG Chee Khern
QUEK Tong Boon
QUEK Poh Huat
Venkatachalam
KRISHNAKUMAR
Davinder SINGH s/o
Amar Singh
KHOO Boon Hui
QUEK See Tiat
Olivia LUM Ooi Lin
Dr BEH Swan Gin
COL Alan GOH Kim Hua
(Alternate to
LG NG Chee Meng)
*1
*2
*3
*4
*5
(a)
(b)
(c)
(d)
(e)
(f)
Salary *1
$
1,263,900
Salary *1
$
Variable *2 Benefit *3
$
$
1,174,109
167,864
$
$
Share-based *4
$
Directors’ Total fees *5
CashSharebased
based
$
$
900,008
Share-based *4
$
(a)
Total
$
N.A. 3,505,881
Directors’ Total fees *5
CashSharebased
based
$
$
Total
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
420,000
180,000
95,200
40,800
–
22,500 (b)
–
6,926 (b)(c)
–
28,250 (f)
56,100
130,900 (f)
600,000
136,000
22,500
6,926
28,250
187,000
–
–
–
–
134,400
57,600
192,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
93,100
149,800 (f)
22,500 (b)
81,900
43,683 (d)
3,750 (b)(e)
39,900
64,200
–
35,100
18,721
–
133,000
214,000
22,500
117,000
62,404
3,750
–
–
–
–
–
–
–
–
–
1,232,909
–
–
492,421 1,725,330
Salary includes base salary and employer CPF for the financial year ended 31 December 2014.
Variable includes Monthly Performance Bonus (which is 1/12 of the 13th month salary or AWS paid over 12 months), Performance Target Bonus paid
& EVA declared* for the financial year ended 31 December 2014.
*
The EVA declared for the year is added to the balance brought forward in each of the executive’s EVA Bank. 1∕3 of the total is paid out, with the
balance 2∕3 carried forward to the next year. A negative EVA declared will result in a clawback of EVA declared in previous years.
Benefits provided for employees are comparable with local market practices. These include medical, dental, insurances, car, transport, etc.
Based on the fair values of PSP and RSP Contingent shares granted in 2014, using the Monte Carlo simulation model.
The directors’ cash fees and share awards will only be paid/granted upon approval by the shareholders at the forthcoming AGMs of the Group.
Fees payable to Tan Pheng Hock of $251,750 includes fees for directorships in subsidiaries and are payable to Singapore Technologies Engineering Ltd.
Fees for public sector directors are payable to a government agency, the DCAC.
Pro-rated. MG (NS) Ng Chee Khern was appointed as Director on 20 May 2014.
Pro-rated. Ms Olivia Lum Ooi Lin was appointed as Director on 20 May 2014.
Pro-rated. Dr Beh Swan Gin was appointed as Director on 1 September 2014.
Includes fees for directorship in subsidiary(ies)/associated company.
117
ANNUAL REPORT 2014
The following information relates to remuneration of directors of ST Engineering:
Number of Directors in Remuneration Bands
$500,000 and above
$250,000 to $499,999
Below $250,000
Total
2014
2013
2
0
12
14
2
0
12
14
Summary compensation table for key management executives for the year ended 31 December 2014 (Group):
Remuneration
$
Salary *1
$
$
$
Share-based *4
$
Total
$
Between $2,250,000
and $2,500,000
Lee Fook Sun
27%
53%
4%
16%
100%
Between $1,500,000
and $1,750,000
Ng Sing Chan
John Coburn
33%
55%
37%
25%
6%
1%
24%
19%
100%
100%
Between $1,000,000
and $1,250,000
Sew Chee Jhuen
43%
19% *5
7%
31%
100% *5
Total for Key Management Executives
*1
*2
*3
*4
*5
$5,809,269
Salary includes base salary and employer CPF for the financial year ended 31 December 2014.
Variable includes Monthly Performance Bonus (which is 1/12 of the 13th month salary or AWS paid over 12 months), Performance
Target Bonus paid and EVA declared* for the financial year ended 31 December 2014.
*
The EVA declared for the year is added to the balance brought forward in each of the executive’s EVA Bank. 1∕3 of the total
is paid out, with the balance 2∕3 carried forward to the next year. A negative EVA declared will result in a clawback of EVA
declared in previous years.
Benefits provided for employees are comparable with local market practices. These include medical, dental, insurances, car,
transport, etc.
Based on the fair values of PSP and RSP Contingent shares granted in 2014, using the Monte Carlo simulation model.
Total Remuneration and variable bonus exclude negative EVA declared of $984,121 which will be clawed back from his individual EVA Bank.
Note: Vincent Chong Sy Feng and Lim Serh Ghee took on new roles as Deputy CEO (Corporate Development), ST Engineering and
President, ST Aerospace respectively with effect from 1 December 2014. As Key Management Executives, their remunerations will be
disclosed in the FY2015 Annual Report.
118
ACCOUNTABILITY AND AUDIT
Accountability
(Principle 10)
The Board is responsible
for providing a balanced
assessment of the Company’s
performance, position and
prospects. In presenting
the annual financial
statements and quarterly
results announcements to
shareholders promptly, it is the
aim of the Board to provide the
shareholders with a detailed
analysis, explanation and
assessment of the Group’s
performance, position, risk
review and prospects.
Directors are required to
issue a Negative Assurance
Statement to accompany the
Company’s interim financial
results announcement. For
this purpose, certain internal
procedures have been put in
place to enable each member
of the Board reviewing the
interim financial statements to
immediately raise any material
information known to him
which may render the interim
financial results to be false
or misleading prior to their
release to SGX. Should there
be any significant adverse
issue(s) raised by the Audit
Committee (AC) or Board
member which may affect
the results in a material way,
the scheduled date of the
results announcement will be
postponed to allow time for
investigation or further review.
The appointment of auditors
is subject to approval at
each AGM. In making
its recommendations
to shareholders on the
appointment and
re-appointment of auditors,
the Board relies on the review
and recommendations of the
AC. KPMG LLP in Singapore
audits Singapore incorporated
subsidiaries that are not
exempt from audit under the
Singapore Companies Act.
Subsidiaries incorporated in
countries outside Singapore
that require an audit in their
local jurisdictions are largely
audited by other independent
member firms of the KPMG
network affiliated with KPMG
International Cooperative,
a Swiss entity. Some of our
overseas associates and joint
ventures which engage other
auditing firms do not constitute
a significant number. The names
of the auditing firms of our
subsidiaries, associates and
joint ventures are disclosed
at pages 205 and 210 of this
Annual Report.
The Company has complied with
Rules 712 and 715 of the SGX
Listing Manual in relation to the
engagement of its auditors.
Directors and key senior
executives of the Group are
prohibited from dealing in
ST Engineering shares
two weeks before the
announcement of ST
Engineering’s first quarter,
second quarter, third quarter,
and full year results up to the
date of the announcement
of the results. Directors are
discouraged from trading on
short term considerations.
Additionally, all directors of
the Group and employees
are reminded not to trade in
situations where the insider
trading laws and rules would
prohibit trading.
The directors’ interests in shares
of ST Engineering and its related
companies during the year are
found on pages 124 to 129 of
this Annual Report.
Risk Management and
Internal Control
(Principle 11)
Internal Audit
(Principle 13)
The AC, with the support of
the respective Sectors’ Risk
and Audit Committees (RACs)
oversees and appraises the
quality of the IA function.
The Board, through the AC,
Risk Review Committee (these
Committees are deliberately
kept separate at the holding
level to specifically focus
on each important area of
responsibility) and the RACs,
is responsible for oversight
of the risk management
responsibilities, internal
controls and governance
processes delegated to
Management.
The IA supports the AC and RACs
in reviewing the adequacy of
the Company’s internal control
system. Staffed by qualified
auditors, IA has unrestricted
direct access to the AC. The
Head of IA’s primary line of
reporting is to the Chairman of
the AC, although she reports
administratively to the President
& CEO of the Company.
IA plans its internal audit
schedules in consultation
with, but independently of,
management. The IA Plan
is submitted to the RACs
and the AC for approval at
the beginning of each year.
The RACs and the AC also
meet with IA at least once a
year without the presence
of management to gather
feedback on management’s
level of cooperation and other
matters that warrant the
RACs’ and the AC’s attention.
All IA reports are submitted
to the RACs and the AC for
deliberation with copies of
these reports extended to the
relevant senior management,
for prompt corrective
actions, as recommended.
Furthermore, IA’s summary of
findings, recommendations
and updates on management
actions taken are discussed
at the quarterly RACs and
AC meetings.
During the year, a joint Risk
Review Committee (RRC)
119
ANNUAL REPORT 2014
and AC meeting was held
in accordance with the
respective terms of reference
of the committees to facilitate
constructive sharing of the
common issues that may need
to be addressed by both these
committees. A risk-based
Internal Audit Framework was
endorsed by the RACs and the
AC linking the audit plan to the
key risks identified in the Group
as part of the overall objective
to strengthen corporate
governance and to seek
independent assurance on the
effectiveness and adequacy of
the system of risk management
in the Group.
During the year, IA worked
with Management to align
companies to the Group’s
internal control environment
and compliance standards
in order to strengthen the
self-regulating checks and
balances. IA also made periodic
visits to overseas subsidiaries
to review their operations to
ensure compliance with the
internal controls framework. An
external accounting firm, which
is not the external auditors of
the Company, was engaged to
assist IA. In accordance with
its plan, surprise audits were
conducted in the course of
the year on selected areas
including treasury activities.
Dormant bank accounts were
also reviewed against bank
mandates, bank statements,
balances, etc. There were no
material issues highlighted
following the surprise audits.
Control issues are discussed at
AC meetings.
The IA continued with its
system of rating a company at
the end of an internal audit for
the purpose of differentiating
the high risk issues which
require immediate attention.
Based on the internal controls
established and maintained by
the Group, work performed
by the internal and external
auditors, and reviews
performed by Management and
various Board Committees, the
Board, with the concurrence
of the RACs and the AC, is
satisfied that the Group’s
framework of internal controls
and procedures as well as
risk management systems are
adequate as at 31 December
2014 to provide reasonable,
but not absolute, assurance of
achieving its internal control
objectives and addressing
financial, operational,
compliance and information
technology risks.
The Board is satisfied that
problems are identified on
a timely basis and follow up
actions are taken promptly to
minimise unnecessary lapses.
The Board, through the board
committees, is supported in
these areas by the Internal
Audit and Risk Management
teams of the Company. In this
regard, the Board also notes
that no system can provide
absolute assurance against the
occurrence of material errors,
poor judgment in decisionmaking, human error, fraud or
other irregularities.
The RRC, chaired by Mr Khoo
Boon Hui, comprises LG Ng
Chee Meng, Mr Davinder Singh,
Mr Venkatachalam
Krishnakumar, Ms Olivia Lum
and Mr Tan Pheng Hock.
Each RAC oversees the risk and
audit aspects at the Sector level.
a) Risk Governance
The RRC assists the Board in its
risk governance responsibility.
RRC’s role is one of oversight
of the responsibility delegated
to Management to ensure
that there is a system of
controls in place for identifying
and managing risks in order
to safeguard stakeholders’
interests and the Company’s
assets.
The RRC is supported by the
Group Risk Management Team
(GRMT), headed by SVP, Risk
Management, working with the
Sector Chief Risk Officers from
each of the following Sectors:
1) Aerospace
2) Electronics
3) Land Systems
4) Marine
The Head of GRMT reports to
the Chairman of the RRC and ST
Engineering’s President & CEO.
The GRMT provides leadership
in the implementation of a
Group-wide Enterprise Risk
Management (ERM) framework
that allows risks to be
identified, assessed, monitored
and managed by the business
managers.
The respective RACs
additionally take on the review
of risks and risk management
systems and assist in the
discharge of the risk oversight
responsibilities at the
Sector level.
Administratively, the RACs are
supported by the GRMT and
the Sector Chief Risk Officers.
The GRMT ensures that there
is general alignment in the
quarterly risk agenda of the
RAC meetings to that of the
RRC. The annual risk work plan
of each sector is also aligned to
the Group risk work plan before
it is approved by the respective
RACs and further endorsed by
the RRC.
The RRC reviews the minutes
of the RAC meetings which are
circulated to all members of
the RRC. The RAC Chairman
or a member of the RAC is
invited to attend the quarterly
RRC meetings so as to have a
clear understanding of group
risk policies and to share any
feedback or raise any issue that
the RACs may have.
120
In the respective Terms of
Reference of the RRC and AC,
the members of the RRC and
the AC will come together at
least once a year to discuss
significant risks and audit issues
of the group.
There is at least a member
on the RRC who is also a
member of the AC to facilitate
communication and access of
information between the two
committees.
b) Risk Aware Culture
and Training
Embedding the right culture
throughout the organisation
is important for effective
risk management. The RRC
recognises good culture fosters
openness that will enable
Management and staff to
escalate concerns in a timely
manner without fear, as well
as promote better judgment,
which provides greater comfort
to the Board and Management.
As part of the risk awareness
and communication
programme, annual risk
management training plans
covering various risk topics are
developed and implemented by
the respective sectors, and the
status of the training is updated
to the RRC and RAC at periodic
intervals.
c) Risk Review Process
Under the ERM framework, a
risk dashboard of the top 15
business risks (comprising the
key inherent risks that may
impact the business objectives)
is developed and maintained
by each of the significant
business units, rolling up into a
summary dashboard for each
of the four business sectors
– Aerospace, Electronics,
Land Systems and Marine.
Once the top business risks
are identified, measures will
then be taken to develop and
implement risk preventive and
mitigation actions (collectively
known as “controls”) and risk
monitoring processes. The
business managers are required
to periodically review the
effectiveness of the controls
implemented, and initiate
necessary changes as the risk
profile changes.
Quarterly, the Presidents
and the Sector Chief Risk
Officers review, with the RRC
and RAC, their respective
dashboard of top 15 business
risks. At the meetings, the
Presidents and Sector Chief
Risk Officers would discuss the
risk management action plans
and measures to address these
top business risks. At the same
time, the Presidents and Sector
Chief Risk Officers would also
highlight the following for
discussion:
1) emerging trends and issues
in each business sector
2) new risk or changes to
existing risk profile
3) new risk incident
4) major risk exposures
5) risk management actions
taken on previously
identified risks
The Committee met five times
during the year.
d) Risk Management
Self Assurance Process
The Risk Management Self
Assurance is a process whereby
the business risk owners,
together with the respective
control owners, evaluate
and assess the operational
effectiveness of the controls
established to manage the key
risks that are reported in Sector
Risk Dashboard.
On the basis of this self
assessment, annually, the RACs
and RRC will receive from the
respective Sector Presidents
and Sector Group Financial
Controllers written assurances
on the adequacy and
effectiveness of the system of
risk management and controls
to manage the significant risks.
For more information on the
Company’s principal inherent
risks, and risk management
framework, please refer to the
“Risk Management Section” at
page 118 of this Annual Report
for more details.
System of Internal Control and
Risk Management
The Board receives, at regular
intervals, updates from the
Board committees on the key
business risks, the material
controls to manage these risks,
and the internal audit reports
on the operational effectiveness
of the material controls.
The Board has also received
assurance from the Group’s
President & CEO and CFO
on the effectiveness of the
Company’s risk management
and internal control systems,
that the financial records have
been properly maintained and
that the financial statements
give a true and fair view of
the Company’s operations and
finances.
121
ANNUAL REPORT 2014
The Board is satisfied with the
risk management process in
place, and, in its opinion, that
the effectiveness and adequacy
of the material controls to
manage the key risks have
been appropriately reviewed
through the management self
assurance process, as well as
the independent assurance
provided by the Company’s
IA Function.
•
undertaking the statutory
and regulatory functions of
an AC as are prescribed by
law from time to time;
•
reviewing the reports of
the external and internal
auditors to provide a further
layer of assurance of the
integrity, confidentiality
and availability of critical
information;
Audit Committee
(Principle 12)
•
reviewing interested person
transactions;
The AC is supported in its
work by the audit committees
of the four business sectors.
The respective chairmen of
the RACs of the four business
sectors are invited to attend the
AC meetings of ST Engineering
so as to have a clear
understanding of policies made
at the holding company level
and to share any feedback or
raise any issue that the Sectors’
RACs may have. As a guiding
principle to provide check and
balance, a member of the AC
should not also be a member
of the Business Investment and
Divestment Committee.
•
evaluating the work of
the external auditors
to determine their
independence and
recommending to the Board
their re-appointment and
compensation on an annual
basis; and
The AC has full authority to
commission and review findings
of internal investigations into
matters where it is alerted
of any suspected fraud or
irregularity or failure of internal
controls or infringement
of any law likely to have a
material impact on the Group’s
operating results. It can
investigate any matter within
its terms of reference and
with the full cooperation of
management.
The AC’s key terms of reference
include the following:
•
reviewing the level of nonaudit services.
The Company has in place a
Whistle-Blowing framework,
where staff may, in confidence
and without fear of retaliation,
raise concerns of incidents of
possible wrongdoing or breach
of applicable laws, regulations
or policies to the respective
chairmen of the RACs in the
Group. In accordance with
this framework, a WhistleBlowing dashboard reporting
is presented to the Sectors
RAC and the AC at its quarterly
meetings. As ST Engineering has
become a global company with
a presence in many countries,
it is aware of the need to
apply international corporate
governance standards wherever
it operates. It takes a serious
view of all reports of violations
received and may commission
investigations as appropriate.
The AC comprises Mr Koh
Beng Seng as Chairman,
Mr Venkatachalam
Krishnakumar, Dr Stanley Lai
and Mr Quek See Tiat. All
the members of the AC are
independent directors and
have the relevant accounting or
financial management expertise
or experience.
The AC held six meetings during
the year. The AC met twice with
the external auditors, without
management, at the beginning
and middle of the year. The AC
also met with the RRC to review
the significant risks and related
key controls.
During the year, the AC
reviewed and recommended
to the Board the release of
the 2013 full year, 1Q2014,
2Q2014 and 3Q2014 financial
statements, and considered
and approved the 2014 Audit
Plan and the 2014 Internal
Audit (IA) Plan. In addition, the
AC reviewed the adequacy of
internal control procedures
including IT security issues,
Interested Person transactions
and the issues raised in IA
reports. It also considered the
reappointment of the External
Auditors as well as their
remuneration.
The AC reviewed the level of
non audit services performed
by its external auditors. For the
full year 2014, $2,385,000 was
paid to the external auditors for
audit and non audit services of
the Group, of which $695,000
or 29% were for non-audit
services. The AC was of the
opinion that the non audit
services performed by the
auditors did not compromise
their independence.
122
The AC is routinely updated on
the proposed and impending
changes in accounting
standards and their implications
for the Group.
Budget and finance Committee
Chaired by Mr Davinder
Singh, the Budget and Finance
Committee members include
Mr Quek Poh Huat, MG (NS)
Ng Chee Khern and Mr Tan
Pheng Hock. Budgets prepared
by the respective subsidiaries
are consolidated at the
ST Engineering level and
presented to the Budget and
Finance Committee for review
and recommendation to the
Board for approval.
During the year, the Budget and
Finance Committee held two
meetings to review the FY2014
budget assumptions and 5-year
forecast and to review the 2015
Plan prior to submission to the
Board for approval.
Business Investment and
Divestment Committee
The Business Investment
and Divestment Committee
comprises Mr Kwa Chong Seng
as Chairman, LG Ng Chee Meng,
Mr Quek Poh Huat and Mr Tan
Pheng Hock. The Committee
is delegated authority by the
Board to consider investments
and divestments up to certain
threshold values and to ensure
that investments/divestments
are in line with the Group’s
strategy.
SHAREHOLDER RIGHTS
AND RESPONSIBILITIES
Shareholder Rights
(Principle 14)
Communication
with Shareholders
(Principle 15)
Conduct of
Shareholder Meetings
(Principle 16)
The Company enters
into regular and timely
communication with
shareholders as part of
the Group’s effort to help
shareholders better understand
its businesses and to obtain
feedback on the views and
concerns of shareholders.
To keep the market abreast
and updated of the Group’s
developments, presentation
materials on financial
results, as well as statutory
announcements and marketing
news releases are made
available on the Company’s
website at www.stengg.com.
In 2014, ST Engineering’s
investor relations team held
over 200 face-to-face investor
meetings and conference
calls, as well as participated
in investor conferences in
Singapore, and non-deal
roadshows in Hong Kong and
the US.
ST Engineering is committed
to timely and transparent
disclosures to ensure that the
investing community receives a
balanced and updated view of
the Group’s performance and
businesses.
Board members attended the
AGM and EGM in 2014 where
shareholders present were
given an opportunity to seek
clarification or question the
Board on issues pertaining
to the resolutions proposed
before they were voted
on. The external auditors
were also present at the
AGM to assist the directors
in answering questions on
audit related matters from
shareholders.
The Company fully supports
the Code’s principle to
encourage active shareholder
participation. For transparency
in the voting process, ST
Engineering has, since
2010, adopted the use of
electronic poll voting for all
the resolutions put to vote at
its AGM and EGM. This is a fair
and transparent way of voting
based on the principle of one
share one vote. ST Engineering
will continue to use electronic
poll voting at the forthcoming
AGM. More on investor
relations can be found on
pages 60 to 61.
123
ANNUAL REPORT 2014
FINANCIAL REPORT
124
135
136
Directors’ Report
Statement by Directors
Independent Auditors’
Report
F I N A N C I A L STAT E M E N TS
137
138
139
Consolidated Income
Statement
Consolidated Statement of
Comprehensive Income
Balance Sheets
141
144
149
Statements of
Changes in Equity
Consolidated Statement
of Cash Flows
Notes to the
Financial Statements
270
271
SGX Listing Manual
Requirements
Sectoral Financial Review
124
DIRECTORS’ REPORT
31 December 2014
(Currency - Singapore dollars unless otherwise stated)
We, the undersigned directors, on behalf of all the directors of the Company, submit this annual report to the members together
with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2014.
DIRECTORS
The directors of the Company in office at the date of this report are as follows:
Kwa Chong Seng
(Chairman)
Tan Pheng Hock
(President and Chief Executive Officer)
Koh Beng Seng
LG Ng Chee Meng
(Appointed on 20 May 2014)
Quek Tong Boon
Quek Poh Huat
Davinder Singh s/o Amar Singh
Dr Stanley Lai Tze Chang
Khoo Boon Hui
Quek See Tiat
Olivia Lum Ooi Lin
(Appointed on 20 May 2014)
Dr Beh Swan Gin
(Appointed on 01 September 2014)
COL Alan Goh Kim Hua
(Alternate Director to LG Ng Chee Meng)
ARRANGEMENTS TO ENABLE DIRECTORS TO ACqUIRE ShARES OR DEBENTURES
Except for the Singapore Technologies Engineering Share Option Plan (“ESOP”), Singapore Technologies Engineering Performance
Share Plan 2010 (“PSP2010”), Singapore Technologies Engineering Restricted Stock Plan (“RSP2000”) and Singapore Technologies
Engineering Restricted Share Plan 2010 (“RSP2010”) (collectively the “ST Engineering Share Plans”), neither at the end of nor at
any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to
enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company
or any other body corporate.
DIRECTORS’ INTERESTS
Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares or debentures
of the Company or of related corporations either at the beginning or at the end of the financial year or as at 21 January 2015.
According to the register kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Chapter 50,
particulars of interests of directors who held office at the end of the financial year in shares, debentures, options and awards in
the Company and its related corporations were as follows:
holdings in the name of the director,
spouse or infant children
1 January 2014 or
date of appointment
if later
31 December 2014
The Company
Ordinary Shares
Kwa Chong Seng
Tan Pheng Hock
Koh Beng Seng
Quek Poh Huat
Quek See Tiat
503,200
3,333,327
201,705
1,148,637
169,409
49,337
59,040
–
521,700
4,122,603
212,505
1,163,337
184,209
59,237
75,540
4,600
125
ANNUAL REPORT 2014
DIRECTORS’ REPORT
31 December 2014
Directors’ interests (continueD)
1 January 2014 or
date of appointment
if later 31 December 2014
Exercise price
$
Exercisable period
The Company
Options to Subscribe
for Ordinary Shares
Tan Pheng Hock
200,000
200,000
200,000
200,000
200,000
200,000
200,000
–
–
200,000
200,000
200,000
200,000
200,000
2.09
2.12
2.37
2.57
3.01
2.84
3.23
10.2.2005
11.8.2005
8.2.2006
11.8.2006
10.2.2007
11.8.2007
16.3.2008
to
to
to
to
to
to
to
9.2.2014
10.8.2014
7.2.2015
10.8.2015
9.2.2016
10.8.2016
15.3.2017
1 January 2014 or
date of appointment
if later
31 December 2014
The Company
Conditional Award of 250,000 shares under PSP2010
for performance period 2011 to 2013
Tan Pheng Hock
0 to 425,000 #1
– #2
0 to 425,000 #1
0 to 425,000 #1
0 to 297,500 #1
0 to 297,500 #1
Tan Pheng Hock
Tan Pheng Hock
Tan Pheng Hock
–
0 to 425,000 #1
Unvested shares under RSP2000 arising from
release of Conditional Award of 96,000 Shares
Tan Pheng Hock
24,096 #3
–
Unvested shares under RSP2010 arising from release of Conditional Award
of 96,000 Shares for performance period 2011 to 2012
Tan Pheng Hock
47,616 #3
23,808 #3
126
DIRECTORS’ REPORT
31 December 2014
1 January 2014 or
date of appointment
if later
31 December 2014
The Company
Conditional Award of 96,000 Shares under RSP2010
Tan Pheng Hock
0 to 144,000 #4
– #5
Unvested shares under RSP2010 arising from release of Conditional Award of
96,000 Shares for performance period 2012 to 2013
Tan Pheng Hock
–
43,872 #3
Conditional Award of 86,000 Shares under RSP2010 for
performance period 2013 to 2014
Tan Pheng Hock
0 to 129,000 #4
0 to 129,000 #4
Conditional Award of 96,000 Shares under RSP2010 for
performance period 2014 to 2015
Tan Pheng Hock
–
0 to 144,000 #4
Related Corporations
Mapletree Commercial Trust Management Ltd.
Unit holdings in Mapletree Commercial Trust
LG Ng Chee Meng
12,000
100,000
12,000
100,000
300,000
300,000
8,000
8,000
Mapletree Greater China Commercial Trust Management Ltd.
Unit holdings in Mapletree Greater China Commercial Trust
Khoo Boon Hui
Mapletree Industrial Trust Management Ltd.
Unit holdings in Mapletree Industrial Trust
127
ANNUAL REPORT 2014
DIRECTORS’ REPORT
31 December 2014
1 January 2014 or
date of appointment
if later
31 December 2014
Mapletree Logistics Trust Management Ltd.
Unit holdings in Mapletree Logistics Trust
Quek Tong Boon
2,000
100,000
2,000
100,000
2,500
2,500
400,000
400,000
$250,000 *1
$250,000 *1
Perpetual Securities
Neptune Orient Lines Limited
Ordinary Shares
Kwa Chong Seng
S$400 million 4.25% Notes due 2017
Kwa Chong Seng
Olam International Limited
Ordinary Shares
Kwa Chong Seng
N.A.
420,000 *1
N.A.
36,085 *1
Warrants
Kwa Chong Seng
Singapore Airlines Limited
Ordinary Shares
LG Ng Chee Meng
Quek Poh Huat
20,000
600
3,733
20,000
600
3,733
$500,000
$500,000
S$300 million 2.15% Bonds due 2015
128
DIRECTORS’ REPORT
31 December 2014
1 January 2014 or
date of appointment
if later
31 December 2014
Singapore Telecommunications Limited
Ordinary Shares
Kwa Chong Seng
Tan Pheng Hock
Koh Beng Seng
Quek Tong Boon
Quek Poh Huat
Khoo Boon Hui
Quek See Tiat
Olivia Lum Ooi Lin
26,466
3,350
1,520
2,720
2,030
42,938
34,000
1,800
3,087
680
100,460
26,466
3,350
1,520
2,720
2,030
42,938
34,000
1,800
3,087
680
100,460
4,000
8,000
4,000
8,000
SMRT Corporation Ltd
Ordinary Shares
Quek Tong Boon
Quek Poh Huat
SP AusNet
Stapled Securities
Quek Poh Huat
272,000
N.A.@
Starhub Ltd
Ordinary Shares
Tan Pheng Hock
Quek See Tiat
25,150
15,716
5,000
25,150
15,716
5,000
30,000
30,000
TeleChoice International Limited
Ordinary Shares
Tan Pheng Hock
129
ANNUAL REPORT 2014
DIRECTORS’ REPORT
31 December 2014
*1
Held in trust by a trustee company on behalf of the director.
@
Ceased to be related corporation of Temasek Holdings (Private) Limited during the financial year.
#1
A minimum threshold performance over a 3-year period is required for any performance shares to be released and the actual number of performance
shares to be released is capped at 170% of the conditional award.
#2
For this period, Mr Tan Pheng Hock was awarded 297,500 new shares upon partial achievement of targets set. The balance of the conditional award
covering the period from 2011 to 2013 has thus lapsed.
#3
Balance of unvested restricted shares to be released according to the stipulated vesting periods.
#4
A minimum threshold performance over a 2-year period is required for any restricted shares to be released. A specified number of restricted shares to be
released will depend on the extent of achievement of all performance conditions and will be delivered in phases according to the stipulated vesting periods.
#5
For this period, Mr Tan Pheng Hock was awarded 87,744 new shares upon partial achievement of targets set. The balance of the conditional award
covering the period from 2012 to 2013 has thus lapsed.
There was no change in any of above-mentioned directors’ interest in the Company between the end of the financial year and
21 January 2015 except for Mr Tan Pheng Hock, whose interest has increased to 4,322,603 shares.
DIRECTORS’ INTERESTS IN CONTRACTS
Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than a benefit
or any fixed salary of a full-time employee of the Company included in the aggregate amount of emoluments shown in the
financial statements, or any emoluments received from related corporations and share options/awards granted pursuant to the ST
Engineering Share Plans) by reason of a contract made by the Company or a related corporation with the director or with a firm of
which the director is a member, or with a company in which the director has a substantial financial interest, except for professional
fees paid to a firm of which a director is a member as shown in the financial statements.
130
DIRECTORS’ REPORT
31 December 2014
ShARE PLANS
The Executive Resource and Compensation Committee (“ERCC”) is responsible for administering the ST Engineering Share Plans.
The ERCC members are Mr Kwa Chong Seng (Chairman), Mr Venkatachalam Krishnakumar and Dr Stanley Lai Tze Chang.
As at 31 December 2014, no participants have been granted options and/or have received shares under the ST Engineering Share
Plans which, in aggregate, represent 5% or more of the total number of new shares available under the ST Engineering Share Plans.
The aggregate number of new shares issued pursuant to the RSP2010 and PSP2010 did not exceed 8% of the issued share capital
of the Company.
Except as disclosed below, there were no options granted and no shares awarded by the Company to any person to take up
unissued shares of the Company.
(a)
ESOP
(i)
The options granted under the ESOP are as follows:
Aggregate options
granted and accepted
since commencement
to end of financial
year under review
Aggregate options
exercised/lapsed
since commencement
to end of financial
year under review
Aggregate options
outstanding as at
end of financial year
under review
Tan Pheng Hock
Koh Beng Seng
Quek Poh Huat
2,602,500
204,000
375,000
152,500
1,602,500
204,000
375,000
152,500
1,000,000
–
–
–
Non-Executive Directors of the
Company and its subsidiaries
(including current and former
directors)
5,405,566
5,405,566
–
193,717,858
170,245,850
23,472,008
187,320
187,320
–
Participant
Directors of the Company
Group Executives
(including Tan Pheng hock)
Parent Group Executives and others
(ii)
The options granted by the Company do not entitle the holders of the options, by virtue of such holdings, to any
right to participate in any share issue of any other company.
(iii)
During the financial year, ordinary shares in the Company were issued pursuant to the exercise of options to take
up unissued shares of the Company.
131
ANNUAL REPORT 2014
DIRECTORS’ REPORT
31 December 2014
share Plans (continueD)
(b)
PSP2010 (“PSP”)
The PSP is established with the objective of motivating senior management staff to strive for sustained long-term growth
and performance in ST Engineering and its subsidiaries (“ST Engineering Group”). Awards of performance shares are
granted conditional on performance targets set based on the ST Engineering Group corporate objectives.
Pursuant to the PSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performance
period, currently prescribed to be a 3-year performance period. The performance shares will only be released to the
recipient at the end of the performance qualifying period. A specified number of performance shares shall be released
by the ERCC to the recipient and the actual number of performance shares will depend on the achievement of set targets
over the respective performance period. A minimum threshold performance is required for any performance share to be
released and the actual number of performance shares to be released is capped at 170% of the conditional award.
The performance measures used in PSP grants are Absolute Total Shareholder Return (TSR) against Cost of Equity hurdles
(i.e. measure of absolute Wealth Added); and Relative TSR against Defensive Stock Index, the constituents of which are
selected “defensive stock” companies that have similar market risk as the Group and are listed on the Singapore Exchange
Securities Trading Limited (SGX).
In addition to PSP performance targets being met, the ERCC decided that the final award for PSP is conditional upon the
performance targets for RSP that has the same end of performance period being met. Known as the plan trigger condition,
this is to create alignment between senior management and other employees. The final award for PSP 2012 is therefore
conditional on the performance targets for RSP 2013, which has the same end of performance period in December 2014,
being met.
The awards granted under the PSP2010 are as follows:
Participant
Conditional
Awards
awards granted released during
during the
the financial
financial year
year under
under review
review
Aggregate
conditional
awards
granted since
commencement
to end of
financial year
under review
Aggregate
Aggregate
awards
conditional
released since
awards not
commencement
released as at
to end of end of financial
financial year
year under
under review
review
PSP2010
Director of the Company
Tan Pheng Hock
(c)
0 to 425,000
297,500
0 to 1,572,500
297,500
0 to 1,147,500
Group Executives
(including Tan Pheng hock) 0 to 2,402,100
1,545,821
0 to 9,486,170
1,545,821
0 to 5,837,012
RSP2000 / RSP2010 (“RSP”)
The RSP is established with the objective of motivating managers and above to strive for sustained long-term growth and
superior performance in ST Engineering Group. It also aims to foster a share ownership culture among staff within the ST
Engineering Group and to better align staff’s incentive scheme with shareholders’ interest.
Pursuant to the RSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performance
period, currently prescribed to be a 2-year performance period. The actual number of restricted shares delivered will
depend on the achievement of set targets over the respective performance period. This will be determined by the ERCC
at the end of the qualifying performance period and released to the recipient over a 3-year vesting period in the ratio of
50%, 25% and 25% consecutively.
132
DIRECTORS’ REPORT
31 December 2014
(c)
RSP2000 / RSP2010 (“RSP”) (continued)
A minimum threshold performance is required for any restricted share to be released while the maximum number of
restricted shares to be delivered is capped at 150% of the conditional award.
The medium-term stretched targets measured over a 2-year performance period are set based on ST Engineering Group
corporate objectives. The performance measures used for the 2-year performance period are ST Engineering Group EVA
Spread and EBITDA Margin.
Since 2011, the awards granted under the ST Engineering RSP2010 to the Non-Executive Directors (other than those from
the public sector) are outright shares with no performance and vesting conditions but with a Moratorium on selling. These
shares will form up to 30% of their total compensation with the remaining 70% payable in cash.
The awards granted under the RSP2000 / RSP2010 are as follows:
Participant
Conditional
awards/awards
Awards
granted during
released
the financial
during the
year under financial year
review under review
Aggregate
conditional
Aggregate
awards/awards
awards
granted since
released since
commencement commencement
to end of
to end of
financial year
financial year
under review
under review
Aggregate
awards not
released
as at end of
financial year
Aggregate
conditional
awards not
released
as at end of
financial year
under review
RSP2000
Directors of
the Company
Tan Pheng Hock
Koh Beng Seng
Quek Poh Huat
Venkatachalam
Krishnakumar
Davinder Singh s/o
Amar Singh
Dr Stanley Lai
Tze Chang
–
–
–
24,096
–
–
0 to 499,500
0 to 58,600
0 to 69,800
246,618
30,205
35,909
–
–
–
–
–
–
–
–
0 to 71,000
37,109
–
–
–
–
0 to 54,800
28,237
–
–
–
–
0 to 31,700
22,540
–
–
Non-Executive
Directors of the
Company and
its subsidiaries
(including
current
and former
directors)
–
–
0 to 812,050
408,663
–
–
Group Executives
(including Tan
Pheng hock)
–
1,659,932
0 to 38,290,836
18,214,397
–
–
133
ANNUAL REPORT 2014
DIRECTORS’ REPORT
31 December 2014
(c)
RSP2000 / RSP2010 (“RSP”) (continued)
Participant
Aggregate
Conditional
conditional
Aggregate
awards/
awards/awards
awards
awards
Awards
granted since
released since
Aggregate
granted during
released commencement commencement
awards not
the financial
during the
to end of
to end of
released
year under financial year
financial year
financial year
as at end of
review under review
under review
under review financial year
Aggregate
conditional
awards not
released
as at end of
financial year
under review
RSP2010
Directors of
the Company
Kwa Chong Seng
Tan Pheng Hock
Koh Beng Seng
Quek Poh Huat
Venkatachalam
Krishnakumar
Davinder Singh
s/o Amar Singh
Dr Stanley Lai
Tze Chang
Quek See Tiat
18,500
0 to 144,000
10,800
14,700
18,500
67,680
10,800
14,700
21,700
0 to 561,000
33,300
45,200
21,700
115,296
33,300
45,200
–
67,680
–
–
–
0 to 273,000
–
–
14,800
14,800
45,600
45,600
–
–
9,900
9,900
31,000
31,000
–
–
16,500
4,600
16,500
4,600
50,000
4,600
50,000
4,600
–
–
–
–
156,300
156,300
480,500
480,500
–
–
Group
Executives
(including Tan
Pheng hock) 0 to 9,015,151
4,094,177
0 to 34,090,011
7,781,687
Non-Executive
Directors of
the Company
and its
subsidiaries
(including
current
and former
directors)
3,224,660 0 to 14,183,430
134
DIRECTORS’ REPORT
31 December 2014
AUDIT COMMITTEE
The Audit Committee comprises four independent non-executive directors, one of whom is also the Chairman of the Committee.
The members of the Audit Committee at the date of this report are as follows:
Koh Beng Seng (Chairman)
Quek See Tiat
The Audit Committee carried out its functions in accordance with Section 201B(5) of the Singapore Companies Act, Chapter 50.
The Audit Committee met during the year to review the scope of the internal audit functions and the scope of work of the
statutory auditors, and the results arising therefrom, including their evaluation of the system of internal controls. The Audit
Committee also reviewed the assistance given by the Company’s officers to the auditors. The consolidated financial statements of
the Group and the financial statements of the Company were reviewed by the Audit Committee prior to their submission to the
directors of the Company for adoption.
In addition, the Audit Committee has reviewed the requirements for approval and disclosure of interested person transactions,
reviewed the procedures set up by the Group and the Company to identify and report and where necessary, seek approval for
interested person transactions and, with the assistance of the internal auditors, reviewed interested person transactions.
The Audit Committee has recommended to the Board of Directors that the auditors, KPMG LLP, be nominated for re-appointment
as auditors at the forthcoming Annual General Meeting of the Company.
AUDITORS
The Auditors, KPMG LLP, have indicated their willingness to accept re-appointment.
On behalf of the Board of Directors
Kwa Chong Seng
Director
Singapore
26 February 2015
Tan Pheng hock
Director
135
ANNUAL REPORT 2014
S tat e m e n t by d i r e c to r S
We, Kwa Chong Seng and Tan Pheng Hock, being directors of Singapore Technologies Engineering Ltd, do hereby state that, in the
opinion of the Directors:
(a)
the accompanying balance sheets, consolidated income statement, consolidated statement of comprehensive income,
statements of changes in equity, and consolidated statement of cash flows together with notes thereto set out on pages
137 to 269 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at
31 December 2014, and changes in equity of the Company and of the Group, and the results of the business and cash
flows of the Group for the year ended on that date; and
(b)
at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they fall due.
On behalf of the Board of Directors
Kwa Chong Seng
Director
Singapore
26 February 2015
Tan Pheng hock
Director
136
Independent audItors’ report
Members of the Company
Singapore Technologies Engineering Ltd
REPORT ON ThE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of Singapore Technologies Engineering Ltd (the “Company”) and its
subsidiaries (collectively the “Group”), which comprise the balance sheets of the Group and the Company as at 31 December 2014,
the statements of changes in equity of the Group and the Company, the consolidated income statement, the consolidated statement
of comprehensive income and the consolidated statement of cash flows of the Group for the year then ended, and a summary of
significant accounting policies and other explanatory information, as set out on pages 137 to 269.
MANAGEMENT’S RESPONSIBILITY FOR ThE FINANCIAL STATEMENTS
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the
provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising
and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded
against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary
to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.
AUDITORS’ RESPONSIBILITY
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance
with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OPINION
In our opinion, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of
the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards to
give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2014, the changes in equity of
the Group and of the Company, and the results and cash flows of the Group for the year ended on that date.
REPORT ON OThER LEGAL AND REGULATORY REqUIREMENTS
In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries
incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
KPMG LLP
Public Accountants and
Chartered Accountants
Singapore
26 February 2015
137
ANNUAL REPORT 2014
C o n s o l i d at e d i n C o m e s tat e m e n t
for the year ended 31 December 2014
(Currency - Singapore dollars)
Revenue
Cost of sales
Gross profit
Distribution and selling expenses
Administrative expenses
Other operating expenses
Profit from operations
Other income
Other expenses
Other income, net
Finance income
Finance costs
Finance costs, net
2014
$’000
4
6,539,433
(5,220,934)
1,318,499
6,633,152
(5,201,083)
1,432,069
5
(180,309)
(467,687)
(115,530)
554,973
(175,908)
(466,598)
(116,348)
673,215
8
45,175
(5,000)
40,175
40,095
(5,907)
34,188
9
43,550
(45,197)
(1,647)
68,911
(77,704)
(8,793)
57,182
650,683
31,082
729,692
(113,693)
536,990
(138,145)
591,547
531,952
5,038
536,990
580,834
10,713
591,547
17.06
17.04
18.73
18.67
Profit before taxation
Taxation
Profit for the year
10
Attributable to:
Shareholders of the Company
Basic
Diluted
The accompanying notes are an integral part of the financial statements.
Group
Note
11
2013
$’000
138
C o n s o l i d at e d s tat e m e n t o f C o m p r e h e n s i v e i n C o m e
Note
Profit for the year
2014
$’000
Group
536,990
2013
$’000
591,547
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Net fair value changes on available-for-sale financial assets
Net fair value changes on cash flow hedges
Share of net fair value changes on cash flow hedges of an associate
Foreign currency translation differences
Share of foreign currency translation differences of associates and joint ventures
Reclassification of foreign currency translation reserve to profit or loss arising
from disposal of foreign entities
36
36
36
(2,020)
(58,327)
(9,891)
19,968
1,336
50
(7,931)
48,592
–
45,993
10,395
(205)
Other comprehensive income for the year, net of tax
(48,884)
96,844
Total comprehensive income for the year, net of tax
488,106
688,391
482,522
5,584
488,106
674,953
13,438
688,391
Total comprehensive income attributable to:
Shareholders of the Company
44
139
ANNUAL REPORT 2014
Balance SheetS
as at 31 December 2014
Note
2014
$’000
12
13
14
15
16
17
18
19
22
43
20
21
22
23
17
18
24
25
Group
Company
2013
$’000
2014
$’000
1,577,523
–
478,352
127,211
671,022
2,735
973
106,318
4,806
24,263
2,993,203
1,520,404
–
462,139
166,033
638,408
12,528
2,679
95,634
7,430
39,978
2,945,233
4,568
1,197,716
17,657
–
–
–
–
7,000
50,000
81
1,277,022
1,434
927,728
17,657
–
–
–
–
7,200
258,874
77
1,212,970
1,802,073
1,319,101
66,382
530,298
11,375
6,872
119,279
1,470,723
5,326,103
1,807,509
1,221,937
40,076
598,210
12,508
16,447
134,581
1,930,140
5,761,408
–
–
497,070
3,597
–
–
–
404,876
905,543
–
–
504,498
9,827
–
–
–
470,124
984,449
8,319,306
8,706,641
2,182,565
2,197,419
809,637
1,667,180
29,364
245,072
725,347
164,660
29,820
43,590
1,126
148
3,715,944
878,895
1,604,740
24,953
218,910
734,725
197,139
139,842
292,789
1,321
369
4,093,683
–
26,961
196,988
–
–
8,112
–
–
–
–
232,061
–
25,017
98,946
–
–
11,666
–
–
–
–
135,629
1,610,159
1,667,725
673,482
848,820
2013
$’000
ASSETS
Non-current assets
Property, plant and equipment
Subsidiaries
Associates and joint ventures
Investments
Intangible assets
Long-term receivables, non-current
Finance lease receivables, non-current
Deferred tax assets
Amounts due from related parties, non-current
Derivative financial instruments, non-current
Current assets
Trade receivables
Amounts due from related parties, current
Advances and other receivables
Long-term receivables, current
Finance lease receivables, current
Short-term investments
Bank balances and other liquid funds
Total assets
EqUITY AND LIABILITIES
Current liabilities
Advance payments from customers, current
Trade payables and accruals, current
Amounts due to related parties, current
Provisions
Progress billings in excess of work-in-progress
Provision for taxation
Short-term bank loans
Long-term bank loans, current
Lease obligations, current
Other loans, current
Net current assets
26
27
28
20
29
29
29
29
140
Balance SheetS
as at 31 December 2014
Note
2014
$’000
Group
Company
2013
$’000
2014
$’000
899,279
274,155
108,484
658,424
267,532
17,547
441
98,759
1,000
11,260
1,871
2,338,752
857,496
353,701
94,867
631,283
288,867
18,150
564
83,695
1,500
22,515
406
2,353,044
–
17,006
–
–
–
–
–
–
–
–
407,413
424,419
–
18,817
–
–
–
–
–
–
–
–
553,192
572,009
Total liabilities
6,054,696
6,446,727
656,480
707,638
Net assets
2,264,610
2,259,914
1,526,085
1,489,781
889,426
(6,529)
116,323
(92,057)
1,225,040
2,132,203
132,407
2,264,610
852,611
–
116,323
(44,651)
1,191,958
2,116,241
143,673
2,259,914
889,426
(6,529)
–
74,865
568,323
1,526,085
–
1,526,085
852,611
–
–
72,754
564,416
1,489,781
–
1,489,781
8,319,306
8,706,641
2,182,565
2,197,419
2013
$’000
Advance payments from customers, non-current
Trade payables and accruals, non-current
Deferred tax liabilities
Bonds
Long-term bank loans, non-current
Lease obligations, non-current
Other loans, non-current
Deferred income
Other long-term payables, non-current
Amounts due to related parties, non-current
26
19
29
29
29
29
30
31
43
27
Share capital and reserves
Share capital
Treasury shares
Capital reserves
Other reserves
Retained earnings
Equity attributable to owners of the Company
32
33
35
36
37
44
Total equity and liabilities
141
ANNUAL REPORT 2014
S tat e m e n t S o f C h a n g e S i n e q u i t y
Note
Share Capital
Other
capital reserves reserves
$’000
$’000
$’000
Retained
earnings
$’000
Noncontrolling
Total interests
$’000
$’000
Total
equity
$’000
The Group
At 1.1.2013
781,841 116,323 (136,121) 1,132,644 1,894,687
Total comprehensive income for the year
Profit for the year
–
–
36
–
–
–
–
–
–
(7,931)
49,401
42,459
–
–
–
(7,931)
49,401
42,459
36
–
–
10,395
–
10,395
36
–
–
Other comprehensive income for the year,
net of tax
–
–
94,119
–
94,119
2,725
96,844
Total comprehensive income for the year,
net of tax
–
–
94,119
580,834
674,953
13,438
688,391
70,770
–
(18,624)
–
52,146
–
52,146
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15,490
–
15,490
–
–
–
– (521,290) (521,290)
–
–
–
–
–
–
22,761
22,761
108
15,598
(1,354)
(1,354)
– (521,290)
(12,767) (12,767)
483
483
70,770
–
(3,134) (521,290) (453,654)
9,231 (444,423)
–
–
70,770
–
–
–
–
–
–
255
–
255
(2,879) (521,290) (453,399)
3,109
3,109
–
255
12,340 (441,059)
Net fair value changes on available-for-sale
financial assets
Share of foreign currency translation
differences of associates and joint ventures
Reclassification of foreign currency translation
reserve to profit or loss arising from disposal
of a foreign entity
Transactions with owners of the Company,
recognised directly in equity
Contributions by and distributions to owners
of the Company
Issue of shares
Capital contribution by non-controlling
interests
Cost of share-based payment
Return of capital by a subsidiary
Dividends paid
Dividends paid to non-controlling interests
Loans forgiven by non-controlling interests
Total contributions by and distributions to
owners of the Company
Changes in ownership interests in subsidiaries
Acquisition of subsidiaries with
non-controlling interests
Disposal of a subsidiary
Total transactions with owners of the Company
Transfer from retained earnings to
statutory reserve
At 31.12.2013
36
38
–
–
852,611 116,323
–
(205)
580,834
–
580,834
117,895 2,012,582
(205)
230
(230)
–
(44,651) 1,191,958 2,116,241
10,713
–
(809)
3,534
–
–
591,547
(7,931)
48,592
45,993
10,395
(205)
–
–
143,673 2,259,914
142
Share Treasury Capital Other Retained
Note capital shares reserves reserves earnings
$’000 $’000 $’000 $’000
$’000
Noncontrolling
Total interests
$’000
$’000
Total
equity
$’000
The Group
At 1.1.2014
852,611
Profit for the year
Net fair value changes on
available-for-sale financial assets
Share of net fair value changes on cash
flow hedges of an associate
differences of associates and joint ventures
Reclassification of foreign currency
translation reserve to profit or loss
arising from disposal of foreign entities
Other comprehensive income for the year,
net of tax
–
–
–
–
–
–
– (2,020)
– (57,327)
–
–
(2,020)
(57,327)
36
–
–
–
–
– (9,891)
– 18,422
–
–
(9,891)
18,422
36
–
–
–
1,336
–
1,336
–
1,336
36
–
–
–
50
–
50
–
50
–
–
– (49,430)
–
–
– (49,430) 531,952 482,522
36,815
–
– (19,559)
36
Transactions with owners of the
Company, recognised directly in equity
Contributions by and distributions to
Issue of shares
Capital contribution by non-controlling
interests
Purchase of treasury shares
33
Dividends paid
38
Total contributions by and distributions to
–
531,952 531,952
143,673 2,259,914
–
Total comprehensive income for the year,
net of tax
Changes in ownership interests in
subsidiaries
Acquisition of non-controlling interests in
subsidiaries representing total changes
in ownership interests in subsidiaries
that do result in a loss of control
Acquisition of subsidiaries with noncontrolling interests
Deconsolidation of a subsidiary
Disposal of subsidiaries
Total transactions with owners
of the Company
statutory reserve
At 31.12.2014
– 116,323 (44,651) 1,191,958 2,116,241
–
–
(49,430)
17,256
–
–
–
–
–
–
–
(6,529)
–
–
–
–
–
–
– 21,574
–
21,574
–
–
–
(6,529)
–
– (498,857) (498,857)
–
–
–
–
36,815
(6,529)
–
2,015 (498,857) (466,556)
5,038 536,990
–
(2,020)
(1,000) (58,327)
–
1,546
546
(9,891)
19,968
(48,884)
5,584 488,106
–
17,256
9,368
9,368
96 21,670
–
(6,529)
– (498,857)
(18,193) (18,193)
(8,729) (475,285)
–
–
–
–
–
–
(194)
(194)
–
–
–
–
–
–
–
–
–
–
–
(4)
–
–
–
–
–
(4)
729
(8,656)
–
729
(8,656)
(4)
36,815
–
889,426
(6,529)
–
2,011 (498,857) (466,560)
(16,850) (483,410)
–
–
13
(13)
–
(6,529) 116,323 (92,057) 1,225,040 2,132,203
–
–
132,407 2,264,610
143
ANNUAL REPORT 2014
Share
capital
$’000
Treasury
shares
$’000
Share-based
payment
reserve
$’000
Retained
earnings
$’000
Total
$’000
781,841
–
75,780
542,390
1,400,011
–
–
–
–
–
–
543,316
543,316
543,316
543,316
70,770
–
–
–
–
–
(18,624)
15,598
–
–
–
(521,290)
52,146
15,598
(521,290)
70,770
–
(3,026)
(521,290)
(453,546)
At 31.12.2013
852,611
–
72,754
564,416
1,489,781
At 1.1.2014
852,611
–
72,754
564,416
1,489,781
–
–
–
–
–
–
502,764
502,764
502,764
502,764
Note
The Company
At 1.1.2013
Profit for the year
of the Company
Issue of shares
Dividends paid
Total contributions by and distributions to owners
of the Company
38
Profit for the year
of the Company
Issue of shares
Dividends paid
Total contributions by and distributions to owners
of the Company
At 31.12.2014
33
38
36,815
–
–
–
–
–
(6,529)
–
(19,559)
21,670
–
–
–
–
–
(498,857)
17,256
21,670
(6,529)
(498,857)
36,815
889,426
(6,529)
(6,529)
2,111
74,865
(498,857)
568,323
(466,460)
1,526,085
144
C o n s o l i d at e d s tat e m e n t o f C a s h f l o w s
2014
$’000
Group
2013
$’000
Cash flows from operating activities
Adjustments:
Depreciation charge
Property, plant and equipment written off
Gain on disposal of property, plant and equipment
Gain on disposal of an investment property
Gain on disposal of investments
(Gain)/loss on disposal of subsidiaries
(Gain)/loss on disposal of associates and a joint venture
Gain on bargain purchase
Impairment losses on goodwill
Impairment losses on other intangible assets
Impairment losses on property, plant and equipment
Impairment losses on quoted and unquoted investments
Impairment losses on associates
Impairment loss on loan to an associate
Impairment loss on progressive payments to contractor
Share-based payment expense
Changes in fair value of financial instruments and hedged items
Changes in fair value of financial instruments held for trading
Interest expenses
Interest income
Dividends from investments
Amortisation of other intangible assets
Operating profit before working capital changes
Changes in:
Trade receivables
Advance payments to suppliers
Other receivables, deposits and prepayments
Amount due from holding company and related corporations balances
Amount due to holding company and related corporations balances
Amount due from associates
Amount due from joint ventures
Trade payables
Advance payments from customers
Other payables, accruals and provisions
Loans to staff and third parties
Deferred income
Foreign currency translation of foreign operations
Cash generated from operations
Interest received
Income tax paid
Net cash from operating activities
650,683
729,692
(57,182)
154,318
885
(1,310)
–
(2,640)
(519)
(2,797)
(47)
10,829
3,210
1,087
638
2,108
2,892
7,109
21,670
(15,592)
(152)
37,874
(23,629)
(2)
16,188
805,621
(31,082)
127,176
1,386
(430)
(12,548)
(6,154)
50
318
–
2,141
312
690
624
5,539
–
–
15,598
(3,174)
(107)
44,240
(23,320)
(1)
14,868
865,818
17,475
10,809
(91,592)
(27,658)
34,891
(21,499)
12,065
(4,508)
(9,122)
43,767
(19,001)
(37,263)
12,191
7,224
52
733,452
23,662
(132,792)
624,322
4,904
(26,476)
(61,792)
26,292
36,296
(7,495)
(6,962)
(7,385)
10,439
105,060
18,648
8,777
11,735
35,432
6,885
1,020,176
19,595
(109,978)
929,793
145
ANNUAL REPORT 2014
Note
2014
$’000
Group
2013
$’000
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Proceeds from sale of an investment property
Proceeds from sale and maturity of investments
Proceeds from disposal of an associate and a joint venture
Proceeds from insurance settlement
Loan to associates
Loan to a joint venture
Repayment of loan from joint ventures
Dividends from associates and joint ventures
Purchase of property, plant and equipment
Purchase of investments
Investments in associates
Investments in joint ventures
Acquisition of other intangible assets
Acquisition of controlling interests in subsidiaries and business, net of cash acquired
Net cash used in investing activities
44
4,543
22,000
147,057
3,280
5,220
(640)
(272)
3,887
38,840
2
(223,771)
(90,172)
–
(622)
(30,878)
(67)
(35,896)
(157,489)
10,166
–
137,419
1,200
–
–
(3,136)
–
39,596
1
(282,121)
(66,623)
(7,924)
(9,385)
(67,079)
(9,877)
–
(257,763)
9,368
(369)
(471,990)
(1,550)
(824)
–
80,435
17,256
(6,529)
–
(194)
(498,857)
(18,193)
(34,504)
1,105
(924,846)
22,761
(335)
(172,596)
(726)
–
836
201,898
52,146
–
(1,354)
–
(521,290)
(12,767)
(40,346)
2,025
(469,748)
Cash flows from financing activities
Capital contribution from non-controlling interests of subsidiaries
Repayment of other loans
Repayment of bank loans
Repayment of lease obligations
Repayment of loan to a joint venture
Proceeds of a loan from a joint venture
Proceeds from bank loans
Proceeds from issue of shares
Payment to non-controlling interest for reduction of share capital
Acquisition of non-controlling interests in a subsidiary
Dividends paid to shareholders of the Company
Interest paid
Deposits discharged
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Exchange difference on cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
25
(458,013)
1,920,924
(299)
1,462,612
202,282
1,700,950
17,692
1,920,924
146
ACqUISITIONS OF CONTROLLING INTERESTS IN SUBSIDIARIES IN 2014
During the year, the Group acquired the following companies:
(i)
On 20 May 2014, the Group acquired 100% of Aviation Academy of America, Inc. (“AAA”) for a cash consideration of
US$811,000. AAA specialises in the provision of flight training services for pilots.
In the seven months to 31 December 2014, AAA contributed revenue of $15,000 and loss of $416,000. If the acquisition
had occurred on 1 January 2014, management estimates that the contributions to consolidated revenue and net profit
would be immaterial. In determining these amounts, management has assumed that the fair value adjustments that arose
on the date of acquisition would have been the same if the acquisition had occurred on 1 January 2014.
The allocation of the purchase price to the identifiable assets acquired and liabilities assumed in the business combination
has been completed with $996,000 of intangible assets recognised on acquisition.
(ii)
On 30 December 2014, the Group acquired additional interest of 1% in an associate, GFM Electronics S.A. de C.V. (“GFME”)
for a cash consideration of $713,000. GFME provides design and implementation, distribution and sales of high technology
systems, services and products, in the communications area, as well as electronics systems.
As a result of the additional interest acquired, the Group increased its equity interest in GFME from 50% to 51%. The
Group was deemed to have acquired control of GFME and accounted for the additional investment as an acquisition of
a subsidiary.
If the acquisition had occurred on 1 January 2014, management estimates that the contributions to consolidated revenue
and net profit would have been $0.17 million and $0.15 million respectively. In determining these amounts, management
has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the
acquisition had occurred on 1 January 2014.
147
ANNUAL REPORT 2014
acquisitions of controlling interests in subsiDiaries in 2014 (continueD)
The acquisitions had the following effect on the Group’s assets and liabilities on acquisition date:
Intangible assets
Trade receivables
Cash and cash equivalents
Trade payables and accruals
Net identifiable assets
Net identifiable assets, after non-controlling interests
Gain on bargain purchase
Total purchase consideration
Total purchase consideration:
Cost of acquisitions
Fair value of pre-existing interest in the acquiree
Cash outflow on acquisitions in 2014:
Cash to be paid in subsequent year
Net cash acquired with the subsidiaries
Net cash outflow on acquisition
Recognised on
acquisition
$’000
Carrying
amount before
acquisition
$’000
24
1,049
115
422
1,255
2,865
24
53
115
422
88
702
(359)
(359)
(606)
(606)
2,506
(729)
1,777
(47)
1,730
96
1,693
37
1,730
(1,693)
371
1,255
(67)
148
ACqUISITIONS OF CONTROLLING INTERESTS IN A SUBSIDIARY AND BUSINESS IN 2013
In the prior year, the Group acquired the following subsidiary and business:
(i)
On 22 July 2013, the Group acquired 90% of Technicae Projetos e Serviços Automotivos Ltda. (“Technicae”) for a cash
consideration of $612,000.
(ii)
On 27 December 2013, the Group acquired the manufacturing assets, intellectual property and relevant manufacturing
expertise from Ticel Equipamentos Ltda, a Brazilian construction equipment company, for a total cash consideration of
$9,284,000.
Following the completion of the final purchase price allocation during the financial year, the Group made adjustments to the
provisional fair value originally recorded in the prior year.
The effect of the adjustments made during the 12-month period from acquisition date (the “Window Period”) is set out below:
Fair values recognised
on acquisition
(provisional)
2013
$’000
Intangible assets
Net identifiable assets
Net identifiable assets,
after non-controlling interests
Goodwill arising on consolidation
Total purchase consideration
Cash outflow on acquisitions:
Net cash acquired with the subsidiary and business
Net cash outflow on acquisition
Adjustments during
Window Period
2014
$’000
Fair values recognised
on acquisition (final)
2014
$’000
400
5,705
3
4
19
6,131
–
(741)
–
–
–
(741)
400
4,964
3
4
19
5,390
(132)
(1,939)
(2,071)
–
252
252
(132)
(1,687)
(1,819)
4,060
(11)
(489)
–
3,571
(11)
4,049
5,847
9,896
(489)
489
–
3,560
6,336
9,896
(9,896)
19
(9,877)
–
–
–
(9,896)
19
(9,877)
Purchase price adjustments, which are non-cash in nature, made during the Window Period have not been applied retrospectively
as these adjustments, which relate mainly to balance sheet effects and certain consequential income statement effects, are
immaterial to the Group.
In 2013, the Group incurred acquisition-related cost at $262,000 related to external legal fees and due diligence costs. The legal
fees and due diligence costs have been included in administrative expenses in the Group’s income statement.
149
ANNUAL REPORT 2014
N O T E S TO T H E F I N A N C I A L S TAT E M E N T S
31 December 2014
These notes form an integral part of and should be read in conjunction with the accompanying financial statements.
1.
GENERAL
The Company is a public limited company domiciled and incorporated in Singapore. The address of the Company’s registered
office and principal place of business is 1 Ang Mo Kio Electronics Park Road #07-01 ST Engineering Hub, Singapore 567710.
The Company’s immediate and ultimate holding company is Temasek Holdings (Private) Limited, a company incorporated
in Singapore.
The principal activities of the Company are those of an investment holding company and the provision of engineering and
related services. The principal activities of the subsidiaries are set out in Note 13 to the financial statements.
The financial statements of Singapore Technologies Engineering Ltd and the consolidated financial statements of Singapore
Technologies Engineering Ltd and its subsidiaries (collectively referred to as the “Group”) as at 31 December 2014 and for
the year then ended were authorised and approved by the Board of Directors for issuance on 26 February 2015.
2.
BASIS OF FINANCIAL STATEMENTS PREPARATION
The financial statements are prepared in accordance with Singapore Financial Reporting Standards (“FRS”).
The financial statements have been prepared on the historical cost convention, except as disclosed in the accounting
policies below.
The financial statements are presented in Singapore dollars which is the Company’s functional currency. All values are
rounded to the nearest thousand ($’000) except when otherwise indicated.
The preparation of the financial statements in conformity with FRSs requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income
and expenses are disclosed in Note 3.20. Actual results may differ from these estimates.
Except for changes in accounting policies discussed in Note 3.19, the accounting policies set out below have been
consistently applied by the Company and the Group and are consistent with those used in the previous year.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1
Basis of consolidation
(i)
Business combinations
Business combinations are accounted for using the acquisition method in accordance with FRS 103 Business
Combination as at the acquisition date, which is the date on which control is transferred to the Group.
Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For the
measurement of goodwill at initial recognition, refer to Note 3.5(i).
The consideration transferred does not include amounts related to the settlement of pre-existing
relationships. Such amounts are generally recognised in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that
the Group incurs in connection with a business combination are expensed as incurred.
150
31 December 2014
3.
summary of significant accounting Policies (continueD)
3.1
Basis of consolidation (continued)
(i)
Business combinations (continued)
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent
consideration is classified as equity, it is not re-measured and settlement is accounted for within equity.
Otherwise, any subsequent changes to the fair value of the contingent consideration are recognised in
profit or loss.
Non-controlling interests (“NCI”) that are present ownership interests and entitle their holders to a
proportionate share of the acquiree’s net assets in the event of liquidation are measured either at fair value
or at the NCI’s proportionate share of the recognised amounts of the acquiree’s identifiable net assets, at
the acquisition date. The measurement basis taken is elected on a transaction-by-transaction basis. All
other NCI are measured at acquisition-date fair value, unless another measurement basis is required by
FRSs.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as
transactions with owners in their capacity as owners and therefore no adjustments are made to goodwill
and no gain or loss is recognised in profit or loss. Adjustments to NCI arising from transactions that do not
involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.
(ii)
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to or has
rights to variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases.
Consistent accounting policies are applied to like transactions and events in similar circumstances. Losses
applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even
if doing so causes the non-controlling interests to have a deficit balance.
In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less
accumulated impairment losses.
(iii)
Acquisitions of entities under amalgamation
The Company’s interests in Singapore Technologies Aerospace Ltd, Singapore Technologies Electronics
Limited, Singapore Technologies Kinetics Ltd, and Singapore Technologies Marine Ltd (collectively referred
to as the “Scheme Companies”) resulted from the amalgamation of the Scheme Companies pursuant to a
scheme of arrangement under Section 210 of the Companies Act, Chapter 50 in 1997.
As the amalgamation of the Scheme Companies constitutes a uniting of interests, the pooling of interests
method has been adopted in the preparation of the consolidated financial statements in connection with
the amalgamation.
Under the pooling of interests method, the combined assets, liabilities and reserves of the pooled
enterprises are recorded at their existing carrying amounts at the date of amalgamation. The excess or
deficiency of amount recorded as share capital issued (plus any additional consideration in the form of cash
or other assets) over the amount recorded for the share capital acquired is recorded as capital reserve.
(iv)
Loss of control
Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any noncontrolling interests and the other components of equity related to the subsidiary. Any surplus or deficit
arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous
subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is
accounted for as an equity-accounted investee or as an available-for-sale financial asset, depending on the
level of influence retained.
151
ANNUAL REPORT 2014
31 December 2014
3.
3.1
Basis of consolidation (continued)
(v)
Investments in associates and joint ventures (equity-accounted investees)
Associates are those entities in which the Group has significant influence, but not control or joint control,
over the financial and operating policies. Significant influence is presumed to exist when the Group holds
between 20% or more of the voting power of another entity. A joint venture is an arrangement in which
the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than
rights to its assets and obligations for its liabilities.
Investments in associates and joint ventures are accounted for by the Group using the equity method and
are recognised initially at cost, which includes transaction costs.
The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive
income from the date that significant influence or joint control commences until the date that significant
influence or joint control ceases.
When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount
of the investment, including any long-term interest, is reduced to zero, and the recognition of further losses
is discontinued except to the extent that the Group has an obligation to fund the investee’s operations or
has made payments on behalf of the investee.
In the Company’s separate financial statements, investments in associates and joint ventures are accounted
for at cost, less accumulated impairment losses.
(vi)
Transactions eliminated on consolidation
All significant inter-company balances and transactions are eliminated on consolidation.
3.2
Foreign currency
(i)
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the Company
and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates
approximating those ruling at the transaction dates. The major functional currencies of the Group entities
are Singapore dollar, United States dollar and Euro. Monetary assets and liabilities denominated in foreign
currencies are translated at the closing rate of exchange ruling at the balance sheet date.
Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using
the exchange rates as at the date of the transactions. Non-monetary items measured at fair value in a
foreign currency are translated using the exchange rates at the date when the fair value was determined.
Monetary item carried at amortised cost in the functional currency at the beginning of the year, adjusted for
effective interest and payments during the year and the amortised cost in foreign currency are translated at
the exchange rate at the end of the year.
Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences
arising on the retranslation of available-for-sale equity instruments, a financial liability designated as a
hedge of the net investment in a foreign operation to the extent that the hedge is effective, or qualifying
cash flow hedges to the extent the hedge is effective, which are recognised in other comprehensive income.
152
31 December 2014
3.
3.2
Foreign currency (continued)
(ii)
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on
acquisition, are translated to Singapore dollars at exchange rates at the reporting date. The income and
expenses of foreign operations are translated to Singapore dollars using exchange rates at the date of the
transactions.
Foreign currency differences are recognised in other comprehensive income and presented in the foreign
currency translation reserve in equity. However, if the foreign operation is a non wholly-owned subsidiary,
then the relevant proportionate share of the translation difference is allocated to the non-controlling
interests. When a foreign operation is disposed of such that control, significant influence or joint control is
lost, the cumulative amount in the foreign currency translation reserve related to that foreign operation is
reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of
its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion
of the cumulative amount is re-attributed to non-controlling interests. When the Group disposes of only
part of its investment in an associate or joint venture that includes a foreign operation while retaining
significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to
profit or loss.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither
planned nor likely in the foreseeable future, foreign exchange gains or losses arising from such a monetary
item are considered to form part of a net investment in a foreign operation and are recognised in other
comprehensive income, and presented in the foreign currency translation reserve in equity.
3.3
Financial instruments
(i)
Non-derivative financial assets
Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party
to the contractual provisions of the financial instrument. All regular way purchases and sales of financial
assets are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.
Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets
within the period generally established by regulation or convention in the marketplace concerned.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction
in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any
interest in transferred financial assets that is created or retained by the Group is recognised as a separate
asset or liability.
Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only
when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to
realise the asset and settle the liability simultaneously.
The Group classifies non-derivative financial assets into the following categories: financial assets at fair value
through profit or loss, loans and receivables and available-for-sale financial assets. The Group determines
the classification of its financial assets after initial recognition and, where allowed and appropriate, reevaluates this designation at each financial year-end.
153
ANNUAL REPORT 2014
31 December 2014
3.
3.3
Financial instruments (continued))
(i)
Non-derivative financial assets (continued)
Financial assets at fair value through profit or loss
Financial assets held for trading are classified as financial assets at fair value through profit or loss. Financial
assets held for trading are financial assets acquired principally for the purpose of selling in the near term.
Financial assets at fair value through profit or loss are measured at fair value and gains or losses arising
from change in the fair values are recognised in profit or loss. Attributable transaction costs are recognised
in profit or loss as incurred.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an
active market. Such assets are recognised initially at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the
effective interest method, less any impairment losses. Gains or losses are recognised in profit or loss when
the loans and receivables are derecognised or impaired, as well as through the amortisation process.
Loans and receivables comprise cash and cash equivalents, and trade and other receivables (including
finance lease receivables and amounts due from related parties).
Cash consists of cash on hand and cash with banks or financial institutions, including fixed deposits. Cash
equivalents are short-term and highly liquid investments that are readily convertible to known amounts of
cash and that are subject to insignificant risk of changes in value. For the purpose of the statement of cash
flows, cash and cash equivalents also include bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management.
Available-for-sale financial assets
Available-for-sale financial assets are those financial assets that are designated as available-for-sale or are
not classified in any of the three preceding categories. Available-for-sale financial assets are recognised
initially at fair value plus any directly attributable transaction costs. After initial recognition, the changes in
fair value are recognised in other comprehensive income and presented in the fair value reserve in equity,
except for impairment losses and foreign exchange differences on available-for-sale debt instruments, until
the financial asset is derecognised. Upon derecognition, the cumulative gain or loss previously recognised
in other comprehensive income is reclassified from equity to income statement as a reclassification
adjustment.
The fair value of available-for-sale financial assets that are actively traded in organised financial markets is
determined by reference to quoted market prices at the close of business on the balance sheet date. For
those financial assets where there is no active market, fair value is determined using valuation techniques.
Such techniques include using recent arm’s length market transactions; reference to the current market
value of another instrument, which is substantially the same; discounted cash flow analysis and option
pricing models.
For those financial assets where there is no active market and where fair value cannot be reliably measured,
they are measured at cost.
Available-for-sale financial assets comprise equity securities and bonds.
154
31 December 2014
3.
3.3
Financial instruments (continued)
(ii)
Non-derivative financial liabilities
Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party
to the contractual provisions of the financial instrument. The Group derecognises a financial liability when
its contractual obligations are discharged, cancelled or expire.
Financial liabilities for contingent consideration payable in a business combination are initially measured
at fair value. Subsequent changes in the fair value of the contingent consideration are recognised in profit
or loss.
Financial assets and liabilities are offset and the net amount presented in the balance sheets when, and
only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or
to realise the asset and settle the liability simultaneously.
Non-derivative financial liabilities are recognised initially at fair value plus directly attributable transaction
costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the
effective interest method.
The Group’s financial liabilities comprise bank overdrafts, trade and other payables (including lease
obligations and amounts due to related parties), and borrowings.
(iii)
Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary
shares are recognised as a deduction from equity, net of any tax effects.
(iv)
Treasury shares
When ordinary shares are reacquired by the Company, the consideration paid is recognised as deduction
from equity. Reacquired shares are classified as treasury shares. When treasury shares are sold, or
re-issued subsequently, the cost of treasury shares is reversed from treasury shares account and the
realised gain or loss on transaction is presented as a change in equity of the Company. No gain or loss is
recognised in profit or loss.
Treasury shares have no voting rights and no dividends are allocated to them.
(v)
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments such as forward currency contracts, interest rate swaps and
cross currency swaps to hedge its risks associated with foreign currency and interest rate fluctuations. From
time to time, the Group also uses monetary assets and liabilities and embedded derivatives as hedging
instruments to hedge its risks associated with foreign currency fluctuations.
Embedded derivatives are separated from the host contract and accounted for separately if the economic
characteristics and risks of the host contract and the embedded derivatives are not closely related, a
separate instrument with the same terms as the embedded derivatives would meet the definition of a
derivative, and the combined instrument is not measured at fair value through profit or loss.
155
ANNUAL REPORT 2014
31 December 2014
3.
summary of significant accounting Policies (continueD))
3.3
(v)
Derivative financial instruments and hedge accounting (continued)
On initial designation of the derivative as the hedging instrument, the Group formally documents the hedge
relationship to which the Group wishes to apply hedge accounting and the risk management objective and
strategy for undertaking the hedge. The documentation includes identification of the hedging instrument,
the hedged item or transaction, the nature of the risk being hedged and the methods used in assessing the
hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or
cash flows attributable to the hedged risk. The Group makes an assessment, both at the inception of the
hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be
“highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items
attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80% to
125%. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur
and should present an exposure to variations in cash flows that could ultimately affect profit or loss.
Derivative financial instruments are initially recognised at fair value on the date on which a derivative
contract is entered into. Attributable transaction costs are recognised in profit or loss as incurred.
Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is
negative. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are
accounted for as described below.
Fair value hedges
The gain or loss from re-measuring the hedging instrument at fair value (for a derivative hedging instrument)
or the foreign currency component of its carrying amount measured in accordance with Note 3.2(i) (for a
non-derivative hedging instrument) is recognised in profit or loss. The gain or loss on the hedged item
attributable to the hedged risk is recognised in profit or loss.
When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative
change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset
or liability with a corresponding gain or loss recognised in profit or loss. The changes in the fair value of the
hedging instrument are also recognised in profit or loss.
The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated
or exercised, the hedge no longer meets the criteria for hedge accounting or the Group revokes the
designation. Any adjustment to the carrying amount of a hedging instrument for which the effective interest
method is used is amortised in the income statement. Amortisation may begin as soon as an adjustment
exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value
attributable to the risk being hedged.
Cash flow hedges
The portion of the gain or loss on a derivative designated as the hedging instrument that is determined to
be an effective hedge is recognised in other comprehensive income and presented in the fair value reserve
in equity, while the ineffective portion is recognised immediately in profit or loss.
Amounts taken to equity are transferred to profit or loss when the hedged transaction affects profit or
loss, such as when hedged financial income or financial expense is recognised, or when a forecast sale or
purchase occurs. When the hedged item is a non-financial asset or liability, the amounts taken to equity are
transferred to the initial carrying amount of the non-financial asset or liability.
If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are
transferred to profit or loss. If the hedging instrument expires or is sold, terminated, or exercised without
replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity
remain in equity until the forecast transaction occurs. If the related transaction is not expected to occur, the
amount is then transferred to profit or loss.
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3.
3.3
(v)
Derivative financial instruments and hedge accounting (continued)
Hedge of net investment in foreign operations
The Group has foreign currency differences arising from the translation of financial liabilities that are
designated as net investment hedges of foreign operations. These hedging instruments are accounted for
similarly to cash flow hedges. The currency translation differences on the financial liabilities relating to
the effective portion of the hedge are recognised in other comprehensive income and presented in the
foreign currency translation reserve in equity, while the ineffective portion of the hedge are recognised
immediately in profit or loss. On the disposal or partial disposal of the foreign operation, the amounts
previously recognised in equity are transferred to profit or loss as part of the gain or loss on disposal.
Separable embedded derivatives and other derivatives
Any gains or losses arising from changes in fair value on derivatives that are not designated in hedging
relationships are recognised immediately in profit or loss.
(vi)
Intra-group financial guarantees in the separate financial statements
Financial guarantees are financial instruments issued by the Company that require the issuer to make
specified payments to reimburse the holder for the loss it incurs because a specified debtor fails to meet
payment when due in accordance with the original or modified terms of a debt instrument.
Financial guarantees are recognised initially at fair value and are classified as financial liabilities.
Subsequent to initial measurement, the financial guarantees are stated at the higher of the initial fair
value less cumulative amortisation and the amount that would be recognised if they were accounted for
as contingent liabilities. When financial guarantees are terminated before their original expiry date, the
carrying amount of the financial guarantee is transferred to profit or loss.
3.4
Property, plant and equipment and depreciation
(i)
Recognition and measurement
All items of property, plant and equipment are initially recorded at cost. The cost of an item of property,
plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the item can be measured reliably.
Cost includes expenditure that is directly attributable to the acquisition of the asset and capitalised
borrowing costs. The cost of self-constructed assets also includes the cost of material and direct labour,
any other costs directly attributable to bringing the assets to a working condition for their intended use
and the costs of dismantling and removing the items and restoring the site on which they are located. Cost
may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency
purchases of property, plant and equipment.
Significant components of individual assets are assessed and if a component has a useful life that is different
from the remainder of that asset, that component is depreciated separately.
Subsequent to initial measurement, except for certain property, plant and equipment which were subject
to a one-time revaluation in 1972 (“the 1972 assets”), property, plant and equipment are measured at
cost, net of depreciation and any impairment losses. The 1972 assets stated at valuation are exempted
from conducting a regular frequency of revaluation but are measured net of depreciation, and any
impairment losses.
The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment, and is recognised net
within other income in profit or loss.
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3.
3.4
Property, plant and equipment and depreciation (continued)
(i)
Recognition and measurement (continued)
The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits embodied within the component will
flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced component
is derecognised.
(ii)
Depreciation
Depreciation is based on the cost of an asset less its residual value.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each
component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of
the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by
the end of the lease term. Property, plant and equipment purchased specifically for projects are depreciated
over the useful life of the class of property, plant and equipment or the duration of the project, whichever
is shorter. Construction-in-progress is not depreciated until each stage of development is completed and
becomes ready for use. Freehold land is not depreciated.
The estimated useful lives are as follows:
Buildings
Leasehold land
Improvements to premises
Wharves and slipways
Syncrolift and floating docks
Boats and barges
Plant and machinery
– Aerospace
– Electronics
– Land Systems
– Marine
– Others
Production tools and equipment
– Aerospace
– Electronics
– Others
Furniture, fittings, office equipment
and computers
Transportation equipment and vehicles
Aircraft and aircraft engines
*
–
–
–
–
–
–
2 to 50 years *
Over the period of the lease of between 2 to 50 years *
3 to 30 years *
20 years
15 years
10 to 23 years
–
–
–
–
–
8 to 25 years
10 years
5 to 15 years
5 to 30 years
5 years
–
–
–
–
5 to 15 years
10 years
3 years
2 to 5 years
–
–
5 years
15 to 30 years
Refer to Note 12(d)(ii) for details of the lease tenure used to approximate the useful lives of the leasehold land, buildings
and improvements.
The residual value, useful life and depreciation method are reviewed at each financial year-end to ensure
that the amount, method and period of depreciation are consistent with previous estimates and the
expected pattern of consumption of the future economic benefits embodied in the items of property,
plant and equipment. Changes in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset is accounted for by changing the depreciation period or method,
as appropriate, and treated as changes in accounting estimates.
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3.
3.5
Intangible assets
(i)
Goodwill
Goodwill represents the excess of:
•
the fair value of the consideration transferred; plus
•
the recognised amount of any non-controlling interests in the acquiree; plus
•
if the business combination is achieved in stages, the fair value of the existing equity interest in
the acquiree,
over the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses. In respect of equity-accounted investees, the carrying amount of goodwill
is included in the carrying amount of the investment, and an impairment loss on such an investment is not
allocated to any asset, including goodwill, that forms part of the carrying amount of the equity-accounted
investee.
(ii)
Research and development expenditure
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical
knowledge and understanding, is recognised in profit or loss as and when incurred.
Development expenditure on an individual project is recognised as an intangible asset when the Group
can demonstrate the technical feasibility of completing the development so that it will be available for
use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate
future economic benefits, the availability of resources to complete and the ability to measure reliably the
expenditure during the development. The expenditure capitalised includes the cost of materials, direct
labour, overhead costs that are directly attributable to preparing the asset for its intended use, and
capitalised borrowing costs. In any other circumstances, development costs are recognised in profit or loss
as incurred.
Development expenditure is measured at cost less accumulated amortisation and accumulated
impairment losses.
(iii)
Film cost inventory
Film cost inventory comprise film production costs which are recognised as an intangible asset when
the Group can demonstrate the technical feasibility of completing the film so that it will be available
for use or sale, its intention to complete and its ability to use or sell the film, how the film will generate
future economic benefits, the availability of resources to complete and the ability to measure reliably
the expenditure during the film production. Other film production costs are recognised in profit or loss
as incurred.
Film cost inventory is measured at cost less accumulated amortisation and accumulated impairment losses.
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3.
3.5
Intangible assets (continued)
(iv)
Other intangible assets
Other intangible assets that are acquired by the Group are initially recognised at cost. The cost of intangible
assets acquired in a business combination is its fair value as at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated
impairment losses.
Licences
•
Licences acquired as part of business combination
a)
These licences relates to Air Operator Certificate issued by the Civil Aviation Safety Authority
of Australia to conduct commercial aviation activities such as flight training school and air
charter, and the Federal Aviation Administration’s Organisation Designation Authorisation
programme that allows autonomy and efficiency in the issuance of supplementary type
certificates for avionics and interiors projects.
b)
These licences relates to the Federal Aviation Administration’s Part 141 Approval to a flight
school for pilot training in the US, including the issuance of the relevant entry visa to foreign
students to enter the US.
These licences are not amortised as they are considered to have an indefinite useful life and are
tested annually for impairment.
•
Licences acquired for purchase and leasing of Boeing parts
These licences are awarded by the relevant authorities such as the Federal Aviation Authority
(“FAA”), European Aviation Safety Agency (“EASA”), ISO9001, AS9100 Rev C, as well as commercial
arrangement with Boeing for the purchase and leasing of Boeing parts.
•
Licences acquired to develop maintenance, repair and overhaul services capabilities
These licence agreements relate to the maintenance, repair and overhaul services for UTC
Aerospace Systems components on Boeing 787 aircraft. These licences are not amortised until the
repair capabilities are set up and available for use.
Technology agreement
The technology agreement relates to the intellectual property assets required to operate the EcoPower
Engine Wash business. The intellectual property is an integral part of business as the business uses highlyproprietary processes to clean engines to enable fuel burn reduction and extended time on-wing.
(v)
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in
the specific asset to which it relates. All other expenditure, including expenditure on internally generated
intangible assets, is recognised in profit or loss as incurred.
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3.
3.5
Intangible assets (continued)
(vi)
Amortisation
Amortisation is calculated based on the cost of the asset less its residual value.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible
assets, other than goodwill, development expenditure of Aerospace sector and film cost inventory, from
the date that they are available for use.
Amortisation of development expenditure is recognised in profit or loss using the units of production method.
Film cost inventory is amortised using the individual-film-forecast computation method which amortises
the film costs in the same ratio that current gross revenue bear to anticipated total gross income for the
film. Amortisation commences when each film begins to earn revenue.
The estimated useful lives/units are as follows:
Dealer network
Development expenditure
– Aerospace
– Electronics
Commercial and intellectual property rights
Brands
– Aerospace
– Electronics
– Land Systems
Film cost inventory
Licences
Technology agreement
–
5 to 10 years
–
–
–
21 to 80 units
2 to 5 years
2 to 16 years
–
–
–
–
–
–
5 years
20 years
70 years
20 years
7 to 30 years
7 to 13 years
The useful lives and amortisation methods are reviewed at the end of each financial year-end to ensure
that the amount, method and period of amortisation are consistent with previous estimates and the
expected pattern of consumption of the future economic benefits embodied in the intangible assets.
Changes in the expected useful life or the expected pattern of consumption of future economic benefits
embodied in the asset is accounted for by changing the amortisation period or method, as appropriate,
and treated as changes in accounting estimates. The amortisation expense is recognised in the expense
category consistent with the function of the intangible asset.
3.6
Investment property
Investment property is property held either to earn rental income or for capital appreciation or for both, but not for
sale in the ordinary course of business, use in the production or supply of goods or services or for administrative
purposes. Investment property is measured at cost, net of depreciation and any impairment loss. Cost includes
expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed
investment property includes the cost of materials and direct labour, any other costs directly attributable to
bringing the investment property to a working condition for their intended use and capitalised borrowing costs.
Depreciation is recognised in profit or loss on a straight-line basis so as to write-off the cost of the investment
property over its estimated useful life of 12 years.
Investment property is derecognised when either it has been disposed of or when the investment property is
permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss
on the retirement or disposal of an investment property are recognised in profit or loss in the year of retirement
or disposal.
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3.
3.6
Investment property (continued)
Transfers are made to or from investment property only when there is a change in use. For a transfer from
investment property to owner-occupied property, the carrying value at the date of change in use becomes the cost
for subsequent accounting. For a transfer from owner-occupied property to investment property, the property is
accounted for in accordance with the accounting policy for property, plant and equipment set out in Note 3.4 up
to the date of change in use.
3.7
Inventories are measured at the lower of cost and net realisable value. Cost is calculated on a first-in, first-out
basis or by weighted average cost depending on the nature and use of the inventories. Cost includes expenditure
incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to
their existing location and condition. Cost may also include transfers from equity of any gain or loss on qualifying
cash flow hedges of foreign currency purchases of inventories. Allowance is made for deteriorated, damaged,
obsolete and slow-moving inventories.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.
Work-in-progress is measured at cost plus profits recognised to date less progress billings and recognised losses. Cost
includes all direct material and labour costs, equipment and sub-contracting services, together with appropriate
overhead expenses and may also include transfers from equity of any gain or loss on qualifying cash flow hedges of
foreign currency purchases of such services. Provision for foreseeable losses on uncompleted contracts is made in
the year in which such losses are determined.
Work-in-progress is included in current assets in the balance sheet for all contracts in which costs incurred plus
recognised profits exceed progress billings. If progress billings exceed costs incurred plus recognised profits, then
the difference is presented as “progress billings in excess of work-in-progress” and is included in current liabilities
in the balance sheet.
3.8
Impairment
(i)
Non-derivative financial assets
The Group assesses at the end of each reporting period whether there is objective evidence that a financial
asset not carried at fair value through profit or loss is impaired.
To determine whether there is objective evidence that financial assets (including equity securities) are
impaired, the Group considers factors such as the probability of insolvency or significant financial difficulties
of the debtor/issuer, default or significant delay in payments, significant adverse changes in the business
environment where the debtor/issuer operates and disappearance of an active market for a security. In
addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its
cost is objective evidence of impairment.
Financial assets carried at amortised cost
The Group first assesses whether objective evidence of impairment exists individually for financial assets
that are individually significant, and collectively for financial assets that are not individually significant.
If it is determined that no objective evidence of impairment exists for an individually assessed financial
asset, whether significant or not, the asset is included in a group of financial assets with similar credit
risk characteristics and that group of financial assets is collectively assessed for impairment. Financial
assets that are individually assessed for impairment and for which an impairment loss is or continues to be
recognised are not included in a collective assessment of impairment.
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3.
3.8
Impairment (continued)
(i)
Non-derivative financial assets (continued)
Financial assets carried at amortised cost (continued)
In assessing collective impairment, the Group uses historical trends of the probability of default, the timing
of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether
current economic and credit conditions are such that the actual losses are likely to be greater or less than
suggested by historical trends.
If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity
investments carried at amortised cost has been incurred, the amount of the loss is measured as the
difference between the asset’s carrying amount and the present value of estimated future cash flows
(excluding future credit losses that have not been incurred) discounted at the financial asset’s original
effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount
of the asset shall be reduced either directly or through use of an allowance account. The amount of the loss
shall be recognised in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised, the previously recognised
impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss,
to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.
Financial assets carried at cost
If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried
at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and
must be settled by delivery of such an unquoted equity instrument has been incurred, the amount of the
loss is measured as the difference between the asset’s carrying amount and the present value of estimated
future cash flows discounted at the current market rate of return for a similar financial asset. The loss
recognised is not reversed in future periods.
Available-for-sale financial assets
If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net
of any principal payment and amortisation) and its current fair value, less any impairment loss previously
recognised in the income statement, is transferred from equity to profit or loss.
Reversals in respect of impairment losses on equity instruments classified as available-for-sale are
recognised in other comprehensive income. Reversals of impairment losses on debt instruments are
reversed through profit or loss, if the increase in fair value of the instrument can be objectively related to
an event occurring after the impairment loss was recognised in profit or loss.
(ii)
Non-financial assets
The Group assesses at each reporting date whether there is an indication that its non-financial assets,
other than goodwill, investment property, inventories, work-in-progress and deferred tax assets, may
be impaired. Goodwill is reviewed for impairment, annually or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired. If any such indication exists, the Group
makes an estimate of the asset’s recoverable amount. An impairment loss is recognised if the carrying
amount of an asset or its related cash-generating unit (“CGU”) exceeds its estimated recoverable amount.
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3.
3.8
Impairment (continued)
(ii)
Non-financial assets (continued)
The recoverable amount of an asset or CGU is the higher of its fair value less costs to sell and its value in
use. In assessing value in use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually
are grouped together into the smallest group of assets that generates cash inflows from continuing use
that are largely independent of the cash inflows of other assets or CGU. Subject to an operating segment
ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated
are aggregated so that the level at which impairment testing is performed reflects the lowest level at
which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination
is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are
allocated first to reduce the carrying amount of any goodwill allocated to the CGU or group of CGUs, and
then to reduce the carrying amounts of other assets in the CGU or group of CGUs on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, an assessment is made
at each reporting date as to whether there is any indication that previously recognised impairment losses
may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used
to determine the recoverable amount since the last impairment loss was recognised. If that is the case,
the impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortisation, if no impairment
loss had been recognised in prior years. Such reversal is recognised in profit or loss unless the asset is
carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such
a reversal, the depreciation or amortisation charged is adjusted in future periods to allocate the asset’s
revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
Goodwill that forms part of the carrying amount of an investment in an associate and/or joint venture is not
recognised separately, and therefore is not tested for impairment separately. Instead, the entire amount of
the investment in an associate and/or joint venture is tested for impairment as a single asset when there is
objective evidence that the investment in an associate and/or joint venture may be impaired.
3.9
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of past events,
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
(i)
Warranties
The warranty provision represents the best estimate of the Group’s contractual obligations at the balance
sheet date. Under the terms of the revenue contracts with key customers, the Group is obligated to make
good, by repair or replacement, engineering or manufacturing defects that become apparent within the
warranty period from the date of sale. The warranty obligation varies from 1 year to 8 years. The Group’s
experience of the proportion of its products sold that requires repair or replacement differs from year to
year as every contract is customised to the specification of the customers. The estimation of the provision
for warranty expenses is based on the Group’s past claim experience over the duration of the warranty
period and the industry average in relation to warranty exposures and represents the best estimates of
the costs expected to incur per dollar of sales. The warranty provision made as at 31 December 2014 is
expected to be incurred over the applicable warranty periods.
164
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3.
3.9
Provisions (continued)
(ii)
Liquidated damages
Provision for liquidated damages is made in respect of anticipated claims from customers on contracts
of which deadlines are overdue or not expected to be completed on time in accordance with contractual
obligations. The utilisation of provisions is dependent on the timing of claims.
3.10
Employee benefits
(i)
Employee equity compensation benefits
The grant date fair value of share-based payment awards granted to employees is recognised as an employee
expense, with a corresponding increase in equity, over the period that the employees unconditionally
become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of
awards for which the related service and non-market vesting conditions are expected to be met, such that
the amount ultimately recognised as an expense is based on the number of awards that meet the related
service and non-market performance conditions at the vesting date.
(ii)
Defined contribution plans
The Group participates in national pension schemes, a post employment benefit, as defined by the laws
of the countries in which it has operations. In particular, the Singapore companies in the Group make
contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme.
Contributions to national pension schemes are recognised as an expense in the period in which the related
service is performed.
(iii)
Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the
related service is provided. A liability is recognised for the amount expected to be paid under cash bonus
plans if the Group has a present legal or constructive obligation to pay this amount as a result of past
service provided by the employee, and the obligation can be estimated reliably.
(iv)
Economic Value Added (“EVA”)-based Incentive Scheme
The Group adopts an incentive compensation plan, which is tied to the creation of EVA, as well as attainment
of individual and Group performance goals for its key executives. An EVA bank is used to hold incentive
compensation credited in any year. Typically one-third of the accumulated EVA-based bonus, comprising
the EVA declared in the financial year and the balance of such bonus brought forward from preceding years
is paid out in cash each year, with the balance being carried forward to the following year. The balances of
the EVA bank in future will be adjusted by the yearly EVA performance of the Group and the payouts made
from the EVA bank.
The Group measures the bonus payable after one year at the present value of the amount payable.
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3.
3.11
Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and
revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable,
net of any returns, trade discounts and volume rebates.
Revenue is recognised using the following methods:
(i)
Revenue from sale of goods is recognised when persuasive evidence exists that the significant risks and
rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the
associated costs and possible return of goods can be estimated reliably, there is no continuing management
involvement with the goods and the amount of revenue can be measured reliably.
The timing of the transfer of risks and rewards usually occurs upon delivery of goods and acceptance by
customers.
(ii)
Revenue from rendering of services is recognised in profit or loss in proportion to the stage of completion
of the transaction at the reporting date. The stage of completion is assessed by reference to the work
performed.
(iii)
Revenue from long-term contracts is recognised by reference to stage of completion, which is measured
by either:
(a)
(b)
(c)
a combination of different cost components or a single cost component that would provide the
most reliable indication of the stage of completion of a contract; or
when goods and services, representing part of a contract, are delivered; or
upon completion of designated phases of a contract.
Provision for foreseeable losses on uncompleted contracts is recognised in profit or loss as soon as such
losses are determinable.
3.12
(iv)
Management fee income is recognised on an accrual basis over the duration upon which management
services are rendered.
(v)
Commission income in excess of the certain percentage of the total amount received is taken up in the
income statement as and when the services are performed. Where it is probable that a portion of the
commission income may not materialise, a certain percentage of the total commission received is treated
as downpayment and is deferred and taken up in the income statement only upon the discharge of specified
contractual obligations.
(vi)
Rental income from investment property is accounted for on a straight-line basis over the duration of the
lease terms.
(vii)
Rental income from leasing of facilities is accounted for on a straight-line basis over the lease terms.
Government grants
Government grants are recognised when the Group complies with the conditions associated with the grants. Grants
that compensate the Group for expenses incurred are recognised in profit or loss as other income in the same
periods in which the expenses are recognised. Grants relating to depreciable assets are deferred and recognised
in profit or loss as other income over the period in which such assets are depreciated and used in the projects
subsidised by the grants.
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3.
3.13
Finance income and finance costs
Finance income comprises interest income on funds invested (including available-for-sale financial assets),
dividend income, gains on disposal of available-for-sale financial assets, fair value gains on financial assets at fair
value through profit or loss, gains on hedging instruments that are recognised in profit or loss. Interest income
is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in
profit or loss when the shareholder’s right to receive payment is established.
Finance costs comprise interest expense on borrowings, losses on disposal of available-for-sale financial assets, fair
value losses on financial assets at fair value through profit or loss, impairment losses recognised on investments,
and losses on hedging instruments that are recognised in profit or loss.
In 2014, the Group has re-assessed the nature of the fair value gains or losses arising from embedded derivatives
and forward currency contracts that provide an economic hedge to trading transactions. The Group has considered
that the economic hedges are part of the Group’s operating activities and are classified under part of cost of sales
prospectively to better reflect the nature of the transactions. Comparative information are not reclassified as the
Group has assessed that the net impact of the fair value changes of embedded derivatives and forward currency
contracts to be not material to the financial statements of the Group.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying
asset are recognised in profit or loss using the effective interest method.
Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either
finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss
position.
3.14
Finance leases
(i)
As lessee
Finance leases are those leasing agreements, which effectively transfer to the Group substantially all
the risks and benefits incidental to ownership of the lease items. Assets financed under such leases are
capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value
of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease
payments are apportioned between the finance charges and reduction of the lease liability so as to achieve
a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit
or loss. Assets acquired on finance lease arrangements are depreciated in accordance with the policy set
out in Note 3.4 above.
(ii)
As lessor
Leases where the Group transferred substantially all the risks and rewards incidental to legal ownership of
the leased assets, are classified as finance leases.
The leased asset is derecognised and the present value of the lease receivables (net of initial direct costs
for negotiating and arranging the lease) is recognised on the balance sheet. The difference between the
gross receivables and the present value of the lease receivables is recognised as unearned finance income.
Each lease payment received is applied against the gross investment in the finance lease receivables to
reduce both the principal and the unearned finance income. The finance income is recognised in profit or
loss on a basis that reflects a constant periodic rate of return on the net investment in the finance lease
receivables.
Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to finance
lease receivables and recognised as an expense in profit or loss over the lease term on the same basis as
the leased income.
167
ANNUAL REPORT 2014
31 December 2014
3.
3.15
Operating leases
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset,
are classified as operating leases. Operating lease payments are recognised as an expense in profit or loss on a
straight-line basis over the lease term.
The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the
lease term on a straight-line basis.
3.16
Income taxes
(i)
Current tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to
be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted by the balance sheet date.
Current taxes are recognised in profit or loss except to the extent that it relates to items recognised directly
in other comprehensive income or in equity.
(ii)
Deferred tax
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax is
not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither accounting nor taxable profit or loss and taxable
temporary differences arising on the initial recognition of goodwill. Deferred tax assets and liabilities are
measured using the tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled based on tax rates enacted or substantively enacted at
the balance sheet date.
Deferred tax liabilities are recognised for all taxable temporary differences associated with investments
in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax
assets and unused tax losses, to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can
be utilised.
At each balance sheet date, the Group re-assesses unrecognised deferred tax assets and the carrying
amount of deferred tax assets. The Group recognises a previously unrecognised deferred tax asset to
the extent that it has become probable that future taxable profit will allow the deferred tax asset to be
recovered. The Group conversely reduces the carrying amount of a deferred tax asset to the extent that it
is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of the
deferred tax asset to be utilised.
Deferred income tax relating to items recognised outside profit or loss is recognised in correlation to the
underlying transaction either in other comprehensive income or directly in equity and deferred tax arising
from a business combination is adjusted against goodwill on acquisition.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists
to set off current income tax assets against current income tax liabilities and the deferred income taxes
relate to the same taxable entity and the same tax authority.
168
31 December 2014
3.
3.17
Earnings per share
The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is
calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted
average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings per
share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average
number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential
ordinary shares, which comprise share plans granted to employees.
3.18
Operating segments
For management purposes, the Group is organised on a worldwide basis into four major operating segments. The
management of the Company reviewed the segments’ operating results regularly in order to allocate resources to
the segments and to assess the segments’ performance. Additional disclosures on each of these operating segments
are shown in Note 41, including the factors used to identify the reportable segments and the measurement basis
of segment information.
3.19
Changes in accounting policies
The Group has adopted FRS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial
Liabilities, FRS 110 Consolidated Financial Statements, FRS 111 Joint Arrangements and FRS 112 Disclosure of
Interests in Other Entities, as well as the consequential amendments to FRS 28 Investments in Associates and Joint
Ventures (2011), with a date of initial application of 1 January 2014.
(i)
Subsidiaries
As a result of the adoption of FRS 110 Consolidated Financial Statements, the Group has changed its
accounting policy for determining whether it has control over and consequently whether it consolidates
its investees. FRS 110 introduces a new control model that is applicable to all investees, by focusing on
whether the Group has power over an investee, exposure or rights to variable returns from its involvement
with the investee and the ability to use its power to affect those returns. In particular, FRS 110 requires the
Group to consolidate investees that it controls on the basis of de facto circumstances.
As a consequence, the Group has changed its control conclusion in respect of its investment in STELOP Pte.
Ltd. (“STELOP”), which was previously accounted for as a subsidiary. Although the Group owns more than
half of the voting rights of STELOP, the contractual agreement requires all shareholders to act together to
direct the operations of STELOP. Accordingly, the Group has reclassified its investment in STELOP to a joint
venture. The change in accounting policy was not applied retrospectively as the impact of restating prior
year’s comparative was immaterial.
(ii)
FRS 111 Joint Arrangements
FRS 111 Joint Arrangements, which establishes the principles for classification and accounting of joint
arrangements. The adoption of this standard required the Group to re-assess and classify its joint
arrangements as either joint operations or joint ventures based on its rights and obligations arising from
the joint arrangements. Under this standard, interests in joint ventures will be accounted for using the
equity method, whilst interests in joint operations will be accounted for using the applicable FRSs relating
to the underlying assets, liabilities, revenue and expense items arising from the joint operations.
The Group has investments in joint arrangements as disclosed in Note 14. The Group has re-evaluated the
rights and obligations of the parties to these joint arrangements and has determined that the parties in
these joint arrangements have rights to the net assets of the arrangements. Accordingly, these have been
classified as joint ventures under FRS 111 and will be accounted for using the equity method. Previously,
these investments in joint arrangements are accounted for as jointly-controlled entities under FRS 31
Interests in Joint Ventures using the equity method. As the Group is already applying the equity method
of accounting, there is no impact to the Group’s financial statements when the Group adopted FRS 111.
169
ANNUAL REPORT 2014
31 December 2014
3.
3.19
Changes in accounting policies (continued)
(iii)
FRS 112 Disclosure of Interests in Other Entities
FRS 112 Disclosure of Interests in Other Entities, which sets out the disclosures required to be made in
respect of all forms of an entity’s interests in other entities, including subsidiaries, joint arrangements,
associates and unconsolidated structured entities. The adoption of this standard resulted in more extensive
disclosures being made in the Group’s financial statements in respect of its interests in other entities;
as FRS 112 is primarily a disclosure standard, there was no financial impact on the results and financial
position of the Company and the Group when the Group adopted FRS 112 in 2014. This has been presented
in Notes 14 and 44.
(iv)
FRS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities
Amendments to FRS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial
Liabilities, which clarifies the existing criteria for net presentation on the face of the Balance Sheet.
Under the amendments, to qualify for offsetting, the right to set off a financial asset and a financial liability
must not be contingent on a future event, and must be enforceable both in the normal course of business
and in the event of default, insolvency or bankruptcy of the entity and all counterparties.
The application of the standard had no impact to the Group’s financial statements.
3.20
Significant accounting estimates and judgements
Estimates and assumptions concerning the future are made in the preparation of the financial statements. They
affect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income and
expenses, and disclosures made. They are assessed on an ongoing basis and are based on experience and relevant
factors, including expectations of future events that are believed to be reasonable under the circumstances.
(i)
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance
sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year are discussed below.
Impairment of non-financial assets
The Group assesses whether there are any indicators of impairment for all non-financial assets at each
reporting date. Goodwill and other intangible assets are tested for impairment annually and at other times
when such indicators exist. Other non-financial assets are tested for impairment when there are indicators
that the carrying amounts may not be recoverable.
When value-in-use calculations are undertaken, management must estimate the expected future cash
flows from the asset or CGU and choose a suitable discount rate in order to calculate the present value of
those cash flows. Further details of the key assumptions applied in the impairment assessment of goodwill
and other intangible assets are given in Note 16 to the financial statements.
170
31 December 2014
3.
3.20
Significant accounting estimates and judgements (continued)
(i)
Key sources of estimation uncertainty (continued)
Impairment of loans and receivables
The Group assesses at each balance sheet date whether there is any objective evidence that a financial
asset is impaired. To determine whether there is objective evidence of impairment, the Group considers
factors such as the probability of insolvency or significant financial difficulties of the debtor and default or
significant delay in payments.
Where there is objective evidence of impairment, the amount and timing of future cash flows are
estimated based on historical loss experience for assets with similar credit risk characteristics. The
carrying amount of the Group’s loans and receivables at the balance sheet date is disclosed in Note 43
to the financial statements.
Depreciation charge
Property, plant and equipment and investment property are depreciated on a straight-line basis over their
estimated useful lives. Management estimates the useful lives of these property, plant and equipment and
investment property to be within 2 to 50 years. Changes in the expected level of usage and technological
developments could impact the economic useful lives and the residual values of these property, plant and
equipment and investment property, and therefore future depreciation charges could be revised.
Revenue recognition and provision for foreseeable losses
The Group has recognised revenue from long-term contracts by reference to the stage of completion. The
bases for measuring the stage of completion are described in Note 3.11(ii) and (iii). Significant judgement
based on management’s knowledge and experience is required in determining the appropriate stage of
completion and estimating a reasonable contribution margin or expected losses for revenue and costs
recognition.
Allowance for inventory obsolescence and write down of finished goods to net realisable value
The allowance for inventory obsolescence is based on estimates from historical trends and expected
utilisation of inventories. The actual amount of inventory write-offs could be higher or lower than the
allowance made.
Provision for warranty
The provision for warranty is based on estimates from known and expected warranty work to be performed
after completion. The warranty expense incurred could be higher or lower than the provision made.
171
ANNUAL REPORT 2014
31 December 2014
3.
3.20
Significant accounting estimates and judgements (continued)
(i)
Key sources of estimation uncertainty (continued)
Income taxes
The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in
determining the group-wide provision for income taxes. There are certain transactions and computations
for which the ultimate tax determination is uncertain during the ordinary course of business. The Group
recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due.
Where the final tax outcome of these matters is different from the amounts that were initially recognised,
such differences will impact the income tax and deferred tax provisions in the period in which such
determination is made.
In addition, certain subsidiaries of the Group have potential tax benefits arising from unutilised tax losses,
unabsorbed wear and tear allowances and other temporary differences, which are available for set-off
against future taxable profits. Significant judgement is involved in determining the availability of future
taxable profits against which the Group can utilise the tax benefits therefrom. The use of the potential tax
benefits is also subject to the agreement of the tax authorities and compliance with certain provisions of
the tax legislation of the respective countries in which the subsidiaries operate. Where the final outcome of
these matters is different from the amounts that were initially recognised, such differences will impact the
income tax provision and recognised deferred tax assets relating to the potential tax benefits in the period
in which such determination is made.
Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for
both financial and non-financial assets and liabilities.
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting
period during which the change has occurred. Further information about the assumptions made in
measuring fair values is included in Note 43 to the financial statements.
EVA-based Incentive Scheme (“EBIS”)
Estimates of the Group’s obligations arising from the EBIS at the balance sheet date may be affected by
future events, which cannot be predicated with any certainty. The assumptions and estimates are made
based on management’s knowledge and experience and may vary from actual experience so that the actual
liability may vary considerably from the best estimates. Negative EVA will result in a clawback of EVA bonus
accumulated in previous years.
(ii)
Critical judgements made in applying accounting policies
Information about critical judgements in applying accounting policies that have the most significant effect
on the amounts recognised in the financial statements relates to assessing whether the Group has control
over its investee companies.
During the year, the Group assessed the terms and conditions of the shareholders’ agreement of subsidiaries
that are not wholly-owned by the Group. The Group made critical judgements over:
(a)
their ability to exercise power over its investees;
(b)
their exposure or rights to variable returns for its investments with those investees; and
(c)
their ability to use its power to affect those returns.
The Group’s judgement included considerations of their power exercised at the board of the respective
investees and rights and obligations arising from board reserve of matters as agreed with the other
shareholders.
172
31 December 2014
3.
3.21
Future changes in accounting policies
Except as otherwise indicated below, those new standards, amendments to standards, and interpretations are not
expected to have a significant effect on the financial statements of the Group and the Company. The Group does
not plan to early adopt these standards.
•
FRS 115 Revenue from Contracts with Customers
FRS 115 Revenue from Contracts with Customers will replace FRS 18 Revenue, FRS 11 Construction Contracts
and related interpretations. The standard establishes the principle for companies to recognise revenue to
depict the transfer of goods or services to customers in amounts that reflect the consideration to which the
company expects to be entitled to in exchange for those goods or services. The new standard will also result in
enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed
(e.g. service revenue and contract modifications) and improved guidance for multi-element arrangements.
The Group is currently assessing the impact upon adoption of this standard in financial year ending
31 December 2017.
•
FRS 109 Financial Instruments
The standard replaces FRS 39 Financial Instruments: Recognition and Measurement. The standard sets out
the requirements for recognising and measuring financial assets, financial liabilities and some contracts to
buy or sell non-financial items. The Group is currently assessing the impact on adoption of this standard in
financial year ending 31 December 2018.
4.
REVENUE
Revenue represents invoiced value of sales/services less returns and discounts given and billings recognised on contracts
as follows:
2014
$’000
Sale of goods
Service income
Contract revenue
2,155,395
3,322,171
1,061,867
6,539,433
Group
2013
$’000
2,381,791
3,277,714
973,647
6,633,152
173
ANNUAL REPORT 2014
31 December 2014
5.
PROFIT FROM OPERATIONS
Profit from operations is arrived at:
Note
2014
$’000
Group
2013
$’000
After charging/(crediting)
Auditors’ remuneration
– auditors of the Company
– other auditors
Non-audit fees
– auditors of the Company
– other auditors
Fees and remuneration of directors *
Fees paid to a firm of which a director is a member
Personnel expenses
Depreciation charges
Allowance/(write-back of allowance) for
– inventory obsolescence
– doubtful debts (trade)
– doubtful debts (related parties)
– unbilled receivables (trade)
– doubtful lease receivables
Provision for
– warranties
– liquidated damages
– foreseeable losses
Property, plant and equipment written off
Research, design and development expenses
Operating lease expenses
Amortisation of other intangible assets
Impairment losses on property, plant and equipment
Impairment losses on goodwill
Impairment losses on other intangible assets
Impairment loss on progressive payments to contractor
Fair value changes in embedded derivatives not designated as hedging
instruments (included in cost of sales)
– Losses
Fair value changes of forward currency contracts not designated as hedging
instruments (included in cost of sales)
– Gains
– Losses
*
Includes share-based payment expense of $492,421 (2013: $345,400).
6
12
1,690
2,375
1,828
2,561
695
1,174
5,231
436
1,749,364
154,318
802
1,184
7,070
488
1,796,531
127,176
102,671
5,546
(792)
–
9,872
28
28
16
12
16
16
23
27,631
2,962
(793)
1,202
7,108
39,076
12,928
24,758
885
96,940
44,425
16,188
1,087
10,829
3,210
7,109
6,524
2,371
38,234
1,386
101,432
48,814
14,868
690
2,141
312
–
24,199
–
(27,577)
4,578
–
–
174
31 December 2014
6.
PERSONNEL ExPENSES
2014
$’000
Wages and salaries *
Contributions to defined contribution plans
Share-based payments
Other personnel expenses
*
7.
1,406,667
130,323
20,925
191,449
1,749,364
2013
$’000
1,450,899
133,163
14,977
197,492
1,796,531
Includes directors’ remuneration of $2,438,009 (2013: $3,909,347).
KEY MANAGEMENT PERSONNEL COMPENSATION
2014
$’000
Short-term employee benefits
Contributions to defined contribution plans
Other long-term benefits
Share-based payments
8.
Group
Group
31,082
475
3
8,287
39,847
2013
$’000
39,575
445
18
7,239
47,277
OThER INCOME, NET
2014
$’000
Other income
Gain on disposal of property, plant and equipment and investment property
Gain on disposal of subsidiaries
Gain on disposal of a joint venture
Government grants
Grant income from Wage Credit Scheme
Commission income
Rental income
Proceeds received from insurers
Others
Other expenses
Loss on disposal of a subsidiary
Loss on disposal of associates
Impairment losses on associates
Impairment loss on loan to an associate
Other income, net, recognised in profit or loss
Group
2013
$’000
1,310
519
2,797
5,787
9,122
398
7,345
5,023
12,874
45,175
12,978
–
–
11,503
–
311
6,336
–
8,967
40,095
–
–
(2,108)
(2,892)
(5,000)
(50)
(318)
(5,539)
–
(5,907)
40,175
34,188
175
ANNUAL REPORT 2014
31 December 2014
9.
FINANCE COSTS, NET
2014
$’000
Finance income
Dividend income quoted equity investments
Interest income
– bank deposits
– staff loans
– finance lease
– bonds
– others
Exchange gain, net
Gain on disposal of investments
Gain on fair value changes of investments held for trading
Net change in fair value of cash flow hedges reclassified from equity
on occurrence of forecast transactions
Fair value changes of financial instruments
– gain on forward currency contract, cross currency interest rate
swaps and cross currency swap not designated as hedging
instrument
– gain on forward currency denominated cash balances designated as
hedging instrument in fair value hedges
Fair value changes of hedged items
Fair value changes of embedded derivatives
– not designated as hedging instrument
Finance costs
Interest expenses
– bank loans and overdrafts
– bonds
– finance lease
– others
Exchange loss, net
Net change in fair value of cash flow hedges reclassified from equity
on occurrence of forecast transactions
Fair value changes of financial instruments
– loss on forward currency contracts, cross currency interest rate
swaps, interest rate swaps and cross currency swap not designated
as hedging instrument
– loss on forward currency contract
designated as hedging instrument
Fair value changes of hedged items
Impairment losses on unquoted investments
Finance costs, net, recognised in profit or loss
Group
2013
$’000
2
1
14,327
15
310
6,921
2,056
–
2,640
152
13,052
20
579
8,917
752
3,315
6,154
107
739
–
15,822
–
–
566
814
1,558
–
43,550
33,642
68,911
(10,269)
(26,542)
(744)
(319)
(5,150)
(16,484)
(26,574)
(871)
(311)
–
–
(1,558)
–
(30,593)
(796)
(739)
(638)
(45,197)
(447)
(242)
(624)
(77,704)
(1,647)
(8,793)
176
31 December 2014
10.
TAxATION
2014
$’000
Current income tax
Current year
Overprovision in respect of prior years
Deferred income tax
Current year
Underprovision in respect of prior years
Effect of reduction in tax rate
Group
2013
$’000
122,606
(15,122)
107,484
155,385
(15,472)
139,913
2,699
3,796
(286)
6,209
(2,234)
542
(76)
(1,768)
113,693
138,145
Deferred income tax related to items (charged)/credited directly to other comprehensive income:
2014
$’000
Net change in fair value of derivative financial instruments designated in
cash flow hedges
Group
2013
$’000
(10,770)
9,479
A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate
for the year ended 31 December is as follows:
2014
$’000
Group
2013
$’000
650,683
729,692
Taxation at statutory tax rate of 17% (2013: 17%)
Adjustments:
Income not subject to tax
Expenses not deductible for tax purposes
Different tax rates of other countries
Overprovision in prior years, net
Effect of change in tax rates
Effect of results of associates and joint ventures presented net of tax
Tax incentives
Deferred tax assets not recognised
Deferred tax assets previously not recognised now utilised
Deferred tax assets previously not recognised now recognised
Others
110,616
124,048
(4,442)
34,257
(4,736)
(11,326)
(286)
(9,721)
(3,536)
9,755
(2,133)
(1,000)
(3,755)
113,693
(5,302)
17,553
19,149
(14,930)
(76)
(5,284)
(3,942)
15,008
(5,729)
–
(2,350)
138,145
177
ANNUAL REPORT 2014
31 December 2014
11.
EARNINGS PER ShARE
Basic earnings per share
The calculation for basic earnings per share is based on:
2014
$’000
Profit attributable to shareholders
Group
531,952
2013
$’000
580,834
The weighted average number of ordinary shares is arrived at as follows:
Number of shares
Issued ordinary shares at beginning of the year
Weighted average number of ordinary shares issued during the year
Weighted average number of ordinary shares
2014
’000
3,105,904
11,959
3,117,863
Group
2013
’000
3,080,442
21,302
3,101,744
Diluted earnings per share
When calculating diluted earnings per share, the weighted average number of ordinary shares is adjusted for the effect
of all dilutive potential ordinary shares. The number of unissued shares under option granted under the ESOP and their
exercise prices are set out in Note 34. The average fair value of one ordinary share during the financial year ended
31 December 2014 was $3.71 (2013: $4.15) per share. The weighted average number of ordinary shares adjusted for the
unissued shares under option is as follows:
Number of shares
Weighted average number of ordinary shares *
(used in the calculation of basic earnings per share)
Weighted average number of unissued shares under option
Number of shares that would have been issued at fair value
Weighted average number of ordinary shares (diluted)
*
2014
’000
3,117,863
25,761
(21,089)
3,122,535
Group
2013
’000
3,101,744
34,882
(24,839)
3,111,787
The weighted average number of ordinary shares takes into account the weighted average effect of changes in treasury shares transactions
during the year.
There are no anti-dilutive share options granted to employees under the existing employee share option plans for the
current and previous financial years presented.
178
31 December 2014
12.
PROPERTY, PLANT AND EqUIPMENT
Valuation/Cost
Arising from
acquisition Finalisation
of interest in of purchase
As at
Disposals/ a subsidiary
price
1.1.2013 Additions* write-off and business
allocation
$’000
$’000
$’000
$’000
$’000
Reclassi- Translation
As at
fications difference 31.12.2013
$’000
$’000
$’000
The Group
At Valuation
Leasehold land and
buildings
Wharves and
slipways
Syncrolift and
floating docks
Plant and machinery
Furniture, fittings,
office equipment
and computers
At Cost
Freehold land and
buildings
Leasehold land and
buildings
Improvements to
premises
Wharves and
slipways
Syncrolift and
floating docks
Boats and barges
Plant and machinery
Production tools and
equipment
office equipment
and computers
Transportation
equipment and
vehicles
Aircraft and aircraft
engines
Construction-inprogress
*
1,919
–
–
–
–
–
–
1,919
1,490
–
–
–
–
–
–
1,490
4,603
1,694
–
–
–
–
–
–
–
–
–
–
–
–
4,603
1,694
279
–
–
–
–
–
–
279
56,737
5,982
–
–
–
166
1,798
64,683
781,301
44,297
(2,870)
–
–
143,815
10,767
977,310
59,168
8,082
(1,125)
11
–
4,588
1,573
72,297
35,520
1,958
–
–
3,719
335
41,532
68,936
10,369
724,412
3,508
–
65,424
–
–
(14,394)
–
–
365
272,581
18,523
(17,528)
–
223,163
29,266
(23,505)
24
16,933
2,677
(1,531)
–
–
192,679
18,601
(5,491)
–
–
99,218
2,551,002
127,401
325,719
(24)
(66,468)
–
400
–
–
–
(317)
–
(215)
–
(532)
14,388
–
(54,652)
(1)
42
12,711
86,831
10,411
733,549
1,364
5,739
280,679
3,379
2,786
234,898
228
17,608
4,485
1,176
211,450
24,041
144,594
2,319
39,473
252,955
2,994,188
(699)
Includes $19,726,000 under finance lease arrangement and $16,405,000 by way of non-cash government grant.
179
ANNUAL REPORT 2014
31 December 2014
12.
ProPerty, Plant anD equiPment (continueD)
Valuation/Cost
Arising from
acquisition of DeconsolidAs at
Disposals/ interest in a
ation of a
1.1.2014 Additions* write-off
subsidiary
subsidiary
$’000
$’000
$’000
$’000
$’000
Reclassi- Translation
As at
fications difference 31.12.2014
$’000
$’000
$’000
The Group
At Valuation
Leasehold land and
buildings
Wharves and
slipways
Syncrolift and floating
docks
Plant and machinery
office equipment
and computers
At Cost
Freehold land and
buildings
Leasehold land and
buildings
Improvements to
premises
Wharves and
slipways
Syncrolift and
floating docks
Boats and barges
Plant and machinery
equipment
office equipment
and computers
Transportation
equipment and
vehicles
engines
*
1,919
–
–
–
–
–
–
1,919
1,490
–
–
–
–
–
–
1,490
4,603
1,694
–
–
–
–
–
–
–
–
–
–
–
–
4,603
1,694
279
–
–
–
–
–
–
279
64,683
403
(1,746)
–
–
305
2,602
66,247
977,310
15,618
(12,805)
–
–
41,329
8,293
1,029,745
72,297
10,789
(3,507)
–
13,455
337
92,920
41,532
1,608
1,629
597
45,366
86,831
10,411
733,549
185
2,152
45,781
759
50
4,866
87,877
181,075
753,231
280,679
–
(451)
–
–
–
–
(18,575)
–
–
–
–
–
–
22,953
(5,662)
–
(1,858)
96
3,613
299,821
234,898
33,643
(11,363)
24
(3,136)
5,670
2,270
262,006
17,608
1,110
(1,245)
–
(101)
25
166
17,563
211,450
996
–
2,492
214,938
252,955
2,994,188
105,256
240,494
2,005
28,050
120,397
3,181,171
–
(584)
(55,487)
Includes $16,258,000 by way of non-cash government grant.
–
–
24
–
102
168,462
(12,390)
– (239,235)
(5,546) (20,552)
180
31 December 2014
12.
Accumulated depreciation
As at
1.1.2013
$’000
Depreciation
charge /
impairment
losses*
for the year
$’000
1,919
1,490
4,603
1,694
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,919
1,490
4,603
1,694
279
–
–
–
–
279
19,160
365,431
37,388
24,454
68,647
4,968
376,265
198,576
1,344
32,259
5,873
968
520
820
33,145
10,457
–
(2,863)
(1,081)
–
–
–
(10,420)
(13,721)
692
3,211
1,020
86
6
42
4,908
5,330
21,196
408,199
43,189
25,508
69,173
5,830
393,025
200,402
177,532
29,433
(22,849)
1,675
186,040
12,281
53,949
–
1,348,636
2,109
10,151
–
127,079
(1,192)
(3,220)
–
(55,346)
172
550
–
17,692
13,374
61,408
36,455
1,473,784
Disposals/
Translation
As at
write-off Reclassifications difference 31.12.2013
$’000
$’000
$’000
$’000
The Group
At Valuation
Leasehold land and buildings
Plant and machinery
Furniture, fittings, office
equipment and computers
At Cost
Freehold land and buildings
Boats and barges
Plant and machinery
Furniture, fittings, office
equipment and computers
Transportation equipment and
vehicles
Construction-in-progress
*
–
10,161
(11)
–
–
–
(10,873)
(240)
249
4
(22)
36,455
35,723
Includes impairment losses of $690,000 resulting from an assessment of the recoverable amount of an engine, based on the fair value less cost
to sell. The fair value is measured based on the amount to sell the engine at market price.
181
ANNUAL REPORT 2014
31 December 2014
12.
As at
1.1.2014
$’000
Depreciation
charge /
impairment
losses* Disposals/
for the year write-off
$’000
$’000
Deconsolidation
Translation
As at
of a subsidiary Reclassifications difference 31.12.2014
$’000
$’000
$’000
$’000
The Group
At Valuation
Leasehold land and
buildings
Wharves and
slipways
Syncrolift and
floating docks
Plant and machinery
office equipment
and computers
At Cost
Freehold land and
buildings
Leasehold land and
buildings
Improvements to
premises
Wharves and
slipways
Syncrolift and
floating docks
Boats and barges
Plant and machinery
equipment
office equipment
and computers
Transportation
equipment and
vehicles
engines
*
1,919
–
–
–
–
–
1,919
1,490
–
–
–
–
–
1,490
4,603
1,694
–
–
–
–
–
–
–
–
–
–
4,603
1,694
279
–
–
–
–
–
279
21,196
1,309
(1,505)
–
–
961
21,961
408,199
37,497
(4,339)
–
–
3,606
444,963
43,189
7,639
(3,495)
–
496
47,473
25,508
1,166
–
153
26,827
69,173
5,830
393,025
1,244
6,634
39,795
–
–
(10,781)
70
50
4,831
70,487
48,969
426,869
200,402
13,821
(5,214)
(1,583)
2
3,901
211,329
186,040
34,683
(11,207)
(2,924)
1
2,122
208,715
13,374
1,862
(1,185)
(101)
–
142
14,092
61,408
9,755
(2)
817
71,978
36,455
1,473,784
–
155,405
–
–
–
(37,726)
(356)
–
–
–
–
–
–
(4,964)
–
36,455
(1)
(36,455)
–
–
–
17,149 1,603,648
Due to continued losses of a subsidiary, the Group performed an impairment assessment and recognised an impairment loss of $1,087,000 on
certain plant and equipment. The recoverable amounts of these plant and equipment were determined based on the fair market value of the
plant and equipment, net of selling costs.
182
31 December 2014
12.
31.12.2014
$’000
Net book value
31.12.2013
$’000
1.1.2013
$’000
The Group
At Valuation
Plant and machinery
Furniture, fittings, office equipment and computers
At Cost
Boats and barges
Plant and machinery
Furniture, fittings, office equipment and computers
Construction-in-progress
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
44,286
584,782
45,447
18,539
17,390
132,106
326,362
88,492
53,291
3,471
142,960
120,397
1,577,523
43,487
569,111
29,108
16,024
17,658
4,581
340,524
80,277
48,858
4,234
150,042
216,500
1,520,404
37,577
415,870
21,780
11,066
289
5,401
348,147
74,005
45,631
4,652
138,730
99,218
1,202,366
Due to changes in the use of assets, plant and machinery with net book value amounting to $20,552,000 (2013: $22,944,000)
were reclassified to inventories.
In the prior year, inventories (Note 20) amounting to $131,815,000 were reclassified to property, plant and equipment
and included within construction-in-progress as the asset would be engaged in an operating lease. This was reclassified to
boats and barges during the year when the asset was put into use.
183
ANNUAL REPORT 2014
31 December 2014
12.
Leasehold land
and buildings
$’000
office equipment
and computers
$’000
Transportation
equipment
and vehicles
$’000
Total
$’000
The Company
Cost
As at 1.1.2013
Additions
Disposal/write-off
As at 31.12.2013
Additions
Disposal/write-off
As at 31.12.2014
As at 1.1.2013
Depreciation charge for the year
Disposal/write-off
As at 31.12.2013
Depreciation charge for the year
Disposal/write-off
As at 31.12.2014
–
–
–
–
2,841
–
2,841
4,109
776
(732)
4,153
1,546
(767)
4,932
398
468
(341)
525
–
–
525
4,507
1,244
(1,073)
4,678
4,387
(767)
8,298
–
–
–
–
165
–
165
3,094
785
(732)
3,147
981
(765)
3,363
103
96
(102)
97
105
–
202
3,197
881
(834)
3,244
1,251
(765)
3,730
Net book value
As at 31.12.2014
2,676
1,569
323
4,568
As at 31.12.2013
–
1,006
428
1,434
As at 1.1.2013
–
1,015
295
1,310
(a)
Property, plant and equipment at valuation
Certain property, plant and equipment, which are shown at valuation are stated at values arrived at by an
independent firm of professional valuers on 30 November 1972, on the basis of open market value for existing use.
As the property, plant and equipment were subject to a one-time revaluation prior to 1984, the Group is exempted
from having a regular frequency of revaluation in subsequent years. These property, plant and equipment have
been fully depreciated as at 31 December 2014 and 2013.
(b)
Property, plant and equipment pledged as security
Property, plant and equipment of certain overseas subsidiaries of the Group with a carrying value of $86,778,000
(2013: $96,217,000) are pledged as security for bank loans.
184
31 December 2014
12.
(c)
Property, plant and equipment under lease obligations
Included in the above are property, plant and equipment acquired under finance lease obligations with a net book
value of:
2014
$’000
17,059
242
17,301
(d)
Group
2013
$’000
16,975
281
17,256
Major properties
(i)
Description
Land
area
(sq. m.)
Net book value
2014
2013
$’000
$’000
13442 Emerson Road
Kidron, Ohio
Industrial buildings
68,351
1,022
1,033
300 Hackney Ave,
Independence, Kansas
117,358
4,718
4,643
400 Hackney Ave,
Washington, North Carolina
39,942
1,541
1,494
914 Saegers Station Drive,
Montgomery, Pennsylvania
122,659
4,383
4,294
7801 Trinity Drive,
Escatawpa, Mississippi
Shipyard and buildings
839,564
3,856
3,707
5801 Elder Ferry Road,
Moss Point, Mississippi
227,151
4,146
3,982
900 Bayou Casotte Parkway,
Pascagoula, Mississippi
331,803
20,486
19,671
3800 Richardson Road South,
Hope Hull, Alabama
Production facility
8,361
2,655
3,021
Office building and training
classrooms
7,714
1,364
1,478
Location
USA
Australia
2 Bowral Place
Ballarat, Victoria
185
ANNUAL REPORT 2014
31 December 2014
12.
(d)
Major properties (continued)
(ii)
Leasehold land, buildings and improvements
Location
Description
Tenure
Land
area
(sq. m.)
Net book value
2014
2013
$’000 $’000
Singapore
501 Airport Road
Factory and office building 10.6 years from 1.6.2013
23,899
4,085
4,247
503 Airport Road
Factory and office building 10.6 years from 1.6.2013
7,175
411
427
505 Airport Road
Jet engine test cell
2 years from 1.7.2014
5,317 16,380 16,695
540 Airport Road
Warehouse and office
building
30 years from 15.8.1985
5,850
165
310
Hangar and office building 30 years from 1.11.1984
18,918
–
381
Hangar and office building 30 years from 1.1.1992
75,713 27,457 29,849
8 Changi North Way
Hangar and office building 22.5 years from 16.6.1999 14,860
2,079
2,220
Hangar and office building 16.3 years from 20.8.2005
9,764
9,331
9,772
102 Gul Circle
Factory and office building 30 years from 17.7.2012
6,857
7,903
8,187
540 Airport Road
Hangars and office building 2 years lease from
1.7.2014 *
48,882 19,625 17,768
Seletar West Camp
Hangars and office building 31.7 years lease from
5.1.2009
25,200 30,987 31,068
Seletar West Camp
New Aero Centre
23,094 10,200 10,301
24 Ang Mo Kio
Street 65
Industrial and commercial 30 years from 1.12.2012
buildings
23,970
4,545
5,211
100 Jurong East
Street 21
Industrial and commercial 30 years from 1.11.1988,
buildings
renewable to 2048
11,232
6,170
6,443
28.4 years lease from
1.4.2012
1 Ang Mo Kio
Electronics Park Road buildings
20,000 68,165 68,561
6 Ang Mo Kio
Electronics Park Road buildings
5,000 19,228 20,753
33 Tuas Avenue 2
Factory and office building 30 years from 1.4.1996 to
31.3.2026
6,669
1,817
1,967
16 Benoi Crescent
Industrial and commercial 30 years from 16.7.1989 to
buildings
15.7.2019
6,981
1,761
1,911
249 Jalan Boon Lay
Industrial and commercial 27 years from 1.10.2001 206,031 125,238 108,238
buildings
to 31.12.2028, renewable
to 10.10.2065
186
31 December 2014
12.
(d)
(ii)
Leasehold land, buildings and improvements (continued)
Location
Land
area
(sq. m.)
Description
Tenure
30 years from 16.8.2013 to 12,029
15.8.2043
Net book value
2014
2013
$’000 $’000
Singapore
16 Tuas Avenue 7
556,074
186
168
4,554
4,140
601 Rifle Range Road Industrial buildings
Renewable every year *
15 Chin Bee Drive
60 years from 1.8.1973 to
31.7.2033
16 Benoi Road
Administrative offices and 56 years from 1.6.1969
workshop
7 Benoi Road
Buildings, foreshore and
workshops
103,802
60 Tuas Road
Buildings, foreshore and
workshops
30 years from 1.12.1992
137,739
4,039
3,532
30/36 Kian Teck
Avenue
Workers’ dormitory
3,908
3,117
3,409
2100 Aerospace Drive Hangar and office building 22 years from 1.1.1991
Brookley Complex,
Mobile, Alabama
103,825
27,579 27,149
9800 John Saunders
Road, San Antonio,
Texas
Hangar and office building 16.6 years from 1.6.2002
255,121
22,045 22,248
No 2, Huayu Road,
Leasehold land for factory 50 years from 20.11.2008
Huli District, Xiamen building
361006, Fujian
38,618
50,207 50,400
97 Zhong Cao Road,
Guiyang, Guizhou
Leasehold land, industrial 50 years from 26.2.2008 to 242,662
and commercial buildings 21.2.2058
21,773 22,006
6 Kuang Ji Road,
Zhenjiang, Jiangsu
Leasehold land, industrial 40 years from 21.5.2009 to 76,711
and commercial buildings 21.3.2049
1 Ding Mao Wei San
Road, Zhenjiang,
Jiangsu
Leasehold land, industrial 46.5 years from 21.5.2006
and commercial buildings to 5.12.2052
39,137
20,224
20,327 21,394
6,119
6,712
16,091 11,764
USA
People’s Republic of
China
55,883
8,461
8,723
–
8,380
187
ANNUAL REPORT 2014
31 December 2014
12.
(d)
(ii)
Leasehold land, buildings and improvements (continued)
Location
Description
Land
area
(sq. m.)
Tenure
Net book value
2014
2013
$’000 $’000
People’s Republic of
China
66 Xin Cheng Rui
Shandong Road,
Dantu, Zhenjiang,
Jiangsu
Leasehold land, industrial 50 years from 30.11.2012
68 Xin Cheng Rui
Shandong Road,
Dantu, Zhenjiang,
Jiangsu
Leasehold land, industrial 50 years from 31.05.2013 200,120
*
13.
12,812
51,576
3,142
12,688 12,713
This relates to buildings constructed by subsidiaries on properties rented from the Ministry of Defence Singapore on leases
which are renewable from one to three years. In view of the relationship between the landlord and the subsidiaries, the cost
of the buildings is depreciated over the period of intended use, i.e. 30 years.
SUBSIDIARIES
2014
$’000
Unquoted shares, at cost:
Singapore Technologies Electronics Limited
Singapore Technologies Marine Ltd
Vision Technologies Systems, Inc.
Singapore Technologies Dynamics Pte Ltd
ST Synthesis Pte Ltd
FusionTech Pte. Ltd.
Kaz-ST Engineering Bastau Limited Liability Partnership
ST Engineering Financial I Ltd.
ST Engineering Financial II Pte. Ltd.
Impairment in subsidiaries
Carrying amount after impairment in subsidiaries
Capital contribution *2
*1 Amount less than $1,000.
Company
358,626
26,982
211,938
56,000
422,301
6,000
4,656
1,000
578
– *1
– *1
1,088,081
(7,000)
1,081,081
116,635
1,197,716
2013
$’000
142,626
26,982
211,938
56,000
359,021
6,000
4,656
1,000
578
– *1
– *1
808,801
(7,000)
801,801
125,927
927,728
*2 The amount relates mainly to capital contribution in the form of share options, performance shares and restricted shares issued to employees
of subsidiaries.
188
31 December 2014
13.
subsiDiaries (continueD)
Details of the subsidiaries are as follows:
Effective equity interest held
by the Group
2014
2013
%
%
(a)
and its subsidiaries
100
100
ST Aerospace Engineering Pte Ltd and its subsidiaries:
ST PAE Holdings Pty Ltd and its subsidiaries
Aerospace Engineering Services Pty Ltd
Aerospace Engineering Services Pty Ltd Unit Trust
Pacific Flight Services Pte Ltd
Pacific Flight Services Pty Ltd
ST Aerospace Academy Pte. Ltd. and its subsidiary:
Aviation Training Academy Australia Pty Ltd and its subsidiary:
ST Aerospace Academy (Australia) Pty Ltd
ST Aerospace Engines Pte Ltd and its subsidiary:
ST Aerospace Technologies (Xiamen) Company Limited
ST Aerospace Systems Pte Ltd
ST Aerospace Supplies Pte Ltd and its subsidiaries:
iShopAero Pte Ltd
ST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd.
ST Aerospace International Structures Pte Ltd
ST Aviation Resources Pte Ltd
ST Aerospace Services Co Pte. Ltd.
Singapore Technologies Engineering (Europe) Ltd
Singapore Aerospace K.K.
Visiontech Investment Pte Ltd ^
Visiontech Engineering Pte Ltd
ST Aerospace Solutions (Europe) A/S and its subsidiary:
Airline Rotables (UK Holdings) Limited and its subsidiary:
Airline Rotables Limited
ST Aerospace Panama, Inc.
ST Aerospace Rotables Pte. Ltd.
Precision Products Singapore Pte Ltd
ST Aerospace Resources Pte. Ltd.
100
100
100
100
100
100
100
100
100
100
80
100
100
100
100
100
100
80
100
100
–
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
80
100
100
100
100
100
100
80
100
100
100
51
100
100
100
100
100
100
100
189
ANNUAL REPORT 2014
31 December 2014
13.
Details of the subsidiaries are as follows: (continued)
by the Group
2014
2013
%
%
(b)
and its subsidiaries
100
100
SEEL Electronic & Engineering Sdn Bhd
ST Electronics (Info-Software Systems) Pte. Ltd. and its subsidiaries:
INFA Systems Limited
ST Electronics (Software Services) Limited
ST Electronics (e-Services) Pte. Ltd. and its subsidiary:
Knowledge Alive Pte. Ltd. and its subsidiary:
COMAT Training Services Pte Ltd
ST Electronics (Data Centre Solutions) Pte. Ltd. and its subsidiary:
PMB Project Management Business Sdn Bhd
ST Electronics (Wuxi) Co., Ltd.
ST Electronics (Training & Simulation Systems) Pte. Ltd. and its subsidiaries:
Antycip Simulation Limited and its subsidiary:
Antycip Simulation SAS
ST Education & Training Private Limited and its subsidiaries:
STET Homeland Security Services Pte. Ltd.
STET Maritime Pte. Ltd.
MERITS Technologies LLP ³
ST Electronics (Enterprise 1) Pte. Ltd.
ST Electronics (Info-Comm Systems) Pte. Ltd. and its subsidiaries:
ST Electronics (Info-Security) Pte. Ltd.
STELCOMMS Pte. Ltd.
Telematics Wireless Ltd. and its subsidiary:
Telematics Wireless USA Corp
ST Electronics (Satcom & Sensor Systems) Pte. Ltd. and its subsidiaries:
ST Electronics (Sichuan) Co., Ltd @
iDirect Asia Pte. Ltd.
OrisTel Systems Pte. Ltd.
ST Electronics (Shanghai) Co., Ltd and its subsidiary:
ST Electronics (Tianjin) Co., Ltd
iTS Technologies Pte Ltd
ST Electronics (Taiwan) Limited
ST Electronics (Thailand) Limited
ST Electronics do Brasil Serviços e Soluções em Sistemas Eletronicôs Ltda
GFM Electronics S.A. de C.V.
100
100
100
100
100
100
100
100
100
100
100
93
93
70
70
70
–
100
100
100
51
100
100
100
–
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
93
93
70
70
70
51
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
–
–
190
31 December 2014
13.
by the Group
2014
2013
%
%
(c)
(d)
Singapore Technologies Kinetics Ltd and its subsidiaries
100
100
SDG Kinetics Pte. Ltd. and its subsidiaries:
LeeBoy India Construction Equipment Private Limited
LeeBoy Brazil Equipamentos De Construção Ltda.
Mobility Systems Pte Ltd and its subsidiaries:
Silvatech Global Systems Limited
Silvatech Systems Corporation Pte Ltd and its subsidiary:
Kinetics Drive Solutions Inc.
Technicae Projetos e Serviços Automotivos Ltda.
STA Inspection Pte Ltd
Singapore Commuter Private Limited and its subsidiaries:
Jiangsu Huatong Kinetics Co., Ltd.
Jiangsu Huaran Kinetics Co., Ltd.
Securedge Pte. Ltd.
STA Investment Pte Ltd
ST Kinetics International Pte. Ltd. and its subsidiary:
VT Hackney, S.A. de C.V.
SDDA Pte. Ltd. and its subsidiary:
Kinetics Link Services Sdn. Bhd.
ST Kinetics Integrated Engineering Pte. Ltd.
Singapore Test Services Private Limited
Advanced Material Engineering Pte. Ltd. and its subsidiaries:
Advanced Pyrotechnic Materials Private Limited
SMART Systems Pte Ltd
Unicorn International Pte Limited
Allied Ordnance of Singapore (Pte) Limited
Ordnance Development and Engineering Company of Singapore (1996) Private Limited
Autonomous Technology Pte Ltd and its subsidiaries:
Guizhou Jonyang Kinetics Co., Ltd.
Kinetics Automotive & Specialty Equipment Co., Ltd
Kinetics Systems (Shanghai) Co., Ltd.
100
99.2
100
100
100
100
100
90
100
100
75.3
75.3
100
100
100
100
100
60
100
100
100
51
51
100
100
100
100
60
100
100
100
97.9
100
100
100
100
100
90
100
100
75.3
75.3
100
100
100
100
100
60
100
100
100
51
51
100
100
100
100
60
100
100
Singapore Technologies Marine Ltd and its subsidiaries
100
100
STSE Engineering Services Pte Ltd and its subsidiaries:
STSE (Shanghai) Co. Ltd.
STSE Engineering Services (B) Sdn Bhd
Hovertrans Solutions Pte. Ltd.
ST Marine (Wuhan) Engineering Design Consultancy Co. Ltd.
100
100
100
51
100
100
100
100
51
100
191
ANNUAL REPORT 2014
31 December 2014
13.
by the Group
2014
2013
%
%
(e)
(f)
Vision Technologies Systems, Inc. and its subsidiaries
100
100
Vision Technologies Aerospace, Incorporated and its subsidiaries:
VT Mobile Aerospace Engineering, Inc.
(formerly known as ST Aerospace Mobile, Inc.)
DalFort Aerospace GP, Inc.
DalFort Aerospace, L.P.
San Antonio Aerospace GP, LLC D
VT San Antonio Aerospace, Inc. (formerly known as ST Aerospace San Antonio, L.P.)
VT DRB Aviation Consultants, Inc. (formerly known as DRB Aviation Consultants, Inc.)
EcoServices, LLC
Aviation Academy of America, Inc.
VT Volant Aerospace, LLC (formerly known as Volant Aerospace, LLC)
VT Aviation Services, Inc. (formerly known as Venture Capital Systems, Inc.)
Vision Technologies Electronics, Inc. and its subsidiary:
VT iDirect, Inc. and its subsidiaries:
iDirect Hong Kong Limited @
iDirect UK Limited and its subsidiary:
Parallel Limited
iDirect Italy S.r.l.
iDirect International, Inc.
iDirect Government Technologies, Inc.
VT iDirect Canada, Inc.
Vision Technologies Kinetics, Inc. and its subsidiaries:
Miltope Corporation and its subsidiary:
IV Phoenix Group, Inc.
MÄK Technologies, Inc.
Vision Technologies Land Systems, Inc. and its subsidiaries:
VT Dimensions, Inc.
VT LeeBoy, Inc.
VT Hackney, Inc.
Vision Technologies Marine, Inc. and its subsidiary:
VT Halter Marine, Inc.
VT Systems International, LLC and its subsidiary:
VT Systems Participações Ltda.
100
100
100
100
100
–
100
100
50.1
100
100
100
100
100
–
100
100
100
100
100
100
100
100
97
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50.1
–
100
100
100
100
100
100
100
100
100
100
100
100
100
97
100
100
100
100
100
100
100
100
100
Singapore Technologies Dynamics Pte Ltd and its subsidiary
100
100
Innosparks Pte. Ltd. (formerly known as ST Kinetics Pte. Ltd.)
100
100
192
31 December 2014
13.
by the Group
2014
2013
%
%
(g)
100
100
(h)
100
100
(i)
Kaz-ST Engineering Bastau Limited Liability Partnership
51
51
(j)
100
100
(k)
100
100
^
The company was struck off from the Registrar of the Accounting and Corporate Regulatory Authority pursuant to Section 344 of Companies
Act, Cap 50, in December 2014.
³
The company was disposed during the year.
@
These companies completed their deregistration during the year.
D
This company merged into VT San Antonio Aerospace, Inc. pursuant to Section 10.151 of the Texas Business Organizations Code, State of Texas,
USA during the year.
Further details of the subsidiaries are as follows:
Name of subsidiary
Principal activities
Country of
incorporation/
place of business
Investment holding and provision of engineering,
marketing and engineering support services
Singapore
ST Aerospace Engineering Pte Ltd
Repair, maintenance and servicing of aircraft
Singapore
ST PAE Holdings Pty Ltd
Investment holding
Australia
Trustee of unit trust fund
Australia
Unit Trust D
Dormant
Australia
Pacific Flight Services Pte Ltd
Providing air transport services
Singapore
Pacific Flight Services Pty Ltd
Flight training school operation and aircraft
management
Australia
ST Aerospace Academy Pte. Ltd.
Flight training school operation and simulator-based
pilot training
Singapore
193
ANNUAL REPORT 2014
31 December 2014
13.
Further details of the subsidiaries are as follows: (continued)
Name of subsidiary
Country of
incorporation/
place of business
Aviation Training Academy Australia Pty Ltd Aircraft management
Australia
ST Aerospace Academy (Australia) Pty Ltd
Flight training academy
Australia
ST Aerospace Engines Pte Ltd
Repair and overhaul of engines, parts repair,
on-wing services, asset management and parts
manufacturing
Singapore
ST Aerospace Technologies (Xiamen)
Company Limited
Repair and overhaul of engines
ST Aerospace Systems Pte Ltd
Service, repair and overhaul of aircraft components
Singapore
ST Aerospace Supplies Pte Ltd
Maintenance-By-the-Hour services, materials
distribution, trading and warehousing services, asset
management and provision of jet fuel services
Singapore
iShopAero Pte Ltd
Trading, e-commerce and information technology
related services for the aerospace industry
Singapore
ST Aerospace Guangzhou
Aero-Technologies &
Engineering Co Ltd.
Import/export for aircraft component leasing, repair,
exchange and trading, warehousing, packaging,
distribution and other related services
ST Aerospace International
Structures Pte Ltd
Designing, developing and manufacturing aircraft,
engines, equipment, accessories, components and
such other parts
Singapore
ST Aviation Resources Pte Ltd
Investment holding
Singapore
ST Aerospace Services Co Pte. Ltd.
Repair, maintenance, modification and servicing of
commercial aircraft
Singapore
Singapore Technologies
Engineering (Europe) Ltd
Providing marketing and investment services to
the Group
United
Kingdom
Singapore Aerospace K.K. #
Providing marketing services to the Group
Visiontech Engineering Pte Ltd
Provision of engineering services for the repair,
maintenance and modification of aircraft, aircraft
equipment and components
People’s Republic
of China
People’s Republic
of China
Japan
Singapore
194
31 December 2014
13.
Name of subsidiary
Country of
incorporation/
place of business
ST Aerospace Solutions (Europe) A/S
Supply of aircraft components, including
purchase, maintenance and logistics services
Denmark
Airline Rotables (UK Holdings) Limited
Investment holding
United
Kingdom
Airline Rotables Limited
Providing component management and support
services for aircraft
United
Kingdom
ST Aerospace Panama, Inc. +
Repair and maintenance of aircraft
Republic
of Panama
ST Aerospace Rotables Pte. Ltd.
Trading, leasing and asset services of rotables
Singapore
Precision Products Singapore Pte Ltd
Manufacture and sale of investment castings,
mould toolings and precision formings
Singapore
ST Aerospace Resources Pte. Ltd.
Investment holding
Singapore
Design, development, supply, installation,
integration and maintenance of transportation,
intelligent building, defence electronics and
communication systems
Singapore
SEEL Electronic & Engineering Sdn Bhd
Sales of electronic instruments and equipment,
electronic engineering and system integration
services and maintenance and calibration
of electronic equipment
Malaysia
ST Electronics (Info-Software Systems)
Pte. Ltd.
Design, development and supply of real-time/
mission critical systems and provision of related
maintenance services
Singapore
INFA Systems Limited
Provision of services in consulting, designing and
developing systems integration, the maintenance
and support of operational and computer
systems and distribution sales of system
equipment
Hong Kong
ST Electronics (Software Services) Limited ~
Dormant
ST Electronics (e-Services) Pte. Ltd.
Providing shared services to government
ministries, agencies and enterprises
People’s Republic
of China
Singapore
195
ANNUAL REPORT 2014
31 December 2014
13.
Name of subsidiary
Country of
incorporation/
place of business
Knowledge Alive Pte. Ltd.
Offer technologically-driven learning and
knowledge solutions, products and services to
corporate, tertiary and workforce markets
Singapore
COMAT Training Services Pte Ltd
Operating a computer training school, providing
training in computer software and applications
Singapore
ST Electronics (Data Centre Solutions)
Pte. Ltd.
Relate to mechanical, electrical and engineering
works to design, build and provide facility
management services for mission critical
environments such as data centres, disaster
recovery and business continuity sites
Singapore
PMB Project Management Business
Sdn Bhd ~
Dormant
Malaysia
ST Electronics (Wuxi) Co., Ltd.
Consulting, research, development, integration,
distribution and maintenance of information
communication technology software & hardware
and related technologies
People’s Republic
of China
ST Electronics (Training & Simulation
Systems) Pte. Ltd.
Design, development, supply, integration
and maintenance of training and simulation
systems, distribution of games, edutainment and
animation programs and the sales and licensing
of related products, merchandise and rights
Singapore
Antycip Simulation Limited
Investment holding and acting as
a selling agent of software and incidental
hardware to the defence industry and education
establishments
United
Kingdom
Antycip Simulation SAS
A value added reseller/distributor of simulation
products and provision of simulation subsystem/components solutions
France
ST Education & Training Private Limited
Provision of education and training,
management and consultancy services for
operational and technical domains of maritime,
aerospace and land services industries
Singapore
STET Homeland Security Services Pte. Ltd.
Provision of security consultancy, solutions
implementation and training
Singapore
196
31 December 2014
13.
Name of subsidiary
Country of
incorporation/
place of business
STET Maritime Pte. Ltd.
Provision of marine audit, survey and
consultancy services
Singapore
ST Electronics (Enterprise 1) Pte. Ltd.
Design, development and manufacture of
computers and data processing systems,
provision of services for the processing and
maintenance of data and information, and
production of animation pictures
Singapore
ST Electronics (Info-Comm Systems) Pte. Ltd. Design and development, systems integration,
manufacturing and sale of communication
equipment, GPS-based fleet management
system, traffic management system, info
appliances and defence electronics
Singapore
ST Electronics (Info-Security) Pte. Ltd.
Design, development, sale and provision of
technical support for information security
products, solutions and services
Singapore
STELCOMMS Pte. Ltd.
To undertake design and integration of
projects in the area of communications
network and systems and to market and trade
in communications related products and
subsystems
Singapore
Telematics Wireless Ltd.
Development, manufacture, and marketing of
products for Location Based Services such as
stolen car recovery, Automatic Meter Reading for
remote reading of utility meters and Electronic
Toll Collection tags and roadside readers
Israel
Telematics Wireless USA Corp #
Serves as a local point of contact for Telematics
Wireless Ltd’s customers for payments and
Return Material Authorisation support
USA
ST Electronics (Satcom & Sensor Systems)
Pte. Ltd.
Manufacture of microwave components and
sub-systems, system integration and provision
of related repairs and maintenance for the
telecommunications and defence electronics
industries
Singapore
iDirect Asia Pte. Ltd.
Marketing and sales, design, manufacture
& engineering services for electronics and
communication systems
Singapore
197
ANNUAL REPORT 2014
31 December 2014
13.
Name of subsidiary
Country of
incorporation/
place of business
OrisTel Systems Pte. Ltd.
Turnkey supply of telecom network solutions to
regional Telecom Service Providers, Government
and Utility companies, sale of telecom
equipment and accessories and provision of
engineering support, maintenance and training
services
Singapore
ST Electronics (Shanghai) Co., Ltd
Development and manufacturing of monitoring
and control systems, microwave systems,
training and simulation systems, security
systems, metro passenger information
systems, metro automated fare collection
systems, metro platform screen door systems,
integrated transportation systems (including
fleet management systems, urban transport
management systems, highway management
systems, etc.), metro transmission and
communication systems, EMC electromagnetic
products and software; sale of product
manufactured, system integration, aftersales, and consultancy services for the above
mentioned products. Engineering contractor
for building intelligent projects (involving
administrative licensing will need approved
certification).
People’s Republic
of China
ST Electronics (Tianjin) Co., Ltd
Development and manufacturing of monitoring
and control systems, microwave systems,
training and simulation systems, security
systems, metro passenger information
systems, metro automated fare collection
systems, metro platform screen door systems,
integrated transportation systems (including
fleet management systems, urban transport
management systems, highway management
systems, etc.), metro transmission and
communication systems, EMC electromagnetic
products and software; sale of product
manufactured, system integration, aftersales, and consultancy services for the above
mentioned products. Engineering contractor
for building intelligent projects (involving
administrative licensing will need approved
certification).
People’s Republic
of China
iTS Technologies Pte Ltd
Dormant
Singapore
198
31 December 2014
13.
Name of subsidiary
Country of
incorporation/
place of business
ST Electronics (Taiwan) Limited
Provide integration for large-scale system
projects in rail, expressway and intelligent
building management solutions
ST Electronics (Thailand) Limited
To engage in engineering project service
business as well as to install, test, inspect, and
control electronic system works of skytrain
projects and other engineering projects
ST Electronics do Brasil Serviços
e Soluções em Sistemas Eletronicôs Ltda #
Engineering services
Design and implementation, distribution and
sales of high technology systems, services and
products, in the communications area, as well
as electronics systems, principally closed circuits
and alarms for airports, malls, stadiums and
highways. Management of reusable electronic
equipment and components
Provision of design and engineering services,
manufacture, sales and knowhow transfer of
military and commercial vehicles, automotive
subsystems, armament, weapons, weapon
systems, ammunition and explosives and the
provision of engineering services for assembly,
upgrading/modifications, maintenance, repair
and overhaul of vehicles and weapon systems,
and trading in motor vehicles, equipment,
vehicle spares and related accessories
Singapore
SDG Kinetics Pte. Ltd.
Investment holding
Singapore
LeeBoy India Construction Equipment
Private Limited
Design, manufacture, sale, distribution and
aftersales support of construction equipment
India
LeeBoy Brazil Equipamentos
De Construção Ltda. # z
Manufacture of road construction equipment
Brazil
Mobility Systems Pte Ltd
Investment holding
Silvatech Global Systems Limited # z
Owns the intellectual property rights to electrohydraulic drive, hydro-mechanical and electromechanical continuously variable transmissions
technologies, and equipment powered by such
drives
Taiwan
Thailand
Brazil
Mexico
Singapore
British Virgin
Islands
199
ANNUAL REPORT 2014
31 December 2014
13.
Name of subsidiary
Country of
incorporation/
place of business
Silvatech Systems Corporation Pte Ltd
Designing, manufacturing, marketing and
managing licences of technologies and products
using electro-hydraulic drive, hydro-mechanical
and electro-mechanical continuously variable
transmissions, and equipment powered by such
drives, globally
Singapore
Kinetics Drive Solutions Inc. # z
Research and development, manufacturing
and sales of electro-hydraulic drive, hydromechanical and electro-mechanical continuously
variable transmissions technologies, and
equipment powered by such drives
Canada
Technicae Projetos e Serviços
Automotivos Ltda. # z
Provision of automotive maintenance, repair
and overhaul services including automotive
platforms revitalisation and modernisation
projects, as well as related trade, import and
export of parts and accessories
STA Inspection Pte Ltd
Dormant
Singapore
Singapore Commuter Private Limited
Investment holding
Singapore
Jiangsu Huatong Kinetics Co., Ltd.
Manufacture and sale of paving, mixing, road
maintenance and compaction equipment and
other road construction machineries
People’s Republic
of China
Jiangsu Huaran Kinetics Co., Ltd.
Manufacture and sale of engineering machinery
and equipment
People’s Republic
of China
Securedge Pte. Ltd.
manufacture and sales of security related
products, and the provision of equipment
maintenance services
Singapore
STA Investment Pte Ltd
Dormant
Singapore
ST Kinetics International Pte. Ltd.
Investment holding
Singapore
VT Hackney S.A. de C.V.
Manufacture and marketing of specialised
aluminium drop-frame truck bodies and trailers
Mexico
SDDA Pte. Ltd.
Assembling and marketing of diesel engines and
related products and the provision of technical
services, field services, repair and maintenance
services
Singapore
Brazil
200
31 December 2014
13.
Name of subsidiary
Country of
incorporation/
place of business
Kinetics Link Services Sdn. Bhd.
Assembling, distributing and marketing of port
handling equipment, diesel engines and related
products, and the provision of technical services,
field services and maintenance services
Malaysia
ST Kinetics Integrated Engineering
Pte. Ltd.
Provision of customised solutions, products for
defence and commercial markets
Singapore
Singapore Test Services Private Limited
Provision of professional engineering
consultancy, tests, inspection, certification and
related services, inspection of heavy goods
vehicles, light vehicles, motor cars, buses and
motorcycles, provision of vehicle inspection,
project management as well as provision of
independent damage assessment services
Singapore
Advanced Material Engineering Pte. Ltd.
manufacture, sales, disposal and knowhow
transfer of precision munitions, ammunition,
armament, weapon systems, military equipment,
explosives, hand-grenades, thunder-flashes,
pyrotechnic products and gunpowder and the
provision of engineering services for assembly,
upgrading/modifications, maintenance, repair
and overhaul of ammunition and weapon
systems, and related services
Singapore
Advanced Pyrotechnic Materials Private
Limited
Manufacture and sale of pyrotechnic products
Singapore
SMART Systems Pte Ltd
Life systems integration of weapon system
Singapore
Unicorn International Pte Limited
Trading and marketing
Singapore
Allied Ordnance of Singapore (Pte) Limited
Dormant
Singapore
Ordnance Development and Engineering
Company of Singapore (1996) Private
Limited
Dormant
Singapore
Autonomous Technology Pte Ltd
Investment holding
Singapore
201
ANNUAL REPORT 2014
31 December 2014
13.
Name of subsidiary
Country of
incorporation/
place of business
Guizhou Jonyang Kinetics Co., Ltd.
Design, manufacture, sale and service support
of construction, engineering and industrialrelated machinery and accessories, provide
engineering consultancy services to engineering
and manufacturing companies, provide rental of
own-manufactured machinery and accessories
People’s Republic
of China
Kinetics Automotive & Specialty
Equipment Co., Ltd z
Dealer support in areas of marketing activities,
product and technical training and aftersales
services including warranty
Myanmar
Kinetics Systems (Shanghai) Co., Ltd.
Manufacture and sale of vehicle drive systems,
industrial drive motors and small external
combustion engines
People’s Republic
of China
Singapore Technologies Marine Ltd
Construction and repair of naval and commercial
vessels, design, integration, fabrication,
installation of military and commercial
engineering equipment and the provision
of engineering consultancy and technical
management services
Singapore
STSE Engineering Services Pte Ltd
Design, manufacture, maintain and operate
environmental infrastructures and provide
planning, consultancy services in environmental
and renewable energy management solutions
Singapore
STSE (Shanghai) Co. Ltd.
Design, development, manufacturing, sales,
after-sales services and consulting services
of equipment for environmental protection
projects; wholesale, import and export and
related business of similar products; consulting
services for environmental projects information,
consulting services for commercial information
People’s Republic
of China
STSE Engineering Services (B) Sdn Bhd
Design, manufacture, maintain and operate
environmental infrastructures and provide
planning, consultancy services in environmental
and renewable energy management solutions
Brunei
Hovertrans Solutions Pte. Ltd.
Design, marketing and solutioning for
employment of heavy lift air cushion marine
vessel for use in oil and gas, transportation and
other civil engineering purposes
Singapore
202
31 December 2014
13.
Name of subsidiary
Country of
incorporation/
place of business
ST Marine (Wuhan) Engineering Design
Consultancy Co. Ltd.
To provide industrial engineering design,
research and development and consultancy
services
People’s Republic
of China
Vision Technologies Systems, Inc. #
Investment holding
USA
Vision Technologies Aerospace,
Incorporated #
Investment holding
USA
VT Mobile Aerospace Engineering, Inc.
(formerly known as ST Aerospace
Mobile, Inc.) # z
USA
DalFort Aerospace GP, Inc. ++ #
Dormant
USA
DalFort Aerospace, L.P. ++
Dormant
USA
VT San Antonio Aerospace, Inc. (formerly
known as ST Aerospace San Antonio, L.P.) # z
USA
VT DRB Aviation Consultants, Inc. (formerly Provision of aircraft engineering services
known as DRB Aviation Consultants, Inc.) # z
USA
EcoServices, LLC # z
Provision of engine wash services
USA
Flight training academy
USA
VT Volant Aerospace, LLC (formerly known
as Volant Aerospace, LLC) # z
Providing new or refurbishment of aircraft
interior parts; support services and aircraft
interior configuration services
USA
VT Aviation Services, Inc. (formerly known
as Venture Capital Systems, Inc.) #
Aircraft management
USA
Vision Technologies Electronics, Inc. #
Investment holding
USA
VT iDirect, Inc. # z
Design, develop and market two-way internet
protocol – (IP) based broadband satellite
networking solutions that deliver voice, data and
video services to enterprise and government
customer locations worldwide
USA
iDirect UK Limited
Markets two-way internet protocol – (IP) based
broadband satellite networking solutions
United
Kingdom
203
ANNUAL REPORT 2014
31 December 2014
13.
Name of subsidiary
Country of
incorporation/
place of business
Parallel Limited
Software development and associated services;
installation, configuration, consultancy and
support
United
Kingdom
iDirect Italy S.r.l. # z
Italy
iDirect International, Inc. # z
USA
iDirect Government Technologies, Inc. # z
Design, develop and market two-way internet
protocol – (IP) based broadband satellite
networking solutions that deliver voice, data and
video services to government customers
USA
VT iDirect Canada, Inc. # z
Research and development
Vision Technologies Kinetics, Inc. #
Investment holding
USA
Miltope Corporation # z
Development of computers and peripheral
equipment for rugged and other specialized
applications for military and commercial
customers, both domestic and international
USA
IV Phoenix Group, Inc. #
Dormant
USA
MÄK Technologies, Inc. # z
Develop and supply software products and
services for Networked Synthetic Environments
USA
Vision Technologies Land Systems, Inc. #
Investment holding
USA
VT Dimensions, Inc. #
Investment holding and licensing of intellectual
properties
USA
VT LeeBoy, Inc. # z
Manufacture of asphalt paving and road
maintenance equipment including LeeBoy
branded asphalt pavers, motor graders,
compactors, force feed loaders, asphalt
maintainers/patchers, tack distributors, and
Rosco branded asphalt distributors, street
flushers, brooms and asphalt spray patchers
USA
VT Hackney, Inc. # z
Manufacture and marketing of specialised
aluminium drop-frame truck bodies, trailers,
refrigerated truck bodies and trailers and
specialty vehicle cabs
USA
Canada
204
31 December 2014
13.
Name of subsidiary
Country of
incorporation/
place of business
Vision Technologies Marine, Inc. #
Investment holding
USA
VT Halter Marine, Inc. # z
Construction and repair of naval and commercial
vessels, design, integration, fabrication,
installation of engineering equipment and
provision of engineering services
USA
VT Systems International, LLC #
Investment holding
USA
VT Systems Participações Ltda. #
Promotion and marketing of products and
services
Brazil
Singapore Technologies Dynamics Pte Ltd
Technology development, advanced concept
design and development and technology
acquisition
Singapore
Innosparks Pte. Ltd. (formerly known as ST
Kinetics Pte. Ltd.)
Manufacturing, distribution, sales and marketing
of engineering products
Singapore
Provision of one-stop total integrated logistic
support services and engineering services
Singapore
Investment holding
Singapore
Kaz-ST Engineering Bastau Limited Liability
Partnership #
Dormant
Kazakhstan
Provision of financial and treasury services to
the Group
Singapore
Provision of financial and treasury services to
the Group
Singapore
D
The company ceased operations in November 2008.
#
Not required to be audited under the law in the country of incorporation.
+
The company ceased operations in November 2012.
~
These companies are under members’ voluntary liquidation.
z
Audited by member firms of KPMG International for consolidation purposes.
++ These companies ceased operations in October 2003.
205
ANNUAL REPORT 2014
31 December 2014
13.
All subsidiaries that are required to be audited under the law in the country of incorporation are audited by KPMG LLP,
Singapore and other member firms of KPMG International, except for the following:
Name of subsidiary
Name of auditing firm
LeeBoy India Construction Equipment Private Limited
Kinetics Automotive & Specialty Equipment Co., Ltd
Deloitte Mexico
B S R R & Co., Bangalore
Khin Su Htay & Associates, Myanmar
(a)
During the financial year, the Group incorporated the following company:
Country of
incorporation/
place of business
Name of company
ST Electronics do Brasil Serviços e Soluções em Sistemas
Eletronicôs Ltda
(b)
Consideration
$’000
Fair value of net identifiable
assets acquired
$’000
100
1,017
1,017
During the financial year, the Group acquired additional equity interests in the following companies:
Interest
Interest acquired after acquisition
%
%
Name of company
LeeBoy India Construction Equipment
Private Limited
Consideration
$’000
Carrying value of
net identifiable
assets acquired
$’000
1
51
713
760
1.3
99.2
194
194
During the financial year, the Group disposed the following company:
Name of company
MERITS Technologies LLP
#
(e)
100
Interest acquired
%
(d)
Brazil
During the financial year, the Group acquired the following company:
Name of company
(c)
Equity interest
held
%
Interest
disposed
%
Consideration
$’000
Carrying value of
net identifiable
assets disposed
$’000
51
–#
–
Date of disposal
4 September 2014
Amount less than $1,000 Singapore dollar.
During the financial year, the Group made an additional capital contribution of $27,086,000 in ST Aerospace
Technologies (Xiamen) Company Ltd. The effective equity interest held by the Group remains the same at 80%.
206
31 December 2014
14.
ASSOCIATES AND JOINT VENTURES
2014
$’000
Unquoted shares, at cost
Goodwill on acquisition written off, net
Share of net assets acquired
Impairment in associates and joint ventures *
Share of post-acquisition reserves
Represented by:
Interest in associates
Interest in joint ventures
*
Group
2013
$’000
373,307
(110)
373,197
(7,222)
112,377
478,352
380,130
(110)
380,020
(6,660)
88,779
462,139
437,385
40,967
478,352
436,258
25,881
462,139
2014
$’000
Company
17,657
2013
$’000
17,657
During the year, an impairment loss of $2,108,000 was recognised in an associate due to sustained losses and expiry of the contract on repair
and overhaul of A320 landing gears.
In the prior year,
(a) An impairment loss of $2,723,000 was recognised in an associate due to a permit not granted by the relevant authorities to conduct its
operations;
(b) An impairment loss of $1,270,000 was recognised in an associate as the financial performance of the associate was not up to management’s
expectation; and
(c) An impairment loss of $1,546,000 was recognised in an associate as there were indications of impairment and management assessed that
the recoverable amount of the investment based on management’s estimate of fair value less cost to sell is $1.
(a)
Details of associates are as follows:
Country of
incorporation/ Effective equity interest
place of business
held by the Group
2014
2013
%
%
Name of associate
Airbus Helicopters Southeast
Asia Private Limited
Selling, maintaining and
overhauling of helicopters
Singapore
25
25
CJS Aviation Pte. Ltd.
Provision of scheduled premium
class jet services
Singapore
26
26
Composite Technology
International Pte Ltd
Repairing and rebuilding
helicopter rotor blades
Singapore
33.33
33.33
207
ANNUAL REPORT 2014
31 December 2014
14.
associates anD joint ventures (continueD)
(a)
Details of associates are as follows: (continued)
Name of associate
Elbe Flugzeugwerke GmbH
Conversion of used Airbus
passenger aircraft to freighter as
well as the production of aircraft
components and equipment,
including supply for Airbus
production of new and converted
aircraft
Country of
place of business
held by the Group
2014
2013
%
%
Germany
35
35
Madrid Aerospace Services S.L. *1 Repair and overhaul of aircraft
landing gears and its related
components
Spain
50
50
Shanghai Technologies Aerospace Aircraft and component
Company Limited
maintenance, repair, overhaul
and other related maintenance
business
People’s Republic
of China
49
49
ST Aerospace (Guangzhou)
Aviation Services Company
Limited
Aircraft and component
maintenance, repair, overhaul
and other related maintenance
business
People’s Republic
of China
49
49
Singapore Precision Repair and
Overhaul Pte Ltd
Repair and overhaul of aircraft
and helicopter landing gears and
its related components
Singapore
50
50
Turbine Coating Services Pte Ltd
Repair, refurbishment and
upgrading of aircraft jet engine
turbine blades and vanes
Singapore
24.5
24.5
Turbine Overhaul Services Pte Ltd Repair and service of gas and
steam turbine components
Singapore
49
49
NEC STEE Cloud Services Pte. Ltd. Providing cloud computing
services, computing infrastructure
for cloud computing services,
systems integration and systems
migration services in relation
to cloud computing services,
customisation of SAP software
or other customised software
for use in conjunction with or
in relation to cloud computing
services
Singapore
40
40
208
31 December 2014
14.
(a)
Details of associates are as follows: (continued)
Country of
place of business
held by the Group
2014
2013
%
%
Name of associate
WizVision Pte. Ltd.
Providing information technology
services and trading of computer
accessories
Singapore
22.8
22.8
CityCab Pte Ltd
Rental of taxis and provision
of premier bus service, charge
card facilities and travel related
services
Singapore
46.5
46.5
GFM Maquinaria, S.A.P.I.
de C.V. *2
Sale of construction and mining
machinery and equipment
Mexico
–
40
Timoney Holdings Limited
Design and prototyping services
and component supply for the
automotive and aerospace
engineering sectors
Republic of
Ireland
27.7
27.7
NanoScience Innovation Pte Ltd
Research and development of
ultra fine structure, especially
nano-scale, materials, devices,
equipment and intellectual
properties
Singapore
21.6
21.6
Experia Events Pte. Ltd.
Organising and management
of conferences, exhibitions and
other related activities, including
the biennial Singapore Airshow
event
Singapore
33
33
Singapore Airshow & Events
Pte. Ltd.
Dormant
Singapore
33
33
209
ANNUAL REPORT 2014
31 December 2014
14.
(b)
Details of joint ventures are as follows:
Country of
place of business
held by the Group
2014
2013
%
%
Name of joint venture
Total Engine Asset
Management Pte. Ltd.
Leasing of engines
Singapore
50
50
WingStar Pte. Ltd.
Acquisition, ownership and
management of aircraft
Singapore
50
50
GFM Electronics S.A.
de C.V. *3
Design and implementation,
distribution and sales of high
technology systems, services and
products, in the communications
area, as well as electronics systems,
principally closed circuits and
alarms for airports, malls, stadiums
and highways. Management of
reusable electronic equipment and
components
Mexico
–
50
ST Electronics
(Satellite Systems) Pte. Ltd.
Design and development, system
integration, manufacturing and sale
of satellite equipment
Singapore
51
51
STELOP Pte. Ltd. *4
Design and development,
manufacturing, maintaining and
sale of electro-optical products and
systems and the provision of related
services
Singapore
50.05
50.05
ATREC Pte. Ltd.
Research and technology
development in advanced materials
for both defence and commercial
applications
Singapore
50
50
Beijing Zhonghuan Kinetics
Heavy Vehicles Co., Ltd. *5
Develop, manufacture and sale of People’s Republic
specialised heavy vehicles and sale
of China
of related spare parts and provision
of relevant technical consultancy
and after sale technical support
services
–
50
Takata CPI Singapore Pte Ltd
Manufacture of pyrotechnic
components for seatbelts and air
bags used in motor vehicles
Singapore
49
49
First Response Marine
Pte. Ltd.
Ship and boat leasing with operator
(including chartering)
Singapore
50
50
210
31 December 2014
14.
(b)
Details of joint ventures are as follows: (continued)
Country of
place of business
held by the Group
2014
2013
%
%
Fortis Marine Solutions
Pte. Ltd.
To provide design and systems
engineering services and
maintenance of specialised naval
vessels
Halter-Bollinger Joint Venture,
L.L.C. *6
Singapore
51
51
To bid and secure US boat
fabrication contracts for its
shareholders
USA
50
50
Joint Shipyard Management
Services Pte Ltd
Construction and managing
workers’ dormitories
Singapore
30
30
Nova Star Cruises Limited
Provision of ferry services
Canada
10
10
*1
This entity is under members’ voluntary liquidation.
*
This entity was disposed during the year for a cash consideration of US$1.
2
*3
This entity has been reclassified from a joint venture to a subsidiary following the acquisition of additional equity interest during the year.
*
4
Based on the revised definition of control over entities in FRS 110 Consolidated Financial Statements, the Group reclassified its
investment in this entity from a subsidiary to a joint venture. The change in accounting policy was not applied retrospectively as the
impact of restating prior year’s comparative was immaterial.
*5
This entity was disposed in January 2014 for a cash consideration of $3.28 million. As part of the agreement, the Group will co-own
the product intellectual property of the entity.
*6
Not required to be audited under the law in the country of incorporation.
All associates and joint ventures that are required to be audited under the law in the country of incorporation are audited
by KPMG LLP, Singapore and other member firms of KPMG International, except for the following:
Name of associate/joint venture
Name of auditing firm
Composite Technology International Pte Ltd
ST Aerospace (Guangzhou) Aviation Services
Company Limited
Turbine Coating Services Pte Ltd
Turbine Overhaul Services Pte Ltd
Total Engine Asset Management Pte. Ltd.
WizVision Pte. Ltd.
CityCab Pte Ltd
Takata CPI Singapore Pte Ltd
Fortis Marine Solutions Pte. Ltd.
Nova Star Cruises Limited
NanoScience Innovation Pte Ltd
Deloitte and Touche LLP, Singapore
BDO Shu Lun Pan Certified Public Accountants LLP,
Guangdong Branch
PricewaterhouseCoopers LLP, Singapore
PricewaterhouseCoopers LLP, Singapore
Ernst & Young LLP, Singapore
R Chan & Associates PAC
Deloitte and Touche LLP, Singapore
Grant Thornton LLP, Canada
NSC & Associates Pac
211
ANNUAL REPORT 2014
31 December 2014
14.
Associates
The following table summarises the information of each of the Group’s material associates, based on their respective
financial statements prepared in accordance with FRS, modified for fair value adjustments on acquisitions and differences
with the Group’s accounting policies. The summarised financial information is not adjusted for percentage ownership held
by the Group.
Name of associate
Elbe
Flugzeugwerke
GmBh
$’000
Shanghai
Technologies Turbine Turbine
Aerospace Coating Overhaul
Experia
Company Services Services CityCab Events Immaterial
Limited Pte Ltd Pte Ltd Pte Ltd Pte. Ltd. associates
$’000
$’000
$’000
$’000
$’000
$’000
Total
$’000
2014
Percentage of interest
35%
49%
Revenue
Profit for the year
Other comprehensive
income
Total comprehensive
income
Attributable to NCI
Attributable to investee’s
shareholders
301,488
4,564
60,182
744
(39,074)
1,880
1,796
4,902
–
–
(34,510)
–
2,624
–
19,728
–
59,978
–
24,664
167
16,622
–
(34,510)
2,624
19,728
59,978
24,497
16,622
Non-current assets
Current assets
Current liabilities
Net assets
Attributable to NCI
shareholders
386,114
158,459
(2,498)
(157,083)
384,992
–
95,668
49,123
–
(10,299)
134,492
–
27,899
26,954
–
(8,157)
46,696
–
27,738
183,575
–
(85,036)
126,277
–
200,022
104,395
(26,467)
(64,972)
212,978
1,253
64,083
41,065
(3,330)
(28,165)
73,653
–
384,992
134,492
46,696 126,277 211,725
73,653
147,657
64,619
11,554
52,276
96,361
18,821
766
364
4,392
26,989
11,391
5,486
(68)
49,320
918
1,282
442
4,834
2,400
29,389
–
11,391
(2)
5,484
422
354
(9,496)
39,824
Group’s interest in net
assets of investee at
beginning of the year
Group’s share of:
– Profit/(loss) for the year
– Total other
comprehensive income
Total comprehensive income
Dividends received during
the year
Impairment of an associate
Carrying amount of
interest in investee at
end of the year
(13,676)
(12,910)
–
–
–
–
134,747
65,901
24.5%
49%
46.5%
33%
47,600 241,944 334,933
17,932 55,076 24,664
52,926
16,622
(4,947) (19,789)
–
–
(9,300)
–
11,441
98,452
61,876
–
–
24,305
44,970 436,258
(2,553) (36,589)
(2,108) (2,108)
40,663 437,385
212
31 December 2014
14.
Name of associate
Elbe
Flugzeugwerke
GmBh
$’000
Shanghai
Technologies Turbine Turbine
Aerospace Coating Overhaul
Experia
Company Services Services CityCab Events Immaterial
Limited Pte Ltd Pte Ltd Pte Ltd Pte. Ltd. associates
$’000
$’000
$’000
$’000
$’000
$’000
Total
$’000
2013
Revenue
Profit/(loss) for the year
Other comprehensive
income
Attributable to NCI
shareholders
Non-current assets
Current assets
Current liabilities
Net assets
Attributable to NCI
shareholders
Group’s interest in net assets
of investee at beginning of
the year
Group’s share of:
– Profit/(loss) for the year
– Total other comprehensive
income
Group’s contribution
during the year
Dividends received
during the year
Impairment of associates
Disposal of associates
during the year
Carrying amount
of interest in investee at
end of the year
35%
49%
347,251
4,829
60,479
(327)
9,043
13,872
–
13,872
24.5%
49%
46.5%
33%
58,859 246,281 316,144
20,876 44,293 21,487
8,080
(6,801)
8,210
7,883
–
1,473
22,349
–
3,541
47,834
–
–
21,487
221
–
(6,801)
–
7,883
22,349
47,834
21,266
(6,801)
24,764
145,740
–
(63,819)
106,685
–
388,734
174,428
(8,094)
(133,190)
421,878
–
97,701
45,915
–
(11,741)
131,875
–
17,326
38,776
–
(8,942)
47,160
–
205,118
88,367
(25,684)
(59,566)
208,235
1,006
66,988
30,855
(3,133)
(37,678)
57,032
–
421,878
131,875
47,160 106,685 207,229
57,032
–
60,753
(2,311)
(160)
9,754
48,431
93,912
26,016
52,232 291,098
5,115
21,707
9,889
(2,245)
(2,970) 29,025
–
(2,245)
1,605 10,890
(1,365) 39,915
3,165
854
4,026
3,866
359
5,474
1,735
23,442
–
9,889
146,803
–
–
–
–
–
–
–
–
–
–
–
–
–
–
147,657
64,619
11,554
52,276
96,361
18,821
(3,674) (19,597)
–
–
(7,440)
–
–
(4,950)
–
3,683 150,486
(2,523) (38,184)
(5,539) (5,539)
(1,518) (1,518)
44,970 436,258
213
ANNUAL REPORT 2014
31 December 2014
14.
Joint venture
The following table summarises the information of each of the Group’s material joint ventures, adjusted for any differences
in accounting policies and reconciles the carrying amount of the Group’s interest in joint ventures and the share of profit
and other comprehensive income of equity-accounted investment (net of tax). The summarised financial information is
not adjusted for the percentage ownership held by the Group.
Total Engine
Asset
Management
Pte Ltd.
$’000
Beijing
Zhonghuan
Fortis
Kinetics heavy
Marine Immaterial
STELOP
Vehicles Solutions
joint
Pte. Ltd.
Co., Ltd. Pte. Ltd.
ventures
$’000
$’000
$’000
$’000
Total
$’000
2014
Revenue
Other comprehensive income a
a
Includes:
– Depreciation and amortisation of:
– Interest expense of:
– Income tax expense of:
Non-current assets
Current assets b
Non-current liabilities c
Current liabilities d
Net assets
b
c
d
Includes cash and cash equivalents of:
Includes non-current financial liabilities
(excluding trade and other payables
and provisions)
Includes current financial liabilities
and provisions)
Group’s interest in net assets of investee
at beginning of the year
Share of total comprehensive income
Group’s contribution during the year
Carrying amount of interest in a joint
venture deconsolidated as a subsidiary
Carrying amount of interest in a joint
venture reclassified to a subsidiary
Disposal of joint ventures during the year
Dividends received during the year
Carrying amount of interest in investee
at end of the year
50%
50.05%
50%
12,213
2,693
1,448
4,141
26,773
307
–
307
5,490
(3,558)
–
(3,558)
4,671
2,180
272
624
–
328
141,035
8,083
(112,781)
(1,233)
35,104
68
193
–
51%
39,977
9,196
–
9,196
306
–
1,872
6,154
52,687
(6,737)
(33,453)
18,651
–
–
–
–
–
338
20,591
–
(9,221)
11,708
8,048
25,523
–
17,576
112,781
–
–
–
675
–
–
–
14,859
2,071
622
–
154
–
–
10,432
–
–
–
–
–
(1,251)
17,552
9,335
4,403
(1,920)
–
–
–
(2,483)
–
–
1,281
4,690
–
5,338
3,808
–
25,881
8,803
622
–
–
10,432
–
–
–
5,971
(37)
–
(1,000)
(37)
(2,483)
(2,251)
8,109
40,967
214
31 December 2014
14.
Total Engine Asset
Management Pte Ltd.
$’000
Beijing Zhonghuan
Kinetics heavy Immaterial joint
Vehicles Co., Ltd.
ventures
$’000
$’000
Total
$’000
2013
Revenue
Other comprehensive income a
a
Includes:
– Depreciation and amortisation of:
– Interest expense of:
– Income tax expense of:
Non-current assets
Current assets b
Non-current liabilities c
Current liabilities d
Net assets
b
c
d
Includes cash and cash equivalents of:
Includes non-current financial
liabilities (excluding trade and other
payables and provisions)
Includes current financial liabilities
and provisions)
Group’s interest in net assets of
investee at beginning of the year
Share of total comprehensive income
Group’s contribution during the year
Dividends received during the year
Carrying amount of interest in investee
at end of the year
50%
50%
4,938
1,600
888
2,488
8,038
(5,122)
–
(5,122)
2,558
1,005
204
101,246
2,532
(72,695)
(1,365)
29,718
171
327
–
750
22,260
–
(14,204)
8,806
2,498
240
72,695
–
679
6,764
4,231
1,244
9,384
–
6,587
(2,184)
–
–
4,200
3,830
1
(1,412)
15,018
2,890
9,385
(1,412)
14,859
4,403
6,619
25,881
215
ANNUAL REPORT 2014
31 December 2014
15.
INVESTMENTS
Note
quoted investments
Equity shares, at fair value (Available-for-sale)
43
Unquoted investments
Equity shares (Available-for-sale)
Non-related corporations, net of impairment losses
2014
$’000
Group
2013
$’000
378
349
3,963
632
Bonds, at fair value (Available-for-sale)
Interest rate: 1.5% to 4.95% (2013: 1.18% to 4.95%) per annum
Maturity: 28.1.2015 to 18.3.2020 (2013: 17.1.2014 to 7.11.2024)
43
122,858
165,009
Venture capital funds and limited partnership, at fair value
Total unquoted investments
43
12
126,833
43
165,684
127,211
166,033
Total investments, net of impairment losses
Unquoted equity investments where the fair value cannot be reliably estimated are classified as available-for-sale
investments. The Group has no intention to dispose these investments at the balance sheet date.
216
31 December 2014
16.
INTANGIBLE ASSETS
(a)
Goodwill
Note
Cost
At beginning of the year
Acquisition of a subsidiary and business
Finalisation of purchase price allocation
Disposal of subsidiaries
Translation difference
At end of the year
Impairment
Impairment losses for the year ^
At end of the year
Net book value
^
5
2014
$’000
Group
2013
$’000
480,397
–
489
(1,732)
476
17,575
497,205
460,337
5,847
(908)
–
(112)
15,233
480,397
31,995
10,829
–
798
43,622
29,262
2,141
(112)
704
31,995
31.12.2014
$’000
Group
31.12.2013
$’000
1.1.2013
$’000
453,583
448,402
431,075
For the purpose of annual impairment testing, the recoverable amounts of the CGUs are determined based on their value-in-use
calculations. During the year, the recoverable amounts of three CGUs (2013: three CGUs) are determined to be lower than the carrying
values and impairment losses of $10,829,000 (2013: $2,141,000) are recognised in other operating expenses in the income statement.
217
ANNUAL REPORT 2014
31 December 2014
16.
intangible assets (continueD)
(b)
Other intangible assets
Commercial
and
intellectual
Dealer Development
property Film cost
Technology
Note network
expenditure
rights inventory Brands Licenses agreement
$’000
$’000
$’000
$’000 $’000
$’000
$’000
Others
$’000
Total
$’000
The Group
Cost
At 1.1.2013
Additions
Acquisition of
business
Finalisation of
purchase price
allocation
Translation
difference
At 31.12.2013
and 1.1.2014
Additions ^
Acquisition of
subsidiaries
Finalisation of
purchase price
allocation
Deconsolidation
of a subsidiary
Translation
difference
At 31.12.2014
12,282
–
14,619
2,978
62,957
–
2,742
–
2,963
–
–
8,252
–
–
–
35
(155)
–
290
166
2,138
–
2,839
(185)
629
23,566
–
17,763
29,094
68,058
2,000
–
–
–
–
–
650
–
–
(749)
156
22,331
184
47,041
1,987
71,946
– 2,903
11,803 79,235
7,540
4,564
40,209
11,803
7,183
39
–
4,215
75,553
5
2,059
2,813
5,754
–
1,229
851
2,002
160
14,868
5
–
–
–
–
312
–
–
–
312
269
145
1,336
–
289
(4)
22
–
2,057
9,868
7,522
47,299
11,803
9,013
886
2,024
4,375
92,790
5
1,488
3,518
4,369
–
1,294
1,154
2,432
1,933
16,188
5
–
–
1,900
–
–
1,310
–
–
3,210
–
–
–
–
–
–
–
340
11,696
82
11,122
1,662
55,055
–
261
11,803 10,568
At 31.12.2014
10,635
35,919
16,891
– 68,667
At 31.12.2013
13,698
10,241
20,759
4,742
10,055
22,748
Accumulated
amortisation
At 1.1.2013
Amortisation for
the year *
Impairment
losses
Translation
difference
At 31.12.2013
and 1.1.2014
Amortisation for
the year *
Impairment
losses +
Deconsolidation
of a subsidiary
Translation
difference
At 31.12.2014
(1,391)
(175)
11,803 73,458
–
–
11,803 76,332
–
–
9,905
32,748
–
31,353
–
–
12,047 197,071
– 67,079
–
(1,068)
–
5,705
7,064
5,877
42,313
12,024
31,982
–
–
996
–
53
–
–
–
–
–
(741)
–
–
–
–
–
(749)
(87)
55,246
(11)
3,339
1,355
33,337
10,979 282,796
– 43,118
1,049
–
6,498
11,032 331,971
(175)
186
4,642
(1) 2,519
6,307 114,532
51,907
28,695
4,725 217,439
– 67,319
41,427
29,958
6,604 190,006
– 66,275
9,866
–
7,832 121,518
Net book value
At 1.1.2013
218
31 December 2014
16.
(b)
(c)
Other intangible assets (continued)
^
Includes $2,000,000 of intellectual property rights received as part of the consideration received from disposal of a joint venture.
*
Amortisation charge of $16,188,000 (2013: $14,868,000) is recognised in the income statement as part of:
– Other operating expenses of $6,172,000 (2013: $8,671,000); and
– Cost of sales of $10,016,000 (2013: $6,197,000)
+
During the year, the Group assessed that certain licenses and commercial and intellectual property rights are impaired as these
intangible assets are not expected to be generating future economic benefits for the Group. Hence, impairment losses of $3,210,000
were recognised during the year.
Total intangible assets
Net book value
31.12.2014
$’000
Group
31.12.2013
$’000
1.1.2013
$’000
671,022
638,408
552,593
Impairment testing of goodwill
For the purpose of impairment testing, goodwill is allocated to the Group’s business divisions. The aggregate
carrying amounts of goodwill allocated to each CGU within the business divisions are as follows:
2014
$’000
Aerospace
Component/Engine Repair & Overhaul
Engineering & Material Services
Group
2013
$’000
11,527
12,940
3,986
10,740
12,133
5,921
Electronics
Communication & Sensor Systems Group
236,985
27,353
229,164
26,263
Land Systems
Automotive
126,702
131,477
34,090
453,583
32,704
448,402
Others
The purchase price allocation to goodwill and other net assets relating to the acquisition of Technicae Projetos e
Serviços Automotivos Ltda. and Ticel Equipamentos Ltda were finalised during the year. Details of the adjustments
made to the provisional purchase price allocation are set out in the consolidated statement of cash flows.
219
ANNUAL REPORT 2014
31 December 2014
16.
(c)
Total intangible assets (continued)
The recoverable amounts of the CGUs are determined based on value-in-use calculations, using cash flow projections
derived from the financial budgets approved by management for the next five years. The key assumptions used in
the calculation of recoverable amounts are as follows:
Pre-tax discount rate
Terminal value growth rate
2014
%
2013
%
2014
%
2013
%
9.2 – 12.1
0 – 4.6
8.9 – 10.8
Engineering & Material Services
6.5 – 12.5
9.2 – 13.5
10.8 – 13.0
5.2 – 18.7
1.3 – 2.4
0 – 2.0
0 – 2.0
2.0 – 4.4
10.6 – 12.0
12.8 – 14.1
4.0 – 5.0
9.6 – 17.7
11.4 – 17.3
2.0 – 3.0
4.0 – 5.0
2.0 – 3.0
11.8 – 15.0
14.0 – 15.9
5.0
5.0
12.7
14.2
3.0
3.0
Aerospace
0 – 3.0
Electronics
Communications & Sensor Systems Group
Land Systems
Automotive
Others
The discount rate used is estimated based on past experience and the industry weighted average cost of capital.
The long-term terminal value growth rate has been determined based on either the nominal GDP rates for the
country in which the CGU is based on the long-term compound annual growth rate estimated by management by
reference to forecasts included in industry reports and expected market development.
220
31 December 2014
16.
(c)
Total intangible assets (continued)
Sensitivity to changes in assumptions:
(a)
Following the impairment in three (2013: three) of the CGUs within the business divisions, the recoverable
amounts in these CGUs are approximately equal to the carrying amounts. Therefore, any adverse movement
in a key assumption would lead to a further impairment in these CGUs.
(b)
Management has identified the following key assumption for which a change as set out below could cause
the carrying amount to exceed the recoverable amount.
Business Divisions
Assumption
Change required for
carrying amount to equal
the recoverable amount
%
2014
Others
Sales growth rate
(average of next 5 years)
1.8
Sales growth rate
4.0
Sales growth rate
5.4
2013
Aerospace
Electronics
Communications & Sensor Systems Group
Land Systems
Automotive
(c)
2.9
Terminal value growth rate
1.0
1.6
No sensitivity analysis was disclosed for the remaining CGUs as the Group believes that any reasonable
possible change in the key assumptions is not likely to materially cause the recoverable amount to be lower
than its carrying amount.
221
ANNUAL REPORT 2014
31 December 2014
17.
long-term receivables
2014
$’000
Long-term trade receivables
Housing and car loans and advances to staff
Loans to:
Third parties *
Allowance for doubtful loans
Receivable:
Within 1 year
After 1 year
887
617
Group
2013
$’000
–
670
12,606
–
12,606
14,110
33,312
(8,946)
24,366
25,036
11,375
2,735
14,110
12,508
12,528
25,036
Long-term receivables are carried at amortised cost and are subject to impairment.
*
Included in the loans to third parties are:
(a) an amount of $12,606,000 (2013: $24,366,000) relating to instalment payment plans granted to customers. These loans are unsecured,
repayable over a period of 7.5 years from 2008. The interest rates on these loans are LIBOR with margins at 0.63% (2013: 0.63%) per
annum. The interest rates range from 0.95% to 0.98% (2013: 0.98% to 1.16%) per annum, which are also the effective interest rates. The
interest rates are repriced every six months.
Included in the loans to third parties in the prior year are:
(a) a loan of $8,312,000 secured by intellectual property rights. Interest was repriced every month and chargeable at the US dollar prime rate
plus 2% per annum, which was also the effective interest rate. The loan was convertible to shares of that entity, subject to certain terms
and conditions. The loan was fully impaired in the prior year and the loan was written off during the year.
(b) a bridging loan of $633,600 (US$500,000) was extended to a third party. The bridging loan was secured by way of a Deed of Debenture,
which created a floating charge over the assets of the third party. This loan was treated as a net investment in the third party. The loan
was stated at cost and was fully impaired due to uncertainty over collectability.
During the year, bridging loan of US$500,000 was converted into ordinary shares of an investment. The conversion was due to the third
party restructuring all their outstanding loans into new ordinary shares.
222
31 December 2014
18.
FINANCE LEASE RECEIVABLES
The Group entered into finance lease arrangements with customers with terms ranging from 1 to 5 years (2013: 1 to 5
years) and effective interest rates ranging from 3.95% to 23.38% (2013: 1.3% to 8.73%) per annum.
Gross
investment in
finance lease
$’000
Unearned
interest
$’000
Present value of
minimum lease
receivables
$’000
Allowance for
doubtful lease
receivables
$’000
Net investment
in finance lease
$’000
31,067
2,553
33,620
(517)
(283)
(800)
30,550
2,270
32,820
(23,678)
(1,297)
(24,975)
6,872
973
7,845
29,903
4,484
34,387
(330)
(545)
(875)
29,573
3,939
33,512
(13,126)
(1,260)
(14,386)
16,447
2,679
19,126
The Group
2014
Within 1 year
2 to 5 years
2013
Within 1 year
2 to 5 years
2014
$’000
Net investment in finance lease
Not past due and not impaired
Past due and not impaired
Individually assessed
Doubtful lease receivables
Allowance for doubtful lease receivables
19.
Group
2013
$’000
2,984
4,861
7,845
6,956
12,170
19,126
24,975
(24,975)
–
14,386
(14,386)
–
DEFERRED TAx ASSETS AND LIABILITIES
Unrecognised temporary differences relating to investments in subsidiaries
As at 31 December 2014, a deferred tax liability of $138,236,000 (2013: $131,076,000) for temporary difference of
$486,606,000 (2013: $459,651,000) related to undistributed earnings of certain subsidiaries was not recognised as the
Group has determined that the undistributed profits of its overseas subsidiaries will not be remitted to Singapore in the
foreseeable future, but be retained for organic growth and acquisitions.
223
ANNUAL REPORT 2014
31 December 2014
19.
DeferreD tax assets anD liabilities (continueD)
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
2014
$’000
244,742
3,135
2,198
250,075
Tax losses
Deductible temporary differences
Unabsorbed wear and tear allowance and investment allowance
Group
2013
$’000
207,291
2,915
2,218
212,424
The tax benefits have not been recognised in the financial statements due to the uncertainty over the sufficiency of
future taxable profits to be generated in the foreseeable future. The use of these potential tax benefits is subject to the
agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries
in which the subsidiaries operate.
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
2014
$’000
Assets
2013
$’000
2014
$’000
Liabilities
2013
$’000
The Group
Intangible assets
Allowance for doubtful debts
Allowance for inventory obsolescence
Provisions and accruals
Unabsorbed capital allowances and unutilised tax
losses
Fair value of derivative financial instruments
designated as cash flow hedges
Other items
Deferred tax (assets)/liabilities
Set off of tax
Net deferred tax (assets)/liabilities
(24)
–
(712)
(25,724)
(131,624)
(51)
–
(1,688)
(18,882)
(130,425)
98,615
71,987
–
–
1
84,955
69,655
–
–
–
(21,002)
(24,700)
–
–
(4,788)
(9,310)
(193,184)
86,866
(106,318)
(803)
(8,711)
(185,260)
89,626
(95,634)
2014
$’000
Assets
2013
$’000
172
24,575
195,350
(86,866)
108,484
2014
$’000
6,934
22,949
184,493
(89,626)
94,867
Liabilities
2013
$’000
The Company
Other items
Deferred tax (assets)/liabilities
Set off of tax
Net deferred tax assets
–
(7,392)
–
(7,392)
392
(7,000)
–
(7,639)
–
(7,639)
439
(7,200)
149
–
243
392
(392)
–
167
–
272
439
(439)
–
224
31 December 2014
19.
DeferreD tax assets anD liabilities (continueD)
Movement in temporary differences during the year:
As at
1.1.2013
$’000
Recognised
in other
Recognised in comprehensive
profit or loss
income
$’000
$’000
Acquired
in business
combinations
$’000
Utilisation
of tax losses
$’000
The Group
Intangible assets
Allowance for inventory obsolescence
Unabsorbed capital allowances and
unutilised tax losses
Fair value of derivative financial
instruments designated as cash
flow hedges
Other items
76,111
60,533
(2,486)
(16,257)
(122,689)
7,822
1,914
890
(2,337)
(6,338)
–
–
–
–
–
–
4,941
–
–
–
–
–
–
–
–
(31,103)
(1,300)
–
–
8,742
(3,299)
13,531
(25,659)
–
(2,419)
(1,768)
9,479
–
9,479
–
–
4,941
–
2,556
11,298
As at
31.12.2013
$’000
Recognised in
profit or loss
$’000
As at
31.12.2014
$’000
As at
1.1.2013
$’000
Recognised in
profit or loss
$’000
The Company
Other items
167
–
(737)
(570)
–
(7,639)
1,009
(6,630)
167
(7,639)
272
(7,200)
(18)
247
(29)
200
149
(7,392)
243
(7,000)
225
ANNUAL REPORT 2014
31 December 2014
Exchange
difference
$’000
As at
31.12.2013
$’000
971
2,267
(92)
(288)
(1,398)
84,904
69,655
(1,688)
(18,882)
(130,425)
(1,039)
(24,700)
(49)
570
942
6,131
14,238
(767)
Recognised
in other
Recognised in comprehensive
profit or loss
income
$’000
$’000
13,024
50
1,023
(6,270)
(912)
63
36
(805)
6,209
–
–
–
–
–
–
(10,770)
–
(10,770)
Deconsolidation of a
subsidiary/
Finalisation of
purchase price
allocation
$’000
(79)
(252)
–
25
412
Utilisation
of tax losses
$’000
(643)
–
–
–
646
Exchange
difference
$’000
As at
31.12.2014
$’000
1,385
2,534
(47)
(597)
(1,344)
98,591
71,987
(712)
(25,724)
(131,623)
–
4,175
(540)
(21,002)
–
–
106
–
1,507
5,685
(13)
325
1,703
(4,616)
15,265
2,166
226
31 December 2014
20.
inventories anD work-in-Progress
2014
$’000
Inventories of equipment and spares
Work-in-progress in excess of progress billings
Work-in-progress, including profits recognised
Progress billings
Total inventories and work-in-progress at lower of cost
and net realisable value
Work-in-progress, including profits recognised
Progress billings
847,574
Group
2013
$’000
935,692
4,184,535
(3,230,036)
954,499
3,506,919
(2,635,102)
871,817
1,802,073
1,807,509
4,318,592
(5,043,939)
(725,347)
4,456,434
(5,191,159)
(734,725)
In 2014, raw materials, consumables and changes in finished goods and work-in-progress recognised as cost of sales
amounted to $4,952,789,000 (2013: $4,739,240,000).
(i)
Allowances for inventory obsolescence and foreseeable losses
As at 31 December 2014, the inventories are stated after allowance for inventory obsolescence of $302,931,000
(2013: $210,103,000) and work-in-progress in excess of progress billings is stated after provision for foreseeable
losses of $15,567,000 (2013: $17,969,000).
(ii)
Net realisable value write-down
As at 31 December 2014, write down of work-in-progress to net realisable value was nil (2013: $30,225,000).
The written-down value was included in cost of sales. In 2013, the work-in-progress with net realisable value
of $131,815,000 was reclassified to construction-in-progress (Note 12) as the asset would be engaged in an
operating lease.
227
ANNUAL REPORT 2014
31 December 2014
21.
TRADE RECEIVABLES
2014
$’000
Not past due and not impaired
Past due and not impaired
Collectively assessed
Gross receivables
Individually assessed
Gross receivables
Unbilled receivables
Allowance for unbilled receivables
Trade receivables, net
596,894
430,723
1,027,617
Group
2013
$’000
574,989
366,912
941,901
4,310
(4,310)
–
4,777
(4,777)
–
50,378
(50,378)
–
44,946
(44,886)
60
292,726
(1,242)
281,201
(1,225)
1,319,101
1,221,937
Trade receivables denominated in currencies other than the functional currencies of the Company and its subsidiaries as
at 31 December are as follows:
•
•
$289,498,000 (2013: $218,060,000) denominated in USD
$51,779,000 (2013: $14,546,000) denominated in Euro
Trade receivables amounting to $30,092,000 (2013: $10,970,000) are arranged to be repaid through letters of credit issued
by reputable banks.
A subsidiary within the Group has not recognised $17,600,000 (2013: $18,100,000) of trade receivable due from one of
its customers in view of uncertainty over the collectability of the debts. The amount would be recognised in the financial
statements upon receipt.
228
31 December 2014
22.
AMOUNTS DUE FROM RELATED PARTIES
Group
Trade:
Subsidiaries
Associates
Joint ventures
Related corporations
Company
2014
$’000
2013
$’000
2014
$’000
2013
$’000
–
22,383
3,090
40,568
66,041
–
16,061
1,527
19,069
36,657
6,592
–
–
43
6,635
5,601
–
–
7
5,608
–
3,049
5,279
8,328
–
2,624
9,285
11,909
547,416
–
–
547,416
762,665
–
–
762,665
(3,181)
71,188
(1,060)
47,506
(6,981)
547,070
(4,901)
763,372
66,382
4,806
71,188
40,076
7,430
47,506
497,070
50,000
547,070
504,498
258,874
763,372
Non-trade:
Subsidiaries *1
Associates *2
Joint ventures *3
Receivable:
Within 1 year
After 1 year
There were no significant amounts due from related parties denominated in currencies other than the functional currencies
of the Group as at 31 December 2014 and 31 December 2013.
Amounts due from related parties denominated in currencies other than the functional currency of the Company as at 31
December are as follows:
•
*1
Included in the amounts due from subsidiaries (non-trade) are:
(a) loans of $532,724,000 (2013: $752,171,000) bearing interest at rates ranging from 1.30% to 4.18% (2013: 0.61% to 4.98%) per annum. The
loans are unsecured and repayable from 12 March 2015 to 31 March 2016; and
(b) interest-free loans of $6,981,000 (2013: $4,901,000), which are unsecured and not repayable in the foreseeable future. The loans are
fully impaired.
229
ANNUAL REPORT 2014
31 December 2014
22.
amounts Due from relateD Parties (continueD)
*2
The amounts due from associates (non-trade) are:
(a) a loan of $2,892,000 (2013: $2,624,000) whereby interest is charged at EURIBOR + 1% per annum (2013: EURIBOR + 1% per annum) and is
repriced every three months (2013: three months). The interest rate on the loan is 1.08% (2013: 1.29%) per annum. The loan is unsecured
and repayable on demand; and
(b) an interest-free loan of $157,000 (2013: nil), which is unsecured and repayable on demand.
*3
Included in amounts due from joint ventures (non-trade) are:
(a) a loan of $272,000 (2013: $1,060,000) bearing interest at LIBOR + 0.75% (2013: LIBOR + 0.75%) per annum. The loan is unsecured, not
expected to be repayable in the next 12 months and had been fully impaired in prior years;
(b) a loan of $4,806,000 (2013: $4,806,000) bearing interest at 6.38% (2013: 6.38%) per annum, which is the effective interest rate. The loan
is unsecured and repayable by 2029; and
(c) a loan of $3,136,000 in 2013 was fully repaid during the year. The loan was unsecured, bearing interest at 6.36% per annum, which was
the effective interest rate.
23.
ADVANCES AND OThER RECEIVABLES
Note
Deposits
Interest receivables
Other recoverables
Non-trade receivables
Prepayments *
Derivative financial instruments
*
43
2014
$’000
22,604
13,098
30,543
37,642
341,503
83,737
1,171
530,298
Group
2013
$’000
2014
$’000
19,519
12,330
42,080
73,261
314,626
84,580
51,814
598,210
63
1,432
2,035
43
–
24
–
3,597
Company
2013
$’000
4,422
1,602
3,557
44
–
88
114
9,827
The Group made progressive payments to a contractor of $7,109,000 for the development of intellectual property rights relating to the design
and prototype of a construction and mining equipment. During the year, the Group issued a notice for breach of contract to the contractor as
they were unable to fulfil their contractual obligations to complete the development. The Group assessed that the progressive payments made
are not recoverable and the intellectual property developed to date has no economic value. As such, the Group fully impaired the progressive
payments made in relation to the intellectual property rights being developed up to 31 December 2014.
230
31 December 2014
24.
short-term investments
Note
quoted investments
Equity shares, at fair value (Fair value through profit or loss)
Unquoted investments
Bonds, at fair value (Available-for-sale)
Interest rate: 2.67% to 4.95% (2013: 1.10% to 5.875%) per annum
Maturity: 26.1.2015 to 7.11.2024 (2013: 7.1.2014 to 18.7.2022)
25.
2014
$’000
Group
2013
$’000
43
359
204
43
118,920
134,377
119,279
134,581
BANK BALANCES AND OThER LIqUID FUNDS
2014
$’000
Fixed deposits with financial institutions
Cash and bank balances
Deposits pledged
Group
1,134,657
336,066
1,470,723
(8,111)
1,462,612
2013
$’000
1,460,088
470,052
1,930,140
(9,216)
1,920,924
2014
$’000
316,033
88,843
404,876
–
404,876
Company
2013
$’000
329,417
140,707
470,124
–
470,124
Fixed deposits with financial institutions mature at varying periods within 10 months (2013: 10 months) from the
financial year-end. Interest rates range from 0.04% to 3.8% (2013: 0.01% to 3.08%) per annum, which are also the
effective interest rates.
Cash and bank balances of $8,111,000 (2013: $9,216,000) have been placed with banks as security for letters of credit
issued to third parties. Cash and cash equivalents denominated in currencies other than the functional currencies of the
Company and its subsidiaries as at 31 December are as follows:
•
•
231
ANNUAL REPORT 2014
31 December 2014
26.
TRADE PAYABLES AND ACCRUALS
Note
Trade payables
Non-trade payables *
Purchase of property, plant and
equipment
Accrued operating expenses
Accrued interest payable
Payable:
Within 1 year
After 1 year
*
43
2014
$’000
Group
Company
2013
$’000
2014
$’000
831,020
172,779
785,872
221,200
–
8,004
–
5,989
693
897,037
18,396
21,410
1,941,335
228
907,400
15,398
28,343
1,958,441
–
35,963
–
–
43,967
–
37,845
–
–
43,834
1,667,180
274,155
1,941,335
1,604,740
353,701
1,958,441
26,961
17,006
43,967
25,017
18,817
43,834
2013
$’000
The non-trade payables includes an amount of $101,352,000 (2013: $142,562,000) for its obligation to perform engineering development work
as part of the consideration for the acquisition of an associate.
Trade payables denominated in currencies other than the functional currencies of the Company and its subsidiaries as at
31 December are as follows:
•
•
232
31 December 2014
27.
AMOUNTS DUE TO RELATED PARTIES
Group
Trade:
Subsidiaries
Associates
Joint ventures
Non-trade:
Subsidiaries *1
Joint ventures *2
Payable:
Within 1 year
After 1 year
Company
2014
$’000
2013
$’000
2014
$’000
2013
$’000
–
5,625
3,117
22,488
31,230
–
3,828
10,266
10,409
24,503
1,882
–
–
3
1,885
1,778
158
–
12
1,948
–
–
5
5
–
837
19
856
602,516
–
–
602,516
650,190
–
–
650,190
31,235
25,359
604,401
652,138
29,364
1,871
31,235
24,953
406
25,359
196,988
407,413
604,401
98,946
553,192
652,138
Amounts due to related parties denominated in currencies other than the functional currency of the Company as at 31
December are as follows:
•
*1
Included in the amounts due to subsidiaries (non-trade) are loans of $562,959,000 (2013: $606,055,000) bearing interest at 4.18% (2013: 4.98%
to 12.15%) per annum. The loans are unsecured and repayable from 01 September 2015 to 16 July 2019.
*2
In the prior year, the amounts due to joint ventures (non-trade) included a loan of $836,000 bearing interest at 1.025% per annum, which was
the effective interest rate. The loan was unsecured and had been fully repaid.
233
ANNUAL REPORT 2014
31 December 2014
28.
PROVISIONS
2014
$’000
Provisions for:
Warranties
Liquidated damages
Foreseeable losses
(a)
200,355
20,710
24,007
245,072
Charge to profit or loss
Provision utilised
At end of the year
5
186,212
10,890
21,808
218,910
2014
$’000
Group
186,212
39,076
(25,924)
(854)
1,845
200,355
2013
$’000
195,447
6,524
(17,479)
–
1,720
186,212
Movements in provision for liquidated damages are as follows:
Note
Provision utilised
At end of the year
(c)
2013
$’000
Movements in provision for warranties are as follows:
Note
(b)
Group
5
2014
$’000
Group
10,890
12,928
(1,861)
(1,241)
(6)
20,710
2013
$’000
11,949
2,371
(3,430)
–
–
10,890
Movements in provision for foreseeable losses are as follows:
2014
$’000
Provision utilised
At end of the year
21,808
14,939
(12,769)
29
24,007
Group
2013
$’000
16,741
19,706
(14,639)
–
21,808
234
31 December 2014
29.
BORROWINGS
Note
Non-current
Bonds
Long-term bank loans
Lease obligations
Other loans
Current
Long-term bank loans
Lease obligations
Other loans
Total borrowings
Total borrowings comprise:
Unsecured fixed rate bonds
Secured bank loans
Unsecured bank loans
Lease obligations
Other loans
(a)
(a)
(b)
(b)
(c)
(d)
2014
$’000
Group
2013
$’000
658,424
267,532
17,547
441
943,944
631,283
288,867
18,150
564
938,864
29,820
43,590
1,126
148
74,684
139,842
292,789
1,321
369
434,321
1,018,628
1,373,185
658,424
46,809
294,133
18,673
589
1,018,628
631,283
87,975
633,523
19,471
933
1,373,185
Unsecured fixed rate bonds
2014
$’000
Principal
Unamortised discount
Unamortised discount:
Amortisation for the year
Group
2013
$’000
660,450
(2,026)
658,424
633,600
(2,317)
631,283
2,317
(372)
81
2,026
2,579
(351)
89
2,317
On 16 July 2009, the Group issued US$500 million 4.80% Notes due 2019 under its US$1.2 billion Multicurrency
Medium Term Note Programme. The bonds bear interest at a fixed rate of 4.80% per annum and interest is payable
every six months from the date of issue. The bonds are unconditionally and irrevocably guaranteed by the Company.
At the reporting date, the Company does not consider it probable that a claim will be made against the Company
under the guarantee.
235
ANNUAL REPORT 2014
31 December 2014
29.
borrowings (continueD)
(b)
Secured and unsecured bank loans
Bank loans
Effective
interest rate
%
Maturity
2014
$’000
0.41% to 7.21%
2015 to 2019
340,942
Group
2013
$’000
721,498
The bank loans are denominated in USD and Chinese Yuan (2013: SGD, USD, Indian Rupees and Chinese Yuan).
Included in the bank loans are:
(c)
(i)
Loans amounting to $17,040,000 (2013: $27,183,000) which are secured by land and buildings of certain
subsidiaries; and
(ii)
Loans amounting to $29,769,000 (2013: $60,792,000) which are secured over certain property, plant and
equipment of a subsidiary.
Lease obligations
A subsidiary leases certain land, buildings and equipment from a foreign Airport Authority under a finance lease
arrangement until 31 October 2041, with an option to terminate the lease at any time with a 36-month written
notice. The leased assets are pledged as collateral against the lease.
The obligations under the finance leases to be paid by the subsidiaries are as follows:
Minimum
lease payment
$’000
Interest
$’000
Present value
of payment
$’000
The Group
2014
1 to 5 years
After 5 years
Total
6,368
30,543
36,911
(3,410)
(14,828)
(18,238)
Repayable:
Within 1 year
After 1 year
2,958
15,715
18,673
1,126
17,547
18,673
2013
1 to 5 years
After 5 years
Total
7,218
30,389
37,607
(3,258)
(14,878)
(18,136)
Repayable:
Within 1 year
After 1 year
Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.
3,960
15,511
19,471
1,321
18,150
19,471
236
31 December 2014
29.
borrowings (continueD)
(d)
Other loans
Included in other loans are:
30.
(i)
US dollar denominated term notes of $468,000 (US$354,622) (2013: of $564,000 (US$445,307)) and
$121,000 (US$91,248) (2013: $138,000 (US$109,393)) owing to the Pennsylvania Industrial Development
Authority and the Industrial Properties Corporation, respectively, by a US entity of the Group. These notes
are secured by land and buildings of the entity and bear interest, respectively, at 2.75% and 4% (2013:
2.75% and 4%) per annum, which are also the effective interest rates, and are payable through 1 July 2019
and 28 June 2019, respectively; and
(ii)
A loan of $231,000 (MYR600,000) from a non-controlling shareholder of a subsidiary in 2013 was fully
repaid during the year. This loan was unsecured, bears interest at 5% per annum, which was also the
effective interest rate.
DEFERRED INCOME
2014
$’000
Government compensation
Government grants
Deferred rents
Group
41,507
47,876
9,376
98,759
2013
$’000
48,209
32,431
3,055
83,695
Government compensation and grants relate mainly to grants received:
31.
(a)
for subsidising the costs incurred in the acquisitions of plant and equipment for new product development and
production activities, and for the relocation of a subsidiary’s manufacturing facility in the People’s Republic of
China; and
(b)
to share the cost for purchase of plant and machinery, and yard facility upgrades in the US operation.
other long-term Payables
2014
$’000
After 1 year
1,000
Group
2013
$’000
1,500
The loan of $1,000,000 (2013: $1,500,000) is payable to a previous non-controlling shareholder of a subsidiary for the
purchase of remaining shareholdings of the subsidiary. The amount payable is unsecured, interest-free and repayable
within seven years from 2010.
237
ANNUAL REPORT 2014
31 December 2014
32.
ShARE CAPITAL
Group and Company
2014
2013
$’000
$’000
Issued and fully paid
3,105,903,530 (2013: 3,080,441,746) ordinary shares
Issued during the year
14,101,186 (2013: 25,461,784) ordinary shares
At end of the year
3,120,004,716 (2013: 3,105,903,530) ordinary shares
852,611
781,841
36,815
70,770
889,426
852,611
Included in share capital is a special share issued to the Minister for Finance. The special share enjoys all the rights
attached to the ordinary shares. In addition, the special share carries the right to approve any resolution to be passed by
the Company, either in general meeting or by its Board of Directors, on certain matters specified in the Company’s Articles
of Association. The special share may be converted at any time into an ordinary share.
The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares
carry one vote per share without restriction.
33.
TREASURY ShARES
Group and
Company
2014
$’000
Purchased during the year
At end of the year
–
6,529
6,529
Treasury shares relate to ordinary shares of the Company that are held by the Company.
During the financial year, the Company purchased 2,034,000 of its ordinary shares by way of on-market purchases. The
total amount paid to purchase the shares was $6,529,000. The shares, held as treasury shares, were included as deduction
against shareholders’ equity.
238
31 December 2014
34.
share-baseD Payment arrangements
The Singapore Technologies Engineering Share Option Plan (“ESOP”), the Singapore Technologies Engineering Performance
Share Plan (“PSP2000”) and the Singapore Technologies Engineering Restricted Stock Plan (“RSP2000”) of the Company
(collectively referred to as the “Old Share Plans”) were approved by the members of the Company at an Extraordinary
General Meeting held on 23 November 2000.
Current share plan comprising the Singapore Technologies Engineering Performance Share Plan 2010 (“PSP2010”) and
the Singapore Technologies Engineering Restricted Share Plan 2010 (“RSP2010”) was approved by the members of the
Company at the Annual General Meeting held on 21 April 2010 (together, the “Current Share Plans”). The Old Share Plans
were terminated following the adoption of the Current Share Plans. However, all options and awards granted under the
Old Share Plans prior to its termination will continue to be valid and be subject to the terms and conditions of the Old
Share Plans.
ESOP
The Company ceased to grant options under the ESOP with effect from 2007. Information regarding ESOP is as follows:
(a)
The exercise price of the options is equal to volume-weighted average price for the shares on the SGX over the
three consecutive trading days immediately preceding the date of grant.
(b)
The options are exercisable at the end of the first year after date of grant, in accordance with a vesting schedule to
be determined by ERCC and are settled in cash.
(c)
The options granted expire after five years for non-executive directors and 10 years for the employees of the
Company and its subsidiaries.
During the financial year, the Company issued 6,644,956 (2013: 17,986,756) ordinary shares for cash at the respective
price per share upon the exercise of options granted by the Company under ESOP.
Grant no.
0402N
0408N
0502N
0508N
0602N
0608N
0703N
0708N
No. of ordinary shares issued
Price per ordinary share
$
1,020,383
1,511,048
730,606
823,404
639,705
612,993
817,837
488,980
2.090
2.120
2.370
2.570
3.010
2.840
3.230
3.610
239
ANNUAL REPORT 2014
31 December 2014
34.
share-baseD Payment arrangements (continueD)
ESOP (continued)
At the end of the financial year, unissued ordinary shares of the Company under options granted to eligible employees and
directors of the Company are as follows:
(i)
Options outstanding under the ESOP
Number of shares
2014
2013
(ii)
ESOP
Exercised
Lapsed
At end of the year
30,517,942
(6,644,956)
(400,978)
23,472,008
48,760,165
(17,986,756)
(255,467)
30,517,942
Exercisable at end of the year
23,472,008
30,517,942
Details of share options
2014
Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:
Date of
Grant
9.2.2004
10.8.2004
7.2.2005
10.8.2005
9.2.2006
10.8.2006
15.3.2007
10.8.2007
*
Balance
as at
1.1.2014
Options
lapsed
Balance
No. of
Options
as at holders at
exercised 31.12.2014 31.12.2014
1,060,256
1,589,308
2,479,376
3,509,381
4,572,311
4,723,330
6,387,216
6,196,764
30,517,942
39,873
78,260
13,320
32,408
36,442
47,104
74,600
78,971
400,978
1,020,383
–
1,511,048
–
730,606 1,735,450
823,404 2,653,569
639,705 3,896,164
612,993 4,063,233
817,837 5,494,779
488,980 5,628,813
6,644,956 23,472,008
Includes one Executive Director of the Company
–
–
118*
193*
346*
345*
512*
638*
Exercise
price
$
Exercisable period
2.090
2.120
2.370
2.570
3.010
2.840
3.230
3.610
10.2.2005 to 9.2.2014
11.8.2005 to 10.8.2014
8.2.2006 to 7.2.2015
11.8.2006 to 10.8.2015
10.2.2007 to 9.2.2016
11.8.2007 to 10.8.2016
16.3.2008 to 15.3.2017
11.8.2008 to 10.8.2017
240
31 December 2014
34.
ESOP (continued)
(ii)
Details of share options (continued)
2013
Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:
Date of
Grant
Balance
as at
1.1.2013
6.2.2003
883,629
11.8.2003 1,300,123
9.2.2004
1,818,628
10.8.2004 2,384,058
7.2.2005
3,496,153
10.8.2005 4,670,559
9.2.2006
6,879,107
10.8.2006 6,645,040
15.3.2007 10,113,959
10.8.2007 10,568,909
48,760,165
*
(iii)
Options
lapsed
Balance
No. of
Options
as at holders at
exercised 31.12.2013 31.12.2013
46,236
837,393
–
30,886 1,269,237
–
182
758,190 1,060,256
–
794,750 1,589,308
3,882 1,012,895 2,479,376
18,434 1,142,744 3,509,381
8,471 2,298,325 4,572,311
– 1,921,710 4,723,330
38,241 3,688,502 6,387,216
109,135 4,263,010 6,196,764
255,467 17,986,756 30,517,942
–
–
83*
142*
193*
265*
406*
405*
580*
709*
Exercise
price
$
Exercisable period
1.790
1.860
2.090
2.120
2.370
2.570
3.010
2.840
3.230
3.610
7.2.2004 to 6.2.2013
12.8.2004 to 11.8.2013
10.2.2005 to 9.2.2014
11.8.2005 to 10.8.2014
8.2.2006 to 7.2.2015
11.8.2006 to 10.8.2015
10.2.2007 to 9.2.2016
11.8.2007 to 10.8.2016
16.3.2008 to 15.3.2017
11.8.2008 to 10.8.2017
Includes one Executive Director of the Company
Details of share options exercised
Exercise
price
$
Proceeds from
share issue
$’000
Share price
$
3,291,672
1,709,312
1,218,411
425,561
6,644,956
2.09 – 3.61
2.12 – 3.61
2.12 – 3.61
2.37 – 3.61
8,430
4,869
2,843
1,114
3.66 – 3.91
3.77 – 3.99
3.61 – 3.84
3.22 – 3.71
11,847,108
4,114,641
1,498,716
526,291
17,986,756
1.79 – 3.61
1.86 – 3.61
1.86 – 3.61
2.09 – 3.61
34,666
12,408
3,711
1,361
3.81 – 4.31
3.69 – 4.54
3.90 – 4.40
3.76 – 4.23
No. of shares
2014
January to March
April to June
July to September
October to December
2013
January to March
April to June
July to September
October to December
The weighted average share price for options exercised during the year was $3.80 (2013: $4.13). The weighted
average remaining contractual life for these options is 1.68 years (2013: 2.43 years).
The fair value of services received in return for share options granted are measured by reference to the fair value
of share options granted. The estimate of the fair value of the services received is measured based on a binomial
model, taking into account the terms and conditions upon which the options were granted. No options were
granted for the years ended 31 December 2014 and 31 December 2013.
241
ANNUAL REPORT 2014
31 December 2014
34.
PSP2010
Performance shares are granted on an annual basis with key performance indicator targets set for a performance period,
currently prescribed to be a 3-year performance period. The performance shares will only be released to the recipient at
the end of the performance period if the targets are met. The final number of performance shares awarded will depend on
the level of achievement of those targets and can range from 0% to 170% of the conditional award of performance shares.
In addition, commencing with the PSP contingent awards for financial year 2009, the final award for performance shares is
conditional upon the performance targets for restricted shares that have the same end of performance period being met.
Outstanding Awards under PSP2010 are as follow:
2014
Year of grant
2013
2012
Total
Number of performance shares
At grant date
Lapsed
Outstanding as at 31.12.2014
1,413,000
(155,634)
1,257,366
1,037,100
(147,584)
889,516
1,627,000
(340,345)
1,286,655
4,077,100
(643,563)
3,433,537
During the year, performance shares amounting to 1,545,821 ordinary shares were awarded in respect of grant made in
2011 under PSP2010.
The fair value of the performance shares is determined on conditional grant date using the Monte Carlo simulation model.
The significant inputs to the model used for the conditional grants are as follows:
Market conditions
Volatility of Defensive Index (%)
Volatility of the Company’s shares (%)
Correlation of volatility of Defensive Index/
MSCI Index vs. the Company (%)
Risk-free rate (%)
Share price ($)
Cost of equity (%)
Dividend yield
2014
Year of grant
2013
2012
9.76
15.35
10.47
14.66
12.54
15.88
51.2
52.7
43.2
0.54
0.24
0.35
3.79
4.16
3.17
6.90
7.00
7.90
(-- Management’s forecast in line with dividend policy --)
RSP2000 / RSP2010
Restricted shares are granted on an annual basis with key performance indicator targets set for a performance period,
currently prescribed to be a 2-year performance period. The restricted shares will only be released to the recipient at the
end of the performance period if the targets are met. The final number of restricted shares awarded will depend on the
level of achievement of those targets and range between 0% and 150% of the conditional award of the restricted shares
and will be delivered to recipients over a 3-year vesting period; half at the end of the performance qualifying period and
the balance will vest equally over the subsequent two years.
242
31 December 2014
34.
Outstanding Awards under RSP2000 / RSP2010 are as follow:
Date of grant
Number of
restricted
shares as at
grant date
Number of
restricted
shares lapsed
Number of
restricted
shares released
Balance
outstanding
as at
31.12.2014
8,547,400
1,194,840
7,352,560
–
50,000
7,380,041
349,900
5,000
4,617,900
4,347,000
90,000
4,873,600
300,000
1,404,751
156,300
–
1,028,241
–
–
874,401
436,669
–
249,125
–
–
–
30,000
4,938,890
349,900
5,000
2,011,749
–
30,000
–
–
323,530
156,300
20,000
1,412,910
–
–
1,731,750
3,910,331
60,000
4,624,475
300,000
1,081,221
–
RSP2000
22 March 2010
RSP2010
25 February 2011
16 March 2011
27 June 2011
17 October 2011
22 March 2012
22 March 2013
19 September 2013
13 March 2014
4 April 2014
28 April 2014
19 May 2014
During the year, restricted shares amounting to 1,659,932 and 4,250,477 ordinary shares were awarded under RSP2000
and RSP2010 respectively.
The fair value of the restricted shares is determined at conditional grant date using the Monte Carlo simulation model.
The significant inputs to the model used for the conditional grant in 2013 and 2014 are as follows:
Year of grant
2014
2013
Volatility of the Company’s shares (%)
Risk-free rate (%)
Share price ($)
Dividend yield
15.35
14.66
0.36 – 0.98
0.21 – 0.35
3.79
4.16
(--Management’s forecast
in line with dividend policy--)
243
ANNUAL REPORT 2014
31 December 2014
35.
CAPITAL RESERVES
Included in capital reserves is:
36.
(a)
an amount of $115,948,000 (2013: $115,948,000) relating to share premium of the respective pooled enterprises,
namely Singapore Technologies Aerospace Ltd, Singapore Technologies Electronics Limited, Singapore Technologies
Kinetics Ltd and Singapore Technologies Marine Ltd classified as capital reserve upon the pooling of interests during
the financial year ended 31 December 1997; and
(b)
an amount of $375,000 (2013: $375,000) relating to an excess capital contribution from non-controlling
shareholders of a subsidiary in China following the additional capital injection in prior years.
OThER RESERVES
Foreign
currency
translation Statutory
Note
reserve
reserve
$’000
$’000
ShareFair
based
value payment
reserve
reserve
$’000
$’000
Premium paid
on acquisition of
non-controlling
interests
$’000
Total
$’000
The Group
At 1.1.2013
Other comprehensive income:
(212,747)
3,830
(10,062)
85,727
(2,869) (136,121)
available-for-sale financial
assets
(i)
–
–
(7,931)
–
–
(7,931)
cash flow hedges
(ii)
–
–
49,401
–
–
49,401
Foreign currency translation
differences
(iii)
42,553
–
69
(54)
42,459
10,395
–
–
–
–
10,395
–
–
–
–
52,743
–
41,361
69
(54)
94,119
Issue of shares
–
–
–
(18,624)
–
(18,624)
–
–
–
15,490
–
15,490
–
–
–
–
255
255
230
4,060
–
31,299
–
82,662
Share of foreign currency
translation differences of
associates and joint ventures
Reclassification of foreign
currency translation reserve
to profit or loss arising from
disposal of a foreign entity
Total comprehensive income for
the year, net of tax
statutory reserve
At 31.12.2013
(205)
–
(160,004)
(109)
–
(2,668)
(205)
230
(44,651)
244
31 December 2014
36.
other reserves (continueD)
Foreign
currency
translation Statutory
Note
reserve
reserve
$’000
$’000
ShareFair
based
value payment
reserve
reserve
$’000
$’000
Premium
paid on
acquisition
of noncontrolling
interests
$’000
Total
$’000
The Group
At 1.1.2014
Other comprehensive income:
(160,004)
4,060
31,299
82,662
(2,668)
(44,651)
available-for-sale financial assets
(i)
–
–
(2,020)
–
–
(2,020)
cash flow hedges
(ii)
–
–
(57,327)
–
–
(57,327)
Share of net fair value changes on
cash flow hedges of an associate
(ii)
–
–
(9,891)
–
–
(9,891)
Foreign currency translation
differences
(iii)
18,330
1
37
121
(67)
18,422
differences of associates and
joint ventures
1,336
–
–
–
–
1,336
Reclassification of foreign currency
translation reserve to profit or loss
arising from disposal of
foreign entities
50
–
–
–
–
50
19,716
1
Issue of shares
–
–
–
–
–
–
–
for the year, net of tax
statutory reserve
At 31.12.2014
–
(140,288)
13
4,074
(69,201)
(67)
(49,430)
(19,559)
–
(19,559)
–
21,574
–
21,574
–
–
(4)
(4)
–
84,798
–
(2,739)
13
(92,057)
–
(37,902)
121
245
ANNUAL REPORT 2014
31 December 2014
36.
2014
$’000
(i)
Net fair value changes on available-for-sale financial assets:
– Net fair value changes during the year
– Reclassification adjustment to profit or loss on disposal of financial assets
in finance costs, net
(ii) Net fair value changes on cash flow hedges:
– Net fair value changes during the year
– Reclassification adjustment to profit or loss on occurrence of forecast
transaction in finance costs, net
– Recognised in the carrying value of non-financial assets on occurrence
of the hedged transactions
(iii) Foreign currency translation differences arising from:
– Translation of quasi equity loans forming part of net investments in
foreign entities
– Translation of foreign currency loans used as hedging instruments for
effective net investment hedges
– Translation of foreign entities
Foreign currency translation reserve
619
Group
2013
$’000
(2,447)
(2,639)
(2,020)
(5,484)
(7,931)
(66,601)
48,535
(739)
1,558
122
(67,218)
(692)
49,401
(8,764)
(945)
(14,579)
41,673
18,330
(5,890)
49,388
42,553
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries whose functional currencies are different from that of the Group’s presentation currency.
As at 31 December 2014, bonds amounting to $396.3 million (US$300 million) (2013: $197.4 million (US$155.8 million))
have been designated as a hedge of the net investment in Vision Technologies Systems, Inc. and its subsidiaries (“US
subsidiaries”) and are being used to hedge the Group’s exposure to foreign exchange risk on this investment. Exchange
gain or loss on the re-translation of these bonds is transferred to other comprehensive income to offset any exchange gain
or loss on translation of the net investment in the US subsidiaries. There is no ineffectiveness in the hedge during the year.
Statutory reserve
(a)
In accordance with the Foreign Enterprise Law applicable to certain wholly-owned subsidiaries in the People’s
Republic of China (“PRC”), the subsidiaries are required to make appropriation to a Statutory Reserve Fund (“SRF”).
At least 10% of the statutory after tax profits as determined in accordance with the applicable PRC accounting
standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the
subsidiaries’ registered capital. Subject to approval from the relevant PRC authorities, the SRF may be used to
offset any accumulated losses or increase the registered capital of the subsidiaries. The SRF is not available for
standard distribution to shareholders.
(b)
In accordance with the Law of the PRC on Joint Ventures Using Chinese and Foreign Investment applicable to certain
subsidiaries, appropriations from the net profits are made to the Reserve Fund and the Enterprise Expansion Fund,
after offsetting accumulated losses from prior years (if any), and before profit distributions to the investors. The
percentage to be appropriated to the Reserve Fund and the Enterprise Expansion Fund is to be determined by the
Board of Directors of the PRC entities.
246
31 December 2014
36.
Fair value reserve
Fair value reserve records the cumulative fair value changes of available-for-sale financial assets until they are derecognised
or impaired, as well as the portion of the fair value changes on the derivative financial instruments designated as hedging
instruments in cash flow hedges that are determined to be an effective hedge.
Share-based payment reserve
Share-based payment reserve represents the equity-settled share options, performance shares and restricted shares
granted to employees and non-executive directors. The reserve is made up of the cumulative value of services received
from employees recorded on grant of equity-settled share options, performance shares and restricted shares. The expense
for services received will be recognised over the vesting periods.
Premium paid on acquisition of non-controlling interests
The reserve represents the difference between the consideration paid on acquisition of non-controlling interests and the
carrying value of the proportionate share of the acquiree’s net assets acquired.
37.
RETAINED EARNINGS
2014
$’000
Retained by:
The Company
Subsidiaries
38.
568,323
515,715
141,002
1,225,040
Group
2013
$’000
564,416
518,693
108,849
1,191,958
DIVIDENDS
Group and Company
2014
2013
$’000
$’000
Final dividend paid in respect of the previous financial year of 4.0 cents
(2013: 4.0 cents) per share
Special dividend paid in respect of the previous financial year of 8.0 cents
Interim dividend paid in respect of the current financial year of 4.0 cents
Additional final dividend paid in respect of the previous financial year due
to issue of shares before books closure date
124,295
123,355
248,591
302,220
124,774
497,660
93,153
518,728
1,197
498,857
2,562
521,290
The Directors propose a final dividend of 4.0 cents (2013: 4.0 cents) per share amounting to $124.9 million (2013: $124.3
million) and a special dividend of 7.0 cents (2013: 8.0 cents) per share amounting to $218.5 million (2013: $248.6 million),
in respect of the financial year ended 31 December 2014. These dividends have not been recognised as a liability as at year
end as they are subject to approval of the shareholders at the Annual General Meeting of the Company.
247
ANNUAL REPORT 2014
31 December 2014
39.
RELATED PARTY INFORMATION
In addition to related party information disclosed elsewhere in the financial statements, the Group has significant
transactions with the following related parties on terms agreed between the parties as follows:
2014
$’000
2013
$’000
Associates of the Group
Sales and services rendered
Purchases and services received
Dividend income
12,087
(22,367)
36,589
9,692
(24,060)
38,184
Joint ventures of the Group
Dividend income
27,514
(15,081)
2,251
15,590
(25,043)
1,412
Other related parties *
Rental expense
Rental income
124,517
(23,023)
(7,180)
2,246
106,323
(22,408)
(11,701)
3,768
*
40.
Group
Other related parties refer to subsidiaries, associates and joint ventures of immediate holding company.
COMMITMENTS
(a)
Capital commitments
2014
$’000
Capital expenditure contracted but not provided
in the financial statements
145,345
Group
2013
$’000
145,575
248
31 December 2014
40.
commitments (continueD)
(b)
Leases
Future minimum lease payments under non-cancellable operating leases are as follows:
2014
$’000
Third parties
Within 1 year
2 to 5 years
After 5 years
Related parties
Within 1 year
2 to 5 years
After 5 years
Group
2013
$’000
40,680
106,850
222,895
370,425
37,574
82,942
214,145
334,661
5,047
17,761
24,161
46,969
2,938
10,884
25,651
39,473
The Group has several operating lease agreements for leasehold land and buildings, office premises and computers.
The leases have varying terms, escalation clauses and renewal rights. Lease terms do not contain restrictions on
the Group activities concerning dividends, additional debt or further leasing.
None of the operating leases is subject to contingent rent arrangements.
(c)
Operating lease commitments – As lessor
The Group has entered into commercial leases on its aircraft, aircraft engines and certain property, plant and
equipment. The non-cancellable leases have lease term ranging from 1 to 16 years. The leases on the aircraft
include a clause to enable upward revision of the rental charge on an annual basis based on prevailing market
conditions.
The future lease payment receivables under non-cancellable operating leases are as follows:
2014
$’000
Within 1 year
2 to 5 years
After 5 years
17,872
27,970
15,424
61,266
Group
2013
$’000
16,298
31,846
17,400
65,544
None of the operating leases is subject to contingent rent arrangements.
(d)
Investments
As at 31 December 2014, the Group has outstanding commitments in respect of uncalled capital to the extent of
$0.7 million (2013: $0.2 million) in subsidiaries.
249
ANNUAL REPORT 2014
31 December 2014
40.
commitments (continueD)
(e)
41.
Contingent liabilities (unsecured)
(i)
The Group is a party to various claims that arise in the normal course of the Group’s business. The total
liability on these matters cannot be determined with certainty. However, in the opinion of management,
the ultimate liability, to the extent not otherwise provided for, will not materially impact the combined
financial statements of the Group.
(ii)
The Group’s certain subsidiaries provided equipment buy-back guarantees to financial institutions which
have extended equipment financing to the customers for their purchase of their products. The outstanding
equipment buy-back guarantees as at 31 December 2014 amounted to $10,531,000 (2013: $10,900,000).
SEGMENT INFORMATION
(a)
Analysis by business segments
The Group is organised on a worldwide basis into four main reportable segments, namely:
(i)
Aerospace
Provides a spectrum of maintenance and engineering services that include airframe, engine and component
maintenance, repair and overhaul; engineering design and technical services; and aviation materials and
management services, including Total Aviation Support.
(ii)
Electronics
Delivers innovative system solutions to government, commercial, defence, and industrial customers
worldwide. It specialises in the design, development and integration of advanced electronics and
communications systems, such as broadband radio frequency and satellite communication, e-Government
solutions, information communications technologies and IT, rail and traffic management, real-time
command and control, modelling and simulation, eLearning and interactive digital media, training services,
intelligent building management and information security.
(iii)
Land Systems
Delivers integrated land systems, specialty vehicles and their related through life support for defence,
homeland security and commercial applications.
(iv)
Marine
Provides turnkey building, repair and conversion services for a wide spectrum of naval and commercial
vessels. In shipbuilding, it has the proven capabilities to provide turnkey solutions from concept definition
to detailed design, construction, on-board system installation and integration, testing, commissioning to
through-life support. It has also established a track record in providing high engineering content shiprepair
and ship conversion services for a worldwide clientele. It also provides a suite of sustainable environmental
engineering solutions.
Other operations include research and development, treasury, investment holding and provision of management,
consultancy, integrated logistics management, integrated facilities management, warehousing and other support
services. None of these segments meets any of the quantitative thresholds for determining reportable segments
in financial years 2014 and 2013.
Management monitors the operating results of its business units separately for the purpose of making decisions
about resource allocation and performance assessment. Segment performance is evaluated based on operating
profit or loss which in certain respects, as explained in the table below, is measured differently from operating
profit or loss in the consolidated financial statements.
Inter-segment pricing is on an arm’s length basis.
250
31 December 2014
41.
segment information (continueD)
Aerospace Electronics
$’000
$’000
Land
Systems
$’000
Marine
$’000
Others Elimination
$’000
$’000
Group
$’000
2014
Revenue
External sales
Inter-segment sales
Reportable segment profit from
operations
Other income
Other expenses
Finance income
Finance costs
Share of results of associates and
joint ventures, net of tax
Taxation
2,061,225 1,583,288 1,396,880 1,341,084
10,239
30,791
8,252
867
2,071,464 1,614,079 1,405,132 1,341,951
156,956
24,069
181,025
– 6,539,433
(74,218)
–
(74,218) 6,539,433
261,471
7,059
(5,035)
11,894
(24,670)
174,371
10,402
(6)
4,867
(6,136)
38,727
14,525
(1,570)
3,124
(11,655)
100,835
12,115
(37)
3,931
–
(76,109)
628,530
(24)
115,809
(112,961)
55,678
(627,456)
1,672
(96,075)
110,225
554,973
45,175
(5,000)
43,550
(45,197)
32,280
282,999
(53,892)
(8,963)
220,144
470
183,968
(30,614)
(1,211)
152,143
13,050
56,201
(11,001)
5,123
50,323
5,936
122,780
(14,695)
1
108,086
–
555,245
(3,491)
–
551,754
5,446
(550,510)
–
12
(550,498)
57,182
650,683
(113,693)
(5,038)
531,952
Other assets
Segment assets
2,202,519 1,783,773 2,091,015 1,106,096 4,250,300 (3,592,749) 7,840,954
322,508
10,297
112,750
8,159
17,657
6,981
478,352
2,525,027 1,794,070 2,203,765 1,114,255 4,267,957 (3,585,768) 8,319,306
Segment liabilities
1,779,360 1,596,964 1,931,326
Capital expenditure
Impairment losses
Other non-cash expenses
87,674
60,166
6,186
807
61,893
38,362
638
56
86,318
38,053
21,049
20
955,383 2,102,832 (2,311,169) 6,054,696
37,581
27,098
–
–
10,635
6,869
–
3
–
(42)
–
(1)
284,101
170,506
27,873
885
251
ANNUAL REPORT 2014
31 December 2014
41.
Aerospace Electronics
$’000
$’000
Land
Systems
$’000
Marine
$’000
Others Elimination
$’000
$’000
Group
$’000
2013
Revenue
External sales
Inter-segment sales
Reportable segment profit from
operations
Other income
Other expenses
Finance income
Finance costs
Share of results of associates and
joint ventures, net of tax
Taxation
2,079,076 1,650,332 1,475,361 1,237,933
9,029
31,946
9,858
914
2,088,105 1,682,278 1,485,219 1,238,847
190,450
31,926
222,376
– 6,633,152
(83,673)
–
(83,673) 6,633,152
673,215
40,095
(5,907)
68,911
(77,704)
291,828
9,884
(2,738)
14,528
(18,645)
165,546
3,685
(1,641)
9,546
(5,342)
90,472
23,840
(4,353)
4,836
(11,175)
134,479
6,047
(43)
37,038
(33,284)
(58,943)
609,322
(21)
77,706
(89,735)
49,833
(612,683)
2,889
(74,743)
80,477
24,585
319,442
(53,589)
(6,639)
259,214
(1,466)
170,328
(30,502)
(2,707)
137,119
8,173
111,793
(19,196)
(1,358)
91,239
2,073
146,310
(36,325)
(30)
109,955
–
538,329
1,467
–
539,796
(2,283)
31,082
(556,510) 729,692
– (138,145)
21
(10,713)
(556,489) 580,834
Other assets
Segment assets
2,421,451 1,732,792 1,991,478 1,137,593 4,281,836 (3,320,648) 8,244,502
328,017
729
110,972
3,223
17,681
1,517
462,139
2,749,468 1,733,521 2,102,450 1,140,816 4,299,517 (3,319,131) 8,706,641
Segment liabilities
2,222,830 1,538,772 1,779,140
Capital expenditure
Impairment losses/(write-back of
impairment)
Other non-cash expenses
950,319 2,260,361 (2,304,695) 6,446,727
176,066
50,194
90,305
29,106
67,719
39,083
56,195
18,514
3,488
956
3,479
315
2,348
112
–
–
7,452
5,189
(9)
3
–
(42)
–
–
397,737
142,044
9,306
1,386
252
31 December 2014
41.
(b)
Analysis by country of incorporation
Revenue is based on the country of incorporation regardless of where the goods are produced or services rendered.
Non-current assets, excluding derivative financial instruments and deferred tax assets, are based on the location
of those assets.
2014
$’000
Asia
USA
Europe
Others
(c)
4,981,137
1,420,462
75,513
62,321
6,539,433
Revenue
2013
$’000
4,811,651
1,642,208
129,952
49,341
6,633,152
Non-current assets
2014
2013
$’000
$’000
1,932,656
781,302
47,647
101,017
2,862,622
1,893,992
732,649
81,599
101,381
2,809,621
Analysis by geographical areas
Revenue is based on the location of customers regardless of where the goods are produced or services rendered.
2014
$’000
Asia
USA
Europe
Others
42.
3,780,770
1,525,088
290,317
943,258
6,539,433
Revenue
2013
$’000
3,868,536
1,705,677
420,875
638,064
6,633,152
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group and the Company are exposed to financial risks, namely, interest rate, foreign exchange, market, liquidity and
credit risks, arising from its operations and the use of financial instruments. The Group’s principal financial instruments,
other than foreign exchange contracts and derivatives, comprise bank guarantees, performance bonds, bank loans
and overdrafts, finance leases and hire purchase contracts, investments, cash and short-term deposits. All financial
transactions with the banks are governed by banking facilities duly accepted with Board of Directors’ resolutions, with
banking mandates, which define the permitted financial instruments and facilities limits. All financial transactions require
dual signatories. The Group has various other financial assets and liabilities such as trade receivables and trade payables,
which arise directly from its operations.
It is the Group’s policy not to engage in foreign exchange and/or derivatives speculation. The purpose of engaging in
treasury transactions is solely for hedging. The Group’s treasury mandates allow only foreign exchange spot, forward or
non-deliverable forward, foreign exchange swap, cross currency swap, purchase of foreign exchange call, put or collar
option, forward rate agreement, interest rate swap, purchase of interest rate cap, floor or collar option (“Permitted
Transactions”). These instruments are generic in nature with no embedded or leverage features and any deviation from
these instruments would require specific approval from the Board of Directors. The Group’s accounting policies in relation
to derivative financial instruments are set out in Note 3.
253
ANNUAL REPORT 2014
31 December 2014
42.
financial risk management objectives anD Policies (continueD)
The policies for managing each of these risks are broadly summarised below.
Interest rate risk
As at reporting date, the interest rate profile of the interest-bearing financial instruments is:
2014
$’000
Fixed rate instruments
Financial assets
Financial liabilities
Variable rate instruments
Financial assets
Group
2013
$’000
2014
$’000
Company
2013
$’000
1,147,308
(735,904)
411,404
1,487,156
(919,839)
567,317
316,033
–
316,033
329,417
–
329,417
254,541
(282,724)
(28,183)
326,376
(454,182)
(127,806)
532,724
(562,959)
(30,235)
752,171
(606,055)
146,116
The Group has cash balances placed with reputable banks and financial institutions. The Group manages its interest rate
risk on its interest income by placing the cash balances in varying maturities and interest rate terms with due consideration
to operating cash flow requirements and optimising yield.
The Group’s debts include 10-year bonds issued, bank loans and lease commitments. The Group seeks to minimise its
interest rate risk exposure through tapping different sources of funds to refinance the debt instruments and/or enter
into interest rate swaps, where appropriate. Movements in interest rates will therefore have an impact on the Group. An
increase of 50 basis points in interest rate at the reporting date would lead to a reduction of the Group’s profit or loss
and other comprehensive income by approximately $1.4 million (2013: $2.1 million) and $2.4 million (2013: $2.9 million)
respectively. A decrease in 50 basis points in interest rate at the reporting date would increase the Group’s profit or loss
and other comprehensive income by approximately $1.4 million (2013: $2.1 million) and $2.6 million (2013: $3.3 million)
respectively. This analysis assumes that all other variables remain constant.
Fixed deposits, bonds, bank loans and other financial instruments with interest rate fixed over the contractual period are
excluded from the sensitivity analysis. Information relating to the Group’s interest rate risk exposure is also disclosed in the
notes on the Group’s borrowings, investments and loans receivable, where applicable.
Foreign exchange risk
The Group’s foreign exchange risk arises both from its subsidiaries operating in foreign countries, generating revenue and
incurring costs denominated in foreign currencies, and from operations of its local subsidiaries which are transacted in
foreign currencies. The Group’s foreign exchange exposures are primarily from USD and Euro and the Group enters mainly
into forward currency contracts to hedge against its foreign exchange risk resulting from anticipated sale and purchase
transactions denominated in foreign currencies in accordance with the Group’s hedging policy. The Group enters into
cross currency swap to hedge the foreign exchange risk of its loans denominated in foreign currency. The Group also uses
monetary assets and liabilities and embedded derivatives to hedge its risks associated with foreign currency fluctuation.
The Company’s centralised Treasury Unit (“Unit”) facilitates intra-group foreign exchange transactions within the Group to
net-off the foreign exchange exposures before proceeding to transact with the banks.
The Unit executes the Group’s material foreign exchange transactions with proper segregation of duties between
authorised dealers and back office. Only authorised dealers can transact with the banks on behalf of the Group, with back
office confirming the deals. The dealers’ limits and permitted treasury instruments in the form of an authorisation matrix
and mandates are communicated to all counterparties.
No foreign exchange sensitivity analysis was disclosed as the Company had assessed that a reasonable change in the
exchange rate would not result in any significant impact on the Group’s results.
254
31 December 2014
42.
Market risk
The Group has strategic investments in quoted equity shares. The market value of these investments will fluctuate with
market conditions.
The impact to the Group’s profit or loss and other comprehensive income arising as a result of a 10% increase in the
fair value of the quoted investments, assuming no impairment on the quoted investments would lead to an increase
in the Group’s profit or loss and other comprehensive income by approximately $0.04 million (2013: $0.02 million) and
$0.04 million (2013: $0.03 million) respectively. A 10% decrease in the fair value of the quoted investments, assuming
no impairment on the quoted investments would have an equal but opposite effect. This analysis assumes that all other
variables remain constant.
Liquidity risk
To manage liquidity risk, the Group monitors its net operating cash flows and maintains an adequate level of cash and
cash equivalents and secured committed funding facilities from financial institutions. In assessing the adequacy of these
funding facilities, management reviews its working capital requirements regularly.
The table below analyses the Group’s financial liabilities and certain derivative financial instruments that will be settled on
a gross basis into relevant maturity groupings based on the remaining period at reporting date to the contractual maturity
date. The amounts disclosed in the table below are the contractual undiscounted cash flows including estimated interest
payments.
Contractual
cash flow
$’000
Within
1 year
$’000
2 to 5
years
$’000
More than
5 years
$’000
The Group
2014
Bank loans
Bonds
Other loans
Lease obligations
Other long-term payables
Trade and other payables
Derivative financial instruments:
• Forward currency contracts
– gross payments
– gross receipts
• Interest rate swaps - settled net
• Cross currency interest rate swaps
– settled net
(351,486)
(804,516)
(669)
(36,911)
(1,000)
(1,951,160)
(76,460)
(31,702)
(18)
(1,818)
–
(1,675,134)
(275,026)
(772,814)
(651)
(4,550)
(1,000)
(276,026)
(791,244)
777,387
(667)
(553,680)
541,255
(857)
(237,564)
236,132
190
–
–
–
19,803
–
24,184
4,381
–
–
–
(30,543)
–
–
255
ANNUAL REPORT 2014
31 December 2014
42.
Liquidity risk (continued)
Contractual
cash flow
$’000
Within
1 year
$’000
2 to 5
years
$’000
More than
5 years
$’000
The Group
2013
Bank loans
Bonds
Other loans
Lease obligations
Other long-term payables
Trade and other payables
– gross payments
– gross receipts
• Cross currency swap
– net receipts
• Interest rate swaps - settled net
• Cross currency interest rate swaps
– settled net
(746,276)
(802,222)
(1,054)
(37,606)
(1,500)
(1,955,457)
(438,292)
(30,413)
(257)
(1,972)
–
(1,601,350)
(294,139)
(121,651)
(84)
(5,246)
(1,500)
(354,107)
(1,652,840)
1,636,338
(1,234,003)
1,233,605
(418,837)
402,733
1,243
(1,744)
1,243
(1,844)
–
100
3,143
4,447
298
(13,845)
(650,158)
(713)
(30,388)
–
–
–
–
–
–
(1,602)
The Company
2014
Amounts due to related parties
– gross payments
– gross receipts
• Intra-group financial guarantee
2013
Amounts due to related parties
– gross payments
– gross receipts
• Intra-group financial guarantee
(43,967)
(638,327)
(26,961)
(201,973)
(17,006)
(436,354)
–
–
(722)
803
(274,748)
–
–
(274,748)
(722)
803
–
–
–
–
(43,834)
(716,713)
(25,017)
(99,671)
(18,817)
(535,941)
(5,354)
5,545
(349,874)
(4,632)
4,746
(349,874)
(722)
799
–
–
(81,101)
–
–
–
256
31 December 2014
42.
Liquidity risk (continued)
For derivative financial instruments, the cash inflows/(outflows) represent the contractual undiscounted cash flows
relating to these instruments. The amounts are compiled on a net basis for derivatives that are net-settled. Gross inflows
and outflows are included for derivatives that are gross-settled on a simultaneous basis. Net-settled derivative financial
assets are included in the maturity analysis as they are held to hedge the cash flow variability of the Group’s bank loans
and bonds.
Except for the cash flow arising from the intra-group financial guarantee, it is not expected that the cash flows included in
the maturity analysis of the Group and the Company could occur significantly earlier, or at significantly different amounts.
At the reporting date, the Company does not consider it probable that a claim will be made against the Company under
the intra-group financial guarantee.
Credit risk
Credit risk, or the risk of counterparties defaulting, is managed through the application of credit approvals, credit limits
and monitoring procedures. Where appropriate, the Company or its subsidiaries obtain collaterals from customers or
arrange master netting agreements. Cash terms, advance payments, and letters of credit or bank guarantees are required
for customers of lower credit standing.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk
at the reporting date is:
2014
$’000
Investments
Long-term receivables
Finance lease receivables
Trade receivables
Amounts due from related parties
Recognised financial assets
246,490
13,223
7,845
24,263
1,028,504
71,188
105,058
1,470,723
2,967,294
Group
2013
$’000
2014
$’000
300,614
25,036
19,126
39,978
941,961
47,506
199,004
1,930,140
3,503,365
–
–
–
81
–
547,070
3,573
404,876
955,600
Company
2013
$’000
–
–
–
77
–
763,372
9,739
470,124
1,243,312
The Group limits its exposure to credit risk on investments held by investing mostly in bonds of high credit ratings.
Management actively monitors the credit ratings and does not expect any counterparty to fail to meet its obligations.
Derivatives are entered into with financial institutions, which have long-term rating of A3 by Moody’s, A- by Standard &
Poor’s or the equivalent by a reputable credit rating agency.
Cash and bank deposits are placed with reputable financial institutions.
257
ANNUAL REPORT 2014
31 December 2014
42.
Credit risk (continued)
As at 31 December 2014, there were no significant concentrations of credit risk, except for 43% (2013: 30%) of trade debts
relating to three major customers of the Group. The table below analyses the trade receivables by the Group’s four main
reportable segments.
2014
$’000
261,162
354,998
303,153
89,863
19,328
1,028,504
Aerospace
Electronics
Land Systems
Marine
Others
Group
2013
$’000
303,981
306,528
205,951
98,065
27,436
941,961
The ageing of financial assets excluding cash and cash equivalents, investments and derivative financial instruments, net
of impairment losses, are as follows:
2014
$’000
Not past due
1 – 90 days
91 – 180 days
181 – 360 days
> 360 days
734,236
365,265
52,347
48,839
23,960
1,224,647
Group
2013
$’000
2014
$’000
769,442
304,316
59,208
23,729
24,124
1,180,819
550,643
–
–
–
–
550,643
Company
2013
$’000
772,997
–
–
–
–
772,997
The movements in allowance for impairment losses in respect of financial assets excluding cash and cash equivalents,
intangibles and derivative financial instruments are as follows:
2014
$’000
Allowance utilised
At end of the year
76,230
17,797
(10,572)
1,012
84,467
Group
2013
$’000
2014
$’000
88,450
9,277
(24,522)
3,025
76,230
4,901
2,000
–
80
6,981
Company
2013
$’000
7,963
2,000
(5,132)
70
4,901
258
31 December 2014
43.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table shows an analysis of financial instruments carried at fair value by level of fair value hierarchy.
quoted prices in
active markets
for identical
Significant other
instruments observable inputs
Note
(Level 1)
(Level 2)
$’000
$’000
Significant
unobservable
inputs
(Level 3)
$’000
Total
$’000
The Group
2014
Financial Assets
Available-for-sale
– Equity investments (quoted)
15
– Venture capital funds and limited
partnership
15
– Bonds (unquoted)
15, 24
Fair value through profit or loss
24
Derivatives
– Forward currency contracts
– Cross currency interest rate swaps
– Embedded derivatives
Financial Liabilities
Derivatives
– Interest rate swaps
378
–
–
378
–
–
–
241,778
12
–
12
241,778
359
–
–
359
–
–
–
737
2,612
22,247
575
267,212
–
–
–
12
2,612
22,247
575
267,961
–
–
–
–
16,469
653
15,548
32,670
–
–
–
–
16,469
653
15,548
32,670
349
–
–
349
–
–
–
299,386
43
–
43
299,386
204
–
–
204
–
–
–
–
553
32,031
1,241
2,871
55,649
391,178
–
–
–
–
43
32,031
1,241
2,871
55,649
391,774
–
–
–
–
48,132
1,728
998
50,858
–
–
–
–
48,132
1,728
998
50,858
2013
Financial Assets
Available-for-sale
15
– Venture capital funds and limited
partnership
15
– Bonds (unquoted)
15, 24
Fair value through profit or loss
24
Derivatives
– Cross currency swap
– Cross currency interest rate swaps
Financial Liabilities
Derivatives
– Interest rate swaps
259
ANNUAL REPORT 2014
31 December 2014
43.
fair value of financial instruments (continueD)
Significant other
observable inputs
(Level 2)
$’000
The Company
2014
Financial Assets
Derivatives
81
2013
Financial Assets
Derivatives
191
Valuation processes applied by the Group
The Group has an established approach with respect to the measurement of fair values.
The Group regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such
as broker quotes or pricing services, is used to measure fair value, then the Group assesses and documents the evidence
obtained from the third parties to support the conclusion that such valuations meet the requirements of FRS, including the
level in the fair value hierarchy the resulting fair value estimate should be classified.
Fair value hierarchy
The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in
making the measurements. The fair value hierarchy have the following levels:
(a)
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;
(b)
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e., as prices) or indirectly (i.e., derived from prices); and
(c)
Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following methods and assumptions are used to estimate the fair value of each class of financial instruments.
Bank balances, other liquid funds and short-term receivables
The carrying amounts approximate fair values due to the relatively short-term maturity of these instruments.
Quoted and unquoted investments
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during
which the transfer has occurred. There have been no transfer from Level 2 to Level 1 and vice versa in 2014 (2013: no
transfers in either directions).
The fair values of quoted investments are determined directly by reference to their quoted bid prices for these investments
as at balance sheet date. For unquoted investments, the fair values cannot be reliably estimated because of the lack of
quoted market prices and the assumptions used in valuation models to value these investments cannot be reasonably
determined. For unquoted bonds, the investments are valued using valuation models which use market observable data.
For unquoted investments in venture capital funds and limited partnerships as stated in Note 15, the fair value is determined
by reference to valuation provided by non-related fund managers based on non-observable data. Changing one or more
of the inputs to reasonable alternative assumptions is not expected to have a material impact on the changes in fair value.
260
31 December 2014
43.
The fair values of long-term receivables and amount due from related parties are estimated based on the expected cash
flows discounted to present value.
Long-term payables
The fair values of amount due to related parties are estimated based on present value of future principal and interest cash
flows, discounted at the market rate of interest at the reporting date.
Short-term borrowings and other current payables
The carrying amounts approximate fair values because of the short period to maturity of these instruments.
Derivatives
The fair value of forward currency contracts, interest rate swaps, cross currency swap, embedded derivatives and cross
currency interest rate swaps are based on broker quotes. Similar contract are traded in an active market and the quotes
reflect the actual transactions in similar instruments.
Bonds
The fair value of the US$500 million bonds as at 31 December 2014 is determined based on quoted market prices.
Movements in level 3 financial instruments measured at fair value
The following table presents the reconciliation for all financial instruments measured at fair value based on significant
unobservable inputs (Level 3).
2014
$’000
Equity instruments (unquoted)
Opening balance
Total gain or loss:
– recognised in profit or loss, in finance costs, net
– recognised in other comprehensive income
Sales
Closing balance
Total gain or loss for the year included in profit or loss
(presented in finance costs, net) for assets held at 31 December
Group
2013
$’000
43
44
–
(31)
–
12
26
–
(27)
43
–
10
261
ANNUAL REPORT 2014
31 December 2014
43.
Set out below is a comparison by category of carrying amounts of all the Group’s financial instruments that are carried in
the financial statements:
Classification of financial instruments
Fair value Derivatives
Loans and
through
used for
receivables profit or loss
hedging
$’000
$’000
$’000
Available
-for-sale
$’000
Liabilities at
amortised
cost
$’000
Total
carrying
amount
$’000
Fair
value
$’000
The Group
2014
Assets
Investments
Finance lease
receivables
Derivative financial
instruments
Trade receivables
Amounts due from
related parties
Advances and other
receivables
Short-term
investments
Bank balances and
other liquid funds
Liabilities
Creditors and accruals
Amounts due to
related parties
Lease obligations
Bank loans
Other loans
Other long-term
payables
Bonds
instruments
–
13,223
–
–
–
–
127,211
–
–
–
127,211
13,223
127,211
13,223
7,845
–
–
–
–
7,845
7,845
–
1,028,504
23,278
–
985
–
–
–
–
–
24,263
1,028,504
24,263
1,028,504
71,188
–
–
–
–
71,188
71,188
103,887
462
709
–
–
105,058
105,058
–
359
–
118,920
–
119,279
119,279
1,470,723
2,695,370
–
24,099
–
1,694
–
246,131
–
–
1,470,723
2,967,294
1,470,723
2,967,294
–
5,257
16,153
–
1,919,925
1,941,335
1,936,667
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31,235
18,673
340,942
589
31,235
18,673
340,942
589
31,235
17,938
340,942
589
–
–
–
–
–
–
–
–
1,000
658,424
1,000
658,424
912
730,227
–
–
821
6,078
10,439
26,592
–
–
–
2,970,788
11,260
3,003,458
11,260
3,069,770
262
31 December 2014
43.
Fair value Derivatives
Loans and
through
used for
receivables profit or loss
hedging
$’000
$’000
$’000
Available
-for-sale
$’000
Liabilities at
amortised
cost
$’000
Total
carrying
amount
$’000
Fair
value
$’000
The Group
2013
Assets
Investments
Finance lease
receivables
instruments
Trade receivables
Amounts due from
related parties
Advances and other
receivables
Bank balances and
other liquid funds
Liabilities
Creditors and accruals
Amounts due to related
parties
Lease obligations
Bank loans
Other loans
Other long-term
payables
Bonds
instruments
–
25,036
–
–
–
–
166,033
–
–
–
166,033
25,036
166,033
25,036
19,126
–
–
–
–
19,126
19,126
–
941,961
18,939
–
21,039
–
–
–
–
–
39,978
941,961
39,978
941,961
47,506
–
–
–
–
47,506
47,506
147,190
–
36,424
204
15,390
–
–
134,377
–
–
199,004
134,581
199,004
134,581
1,930,140
3,110,959
–
55,567
–
36,429
–
300,410
–
–
1,930,140
3,503,365
1,930,140
3,503,365
–
20,734
7,609
–
1,930,098
1,958,441
1,951,234
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25,359
19,471
721,498
933
25,359
19,471
721,498
933
25,359
19,329
721,498
933
–
–
–
–
–
–
–
–
1,500
631,283
1,500
631,283
1,357
698,265
–
–
16,621
37,355
5,894
13,503
–
–
–
3,330,142
22,515
3,381,000
22,515
3,440,490
263
ANNUAL REPORT 2014
31 December 2014
43.
Loans and
receivables
$’000
Fair value
through
profit or loss
$’000
Liabilities at
amortised cost
$’000
Total
Carrying
amount
$’000
Fair
value
$’000
–
81
–
81
81
547,070
–
–
547,070
547,070
3,573
–
–
3,573
3,573
404,876
955,519
–
81
–
–
404,876
955,600
404,876
955,600
–
–
43,967
43,967
42,893
–
–
–
–
604,401
648,368
604,401
648,368
604,401
647,294
–
77
–
77
77
763,372
–
–
763,372
763,372
9,625
114
–
9,739
9,739
470,124
1,243,121
–
191
–
–
470,124
1,243,312
470,124
1,243,312
–
–
43,834
43,834
42,629
–
–
–
–
652,138
695,972
652,138
695,972
652,138
694,767
The Company
2014
Assets
instruments
Amounts due from related
parties
Advances and other
receivables
Bank balances and other
liquid funds
Liabilities
Trade payables and
accruals
parties
2013
Assets
instruments
Amounts due from related
parties
Advances and other
receivables
Bank balances and other
liquid funds
Liabilities
Trade payables and
accruals
parties
264
31 December 2014
43.
Note
Contractual/
notional
amount
$’000
2014
Estimated fair value
Asset
$’000
Liability
$’000
Contractual/
notional
amount
$’000
2013
Estimated fair value
Asset
$’000
Liability
$’000
Cash flow hedges
Forward currency contracts:
– to hedge confirmed sales in
foreign currencies
– to hedge firm purchase
commitments in foreign
currencies
– to hedge accounts
receivable
in foreign currencies
– to hedge accounts payable
in foreign currencies
Interest rate swaps
Embedded derivatives
(a)(i)
275,705
1,505
(6,016)
410,956
2,558
(7,720)
(a)(i)
180,123
134
(5,528)
159,225
5,912
(1,308)
(a)(i)
4,861
–
(154)
84,950
24
(1,666)
(a)(i)
(b)(i)
(a)(i)
2,045
231,158
433,068
–
–
–
(143)
(653)
(12,211)
2,411
221,760
644,391
18
–
27,904
(13)
(886)
(998)
(a)(i)
742
49
872
13
(a)(i)
22,971
6
(952)
32,919
–
(a)(i)
14,060
–
(935)
–
–
(a)(ii)
(a)(ii)
(b)(ii)
(c)
230,110
52,807
–
–
462
456
–
–
(2,671)
(70)
–
–
625,415
348,326
151,372
210,913
104
23,402
–
1,241
(36,513)
–
(842)
–
(d)
(a)(ii)
246,350
249,512
–
(3,337)
(32,670)
21,410
(11,260)
246,350
470,178
2,871
27,745
91,792
(51,814)
39,978
–
–
(50,858)
28,343
(22,515)
Fair value hedges
– to hedge firm purchase
commitments in foreign
currencies
receivable in foreign
currencies
payable in foreign
currencies
–
–
(912)
–
Non-hedging instruments
– sales
– purchases
Interest rate swap
Cross currency swap
Cross currency interest
rate swaps
Embedded derivatives
Total
Less: Current portion
Non-current portion
22,247
575
25,434
(1,171)
24,263
265
ANNUAL REPORT 2014
31 December 2014
43.
(a)
Forward currency contracts
(i)
As at 31 December 2014, the Group has forward currency contracts and embedded derivatives separated
from the foreign currency portion of sales contracts amounting to $933,575,000 (2013: $1,335,724,000)
designated as hedges of confirmed sales in foreign currencies, firm purchase commitments in foreign
currencies, accounts receivable in foreign currencies and accounts payable in foreign currencies.
The maturity dates of the forward currency contracts and embedded derivatives separated from the
foreign currency portion of the sales contracts approximate the timing of the expected cash flows of their
respective hedged items, which are on varying periods up to six years (2013: seven years) from the financial
year-end.
(ii)
(b)
As at 31 December 2014, the Group has outstanding forward currency contracts and embedded derivatives
separated from the foreign currency portion of sales contracts amounting to $532,429,000 (2013:
$1,443,919,000). These were not designated as accounting hedges, but were used to economically hedge
confirmed sales in foreign currencies and firm purchase commitments in foreign currencies.
Interest rate swaps
(i)
As at 31 December 2014, the Group has outstanding interest rate swaps amounting to $231,158,000 (2013:
$221,760,000), which are designated as cash flow hedges.
The USD interest rate swaps are being used to hedge the exposure to variability in cash flows associated
with the floating rate of the unsecured USD long-term loans. Under the USD interest rate swaps, the Group
pays fixed rates of interest of 0.61% to 0.77% (2013: 0.62% to 0.77%) per annum and receives variable rates
of interest equal to the LIBOR per annum on the notional amount. The USD interest rate swaps have the
same maturity terms as the unsecured USD long-term loans due in 2016.
(ii)
In the prior year, the Group had an outstanding interest rate swap amounting to $151,372,000, which was
not designated as hedging instrument in a cash flow hedge relationship.
The Euro interest rate swap was being used to hedge the exposure to variability in cash flows associated
with the floating rate of the unsecured long-term bank loan. Under the Euro interest rate swap, the Group
paid a fixed rate of interest of 2.50% per annum and receives a variable rate of interest up to the EURIBOR
per annum on the notional amount. The Euro interest rate swap had the same maturity terms as the
unsecured bank loan. In 2014, the interest rate swap had matured with the repayment of the bank loan.
(c)
Cross currency swap
In the prior year, the Group had an outstanding cross currency swap amounting to $210,913,000, which was not
designated as hedging instrument in a cash flow hedge relationship. The cross currency swap was matured during
the year with gain recognised in profit or loss.
The USD cross currency swap converted the USD bank loan with floating USD interest rate at LIBOR + 0.60% per
annum to an equivalent Euro bank loan (Euro 120,000,000) with floating Euro interest rate at EURIBOR + 0.41%
per annum.
(d)
Cross currency interest rate swaps
As at 31 December 2014, the Group has outstanding cross currency interest rate swaps amounting to $246,350,000
(2013: $246,350,000), which are not designated as hedging instruments.
The swaps are being used to economically hedge the foreign currency exposure of the US$500 million bond liability
and convert the fixed USD bond interest rate of 4.8% (2013: 4.8%) per annum to floating SGD interest rate at 6-month
SOR plus margins. The effective SGD interest rates range from 2.8% to 3.6% (2013: 2.9% to 3.6%) per annum.
266
31 December 2014
43.
Master netting or similar agreements
The disclosures set out in the tables below include financial assets and financial liabilities that:
•
are offset in the Group’s and the Company’s balance sheets; or
•
are subject to an enforceable master netting arrangement, irrespective of whether they are offset in the balance
sheets.
Financial instruments such as trade receivables and trade payables are not disclosed in the tables below unless they are
offset in the balance sheets.
The derivative transactions that the Group and the Company enter into, are not subject to master netting arrangements.
These derivative transactions are also not offset into the balance sheets as the Group and its counterparties do not intend
to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
The following table sets out the carrying amounts of recognised financial instruments that are subject to the above
agreements.
Gross amount of
recognised financial
instruments
$’000
Gross amounts
of recognised
financial
instruments
offset in the
balance
sheets
$’000
Net amounts
of financial
instruments
presented in
the balance
sheets
$’000
Related
financial
instruments
that are not
offset
$’000
Net amount
$’000
55
55
–
–
–
122
55
67
–
67
53
1
52
–
52
1
1
–
–
–
The Group
2014
Financial assets
Trade receivables
Trade payables
2013
Financial assets
Trade receivables
Trade payables
The gross amounts of financial assets and financial liabilities and their net amounts as presented in the balance sheets that
are disclosed in the above tables are measured amortised cost.
The amounts in the above tables that are offset in the balance sheets are measured on the same basis.
267
ANNUAL REPORT 2014
31 December 2014
44.
non-controlling interests in subsiDiaries
The following table summarises the information relating to each of the Group’s subsidiaries with material NCI, based on
their respective (consolidated) financial statements prepared in accordance with FRS, modified for fair value adjustments
on acquisition and differences in Group’s accounting policies. The summarised financial information is not adjusted for
percentage ownership held by NCI.
EcoServices,
LLC
$’000
Guizhou
Jonyang
Kinetics
Co., Ltd
$’000
Jiangsu
huatong
Kinetics
Co., Ltd
$’000
20%
50%
40%
24.7%
Revenue
Profit/(loss)
Other
comprehensive
income
Total comprehensive
income
Attributable to NCI:
– Profit/(loss)
– Other
comprehensive
income
– Total
comprehensive
income
269,186
42,267
30,038
3,853
7,950
3,031
Non-current assets
Current assets
Non-current
liabilities
Current liabilities
Net assets
Net assets
attributable
to NCI
61,034
237,244
34,452
24,299
31,384
235,131
105,789
56,907
(15,900)
(91,197)
191,181
–
(5,065)
53,686
(7,838)
(202,452)
56,225
(41,299)
(62,009)
59,388
38,236
26,789
22,490
14,669
61,956
(1,794)
(7,753)
30,289
(19,659)
(431)
(23,364)
2,397
(40,000)
(11,793)
2,495
(15,600)
2,297
(14,018)
(28,622)
17,086
(8,000)
(3,926)
(3,706)
–
Name of NCI
ST Aerospace
Services Co
Pte. Ltd.
$’000
Other
individually
immaterial
subsidiaries
$’000
Intra-group
elimination
$’000
Total
$’000
3,547
(546)
5,038
(18)
546
(564)
5,584
2014
NCI percentage
Cash flows from
operating
activities
Cash flows from
investing activities
Cash flows
from financing
activities *
Net increase/
(decrease) in
cash and cash
equivalents
* including dividends
to NCI
129,717
(15,029)
(2,517)
2,221
39,750
6,074
(14,134)
(8,061)
8,453
1,923
(6,012)
(2,327)
(503)
1,108
895
54,227
(9,421)
379
(5,633)
1,360
296
(2,031)
(716)
2,831
27,403
2,820 132,407
268
31 December 2014
44.
non-controlling interests in subsiDiaries (continueD)
Name of NCI
ST Aerospace
Services Co EcoServices,
Pte. Ltd.
LLC
$’000
$’000
STELOP
Pte. Ltd. D
$’000
Guizhou Jiangsu
Other
Jonyang huatong individually
Kinetics Kinetics immaterial Intra-group
Co., Ltd Co., Ltd subsidiaries elimination
$’000
$’000
$’000
$’000
Total
$’000
2013
NCI percentage
20%
50%
49.95%
40%
Revenue
Profit/(loss)
Other
comprehensive
income
Total
comprehensive
income
Attributable to NCI:
– Profit/(loss)
– Other
comprehensive
income
– Total
comprehensive
income
252,737
34,332
28,467
3,248
35,482
3,028
185,786
3,790
(4,325)
1,464
–
6,017
2,960
30,007
4,712
3,028
9,807
(3,544)
6,866
1,621
1,512
1,516
(1,606)
732
–
2,146
6,001
2,353
1,512
3,662
Non-current assets
Current assets
Non-current
liabilities
Current liabilities
Net assets
Net assets
attributable
to NCI
63,945
235,670
37,626
25,482
1,514
57,423
32,222
261,547
(21,364)
(87,299)
190,952
–
(7,631)
55,477
38,190
27,683
8,669
31,782
14,187
35,422
8,791
(3,913)
35,244
630
(8,766)
(32,684)
(30,000)
Cash flows from
operating
activities
Cash flows from
investing
activities
Cash flows from
financing
activities *
Net increase/
(decrease) in
cash and cash
equivalents
* including
dividends
to NCI
D
(865)
24.7%
61,148
(6,504)
524
(1,082)
1,522
284
(718) 10,713
(96)
2,725
1,806
(814) 13,438
19,943
3,219 143,673
71,403
81,399
(7,969)
(5,294) (48,804)
(33,612) (209,020) (46,562)
17,356
79,455
57,436
(290)
(755)
4,371
32,259
(4)
(9,031)
28,576
(3,344)
8,366
(4,207)
25,458
33,577
(6,000)
–
–
(3,638)
–
Due to the implementation of the FRS 110 Consolidated Financial Statements, the Group has reclassified its investment in STELOP Pte. Ltd. (“STELOP”)
from a subsidiary to a joint venture with effect from 1 January 2014. The net assets of STELOP includes cash and cash equivalents of $35,896,000.
269
ANNUAL REPORT 2014
31 December 2014
45.
CAPITAL MANAGEMENT
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy
financial metrics in order to support its business and maximise shareholder value. Capital consists of total shareholders’
funds and gross debts.
The Group manages its capital structure and makes adjustment to it, in the light of changes in economic and financial market
conditions. The Group may adjust the dividend payout to shareholders, buy back or issue new shares to optimise capital
structure within the Group. No major changes were made in the objectives, policies or processes during the years ended
31 December 2014 and 31 December 2013.
The Group is currently in a net cash position. The Group will continue to be guided by prudent financial policies of which
gearing is an important aspect. Neither the Company nor any of its subsidiaries is subject to externally imposed capital
requirements other than those imposed by local regulatories.
2014
$’000
Gross debt
Bank loans
Bonds
Capitalised lease obligations
Other loans
Shareholders’ funds
Share capital
Treasury shares
Other reserves
Retained earnings
Gross debt/equity ratio
Funds under management
Gross debt (excluding bank overdrafts)
Net cash position
Group
2013
$’000
340,942
658,424
18,673
589
1,018,628
721,498
631,283
19,471
933
1,373,185
889,426
(6,529)
24,266
1,225,040
2,132,203
132,407
2,264,610
852,611
–
71,672
1,191,958
2,116,241
143,673
2,259,914
0.4
1,462,612
241,778
1,704,390
(1,018,628)
685,762
0.6
1,920,924
299,386
2,220,310
(1,373,185)
847,125
270
SGX LiStinG ManuaL RequiReMentS
31 December 2014
INTERESTED PERSON TRANSACTIONS
Interested person transactions carried out during the financial year pursuant to the Shareholders’ Mandate obtained under
Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX”) by the Group are as follows:
Aggregate value of all transactions
excluding transactions conducted
under a Shareholders’ Mandate
pursuant to Rule 920 of the SGx
Listing Manual
2014
2013
$’000
$’000
Aggregate value of all
transactions conducted
under a Shareholders’
Mandate pursuant to Rule 920
of the SGx Listing Manual
2014
2013
$’000
$’000
Transactions for the Sale of Goods and Services
CapitaLand Limited and its Associates
SembCorp Industries Ltd and its Associates
SembCorp Marine Ltd and its Associates
SATS Ltd. and its Associates
Singapore Telecommunications Limited and its
Associates
SMRT Corporation Ltd and its Associates
StarHub Ltd and its Associates
Temasek Holdings (Private) Limited and its
Associates
–
–
–
–
–
–
–
–
215
190
13,236
–
173
–
6,399
900
–
–
–
–
–
–
130
120,535
2,296
722
750
–
–
–
–
–
4,490
141,092
10,208
19,152
–
–
–
–
2,599
11,977
2,552
–
–
–
–
–
2,775
–
1,389
283
–
–
–
–
23,036
40,387
2,927
7,151
–
–
181,479
26,303
Transactions for the Purchase of Goods and
Services
SATS Ltd. and its Associates
Singapore Airlines Limited and its Associates
Singapore Telecommunications Limited and its
Associates
SMRT Corporation Ltd and its Associates
Temasek Holdings (Private) Limited and its
Associates
Total Interested Person Transactions
271
ANNUAL REPORT 2014
S EC TO R A L F I N A N C I A L R E V I E W – A E R O S PAC E
31 December 2014
INCOME STATEMENT
2014
$’000
Revenue
Cost of sales
Gross profit
2013
$’000
2,071,464
(1,664,645)
406,819
2,088,105
(1,659,131)
428,974
(10,892)
(113,731)
(20,725)
261,471
(3,072)
(116,936)
(17,138)
291,828
Other income
Other expenses
Other income, net
7,059
(5,035)
2,024
9,884
(2,738)
7,146
Finance income
Finance costs
Finance costs, net
11,894
(24,670)
(12,776)
14,528
(18,645)
(4,117)
32,280
282,999
24,585
319,442
Taxation
Profit for the year
(53,892)
229,107
(53,589)
265,853
220,144
8,963
229,107
259,214
6,639
265,853
Attributable to:
Shareholder of the Company
272
31 December 2014
BALANCE ShEET
2014
$’000
2013
$’000
671,068
322,508
12
126,958
1,534
19,941
1,142,021
679,552
328,017
43
108,546
14,900
17,778
1,148,836
560,001
388,430
35,173
144,118
11,428
359
243,497
1,383,006
666,523
410,695
18,433
110,384
12,371
204
382,022
1,600,632
2,525,027
2,749,468
60,244
500,842
360,864
47,538
105,617
64,518
–
–
330
1,139,953
110,305
520,909
415,443
55,339
87,707
71,812
53,793
204,085
358
1,519,751
243,053
80,881
237,838
180,794
39,689
29,769
17,341
1,000
–
132,976
639,407
249,931
246,188
30,559
60,771
16,951
1,500
318
96,862
703,080
1,779,360
2,222,831
NET ASSETS
745,667
526,637
668,421
77,246
745,667
453,316
73,321
526,637
2,525,027
2,749,468
ASSETS
Non-current assets
Investments
Intangible assets
Deferred tax assets
Current assets
Trade receivables
Amount due from related parties, current
TOTAL ASSETS
Current liabilities
Amount due to related parties, current
Provisions
Progress billing in excess of work-in-progress
Long-term bank loans, current
NET CURRENT ASSETS
Long-term bank loans, non-current
Other loans, non-current
Amount due to related parties, non-current
TOTAL LIABILITIES
TOTAL EqUITY AND LIABILITIES
273
ANNUAL REPORT 2014
31 December 2014
STATEMENT OF CASh FLOWS
2014
$’000
2013
$’000
247,726
318,689
Proceeds from sale and maturity of investments
Dividends from associates
Investment in associates
Acquisition of subsidiaries
Investment in joint ventures
Loans to associates
Acquisition of intangible assets
(49,883)
2,318
–
27,125
2
(65,410)
–
(632)
(622)
(640)
(12,024)
(141,534)
8,833
27
25,771
1
(97,040)
(7,620)
–
(9,385)
–
(62,121)
Capital contribution from non-controlling interests of subsidiary
Capital contribution from holding company
Repayment of bank loans
Repayment of lease obligations, net
Proceeds from bank loans
Proceeds from loans with related corporations
Repayment of loans with related corporations
Payment to non-controlling interests for reduction of share capital
Dividends paid to shareholder
Interest paid
(330,753)
6,772
216,000
(290,014)
(371)
–
290,224
(419,113)
–
(107,299)
(12,525)
(14,427)
(108,786)
15,645
–
(20)
(394)
9,181
8,034
(24,247)
(1,354)
(92,366)
(6,742)
(16,523)
(132,910)
382,022
(5,615)
243,497
68,369
305,124
8,529
382,022
274
31 December 2014
FINANCIAL hIGhLIGhTS
Income Statement
Revenue
Profit
EBITDA
EBIT
PBT
Net Profit
Balance Sheet
Trade receivables, deposits and prepayments
Bank balances and other liquid funds, and
Current liabilities
2014
$’000
2013
$’000
2012
$’000
2011
$’000
2010
$’000
2,071,464
2,088,105
2,025,627
1,926,800
1,874,995
321,637
261,471
282,999
220,144
342,022
291,828
319,442
259,214
323,320
274,306
297,840
253,242
299,886
242,114
278,198
231,794
299,864
233,829
262,219
209,767
671,068
470,953
560,001
579,149
679,552
469,284
666,523
551,883
630,709
298,485
603,391
614,346
836,777
255,096
334,451
498,591
825,248
199,426
374,815
765,529
243,856
382,226
305,219
253,904
323,869
1,139,953
639,407
1,519,751
703,080
1,374,363
601,082
1,082,014
629,349
1,464,573
602,227
368,512
(41,493)
341,402
77,246
152,512
(37,753)
338,557
73,321
152,512
(73,513)
341,709
55,997
152,512
(65,331)
332,843
47,432
100,000
(68,672)
346,649
44,110
46.99
159.16
11.1
29.2
9.1
15.7
102.65
208.56
12.7
48.0
9.7
19.6
100.29
238.35
12.7
52.0
10.5
20.1
115.90
233.73
12.3
48.8
10.8
20.1
104.88
211.04
11.5
48.7
8.7
18.4
Productivity Data
Employment costs
7,314
283,219
30,099
607,228
0.29
7,370
283,325
35,172
648,113
0.31
7,307
277,217
34,657
657,440
0.32
7,303
263,837
31,740
608,257
0.31
7,323
256,042
28,645
591,191
0.31
Economic Value Added
Economic Value Added per employee ($)
162,092
10.1
22,162
217,064
14.4
29,452
189,716
14.8
25,964
180,047
14.2
24,654
163,904
12.7
22,382
Value added
Value added per $ of gross property, plant
and equipment ($)
975,569
133,384
1.61
1,035,479
140,499
1.60
1,032,108
141,249
1.57
959,184
131,341
1.58
935,010
127,681
1.58
0.74
0.47
0.79
0.50
0.83
0.51
0.63
0.50
0.64
0.50
Share capital
Retained earnings
Return on sales (%)
Return on equity (%)
275
ANNUAL REPORT 2014
SECTORAL FINANCIAL REVIEW – ELECTRONICS
31 December 2014
INCOME STATEMENT
2014
$’000
Revenue
Cost of sales
Gross profit
2013
$’000
1,614,079
(1,125,260)
488,819
1,682,278
(1,182,514)
499,764
(82,982)
(153,706)
(77,760)
174,371
(86,827)
(158,134)
(89,257)
165,546
Other income
Other expenses
Other income, net
10,402
(6)
10,396
3,685
(1,641)
2,044
Finance income
Finance costs
Finance (costs)/income, net
4,867
(6,136)
(1,269)
9,546
(5,342)
4,204
470
183,968
(1,466)
170,328
Taxation
Profit for the year
(30,614)
153,354
(30,502)
139,826
152,143
1,211
153,354
137,119
2,707
139,826
Attributable to:
276
31 December 2014
BALANCE ShEET
2014
$’000
2013
$’000
179,704
10,297
3,963
304,545
187
30,023
528,719
170,244
729
632
282,861
–
31,159
485,625
381,322
427,564
104,178
57,776
16,976
7
–
277,528
1,265,351
280,051
385,754
24,053
58,737
19,818
6
1,415
478,062
1,247,896
1,794,070
1,733,521
169,046
387,775
26,934
78,382
375,486
48,805
–
1,086,428
173,581
337,406
21,210
65,440
431,917
51,445
6
1,081,005
178,923
166,891
182,717
42,534
4,825
8,565
271,895
510,536
161,379
38,561
5,009
2,583
250,235
457,767
1,596,964
1,538,772
NET ASSETS
197,106
194,749
191,847
5,259
197,106
182,754
11,995
194,749
1,794,070
1,733,521
ASSETS
Non-current assets
Investments
Intangible assets
Long-term receivable, non-current
Deferred tax assets
Current assets
Trade receivables
Loan receivables, current
Finance lease receivable, current
TOTAL ASSETS
Current liabilities
Provisions
NET CURRENT ASSETS
Deferred income
TOTAL LIABILITIES
277
ANNUAL REPORT 2014
31 December 2014
2014
$’000
2013
$’000
88,193
266,548
(99,367)
65
–
–
–
1,297
(42,574)
–
(18,854)
(3,970)
565
(35,896)
(69,032)
173
1,200
12,842
100
23
(80,088)
(304)
(2,978)
–
–
–
Repayment of a related party loan
Loans to related parties
Proceeds from a related party loan
Repayment of lease obligations
Repayment of loans by related parties
Proceed of a loan from a joint venture
Repayment of a joint venture loan
Interest paid
Deposits discharged
(188,171)
(50,140)
(173,000)
89,009
(6)
93,000
–
(824)
(143,249)
–
(4,005)
1,044
(120,836)
(24,803)
(5,187)
14,664
(29)
7,010
836
–
(109,300)
(660)
(3,512)
145
(199,345)
476,383
(145)
276,893
76,680
396,312
3,391
476,383
Proceed from sale of an associate
Proceeds from sale of a quoted investment
Proceed from sale of an unquoted investment
Dividends from an associate and a joint venture
Additional investment in an associate
Acquisition of other intangible assets
Investment in unquoted investments
Acquisition of controlling interests in a subsidiary, net of cash acquired
278
31 December 2014
Income Statement
Revenue
Profit
EBITDA
EBIT
PBT
Net Profit
Balance Sheet
Property, plant & equipment, and investment
property
Trade receivables, deposits and prepayments
Bank balances and other liquid funds, and shortterm investments
Current liabilities
2014
$’000
2013
$’000
2012
$’000
2011
$’000
2010
$’000
1,614,079
1,682,278
1,618,717
1,516,975
1,428,467
212,733
174,371
183,968
152,143
194,652
165,546
170,328
137,119
185,659
158,207
152,332
119,771
169,536
145,587
136,853
108,802
152,948
130,322
127,563
100,708
179,704
348,855
381,322
606,661
170,244
315,530
280,051
489,634
104,672
329,671
306,697
421,520
79,393
360,524
393,085
406,138
60,862
380,970
365,162
376,186
277,528
478,062
398,136
371,411
250,458
1,086,428
510,536
1,081,005
457,767
1,035,080
372,975
990,176
475,975
856,156
455,829
52,522
(5,135)
144,460
5,259
52,522
(20,609)
150,841
11,995
52,522
(32,821)
123,022
9,918
52,522
(24,361)
103,751
12,488
52,522
(35,834)
88,949
16,016
144.84
187.64
9.5
47.1
8.5
22.2
130.53
185.40
8.3
43.7
8.1
23.3
114.02
145.31
7.6
43.7
7.8
24.8
103.58
137.47
7.3
41.4
6.9
23.9
95.87
115.81
7.2
42.5
7.2
21.1
Productivity Data
Employment costs
5,933
272,051
25,644
536,807
0.33
5,678
296,280
24,149
527,360
0.31
5,485
295,117
21,836
493,720
0.31
5,274
287,633
20,630
457,155
0.30
4,987
286,438
20,194
418,477
0.29
Economic Value Added Spread (%)
118,650
16.6
19,998
106,127
18.1
18,691
101,777
19.5
18,556
88,689
18.0
16,816
80,916
15.4
16,225
Value added
Value added per $ of gross property, plant and
equipment ($)
764,967
128,934
1.43
737,285
129,849
1.40
691,904
126,145
1.40
633,677
120,151
1.39
587,679
117,842
1.40
2.12
0.47
2.23
0.44
2.69
0.43
2.84
0.42
3.06
0.41
Share capital
Retained earnings
Return on sales (%)
279
ANNUAL REPORT 2014
SECTORAL FINANCIAL REVIEW – LAND SYSTEMS
31 December 2014
INCOME STATEMENT
2014
$’000
Revenue
Cost of sales
Gross profit
2013
$’000
1,405,132
(1,140,622)
264,510
1,485,219
(1,188,779)
296,440
(69,100)
(106,692)
(49,991)
38,727
(70,289)
(100,077)
(35,602)
90,472
Other income
Other expenses
Other income, net
14,525
(1,570)
12,955
23,840
(4,353)
19,487
Finance income
Finance costs
Finance costs, net
3,124
(11,655)
(8,531)
4,836
(11,175)
(6,339)
13,050
56,201
8,173
111,793
(11,001)
45,200
(19,196)
92,597
50,323
(5,123)
45,200
91,239
1,358
92,597
Taxation
Profit for the year
Attributable to:
280
31 December 2014
BALANCE ShEET
2014
$’000
2013
$’000
372,275
112,750
378
205,335
–
13
973
18,028
5,650
1,196
716,598
330,063
110,972
349
213,942
–
58
2,679
8,898
5,420
9,208
681,589
673,177
359,991
27,726
134,505
61
6,872
609
284,226
1,487,167
673,322
265,431
21,062
189,853
63
15,032
4,252
251,846
1,420,861
2,203,765
2,102,450
247,876
468,553
119,872
1,848
60,199
30,907
153
148
29,820
–
5,687
965,063
244,284
413,309
100,138
3,941
46,857
39,687
123
138
46,639
231
2,821
898,168
522,104
522,693
ASSETS
Non-current assets
Investments
Intangible assets
Investment property
Finance lease receivables, non-current
Deferred tax assets
Current assets
Trade receivables
Finance lease receivables, current
Derivative financial instruments, current
TOTAL ASSETS
Current liabilities
Provisions
Long-term loans, current
Short-term loan from non-controlling interests
Derivative financial instruments, current
NET CURRENT ASSETS
281
ANNUAL REPORT 2014
31 December 2014
balance sheet (continueD)
2014
$’000
2013
$’000
478,074
2,455
356,810
107
441
6,605
50,588
63,041
8,142
966,263
446,187
14,377
295,275
195
564
6,336
55,032
58,316
4,690
880,972
1,931,326
1,779,140
NET ASSETS
272,439
323,310
223,060
49,379
272,439
265,486
57,824
323,310
2,203,765
2,102,450
Long-term loans, non-current
Long-term bank loan
Deferred income
TOTAL LIABILITIES
282
31 December 2014
2014
$’000
2013
$’000
122,107
145,577
Cash flows used in investing activities
Proceeds from sale of an investment property
Proceeds from disposal of a subsidiary
Proceeds from disposal of quoted equity investment
Proceeds from disposal of a joint venture
Short-term loan to joint venture
Repayment of short-term loan by joint ventures
Dividends from associates
Purchase of intangible assets
Acquisition of a subsidiary and business, net of cash acquired
Acquisition of a non-controlling interests in subsidiary
(43,601)
1,834
22,000
2
1
3,280
–
3,887
9,418
(83,829)
–
–
(194)
(66,522)
841
–
–
82
–
(3,136)
–
7,440
(59,892)
(1,980)
(9,877)
–
Cash flows used in financing activities
Interest paid
Repayment of short-term related party loans
Proceeds from short-term related party loans
Repayment of short-term immediate holding company loans
Proceeds from long-term immediate holding company loans
Repayment of long-term immediate holding company loans
Repayment of long-term related party loans
Repayment of long-term loans
Repayment of short-term loans
Proceeds from long-term bank loan
Proceeds from short-term bank loans
Repayment of short-term bank loans
Capital contribution from non-controlling interests
Deposits discharged
(47,095)
(10,190)
(7,865)
20,000
(47,000)
50,000
–
–
–
(369)
–
28,847
(45,709)
(31,800)
(5,666)
2,596
61
(73,587)
(10,587)
(3,669)
8,152
(21,272)
–
(6,851)
(2,976)
(335)
–
2,616
10,895
(4,391)
(48,800)
(5,365)
7,116
1,880
Net increase in cash and cash equivalents
31,411
244,309
1,030
276,750
5,468
237,969
872
244,309
283
ANNUAL REPORT 2014
31 December 2014
2014
$’000
2013
$’000
2012
$’000
2011
$’000
2010
$’000
1,405,132
1,485,219
1,525,341
1,506,465
1,518,406
76,780
38,727
56,201
50,323
129,555
90,472
111,793
91,239
139,979
98,512
113,268
88,160
136,836
100,250
108,073
83,818
140,750
111,341
113,949
90,255
Balance Sheet
Property, plant and equipment and
investment property
372,275
338,296
673,177
535,791
284,226
330,063
347,621
673,322
499,598
251,846
311,761
324,702
669,198
504,660
247,386
307,314
341,267
541,886
527,333
151,452
288,408
350,563
496,561
484,191
254,066
Current liabilities
965,063
966,263
898,168
880,972
971,044
936,491
979,820
734,291
1,081,625
651,357
Share capital
Retained earnings
194,445
8,655
19,960
49,379
194,445
18,204
52,837
57,824
44,445
(13,842)
67,628
51,941
44,445
(6,478)
67,606
49,568
44,445
(14,916)
66,638
44,640
9.57
51.80
3.2
13.6
2.1
5.2
17.35
61.47
6.2
22.2
4.4
11.6
73.12
124.56
5.9
36.1
4.4
14.1
69.52
128.68
6.0
33.3
4.8
12.2
74.86
116.79
6.4
37.3
5.2
13.5
6,738
208,538
7,469
342,860
0.24
6,998
212,235
13,038
340,675
0.23
6,968
218,907
12,652
339,518
0.22
6,872
219,218
12,197
318,485
0.21
6,574
230,971
13,729
313,406
0.21
61,162
6.4
8,740
72,381
8.8
10,388
55,121
6.3
8,021
63,686
7.8
9,688
483,896
71,816
1.41
517,685
73,976
1.52
532,146
76,370
1.57
487,530
70,944
1.53
466,122
70,904
1.49
0.67
0.34
0.80
0.35
0.88
0.35
0.83
0.32
0.83
0.31
Income Statement
Revenue
Profit
EBITDA
EBIT
PBT
Net Profit
Return on sales (%)
Productivity Data
Employment costs
Value added
equipment ($)
4,963
(0.4)
737
284
SECTORAL FINANCIAL REVIEW – MARINE
31 December 2014
INCOME STATEMENT
2014
$’000
Revenue
Cost of sales
Gross profit
Other income
Other expenses
Other income, net
Finance income
Finance costs
Finance income, net
2013
$’000
1,341,951
(1,187,968)
153,983
1,238,847
(1,050,705)
188,142
(8,906)
(33,150)
(11,092)
100,835
(6,699)
(35,302)
(11,662)
134,479
12,115
(37)
12,078
6,047
(43)
6,004
3,931
–
3,931
37,038
(33,284)
3,754
Share of results of joint ventures, net of tax
5,936
122,780
2,073
146,310
Taxation
Profit for the year
(14,695)
108,085
(36,325)
109,985
108,086
(1)
108,085
109,955
30
109,985
Attributable to:
285
ANNUAL REPORT 2014
31 December 2014
BALANCE ShEET
2014
$’000
2013
$’000
334,075
8,159
94
1,001
19,021
12,806
605
375,761
324,043
3,223
355
194
16,072
4,806
27,899
376,592
110,445
117,296
123,776
5,252
157,683
15
224,027
738,494
112,178
119,858
21,403
28,071
149,612
44
333,058
764,224
1,114,255
1,140,816
289,949
256,322
2,900
51,491
241,197
14,456
856,315
305,632
265,242
3,462
42,001
210,479
19,823
846,639
(117,821)
(82,415)
650
29,670
39,606
2,799
26,343
99,068
–
34,636
26,080
16,621
26,343
103,680
TOTAL LIABILITIES
955,383
950,319
NET ASSETS
158,872
190,497
158,834
38
158,872
190,459
38
190,497
1,114,255
1,140,816
ASSETS
Non-current assets
Joint ventures
Intangible assets
Deferred tax assets
Current assets
Trade receivables
TOTAL ASSETS
Current liabilities
Provisions
NET CURRENT LIABILITIES
Deferred income
286
31 December 2014
2014
$’000
2013
$’000
112,462
227,625
Proceeds from disposal of property, plant and equipment
Proceeds from insurance settlement
Proceeds from disposal of investments
Dividends from joint ventures
(15,064)
39
5,220
–
(21,323)
1,000
(38,082)
43
–
253
(39,790)
1,412
Repayment of related corporation loans
Repayment of short-term bank loan
Proceeds from related corporation loans
Proceeds from short-term bank loan
Loans to related corporation
Repayment of loan by a related corporation
Dividends paid to shareholders
Interest paid
(209,460)
–
–
–
–
(115,494)
19,814
(113,780)
–
(79,598)
(14,653)
(6,194)
14,624
6,373
–
–
(79,684)
(64)
(112,062)
333,058
3,031
224,027
109,945
221,190
1,923
333,058
287
ANNUAL REPORT 2014
31 December 2014
2014
$’000
2013
$’000
2012
$’000
2011
$’000
2010
$’000
1,341,951
1,238,847
1,011,092
877,204
1,044,850
127,933
100,835
122,780
108,086
152,993
134,479
146,310
109,955
136,565
122,226
127,582
95,013
123,152
110,522
121,617
91,465
119,946
109,389
117,666
89,057
334,075
28,776
110,445
416,932
324,043
70,050
112,178
301,487
151,322
38,058
280,740
196,915
118,578
35,214
236,426
233,480
112,313
36,702
154,194
263,015
224,027
333,058
221,442
139,889
167,239
Current liabilities
856,315
99,068
846,639
103,680
624,457
139,636
574,776
73,563
597,995
43,022
Share capital
Retained earnings
50,856
2,494
105,484
38
50,856
28,425
111,178
38
55.27
81.24
8.1
58.4
9.7
42.9
Income Statement
Revenue
Profit
EBITDA
EBIT
PBT
Net Profit
Balance Sheet
Bank balances and other liquid funds and
Return on sales (%)
Productivity Data
Employment costs
Value added
equipment ($)
50,856
(6,920)
80,907
(459)
50,856
2,369
62,137
(114)
50,856
(1,146)
42,745
(9)
56.22
97.41
8.9
50.7
9.6
63.3
48.58
63.60
9.4
62.8
10.7
74.1
46.77
58.93
10.4
64.5
12.0
50.2
45.54
47.27
8.5
75.0
12.1
44.7
1,884
712,288
57,370
180,390
0.13
1,871
662,131
58,768
197,545
0.16
1,834
551,304
51,806
186,990
0.18
1,850
474,164
49,441
174,248
0.20
1,856
562,958
47,983
179,228
0.17
93,593
37.3
49,678
114,848
58.2
61,383
91,402
68.8
49,838
81,042
44.3
43,806
71,095
39.0
38,305
336,164
178,431
1.86
366,414
195,839
1.85
332,510
181,303
1.78
308,606
166,814
1.77
307,242
165,540
1.71
0.49
0.25
0.56
0.30
0.77
0.33
0.79
0.35
0.83
0.29
288
S h a r e h o l d i n g S tat i S t i c S
As at 2 March 2015
ShARE CAPITAL
Paid-Up Capital (including treasury shares)
Number of issued ordinary shares (excluding treasury shares)
Number of ordinary shares held in treasury
Percentage of such holding against the total number of issued
ordinary shares (excluding ordinary shares held in treasury)
Class of Shares
:
:
:
:
$894,282,405.723
3,108,513,160
13,481,700
0.4337%
:
Voting Rights
:
Ordinary Shares
One Special Share held by the Minister for Finance
One vote per share (excluding shares held in treasury)
ShAREhOLDING hELD IN hANDS OF PUBLIC
Based on the information available to the Company as at 2 March 2015, 38.8552% of the issued ordinary shares of the Company
is held by the public and therefore, Rule 723 of the Listing Manual issued by SGX-ST is complied with.
ANALYSIS OF ShAREhOLDINGS
Range of Shareholdings
1
--99
100
--1,000
1,001
--10,000
10,001
--1,000,000
1,000,001 AND ABOVE
Substantial Shareholders
Aberdeen Asset Management PLC
Aberdeen Asset Management Asia Limited
No. of
Shareholders
%
736
4,518
23,234
6,181
36
34,705
2.12
13.02
66.95
17.81
0.10
100.00
Direct
Interest
1,554,764,574
–
–
No. of
Shares (excluding
treasury shares)
%
12,191
3,895,416
106,483,342
238,333,273
2,759,788,938
3,108,513,160
No. of Shares
Deemed
Interest
40,066,552
299,319,771 (2)
283,470,271 (3)
(1)
0.00
0.12
3.43
7.67
88.78
100.00
Total
Interest
%*
1,594,831,126
299,319,771
283,470,271
51.305
9.62903
9.11915
Notes:
(1)
Temasek Holdings (Private) Limited is deemed to have an interest in the following shares held by:Name of Company
No. of Shares
DBS Group Holdings Ltd
Keppel Corporation Limited
ST Asset Management Ltd.
Vestal Investments Pte. Ltd.
9,181,552
2,302,000
82,000
28,501,000
(2)
Includes interests held by Aberdeen Asset Management PLC and its subsidiaries, including Aberdeen Asset Management Asia Limited.
(3)
Details of their deemed interests are not available.
*
The percentage of issued ordinary shares is calculated based on the number of issued ordinary shares of the Company (excluding ordinary shares held
in treasury) as at 2 March 2015.
289
ANNUAL REPORT 2014
S h a r e h o l d i n g S tat i S t i c S
As at 2 March 2015
major shareholDers list – toP 20
No.
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
DBS Nominees (Private) Limited
Citibank Nominees Singapore Pte Ltd
DBSN Services Pte. Ltd.
BNP Paribas Securities Services
United Overseas Bank Nominees (Private) Limited
HSBC (Singapore) Nominees Pte Ltd
Raffles Nominees (Pte.) Limited
Vestal Investments Pte. Ltd.
Lee Pineapple Company (Pte) Limited
DB Nominees (Singapore) Pte Ltd
OCBC Securities Private Limited
OCBC Nominees Singapore Private Limited
DBS Vickers Securities (Singapore) Pte Ltd
Bank Of Singapore Nominees Pte. Ltd.
Lee Seng Tee
Tan Pheng Hock
Phillip Securities Pte Ltd
Mrs Lee Li Ming Nee Ong
KI Investments (HK) Limited
*
No. of Shares
1,554,764,574
363,097,510
231,441,815
177,375,912
154,106,602
66,527,495
64,187,291
29,470,461
28,501,000
15,000,000
8,183,240
6,388,852
6,365,298
5,874,322
5,846,028
5,750,000
4,322,603
4,036,236
3,500,000
2,302,000
2,737,041,239
%*
50.02
11.68
7.45
5.71
4.96
2.14
2.06
0.95
0.92
0.48
0.26
0.21
0.20
0.19
0.19
0.18
0.14
0.13
0.11
0.07
88.05
The percentage of issued ordinary shares is calculated based on the number of issued ordinary shares of the Company (excluding ordinary shares held
in treasury) as at 2 March 2015.
ANNUAL REPORT 2014
C O N TA C T I N F O R M AT I O N
(ST Engineering)
ST Engineering Hub
1 Ang Mo Kio Electronics Park Road
#07-01
Singapore 567710
Tel: (65) 6722 1818
Fax: (65) 6720 2293
Email: comms@stengg.com
Website: www.stengg.com
SINGAPORE TECHNOLOGIES AEROSPACE LTD
(ST Aerospace)
540 Airport Road Paya Lebar
Singapore 539938
Tel: (65) 6287 1111
Fax: (65) 6280 8213
Email: comms.aero@stengg.com
Website: www.staero.aero
SINGAPORE TECHNOLOGIES ELECTRONICS
LIMITED
(ST Electronics)
24 Ang Mo Kio Street 65
Singapore 569061
Tel: (65) 6481 8888
Fax: (65) 6482 1079
Email: comms.elect@stengg.com
Website: www.stee.stengg.com
SINGAPORE TECHNOLOGIES KINETICS LTD
(ST Kinetics)
249 Jalan Boon Lay
Singapore 619523
Tel: (65) 6265 1066
Fax: (65) 6261 6932
Email: comms.kinetics@stengg.com
SINGAPORE TECHNOLOGIES DYNAMICS PTE LTD
(ST Dynamics)
249 Jalan Boon Lay
Singapore 619523
Tel : (65) 6660 7060
Fax : (65) 6261 6566
Email: contact@stengg.com
ST SYNTHESIS PTE LTD
12 Tai Seng Street #06-02
Luxasia Building
Singapore 534118
Tel: (65) 6861 6566
Fax: (65) 6861 6676
Email: puahls@stengg,com
VISION TECHNOLOGIES SYSTEMS, INC.
(VT Systems)
99 Canal Center Plaza
Suite 220 Alexandria
Virginia 22314
United States of America
Tel: (1) 703 739 2610
Fax: (1) 703 739 2611
Email: info@vt-systems.com
SINGAPORE TECHNOLOGIES ENGINEERING
(EUROPE) LTD
Marquis House
68 Jermyn Street
London SW1Y 6NY
United Kingdom
Tel: (44) 20 7930 8989
Fax: (44) 20 7930 7828
Email: augustsyn@stengg.com
SINGAPORE TECHNOLOGIES MARINE LTD
(ST Marine)
16 Benoi Road
Singapore 629889
Tel : (65) 6861 2244
Fax : (65) 6861 3028
Email : comms.marine@stengg.com
This annual report has been certified by the Forest Stewardship Council as an example of
environmentally responsible forestry print production. From the forest, to the paper mill and printer,
each step of this annual report’s production is certified according to FSC standards.
ST Engineering Hub
1 Ang Mo Kio Electronics Park Road, #07-01
Singapore 567710
Tel : (65) 6722 1818
Fax : (65) 6720 2293
(Regn. No.: 199706274H)
www.stengg.com

View - ST Engineering

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