Singapore Tech Eng Ltd

Good morning. Welcome to SC Engineering's first half 2025 results briefing. We will begin with a presentation by our Group CFO, Cedric Foo. Our Group President and CEO, Vincent Chong, will then give his remarks. After that, we will end today's session with a Q&A session for the analysts. Without further ado, may I invite Cedric to give his presentation, please?

Yeah, thank you. Welcome to SD Engineering's first half 2025 results briefing. A very good morning to everyone here in person, many familiar faces, as well as those joining us via webcast. Slide two. Before I begin, I would like to bring your attention to slide number two, which states amongst others that the group's actual performance outcomes and results in the future may differ materially from those expressed in forward-looking statements. Slide three. This is our agenda for today. First, group highlights, group business discussions for each of the three segments, contract wins and all the books, debt management, portfolio management, dividends and outlook. Slide number four, group highlights. I am pleased to report a strong set of first-half 2025 results. The Group achieved 7% year-on-year growth in revenue to $5.9 billion, 15% year-on-year growth in EBIT, breaking the digit 6 to $602 million. 20% year-on-year growth in profit before tax to $500 million, again breaking the digit five, and 20% year-on-year growth in net profit to $403 million, breaking the four-figure. The good performance was due to the successful execution of our order book, better margin mix, and concerted efforts by everyone here in managing our cost. Slide six. From left to right, this slide shows the revenue breakdown by segment, by product type, and by location of customers. On the left, the pie chart shows revenue by segment. In first half 25, CA contributed 40%, that's commercial aerospace. DPS, 45%, defense and public security. And USS, 16%, urban solutions and SECOM. In the center of the slide, the bar chart shows revenue by product type. Commercial revenue increased from $3.9 billion in first half 24 to $4.1 billion in first half 25. Defense revenue increased from $1.6 billion in first half 24 to $1.8 billion in first half 25. Very healthy growth. DPS segment includes commercial domains, such as public security and safety, critical information infrastructure and others. It also includes both local and international businesses. Hence, DPS segment revenue of $2.6 billion in the left of the pie chart is higher than defence revenue, which is by product type, of $1.8 billion in the centre bar chart. Defence revenue, as shown in the centre, is defined as defence products, solutions and services rendered for national defence. They include work performed to maintain, protect, train and support these products and solutions. On the right-hand side, the table shows revenue breakdown by customer location. Asia contributed 54%, the US 20%, Europe 20% and others 6%. Slide 7. Group revenue grew at 7% year-on-year to $5.9 billion. This is contributed by all segments. As several of our entities have US dollars as their functional currency, accounting-wise, their revenue is translated into Singapore dollars upon group consolidation. The average US dollar to Singapore dollar rate for the first half of 2025 is 2.5% weaker than the first half of 2024. Hence, after adjusting for this FX translation impact, revenue growth year on year would have been 8% on a constant currency basis. Slide 8. EBIT grew a strong 15% year-on-year to $602 million due to higher revenue, translating to better EBIT, as well as better margin makes of our solutions and products delivered, and cost savings. This is representative of our continuing operations, notwithstanding, as some of you have noted, that the higher other income in first half 2025 versus first half 2024 this other income line was higher by $38 million. This one-off other income were recorded in both commercial aero and DPS segments and were offset by one-off loss from the impairment of the Mobile Alabama commercial aerospace site and some other smaller areas. The effects of one-offs, both plus and minus, offset each other, resulting in a neutral effect on the group's and segment's bottom lines. So in other words, the group EBIT and segment's EBIT are representative of continuing operations. Slide 9. Net profit improved very strongly by 20% year-on-year to $403 million. This was contributed by stronger EBIT and lower finance costs. Slide 10. On tariffs, including the recent intention to impose US tariffs on chips, our preliminary assessment is that the impact is immaterial at the group level. However, we will continue to monitor this closely as the tariff situation is evolving. We have classified the tariff impact into three broad categories. First order impact refers to tariff payable by our businesses for purchases from primary suppliers overseas. For example, our businesses in the US buying from, say, China or the EU. Such first-order impacts are largely confined to commercial aerospace segment, whilst impacts on USS and TPS segments are much smaller. Against our initial assessment in May 2025, there was limited first-order impact. For engine MRO, about $34 million of revenue was deferred over two and a half months when tariff exists, in second quarter 2025. This is less than the $40 million per month revenue deferral that we previously estimated. And all this relates to the engine MRO shop, which is in China, Xiamen, importing engine parts from the US into China. So those were originally subject to tariff. The tariff has since been reduced. Second order impact refers to tariffs paid by our secondary suppliers, which is basically suppliers of our suppliers. We have no plans to absorb such tariffs unless they can be passed through to the customers. In any case, versus other competitors, we are not competitively disadvantaged. Thirdly, other global impact includes possible recession and inflation risks triggered by tariffs. Hence, we are monitoring this situation closely. For now, our truck business, Hackney, reported that orders are affected as customers adopted a wait-and-see posture. Nevertheless, our diverse business portfolio, including defence and public security, is more resilient to economic downturn, as defence is not directly correlated to economic cycles. The terrorist situation is evolving and unfolding. Hence, we will continue to monitor this space closely. We are also actively adopting key mitigating actions as appropriate, such as renegotiating customer agreements, diversifying supplier network, activating alternative service delivery sites, and stockpiling inventory where applicable. Next, I'll move on to business discussions. Slide 11. Slide 12. CA segment revenue grew 5% year-on-year to $2.3 billion. That's the chart on your left. Excluding aircraft sales, which is shaded in dot chat gray, of $7 million in first half 24, and US dollar, SING dollar, FX translation impact, which I explained earlier, of $35 million, revenue growth year-on-year would have been 7%. This growth is contributed due to stronger sales from engine MRO and nacelles. It is offset by lower PTF revenue due to a lack of PEX aircraft fixed stock, as we have discussed previously, arising from extended use of existing PEX aircraft. EBIT for CA improved 18% year-on-year to $223 million. This is a strong increase due to higher revenue, better margin mix, and cost savings. Slide 13, DPS. Its revenue grew 12% to $2.6 billion. This growth was contributed by all sub-segments of DPS. EBIT for GPS increased strongly as well by 13%, one tree, to $367 million. This is contributed by higher revenue and cost savings. Slide 14, moving on to USS. Revenue grew to $921 million. This was largely flat year on year at 0.3%. Adjusting for FX translation impact that we discussed, revenue growth year-on-year would have been plus 2%. This growth was contributed by URS and partially offset by SECCOM, which continues to be challenging, as I will elaborate in my next slide. EBIT for USS increased from $9 million to $12 million, contributed by better margin-next and cost savings in URS. Slide 15, SECCOM. We continue to drive the performance of this particular line of business while positioning for the future in an evolving industry landscape. Vertically integrated non-geo satellite operators such as Starlink continue to disrupt the market. Intuition, which is the platform name that we gave, Its general availability release is on track for end September 25 to deliver features such as standards, cloud, multi-orbit and virtualization. At the recent Singapore Asia Tech X Conference, iDirect, which is our SECCOM entity in the US, demonstrated various capabilities such as satellite switching between Jio and Shio. Shio is the helical kind of orbit around the poles. And AI and analytics for network monitoring and dynamic bandwidth management. So these were features sought by customers, and we are actively working to deliver them. So intuition has been gaining traction, but notwithstanding, customer transition to newer ground equipment platforms have taken slightly longer than we expected. We will continue to invest in intuition capabilities, watch this space, and all hands on deck to turn this around. Let's move on to the group's work audiobook. Slide 17. Our contract wins totaled $9.1 billion for first half 2025, with $4.7 billion for the second quarter. This was contributed again by all segments, DPS $4.2 billion, CA $2.8 billion, and USS $2.2 billion. Our order book of $31.2 billion, as at 30 June 2025, remains robust. $5 billion of this order book is expected to be delivered in the remaining half of the year. Again, excluding the FX impact, which also would impact order book, because some of our orders are in US dollars, order delivery in second half would have been $5.2 billion instead of the $5 billion you see on the right-hand side. Underlying revenue delivery continues to be robust. As the year is not yet over, there is also in-quarter revenue on top of the $5 billion or $5.2 billion to be delivered, as well as growth prospects that are actively being pursued right now. So I hasten to draw a conclusion about second-half revenue just from these figures alone. Slide 18 covers new contract wins for second quarter 2025. In second quarter 2025, the group secured 4.7 billion of new contracts, with commercial aerospace recording 1.5 billion, DPS 1.5 billion, and USS 1.7 billion, a very strong 1.7 billion. All segments secured very healthy level of new contracts. Moving on, let's review the group's debt management. The bar chart on the right shows the debt level at the end of each year, and as of 30th June 25. As of 31st December 22, our total borrowings were $6.5 billion, the first bar chart, and that's debt applied for the acquisition of Transcorp. Our borrowings have since progressively reduced from $6.5 billion as at end 2022, all the way down to $6.1 billion, $5.8 billion, to $5.5 billion as at 30 June 2025. The cumulative debt reduction between December 2022 and June 2025 is 16%. We have also announced the signing of SPA, Sears and Purchase Agreements, for the divestment of Liboy and SPTEL. These announcements were in June and July this year. And these M&As obviously are subject to regulatory approvals and customary closing conditions. But once these conditions are satisfied, and assuming that we apply the NAP Sears proceeds, our debt level will drop further by $450 million. EBITDA for the first half of 2025 increased 11% to $871 million. The line chart on the right, the black line chart, shows the gross debt to EBITDA ratio. This is a popular ratio used by rating agencies to assess the strength of the operations, which is represented by EBITDA, versus the amount of debt that a company carries. This ratio has been reducing year on year since 2022 and was 3.2x as at end June 2025. It's all the way down from 5.2 in December 2022. This achievement was a result of our strong operating cash flows over the years and also our EBITDA growth. We have also been actively recycling capital and managing networking capital. Now, draw your attention to the left again. The fixed and floating interest rate ratio as of 30 June 2025 continued to remain balanced at 71% fixed, 29% floating. We expect the weighted average borrowing cost for the full year of 2025 to be in the mid-3%. Our credit rating remains very strong, a AAA stable by Moody's and AA plus stable by S&P. Next, portfolio management. Slide 22. Our portfolio will be further streamlined with the divestment of Liboy and SPTEL. This is part of the group's ongoing portfolio rationalisation effort. to ensure that capital and resources are efficiently allocated, and also to drive growth and value, so as focus on our core businesses. The SPAs for Liboy and SPTEL were signed in June and July. These are subject to regulatory approvals and customary closing conditions. These transactions are expected to close in the fourth quarter of 2025. When approved and upon closing of these transactions, the group will generate net proceeds of approximately S$450 million. And assuming these proceeds are channeled to repaying borrowings, the net annual interest savings will be S$15 million. Nevertheless, if good opportunities presents, the proceeds or some parts of it can be reinvested in businesses to support further growth. The net investment gain is expected to be about S$180 million. Of course, these are one time. The EV EBITDA multiples for the transactions are 9.3 times for Liboy and 21.4 times for SPTEL. On a pro forma full year 2024 basis, the annual revenue and EBIT for Liboy, which is wholly owned, is $326 million and $37 million respectively. the revenue of SPTEL, which is a joint venture, is not consolidated into the group. So there's no revenue loss as such post the sale of SPTEL. Our share of SPTEL's performance is a net loss of 2 million for 2024. So we avoid that loss. So these data are produced for the benefit of analysts creating their models. Next, dividends. We are pleased to announce that a second quarter interim tax exempt cash dividend of $0.04 per ordinary share has been approved by the Board for the quarter ended 30 June 2025. The record date is 25 August 2025, and shareholders can expect payment on 5 September 2025. So on top of the first quarter 2025 interim dividend of also $0.04, the total dividends announced and paid so far for first half 2025 will be $0.08. Next outlook, slide 26. This is the Group President and CEO's message, and let me just read it out for you. We delivered a robust set of results in first half 25. In executing our growth strategy, we continue to be agile in navigating the evolving global landscape. Our recent divestments are in line with our portfolio rationalisation strategy to exit non-core businesses and to recycle capital. We remain steadfast in strengthening our core businesses. Our strong order book continues to provide revenue visibility for the Group. So this marks the end of my presentation, and we now invite Vincent and the other EXCO members to I think Desine and Vincent will give some remarks before Q&A. Thank you.

Thank you, Cedric. May I now invite our panellists up on stage, please? The panellists this morning are Vincent Chong, Group President and CEO, Cedric Foo, Group CFO, Mervyn Tan, Group Chief Operating Officer, Technology and Innovation, and President, Defence and Public Security, Tan Lee Chew, Group Chief Commercial Officer, Market Development, and President, Smart City and Digital Solutions. and Jeffrey Lam, Group Chief Operating Officer, Operations Excellence and President of Commercial Aerospace. I will now hand the floor over to Vincent to deliver his remarks. Vincent, please.

Good morning everyone here at ST Engineering Hub and those who join us online virtually, welcome to our first half 2025 financial results briefing. Before that, before I start, I'd like to just introduce to you Mervyn Tan, who just joined us recently as a Group Chief Operating Officer for Technology and Innovation and President of Defence and Public Security, succeeding Ravinder Singh, who retired recently. Mervyn is also a member of our Group Executive Committee. Mervyn joined us from Vertex Holdings, where he was Managing Director of Investments, focusing on startups in deep tech domains. But before that, he spent over three decades with the Ministry of Defence and Singapore Armed Forces, holding various senior leadership roles, as described in our official announcement. So Mervyn brings with him her deep domain expertise, especially in the defence technology domains. So now let's turn to the group's first half 2025 performance. You have heard the details from Cedric, so I'll just keep my remarks to the key takeaways to allow more time for our Q&A session. I'm sure you have many questions. As the headline numbers show... we have delivered a robust set of results compared to the same period last year. Group revenue was up 7%, EBIT rose 15%, just to recap, while PBT and net profit each grew 20%. Group revenue would have grown 8%, if not for translational impact of a weaker US dollar versus Singapore dollar in the first half versus same period last year, while the corresponding impact on net profit was negligible. Revenue growth was contributed largely by commercial aerospace and defence and public security segments, as you heard from Cedric. Group EBIT and net profit outpaced revenue growth, driven largely by margin improvements across all three segments, as well as cost savings. As we mentioned before, we have a very disciplined process to reduce costs while we pursue growth. Underlying profits continue to perform well. As the year progresses, our focus remains on delivering strong, sustainable earnings over time, in line with our five-year targets. I know earlier on, Cedric talked a little bit about... the other income, this half, which was about $38 million higher than the same period last year. And these were recorded. Basically, these are one off incomes that were recorded in both commercial aerospace and DPS segments. And They were offset by corresponding one-off losses from, for example, the impairment of Mobile, Alabama, commercial aerospace sites where we said we have rationalised the capacity away, and some other more minor items. one-off effects offset each other resulting in a neutral effect on the group and segment bottom lines for both DPS and commercial aerospace hence the group EBIT and the segment EBIT are representative of our continuing operations basically so nothing more than that so the fundamentals remain very strong these are all one-off effects In his presentation, Cedric highlighted the continuing transformation journey in Satcom. The team continues to work on turning the business around, including preparing for the general release of our next generation platform, Intuition, at the end of September, while remaining focused on addressing the near-term challenges. On international defence business, which later on I'll invite Mervyn to share some information and insights on, we are deepening market engagement, especially with our land and naval platforms, which are gaining traction as credible solutions to evolving operational needs, as reflected by the growing interest from prospective partners and customers. We will hear from Mervyn later on in the Q&A session. On new contracts, we secured a robust $9.1 billion of new order wins in the first half, comprising $4.7 billion in the second quarter, amongst the highest quarter, and $4.4 billion in the first quarter. But as I said, New order wins will ebb and flow through the quarters, so I don't think we need to pay too much attention to any quarter. Suffice to say that our new order win momentum in the past years will give you confidence that we are on the right track. Continues to win. new contract. And that points to our strong underlying demand from our customers and the industries that we operate in and our good business fundamentals. Now, the ebb and flow of new orders is largely because of timing of opportunities, timing of projects. But we certainly will keep you posted in our quarterly briefs. Now, these new order wins have contributed to a stronger order book, which has now again broken a new record at $31.2 billion at the end of June. If not for Forex, the number would have been at $31.6 billion. We know that we have weaker US dollars. We have about $5 billion expected to be delivered from our order book in the remaining months of the year. And that provides us with very healthy revenue visibility going forward. As Cedric mentioned, if not for Forex effects, the number would have been $5.2 billion to be delivered for the rest of the year instead of $5.0 billion. In addition to the order book delivery, as you all know, which accounts for the bulk of our revenue, a portion also comes from short cycle work, or for example, product sales and ship repair work, completed within the three-month window, while not captured in headline order book, these revenue streams continue to contribute meaningfully to our overall performance. So the $5 billion are what we expect to be delivered from our order book, but we also have in-quarter or intra-quarter revenues that contribute meaningfully to us. I want to maybe at this time, I'm sure there are some questions in your mind before I switch to the next topic on our divestments. A question on what's the momentum of our revenue in the second half, in the years ahead? I would just say, and this is a message that is quite consistent, we expect group underlying results momentum to continue in alignment with our five-year plan or five-year targets. As we disclosed at the investor dig, the strong first half results give us a strong foundation upon which we'll build on for the rest of the year. However, the year is not yet over. We will update in our quarterly results briefing. In the meantime, I will share with you a few maybe highlights for each of our three segments. Commercial aerospace strong performance came mainly from engine, MRO and nacelle manufacturing, partly offset by passenger to freighter conversion. It's too early to tell for the rest of the year, but we will continue to grow faster than industry. that we are quite confident of in DPS we had very strong half on half or year on year performance first half 25 versus first half of 24 we grew 12% now sequential quarter depends on project timing you know in first quarter when we scored recorded 18% revenue uplift we already told you that it depends on project timing so let's not look at quarter by quarter first half is a very strong 12% revenue I think which is representative of the strong fundamentals and the order book is very strong, and the international defence arena is showing really good progress. For Urban Solutions and SECCOM, our revenue is second-half weighted. We're encouraged by the sequential quarter-on-quarter growth And EBIT and so forth, I think it's too early to tell for the rest of the year, but at least in the first half, we recorded higher EBIT than the same period last year. So maybe just some insights before I switch on to the next topic on the two business units which we have divested. Those two divestments or these two divestments are in line with our portfolio rationalization strategy. In each case, we exited the businesses where they no longer align with our growth strategy and where greater value could be realized under different ownership. So it's a case where the businesses are worth more to others than to us, to the buyers than to us, and that these businesses in the base case are no longer strategic to the group. This disciplined approach that we take for portfolio review and streamlining allows us to reallocate capital to areas with stronger return potential and long-term value creation. I'm sure you have questions. Are there any more? in the pipeline. You know, you ask me all the time. But I'll say that the portfolio review and streamlining are ongoing efforts as even before these two divestments, in the last many years, we have shut down or divested 16 different businesses as we mentioned in our previous presentations. We can only share and we'll only share information on divestments when they actually happen at the appropriate juncture because But the nature of such discussions and reviews are always very sensitive when we need to protect confidential information. So overall, we had a very strong first half, which gave us a good start to build on for the rest of the year, as I mentioned just now. As we head into the second half, our focus remains unchanged. Execute well, stay agile as we navigate the evolving global landscape. and keep our pursuit of sustainable quality long-term growth. Finally, our Board of Directors has approved a second-quarter interim dividend of $0.04 a share, which shareholders will receive on 5 September 2025, sometime next month. I also anticipate a question whether portfolio rationalization gains will be part of the consideration in our dividend. So let me just take time to address that before you have those doubts. As you know, our proposed dividend payout for 2025, when we announced it, I think sometime during our investor day, our proposed dividend payment for 2025 is $0.18, subject to shareholder approval. We have no plans to change it. Okay? At this point, our investor day financial targets exclude all gain and loss from M&A and divestment. So therefore, it follows logically that dividend treatment will be similar, subject to board and shareholder approval. Of course. So maybe just have that for your information for now. So on that note, we will open the floor to questions if you have any. Thank you. Yes, Rachel, maybe Rachel and then Rahul.

Hi, this is Rachel from UBS. Thank you for inviting and congratulations on a good set of results. I have three questions. The first one is on your intra-quarter revenue and net profit growth. It was actually quite sizeable for this particular quarter. Should this be something that is indicative of future quarters as well? Could you elaborate on the nature of these revenues? Shall I ask my next question or we go back? Yeah, go ahead. My second question is on margins. You attributed better CA and USS EBIT to margin mix. Could you elaborate on this in terms of product skew and what led to better margins? And my final question is on the defense business. Welcome, Mervyn. You mentioned that you had signed strategic partnerships with multiple companies, one of which was Babcock. Not referring to any company in particular, but could you elaborate on how these partnerships are manifesting and the types of value that ST Engineering brings? Thank you.

Okay, thank you, Rachel. There are three questions. The first one is intra-quarter revenue and profit growth strong. Are they indicative for future quarters? And then you have a second one, which is margin, better CA margins. I'll let Jeff answer that. And then DPS, Mervyn is all ready to share with you the opportunities that we have in the pipeline. So intra-quarter, as I mentioned just now, the momentum continues. I think the strong underlying fundamentals are continued. We are certainly on track to achieve our goals. five year plan targets, at least, you know, based on what we can see, the first half results are very strong. And that, I think, gives us, you know, more confidence that we are on the right track. We won't go into quarter by quarter because as I said, there are always ebb and flows in terms of margin. But if you look at the overall trend, our revenue went up 7%. If not for the effects of Forex, we would have been 8%, which is quite in line with our five year plan CAGR or you know that we articulated those of you would did your math would already be familiar and then we also expected now profit to outpace revenue growth and we are accomplishing both uh you know the revenue growth uh momentum as well as you know bottom line or net profit growing faster than revenue growth. So we are certainly on the right track. And maybe we can discuss more if you have more detailed questions about each of the segments. Let's start with perhaps Jeff to answer your question on the factors contributing to better margins for CLA.

So actually, Vincent did allude to the contribution, the revenue contribution for CAA. The growth came from the engine MRO business and the nacelle business. So in addition, of course, we have been focused on addressing operational challenges across the network, plus our continuing focus on productivity. So in the end, it's a combination of product mix focused on addressing operational challenges and continuous improvement projects that enable us to achieve the outcome.

For the other two segments, Rachel, just to recap, I also mentioned that our defence and public security segment had a very strong first half. For revenue, 12% is really very robust and healthy and very strong. First quarter is at 18%. We already said that it was really driven by project timing. We don't expect that kind of momentum, but the same kind of level of revenue increase. But the underlying business is very healthy and very strong. So we expect, of course, to continue our growth journey for DPS. And I said early on that for USS, it will be second half weighted. And we'll share more as the year unfolds at the quarterly briefing. Maybe we invite Mervin to talk about DPS, strategic partnerships for international defense business.

Yeah, he's on. That's the problem with doing this for the first time. You don't know where the buttons are. But thank you very much, Rachel, for your question. I first want to say that my remarks are set in the context of a very strong first half for DPS, a 12% growth year on year in terms of revenue and a very strong value tied to new wins of $4.2 billion. And in this context of that very strong achievement, I would say that our international defence business is a meaningful contribution to this strong achievement. And the reason why we are able to achieve well both locally as well in terms of our overseas pursuits is because of the strong partnerships that we have established with partners across the world. And you mentioned BEPCorp, but BEPCorp is just one of the many partners that we have established that teaming as well as MOU relationship with, because we believe that our competitive advantage is built on these partnerships that we have established. These local partners understand the customer better, they understand the market that we have ambitions to go into, and they are typically ready to work with us because they recognize the strength, the fundamentals in our technology. The competitive advantage that we have, and that's a remark that is set on my 30 years of experience in the defense ecosystem, is that unlike other competitors, we are quite ready to localize our capabilities and to manufacture locally. So beyond the capabilities that we bring to these customers, I think many of the governments and the militaries that sort of work with us are also quite glad that we are able to contribute to their local economy because of our willingness to localize our capabilities there. We are also ready to share our technologies with them. And you saw that when we did the establishment with the KPE in Kazakhstan, where we are manufacturing our amphibious 8x8 Tarex vehicles. And we derive our revenue through a licensing agreement from these partnerships that we have established. Just to give you a sense of what's to come in the near future, we have teeming relationships with partners in the pursuit of several platform potential opportunities in Europe as well as the Middle East. And in platforms, I'm referring to our 8x8 Terex platform, the new ones, as well as our Bronco platform. So we think that the momentum in terms of munition sales, and we're talking about 40mm and 155mm that we saw contributed to our first half revenue, we are confident that that will continue into the second half because there's simply a demand for such products in the market, especially in the Middle East as well as in Europe, as you can understand the reason why. We are also looking at potentially growing our shipbuilding business. Outside Singapore, especially in the Middle East, you'll be aware that we are building a fleet of ships based on our fearless class OPV hull structure for a Middle Eastern customer. And we are looking to do more with another Middle Eastern customer and something that we are fairly optimistic that we will be able to achieve in the near term. In the area of international business, we are also looking at the new satellite bus built for a Middle Eastern customer. On the MRO front, we are looking at potential new military aircraft MRO services built on what we have established previously, especially in the Middle Eastern North African market. On the whole, I would say that we are quite optimistic that our good performance in the first half of 2025 will follow through into the second half and hopefully into the medium term. We are fairly confident that what we saw as an increase in defence investment by partners, especially in Europe, is something that we assess to be structural in nature, and it is unlikely to wane whether the wars or peace prevail at war stop in the medium term. Even last month, during the NATO summit, we saw the commitment of the Allies to increase defence their defense spending as a percentage of the GDP to 5%. So that's something that in my 30 years, I've never seen before. And I assess that to be a structural change, something that is unlikely to win, whether some of these conflicts continue or not. But to be clear, clearly, we hope that peace will prevail. So I will end my remarks there regarding the international defence business opportunities. Thank you for your question.

Well, thank you, Mervyn. I hope you have gleaned more insights from what Mervyn said. It's quite clear that we have quite a few irons in the fire. We will hopefully provide more updates as they become actual projects, but certainly a lot of work has been put in And we're actively participating in competitions and opportunities. So I think we're in a good place for international defense business. Rachel, thank you. Can we go to Rahul and then after that, Nasuki, thank you.

Thank you. Rahul Vaidya from HSBC. Three questions, please. One for each division. Starting from USS, could you explain where we are in terms of intuition? Have we started taking pre-orders? What is the customer feedback? And what are we expecting in terms of trajectory related to intuition for the next two, three, five years based on how the technologies are moving globally at such a fast pace? Second, on commercial aerospace, I think we just started a new hangar in China. Could you talk about the utilization levels? How do we think about that hangar? Finally, on defense, thanks for all the feedback that you just shared. Based on your experience, if you put yourself in the shoes of Singapore Defense, How would they react to that, given engineering is going a lot more international, doing partnerships, sharing the technology? How do they think about all this? Thank you.

Okay, well, they are very supportive. I'll let Mervyn, because Mervyn has worked in Mindef. In fact, it's very good for the ecosystem if we have continued success, when we have continued success in the international defense, because it's a very virtuous cycle. Getting scale gives you more capabilities to invest more in R&D to make your product even better. better scale, more cost competitiveness. So I think it's all around support in various domains, but Mervyn can give her insight. So I'm very appreciative of all the support that we've been given by our principals in MINDEF SCF. And we'll talk about hanger capacity, new capacity in China. and utilization rate before we do it the reverse, before we talk about intuition, the amount of pre-orders and the trajectory expected in the next two, three years. Maybe we can continue with Mervyn because we just fresh off the discussion on international defense.

Thank you very much, Rahul, for your question. It wasn't that long ago when I was wearing the shoes of the Singapore Defence. Thank you for your question. I would say that, as Vincent highlighted, the defence establishment in Singapore is very supportive of our efforts to bring our products overseas. I would describe this as a state of enlightened self-interest, right? Because as Vincent highlighted, number one, there's the opportunity to share the overhead costs if they scale. So Singapore is a small country, right? And the amount of defence products that It's bought locally, it's small. But if we are able to extend our products overseas and to bring them out of Singapore shores, then you can imagine that we achieve that scale and then the non-recurring engineering and fixed costs can be shared. And therefore, the local customers will actually enjoy a reduction in terms of the cost per unit. So that's quite apparent. Number two is that many of these products that we sell overseas may see operational action. Clearly, in Singapore, we prefer not to have to see our products used in anger. But overseas, there's the opportunity for our products to be used in operations. And many of these capabilities, if used overseas, actually bring in useful lessons where we can bring back to the Singapore local defence ecosystem to improve the products to serve our local needs. And third, many people speak about supply chain resilience today. And therefore, if our products are sold overseas, actually there's more opportunities for us. For example, I spoke earlier about how we may be producing some of this equipment and products overseas in order to benefit the customers there. what we call localising our production house. And if you have more than just Singapore as a source of some of these defence products, actually, you increase the supply chain resilience of our defence in Singapore. So on those three counts, number one, a reduction in fixed costs, the reduction in unit cost because the fixed cost is shared. Number two, the gathering of operational experience to improve the capabilities that we bring to our defence ecosystem in Singapore. And number three, the enhancement in that supply chain resilience, which has come to the fore in more recent times as a critical consideration when we do defence acquisition in Singapore. I think on those three fronts, you know, there's this enlightened self-interest. And therefore, I would say that our local defence ecosystem in Singapore is very supportive of us bringing our capabilities and selling them overseas. I hope that answers your question.

It's really complementary to each other. So we're very glad that we have been really putting our efforts addressing both the Singapore defence as well as international defence. If you notice or recall in our investor day presentation material, we actually spelled it out this way, Singapore and international and how they are actually quite complementary with each other. All right. Thank you, Rahul, for your question. And then maybe the last one you will get on USS Intuition. We'll let Lee Chiu address the question.

Thank you, Rahul, for the question. So let me just say that for intuition, first of all, Cedric also reiterated earlier that we are on track to deliver, more importantly, the features that the customers are demanding. And we look at those features in the area of standards, in the area of multi-orbit, virtualization, and cloud. So as we develop the general release product, we have also been engaged with many strategic customers on workshops to define and refine some of these features. So, suffice to say, you know, in answer to your question with regards to how much traction that is getting, we are getting a lot of feedback to build into the product features itself and we're responding to many RFPs globally. The conversion or rather the decision-making process is slower than we expect because there's a lot of, I think, strategizing in terms of how they would address their customers of the future. You would recall that we also introduced Intuition Unbound, which is a consumption-based model for satellite operators in the first quarter of this year. So our customers are not just looking at the feature set, but they're also looking at maybe transforming their business model as they approach the demands of the customer. We have, through the course of this year, made announcements and press releases on customers who have adopted what we call future-ready or journey-enabled remotes and modems. Some of these examples that we related earlier were for Arabsat, for example, for Satria. for Barsat Energy. And this shows the confidence of our existing customers as well as new customers in the journey that we are taking them to this next generation platform. For this quarter, we also announced that we have a partnership and a contract in Saudi Arabia. And that is encouraging for us because now we open up even more opportunities as we look at the middle east region so intuition again we talk about why it is important as a next generation product we said that you know customers and satellite operators are no longer just looking at throughput of ground segment equipment. They are going to have to pivot to a scenario whereby bandwidth allocation is dynamic and ground segment equipment can operate in multi-orbit scenarios. And that's what we are targeting our platform to deliver. And we have always had a very strong equity in the market in terms of aviation as well as in the mobility space. So maritime and aviation. So we continue to build on that strength. We continue to build on the longstanding relationships that we have with the customer and help them evolve through this transformation and transition. I can't say how that's going to spin over the next few years, but I would say that the features that we are seeing in Intuition is setting ourselves up ready for geoconstellations that will be launched in 2026 and 2027. So if you look at the ITU you know, kind of timeline and plans, you will see that many constellations from more than 50 operators are planned in the out years. And we hope that, you know, by focusing on the quality product and the flexibility of what operators can do with intuition, that is going to take them in a ready state to the next phase of constellation launches.

We did just open a new hangar in China on Monday, and that added additional capacity. Overall, across the network, our hangar utilization is well over 80%.

I think we mentioned that we have various cost savings in various departments, different segments. What kind of cost savings are we talking about? That's my first question. And also, is there any cost savings that are significant that you will see would improve your EBIT margin as you close off Mobile, Alabama in CA? That's my second one. And my third one is, I'm not sure, because Vincent, you mentioned that USS will be second half weighted, but earlier on when you presented, you also said that it's too early to tell for second half, but just want to actually get a sense whether we, what are the things that you are wary of? Are we still looking at second half weighted for USS? That's the next question. And finally, Welcome aboard. You mentioned that you are looking at MRO for military aircraft in Middle East and North Africa. And just wanted to check that. Have we gone there before and whether this is something new that we're looking at and just how does it actually, I know that you're actually starting to actually do more work in Middle East, but is this something that is a big step up?

Okay. Can you repeat the last question?

MRO for military aircraft in new markets.

That's a new domain that we're looking at. We'll let Mervyn answer that. Let me just clarify. A few things you asked, cost savings. We will tell you that it's more than $100 million of cost savings, both from a procurement as well as continuous improvement for first half only. Remember in our five-year plan, we said that we expected to save a billion dollars over the next five years. So on average, 200. So in first half, we have achieved more than 100 when you combine the procurement and continued productivity savings. So we're well on track. And I think that there's more potential for even more savings. That's why if you look at our unit operating expense, if you use OPEX... Divide by revenue. In the first half, we're at 10.3%, which is the all-time low. Even lower than last year. So I think we are in a good place. Now, you have three other questions on this Mobile, Alabama question I'll let Jeff talk about. And then I can talk a little bit about USS because you asked me for my specific comment, and then Lichu can complement that. And then followed by, at the end, Mervyn sharing more insights on the MRO in Middle East. So maybe let me just finish the USS one first before I go to... I said it will be second half weighted for revenue. Yes, it will be second half weighted. It's by how much? I think that one, the year is not over. So therefore, we will give an update at the next quarterly review. nothing to be too excited about. So it's just a matter of fact. I say the same for commercial aerospace. We say the fundamentals are strong, the momentum is strong, the year is not over. We expect to be doing better than industry, as I told you, growth rate. So there's nothing exceptional in my comments on USS as far as the second half weightedness is concerned. Okay, any comments, Hadish?

Maybe I'll just add that in the first half, Transcor as well as our urban solutions business have performed well. We also talk about the challenges in SECCOM. So the near-term challenges will continue to address as we go into the second half. And, you know, Vincent put it well. In totality, as we look at the USS segment, it continues to be second-half weighted.

Well, I want to go back to the part on cost savings before I move on to Jeff. Remember, we said in the next five years, expect a billion dollars of savings from continuous improvement, productivity, basically, and procurement so that we can offset the effects of inflation, which is what we are effectively doing right now. We are certainly well on track. Jeff, thanks.

Okay, so specific to Mobile, Alabama, we did a capacity rationalization. It's currently in progress to be completed before year end. And obviously, then we will size capacity to the workload, right? Yes, when we exit a site, we would save on rental, we would reduce the workforce we need because we actually don't have work at the site anymore. So all these will be actually cost savings. At the same time, obviously, we also wouldn't have the workload, right? So essentially, rationalization would size our capacity to the workload, right? So to match revenues and costs. Thank you.

All right. So thanks, Jeff. And we will go to Mervyn.

Okay. Thank you for your question. Actually, doing MRO for Middle East, North African countries is not new to us. We have several contracts in the past. I wouldn't want to name the countries because we are subjected to a non-disclosure agreement for some of these countries. But I will want to broaden the opportunities to say that beyond just aircraft, we are also looking at MRO opportunities in ship maintenance as well as in vehicle maintenance. And in fact, even as we speak, we are pursuing some opportunities to do more land vehicle MRO in the Middle East. We also have ship MROs that we are doing in Singapore for ships that are passing by, for both commercial as well as military ships. And in fact, we serve not just the RSN ships, but military ships from the US Navy, auxiliary ships where they pass by our region, do perform some of their MRO and ship repair activities here as well. Our interest in MRO stems from our strengths in supporting the equipment of the SAF. I think we have built a strong foundation in terms of our technical competencies, that's one. We are competent in terms of the workshop design, something that is desired by some of these customers overseas. And number three, I think most importantly, I think we have a very systematic space provisioning system that appeals to customers who want to make sure that beyond just acquiring some of these platforms, they also want to make sure that the serviceability rates of these platforms are kept high. So on account of these three competencies, technical competency, workshop design, as well as our space provisioning process, I think we have a competitive advantage where we try to offer MRO support to some of these countries overseas. So we are targeting primarily the Middle East countries right now, where we feel that the opportunities are there for such a capability to be brought in-country. Thank you. Can we just have a bit of a closing question?

So at a strategic level, when we looked at the group strategy, at one time we were sitting on net cash balance sheet, we said we have to grow. Because not growing is like a treadmill, right? Your competitor grows, so you're regressing. And growth come with many benefits. When you gear up your balance sheet, actually your cost of debt is lower than the cost of equity, you get better with average cost of capital. But more importantly, growth from a procurement standpoint gives you a lot of leverage with the suppliers. And consolidating those procurement at a group level also helps us create the leverage to have more strategic discussion with suppliers. So instead of using XX number of suppliers, if we swing it down to five suppliers for a particular work, you can look at each other's strengths and weaknesses. For example, they may prefer to do hub and spoke shipment pattern, and that is cheaper for them and cheaper for us, so you can create win-win solutions, yeah. And as your volume grow, those win-win solutions increases. And as we increase, as we said in the investor day, we're going to increase our revenue from 11 to $17 billion or more. There's a 50% increase in revenue. And of course, cost of goods will increase, but not by the same proportion, just by the virtue of scale. Also with scale, we can invest in software work processes, where when you don't have the scale, the IT system looks too expensive, right? We can also set up offshore competency centres like we have done. So instead of banging our heads at one time when the employment situation is very tight in Singapore, now we can have talented people at lower cost points and very highly productive, very energetic and very motivated, just to add. Lastly, AI. AI offers a tremendous opportunity for us to improve our workplace processes, agentic AI, look at our tasks differently, how we code. And therefore, I'm very excited about cost and productivity opportunities going ahead.

That's a very good summary, Cedric. Thank you. Maybe we can move to the online, and then we come back to the room. We do have Luis from Citibank. You have some questions, Luis?

Vincent, we will move to Citi. Luis, the line is open for you. Please ask your question.

Hi, good afternoon. Thanks for hosting the call. Most of my questions have been asked. Just two questions from me. Just on DPS, just wondering if you can give us a flavor for which DPS sub-segments are the higher margin ones. For instance, is digital systems and cybersecurity, which is growing the fastest? a high margin business. So if that continues to grow, margins should expand. Second question is housekeeping one. As you mentioned, the other income is actually normalized because all the one-offs cancel each other. So is it fair to say that for second half, that other income level is probably the same we'll see in the second half because it's just normal?

There's nothing extraordinary that we can foresee in the second half, at least based on what we know at this time. Yes, so first half, they do neutralize or they did neutralize each other. If there's anything second half, we'll let you know. But for now, we don't anticipate. We can't see any that we are able to discuss. There's nothing in the horizon. Anything that is material, we don't have any. For margins beyond... We don't talk about margin at the sub-segment level. Suffice to say, if you look at the DPS margin, it has been very steady and very consistent over the years. We expect the margin to be still robust based on the track record. Louis, so I hope I didn't go into details of margin, but we don't really talk about margins at the sub-segment level.

Okay, no worries. Thanks, Vincent.

Great. Louis, thank you. We now open the line to Roy from UOB. Roy, question.

Thanks, Magine. Thank you for the opportunity to ask these questions. Actually, most of the questions might also be answered. I just want to drill down a little bit more to clarify the other income of 47 million. I understand you mentioned that at the second level, the one-off gains and losses more or less offset each other. But because we only see the other income as the one-off gains, so might clarify in accounting, where are those one-off losses, for example, like the impairment loss of Alabama booked? Is it booked under other operating expenses?

Can you continue with your questions? Thanks. Roy, do you have any other question or is this your only one? This is my only one. The rest are already answered. Thank you. Okay, good. Very good. So I'll let Cedric take on that question.

Yeah, I think largely correct. The one-off pluses are in the other income and the delta between first half and 25 and 24 is about 38 million. So there are some of the pluses are in DPS. And some of the minuses are carried in like provisions for several small and multiple contracts in cost of goods sales and so forth. So they are not really line by line within the other income, but we stack it up and we found that both at the group and at the segment level, they washed out.

the ones that you're more familiar with, you're more familiar with, like the mobile rationalization, but then you stack them all together, there's really nothing that we can, you know, so it's a wash for us. Okay. And at the segment level, the both segment, DPS and commercial arrow space, these are the two where the one-off items were residing in. Both at the segment level and at the group level, they are awash. So there's nothing much that we think that will be interesting as far as you are concerned. Okay, so we can come back to the room and then after that, we can go back online.

Vincent, we just got one more shinkawa tonight.

I have two questions.

The first one is, there was a mention of net cash inflows from the divestment. There will be net cost savings on the interest expense. You said some of this could be reinvested. What are the specific reinvestment priorities from these proceeds? Second is, you know, there's a tariff impact on the NG Navarro, the deferment of revenue of $34 million, lower than what was expected. How should we look at this deferment over the longer term? And what is SC Engineering's plan to mitigate such exposure on tariff-related disruptions, specifically with this business?

The second question is the deferral of $34 million of revenue. Are you referring to that?

Yeah, referring to that. So I'm trying to understand how should we look at this over the longer term? And what is ST Engineering's plan to mitigate this kind of exposure in the future?

Well, so as Cedric presented in the last quarter as well, We have quite a few mitigating steps that we have put in place. I can let Cedric recap later on on the tariff, what steps we are taking. So actually, the revenue deferral is not revenue cancelled. It's just sometimes when you have such uncertainties, your customer may not want to wait for a while. We were expecting $40 million a month of revenue deferral for commercial aerospace, if you recall, at the last quarterly results or market update. As it turned out, we only saw a deferral of about $34 million over two and a half months. So it's not in one month, but over two and a half months compared to $40 million a month that we originally thought that it could get to. So actually, the deferral is a very small fraction of what we thought could have been the worst case for commercial aerospace. But it's also a lot of mitigating steps that we have taken, as we mentioned, but Cedric can recap them. The aerospace team has also done a lot of work to work with customers to make sure that the revenues continue. So we can also talk a little bit about that, Jeff, if you would like. So that's nothing that we... But we're not immune to tariff. Just that the impact is not material. We'll continue to navigate. We'll continue to take the mitigating steps, including stocking up with spares, going out to alternative... suppliers, if we have, pass through additional costs to our customers. Those are the steps that we have been taking or reallocate work to locations within our network that are not subject to tariff. So far, we have been quite effective in our endeavour. So we'll continue to navigate that very carefully. I think I've already covered all the mitigating steps.

Let me just add a little bit on tariff and give some color. Obviously, if we are exporting steel or aluminum or copper or pharmaceutical in the US, we will be hit. We're not in those business. In fact, out of Singapore, we're exporting very little into US at all. Most of our US businesses produces revenues within the US and they source within the US. So that's the context. The only area where we get caught somehow so far is our engine shop in Xiamen, which is in China, and engine parts come from the US, and the Chinese want to impose tariff on engine parts in the beginning. And as we said, the state in China will collect the tariffs, but the Chinese airlines who are rendering their engines for short visits within China will have to pay the tariffs, so it's actually left-right pocket within the Chinese system. But eventually what happened is the Chinese has exempted those parts from tariffs. But in the meanwhile, while this tariff exists, we refuse to accept it, the tariffs, and therefore we deferred some of the revenue and those deferral were less than we had expected. So that's the background of the tariff situation. For non-Chinese airlines, you can go and visit the Xiamen facility because you are not really an import because you are going in and then you're flying out. So all we need is to just post a bank guarantee and then so long as the aircraft go in and come out or the engines go in and come out, the guarantee is not drawn. So I think those are much better. For Airframe, Airframe, I think the tariffs are small, and most of the Chinese allies are prepared to adopt them, and some of them have set a certain limit, which was adequate. So you put it in a nutshell, we're not in those business that are very tariff sensitive, and most of our US business are producing revenues and sourcing within the US. So the only one is the Chinese one for commercial aerospace, which I have just described. So in that sense, the first order, second order impacts are not that high. Of course, if tariff results in stagflation, well, all bets are off. Everybody's affected.

So we're not immune. So Jeff, any more insights on that?

I think conceptually, when we do get tariff hit, our objective is to work with customers so that they carry the tariffs. There's no way that we are going to pay for the tariffs for the customer, right? so then the question is are the customers willing to pay right and then with regards to competition if if we are hit by tariffs then it is likely that our competitors are also hit by similar tariffs so in a way it doesn't make us less competitive We are still on a level playing field. Then the challenge is, of course, working with customers in a timely manner to effect that they would pay for the tariffs. And of course, in China, we had a situation where we had to stop work for a while while we worked with the customers and see how the tariff situation worked out. But eventually that was mostly ironed out and then the objective in the coming months is to catch up on the work that was deferred at the time. So overall full year, we are not expecting any significant impact to our top line arising from the tariff activities.

So Shekhar, I hope that answers your question. So we are, you know, the impact, yes, we have, but it's not material. We took many mitigating steps to, you know, reduce the effects. But we are monitoring the evolving situation because every other day there's news coming out. So we just have to keep watch as of now. Well, we don't see the impact as material and we are not competitively disadvantaged. against our competition. And that's a very important point. So we'll keep watch. And Shaka, you have another question on what do we do with the cash that we get back? We have many options. We can pay down debt to reduce interest expense, or we can reinvest in growth projects. So that gives us a lot of flexibility. So, I mean, that's a part of recycling capital. So nothing more to say beyond that. When the opportunities come, we already said, first, any acquisition must fit our strategy, businesses where we have a strategic focus on, and that they must be value-accurative, and it must give us good returns, sufficient returns. So over the business cycle, of course, over the long term. So those fundamentals have not changed. All right. Thank you, Shekel, for your question. Now I have two other questions in the room. Karen and then from JP Morgan will go first. And then after that, Douglas from The Edge. And then after that, we will take a pause and adjourn. Thank you.

Thank you. Vincent, very nice seeing you physically. I flew in from Hong Kong to tennis. Yeah, so may I ask a few questions, actually three in total, if this is okay. First of all, our first order across all the key segments apparently is picking up pace. DPS in particular I think is catching my attention. It's up 61% young year. I do think a large part of that should be driven by international defense segment. May we know what roughly is the percentage, whether there are any key highlights, particularly Mervyn's here. Very nice seeing you. And then Mervyn, can you share with us what are you going to do differently compared to Ravi in terms of the focus for international defense markets? Right, and then I remember Vincent, during the roadshow I was with you in Hong Kong, you mentioned a lot of these international defense projects are short duration. So in terms of order to delivery cycle, can we expect to be a faster pace? as compared to the traditional defense projects which have been working, you know, either in Singapore home markets or outside Singapore. Lastly, but not least, can I ask, you know, Vincent, you've been, I think, with SD Engineering, I think, seven or eight years. We clearly have seen rationalization, like you mentioned, in terms of divestiture, in terms of sharpening focus on a few key segments. Now, I think, can you probably just share with us what you are looking at, you know, as a next step? I think probably most of the growth initiatives are now super clear. I think a true investor like me. Thank you.

Thank you. Thank you, Karen, first of all, for flying in all the way from Hong Kong to see us and attend this meeting. It's very good to see you in person, too. So welcome. And, you know, I was prepared to give you a lot more time After three questions, given that you came here. Okay, I think for international defence, I'll let Mervyn talk about it. Well, usually, depending on what kind of projects they are, the delivery time can take a few years. You know, if you are talking about, say, major naval platforms or major land platforms, it can take several years. But it really depends. If it's ammunition, it's going to be a very short cycle. So I'll let Mervyn share more with you. And of course, you have quite a pointed question to him in terms of his style, what he's going to do differently. I'll let him decide how to answer that. As far as the group strategy is concerned, we have been very clear. if you wind back the clock to 2018 when we did our first investor day we said that we want to strengthen our core businesses and then grow in new growth areas especially in international defense at that time we call it defense export but really it's international defense as well as smart city And in 2021, when we had our second investor day, we actually said the same thing. This time we overlay with sustainability linked businesses. And also we showed you a segment of our business in the digital domain, which we have done very well and we continue to do pretty well. Then in 2025, March this year, we had our third investor day. And the theme is also the same. Why? Because the strategy has yielded results, good results. And we have shown a good track record to our investors. The clarity of our strategy, I think, continues to be high. And we will continue that path. And we also say we will rationalize our portfolio on an ongoing basis, and we have been doing so. We reallocate capital. So suffice to say, those who are not changed. Now, key for us is keep scaling up, achieving our five-year plan. We expect our revenue to be $17 billion, excluding any divestments. We are still on track, notwithstanding the divestments that we have made. But then we also grew the business. We also took out costs. So it's not always about growth, but how do you streamline your operations to capture cost savings? So in bad times, and you know that business goes in cycles, in bad times, in lean times and leaner times, we will be much more resilient. As we have proven ourselves during COVID, Notwithstanding the fact that 40% of our revenues were commercial aerospace related, we were really quite resilient in our underlying results. So those will continue. So you will hear more, but our strategy remains unchanged. And you will see, I think, continued growth over the long term. We want to be a yield-come-growth stock. That's why we came out with a new dividend policy where we say, you know, a third of our incremental profit will be given out as additional or incremental dividend because the dividend payout is important to our shareholders. We appreciate that. But two thirds will be used to grow the business. So we are going to continue that journey. Karen, I hope I answered your third question. Then we'll talk about the defence piece. There are a couple of questions in there. Mervyn, all yours.

Well, thank you very much, Karen. And thank you very much for flying all the way here just to join us today. Really appreciate that. On the question about the cycle and how long it takes. Well, I would say that from my experience, defense projects and contracts are notorious for a few reasons. Number one, they can be very lumpy. meaning that it can be quite large in size, but at the same time, whilst they're large in size, the timing can be unpredictable, because in between such slumpiness, you can't really predict when you come in. And as As mentioned by Vincent, it really depends on the product. Because we have such a wide range of products, from munitions to platforms, and in between you have digital solutions, including AI-enabled analytics to cyber solutions. both hardware as well as software. So it's quite difficult to put a finger to how long that sales cycle is because it's so very, very diverse. And the gestation time for some can be very long. It can take years, like what Vincent mentioned about shipbuilding, from the time when the user rationalizes what they need in terms of requirements to the time that they put up the request for information in the market. to an RFP, to tender, and then tender evaluation can sometimes take months or even years, and eventually getting to contract. And post-contract, the process of delivery is not straightforward. There's also operationalization, there's equipment acceptance, etc. So... It's a difficult question, Karen. And we really can't put a finger to it. It really depends on the product type. And sometimes it can be very political as well. The timing of revenue recognition is also determined by the customer. So to be able to quite accurately predict the translation of new wins into when the revenue can be recognized is a difficult task. And you ask all the defense companies around the world, I don't think they will be able to give you a better answer than mine. So I keep it as that. On my views, after having spent the last two plus months here, I would say that actually my confidence in SD engineering has increased quite significantly after what I've seen. For two reasons. Number one, I think as a technology company, you have to have strong technologies. And I must say that the foundations in terms of our technology competencies is very strong. And I think that is quite key for us to be able to address the needs of our customers, both local as well as overseas. So I think we have strong technologies here built on very strong fundamentals. That's number one. But having strong fundamental technologies does not allow you to be able to get your products to the market unless you have strong networks. And from my observation, I think our networks and our relationships with customers, both local as well as overseas, is very strong. And that speaks to my point earlier about our strategy to leverage on our partners overseas in order to get to the markets where our partners are more familiar with, where they can... So the value add to us in terms of the nuances of how to go to market in some of these places and added to with our technologies that we bring, I think we have a strong winning formula. So in combination, both strong technologies together with a robust network, I think give us a lot of confidence that we'll be able to address the needs of our customers, both local as well as international. On how I would do things differently from my predecessor, I think he has built a very strong foundation here. I think there is good traction with the market. I think customers are very satisfied with the products and the services that we bring to them. So I would say that that strong foundation gives me great confidence and optimism in terms of our ability to do even more. We have been pushing our unique products like our Bronco 8x8 systems on the land systems front. We have been pushing opportunities on shipbuilding. Those are on the products end. But as I mentioned earlier, we go beyond just products. We're also looking at the kind of services that we can provide. post-acquisition by the customer, services in terms of MRO support that I spoke about earlier, and we're even thinking about the aftermarket opportunities because we see that many of the potential customers in Europe and Middle East, they have a large fleet of legacy platforms. And it is quite expensive and time-consuming because they need the capabilities fast. for us to replace them with new platforms. So we have come up with technologies that will allow us to quickly digitalize and electrify some of these platforms. And this comes in the form of our products such as our defense platform electronics. We are even looking at hybrid electric drive in order to support the electrification of these products for new missions that requires more energy. And I think we have some initial traction with some customers in Europe, and we hope to be able to do more on that front. Coupled with that is our plan to sort of localize and to share our technology locally in order to benefit the local communities that are there. So on those three fronts, new and exciting products, after sales support and addressing new markets, especially addressing their legacy platforms that they have, which they find challenging to replace, overnight. I think on those three fronts are where I think there are opportunities that we can sort of exploit in order to grow our business. Of course, that's built on the foundation of our strong technology as well as a very robust network. Thank you for your question.

Karen, I hope we've addressed your question. So we will go to the last question from Douglas, but those who have further questions will be pleased to address them after we have adjourned because we are an hour and a half into the session. Unless you have very pressing ones, then we will maybe take a pause after Douglas and then we'll take the rest as they come. Douglas.

Thanks for taking my question. I'll make it quick. The first is with regards to the securitisation aviation asset management. I think previously it's been mentioned that there's a 2029 target of 3.5 billion AUM. So are things currently on track with that? And then secondly, just some colour on the continued challenges the CETCOM business is facing. Thank you. What's your second question? The challenges that SETCOM continues to face. Okay. Just some colour on that.

Thank you. Okay, I'll have Lee Chew answer the second question. But aviation asset management, Jeff?

Okay. Okay. So we did set out some targets for achieving certain AUM and yes, we are well on track. Today we are at 2.4 billion. So we are certainly well on track to achieving, hopefully exceeding the targets we have set for ourselves. The ongoing work around securitization, working with investment partners in the market is very active. So we have, over the years, done a number of sales and securitization. We did share earlier this year that we would go out with the aviation fund structure, which is currently in progress. And we expect that to enable us to access the investment market in a bigger way and in a more institutional way. And we expect that step to be progressing well through year-end. And of course, we continue to look for opportunities to build our portfolio, even as we plan to transition to the aviation fund structure. Thank you.

So Douglas, thanks for your question on SECCOM. Let me give some colours in terms of continued challenges. They are, as we see it, multiple just because of the fact that the industry and the landscape is also evolving. We know that there has been a lot of consolidation amongst the satellite operators. In fact, only recently, the acquisition between SES and Intelsat was closed in July. So that's a big, I guess, consolidation effort that's happening. In the past, we've seen Utelsat and OneWeb. We've also seen Viasat and Imarsat. So with any of these consolidation, clearly a lot of restructuring effort would be ongoing. And, you know, this might manifest itself in different ways in terms of their, perhaps their, you know, strategy in the go forward, which I mentioned earlier, as they contemplate their competition, which in this case would be the little satellite operators like Starlink, like Kuiper, Because that in itself is a disruption. Obviously, the whole global landscape, the whole global economic outlook, that industry in satellite communications is also not immune to. So there are a lot of uncertainties that delay the decision-making process of enterprises and of customers in terms of how they spend, when they spend. I talk about the dual constellations. Obviously, we have seen through some of these filings, when these constellations will launch, potential challenge for us might be, you know, the delay of some of these activities or a move to the right. A portion of the business is also in defense, so defense Millsat Com. And with everything that is happening, it might also change priorities. and focus on when customers would buy and how they would purchase these platforms. So these would be some of the challenges that we are navigating through. And yeah, so we continue to stay steadfast and we believe that if we bring the customer through the journey of getting them to an end state whereby it's no longer important whether it is a geo-satellite, a LEO satellite, a MEO satellite that is serving their needs, but a set of ground segment equipment that will allow them that flexibility to scale. And added on top of that, why did we talk about intuition unbound. You know, if we added on top of that the flexibility of how customers might want to buy, and if we are able to then help them structure the business model that way, then we are maybe changing the playing field of how we want to look at the satellite communications market. Okay, so hopefully that helps.

Thank you, Lichu. So maybe at this point, we'll adjourn the meeting. For those of you who have questions, we'll be happy to take them offline. I just want to summarize. We had a very strong first half, 2025. For USS, I mean, this contributed by all three segments, but USS, notwithstanding the near-term challenges that we are facing for CEDCOM, the team is working very hard to turn the business around. The urban solutions piece, including Transco, is actually going very well. In the last market update in May, we talked about the major mobility projects where we secured more than $5 billion of new wins from 2021 to 2025, and we expect the revenue momentum to actually kick up a notch. We said that 2024, these major projects... gave us revenue of $200 million. By 2028, we expect it to double. By 2030, it should be triple. And these are all excluding the New Jersey NJTA back office project, which has started. The project is already ongoing. We have not recognized the order book because it's still being challenged in the court over the you know, the court process, but the work has started. So meanwhile, revenue has already started. But the order book or the new orders that I've just mentioned that more than $5 billion, we said $5.2 billion, exclude the New Jersey back office project. So we are in a very good space so far as urban solutions and trans-core is concerned. For commercial aerospace, we had a very strong start. in the first half, notwithstanding the challenges that tariff could cause on some parts of our business in China. But I think given that and the very strong EBIT performance, we are really off to a very good start. And as I said, we will outperform the industry in terms of growth. We will update more in the coming quarters. Finally, DPS. You heard Mervyn talk about the international defence business. It's actually quite exciting. We have a good pipeline of opportunities being worked upon. And hopefully, as they come to fruition, we can share more with you. But certainly, we are building our business in defence and public security on a very strong foundation. So on that positive note, we will adjourn the meeting. Thank you very much for those of you who join us online and especially those who travel all the way to join us today. A very good afternoon and then we'll talk to you soon. Thank you.