Singapore Technologies Engineering Ltd

Good morning and welcome to ST Engineering's first half 2026 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. Following that, we will open the floor for a Q&A session for the analysts. Without further ado, may I invite Cedric to give his presentation, please.

Good morning. Welcome to ST Engineering's first half 2026 market update. Also, a warm welcome to those joining us via the webcast. Slide 2. Before I begin, I would like to draw your attention to slide number 2, which states, among others, that the group's actual performance, outcomes and results in the future may differ materially from those expressed in forward-looking statements as a result of risks, uncertainties and assumptions. Slide 3. Slide 4. For our agenda today, I'll be covering group highlights, business segment discussions, contract wins and order books, as well as dividends and outlook. Thereafter, Vincent will make some key remarks before the Q&A. Slide four. First, let's start with group highlights on slide number five. I'm very pleased to report a very robust set of first half 2026 results. For this period, the group delivered very strong revenue growth at 11% year-on-year. In addition, it recorded even stronger earnings growth year-on-year. EBIT at 23%. PBT at 30%. And net profit at 27%. Our discipline, execution, and skill effects are clearly manifested in these numbers. Net profit for the first half of 2026, as you can see on the slide, was $512 million. And this is with a 500-hander. This is the highest half-year profit in our history. I recall Not so long ago in 2023, some three years ago, the entire full-year profit for 2023 was with a 500-hander, about $500 million. And now at half-time, we are already 500-plus million. Slide 6. From left to right, it shows the revenue breakdown by segment. by type and by location of customers. First, by segment on the pie chart. CA contributed 41%, DPS 43%, and USS 16%. Now, DPS stands both local and international customers, as well as commercial domains, such as critical infrastructure, and not just defense domains. Hence, the DPS segment revenue of $2.8 billion you can see on the pie chart differs from the defense revenue of $2 billion on the bar chart in the middle. Now in the center, we show revenue by type. Commercial revenue rose from $4.1 billion to $4.6 billion or 11% year-on-year. Defense revenue from $1.8 billion to $2 billion or 12% year-on-year. On the right hand side, we show revenue breakdown by customer location. Asia contributed 55%, US 14%, Europe 23% and others 8%. Revenue to customers in Europe increased while those of US reduced, largely as a result of the divestment of Liboy in September last year. But importantly, the overall group revenue increased 11% as I have described. Slide 7. This 11% revenue growth is contributed by all segments. Excluding Levoit, it would be 14%. Excluding both Levoit and the weakening US dollar, for which many of our revenue are denominated, group revenue would have grown by 15.5%, close to 16%. So a very healthy underlying revenue growth. Slide 8, EBIT. EBIT grew by a very strong 23% year-on-year to $738 million. On a rebase basis, excluding Lebois and our share of CityCap, both of which were divested last year, EBIT grew 27%. Elipman's test for underlying performance is cash flow. Here, our operating cash flow grew very strongly at 26%, from $761 million first half 25 to $960 million first half 26. And this underscores the strength of our core business. So the accounting numbers Very straightforward, EBIT rose 27%. I will dwell into what are the drivers of that growth. But the cash also grew 26%. Slide number nine, net profit. Net profit improved from $403 million in first half 2025 to $512 million in first half 2026. An impressive 27% year-on-year improvement. Now, this is enabled by one, stronger product and margin mix. Two, higher productivity. We have aimed to secure about 200 million a year in productivity. We have already secured more than 150 million in a half year. And lower finance costs. As we generated more cash flow, as I described, we are able to pay down debt and reduce interest costs. We are indeed very encouraged by our growth momentum and are confident of finishing the year strongly. By that, we meant strongly in terms of earnings, not just top nine. DPS is targeting a similar growth momentum as they did in first half 25. CA expects continued strong earnings growth rate And USS will have a stronger second half. So all segments are poised to finish the year strongly. Slide 10, let's move on to business segment discussions. 11, commercial aerospace revenue grew 15%, $2.7 billion. And this is at half-time, $2.7 billion. This was driven by stronger engine MRO, nacelles, and spare sales. CA EBIT grew by a very strong 29% to $288 million on the back of higher revenue, better product mix, and cost savings. Slide 12, next on DPS. DPS revenue grew 7% year-on-year on a reported basis. However, on a rebased basis, which is the underlying growth, DPS revenue grew 14%, 1.4% year-on-year, to $2.8 billion. This is largely because Leiboy was divested in September last year, and hence, for the whole first half of 26, we do not enjoy any Leiboy revenue. Digital business spanning cloud, AI analytics and cyber achieved 27% revenue growth year-on-year from $367 million to $468 million in first half of 2016. $468 million just for the digital business aspect. This shows an increased momentum given that in 2025, digital business revenue grew 15% year-on-year and now 27% if you compare FASAF 26 to FASAF 25. We are about one year ahead of schedule and will achieve our targeted 2029 annual revenue for digital business of more than $1.3 billion, not in 2029 but in 2028 or earlier. International defense wins amounted to $1.2 billion for first half 26 compared to more than $600 million for the full year of 2025. So by this year end, since we have achieved $1.2 billion in first half 26, we will be well above 2x of the full year 2025 wins, which is more than $600 million. So last year, we are more than 600. First half, we are already 1.2 billion. We have half a year to go. And hence, we will exceed two times 2025 wins. On a reported and rebased basis, DPS EBIT rose 10% and 16% respectively to $404 million ahead of its revenue growth. Slide 13, moving on to USS Segment. Revenue grew 15% to $1.1 billion. And this is contributed by both URS and SECCOM. USS EBIT improved from a low base of $12 million to $46 million and boosted by stronger revenue across both businesses. SECCOM cost reduction initiatives which we have explained previously were completed by end of the first half of this year with $63 million of annualized cost savings and these are starting to accrue. I will cover SECCOM in greater detail in the next slide. Slide 14. iDirect improved its financial performance in first half 2026. revenue grew 18% year-on-year, increasing from 117 to 138 million. Cost savings initiatives, as I mentioned earlier, 63 million on an analyzed basis, were completed in first half of 2026 as planned. This puts iDirect on track to becoming EBIT positive. iDirect's intuition Portfolio of Products and Services continues to gain traction with customers. We secured strategic wins in Asia and Europe, supporting mission-critical operations for government and defense contractors, while our new software-defined modem is gaining good adoption with U.S. and international government and defense customers. This new software-defined modem is a key differentiator which enables multi-wayform, multi-orbit operations on a single-edged platform, protecting customer investments as mission requirements and networks evolved. Intuition Foresight, which is a trade name for this single pane of glass that iDirect have introduced, have increased traction with customers. It does so by delivering AI driven intelligence that helps customers simplify their network operations. So it is a network management system through a single pane of glass so that they can have a hybrid modems and they can manage their network through intuition foresight. This allows them to scale their networks and also do so more efficiently. So as a result of both our cost initiatives and product initiatives, and customer traction, we target for SECCOM sub-segment to be EBIT positive in 4Q26 and in the year 2027 as well. Slide 15. This next section is about contract win and all the work. Our contract wins totaled $7.6 billion for 1.526 years. This was contributed by DPS, $3.6 billion, CA, $2.9 billion, and USS, $1.2 billion. Our order book stood at a robust $35.7 billion as it ends June 2026. We have included the NJTA E-ZPass contract this quarter. Of this $35.7 billion of order book, $5.7 billion is expected to be delivered over the remainder of the year. Based on the current Sears pipeline and barring exceptional events, we expect contract wins for Q3-26 and Q2-26 to be strong. Slide 17 This slide details our new contract wins for Q2 2016. In the quarter, the Group secured new contracts worth $1.2 billion for CA, $1.2 billion for DBS and $0.5 billion for USS. As I said, the NJTA E-ZPass service contract was awarded to Transcor, and included here. It was awarded in September 24, but we have not included it at that time due to some ongoing legal appeal by the incumbent service provider who lost the contract. It has been recognised in the audiobook now more than a year after the customer affirmed that the contract remains awarded to Transcom. and this was in April 25. And also, the commencement of the contract, there was already a notice to proceed and contract and revenue has been accruing since May 25. This contract also includes options for two further one-year extensions valued at US $0.4 billion or SING $0.5 billion, which have not yet been included in the Group's audiobook according to our policy. because the option is for the customer to exercise. But the base amount has been included in our order book. Slide 18. 19. The Board has declared a higher interim dividend of $0.05 per ordinary share for the quarter ended 30 June 2026. which is a sign of our confidence for a strong 2026 financial performance and dividends. The record date for the second quarter interim dividend is on 24th August 2026 and payment will be on 4th September 2026. Additionally, the Board has planned to pay out a dividend of $0.05 per ordinary share for the third quarter ended 30th September, 2026. So we used to pay 18 cents if you remember as a base division in 2035. So it was like four, four, four, six. This year, first quarter was four. Second quarter, we have now declared five. So it's higher. Third quarter, the board plan to declare five. And then for the final dividend, we will use our dividend policy to compute. And this is how it works. For the total dividend of 26, it will be based on 18 cents as a base, which is last year's ordinary dividend, and about one-third of the year-on-year incremental net profit per share. So the base... will be 2025 BOP net profit of $8.51 million. And then depending on how much is the net profit in 2026, we'll use that number, minus $8.51. And that difference, we'll take one-third to be paid out as dividend. And of course, if we already paid three interim dividends, then the balance will be paid in the fourth quarter. The final dividend will be proposed in February 27, subject to shareholders' approval. Slide 20. Last but not least, this is the group CEO's message, and let me read it out to you. The group achieved strong revenue and earnings growth for the first half. Our earnings growth rate outpaced, in fact well outpaced, the revenue growth rate. The robust performance was underpinned by the strength of our businesses and disciplined execution. We are encouraged by our growth momentum and are confident of finishing the year strongly. At the same time, our strengthening audiobook and robust pipeline of opportunities stand us in good state to drive continued revenue growth. Slide 21, a summary. We delivered a strong set of results for first half 26. Both revenue and earnings year-on-year growth rate was strong. In fact, earnings growth rate outpaced revenue growth rate. Order book continues to strengthen to $35.7 billion, and this will provide revenue visibility. Based on the current sales pipeline, we expect contract wins for 3Q26 and 2H26 to be strong. We are confident of finishing the year strongly. Our mid-term 2029 goals remains well on track. Interim dividend $0.05 per share was declared for Q2 2026 and is also planned for Q3 2026. This marks the end of my presentation. Thank you so much for your attention. I will now hand over to Vincent for his key remarks. Can we invite the actual members to the stage? Thank you.

Thank you, Cedric. The panelists this morning are Vincent Chong, Group President and CEO, Jeffrey Lam, Group Deputy CEO, Cedric Foo, Group CFO, Mervyn Tan, Group Chief Operating Officer, Technology and Innovation, and President of Defence and Public Security, and Tan Lee Chew, Group Chief Commercial Officer, Market Development, and President, Smart City and Digital Solutions. I will now hand it over to Vincent to deliver his remarks. Vincent, please.