Singapore Technologies Engineering Aktie

Good morning. Welcome to ST Engineering's Full Year 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 from the analysts. Without further ado, may I invite Cedric to give his presentation, please.

Yes. Thank you. First of all, welcome to ST Engineering's Full Year 2025 Results Briefing. Good morning to all participants, whether you are in person here or via the webcast. Slide 2. Before I begin, I would like to bring your attention to Slide #2, 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 herein.

Slide 3. This is our agenda for today. I'm very pleased to present our '25 full year results covering the following topics: group highlights, business segment discussions, portfolio management, productivity, contract wins and order book, debt, dividends and outlook.

Group highlights. Slide #5. In the second half of 2025, we continue to streamline our portfolio with 4 significant divestments. We also recorded noncash impairments relating to our Satcom business. These actions with the one-off effects affected our reported financial statements and distorted the group's underlying base operating performance. To enable our stakeholders to better assess the financial performance underlying our continuing businesses, we will be using the term BOP, or base operating performance, throughout this presentation. Some of you call it by other names like clean or underlying, but it means the same thing, or non-GAAP.

On a BOP basis, we delivered an excellent set of results for 2025. Here are some highlights. Revenue reached $12.3 billion. BOP net profit surged to $851 million. This translates to year-on-year growth rates of 9% and 21%, respectively. We also achieved contract wins of $18.7 billion, which is 49% higher year-on-year, lifting our order book to $33.2 billion or 16% higher year-on-year.

During the year, we recognized one-off noncash impairment of $689 million, partially offset by divestment gains of $301 million. These figures were reflected in the reported P&L statements. Importantly, the group generated strong cash flow, $1.7 billion from operations and about $700 million from divestments. These cash resources enabled us to, firstly, return value to shareholders via the special dividend as recommended by the Board; secondly, pay down debt to $4.8 billion; and thirdly, reinvest in our growth. Informatively, our return on equity for 2025 is 28-plus percent.

Slide 6. This slide shows the reported P&L, and I will not dwell too much because of the distortions from one-offs. At the revenue level, unchanged from base operating performance, with second half '25 revenue up 12% on the left and full year '25 up 9% on your right. Reported EBITDA, EBIT, PBT and net profit are lower year-on-year, primarily due to one-off items recorded during the year, such as impairment losses and divestment gains. And these impairment losses do hit many lines of the P&L, except revenue. Nevertheless, we are pleased to report a positive second half '25 net profit after taking in all the one-off effects of 2 half '25 as we have guided.

Slide 7. Now this slide shows base operating performance or BOP. On a BOP basis, 2025 was a very strong year, which reflected the strength and resilience of our underlying businesses. For the second half of 2025, which is on the left, the group achieved very strong growth, 12% growth in revenue, 9% growth in EBITDA, 16% growth in EBIT, 21% growth in PBT and 22% growth in net profit. For second half 2025 growth over first half, which is not shown here, which is a half-on-half, second half '25 versus first half '25, net profit was $448 million or 11% higher than first half '25 of $403 million. This represents good trajectory going into 2026. In other words, the second half is -- have higher and better numbers than first half.

For the full year 2025, the group also performed very well, 9% growth in revenue, which crossed the $12 billion mark for the first time, 10% growth in EBITDA, 16% growth in EBIT, 20% growth in PBT and 21% growth in net profit. As the year-on-year revenue growth rate for second half 2025 was 12%, as you can see in the slide, and higher than the 9% growth for the full year 2025, as you can see on your right, the operating momentum is indeed very strong.

Slide #8, revenue by segment. On the left, the pie chart shows the revenue breakdown by segment for 2025. 40% was contributed by Commercial Aerospace, CA in short; 43% was contributed by Defense and Public Security, DPS in short; and 16% was contributed by Urban Solutions and Satcom, or USS. DPS as a segment includes both local and international customers. It also covers commercial domains, including public security, safety, critical infrastructure and others. Hence, DPS as a segment has a revenue of $5.3 billion in 2025 on the left, is different from the revenue derived from defense products and solutions, which is in the middle of the chart of $3.8 billion. So in other words, the $3.8 billion is a subset of the $5.3 billion.

Revenue by type in the center, it shows revenue for the past 2 years. Commercial revenue increased from $7.8 billion to $8.6 billion. Defense revenue increased from $3.5 billion to $3.8 billion. On the right-hand side, revenue by customer location. The table shows revenue by customer location. Asia contributed 55%. It went up. U.S. down 19%, partly because of Leeboy, MAE and lower PTF in the U.S. Europe 20%, and others 6%.

Slide #9. This slide shows the year-on-year increase in group revenue by segment. In 2025, our revenue grew from $11.3 billion to $12.3 billion, an increase of 9%, contributed by all segments. If not for the weaker U.S. dollar average rate in '25 versus '24, the group revenue would have grown more than 9%. It would have grown by 10% year-on-year.

Now from another perspective, on a rebased basis, if we exclude Leeboy revenue, which was divested in September last year, from both the 2025 Leeboy's revenue and 2024 Leeboy revenue, we just rebased everything, our underlying continuing businesses would have grown by 11% instead of 9%.

Slide #10. This slide shows BOP EBIT. EBIT grew 16% year-on-year on a BOP basis, driven by effective execution, business growth and cost savings across the group. After accounting for one-off items during the year, reported EBIT is lower. This -- these items relate to portfolio actions taken in 2025. On a rebased BOP basis, if we exclude EBIT of Leeboy and our share of [indiscernible], both these companies were divested, for both years, '25 and '24, the underlying businesses grew 18% year-on-year.

Slide 11, net profit. On a BOP basis, net profit grew 21% year-on-year to $851 million. On a rebased BOP basis, again, excluding the net profit from Leeboy and share of [indiscernible], the underlying businesses grew 24% year-on-year, that almost 1/4.

Next, we move on to discuss business segment. Slide 13. For CA, revenue grew 14% to $5 billion. I think Jeff is very proud of hitting that $5 billion, very close, but really almost there. This growth was contributed by stronger sales from engines, MRO and [indiscernible]. In terms of contract wins, CA secured $5.8 billion, and this is on your right, of new contracts in 2025, of which $1.7 billion was secured in the fourth quarter alone. You will notice that the contract wins exceed the revenue drawdown from the order book, which is a good sign.

Slide 14, Commercial Aerospace EBIT. On a BOP basis, EBIT for CA grew 22%, very strong, to $487 million, outpacing the revenue growth we talked about of 14%. So revenue grew 14%, but BOP EBIT 22%. So clearly, this is driven by higher margins. On a reported basis, EBIT for CA was $542 million. This is the last bar on the chart, and that includes the divestment gain on STACO of $56 million.

Next, DPS, Slide 15. For DPS, revenue grew 8% to $5.3 billion. On a rebased basis, revenue grew 11%. The growth was contributed by all subsegments. In terms of contract wins, DPS secured $9.1 billion new contracts, very large number, in 2025, of which $2.5 billion was signed in the fourth quarter 2025, reflecting continued demand from both domestic and international customers. Again, I want to highlight the contract wins of $9.1 billion far exceeds the revenue drawdown from order book for this period of $5.3 billion. So very, very healthy, more than replacement rate.

The Qatar MRO contract, which we just announced this morning, to maintain different fleets of land platforms for the Qatar Emiri land forces is a very significant win for us. Why? Because in addition to the contract value of $470 million, this contract demonstrates the trust and confidence placed in us to maintain the operational readiness of critical land assets of an international military organization. So from that perspective, it is a breakthrough, and we hope this will lead to even more successes. And such MRO revenues are also recurring in nature, which is helpful.

Notably, our international defense contract wins have also doubled year-on-year, underscoring the growing contribution from overseas markets. We continue to work on many international defense projects, and there are many irons in the fire. We target to double international defense contract wins in 2026 year-on-year. We hope to do better than that.

Slide 16, Defense and Public Security EBIT. On a BOP basis, EBIT for DPS grew 14% year-on-year to $725 million, outpacing revenue growth again. This is driven by strong business growth and higher margins, so Commercial Aerospace, higher margins, DPS higher margins, 2 of our largest segments. On a rebased BOP basis, if we exclude the EBIT of LeeBoy and share of CityCAP, the underlying segment EBIT grew 18% year-on-year.

On a reported basis, EBIT for DPS was $919 million, including the divestment gains for LeeBoy and CityCap net of impairment loss in [indiscernible].

Now the third segment, Slide 17, USS, Urban Solutions and Satcom. For USS, revenue grew 4% to $2 billion. The growth was contributed by URS, which is our URS mobility, rail and TransCore, partially offset by Satcom. URS performance was supported by steady project deliveries across railroad and Smart Mobility solutions. This pace of delivery for Smart Mobility will accelerate in the coming years. Why? Because it's underpinned by a $5 billion order book already secured, already in the bag for rail and tolling contracts in Taiwan, Thailand and the U.S. And these deliveries will pan out in the coming few years. This $5 billion figure excludes the New Jersey Turnpike Authority back office service contract with a value of up to USD 1.7 billion, including options. [indiscernible] will talk to this a little later, but we basically have been executing to this contract and collecting revenue already. But we did not recognize it because we want to see how it develops in the coming months, and we are continuing to assess it.

In terms of contract wins, USS secured $3.9 billion of new contracts in 2025, of which $0.5 billion was secured in the fourth quarter alone. Again, the contract win, similar to the other 2 segments, far exceeds the revenue drawdown from order book, $3.9 billion versus $2 billion. And this provides very clear visibility to revenue growth in the coming years.

Slide 18. On a BOP basis, USS EBIT declined by $8 million to $32 million, mainly due to higher losses in the Satcom business. This was partially offset by continued growth in Urban Solutions, which is well positioned to grow because of a solid multiyear order book as we discussed earlier. On a reported basis, EBIT for USS was minus $556 million due to direct impairment loss, net of divestment gain of [indiscernible].

Slide 19. We have been providing you update on Satcom, and we will do likewise in this briefing. Allow me to walk you through the transformation progress within the iDirect Group and provide an outlook for Satcom in 2026. First, on the left of your slide, there is good revenue momentum into first quarter '26 at a minimum. On the commercial and government markets, we are expecting a stronger first half 2026, underpinned -- for a stronger first quarter 2026, underpinned by secured orders across multiple commercial and defense customers. These orders, including customers in Saudi Arabia and Europe, will deliver year-on-year revenue growth in 1Q 2026 compared to 1Q 2025.

Intuition, which is our multi-orbit platform, is gaining good traction, for example, with customers like Verizon and AI Telecom of Mexico signing up to this program. Separately, iDirect government was qualified under -- by the government to participate in the U.S. MDA Shield contract, strengthening our position in the government segment. So on the left, on the revenue side, the outlook looks good.

We are targeting for stronger year-on-year growth, not just in first quarter, which we have good visibility, but also in the first half of 2026 year-on-year and the second half of '26 year-on-year. We will keep you posted as the year progresses. Second, on the right-hand side, that's the cost outlook. Actions relating to about $43 million of annualized savings were successfully completed in 4Q '25 and 1Q '26. And these are beyond what we brief you in earlier years where there were rationalization occurring in iDirect. So these are recent actions taken in 4Q '25 and 1Q '26, producing $43 million of annualized savings that are already flowing into the bottom line.

Now the second set of actions relating to the remaining $20 million are on track. The items have been identified. We are executing towards it, and we expect to complete it by second quarter 2026. Therefore, we can expect an annualized total cash savings of $43 million plus $20 million, which is $63 million to accrue in full commencing from third quarter of this year. So on an annualized basis, from third quarter of this year, second quarter next year, we should see a flow down of $63 million of cash savings.

Our priority is to continue focus to support customers and to turn around the business while we evaluate the best path forward for our Satcom business, including strategic actions. Nonetheless, revenue and cost savings is no regret and remain a top priority for [indiscernible].

Next, Slide #10 -- Slide 21, sorry. For financial year 2025, we completed several strategic divestments, Leboy, CityicapP, SPTel and Starco, which collectively generated net cash proceeds of $705 million. These divestments strengthened our cash position for the year. While these divested units will no longer contribute to group EBIT in 2026 after the divestment, the year-on-year reduction in this EBIT is expected to be fully offset by interest and tax expense savings as the cash proceeds were applied towards reducing debt. If we apply some of this towards reinvestment, and we can repeat our return on equity of 28.7%, I think you will have even more accretive EBIT going forward.

Slide 22, productivity. Our OpEx over revenue growth has been trending well over the years, scale effects, continuous improvement, procurement savings and so forth. In 2025, we achieved a new low of OpEx over revenue ratio of 10.2%. As our revenue grow, we continue to experience scale and network effects. Together with productivity gains and cost savings, this helped to mitigate inflation effects in certain areas and help us improve margins as we have shown.

Slide 24, contract wins and order book. Slide 25. We secured $18.7 billion of new contracts, a new record. The group ended the year with a robust order book balance of $33.2 billion, another record. Weaker U.S. dollar and Sing dollar as at end of 2025 compared to end of '24 resulted in a $0.5 billion downward adjustment to the order book. So had the exchange rate been constant, '24 and '25, our order book would look more like $33.7 billion. From this, about $9.9 billion is expected to be delivered in 2026.

Now some of you will recall that in last year in '25, it was $8.8 billion to be recorded in the next year. So this number is creeping up quite fast.

Slide 26. This slide highlights some of our major wins in 4Q '25. And in this period, the group secured $4.7 billion worth of new contracts, $1.7 billion from CA, $2.5 billion from DPS, $0.5 billion from USS. This brings the total contract value for the year '25 to $18.7 billion.

Next, debt management. The company did gear up to seek growth. And some of the major acquisitions we did was MRAS, which is performing very well today, TransCore and so forth. And because cost of debt is always lower than cost of equity, I think it makes sense to gear up to make sensible accretive acquisitions. But since then, we have been performing well operationally, generating the cash flows that I talked about. And hence, our debt level has been dropping from $6.5 billion in '22 to $6.1 billion to $5.8 billion to $4.8 billion. And additionally, the credit metric and rating agencies like to use debt to EBITDA has been dropping from 5.2 in '22 to 4.2, 3.6, 2.7. So hence, our credit rating remains very strong at AAA stable by Moody's and AA+ by S&P.

Next, Slide 30, dividends. For 2025, the Board has recommended a final tax-exempt cash dividend of $0.06 per ordinary share as well as a special dividend of $0.05 per share for the financial year ended December '25. Payment of the final dividend is subject to shareholder approval at the upcoming 2026 AGM. The ex dividend date to be eligible for final dividend is 28th of April 2026. If approved, shareholders will receive their dividend on 13th of May 2026. For the first 3 quarters of 2025, we have already paid out 3 interim dividends of $0.04 each, totaling $0.12. This brings the total dividend for 2025 to $0.23 if you add the final dividend. And as previously shared, the 2026 total dividend shall be determined by the sum of 2 elements. Firstly, $0.18 per share, which is our ordinary dividend as a base. And you add to that 1/3 year-on-year incremental net profit, which we have communicated at Investor Days, but using the 2025 BOP net profit of [ 851 ] as a base and then on a per share basis, adding that to $0.18 will be the dividend guidance that we are giving for 2026. And all the net profit parameters will exclude one-off effects of major divestments and impairments. I think that truly reflects the underlying performance and how we will share the underlying performance with shareholders.

Finally, Slide 32 is the message from our Group CEO and President. In 2025, the group delivered excellent set of underlying performance, reflecting the strength and resilience of our businesses. We continue to streamline our portfolio through several divestments, recycling capital and enhancing our focus on our core businesses. Looking ahead, supported by strong growth momentum and a robust order book, the group is very well positioned to deliver on our strategic objectives and 2029 targets. This marks the end of our presentation. Thank you very much for your attention.

Thank you, Cedric. May I now invite our panelists up on stage, please. The panelists this morning are Vincent Chong, Group President and CEO; Cedric Foo, Group CFO; Marvin Tan, Group Chief Operating Officer, Technology and Innovation and President, Defense 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.

Well, good morning. Welcome to the SP Engineering Full Year 2025 Results Briefing. Very good to see you. And for those of you who signed online, thanks very much for joining. And for those who celebrate the Lunar New Year, let me just wish you a very happy Lunar New Year of the Fire Horse. Hopefully, that brings us all good health and prosperity in 2026 or the year of the Fire Horse.

Now building on the financial results covered by Cedric just moments ago, I will focus on a few key takeaways. First, our 2025 results demonstrated the underlying strength of the group's business. Our base operating performance, or BOP for short, broke new highs, including our BOP profit before tax, which passed $1 billion, as Cedric already shared. On a BOP basis, 2025 was a very strong year with robust revenue and net profit growth. The fundamentals of the business continued to strengthen through the year. And revenue, we didn't really call this out, but I'll share with you. Revenue would have been 1 percentage point higher if not for the weaker USD, U.S. dollars in '25 versus 2024.

2025 was also a year of active portfolio actions. The divestments generated net cash proceeds and gains and our decisive steps or were decisive steps to streamline our portfolio, recycle capital and sharpen the group's focus. We also made impairments relating to the iDirect Group and JetTalk, which we -- which were noncash in nature, following a reassessment of near-term assumptions of the business in a challenging operating environment, which we discussed extensively in November last year.

Building on the strong first half, underlying performance was sustained through the second half with continued year-on-year growth. Subsequently -- or sequentially, underlying performance reflected continued revenue momentum with underlying net profit growth outpacing revenue growth, as Cedric highlighted. Taken together, the group remains confident in achieving our 5-year plan targets as set out during our Investor Day last year.

Beyond financials, technology and innovation remains central to how we compete in the various domains, and many of you would have seen this being reflected in our multi-domain capabilities showcased at the recent Singapore Air Show, where we had very good customer engagements. This reflects sustained investments over the years in strengthening our core engineering and technological capabilities, building our R&D ecosystem and innovating in areas that translate into real customer outcomes, which in turn underpins our long-term growth.

Let me just next talk about the next -- the 3 segments. For Commercial Aerospace, in a highly competitive environment where customers place exacting demands on capability, reliability and delivery, our strong performance in 2025 reflects not just a continued recovery in the aviation market post-COVID, but how this business has been built and positioned over time across both OEM subsegment, particularly our [indiscernible] business, and our MRO activities. We have continued to optimize our global network, as we have shared with you across our facilities in Singapore, China and the U.S., particularly for our hangar capacity, expanding where demand is growing and streamlining where needed, while maintaining a strong and competitive MRO footprint globally and sharpening execution across the network. This includes capacity and expansion in our engine MRO operations in Singapore, alongside our early investments in LEAP engine MRO capabilities, which have strengthened our ability to support customers as the LEAP fleet continue to expand.

This is evident in the scale of the Commercial Aerospace business today with a revenue of $5 billion, which is more than double its pre-COVID level and is further validated by strong contract wins during the year, as Cedric walked you through. Together, these outcomes reflect both the strength of our customer value proposition and our consistency of execution in this business.

Next, moving on to the Defense and Public Security segment. The segment delivered a strong full year performance with contributions across its subsegments. Following strong first half, the second half revenue moderated to 5% year-on-year growth, reflecting the timing of project deliveries that is typical of the business as well as the divestment of LeeBoy in September last year. And if you rebase the revenue for DPS without LeeBoy, second half, we would have grown by 9%, as Cedric also mentioned.

On a rebased basis, adjusted for LeeBoy, full year revenue and BOP EBIT growth remained really quite robust. At a subsegment level, Land Systems rebased revenue grew 4% year-on-year, rebased without Leeboy, I meant. All other subsegment revenues also grew. You can find those information in the latter half of the analyst PowerPoint presentation that you have a copy.

Contract wins for the [indiscernible] segment were strong at $9.1 billion. And while wins can be lumpy by nature, it depends on timing of projects at the customer end. The segment benefits from good revenue visibility, supported by ongoing programs. Digital Systems and Cyber continue to benefit from demand for secure, digital and cyber-enabled solutions across defense, public security and critical infrastructures. We continue to see good traction in international defense markets. Though progress remains program timing driven, as I mentioned, it really depends on customers' project timing. And we are engaged with customers at a mature stage in a couple of other programs, and we'll update the market when appropriate.

We marked a key milestone in our international defense business with our entry into the Qatar defense market, as Cedric already mentioned, as you would have seen the announcement this morning. It's a 5-year MRO contract for the Qatar Emiri Land Forces. The win reinforced the fact that Middle East is a key market for us as we articulated during our Investor Day. While the digitally enabled end-to-end MRO program for the Qatar Emiri Land Forces highlights our capability to deliver long-term technology-driven land forces support. Later on, Mervin can shed a little bit more information on this particular contract, which is a key win for us.

Now turning to Urban Solutions and Satcom. Urban Solutions performance was supported by steady project execution and increased delivery momentum, particularly in the second half as projects progressed. Beyond near-term delivery, what gives us confidence is the structural relevance of this business. As urbanization accelerates globally and cities modernize critical infrastructure, demand for integrated technology-enabled smart mobility and urban systems continues to grow. This gives us good visibility on business growth, particularly across the smart mobility pipeline.

On the iDirect Group, as Cedric has outlined, we are seeing improving activity heading into 2026, supported by secured orders and progress on the intuition multi-orbit program. We are targeting a stronger year-on-year first half revenue for our Satcom business, as Cedric already mentioned.

On the cost side, we have already implemented about $43 million of annualized cost savings for our Satcom business, which are flowing through to the bottom line, with the remaining actions -- which will be flowing through to the bottom line with the remaining actions on track. In total, these initiatives are expected to deliver about $63 million of annualized cash savings, reinforcing our focus on cost structure. Our priority remains supporting customers, executing the turnaround and evaluating the strategic path forward for the Satcom business or, in particular, the iDirect Group.

Overall contract wins of $3.9 billion for the USS segment well exceeded the 2025 revenue, as Cedric pointed out, supporting good revenue visibility, particularly for Urban Solutions. Importantly, this visibility is supported by a strong pipeline of major smart mobility projects, which are moving progressively into delivery. We have shared that these programs are expected to drive a meaningful step-up in Urban Solutions revenue in the coming years as large-scale rail and tolling projects advance through their delivery phases.

And next, in terms of order book and new orders secured, we secured wins of $18.7 billion last year, strengthening our order book to $33.2 billion at year-end. Our record order book is a clear leading indicator of revenue growth in the years ahead. And finally, on dividend, our Board of Directors has proposed a final dividend of $0.06 per share, bringing the total ordinary dividend for financial year 2025 to $0.18 per share, together with a one-off special dividend of $0.05 per share. Subject to shareholders' approval at the AGM, shareholders will receive total dividends of $0.23 per share for financial year 2025. This is consistent with what we announced at the third quarter 2025 market update in November last year. As we have mentioned at our Investor Day presentation, our dividend policy reflects our focus on realizing value and returning that value to shareholders as the group's profitability continues to strengthen.

Finally, our strong underlying results and BOP performance in 2025 speak to the clarity in the group's strategy and disciplined execution of our businesses. We will continue to well execute our strategy, maintain financial strength and return value and return value to shareholders while continuing to keep a long-term view of our business strategy and growth. On that positive note, we will now take questions.

[Operator Instructions] May we have our first question from the room, please?

[indiscernible] Roy and then we go to Lori.

Roy from UOB Kay Hian. First, congratulations for the very strong core performance. I have 3 questions each related to different segments. Okay. So the first question is for the Defense segment. I understand, Cedric said, we expect to double the international contract wins. We already doubled this year, and we will try to double next in 2026. So could you please share with us what is the international Defense revenue as a percentage of your total Defense revenue? And also in terms of your contract double -- doubling your contract wins, could you please share the scale of your contract wins for international Defense in 2025? That's for the Defense segment.

For the Urban Solutions and Satcom segment, I understand for iDirect, there will be -- sorry, $63 million of cash cost savings initiatives. I want to double clarify this one. Is it -- does it include the previous $15 million amortization savings from the impairment or is on top of that? And it seems to me based on your $63 million savings, even without potential disposal, you may also be able to turn around the operation this year. I also would like to clarify on that.

And the last question is for Commercial Aerospace. I see for the second half, there is improving in your operating margins, even excluding the disposal gains from the [indiscernible]. This improvement in operating margin year-on-year, I would like to know what is -- what caused the improvement, and whether this is sustainable in 2026?

Okay. Thank you, Roy, for your questions. I'll, of course, point to my colleagues for the Commercial Aerospace question. I'll let Jeff answer as the third answer. And then we talk about USS. So first of all, the $63 million cash savings is over and above the amortization and depreciation savings. I'll let Lee Chew go into a little bit more details.

And then on your questions on DPS, we do not disclose international defense revenue as a percentage of total defense revenue. But we will let Marvin talk about the scale of international defense wins in 2025. Maybe we'll start with Marvin, then we go to Le Chew and then followed by Jeff.

Thank you very much, Roy, for your question, and happy New Year to you, and thank you, Vincent. Well, I would say that the doubling of our international defense win for 2025 is a significant milestone for us. And in terms of the figures, I would just highlight that it's more than SGD 600 million, okay? And that's a double from 2025 numbers -- 2024 numbers. And looking ahead to 2026, as you already heard from our announcement this morning, our MRO win of -- for the Qatar Emiri Land Forces land platform maintenance requirements amounts to about SGD 470 million. So taken together, we are quite confident given the prospects that we are looking at, some of which are in quite advanced stages of discussions that we would be able to achieve in 2026, a doubling of that SGD 600 million that we have achieved in 2025.

The source of my confidence come from what Cedric highlighted earlier about multiple irons in the fire, right, and some of which are in the advanced stage. Maybe I'll just quickly give you a sense of some of these opportunities that we are actively pursuing right now. So the MRO for the Qatar Emiri Land Forces is a win for us today. And beyond that, we are hoping that in the MRO space for land platforms, especially in the Middle East market, this would be the vanguard towards having more opportunities, not just within the Qatar Land Forces, but also to provide the same capability for other Middle Eastern militaries in that region.

But beyond the land platform MRO, we are also looking at potential new builds for ship platforms for many of the customers in the Middle East as well as beyond. I would say that we are in quite advanced stages of conversation and discussions regarding potential new ship builds for another Middle Eastern country. And still in the area of new ship build, we are also pursuing quite actively opportunities for ship build to a European country as well as another country in the Asia Pacific region, okay?

On land platforms, as I highlighted in the last quarter, we are in active pursuit for customers for our Bronco as well as our Terex platform. For the Bronco platform, as I highlighted previously, we are partnering with Leonardo as well as Ares for the Italian future all-terrain vehicle platform program. And that is something that is active right now, and we are in close conversation with partners there in order to fulfill the specific requirements of the customers. But beyond the Italians, we are looking at other opportunities in the European theater, which I highlighted previously, which includes Finland, which includes Austria, which includes Sweden, who are all actively -- have active interest in our Bronco platform.

For the Terex platform, we are also in active pursuit of opportunities in the Middle East market, and we are in active conversation with the users there. And hopefully, some of these opportunities will turn into new wins for us. But beyond the new build for ships as well as land platforms, we are also -- some of you may recall that we announced a first overseas satellite win for UAE last year, right? That was in the third quarter, and we are hopeful that we will be able to add more satellites to other customers as well as current customers in the Middle East.

Beyond that, we are also actively pursuing MRO opportunities for our military aircraft platform as well as potential C-130 upgrades, particularly in the Middle East as well as North Africa region. And you would have been keeping track of our successful sales of our munitions including the 155 mm as well as 40 MM, which has seen new customers globally, including in the Americas, in Europe, in Middle East and in Asia Pacific. So taken together, given that we have already clocked the Qatar MRO win under our belt, which amounts to close to $500 million, which we announced today, we have high confidence that we will be able to exceed the $600 million -- more than $600 million international business wins that we achieved in 2025 and to continue the momentum for more international business win at least twice the amount that we achieved in 2025 for 2026. Yes. I hope I answered your question, Roy.

So certainly, we're targeting to double that contract win figure in 2026 and hopefully, for international defense wins and hopefully, we can do better. Well, we'll see because sometimes for -- oftentimes for defense projects, the timing depends on customers' prioritization. So we don't have full control, but we certainly have quite a few opportunities that are being actively worked upon. And hopefully, we can share more news in time to come.

So I think Vincent mentioned the fact that the cost savings of $63 million is on top of impairment savings. And as we look at these cost savings, cash flow improvement, obviously, from an EBIT standpoint, we expect the EBIT to improve in 2026 as well. Cost management is a critical component of the turnaround effort. And I think your other question was, based on this, what is the progress against the turnaround? Cost element being one. The other that we also talked about in Cedric's update is revenue. And we are seeing secure orders that will give us a year-on-year growth in quarter 1 of 2026. And we talked about the fact that we are targeting a revenue picture for the first half to be stronger and obviously targeting to do the same in the second half as well. So that, together with the cost management, will set us on the right path to deliver even better turnaround than we had originally been forecasting and hope. So we'll keep you posted as we go along in the year. But so far...

On the revenue growth and the [indiscernible].

We are on the right -- we are on the right path, and we will obviously update, but we feel good about the revenue traction in the first quarter. We're targeting stronger first half and also stronger second half and cost reduction efforts are bearing fruit. So we'll update in due course, but it's certainly in the right track -- on the right track.

Okay. My turn, Roy. So straight to the point, excluding divestment gain, our second half revenue was actually up 12% over first half. So there's already strength on the top line. And then we also had -- we had good ramp-up on the engine revenue because we built new shop, we introduced new capability. We saw increased nacelle delivery in the second half, right? And we also didn't have costs associated with the closure of our mobile facility in the U.S. right? Okay.

So Lorraine, next.

Yes, great set of results, particularly on the margins, very impressive. Just following up on the trend of Roy's questions, maybe starting a couple of questions. One for Jeff. Looking at the commercial Aerospace margins, I think core margins is 9-plus percent. It seems to be back to pre-pandemic levels. I'm just very curious how much of that would -- and I note Cedric's productivity enhancement chart. But I'm just wondering how much of that is also due to operating leverage and also product shift -- product mix in a sense? And if there's -- going -- looking forward, if there's room for further margin improvement, is that mainly coming from productivity then? That's for Jeff.

I just want to follow up with Marvin. Previously, you mentioned there's a structural change in defense demand. Our indication is that the demand is actually pretty -- much stronger than expected upfront. I'm just wondering when you look at the growth prospects going forward, I mean, this might be crystal ball gazing, but do you sense that this will continue for the next 5 years? Or do you have feeling that things -- after this inertial -- let's say, after this initial spurt, if things will sort of normalize if threats are perceived to be mitigated in that sense?

Okay. So on your first question, just recap the trending for our EBIT margin for commercial aerospace has shown consistent improvement over the last few years. You just recap, right? In 2023, we're 8.6%, 2024, we had 9.1%, 2025 is now 9.8%. And we have said -- and Jeff has said many times that we are targeting EBIT margin of more than 10% -- above 10% as our target, and we are certainly making progress. I'll let Jeff speak more to that. As a second answer, maybe we'll go to Mervin first, whether we see defense demand is structurally changing. And I think we obviously hope that the conflicts can subside. The question about defense industry is related, but it's a separate track in our view because there's a structural change in how countries are looking at defense spending. And I think this upward trend is going to last some time. We'll get Mervin to share more insights.

Thank you very much, Vincent, and thank you, Lorraine, for your question. We continue to stick to our assessment that the increase that we see in the investment in defense for various countries to be a structural shift. And the reason for that is supported by some of the conversations that we have with our, what we call the [indiscernible] directors of the various countries. [indiscernible] directors are essentially the leading individual of countries that are -- who have the responsibility of acquiring arms for their respective countries. And from those conversations, we assess that even if the current wars end, specifically the ones that we are seeing in Ukraine, the perception of threat, I believe, remains, especially in the European theater. So some of the conversations revolve around countries preparing for the reemergence of that threat even after the threat in Ukraine has subsided. It may come up in some other locations in Europe. I won't go to the specifics of it, but like I said previously, what we saw in the NATO Summit in June last year, where the nation states reached a historical decision to increase defense spending to 5% of GDP by the year 2035 is all [indiscernible] one. It's a telling one. I think in recent history, we have never seen, at least after the cold war, we have never seen such commitment by disparate states of NATO committing to spend up to 5% of their GDP.

And individual states, even like Germany, openly say that to reach that 5%, their interim target is to hit almost 3% by the year 2029. But even beyond Europe, you see increased defense spending in other regions as well. The Japanese are now spending about 2% of their GDP on defense and the Japan being the third or fourth largest economy in the world, spending 2% of their GDP on defense, I would say, is quite unprecedented for a country like Japan. And they used to have a spending pattern of less than 1% of GDP, given that their defense force built up is primarily for self-defense given Article 7 in their constitution.

Beyond Japan, we see the Canadians now looking at building quite significantly their own defense industry. And of course, when you build up your own defense industry there, you're looking at partners that will be able to help support transfer of technology and as well as sharing of technology in order for them to build up their own defense industrial base. And they are spending up to 2% of their GDP as well, which is also quite a significant increase from the past.

And in the theater that we are actively involved in the Middle East, all, if not, I think almost all the countries have pledged to spend a lot more in defense over the next 5 years. So I think, one, given the kind of pledges that alliances like NATO is making with regards to long-term defense spending, i.e., 5% by 2025; two, countries beyond NATO looking at increasing their defense spending as a percentage of their GDP; and number three, from the feedback that we get when we talk to all the different [indiscernible] directors, Europe, in the U.S., in the Middle East as well as in our region, you get a very strong sense that this commitment to rearm and to sort of reconstitute the defense capabilities is structural in nature.

And our assessment continue to be that even if the current war subside, such defense spending patterns or accelerated defense spending patterns will likely continue. So that augurs well for our Defense and Public Security business, which is the reason why we are confident to be able to double our new wins for 2026 over 2025, building on our doubling of our new wins from 2025 from 2024. So that source of the confidence is supported by the data that we are seeing.

Thank you, Mervin. Yes.

Lorraine, in many ways, you actually answered your own question because you mentioned operating leverage, which is the kind of scale that we are achieving and the product mix. In addition, obviously, we continue to work very hard on productivity gains, applying the latest technology in digital and AI. Our target, as previously communicated, is to grow Commercial Aerospace revenue at more than 2x industry growth rate, which is estimated at around 3% to 4% today. As can be seen from our latest results, our revenue outpaced our target and grew 14% year-on-year. Even though there may be short-term fluctuations in growth rate, I am optimistic that the market continues to be robust and steady. From an EBIT margin perspective, as Vincent has highlighted, we have always targeted double-digit margin, and we are progressively achieving -- getting closer to achieve that outcome, right? Thank you.

Thank you, Lori, for your questions. Anyone else? Okay, Jason, and then after that, Hong.

Jason from DBS. Just 2 questions for me. So the first one is for Jeff. So maybe if you could share an update on the progress of new hangers and engine shop capacity expansion. What kind of uplift in percentage terms to provide to -- in terms of capacity that will be coming on stream over the next few years? So that's the first one for Jeff.

Second question is on the Urban Solutions and Satcom business. So this is for you, [indiscernible]. So maybe I was hoping you could provide some color on the kind of operating profits that the Urban Solutions subsegment has been able to achieve over the past few years, given that segmental operating profit figures are being dragged by Satcom. So it's hard to decipher, it's hard to tell the extent of growth that the core business has been able to achieve. And it's been a few years since [indiscernible] acquisition now. Hoping you can provide an update whether it's tracking your initial targets and whether you are still on track?

Okay. So Jeff will be able to give you an update on the capacities and for the new capacities that we are adding. For USS, we do not disclose operating profit at the subsegment level, but I think for URS is strengthening as you can tell. We are -- as we already mentioned, we also have a very strong pipeline of projects that we are delivering against in the Smart Mobility segment. So we expect URS to continue growing. And of course, the acquisition of TransCore was a good acquisition for us. We are on track to achieve what we set out to achieve the objectives of the acquisition. And we mentioned to you before, the order book of TransCore compared to when we first acquired it has more than doubled -- about doubled, excluding the New Jersey NJTA EasyPass back office project that we have started but have not recognized in the order book. So we are certainly on track, but [indiscernible] can give you more color about our URS business, not just tolling, but also urban mobility in the rail space, which we are really doing quite well.

Okay. All right. So you learned that we did rationalize the mobile facility in the U.S. in terms of optimizing our operations. But currently, we are building at 3 different sites for airframe maintenance capacity. One is Changi Creek in Singapore. Second is Pensacola hangar, construction continues. And third, our new [indiscernible] joint venture continues to build its second hangar. So over the coming years, we do expect to increase net capacity for airfreight maintenance by double-digit percentage. In addition, on the engine shop that we opened in Singapore last year, that will give us in the next few years, additional capacity of about 50% to overhaul engines, right? And you can already see the growth that we saw last year from -- in terms of engine maintenance work that was also driving a lot of the MRO growth. Thank you.

Okay. So maybe I'll start with TransCore. We have achieved the acquisition milestones in the first couple of years post acquisition. Obviously, TransCore is now part of the URS business. And to Vincent's point earlier, we are seeing good robust traction and growth in the Urban Solutions business. I guess that's what you meant when you say the core business. If you look at what we have shared in quarter 1 of 2025 and what we've reiterated today, we talk about the fact that just the mobility part of the business, looking at an order book of $5 billion, that's a subset of what we ended in terms of order books for 2025. So we see that as we look at the strength of the new contracts in Urban Solutions as well as the strength of our order book, the revenue and EBIT for this core business will increase with the major contracting to be delivered over the next few years. So in that context, this business, the Urban Solutions business with TransCore integrated as part of it, is tracking well and within expectations.

So [indiscernible], maybe you want to talk a little bit about the synergies, too. Post acquisition, after having TransCore as part of our network, we have secured wins for TransCore in the Asia Pacific region, which speaks to the synergy that this acquisition brought us.

Yes. So I think we have announced that TransCore won a contract in Southeast Asia early last year. And then we also announced a contract from Transport for New South Wales to deliver the next-generation multilane free flow tolling system. The synergies that we looked at as we acquired TransCore was to bring the tolling solutions from the U.S. into Asia Pacific. So we've seen that come through for Southeast Asia, also extending to South Pacific in Australia. On top of that, we are seeing that momentum also carrying forward into opportunities and RFPs that we are working on outside of Asia, outside of the United States into Middle East and so forth. So our teams are working together because, obviously, our footprint for Urban Solutions is not just restricted to Southeast Asia as well. So the teams are working together to extend the adjacencies of our capabilities, both from a road and rail perspective for Urban Solutions as well as the tolling part in road from TransCore.

Do we have anybody -- any questions from those who participated online? Then we'll come back to the physical attendees, if it's okay.

Yes, we have Louis from Citibank.

Congrats on the results. I have 3 questions on the 3 major segments. First off, for DPS, we noticed that half-on-half movements, ever since second half 2024, Marine Systems and Digital and cybersecurity have been consistently on upward trajectory, while land and defense and aero swing between the halves. But given your order win momentum recently and after the announcement today, do you see that changing so that everything will be essentially improving half-on-half from here on?

The second question is on Commercial Aerospace. It seems that aero structures and system revenues in second half '25 have rebounded nearly back to the levels of first half '24. Is this largely due to nacelle, or is even TTF starting to pick up at this stage?

And the last question for Urban Solutions essentially is, if we can get an update on the New Jersey Pipe contract issue? Is there any time lines or milestones we should look out for then you'll be able to put it as official order book?

So let's have Mervin answer your first question. Luis, thanks very much for your question. And then we'll get Jeff and subsequently Chew to answer the other 2 questions that you had. So Mervin, please?

Thank you very much, Luis, for your question and being online to listen to our presentation. I would say that your observation that for the digital kind of business where it tends to be more consistent in terms of new wins, right? Yes, I think that's correct. Because typically, the digital solutions kinds of wins, including cyber, of course, tend to be smaller and more consistent in nature. So to have consistent wins across quarters, across half-on-halves is quite expected. But I would say that for the engineering side, where we are looking at land platforms, ship builds as well as even defense aerospace kinds of business, the tendency for the wins tend to be lumpy and episodic. They can be large in nature, sometimes big and sometimes small. And I would say the timings of those wins are rather irregular.

As Vincent pointed out earlier, some of these larger kind of contracts for land, marine or defense aero takes just long gestation times. And when they come in, they can come in quite episodically. And certain periods, there will be none, other times, there will be significant projects that we may win. So it can be quite episodic. And I would say that it's quite different in terms of the nature compared to projects that are in the digital space. Therefore, I would say that whether you're comparing quarter-to-quarter or even half-to-half comparisons or updates may not be as useful as it doesn't really reflect the underlying momentum of our defense business.

I think a more useful gauge you should look at would be at the DPS level, our quarter-to-quarter reported wins, which you would have registered has been quite -- getting quite significant momentum over the last few quarters. I think those would be a better indication of our strong momentum that we have gathered over the last few quarters where eventually, many of these reported wins will translate to revenue. So I would say that don't look at it quarter-to-quarter or month-to-month at the subsegment level, look at it from the perspective of the entire DPS new wins quarter-to-quarter, and that will give you an indication of the strong momentum that we are enjoying currently. I hope I answered your question, Luis.

The aero structures and systems revenue in second half was stronger than in first half due to both nacelle and PTF revenue growth. Having said that, the PTF revenue in second half of '25 is still weaker than in 2024, right? So as we look forward, we are hopeful for the market recovery, and we continue to look out for the signs of this recovery.

Luis, for the New Jersey Tmpi Authority back office project, while the court appeal is ongoing, actually, the contract award has been given to us, it's signed, and we commenced project work in the middle of last year. As it relates to when we are going to add that to our order book, we are reassessing it, and we'll do that on an ongoing basis.

So basically, we're in a good position because the project has started and the work has started. But as far as when we recognize the order book, we'll continue to assess on an ongoing basis, okay?

Okay. So any other -- we'll come back to the room and then we go back to the online participant again. So we say Hong Han, maybe.

Congratulations on a very strong set of results. I have questions regarding Qatar MRO contract wins and iDirect with respect to the Shield program. So 2 questions on Qatar MRO, right? I want to try to understand with regards to the MRO solutions that you provide. Is that agnostic of the military equipment your customer use? Or is that limited to a specific type of weaponry? I'm trying to -- I ask this question because I want to understand in terms of your addressable market and how it could apply to other potential customers as well.

Second question on this MRO solution is, why is the tenure just a 5-year contract? It seems rather odd and short. We thought that MRO with regards to military tend to have a 10-, 20-year tenure.

The last question with regards to iDirect would be on the Shield program. It looks like there's a lot of things going on there. Can we try to understand in terms of the addressable market that you're looking at and some near-term prospects?

Okay. All right. Thank you, Hong Han, for your question. We'll let Mervin start first and then followed by Lee Chew. Mervin, please?

Thank you very much, Hong Han for your question. Happy New Year to you. Thank you for your questions for the Qatar MRO because it gives me an opportunity to sort of highlight how pleased we are with this new win, right, as highlighted by Vincent earlier and also Cedric, is that this is an important win for us, not -- on a few fronts. First of all, it is the first breakthrough that we have into the Qatar market. That's number one. Number two is that I think more important than just a platform win, this is an MRO services win. What it means to us is that actually, you require more trust on the part of the customer to entrust the maintenance of critical assets and critical platforms of your land forces to a foreign supplier like ourselves. So it sort of underscored not only the confidence that they have in terms of our technical capabilities, but I think more importantly, the trust that they have that we will be able to respond effectively in terms of logistics support, in terms of technical support should the forces that are using these land platforms are caught into operations.

It's not easy for them to make a decision. And therefore, their decision to award us this contract underscores both confidence, but more importantly, trust that they have that we will be there to support them in actual operations, right?

On the technical competency front, I would say that the competencies are quite agnostic of the platform, but the technical solution are specific. So our MRO support is not just for one fleet of platforms. It's actually across different fleets of land -- different land platforms for the Qatari Emiri Land Forces. I wouldn't tell you the numbers because I don't think my customer is comfortable for me telling you the numbers. But I would say that it will be in excess of 5 different kinds of platform types.

The competencies are agnostic because the technical capabilities that we have acquired over the years for MRO, of course, supporting the SAF, have come in quite useful. And that includes things like the design of the workshop, things like how we are able to leverage digital solutions in order to digitalize the MRO processes, cut down manpower, et cetera. Our philosophy of how we provision for spares, which is something that is an acquired skill after many years of support that we have provided to the SAF, right? So those kind of qualities, whether in the technical space, whether in terms of our process and procedures, in terms of our design of digitalization, process and procedures in terms of spares provisioning, those are not trivial and those are quite critical competencies that are agnostic to the platform that we support. Because those philosophies and capabilities that we leverage on in order to support the Qatari Land Forces, those are agnostic capabilities that we have acquired over the years, right?

But the solution translating from these agnostic competencies into the specificities of the technical solutions for the different kind of fleets, right, that the Qatari Land Forces have, those are, of course, specific, okay? Those are specific. So we have to apply ourselves to some of the platforms where we already have competencies because the SAF have the same platforms, but we also have to apply those same competencies to support platform fleets that are first time for us. That means the SAF doesn't operate those, but they operate those platforms, but they have entrusted us to apply our competencies to come up with technical solutions for those platforms.

So I hope I answered the first part. On the question of why it's a 5-year contract, I would say that this is the comfort level of the customer. But I will tell you that MRO services is very sticky, okay? As you can imagine, after what I described in terms of the competencies, the design of the workshop, the designs of the philosophy of how you do spec provisioning, the relationship that we have with the OEM that supply these platforms to the Qatari forces. So I would not be too concerned that it's a 5-year contract. It's the first time they are doing this. So you can imagine from their perspective is that they want to try it out, right? But as a supplier, I'm very confident because it's easier to change a platform type from one to another. It's very difficult to change your MRO partner from one to another.

So I wouldn't put too much weight on the fact that it's 5 years. I would say that, that's because it's the first time for both of us. So we want to try it out. But I would say that I'm fairly confident that after these 5 years, we will be able to do a sufficiently good job to be able to continue to provide the service beyond the 5 years.

Well, thank you, Mervin. We are confident of our capability to add value and support the Qatari Emiri Land Forces. Let me also recap that the MRO contract covers digitization of maintenance workflows, anomaly detection, feed analytics. So it's not just a mechanical part, but it's going to be digitized as well, which plays to our strength because we do that very well over time. So we will be able to very well support the Qatari Land Forces for sure. So we are yet to...

So on the iDirect front, we are obviously very thrilled that iDirect Gulf has been qualified to supply the Shield contract, and this Shield contract is with the U.S. Missile Defense Agency. What it allows us to do is to be qualified to compete for task orders over the next 10 years. What has been announced is that the ceiling of this whole program is $151 billion. Of course, it's hard to crystal ball what that market share for us is going to be. But I think the important thing is that as part of our growth strategy in iDirect Gulf and Defense, we want to make sure that we engage early in government programs. So this is one of the examples of the programs. We are obviously also very laser-focused on building our government network. I think over the last few months, if you're following some of our press releases, you would see that, in November, we talked about our expanded leadership with Black Cat Systems, more for the Australian Defense Force to set together -- to set up together an advanced technology demo lab to look at innovations.

In later part of 2025 in December, we talked about how our EPW, the European Protected Waveform program achieved a major milestone because we were able to complete the over-the-air testing successfully. In January of this year, we talked about this Shield contract. And then just very recently, we talked about how our manufacturing competency center in Belgium was selected by Raytheon to support NATO's ESSM Block 2 program. So that's the focus that we have, looking at how we leverage this increased demand for sovereign networks as well as this increased demand for secure communications. And so all of this will be part of that growth trajectory that we envision.

Thank you. We have a few other hands in the room. So we'll take time to cover all your questions, and then we go back to online later. Siew Khee, and then after that, we come to [indiscernible], since you have the mic. And then we'll Siew Khee, We'll cover all.

Zhiwei from Macquarie. Congratulations on a very good set of results. I have one question and it's on the defense side. It kind of follows up on what Luis was asking just now. So your defense -- the gist of the question is how do we think about your defense margins going forward as you increase the amount of contract wins that you have? And I'll expand a little bit on where I'm coming from.

So as Luis said that most of your revenue growth has come from 2 areas, which is your digital systems and cyber as well as your marine, right? And that have been helping to lift your margins to the about 13% EBIT margin range. So I understand the MRCVs will help to improve margins, and it's not too difficult to see that digital systems actually have very high -- carry high margins with it. Now as you win your more other contracts, let's say, land systems, right, [indiscernible], if I look at your peers, their EBIT margins are closer to 10%. So how -- do I expect a certain form of dilution as these lumpy contracts come in to kind of keep your margin it is or even drag it down? Or can I still expect further improvements in your defense margin, if you see where I'm coming from? Also, you also have the Hunter AFV program that comes off this year and it's replaced by the Titan. So I'm also not sure how that affects your margins.

Is that the only question you have? Okay. All right. Mervin?

Okay. So thank you very much for your question, and happy New Year to you. And you can imagine how difficult it is for me to answer that question given the kind of product mix that I'm responsible for in DPS. I sell things from digital systems and like cloud solutions, AI, cybersecurity, data diodes, all the way to armored fighting vehicles, ships and all that. So your question is particularly challenging because I'm not sure what specificity in terms of your product that you are referring to. But suffice to say that I think there was a bit of a misinterpretation there where you said that we are only -- most of our wins come from digital systems, cyber and marine.

[indiscernible] delivered an improvement in margins, at least that's what we observed just from the financial statements. So I'm trying to understand, as your product mix changes, you sell more broncos, you sell more Terex, right? How does that margin evolve?

Okay. Okay. But I'm also selling more Terex yesterday.

Yesterday?

Yes. Because like, for example, we just won the contract, right, for the Terex for our Singapore Armed Forces last year. So but -- so I would say that I don't think that our margins would change significantly, I would say. In fact, over the last few years, I was looking at those numbers, and our margins have always been in the low teens. If you look at 2025, low teens, if you look at 2024, low teens, you look at 2023, low teens. And in that space of the few years, the product mix and services mix that we have contracted and converted to revenue are very diversified. And moving ahead, I would say that, that diversification will continue. So it won't come from just one specific business area, but we'll continue to deliver a very diverse range of products and services across our 5 business areas. So on that account, I would expect the margins moving forward for 2026, 2027 to continue to have that diversity, and therefore, to continue to have that comparable margins.

In our Investor Day targets, we said that net profit growth rate will be up to 5 percentage points higher than revenue growth rates for various reasons because I think the discussion now gets into very specific platform types. But at the higher level, with scale, with productivity that we have been showing that we are managed to achieve and then with scale of operations with product mix and margin, our net profit growth will continue to strengthen at a rate that is faster than our revenue growth holistically as a group for those reasons. So that applies across the 3 segments.

Yes, can we have Siew Khee?

I'll just cut it to 2 questions. The -- just on strategic review and options for iDirect, where are we now? Whether there's any like time line pushing to the right in what we wanted to do? Is there any stumble block in that process? That's my first question.

And the second question is on -- just going back to the MRO on defense side. Given that this is a major breakthrough, was it an open bid? How did they use to do their MRO? Was it internally? And what were the deliverables that allow them to -- I know that they trust you, but was it like cost optimization that you can actually give the customers to actually engage you instead of doing themselves or who were the previous provider? And what sort of CapEx or scaling that we need to actually do to be there to do this service?

Yes. So let's answer -- you have 2 questions. One is strategic actions for iDirect, right? The other one is Qatari Emiri Land Forces, how did they -- how did this opportunity arise? So when we talk about -- let's talk about Satcom strategic actions. We already mentioned that we are evaluating. There's never an assurance or definitive outcomes that we expect. So we'll continue to evaluate. Meanwhile, it is important for us to continue our turnaround, continue to focus on taking care of our customers, continue to focus on improving our revenue and cutting our costs. Whether strategic actions come at what time, I think we'll let the -- let this particular topic take its own cost, and we'll update as and when we have any, but the evaluation continues, right?

The Qatari MRO contract. First of all, we are deeply honored to be selected. In talking to our partners and users and customers, they have high confidence in our ability to help them improve on their MRO performance. We won't go into details of who is the current provider. Those are, I think, customer information that we shouldn't get into. But suffice to say, they have high confidence that we will be able to add value to help them improve on their performance. And that, I think, is an honor that we have to execute against that expectation, which we are very confident that we will be able to do a good job. And then with that, there will be more opportunities that will come to us. And this is an important, I think, first step in the MRO space, especially for the Middle Eastern market.

Okay. I hope that at least address your question for now, and we can come back to you if you have further questions later.

It's Da Wei from Morgan Stanley. I have 2 questions. First one is actually at a group level. I know we saw a series of portfolio management activities this year or 2025. Are we at the optimal level at this point? Or should we actually expect more on a going-forward basis?

The second is actually on Commercial Aerospace. Congrats on a very strong growth. And I know you mentioned -- Jeffrey mentioned that we are adding capacity, et cetera. It sounds like there's significant capacity that's coming through. Can you also share some commentary with regards to the demand outlook? How should we think about the potential take up for all this capacity that's coming and the pricing with regards to that? And actually have further questions on defense bridge, but I think we can take it offline over lunch.

Yes. And the first question, can you repeat the last part? I want to make sure that we get your question.

So are we at the optimal level with regards to the portfolio at this point? Are you thinking of...

Portfolio.

Yes, potentially more divestments or...

Okay. Okay. Then we'll get -- I'll answer that question, and then I'll get Jeff to address your question on aerospace demand and pricing margin. As we mentioned oftentimes, portfolio evaluation is a continual process. We constantly look at the businesses in our portfolio, and we look -- we do so through several filters. First of all, is the business strategic still -- still strategic to the group? If it is, is it performing to our expectations financially? If it is, do we have a long-term expectation that you will continue to grow to a better scale, global scale. Then with those answers, it inform our decisions on whether or not it's a long-term keeper in our portfolio. We also ask ourselves whether a particular business when they -- based on their performance, whether it is worth more to a bit different owner than is it to us. Then we make that determination.

It's an ongoing process, a business that we decide to have within our portfolio at a certain point in time might not be a business that we want maybe when the external environment changes. That's how we have been managing our portfolio. In the last 8, 9 years, we have either stopped, divested or shut down more than 20 businesses. We also, at the same time, acquired new ones that are strategic to the group. So -- and that will allow us to allocate capital efficiently, ending up with a portfolio that gives us the best value. So that is a continual process. So that, of course, in the years ahead, we'll continue to do the same. So we'll get Jeff to answer your questions on commercial aerospace. Da Wei, I hope I have answered your question.

Thank you for a very relevant question. The market -- the aerospace market is largely driven by the size of the fleet and the flying demand of the public. So as you can see, every year, the fleet size grows with new deliveries, and there will obviously be retirements. But there is a strong order backlog of over 10,000 aircraft that is yet to be delivered. And the OEMs are striving to deliver as many new aircraft as possible at a high growth rate. Although there are supply chain challenges in the short to medium term, there is a strong and steady demand for new aircraft based on the demand for flying.

Secondly, as the fleet grows, the MRO demand also grows. As the fleet ages, the MRO demand also ages. So driven by the growth of the aircraft fleet in the market, there is also a strong growth in MRO demand that is steady and long term. As forecasted by the analysts, there is this -- MRO market growth is in the range of 3-plus percent for the next 20 years CAGR.

And then thirdly, because of the fleet growth, there is also a growth in demand for financing. So there is -- the world's fleet is largely financed now. Over 55% of the fleet is financed as leased aircraft by the financing industry in support of the airlines. So this segment of business also grows. So what I have mentioned is actually aligns with our 3 segments of business, including the OEM product business; secondly, the MRO maintenance business; and thirdly, the leasing business. So we are plugged into all of these 3, and we continue to expect a steady, robust growth in the coming years. There is obviously competition in the market, but we are used to global competition across all of our business segments. We face global competition in any business that we try to win. So I think the positioning and the outlook is positive.

Any other question. Jesse?

Jesse from Bank of America Securities. My first question is, given we have witnessed very robust order wins last year, could we actually accelerate the review of our 5-year target? Or alternatively, what business trajectory scenario would prompt us to revisit that target as it may no longer align with our expectation?

And second, more for Mervin, regarding to the Qatar MRO contract. Was it considered as part of the addressable -- international addressable market we mentioned before at $11 billion? If not, how should we think about the new revenue pool or addressable market after this initiative or contract win?

Okay. So I think they are all related questions. Maybe I'll take it and then we can invite Mervin to give you a little bit more insight. So we don't revise our targets in between that regularly because I think it is long-term plan. And as we mentioned, there's always an upside, downside risk to that set of targets and the external environment continue to change. What we have done in the last few -- many years, I think since 2018 when we first had our Investor Day meeting, we set a 5-year target. And then 3 years later, we had a second Investor Day in 2021, where we took stock of our progress towards the first set of targets. And then we set a new set of targets. In 2021, we set a new set of 5-year plan targets. And then last year, we set another new set while giving our stakeholders and shareholders an update of how we did versus the 2021 set of targets, and we'll follow this cadence.

Suffice to say that at this time, we are not changing our targets despite the divestments that we have made. First of all, our 5-year targets are based on constant portfolio basis, excluding M&A and excluding acquisitions and excluding divestments. And we said that if there are divestments or new acquisitions, at the appropriate time, we'll adjust the targets. At this time, despite the divestments, we are not adjusting those targets because we are confident that we will have other growth levers that will allow us to pursue the same set of targets.

As far as the defense pipeline of $11 billion is concerned, that pipeline was assessed prior to the announced increases in defense spending, especially in Europe. So directionally, you would think that the pipeline or the addressable market for us would have increased, which is also consistent with what we are seeing. So instead of updating that pipeline figure, we will update you as and when we win new contracts because they will be much more tangible. So I hope I answered your question. We are not adjusting the targets. We are very confident that we are on track to achieve them, and we will give progressive updates as and when we have new wins so that you can better calibrate our progress against those sets of targets.

Jesse, thank you.

Anyone else in the room with questions? Okay. So if not -- is there anyone else? Okay. If not, we'll adjourn the meeting. Let me just recap that we have really had a very strong set of underlying performance in 2025. And with a very strong order book, we are confident of our growth trajectory in the years to come as we have already articulated during our Investor Day and during our regular updates with you. We'll keep you posted of noteworthy developments. And on this note, thank you very much for joining us today, and we wish you a very good weekend ahead, today's Friday. Thank you very much.

Good morning. Welcome to ST Engineering's First Half 2025 Results Briefing. We will begin with the 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.

Yes. Thank you. Welcome to ST 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 2. Before I begin, I would like to bring your attention to Slide #2, 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 3. This is our agenda for today. First, group highlights, group business discussions for each of the three segments, contract wins and order books, debt management, portfolio management, dividends and outlook.

Slide #4, Group highlights. I'm 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 5 and 20% year-on-year growth in net profit to $403 million, breaking the 4 figure. The good performance was due to the successful execution of our order book and better margin mix and concerted efforts by everyone here in managing our cost.

Slide 6. 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%, this Commercial Aerospace. DPS, 45% Defense and Public Security; and USS 16%, Urban Solutions and Satcom. 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, a 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 defense revenue, which is by product type of $1.8 billion in the center bar chart.

Defense revenue, as shown in the center, is defined as defense products, solutions and services rendered for national defense. 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 U.S., 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 U.S. dollar as their functional currency, accounting-wise, their revenue is translated into Singapore dollars upon group consolidation. The average U.S. dollar to Singapore dollar rate for the first half of '25 is 2.5% weaker than 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 mix 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 U.S. 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 U.S. 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 2.5 months when tariff exists in the second quarter '25. 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 U.S. 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 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 defense and public security is more resilient to economic downturn as defense is not directly correlated to economic cycles. The tariff 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...

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 checked grey of $7 million in first half '24 and U.S. 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 [ PIS ] aircraft fixed stock as we have discussed previously, arising from extended use of existing [ PIS ] aircraft. EBIT for CA improved 18%, 1-8% 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 subsegments of DPS. EBIT for DPS increased strongly as well by 13%, 1-3 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 Satcom, 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 mix and cost savings in URS.

Slide 15, Satcom. 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 virtualisation.

At the recent Singapore Asia Tech X Conference, iDirect, which is our Satcom entity in the U.S., demonstrated various capabilities such as satellite switching between GEO and HEO. HEO is the elliptical kind of orbit around the [ pulse ], 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 order book. 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 30th June '25 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 U.S. dollars, order delivery in the 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's 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 from 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 a 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 this 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 TransCore. 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 30th June 2025.

The cumulative debt reduction between December '22 and June '25 is 16%. We have also announced the signing of SPA, shares and purchase agreements for the divestment of LeeBoy and SPTel. This 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 net sales 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 the 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 net working capital.

Now I draw your attention to the left again. The fixed and floating interest rate ratio as of 30th June '25 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, at AAA stable by Moody's and AA+ stable by S&P.

Next, portfolio management. Slide 22. Our portfolio will be further streamlined with the divestment of LeeBoy and SPTel. This is part of the group's ongoing portfolio rationalization effort to ensure that capital and resources are efficiently allocated and also to drive growth and value as well as focus on our core businesses. The SPAs for LeeBoy 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 '25. When approved and upon closing of these transactions, the group will generate net proceeds of approximately SGD 450 million. And assuming these proceeds are channeled to repaying borrowings, the net annual interest savings will be $15 million.

Nevertheless, if good opportunities present, the proceeds of some parts of it can be reinvested in businesses to support further growth. The net investment gain is expected to be about $180 million. Of course, these are onetime. The EV/EBITDA multiples for the transactions are 9.3x for LeeBoy and 21.4x for SPTel. On a pro forma full year 2024 basis, the annual revenue and EBIT for LeeBoy, 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 the loss. So these data are produced for the benefit of analysts creating their models. Next, dividends. We are pleased to announce that the second quarter interim tax-exempt cash dividend of $0.04 per ordinary share has been approved by the Board for the quarter ended 30th June 2025. The record date is 25th of August 2025, and shareholders can expect payment on 5th of 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 rationalization strategy to exit noncore 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 will now invite Vincent and the other expo members to take their seat, and Vincent will give some remarks before Q&A. Thank you.

Thank you, Cedric. May I now invite our panelists up on stage, please? The panelists this morning are Vincent Chong, Group President and CEO; Cedric Foo, Group CFO; Mervyn Tan, Group Chief Operating Officer, Technology and Innovation and President, Defense 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 the Group Chief Operating Officer for Technology and Innovation and President of Defense 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, Investments focusing on start-ups and deep tech domains. But before that, he spent over 3 decades with the Ministry of Defense and Singapore Armed Forces holding various senior leadership roles as described in our official announcement.

So Mervyn brings with him deep domain expertise, especially in the defense 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 U.S. 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 Defense 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 5-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're going to -- we have rationalized the capacity away and some other more minor items.

And these 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 in INTUITION at the end of September, while remaining focused on addressing the near-term challenges.

On international defense business, which later on, I'll invite Mervyn to share some information on 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 end 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 to particular -- 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 contracts.

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 brief. Now these new orders -- order wins have contributed to a stronger order book, which is now, again, broken 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 a weaker U.S. 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 3-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 the mind before I switch on to the next -- 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 5-year plan or 5-year targets as we disclosed at the Investor Day.

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. Well, in the meantime, I'll share with you a few maybe highlights for each of our three segments. Commercial Aerospace strong performance came from -- mainly from Engine MRO and Nacelles 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. In the first quarter, where we 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 defense arena is showing really good progress. For Urban Solutions and Satcom, 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 them. 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 ask me all the time.

But I'll say that the portfolio review and streamlining our ongoing efforts as even before these two divestments which 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 will 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. Now finally, our Board of Directors has approved a second interim dividend or second quarter interim dividend of $0.04 a share, which shareholders will receive on 5th September 2025, so sometime next month.

I also anticipate a question whether portfolio rationalization gains will be part of the consideration in our dividend. And so maybe 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 '25 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 gains and loss from M&A and divestments. 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.

Yes, Rachael. Maybe Rachael and then Rahul.

This is Rachael from UBS. Congratulations on the good set of results. I have three questions. So the first one is on your intra-quarter revenue and net profit growth. It was actually quite sizable for this particular quarter. Is -- should this be something that is indicative of future quarters as well? And could you elaborate on the nature of these revenues. Shall I ask my next question or we go about...

Yes, yes, go ahead

Okay. 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 scale, 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?

Okay. Thank you, Rachael. There are three questions. The first one is intra-quarter revenue and profit growth strong, yes? 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 already 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 continue. We are certainly on track to achieve our 5-year plan targets at least based on what we can see. The first half results are very strong. And that, I think, gives us 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 5-year plan CAGR of that we articulated those of you would did your math would already be familiar.

And then we also expected our profit to outpace revenue growth, and we are accomplishing both the revenue growth momentum as well as 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 by each of the segments. Let's start with perhaps Jeff, to answer your question on the, okay, the factors contributing to better margins for CA.

So actually, Vincent did allude to the contribution, the revenue contribution for CA. The growth came from the Engine MRO business and Nacelles business, right? 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. Yes. Then for the other two segments, Rachael, just to recap, I also mentioned that our Defense and Public Security segment had very strong first half. For revenue, 12% is really very robust and healthy and very strong.

First quarter is 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 earlier 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 Linch -- sorry, Mervyn to talk about DPS strategic partnerships for our international defense business.

Yes, so that's the problem with doing this for the first time. You don't know where the buttons are. But thank you very much, Rachael, for your question. I first want to say that my remarks are say 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 defense business is a meaningful contribution to this strong achievements. 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 our partners across the world, right?

And you mentioned Babcock, but Babcock 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, right?. 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 that a remark that I 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 the 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, Kazakhstan where we are manufacturing our amphibious 8x8 Terrex vehicles, right? 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 teaming relationships with partners in pursuit of several platform potential opportunities in Europe as well as the Middle East and in platforms, I'm referring to our 8x8 Terrex platform, the new ones, as well as our Bronco platform.

We think that the momentum in terms of munition sales, and we're talking about 40 mm and 155 mm 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 Hov structure for a Middle Eastern customer, and we're 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 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 American market. Yes, North African market. So 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 defense 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 and war stop in the medium term. Even last month, during the NATO summit, we saw the commitment of the allies to increase 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 wane, 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 defense business opportunities. Thank you for your question.

Well, thank you, Mervyn. I hope you have gleaned more insights as you -- 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 are actively participating in competitions and opportunities. So I think we're in a good place for international defense business. Rachael, thank you.

Can we go to Rahul, and then after that Siew Khee.

Rahul Bhatia 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 preorders? What is the customer feedback? And what are we expecting in terms of trajectory related to INTUITION for the next 2, 3, 5 years based on how the technologies are moving globally at such a fast pace.

Second, on Commercial Aerospace. I mean we just started a new hangar in China. Could you talk about the utilization levels? How do we think about that hanger. Finally, on defense, Mervyn. Thanks for all the feedback that you just shared, based on your experience side, if you put yourself in the shoes of Singapore defense, how would they react to that given ST Engineering is going a lot more international doing partner shifting, sharing the technology? How do they think about all this?

Well, they are very supportive. I'll let Mervyn, because Mervyn is working in them. In fact, it's very good for the ecosystem if we have continued success -- when we have continued success in the international defense, because is 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 insight. So I'm very appreciative of all the support that we're being given by our principles in MINDEF. And we talk about hanger capacity -- new capacity in China and utilization rate before we will do it a reverse, before we talk about INTUITION, the amount of preorders and trajectory expected in the next 2, 3 years. Maybe we can continue with Mervyn because he just fresh off the discussion on the 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 defense. Yes. So thank you for your question. I would say that, as Vincent highlighted, the defense establishment in Singapore is very supportive of our efforts to sort of bring our products overseas. I would describe this as a state of enlightened self-interest, right? Because as Vincent highlighted, number one, that's the opportunity to share the overhead cost if they scale. So Singapore is a small country, right? And the amount of defense products that can be bought, is bought locally 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 achieved that scale and then the nonrecurring engineering and fixed cost 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 2 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 hanger, but overseas, there's an opportunity for our products to be used in operations. And many of this capabilities if use overseas, actually bring in useful lessons where we can bring back to the Singapore local defense ecosystem to improve the products, to serve our local needs, right?

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 localizing our production house. And if you are more than just Singapore as a source of some of these defense products, actually, you increase the supply chain resilience of our defense in Singapore.

So on those three counts, number one, a reduction in fixed costs -- have 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 defense 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 where we do defense acquisition in Singapore. I think on those three fronts, there's this enlightened self-interest. And therefore, I would say that our local defense ecosystem in Singapore is very supportive of us bringing our capabilities and selling them overseas. I hope that answers your question.

Well, it's really complementary to each other. So we are very glad that we have been really putting our efforts, addressing both the Singapore defense as well as international defense. If you notice or recall, in our Investor Day presentation material, we actually sell it out as Singapore and international, and how they are actually quite complementary with each other.

All right, thank you, Rahul, for you question. And then maybe the last one, you will get on USS INTUITION. I will let Lee Chew address the question, yes.

Thank you, Rahul, for the question. So let me just say that for INTUITION, first of all, Cedric, also reiterated a year 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 virtualisation and cloud native features. 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, 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 whether 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 will 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 remote 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 talked about why it is important as a next-generation product. We said that 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 long-standing 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 dual constellations that will be launched in 2026 and 2027. So if you look at the ITU kind of time line and plans, you will see that many constellations from more than 50 operators are planned in the out years. And we hope that 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.

The [indiscernible], one more, yes.

Yes. So a really quick one. Our -- we did just open a new hanger in China on Monday. And that added additional capacity, overall across the network, our hanger utilization is well over 80%.

Siew Khee? Thank you, Rahul.

I'll just do one by one, or you want me to read out all?

Read all.

Read all, okay. I think we mentioned that we have various cost savings in various departments, the 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 will improve your EBIT margin as you close out Mobile, Alabama in CA, is my second one.

And my third one is, I'm not sure, because you mentioned that USS will be second half weighted. But earlier on, when you presented, you also say that it's too early to tell for second half, but just want to achieve get a sense whether we -- what other things like where we of? Are we still looking at second half weighted for USS, that's next question. And finally, we welcome [indiscernible] 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, how does it actually -- I know that you're actually starting to actually do more work in Middle East, but this is something that is a big step up.

Okay. So can you repeat the last question, So I can get the...

MRO, military aircraft in new market.

Okay. Yes. That's -- yes, that's a new domain that we're looking at. So we'll let Mervyn answer that. So let me just clarify. So 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 5-year plan, we said that we expected to save $1 billion over the next few -- next 5 years.

So on average $200 million. So in first half, we have achieved more than $100 million, when you combine the procurement and continuous productivity savings. So we are well on track. And I think that there are really -- there's more potential for even more savings. That's why if you look at our unit operating expense, if you use OpEx divided by revenue, we -- in the first half, we are 10.3%, which is an all-time low, even lower than last year.

So I think we are in a good place. So now you have three other questions on the Mobile, Alabama question. I'll let Jeff talk about and then, then I can talk a little bit about USS, because you asked me for my specific comment and then Lee Chew can complement that. And then followed by at the end, Mervyn sharing more insights on the MRO in Middle East. So let -- 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 on 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 that fundamentals are strong. The momentum is strong. The year is not over. We expect to be doing better than the industry, as I told you growth rate. So I think there's nothing exceptional in my comments on USS as far as the second half weightedness is concerned. Okay. Any comments, Lee Chew?

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

I want to go back to the part of cost savings before I move on to Jeff. Remember, we said in the next 5 years, we expect $1 billion 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 is currently in progress to be completed before year-end. And obviously, then we will size capacity to the workload rate. 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 a 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 rate to match revenues and costs.

All right. So thanks, Jeff, and we will go through Mervyn.

Okay. Siew, thank you for your question. Actually, doing MRO for Middle East, North African countries, not new to us. We have several contracts in the past. I wouldn't want to name the countries because we have -- we are subjected to a nondisclosure agreement for some of these countries. But I would 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 shipped 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 RSN ships, but military ships from the U.S. Navy, auxiliary ships when they passed by our region do perform some of the MRO and ship repair activities here as well.

Our interest in MRO stems from our strengths in supporting the equipment that by 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 best provisioning system that appeals to customers. We want to make sure that you're just acquiring some of these platforms, right?

They also want to make sure that the serviceability rates of this platforms are kept high. So in the term of these three competencies, technical competency, workshop design as well as our past provisioning process I think we have a competitive advantage where we started 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.

So at a strategic level, when we looked at the group strategy, at one time, we were sitting on a net cash balance sheet, we say we have to grow, because not growing [indiscernible] right? The competitor growth, so you're regressing. And growth come with many benefits. When you gear up your balance sheet, actually, your cost of debt is lower the cost of equity, you get better with 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 the group level also helps us create the leverage.

So we have a more strategic discussion with suppliers. So instead of using x number of suppliers, if we swing down the 5 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. Yes. And as the volume grows, 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 billion to $17 billion or more.

There's a 15% 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 you don't have the scale, the IT system looks too expenses, right? We can also set up offshore competency centers like we have done, right?

So instead of banging our head at one time when employment situation is very tight in Singapore, I mean now we can have talented people at lower cost price and very highly productive, very energetic and very motivated just to add. Lastly, AI. AI offers a tremendous opportunity for us to improve our processes, Agentic AI look at our task differently, how we quote. 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 room.

We do have Luis from Citibank. You have some questions, Luis.

Yes. Vincent, we will move to Citi. Luis, the line is open for you.

Most of my questions have been answered. Just two questions for me. Just on DPS. Just wondering if you can give us a flavor for which DPS subsegments are the higher-margin ones. So for instance, is digital systems and cybersecurity, which is growing the fastest, a high-margin business, so if that continues to grow margins expand.

Second question is housekeeping one. As you mentioned, the other income is actually normalized because all the one-offs cancel each other. So for, is it fair to say that for the second half, that other income level is probably the same, we'll see in the second half because its just normal.

There's nothing extraordinary that we can foresee in the second half at least based on what we know at this time. 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, we don't talk about margin at the subsegment level. Suffice to say, if you look at the DPS margin, it has been very steady and very consistent over the years. And we expect the margin to be still robust at the -- based on the track record.

Luis, so I hope. I think in terms of margin, but yes, we can't really talk about margins at the -- EBIT margin at the subsegment level.

We now open the line to Roy from UOB.

Actually, most of the questions of might also be answered. I just want to drill down a little bit more to clarify the -- sorry, sorry, the other income of [ $47 million. ] I understand you mentioned that at the segment level, the one-off gains and losses is more or less offset each other. But because we always see the other income as the one-off gains. So it might clarify in accounting those one-off losses, for example, like the impairment loss of Alabama. Is it under other operating expenses?

Can you continue with your...

Roy, do you have any other questions, or is this the only one?

This is the only one, the rest already answered.

Okay, good, very good. So I'll let Cedric take on that question.

Yes. I think largely correct. The one-off pluses in the other income and the delta between first half '25 and '24 is what $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 multiple contracts in cost of goods sales and so forth. So they are not really line by line within the other income, but we stacked it up, and we found that both at the group and the segment level, they washed out.

The more -- the ones that you're more familiar with, you are more familiar with like the Mobile rationalization. But when you stack them all together, there's really nothing that we can -- yes, so there is wash, so for us. And at the segment level that both segments, DPS and Commercial Aerospace, this is where -- these are the two where the one-off items were residing in. Both at the segment level and at the group level, they are a wash. So there's nothing much that we think that will be obvious, that will be interesting for 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 Shekhar on the line.

Shekhar, okay. So we will finish all the online questions, then we come in the room.

Shekhar?

I have two questions. The first one is, there was a mention of there's net cash inflows from the divestment, the net cost savings on the interest expense. You said some of this could be reinvested. What are the specific reinvestment priorities on these proceeds? Second is, remember the tariff impact on the Engine MRO 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 the ST Engineering's plan to mitigate such exposure on tariff-related disruption, specifically with this business.

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

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

Well, so as Cedric presented. And I think not this time, last quarter as well. We have quite a few mitigating steps that we have put in place. I can let Cedric recap later on the tariffs, what steps we are taking. So actually, the revenue deferral is not revenue canceled. It's just sometimes when you have such uncertainties, your customer may 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 turn out, we only saw a deferral of about $34 million over 2.5 months, so it's not in one month, but over 2.5 months, compared to $40 million a month that we originally thought that we 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 there's also a lot of mitigating steps that we have taken. That's we mentioned, but we -- 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 are 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 space, going out to alternative suppliers, if we -- which we have, past-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 tariffs.

So far, we have been quite effective in our endeavor. So we'll continue to navigate that very carefully, okay? I think I've already covered all the mitigating expense. Yes, 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 U.S. we will be hit, well not in those business, right? In fact, our Singapore, we're exporting very little into U.S. at all, right?

Most of our U.S. businesses produces revenues within the U.S. and they source within the U.S. 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 U.S. and the Chinese want to impose tariff on engine parts in the beginning, right?.

And as you said, the state in China will collect the tariffs, but the Chinese airlines were rendering their engines for shop visit in China, we have to pay the tariff. So it's actually the right pocket within the Chinese system. But eventually, what happened is the Chinese has exempted those parts from tariffs, right? But in the meanwhile, while these tariffs exist, we refuse to accept it, the tariffs, and therefore, we deferred some of the revenue, and those deferrals 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 input, because, you're going in and then you're flying out. So all we need is to just post a bank guarantee. And then as long as the aircraft go in and come out, or the engines go in and come out, the guarantee is not drawn, yes. So I think those are much better.

For Airframe, I think the tariffs are small and most of the Chinese airlines are prepared to absorb them and some of them have set a certain limit, which is adequate. So you put it in a nutshell, we're not in those businesses that are very tariff sensitive. And most of our U.S. business are producing revenues and does the sourcing within the U.S. 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 tariffs result in saturation, well, that's all, everybody is affected. So we're not immune. So Jeff, any more insights on the commercial?

Yes. I think conceptually, tariffs -- we -- the purpose -- when we do get tariffs hit, our objective is to work with customers so that they carry the tariffs, like 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 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, right? We are still on a level playing field. Then the challenge is, of course, working with customers in a timely manner to affect that they will 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 objectives in the coming months is to catch up on the work that was deferred at the time, right? 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 -- the impact, yes, we have, but it's not material. We took many mitigating steps to reduce the effects. But we are monitoring the evolving situation because every other day is 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 negative -- we are not competitively disadvantaged against our competition. And that's a very important point. okay? So we'll keep watch.

And Shekhar, 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 accretive and they 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 Shekhar, for your question. Now I have 2 other questions in the room, Karen and then from JPMorgan, we will go first. And then after that, Douglas from the Edge. And then after that, we will take a pause and adjourn. Thank you.

Yes. So may I ask a few questions, actually three in total, if it's okay. First of all, our first half order across all the key segments apparently is picking up pace. DPS, in particular, I think is catching my attention. It's up 61% year-on-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 is 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 road show, 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 either in Singapore home market or outside Singapore.

Lastly, but not least, can I ask Vincent, you've been I think with ST Engineering I think, 7 or 8 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're looking at as the next step? I think probably most of the growth initiative now super clear, I think to investors like me.

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 I was prepared to give you a lot more time three questions even that you came in. Okay. I think for international defense, I'll let Mervyn talk about it. Well, usually, it depends on what kind of projects they are. The delivery time can take a few years. If you are talking about, say, major naval platforms or major land platforms, it can take several years.

But it really depends if this ammunition is going to be very short cycle. So I'll let Mervyn share more with you on -- and of course, you have a quite appointed question to him in terms of his style and 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 will reallocate capital. So suffice to say, those will not change. Now key for us is keep scaling up, achieving our 5-year plan, we expect our revenue to be $17 billion, excluding any M&A and 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 and 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 cum growth stock. That's why we came out with a new dividend policy where we say a 1/3 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 2/3 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 will talk about the defense 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, right, 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 are large in size, the timing can be unpredictable, right? Because in between such lumpiness, you can't really predict when you come in.

And 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 rationalize 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, et cetera. 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 really in terms -- 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'll give it as that. On my views, after having spent the last 2-plus months here, I would say that actually, my confidence in ST Engineering has increased quite significantly after what I've seen for 2 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 market where our partners are more familiar with, where they can sort of 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 will 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. right?

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 product 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 are even thinking about the aftermarket opportunities, because we see that many of the customers, 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, right?

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, right, new and exciting products, aftersales 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, we'll be pleased to address them after we have adjourned, because we are 1.5 hours into the session unless you have very pressing ones, we will maybe take a pause after Douglas, and then we'll take the rest as they come. Douglas?

I'll make it quick. The first is with regards to the securitization of 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 color on the continued changes -- continued challenges of the Satcom business is facing?

What's the second question?

The challenges that Satcom continues to face. Some color on that.

Okay. I will have Lee Chew answer the second question. But as Aviation Asset Management, Jeff?

It's 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, right? 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 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, that step to be progressing well through year-end, right? And of course, we continue to look for opportunities to build our portfolio even as we plan to transition to the aviation fund structure.

Lee Chew?

Yes, so Douglas, thanks for your question on Satcom. Let's give some colors in terms of continued challenges. They are, as we see it, multifold 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 Eutelsat and OneWeb. We've also seen Viasat and Inmarsat. So with any of these consolidation, clearly, a lot of restructuring efforts would be ongoing. And this might manifest itself in different ways in terms of the -- perhaps the strategy in the go forward, which I mentioned earlier, as they contemplate their competition, which, in this case, would be the LEO satellite operators like Starlink like [indiscernible] 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 the delay of some of these activities or a move to the right portion of the business is also in defense.

So defense MilSatcom. And with everything that is happening, it might also change priorities and focus on when customers would buy, and how they would purchase this platform. So this would be some of the challenges that we are navigating through. And yes, 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 Mil 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 intrusion and bond?

If we added on top of that, the flexibility of how customers but 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. So hopefully, that helps.

Thank you, Lee Chew. So maybe at this point, we will adjourn the meeting, for those of you who have questions, we'll be happy to take them off-line.

I just want to summarize, we had a very strong first half 2025. For USS, I mean, this is contributed by all 3 segments. But USS, notwithstanding the near-term challenges that we are facing for Satcom, the team is working very hard to turn the business around. The Urban Solutions piece, including TransCore is actually going very well. In the last market update in May, we talked about the major mobility businesses or 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 that to double. By 2030, it should be triple.

And these are all excluding the New Jersey NJTA back office project, which has started. We got -- the project is already ongoing. We have not recognized the order book, because it's still being challenged in the court over 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 in so far as Urban Solutions and TransCore 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 defense 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 defense 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.