1H 2025 Financial Results Webcast Briefing

Good morning. Welcome to SD Engineering's first half 2025 results briefing. We will begin with a presentation by our group CFO Cedric Fu. Our group president and CEO Vincent Chong will then give his remarks. After that we will end today's session with a Q&A session for the analysts. Without further ado, may I invite Cedric to give his presentation please. Yeah, thank you. Welcome to SD Engineering's first half 2025 results briefing. A very good morning to everyone here in person, many familiar faces, as well as those joining us via webcast. Slide two. Before I begin, I would like to bring attention to slide number two, which states amongst others that the group's actual performance outcomes and results in the future may differ materially from those expressed in forward looking statements.

Slide three. This is our agenda for today. First, group highlights, group business discussions for each of the three segments, contract wins and all the books, debt management, portfolio management, dividends, and now slide number four, 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 4th figure.

The group performance was due to the successful execution of our order book, better margin mix, and concerted efforts by everyone here in managing our cost. Slide six. From left to right, this slide shows the revenue breakdown by segment, by product type, and by location of customers. On the left, the pie chart shows revenue by segment. In first half 2025, CA contributed 40% this commercial aerospace. DPS, 45% defense and public security, and USS, 16% urban solutions and second. In the center of the slide, the bar chart shows revenue by product type. Commercial revenue increased from 3.9 billion in first half 24 to 4.1 billion in first half 25.

Defense revenue increased from 1.6 billion in first half 24 to 1.8 billion in first half 25. Very healthy growth. DPS segment includes commercial domains such as public security and safety, critical information infrastructure, and others. It also includes both local and international businesses. Hence, DPS segment revenue of 2.6 billion in the left of the pie chart is higher than 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 US, 20%.

Europe, 20%. And others, 6%. Slide seven. Group revenue grew at 7%, year on year, to 5.9 billion. This is contributed by all segments. As several of our entities have US dollars as their functional currency, accounting-wise, their revenue is translated into Singapore dollars upon group consolidation. The average US dollar to Singapore dollar rate for the first half of 2025 is 2.5% weaker than the first half of 2024. Hence, after adjusting for this FX translation impact, revenue growth year on year would happen 8% on a constant currency basis. Slide eight. EBIT grew a strong 15% year on year to 602 million.

Due to higher revenue, translating to better EBIT, as well as better margin makes of our solutions and products delivered and cost savings. This is representative of our continuing operations, notwithstanding, as some of you have noted, that the higher other income in first half 2025 versus first half 2024, this other income line was higher by $38 million. This one-off other income was recorded in both commercial error and DPS segments and was 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 nine. Net profit improved very strongly by 20% year on year to $403 million. This was contributed by stronger EBIT and lower finance cost. Slide 10. On tariffs, including the recent intention to impose US tariffs on trips, our preliminary assessment is that the impact is immaterial at the group level. However, we will continue to monitor this closely as the tariff situation is evolving. We have classified the tariff impact into three broad categories. First order impact refers to tariff payable by our businesses for purchases from primary suppliers overseas. For example, our businesses in the US buying from, say, China or the EU. Such first order impacts are largely confined to commercial aerospace segments,

whilst impacts on USS and DPS segments are much smaller. Against our initial assessment in May 2025, there was limited first order impact. For engine MRO, about $34 million of revenue was deferred over two and a half months when tariffs existed in second quarter 25. This is less than the $40 million per month revenue deferrer that we previously estimated. All this relates to the engine MRO shop, which is in China, Xiamen, importing engine parts from the US into China. Those were originally subject to tariffs. The tariff has since been reduced. Second order impact refers to tariffs paid by our secondary suppliers, which is basically suppliers of our suppliers. We have no plans to absorb such tariffs unless they can be passed through to the customers.

In any case, versus other competitors, we are not competitively disadvantaged. Thirdly, other global impact includes possible recession and inflation risks triggered by tariffs. Hence, we are monitoring this situation closely. For now, our truck business, HACNE, reported that orders are affected as customers adopted a wait and see posture. Nevertheless, our diverse business portfolio, including defence and public security, is more resilient to economic downturn, as defence is not directly correlated to economic cycles. The 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 web.

Next, I'll move on to business discussions. Slide 11. Slide 12. CA segment revenue grew 5% year-on-year to $2.3 billion. That's the chart on your left. Excluding aircraft sales, which is shaded in dot-check grade, of $7 million in first half 24, and US dollar-sing dollar FX translation impact, which I explained earlier, of $35 million, revenue growth year-on-year would have been 7%. This growth is contributed due to stronger sales from engine MRO and Nacelle's. It is offset by lower PTF revenue due to a lack of PEX aircraft fixed on, as we have discussed previously, arising from extended use of existing PEX 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% to $367 million. This is contributed by higher revenue and cost savings.

Slide 14. Moving on to U.S.S. Revenue grew to $921 million. This was largely flat year-on-year at 0.3%. Adjusting for FX translation impact that we discussed, revenue growth year-on-year would have been plus 2%. This growth was contributed by URS and partially offset by SECCOM, which continues to be challenging, as I will elaborate in my next slide. EBIT for U.S.S. increased from $9 million to $12 million, contributed by better margin mix and cost savings in URS.

Slide 15. SECCOM. We continue to drive the performance of this particular line of business while positioning for the future in an evolving industry landscape. Vertically integrated non-geo satellite operators, such as Starlink, continue to disrupt the market. Intuition, which is the platform name that we gave, its general availability release is on track for end September 25. The deliver features such as standards, cloud, multi-orbit and virtualization. At the recent Singapore Asia Tech X conference, iDirect, which is our SECCOM entity in the U.S., demonstrated various capabilities such as satellite switching between Jio and Xio. Here is the helipthical kind of orbit around the poles, AI and analytics for network monitoring and dynamic bandwidth management.