FY 2024 Full-Year Financial Results Webcast Briefing

Good morning, welcome to SD Engineering's full year 2024 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 for the analysts. Without further ado, may I invite Cedric to give his presentation, please? Yeah, thank you. Welcome to SD Engineering's full year 2024 results briefing. Very good morning to everyone here in person, as well as those joining us via webcast. Slide two, please. Before I begin, I would like to bring your attention to slide number two, which states amongst others that the group's actual performance, outcomes and results in the future may differ materially from those expressed in forward-looking statements. Slide three, please. This is our agenda for today. I'll be covering group highlights, business discussions, productivity, debt profile, contract wins and order book,

investing for the future, dividends and outlook.

Slide four, please. First, let's take a look at group highlights.

Slide five. I'm pleased to report a very strong set of second half 2024 and full year 2024 results. First, on the left, for second half 2024, the group achieved a solid year growth, 10% growth in revenue, 11% growth in EBITDA, 18% growth in EBIT, 26% growth in PBT and 20% growth in net profit. For the full year 2024, the group also performed very well. On a year-on-year basis, 12% growth in revenue, which crossed the $11 billion mark. 11% growth in EBITDA. And as you know, EBITDA is a good proxy for operating cash flow, growing to $1.6 billion. 18% growth in EBIT to $1.1 billion, which exceeded the $1 billion mark.

23% growth in PBT to $863 million and 20% growth in net profit to $702 million. The above good performance was due to our concerted efforts all across the group in successfully executing on our audiobook. Audibook as at end 2024 came in at $28.5 billion, with about $8.8 billion to be delivered in 2025. Slide six, please. This slide shows revenue by segment, revenue by type, and revenue by location of customers. First, from the left, the pie chart shows revenue breakdown by segment. 39% was contributed by commercial aerospace, or CA, in short. 44% contributed by defence and public security, DPS, in short. And 17% contributed by Urban Solutions and SecCom, USS.

DPS as a segment includes both local and international customers. It also covers commercial domains, not just defence domains, including public security and safety, critical information infrastructure, and others. Hence, the DPS segment revenue in the pie chart, which was $4.9 billion in 2024, is different from the revenue derived from pure defence products and solutions, as shown in the middle, which is $3.5 billion. So I just want to clarify that the $3.5 billion is a subset of the $4.9 billion, or pure defence is a subset of DPS, which has more than defence.

Revenue by type, in the centre of the slide, the bar chart shows revenue by type of products and solutions over the past three years. They have all been growing. Commercial type increased from $7.1 billion in 2023 to $7.8 billion in 2024. Defence revenue grew a very robust 15% from $3 billion in 2023. To $3.5 billion in 2024, reflecting the opportunities arising from ongoing conflicts and geopolitical tensions around the world. Revenue by customer location, on the right of the slide, Asia contributed 51%, US 23%, Europe 19%, and others 7%. Slide seven, please. This slide shows the year-on-year increase in group revenue by segment.

As you can see, all segments contributed to the growth, and our revenue grew from $10.1 billion to $11.3 billion as a group, 12% increase contributed by all segments. Slide eight, this waterfall chart shows a strong EBIT growth of 18%, from $915 million in 2023 to $1.1 billion in 2024, driven by business growth and cost savings. Slide nine shows a significant net profit growth of 20% year-on-year, which crossed the $700 million mark for the first time. Next, I will move on to cover business discussions by segment. Slide 11, for commercial aerospace, revenue grew 12% to $4.4 billion. Excluding aircraft sales in both 23 and 24, revenue growth would have been 15%.

This growth is contributed by stronger sales from engine MRO, Nacelles, PTF, and composite panel.

Although the base revenue for commercial aerospace is now much higher, at $4.4 billion, the second half-24 growth rate, I must well point out to you, year-on-year was not as high as the first half-24 growth rate year-on-year. And this isn't a surprise, as Jeff has anticipated and spoken to you before. Nevertheless, we remain confident in the growth trajectory for the CA business. We will share more at investor day, 18th of March, and we do expect our growth rate in the midterm going forward to be stronger than industry growth rates, given our very strong competitive position. EBIT for commercial aerospace improved 19% to $400 million due to stronger revenue and good product mix. Aircraft OEM have been unable to produce new aircraft fast enough to meet demand from airlines. Hence, existing aircraft fleet remain in service for longer.

This resulted in a lack of PTF packs aircraft feedstock, impacting our PTF business volume. Nevertheless, we can and we are optimizing our hangar capacity since the capacity is fungible by increasing airframe MRO revenue to offset the lower PTF revenue. We are also looking at optimizing our CA facility network around the world for greater efficiency. In terms of contract wins, CA secured $4.7 billion of new contracts in 2024, of which 1.8 billion of new contracts were signed in the fourth quarter.

Next slide 12 on DPS. DPS revenue grew 16% to $4.9 billion. This strong growth was contributed by all subsegments. Digital business comprising cloud, AI analytics, and cyber achieved a revenue of $645 million. On a BOP basis, base operating performance, that is, by excluding one of US marine post-sale completion gain of $16 million, which you will remember, EBIT for DPS increased 15% to $636 million, which is more in line with revenue growth of 16%. DPS secured 5.3 billion of new contracts in 2024, of which 1.7 billion came in the fourth quarter. Slide 13, moving on to USS Segment. Revenue grew 1% to close to $2 billion.

This growth was contributed by URS and partially offset by Sycom. EBIT for USS improved from $10 million to $40 million. Attributed to higher revenue, the absence of satisfied divestment loss, and lower Sycom severance cost. USS secured $2.6 billion of new contracts in 2024, of which $0.7 billion was for the fourth quarter. During the quarter, Transcore recorded its first tolling solution win in Southeast Asia. We have been talking about cross-selling and synergies from this very big acquisition of ours. So we are very heartened indeed that this tolling contract win is extensive. It will cover numerous expressways and lanes. It is a result of our US tolling technology, which exists at Transcore level when we bought it,

been sold into Asia, where the rest of the group has a very strong customer network. The size of the synergy here is also meaningful, and we expect to do more of such cross-selling synergistic wins. Slide 14, whilst challenges in the Sycom subsegment remains, its transformation continues. We are encouraged by early signs of recovery, but we're not out of the woods yet. Revenue for fourth quarter, 24, was 12% higher year-on-year. The operational EBIT turned marginally positive in fourth quarter, 24. So this is an encouraging early sign. Sycom recorded key wins, such as the Indonesia's C3R1 satellite network and Brazil's energy connectivity project in collaboration with ISAT, just to name a few.

Now I've completed the business discussions. Let me now move on to productivity. Slide 16, our OPEX over revenue ratio has been trending well over the years. In 2024, we achieved the lowest OPEX over revenue ratio of 10.6% in recent years. As the group grows, we are experiencing scale and network effects, which have been translating to productivity gains, cost savings, and better margins. Such savings have enabled us to mitigate inflation and improve margins. Slide 17, debt profile. Our borrowings at 31st December, 24th, reduced by 5% year-on-year from 6.1 billion to 5.8 billion. And this is despite a 3% stronger US dollar to $3.0 exchange rate, impacting the revaluation of US dollar loans back to $3.0.

If we work on a constant FX basis against N23 FX level, our borrowings as N24 would have been even lower at 5.7 billion. EBITDA increased 11% year-on-year to 1.6 billion. Again, very strong cash flow. Gross debt to EBITDA leverage ratio correspondingly reduced from 4.2 times in 2023 to 3.6 times in 2024. Due to the twin effect of a reduction in debt, the numerator and the increased EBITDA, the denominator. Fixed versus floating rate interest rate ratio stood at 69% to 31% as at N24. The group weighted average borrowing cost for 2024 was at a competitive level of 3.6%. Previously guided to be mid trees. Now looking ahead, we expect this weighted average borrowing cost to remain at mid 3% in 2025,

assuming two small rate cuts in 2025. Our credit ratings remain very strong with AAA stable by Moody's and AA plus stable by S&P. I think even without the two rate cuts, we will still be around mid trees because the impact will not be that significant. Next, contract wins and order book. Slide 20 highlights some of our major wins in fourth quarter 2024. In this period, the group secured $4.3 billion worth of new contracts with 1.8 billion from CA, 1.7 billion from DPS, 0.7 billion from USS. This brings the total new contract value for the year 2024 to 12.6 billion dollars. Slide 21. The group ended the year with a robust order book of 28.5 billion, another new record. About 8.8 billion of the order book is expected to deliver in 2025. This strong order book

provides visibility for future revenue in the coming periods. Slide 22, investing for the future. Slide 23. Even as we perform well in 2024, we continue to focus on the future. To invest in line with our strategy and to optimize our portfolio. Our investment in the future covers three main areas, capacity and capability building, two, geographical market expansion, and three, operation efficiency. Firstly, for capacity and capability building, this includes the new airframe MRO capacity such as Changi Creek here in Singapore, Ercho, and Pensacola in Florida. Gao Yat, also in Singapore for our marine business, the fourth data center in Boonlei, AI and cyber capability building, an area we are very focused on, and to develop and roll out SACCOM's next generation intuition platform.

Secondly, for market expansion, this includes 155mm ammunition export to Europe, partnership for in-country production of 8x8 armored vehicle in Kazakhstan. This is a milestone for us, as it is a significant land platform program. Smart city platform in Lucille City, Qatar, and as I described earlier, the first Transcord Toling solution in South Asia. Thirdly, for operations improvement, we are doing the following. Harnessing AI for internal productivity, continuing to seek procurement savings by leveraging scale, and also across international business units of ours. We have also formed a Vietnam competency center. It has about 200 people now, one year or so into the program, and this headcount is expected to increase. Additionally, our Vietnamese colleagues are also taking on higher value-added work,

and we can do this productively, and as well with cost arbitrage, vis-a-vis Singapore or elsewhere. Slide 24. Dividends, 25 actually. We are pleased to announce that a final tax exam cash dividend of five cents per ordinary share has been recommended by the board for the financial year ended 31st December 24. We are increasing our dividend per share by one cent per share. Payment of the final dividend is subject to the approval of shareholders of the company at the upcoming AGM on 24th April. The record date, 30th April, and with so approved, shareholders will receive the dividend payment on 15th May. For the first three quarters of 2024, we have paid three interim dividends of four cents each for the financial year, and if you add that to the five cents final dividend, this will make a total of 12 cents per share.

Sorry, the interim dividends of 12 cents, this will make a total of 17 cents per share. So let me say again, for the first three quarters of 2024, we have paid three interim dividends of four cents each. Four times three, making a total of 12 cents interim dividends in total. Hence, the total dividend for the year ended 31st December 2024 will be 17 cents per share if you add the five cents and final dividend to the 12 cents interim dividends. Slide 26, next let's move on to the outlook. I'll just read out the group president and CEO's message. We delivered a very strong set of results in 2024 despite an uncertain and challenging environment. We are confident that our strong fundamentals will continue to position as well, even as we confront a fast-changing landscape. We have a robust order book and a competitive

market position which will underpin our continuing revenue growth and performance. So this brings me to end my 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 Full Group CFO, Rabinda Singh, group chief operating officer, technology and innovation and president, defense and public security, Tan Li Chiu, 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 everyone here at SD Engineering Hub as well as those who joined us virtually. Thank you for being with us this morning.

Welcome to SD Engineering's financial results briefing for second half and full year of 2024. As Cedric mentioned, we ended 2024 on a very positive note with a strong second half performance driving improvements across a range of financial metrics. Cedric had outlined the key factors behind those results and I will just highlight some key takeaways. In the second half of 2024, group revenue grew 10% year on year and group EBIT rose 18%. Group net profit up 20% compared to 2023. These improvements contributed to the stronger full year 2024 compared to 2023. Group revenue rose 12% higher, a close 12% higher at 11.3 billion dollars.

Group EBIT crossed the 1 billion dollar mark to 1.08 billion dollars. Group net profit reached a new level of 702 million dollars or a 20% increase that outpaced the annual revenue growth driven by a stronger margin mix across segment projects. At the segment level, commercial aerospace posted 12% increase in revenue. As we had anticipated, the segment revenue had a more gradual second half growth after more than 10 consecutive or successive quarters of double digit year on year growth. Its full year EBIT grew 19% reflecting an improved margin or EBIT margin of 9.1%. As we had informed in the last briefing or the last results briefing or quarterly updates,

we are addressing near term shortages in aircraft feedstock for PTF work by reallocating capacities and resources to capitalize on stronger airframe MRO demand, notwithstanding the near term effects of PTF feedstock situation at a close of 2024, our PTF business achieved a mid single digit EBIT margin percentage as expected and with a revenue of 706 million dollars in total for PTF business surpassing our revenue target of 700 million dollars for PTF set for 2026. So we have already achieved our 2026 target ahead of time, two years ahead of time actually. The Airbus A330, A321, A320 PTF programs are now integral part of our commercial aerospace business.

The programs have matured and stabilized over the years. Given our much higher total commercial avenue, commercial aerospace revenue now, compared to pre-COVID levels, we feel it's no longer as meaningful to single out PTF targets going forward. That said, it remains a valuable contributor to the segment's revenue and profitability, but we will not call out PTF targets going forward, given the reasons which I've just mentioned. Now moving on, looking ahead, we remain confident, as Cedric mentioned, in the growth trajectory of our commercial aerospace business. We will share more at the upcoming investor day on the 18th of March. I hope all of you can attend, but we do expect our commercial aerospace growth to be stronger than industry growth rates for the commercial aerospace industry, given our strong value proposition,

growth track record, as well as our own growth plans. More to come on the 18th of March. Moving on, the defence and public security segment perform very well, with revenue rising 16% and BOP EBIT, or Base Operating Performance EBIT, up 15% in full year 2024 compared to full year 2023. So with that, we have to exclude the post-closing adjustment for US marine business that we benefited from in 2023. If you exclude that effect, DPS EBIT went up 15% as the slide would have shown you just now. This also serves as a good segue to highlight that our defence business sales increased 15% to $3.5 million as presented by Cedric. We saw stronger demand for defence related products and services driven in part by heightened geopolitical tensions and ongoing

conflicts around the world. Next, our urban solutions and SACCOM segment delivered a stronger 2024 than 2023 as expected. While this segment had a weaker second half year on year, second half revenue and EBIT were stronger than the first half of 2024, in line with our expectations and in line with what we have communicated as our outlook in the last couple of briefings. And as Cedric mentioned, Transcore secured. Its first tolling solution win in South-East Asia. We are very heartened by that. While we are not at liberty to disclose contractual details at this time, it was a synergistic win involving the provision of full-fledged tolling solutions for numerous expressways and lanes, leveraging on the groups, customer networks in South-East Asia and Transcore's very strong value proposition

and technologies in the tolling solution space. SACCOM, while its full-year revenue remained weak in 2024 due to its ongoing transformation and focus on enhancing revenue quality, we are heartened to see early signs of improvement in the fourth quarter of 2024 with a 12% year on year revenue increase versus the same period last year and marginally positive creating EBIT in the quarter. But as Cedric said, we are not out of the woods, but we are heartened by the so-called early signs, but we will continue our focus on turning around the business for SACCOM sub-segment. On order book, a strong order win of $4.3 billion in the fourth quarter, a total of $12.6 billion order wins for 2024, strengthen our order book to a new level

at $28.5 billion. While we are heartened by the strong order wins in fourth quarter 2024, I will say again that quarterly order book fluctuations are normal part of our business and therefore it is more important to look at our order book win track record and order book trends. Notwithstanding short-term variations in contract win timing and project completions, key points to note are that our robust order book is a leading indicator of growth and our strong revenue pipeline ensures sustained revenue growth over the next few years in the medium term. These are points which we have made before but it's worth mentioning again against our strong set of results in 2024. The group has a strong track record of focusing on improving operational efficiencies, productivity and cost management to drive better margin outcomes

as evidenced by the resilient results even during the COVID years. Such focus continues in 2024 and will continue in the years ahead and Cedric have really showed you the unit operating expenses which went down to 10.6% of total revenue in 2024 or new look. In summary, we delivered a strong set of results in 2024 with three segments each playing a key role in delivering growth and profitability. A healthy project mix along with cost efficiencies and procurement savings helped improve our margins. Building on this strong foundation, we have set our next five year targets with a clear commitment to continue investing in growth and innovation and continual portfolio management to high grade our portfolio. You remain mindful of external factors which we cannot control and as well as execution risks

in today's fast changing external environment and we will stay focused in the pursuit of our strategic objectives as we navigate the challenges in our operating landscape. As we have so effectively done over the years, you will hear more from us at our investor day on 18th March so we'll give you a more comprehensive overview and description of our plans and our growth plans in the next five years. And finally, on dividend, our board of directors has approved a final dividend of five cents per ordinary share subject to shareholders approval at the upcoming AGM. This will bring the total dividend per share for 2024 to 17 cents if approved at the AGM compared to 16 cents per share paid out for each of 23 and 2022. This increase is in line with our unwavering focus in returning value to our shareholders as our net profit progressively improves. With concurrent disciplined allocation of growth capital and prudent

management of our balance sheet. So on that note, we'd like to take questions that you may have at this time. Thank you Vincent. We will now move on to the Q&A session for the next half an hour. I will open up the floor to our participants in the room first. For our analysts online, please click the raise your hand icon and we will place you in the queue. May we have our first question please? Hello. Thanks. Thanks management. Congrats for the very strong results and very good achievement over the past few years reaching many of your targets two years in the round. I have three questions. The first question is regarding the five cents dividend. We raised from four cents to one cents for the fourth quarter. So the question is should we take it as a run rate for future quarterly dividend pay out? Just for the confirm this is not just

one quarter impact. Yeah. Second question is regarding your order book delivery guidance. We are guiding for 8.8 billion delivery for I-425. This is 0.9 billion higher than the start of last year when you get for I-124. So on to have a sense of the breakdown of this additional 0.9 billion. How much is for defense and public security? How much for CA and how much is for USS? That's the second question. The third question is regarding the defense public security margin. Young year based on my own adjustment in the second half this year there is still a slight improvement in margin young year. Last year was about 11.5% and this year second half is 12% but if you compare with the first half there is a moderation. First half was like 13 plus percent. Second half is 12%. So would I like to have some understanding about the margin outlook?

Should we expect similar level of margins going forward or you expect the margin to moderate? That's all from me. Thank you. Okay. Well thank you Roy. I will let Ravi talk about the DPS margin last. As we told you before, you know, margin is also dependent on project timing, margin mix but Ravi will be able to give more insights. Now we do not disclose order book delivery by segment. It is true that you know the 8.8 billion dollars of order book delivery expected in 2025 is higher than the previous year but we will not be able to break down for you. We do not break down for you the segments. Dividend. As we said before and we say again, as our net profit progressively strengthens we have more capacity to return value to our shareholders through dividend but at the same time we also need to preserve capital for growth to capture growth. We are a yield come growth stock so we'll make sure that we return value through dividend

but at the same time reserve capital growth capital so that we can pursue those growth that will create value for our shareholders and its our commitment still that as our net profit continues to strengthen, aggressively strengthens we will have more capacity to look at dividend returns to our shareholders but maybe you know later on you know Cedric can can add on as appropriate but let me just go to Ravi about the DPS model. Roy thanks for your question. So the first of all I think as Vincent mentioned in our business in the defense and public security our projects tend to be quite long and multi-year and a lot of it depends on when the project is completed and also the milestones. When we look at margins we tend to look at it over the year and if you compare the margin last year 24 and with the margin 23 without the one off actually they're very comparable. I would say the DPS margins are quite good and of course with the other orders that we have won

and I think the opportunities that we are pursuing we hope to continue to maintain the margin.

Thanks Roy for a question. I'll just add that uh uh investor day is 18th March is about three weeks from now. I think then we can fit the subject of dividend and which is driven by our growth a more meaningful way and I look at more time and describe in more detail so I I I uh I uh I seek your patience on that subject. Yeah yeah. For the other understand you will not look at the breakdown of the guided delivery uh just want to have a sense because uh year on year growth in terms of delivery the guidance for the whole group is like maybe 12-13 percent uh so just want to have a sense which segment of of the tree occurring faster. That's the order book. In terms of no in terms of the order book delivery guidance for next year. Okay so we will not break down the delivery book delivery guidance by segment um and we just tell you that we can only share that is 8.8 billion dollars to be drawn down from the order book but at

the same time we also have in-year revenue as we as you are aware but maybe I can share this with you in 2024 the higher order book was contributed contributed by all three segments all three segments had higher order book in 2024 at the year end of 2024 compared to year end 2023. Okay thank you. Hi uh morning everyone Shaker from IHP uh two more questions on margins but this time for the other two segments. So I'll start with commercial aerospace second half 24 EBIT margin was fairly strong is there a one-off in that number second question is on the USS margin uh very solid set of numbers for SATCOM fourth quarter turning EBIT positive how should we look at the margin outlook for USS over the next year uh two more questions one is on the associates I noticed the DPS associate earning was fairly strong in the first half and then it tapered off what led to that increase and then decline and last question is on investing of our

growth uh Vincent you mentioned that ST engineering is a growth plus yield company you're not comfortable giving a yield guidance right now but looking at capex so where are you growing and what kind of capex outlook we should look at for the next two years I think at the investor day we don't also break down by you know capex growth category but we have been investing in the strategic areas so if you go back to our growth plans our strategy which has remained steadfastly consistent since 2018 we talked about strengthening our base business core businesses while pursuing new growth areas including international defense and smart city so you'll hear this theme um going on because it has been a very good strategy for us so on investor day conference we will share more details with you on how we intend to move on this on this uh on this uh on this front in each of our segments so you'll be a holistic

uh overview for the next five years so run rate I mean for replacement capital uh capex and so forth we are somewhere between four to five hundred million dollars but then this excludes mna if there are mna opportunities we may uh you know spend more but run rate is between four to five hundred million dollars of capex and that gives us capacity to pursue our base business growth um but then there are incremental uh capex requirements that are not baked in which will include mna or if there are opportunistic aircraft purchase which will later on be recycled in terms of the capital we might also do so supported by of course a robust set of returns that we expect to get and so far we have been achieving those return targets over the years so I'll I think you

have two other questions on margins for commercial aerospace and um a second half whether there are any extraordinary items for ca and then for uss what do we expect the margin uh outlook to be and then we'll then move on to ravi to talk about the s-sok and jvs why is second second half a little softer than first half okay so maybe um jeff can start okay your question was whether there were one-offs um we we had a combination of product mix uh and stronger performance due to productivity improvements which we obviously will continue to work on so uh there isn't a one-off uh happening but um we have a combination of multiple businesses that are working towards productivity improvements thank you I won't say it's a new run rate but there are always challenges in the market

but we we aspire to achieve a better outcome as you can see you know commercial aerospace we our margins were really quite resilient even in the covid years and we have already achieved the mid single digit e-bit margin expectation for ptf and you know fundamentals continue to strengthen for the first time we passed 400 million dollars of e-bit for aerospace so I think uh let our track records speak um speak for itself um and we're here more during the investor day did you so on the uss front the urban solutions business as you would appreciate is no different from what ravi was mentioning earlier um they are project milestone base and our revenue as well as profitability will track the milestones as we deliver to those projects on the setcom side

we feel good coming into 2025 with the fundamentals uh which is why we called out q4 being early signs of improvement that we see and um you know the commitment that we made in terms of cost savings on the cash flow front continues to be front and center for us and we are on track to deliver the 60 to 70 million of cash flow cost savings as we had communicated earlier so all of this will add to our e-bit profile as we work into 2025 20 million is already achieved 60 to 70 million that we communicated is an annual savings that you will see obviously you know as we get into um impact of that in uh for the bottom

line we had also made it clear that not everything is going to fall into the bottom line because of amortized engineering costs etc we said earlier that about 60 percent of that will help us we have achieved that number for this year yes which of course um helped in because we did have lower revenue but the cost saving sites actually provides the mitigation okay so maybe we can go to ravi that's always a very simple quick answer thanks for the the question the um the contribution actually some experience for the singapore ash show every two years in the first half of the year there'll normally be a um a contribution from them and that's where the variation comes from ravi also happens to be the chairman or experience okay is there any question from online okay come please jason um hi good morning thanks for the

opportunity to ask questions uh just three questions from me so um right now at this juncture how are you assessing um the potential impact of tariffs that were recently implemented or tariffs that have already been announced on your u.s base um commercial aerospace operations and maybe discuss if you have any contingency implants if the tariff conditions worsen um second question is gee and saffron has guided for 15 to 20 increase in leap engine output for 2025 so should we be expecting nazio production to keep pace with their guidance this year and um third question is um maybe just a quick update on where we are today with the new york congestion pricing project um i think trump just came up and said that the march 21st date line for the project to conclude so have you seen any um changes in your discussions with partners in other cities that were um initially interested in implementing congestion pricing as well okay so there are three questions um tariffs and then um tariffs in the u.s the other one is output of aircraft for from

engines i mean but yeah and the sales for uh you know based on what gee and saffron sits so i'll let jeff answer that and the third one on new york congestion pricing um the two questions there are two sub questions there one you know what do we think is the immediate impact and then the other one is whether uh the other cities are still looking at it yeah um just keep in mind that the constellation or the the global space for congestion pricing is not just limited to the united states on potential tariffs we are watching the space very closely um i think we've got to see what actually gets finally done um because there's a lot of news coming out from there um so our competitors will also have the same um considerations and situations and you know for our commercial aerospace business ours is a global network so we have uh some degrees of freedom to to balance our work share workload and and portfolio of customer locations um we also uh have uh supply chain resilience and measures in place so i think

it's a bit too early to talk about the effects but we're watching because right now there's a lot of uh news flow but the actuals are remain to be seen okay but we are watching the space very closely but i can ask uh maybe uh jeff you know for commercial aerospace business to talk a little bit about that and then let him talk about the engines as well engines and the cell prospects as well okay in terms of tariff uh policies i think it's not yet clear what's going to happen but we do have a complex uh and should i say resilient uh supply chain of suppliers both within the us and outside the us right and we source partially from suppliers in the us which may also be affected by the supply chain coming from outside the us so it remains to

be seen how this would be dealt with depending on the the venture uh tariff policy in terms of jeff front leap engine output they have been outputting insufficient number of engines in past years as a result the spare engine market is insufficiently supplied so what they will supply is a combination of both with a new aircraft deliveries as well as in the spare engine market right so we are happy to hear they are good forecasts we continue to take guidance from airbus in terms of the number of 320 new deliveries which is our largest in the cell market and obviously airbus is going to aim for a good outcome and we saw last year that eventually they actually came down on original forecast right so we are hopeful and hopefully the engines

can supply it can be supplied well and then all of us will also follow the drum beat thank you

okay and then we have the new york congestion pricing yes so on uh new york congestion pricing obviously we are monitoring it closely as you said the news came out uh this morning but we've been monitoring the situation as a unfold uh the o and m arrangement with mta is still ongoing uh and in the event that you know future uh circumstances might impact that i just want to also iterate that this is immaterial at the group level in terms of revenue uh and also immaterial for us at the uss level so less than one percent uh at the group level and maybe less than two percent at the uss level um the second question around interest in congestion pricing we uh you know since the congestion pricing uh when live in january we've received

actually a lot of interest from europe as well as from southeast asia just inquiring about congestion pricing as a project and as a program yes so i think we we got to look longer term and beyond any specific market we have good solutions and it is really part of a set of measures a part of the measures that can address um you know continued urbanization of the world population so we stay tuned so far we've been getting good inquiries and we'll see we still remain optimistic any other questions in anyone from the line and then we'll come back to to you paul after we take a question from the online but now move on to participants online may we have laurine from morning star please okay we will move on to louis from ct louis please

unmute to talk please hi uh good morning and congratulations on the results uh i joined the call late so apologies if these questions uh were in the presentation uh two questions uh the first is on your order win outlook for this year uh are you expecting similar as to last year or even better uh we note of course that your uh disclosure of the order wins is now coming ahead of the results so should that be a positive signal and second question is housekeeping on the transport as young contract uh appreciate you can't disclose uh the counterparty but are you able to disclose whether it's the public or private sector contract sorry louis or southeast asia whether it's public sector or private sector okay let uh let you um talk about it i at this time we don't have liberty to go into a lot of details because contractually we are obliged to keep things confidential for now um and let's see whether during investor day we can say more but not

not at this time but the fact of the matter is it will be an awarded contract and it is a synergistic win or let lee to elaborate now order win uh we do not give a forecast on order wins which is why louis perhaps that was before you darlin i did recap um the fact that order wins you know comes um you know there are fluctuations uh quarter to quarter it is more important to look at our order win track record over the last few years as cedric showed you our order book which is a derivative of our new order win uh has almost doubled in fact more than double compared to pre-covid um you know if you exclude the u.s marine um divested uh divestment or order book has has doubled over the last few years so it is more important louis even as we see quarter to quarter year to year fluctuations

look at the longer term trend and our trend record of successfully competing for new contracts due to our competitive advantage our value proposition and our project execution so keep that in mind um now then you also ask this time we decided to announce new order wins a few weeks before our results we think for those of you who have been following us for some time you would recall that that was what we used to do um and we think that it will give insights um you know before the results we think and we will continue to do so um to for you to get some indication of our order wins and which again is a you know contributor to order book so it's not exactly a new practice uh louis we used to do that and uh yeah given that you know we only report full year half year results we

thought that maybe uh sharing uh more with you ahead of the quarterly and half yearly calls may be helpful um to you okay so maybe i'll move to um the second question to lead you yeah sure just a simple answer it is a private entity that we've contracted with thank you louis now we move on to karen from jp morgan hong kong hello my hi vison how are you and all the management yeah good to reconnect again i used to cover your company anyway i'm back again uh quick question is a follow-up question uh related to uh the nyc congestion in charge um i heard that the impact on annual basis not as significant but is there any event that we might have to do the write-off and in that case i think the impact might be quite substantial i don't know whether

we are able to uh give any cover on that and also related to uh march uh i don't know whether we can talk much about it but is it possible to understand is there any margin differential between the epc stage and also all and end stage and then that's the very first question so i do have a follow-up question regarding uh the contract part of the side defense part of the business as well are you able to give a little bit more color with regard to our progress in terms of getting order from natto standardization which i think is important initiative last year thank you i'm sorry karen well first of all very nice to hear from you the second question the last part were you referring to sekkom or what were you referring to natto n-a-d-o so i remember last year we were trying to uh you know capitalize on the opportunity over there because right now for the

defense part of business it's mainly home driven and then last year i recall that we actually managed to get ammunition related contract which i think is a very important step forward just wondering i know we probably can't talk too much but maybe just keep some color on that front i i think ravi will be very very delighted to tell you the success stories that we had in 2024 uh in the international defense space we have actually secured quite a few uh good wins and of course at the investor day ravi will give you a more comprehensive overview of our track record in the last few years and what we expect in the next few years so we'll come back to ravi very shortly but um to your first question we for the congestion pricing contract in uh new york we don't own the assets we are basically the epc contractor to help them build the solution and do the maintenance so there is no impairment um effects on on us at all um and we said that if

if the onm contract or or the congestion pricing operation gets terminated um hopefully not but if it does then the impact on our revenue is very small at the group level is less than one percent at the uss level is second two percent so so it's not something that uh would be material impact on our group then as leechu mentioned there are also interests from outside of the us to look at congestion pricing solutions and so we still remain long-term positive about the potential of a congestion pricing solution but maybe uh leechu is there anything that you'd like to add no i think you would describe it well maybe i just answer the question around margins whether there's any differentiation between epc margin and onm margin and unfortunately we're not at liberty to kind of disclose the split of the margins across these projects um so you know yeah

all right but anyway thanks for your question karen really nice to hear from you today i hope we have answered your question so let's uh or maybe we say second one on to ravi yeah so karen thank you very much for your question um we we announced earlier that we saw 155 ammunition to Europe um last year 24 last year i would say that overall our international defense business is doing um well better than in the past and things improving um last year in fact we had a few wins that were the first i mean the 155 is one of them first time we did it also managed to sell some electronic solution to Europe we sold uavs to a country in asia and as we announced we're doing some work with karzakstan on the eight by eight so overall i would say that we've done better than the year before and there are a lot more prospects which we are pursuing we are we are positive about the opportunities moving forward all right thank you uh so karen i hope we've

answered your question so maybe we can uh is lorraine also uh lining up no okay so perhaps we can come back to paul so you had a question before we went to the online participants thanks uh and sorry to drag this just to zero in on your second half results uh notice your other op-ex did come down uh i just wondering and part of it was impairment just wanted some housekeeping what was the amount and just to follow up on the on the ca question again just on the second half again the the your revenue grew hungry but your e-bit kind of grew 50 so i know there's a bit of timing issues but just seemed a bit uh extreme at least on the second half numbers for your ca uh earning earnings jama okay well let uh jeff talk about the uh ca results in uh second half of 2024 but for the other op-ex i mean i think let's recap this our overall op-ex trend is going in

the right direction it continues to be um you know at a lower level in fact 10.6 is the lowest we've we've gotten at least in the last 20 years that we've kept record um so it's as a result of our discipline in pursuing operational efficiencies procurement savings in fact last year a total procurement savings and and uh productivity improvements of more than 200 million dollars that helped us you know mitigate the effects of inflation so we're actually quite heartened by the continued progress that we have made as i mentioned to you before we have uh a team of dedicated people in the continuous improvement team that the whole team will go around go so the team members go around the company at every sector working with the business units to see how best to progress efficiency capture productivity gains and that team is under the oversight of of jeff so we'll continue to make that but to your specific question we maybe

later on we can point us to the details and we'll share with you exactly what it is but overall our objects um is in a pretty good situation um jeff yeah okay just to add um the numbers are not exactly what you said but in terms of product mix obviously we did have some spare sales in the second half that were not so strong in the first half

uh okay hello hi thanks morning dr swedish okay just two quick questions the first of which is could i get some color on how the group navigates uh negative forex impact the us dollar on revenue and secondly i think you mentioned earlier that uh you guys are going to optimize your hangar capacity so could i just get some details on that in terms of keybacks timeline yeah thanks okay so the second question uh we'll direct to jeff later on we have been announcing our new hangar capacities but i can tell you that um we'll always be looking at optimizing our network so you know we have growth plans but at the same time we're always constantly looking at how to optimize so i'll let jeff talk talk about it and then maybe um cedric can talk about how in general we manage our forex exposures so the the first aspect of the forex is just accounting translation right so if we receive us dollar revenue and us dollar strengthen we will have

higher revenue in single order terms and vice versa a 1 uh appreciation in us dollar versus single order will result in something like 20 odd million increase in the good revenue and vice versa so it's not very significant but beyond accounting on the economics aspects of it we have a very disciplined way of hedging our foreign exchange exposure on the economic basis so ideally we would like the revenue in a certain currency other than single order let's say us dollar revenue we negotiate with the customers

or us dollar revenue to match us dollar cost i think that's on a project basis that's a natural hedge that's what we seek to do or euro revenue part of a contract to match euro cost that's the best way in which if we cannot achieve a natural hedge then we will try to buy forward that particular currency that we are short of so for example we have years of revenue but euro cost we're short of euro so we'll buy euro forward in a wedge basis over three four years so in the near term it will be 100 percent hedged and then 80 to 100 and then in the next few periods it will be quarters or so it will be like 60 40 percent so it's a wedge basis the reason why we do a wedge basis is to ensure that what we are trying to hedge or reduce the volatility off which is the exchange rate it's not offset by forecasting error in a very long term because if you're going to hedge 10 years out you're going to hedge a

volatility that is a big bar of a certain value but actually the volatility of a casting error is even higher then you'll be locked over high volume which you may not need right so so there's economics and there's accounting accounting so accounting is about 20 million for one percent movement economics which is more important to me is insignificant after we hedged the way we went about it so it's not one million type impact all right um now jeff you can talk about commercial aerospace capex so uh we we do have as dinson mentioned earlier we do have capacity coming online it's under construction so in fact in the next three years meaning 25 26 27 every year we have additional capacity coming online at the same time we continue to look at network optimization to make sure that we are we have capacity in the right places supporting the right customers

additionally our engine mro is also adding capacity so that we can handle both leap engine mro capacity and the cfm 56 engine mro capacity so basically across all of our opportunities growth markets we are looking at growing capacity and capability thank you

you will take our last question from laurine from morning star laurine please unmute your mic please um yeah hi morning um just uh most interested your working capital seems to have improved a fair bit this uh 2024 i'm curious whether that's part and parcel of what you've mentioned improved productivity um but were there any sort of runoff uh you know sales or something like that which would have improved that situation as well okay uh laurine is that your only question oh yes it is okay good yes we do manage our working capital very closely it is one of our internal stewardship items we look at how to optimize a networking capital and that's one of the reasons why a key reason why we're able to reduce our working capital in 2024 we also sold some aircraft uh you know recycling our capital so as we mentioned and that also helped us in

our working capital productivity as well um so it's not a one-off uh item but it is a result of our constant uh consistent focus on making sure that our networking capital is optimized maybe cedric can add a few yeah um we have also centralized a credit control team which uh enable them to use more analytical tools to look at trends sometimes with ai a credit risk but i would say that all the segments have worked very well especially commercial aerospace that has reduced receivables uh to to quite a big extent and we are always very focused on capital employed even in when we evaluate new investments we don't just look at pnl if a particular project requires a lot of capital we are scorned at it right so i think that's the approach that we have done for many years in a very disciplined way and it's beginning to yield results okay well thanks for a question so we don't have any more questions

from online and um for those who join us here uh we appreciate your attendance in fiscally for those who join us virtually thank you for dialing in we hope and we wish that all of you can join us at the investor day conference that we have organized and you should have gotten the invitation on the 18th of march where we can give you a more holistic um you know description projection of our next five-year plan all right on that very positive note thank you very much thank you