Good morning, welcome to ST Engineering's Full Year 2023 results briefing. This morning 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 open up the floor to a Q&A session. For participants dialing in, please note that you'll be placed on a listen-only mode until we open up individual lines for the Q&As. Without further ado, may I invite Cedric to give his presentation. Cedric, please.
Good morning to everyone here in person at the ST Engineering Hub, as well as those joining us via webcast. Welcome to ST Engineering's full year 2023 results briefing. Before I begin, I would like to bring your attention to slide two which states, among others, that the group's actual future performance and outcomes and results may differ materially from those expressed. Slide three shows the agenda for today. I'll be covering group highlights, business discussions of each of the segments, order book and debt profile, dividends and outlook. Thereafter, CEO Vincent Chong will make some remarks followed by Q&A. First, let's take a look at group highlights. On slide five, we are very pleased to report a very strong set of results for financial year 2023. First, let me take the second half year-on-year figures first.
For the second half of 2023, the group achieved double-digit year-on-year growth in major financial metrics: 10% growth in revenue, 17% growth in EBITDA, 34% growth in EBIT, 43% growth in PBT, and 20% growth in net profit. Strong sets of results. This second half 2023 year-on-year comparison to second half 2022 is a better way to look at momentum compared to, say, second half 2023 versus first half 2023, because this latter sequential method is distorted by seasonal factors. So as you know, in the second half versus second half, you take away all the seasonal factors. You're comparing the correct season to season. Next, the full year results. The group achieved also double-digit year-on-year growth in major financial metrics. Revenue up 12%, and we breached or surpassed the SGD 10 billion mark for the first time. EBITDA up 16%.
EBITDA, as you know, is a proxy for operating cash flow, and it's at a very strong SGD 1.5 billion. EBIT up 24%, PBT 18%, and net profit 10% at SGD 586 million. Our order book came in at SGD 27.4 billion, with about SGD 7.9 billion to be delivered in 2024. Moving on to slide six. Here we discuss revenue growth. This slide shows year-on-year increase in revenue by segment. The group recorded a 12% increase in revenue, and this increase is contributed by all segments, including commercial aerospace, DBS, and USS. In the DBS case, we have normalized 2022 base by taking out the U.S Marine, which was sold in 2022. Slide seven from left to right shows the revenue breakdown by segment, by type, and by location of customers. Revenue by segment. In financial year 2023, commercial aerospace contributed 39%, DBS segment, Defense and Public Security segment, 42%, and USS 19%.
So USS, as you know, is our urban solutions-based business, TransCore, as well as Satcom. I would like to clarify that DBS as a segment included both local and international customers, so not just Singapore defense customers. It also covered commercial domains such as public security and safety, critical infrastructure, and others. Hence, the DBS segment revenue of SGD 4.3 billion is different from the defense revenue of SGD 3 billion, because this is only a subset of this, right? Because this has non-defense public security elements as well. Now, in the center of slide seven, it shows the revenue by type of business. Commercial grew steadily to SGD 7.1 billion. Defense grew as well. If you take off the Marine, U.S. Marine, SGD 2.6 billion, SGD 2.8 billion, and SGD 3 billion. On the right-hand side, it shows the revenue breakdown by customer location. Asia contributed 49%, U.S. 24%, Europe 20%, and others 7%.
So Asia and U.S. actually climbed a little bit compared to the year before. Slide eight . This slide shows the revenue by segment and the growth for each of the three segments. Commercial Aerospace grew robustly by 31% to SGD 3.9 billion. So we are pleased to share that Commercial Aerospace surpassed one, the 2019 pre-COVID revenue level of about SGD 3 billion, and two, our November 2021 investor day target of more than SGD 3.5 billion by 2026. So this is 2023, and it's already exceeding SGD 3.5 billion. This group performance is attributed to strong MRO, but also partly attributed to the success of the MRAS acquisition, which produces the aircraft nacelle. Two, DBS, excluding U.S. Marine, revenue of SGD 249 million recorded in 2022 and was sold in that year as well. DBS revenue of SGD 4.3 billion was higher by SGD 229 million or 6%. USS revenue grew 10% to SGD 1.9 billion.
It's contributed by Urban Solutions, including TransCore, and partially offset by Satcom. Slide 9. 2022 EBIT was SGD 735 million. 2023 EBIT was SGD 915 million. So there's an increase in the EBIT per reporting standards of 24%, driven by business growth and cost savings of SGD 268 million. Now, if we strip out the one-off effects, which we term as base operating performance, so excluding the pension restructuring gains that we had in 2022 and also the lower TransCore transaction and integration expenses that we experienced in 2023 versus 2022, the 2022 BOP EBIT is at SGD 678 million. So if we take out the one-off for 2023, which is the Satcom divestment loss and Satcom severance cost totaling SGD 32 million, the 2023 BOP is at SGD 946 million. So comparing 946 to 678, at the base operating performance level, there's an increase of 40%. So the underlying operating performance is indeed quite strong.
We discussed a bit about energy in previous briefings. The average energy rate in 2023 is lower than 2022. So the rate, in other words, dollar per megawatt-hour is lower. However, consumption increased in 2023 versus 2022 to support the higher business volume and higher revenue. Slide 10, please. Here we discuss net profit. It improved from SGD 535 million to SGD 586 million, an increment of 10% year-on-year. Again, at the base operating profit or BOP net profit level, it improved from SGD 493 million to SGD 610 million, or a strong 24% at the operating level. All figures here are after tax because we're discussing net profit. Now, let's move on to business area discussions. Slide 12. Here we will discuss commercial aerospace EBIT. EBIT grew 12% from SGD 301 million to SGD 337 million, or a very strong 47%.
Again, normalizing for 2022 EBIT by removing the pension restructuring gain in 2022, base operating performance EBIT grew 47% from SGD 229 million to SGD 337 million. This strong commercial aerospace performance is attributed to the recovery of the aviation industry, as well as the very good performance of MRAS and the improving PTF margin as we climb the learning curve. More on CA for slide 13. The aerospace MRO business continued to recover in tandem with the aviation market. This business has done well as we continue to invest in it, even during the difficult COVID period. So these steady investments included new hangar capacity in Pensacola, in Guangzhou, and so forth. And this positions us to emerge stronger when COVID is behind us. Unrelentingly, post-COVID, we continue to invest in new capabilities like the new CFM CBSA for LEAP-1A/1B, as well as Changi Creek and others.
These will, again, position us for a brighter future. Continuous improvement in operations has been the modus operandi of commercial aerospace. In fact, Jeffrey chairs our continuous improvement committee for the whole group. For aerostructures and systems, MRAS nacelle growth benefited from the increased A320neo fleet deliveries. So as you know, for narrow-body A320neo, if the LEAP engine is chosen, then MRAS is the exclusive provider. MRAS has indeed performed very well, and it has been a very successful M&A to date. As I said earlier, PTF has also turned positive at the program level as we climb the learning curve. For asset under management, the AUM, which is under our Aviation Asset Management Unit, exceeded $2 billion as of end 2023. Again, we have set in November 2021 investor day a 2026 target of $2 billion, and we have now exceeded it in 2023.
Now, this AAM business, based fundamentally, is to purchase aircraft and engines, lease them out, and when we reach a critical mass, to securitize it or to sell it down to joint venture or other parties. But even after securitization or selling it down, this portfolio will continue to be managed by AAM of ST Engineering, and it avails us to more airframe engine and component MRO opportunities. So it is working well for us. Slide 14, DBS. DBS EBIT improved from SGD 405 million in 2022 to SGD 567 million in 2023, a very robust 40% year-on-year growth. This is due to business growth, better margin makes, cost savings, as well as the avoidance of U.S. Marine losses, which was divested in 2022. Slide 15. This slide discusses DBS business highlights.
Firstly, the strong order book for DBS, which comprises the frigate upgrades, the MRCV construction, among others, provide clear visibility of future revenue for this segment. For 2023, DBS won international contracts totaling about $950 million. So we are showing this figure to demonstrate our ability to penetrate international markets, even for the DBS segment. We also make good progress in international markets like Europe and the Middle East. The digital business continues to do well and is on track to exceed again our November 21 investor day target of more than SGD 500 million by 2026. Revenue of SGD 463 million was achieved in 2023, representing a 20% year-on-year growth, and we have three more years to exceed more than SGD 500 million. Finally, we will continue to harness the rapidly evolving digital technologies in cloud, AI, analytics, and cyber to seek even further growth. Slide 16 is about USS.
I'm pleased to announce that TransCore earnings became accretive in 2023, which is slightly ahead of plan as we have guided when we made the acquisition. TransCore was cash accretive in the first year, and it was P&L accretive ahead of plan before the end of the second year. The EBIT for USS dropped 66%, and this is largely due to Satcom and Satcom weakness. Excluding the Satcom divestment loss and Satcom severance expenses, the USS base operating performance EBIT declined by 6% from SGD 44 million to SGD 42 million in 2023. Even though the USS EBIT dropped, this segment performed significantly stronger in second half 2023 versus first half 2023. In first half 2023, this segment recorded an EBIT loss of SGD 34 million.
In second half 2023, this segment recorded a positive EBIT of SGD 44 million, bringing the full-year segment EBIT to a positive SGD 10 million, as guided previously. As you know, the Satcom industry is rapidly evolving, the industry itself, into a multi-orbit cloud convergent space. Hence, our Satcom business, iDirect, is also responding and transforming likewise. Slide 17 will review the business updates for urban solutions. So you have USS, you have urban solutions, which is the urban solutions-based business, and TransCore. Then you have Satcom, right? So we are talking about urban solutions. We have announced yesterday that we won a contract to enable automatic and ticketless parking fee collection at the Dubai Mall, which is one of the largest malls in the world, 13,000 car park lots. Just hard to imagine. This is a demonstration of how we could derive synergies from the TransCore acquisition.
The project demonstrates the Urban Solutions team's ability to synergize by combining TransCore's expertise in the Salik traffic toll system, which they developed for Salik in Dubai, with the barrier-free smart car park technology developed here by Urban Solutions in Singapore. So they are combining this to win a good contract in Dubai. So we were able to tap capabilities everywhere in the U.S., in the Middle East, of course, the folks working the ground, and in Singapore, and combining technologies and channel network to offer a superior solution to the customer. So I would also like to reiterate again that TransCore became earnings accretive in 2023 ahead of plan. So it is doing well. Thirdly, USS recorded its first international airport security project win to deploy the AGIL Secure Integrated Security Management Platform at the Dhoho Kediri International Airport in Indonesia.
In addition, USS has also won a rail project in Abu Dhabi and rail projects in Chennai, Sydney, and Ontario, Canada. Slide 18 describes the measures we are taking for our Satcom business. In 2023, these actions were taken. Firstly, we undertook an organizational right-sizing with a reduction of about 20% of the workforce. So this puts us on a better cost base. Secondly, we focus our engineering efforts on developing the next-generation platform, and this leverages on the existing Velocity platform, just one platform, leverage on it, with plans to convert the best-in-class features from both the Velocity as well as the Dialogue platforms into our future product offerings. Thirdly, we have successfully completed proof of concept on interoperability and cloud deployment. So these are features of the future. Our Internet of Things and over-the-top services have helped us expand into adjacent markets.
In 2024, we will unveil the NGP brand. This will be done at the Satellite Show in Washington, D.C., in the middle of next month to showcase the NGP's capabilities to our customers. Secondly, we will continue with cost optimization and process improvements and improve the revenue quality through better pricing and contract management. Let's move on to the group's order book and debt profile. Slide 20 highlights some of our major wins in 4Q23. I will leave you to read the details. But in this period, the group secured SGD 3.1 billion of new contracts, SGD 1 billion from commercial aerospace, SGD 1.5 billion from defense and public security segment, and SGD 645 million from urban solutions and Satcom. This brings the total contract value, new contract rather, the total new contract value for the year 2023 to SGD 14.8 billion, the year as a whole.
The group ended the year, slide 21, with a robust order book balance of SGD 27.4 billion, 19% higher than the SGD 23 billion recorded as at end 2022. About SGD 7.9 billion of this SGD 27.4 billion is expected to be delivered in 2024. This strong order book provides visibility for future revenue in the coming periods. Slide 22, our debt profile. Our borrowings as of December 31st 2023 has reduced by 7% from SGD 6.5 billion the year before. EBITDA has increased to SGD 1.5 billion by a strong 16%. Debt to EBITDA leverage ratio, which is what rating agencies look at, improved from 5.2, that means more debt to EBITDA in 2022, to 4.2, which is less debt to EBITDA in 2023. More than SGD 500 million has been invested in capital expenditure and capability building to support future growth such as LEAP-1A/1B, Changi Creek, Guangzhou, etc.
So we are also incurring interest expenses, which may not be seen in EBITDA for future growth. So this is investing in the future. Our debt profile remains balanced at 62% fixed interest rate and 38% floating interest rate. Group weighted average borrowing cost for 2023 is still at a competitive level of 3.3%. Our credit ratings remain very strong, with a AAA stable by Moody's and AA+ stable by S&P. Next, dividends. Slide 24. As you have read in the press release, we are pleased that the final tax-exempt cash dividend will be SGD 0.04 per ordinary share for the year ending December 2023. Payment of the final dividend is subject to the approval of shareholders of the company at the forthcoming AGM in April.
If so approved, the record date to be eligible is 2nd of May 2024, and shareholders will receive the dividends on 14th of May 2024. For the first three quarters of 2023, we have paid three interim dividends at a very ratable manner of SGD 0.04 each, making a total of SGD 0.12 for the first three interim dividends. Hence, the total dividend for the year ending December 2023 will be SGD 0.16 after including the final dividend of another SGD 0.04. Next slide, please. We now look at the outlook and the Group CEO statement. So let me just read it out. In 2023, our group achieved significant financial milestones. Group revenue exceeded SGD 10 billion, while group net profit grew 10% year-over-year to SGD 586 million. This performance was underpinned by the strength of our commercial aerospace and DBS segments and a high-graded portfolio.
Our investment in TransCore became accretive in 2023 ahead of plan. This strong set of results was also supported by productivity and cost-savings measures and investments made during the COVID-19 downturn. We remain focused on executing our robust order book of SGD 27.4 billion, while delivering sustainable growth and creating value for our shareholders. Finally, in summary, group did well for 2023 and is well positioned for the future. Revenue, EBITDA, EBIT, and net profit in 2023 had all witnessed strong growth. Contract wins, SGD 14.8 billion, a robust order book, SGD 27.4 billion, will provide visibility of revenue in the periods ahead. Our strong results are underpinned by commercial aerospace and DBS good performances. MRAS performed very well. TransCore became earnings accretive ahead of plan. Satcom transformation is well underway.
Cost of borrowings remained competitive at 3.3% per annum, and we have made consistently and steadily investments for capacity expansion and capability building with an eye for better performance and growth into the future. Last but not least, final dividend of SGD 0.04, making a total dividend for 2023 of SGD 0.16. This brings me to the end of my presentation, and thank you for your attention.
Thank you, Cedric. May I now invite our panelists to the head table? The panelists this morning are Vincent Chong, Group President and CEO; Cedric Foo, our Group CFO; Ravinder Singh, Group COO 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, President of Commercial Aerospace. I will now hand the floor over to Vincent to deliver his remarks. Vincent, please.
Good morning, everyone. Those of you at the ST Engineering Hub and also participants who are joining us virtually, welcome to ST Engineering's financial results briefing for second half and full year of 2023. First, let me just extend my appreciation to those who took time to visit ST Engineering Pavilion at the Singapore Air Show, which just concluded over the last weekend. It was really heartening to hear from those who attended the show that the show provided the opportunity for you to review our suite of solutions, and our showcase featured numerous new innovations underscoring our emphasis on deep tech capabilities for this year's show.
This focus expands beyond our well-established strengths in MRO products and hardware, and the feedback we have received indicates that your visit allowed for a deeper understanding of our comprehensive capabilities and value proposition, placing them into meaningful context when you have a show and tell, particularly regarding our longstanding investments in deep tech capabilities now. So let me just now move on to our financial results. In the second half of 2023, as Cedric presented, our revenue grew by 10% year-on-year, driven by improved performance in commercial aerospace and DBS as well as USS.
Our second half EBIT saw a 34% increase year-on-year with strong contributions from commercial aerospace and defense and public security segments, as well as a higher urban solutions and Satcom EBIT, in alignment with our earlier guidance for the segment performance to be second-half weighted, if you recall, that's what we have been informing the market. Group net profit for second half increased strongly by 20% compared to the year before, boosted by strong business growth, productivity improvements, and cost savings. We had a strong sequential half performance in second half 2023 compared to first half of 2023, this being another indicator of our growth momentum. Group revenue was 8% higher sequentially. EBIT was 6% higher, and net profit was 9% higher. On a full-year basis, our results achieved several milestones. The Group exceeded SGD 10 billion in annual revenue.
We also achieved very strong EBIT and net profit with year-on-year growth of 24% and 10% respectively. This set of results was underpinned by the strength of commercial aerospace and defense and public security, as well as a high-graded portfolio. Further support came from productivity gains and cost savings, as well as positive impact stemming from continual investments made during the COVID-19 downturn. As you would recall when we were briefing you during the height of COVID, we kept sharing with you that we continue to invest in growth projects so that we are ready for the upturn, and I am really glad that we made those investments during the downturn. Amidst inflationary pressures, we achieved notable improvements in our unit operating expenses defined as OpEx per unit revenue, decreasing from 12.1% in 2022 to 11.4% in 2023.
So if you use all of our OpEx divided by our revenue, that ratio came down to 11.4% in 2023, underscoring our consistent focus on achieving better productivity and lower costs. This is a result of our ongoing effort. As I mentioned to you, we have a team of people doing continuous improvement across the group, and then our functions, including procurement organization, continue to look at opportunities to optimize our purchases and costs. These outcomes underscore our strong group fundamentals and strategic focus. Let me just point to you some highlights. At the segment level, the commercial aerospace segment demonstrated remarkable growth for its full year revenue and EBIT, which increased by 31% and 12% respectively. Its SGD 3.9 billion revenue exceeded our investor day target of SGD 3.5 billion set for 2026.
This strong performance was attributed to contributions from all of our commercial aerospace business lines, reflecting the ongoing recovery in the aviation industry. I mean, albeit that half and half, we have project timing that would cause some intra-half or cross-half fluctuations in margins, but overall, our momentum is very, very strong. And just to remind you that our PTF also achieved accretion in 2023, as we have committed, and there is continued recovery in air travel. Asia Pacific has not yet recovered to pre-COVID level as a whole. It was at 83% at the end of last year, so we see more upside in our commercial aerospace business. And our nacelle production is also ramping up in conjunction and in alignment with the growth in aircraft production by the OEM, by Airbus. And we also have new hangars coming on stream in the next few years.
We broke ground at Changi Creek, and we're going to start our fourth hangar at Guangzhou very shortly, and of course, later on, we'll have Jeff share more with you. This segment posted a strong 35% year-on-year second half EBIT growth. Now, that's quite remarkable. As Cedric said, we already surpassed pre-COVID level for commercial aerospace in terms of the revenue and EBIT performance ahead of the global industry. Notably, as I mentioned just now, our Airbus PTF conversion programme achieved positive EBIT in 2023, benefiting from improved learning curve and realized productivity savings. With further progress, we expect the EBIT margin percentage to reach a mid-single digit this year and high single digit percentage by 2025. In 2023, we got low single digit % EBIT margin, as we also guided early on.
This projection is underpinned by ongoing efforts to mature the learning curve, especially at the new PTF sites, and a dedicated effort on enhancing turnaround time for each conversion. Importantly, fundamental demand for converted freighters remains strong. Looking ahead, we expect sustained momentum from the ongoing aviation recovery, especially in Asia Pacific, which was still lagging the other regions, but I think we should get past the notion of recovery to pre-COVID. We are really now very well positioned for growth, way past what we achieved pre-COVID, given all the investments that we have made over the last few years and the focus on growing our top and bottom line for commercial aerospace business. And as I mentioned, our decision to invest in capacity expansion during COVID-19 pandemic downturn has really paid off for us now that the aviation industry has rebounded strongly.
The second hangar in Pensacola, which was operational since February of last year following groundbreaking in July of 2021, is a testament to this. Looking ahead, I mentioned just now, fourth hangar in Guangzhou should be ready this quarter, and we have ongoing construction projects, including the first hangar at Changi Creek and the first hangar in Ezhou, Hubei from our JV with SF Airlines, and both of them are slated to be operational by the end of 2025. Overall, our current expansion plans will add about 30% more airframe man-hours to our global MRO capacity, and that's a significant improvement or increase. Our commitment to strategic investments in global capacity and the expansion of our MRO business, coupled with the introduction of innovative solutions such as our new LEAP-1A, 1B solutions for engine MRO, positions us for continued success.
Furthermore, our nacelle business will grow in tandem with A320 new deliveries. Let me just move on to defense and public security segment. This segment's annual revenue grew 6% in the second half, revenue grew 5% year-on-year if we exclude U.S. marine business revenue in 2022. I mean, if we exclude those revenues, then 2023 would have grown by 6%, and the second half would have grown by 5%. The EBIT was a very strong 40% increase for both reporting periods, driven by a combination of factors, including avoidance of losses from the divested U.S. marine business, project margin mix, and positive outcomes from cost-saving initiatives.
While revenue and EBIT may be lumpy at times, that's the nature of the defense business, stemming from project mix and timing. The segment has very robust order book providing clear revenue stream in the years ahead, where we are very confident in the performance of this particular segment, our DBS segment. Notably, as Cedric mentioned, our digital business comprising cloud AI analytics and cyber business recorded 20% year-on-year growth, poised to well exceed our investor day revenue target of more than $500 million by 2026. Our international business growth for the DBS segment gained momentum, as evident in the full year contract wins of close to $1 billion from its continued internalization. Specifically for our international defense business, we have forged partnerships within global defense ecosystems, strengthening our foothold in Europe and the Middle East, positioning us for continued growth in these target markets.
Next, for our urban solutions and Satcom segment, revenue improved for the reporting periods. Despite full year EBIT being impacted by Satcom weakness, second half EBIT was 7% stronger year-on-year. We also had stronger Satcom performance second half versus first half of 2023, as we guided. As we guided for the segment EBIT to be second half weighted, I will call out that as projected, sequential second half segment EBIT was stronger, contributed by TransCore and smaller Satcom losses. This resulted in an improved EBIT from -$34 million in first half of 2023 to $44 million in second half 2023, with a very strong improvement in performance during the period. As you have heard earlier, our investment in TransCore became earnings accretive ahead of projected second year post-acquisition timeline.
If you look at second year post-acquisition, that will be March of this year, but then we achieve accretion in full year of 2023, a few months ahead of schedule. When we talk about accretion means after you take all, you consider all the amortization and interest expense, we are positive on the bottom line for our investment in TransCore. As Cedric mentioned yesterday, we announced a new project in Dubai to extend TransCore tolling technology currently used in Dubai to a smart car park system at Dubai Mall, one of the largest malls in the world. The significance of this win really is that it demonstrates our urban solutions team's synergistic capabilities by combining TransCore expertise in traffic toll system with the barrier-free smart car park technology developed by our teams in Singapore.
We have a good pipeline of synergistic projects that are being worked on, prospects in this part of the world, in Southeast Asia, as well as in the United States. Of course, we'll share more in due course when we have more success. We continue to work on cross-selling our smart mobility solutions, and then we'll provide, again, updates of significant development as time passes. Meanwhile, we expect the transformation efforts of our Satcom business implemented in the middle of last year to continue this year. Cedric, in his presentation, has highlighted key focus areas that we have outlined to strengthen the business in 2024 and beyond. Moving on to new contract wins in 2023, we secured close to $15 billion of new contracts, including $3.1 billion secured in the last quarter of this year. This is 13% more than the year before.
Lifted by these new contract wins, we ended 2023 with a very strong order book of SGD 27.4 billion, and we expect to deliver about SGD 7.9 billion in 2024. The robust order book remains a leading indicator of growth in the years ahead, keeping us on track towards exceeding our five-year planned targets, which we have shared at the investor day. So we are confident that we are on the right track, and we will exceed our five-year planned targets based on our momentum in the last few years. Finally, our board of directors has approved a final dividend of SGD 0.04 per share, bringing our total dividend for 2023 to SGD 0.16 per share. Now, I have come to the end of my prepared remarks. We will now take questions, so we welcome questions that you may have at this time. Thank you.
Thank you, Vincent. We will now move on to the Q&A session. I will open up the floor to our participants in the room first. Kindly state your name and the company you are from before asking your question. For our online analyst participants, please click the raise your hand icon, and we will place you in the queue. May we have our first question from the floor, please?
Yes. Hi, I'm Jatin from Jabout. Thank you very much for having me here today. The first question I would like to understand is, I noticed that the CAPEX for 2023 is significantly lower than the year before, lower than SGD 500 million. I think it's only slightly over SGD 200 million compared to FY 2022, which was about SGD 4.6 billion. I'm just wondering, what's the key reason behind this drop in CAPEX, and whether you expect this to climb back up to the SGD 4 billion-SGD 5 billion range in FY 2024? That's the first question.
Okay. Would you want to complete your questions, or you want us to address one by one? Is your preference?
You can address one by one because I'm afraid it might be a bit overwhelming if I ask that.
Okay. Well, I'll let Cedric go into a little bit more details. But 2022 reflected our investments in TransCore. Our ongoing CAPEX, we expect run rate to be anywhere between $300 million, $400 million, $500 million, depending on the year. So that's kind of our run rate. So $540 million is really not extraordinary. $540 million-ish CAPEX in 2023 is not extraordinary. It's quite in line with our run rate.
Yeah. I think that's almost a complete answer. Indeed, 2023, our CAPEX is about SGD 540 million.
Okay. So the other question I would like to understand is more straightforward. I noticed that you mentioned $7.9 billion of the order book is going to be delivered in FY 2024. So I'm wondering whether it will be evenly spread out across the quarters, or would it be maybe more back-heavy?
There's no particular exceptions that we would like to highlight. I think it's no different than the past cyclical or quarterly trends. So what we mention here is just the rundown or drawdown from our order book. There's nothing that would cause us to believe the so-called pattern of rundown or drawdown would be different than previous years. But of course, quarterly, there are always plus and minuses, but I won't say that it's weighted in any way differently than previous years.
Previous year, meaning it will be more back-heavy, right, towards the end of the year?
Yeah, but it's not so. When we say last year, back-end weighted is really for USS. And then, of course, for the rest of the sector, for commercial aerospace, it also reflects more projects, but also recovery of the aviation industry.
Okay. Last question is on the margin profile. I would like to understand across the three primary segments, how different are their margins and whether you expect the revenue mix by segments to differ significantly in 2024, and how would that look like this year?
Okay. So first of all, the growth momentum, maybe I'll invite Ravi and Jeff, especially, later on in the Q&A, maybe not now, to talk a little bit about their business. The margin profile has been very robust and healthy, I must say, across the group, as you saw the strong EBIT performance. In between quarters, there are always timing of projects, but our overall momentum has been very strong, as evident in our sequential half performance. And so I think we are on a very strong footing.
Would you be able to rank the margin profile from best to worst among the three segments?
Well, you would have seen the EBIT, the dollar value versus revenue. I think DBS had a very good year, and then aerospace is really climbing up, ramping up because we are active for passenger-to-freighter conversion. We'll see more momentum because, as I said, we're going to improve from single-digit EBIT margin percentage for our PTF business to now mid-single-digit for this year. So you will see aerospace margin continue to improve. For defense and public security, we had a good year of margin strength, and that's the highest EBIT margin sector. But it depends on the project timing. Overall, we are on very solid foundation. I think our revenue momentum and project momentum will kick in, will continue to allow us to perform very well in this segment.
In terms of the revenue breakdown, will it be similar to FY 2023, or will we maybe see more CA revenue in 2024?
Yeah. We do not give any revenue forecast for the segment. Suffice to say that all three segments are getting good momentum, as we've shown sequentially. And also across quarter, between third and fourth quarter, all segments have done well in terms of revenue growth. So short of giving specific guidance on revenue, I think all three segments are on good momentum. Thank you. Thank you, Jatin, for your questions.
I think the EBIT margin by segment can be found in this booklet. Yeah.
Thank you. Hi, this is Kenneth from CGS. Congrats to the team on a good set of results. I have three questions, all on the aerospace sector. Firstly, the aerospace EBIT margin was down half-on-half by about 2%. What's driving the half-on-half softness, and is second half a good run rate that we should expect going to 2024? Second question is on the labor market. On a quarter-on-quarter basis, have we seen any changes in aerospace labor market trends? And is there any difference in the labor tightness across your key markets, or is it mostly broad-based? Last question is on clarification whether there was any aircraft sales in the fourth quarter. Are we expecting any more in 2024, and what's the guidance? Thank you. Yeah.
Maybe I'll invite Jeff to take on these questions. Thanks.
Okay. Thank you.
The EBIT margin half-on-half, we have to consider the project mix and the project timing. So I would really read the full year EBIT margin and then be able to project forward. We certainly have differences between quarters and between halves. The momentum, as Vincent said, continues. So we do expect to see continued growth and good recovery. On the labor market trends, it's abating gradually. Nevertheless, we continue to see challenges, particularly in the U.S. market, where there's a very tight labor market and huge demand, right? So it does drive some inflation. But if we look at our labor cost per headcount over 2023, we've been able to keep it very moderated. And with the high revenue growth rate and the recovery and the EBIT margin growth, I think we managed to keep it under management. We continue to work with the regional schools.
We work with the governments on foreign visas for the foreign contract labor. Of course, we continue to automate our operations. Last but not least, aircraft sales. We continuously rationalize and develop our portfolio. So you can expect that there continues to be movement in aircraft sale, purchase, rationalization, working with our partners. So yes, the answer is we will continue to see aircraft sales. They tend not to be constant throughout the year. So once again, don't read too much into the quarter-and-a-half financials. Thank you.
Just to add that those aircraft sales that we did were profitable, although it's not a material percentage of our total EBIT. Okay? In terms of second half versus first half EBIT profile, as Jeff mentioned, it sometimes depends on project timing. I won't read too much into it. We're actually quite confident of this continued trajectory for our Commercial Aerospace, given the project pipeline that we have and the continued strengthening of our PTF EBIT accretion. Even in the fourth quarter of 2023, you are able to do the mathematics. Actually, our revenue for Commercial Aerospace increased 9% versus third quarter of 2023. So you can see the growth momentum building up because we did disclose Commercial Aerospace revenue in the third quarter of 2023. When you use your second half minus off, then you'll see the continued growth momentum for the fourth quarter of 2023.
Hi. Thank you for the opportunity to ask questions. This is Jason from DPS. Yeah. So thanks for providing more color on the aerospace segment earlier, but I wanted to get a bit more color on how MRAS, in terms of its margin profile, how has it trended over the past few years, and how does it compare to 2019? Next question is on TransCore. So very encouraging to see that it has turned EBIT positive ahead of plans. So I just wanted to see what level of margins you're actually targeting for TransCore business this year. And just one more question on your cost of debt. So cost of debt for 2023 has been very impressive. So I'm hoping that you can provide an update on your expected all-in cost of debt in 2024 and what are the underlying assumptions behind this expectation. Yeah. Thank you.
Okay. Maybe we start with question three, Cedric, to answer the expected weighted average cost of debt in 2024, which we did give an indication some time back, even assuming no reduction in interest rate at the Fed level. Now then, on TransCore margin target, I'll let Lee Chew talk about. We don't really give a forecast on margin net specifically, but we can give you some color on TransCore's performance. And then we end with the third question in reverse order, MRAS margin. Again, we don't get to that specific, but we are actually very pleased with MRAS performance, the cost takeout that has happened in the last few years. So it's giving us very strong performance. So maybe let's start with Cedric.
Thanks, Vincent. The weighted average cost of borrowing between floating and fixed rate for 2023 is a competitive 3.3%. Next year, assuming no Fed interest rate cuts because nobody knows when they will cut, how much they will cut, but assuming no cuts, which is kind of a conservative estimate, we will come out mid-3%. But if they do cut, then we expect that mid-3% to be even better, even lower. Just a clarification, when we mentioned TransCore is earnings equivalent, it's not EBIT equivalent only. It's net profit equivalent.
So thanks for the question on TransCore. First of all, apologize for the occasional cough and talk too much at the air show last week. So like Vincent mentioned, we actually look at TransCore as a very integrated part of our smart mobility business right now. And as we look at the margin profile of that business, no different from everything else that we own, we are looking at scaling the business. We're looking constantly at driving down costs. And we're also looking at how, as we go to market, we continue to develop partnerships. So we will obviously focus on how we can bring a more high-graded margin profile as we conduct all the projects and the businesses across many parts of the globe. All right?
TransCore certainly did better in second half of 2023 than first half, both revenues as well as margins. So we expect the performance to be on very strong foundation going into 2024 and the years forward, especially when we have actually quite a few projects in the pipeline, synergistic projects. And of course, when we have some more to share, we will share along the way. Maybe we'll finish up the question from MRAS.
Okay. So on Middle River, as we continue to deliver more in the sales to our customers, obviously, the scale synergies begin to kick in even more. And our focus on productivity is to take costs out of the production system so that we can improve our margins. In addition, there's also spare sales that also can come in based on the market requirements. So we saw a good profile in 2023 that contributed to the margin improvement. We certainly hope this will continue. And we expect, as we continue to deliver more, that we will derive more scale synergies. For example, even beyond the A320neo, we saw increases in the deliveries to support the Chinese C919 and the ARJ21 programs, right? So we do have a diverse portfolio that enables us to enjoy these synergies and address market requirements. Thank you.
Jason, thanks for your question. Yes, Silky.
Hi. Just wanted to check on two questions. For USS, we had some surveillance costs in second half, which is about SGD 6 million. Just wanted to check if there are any more going ahead in 2024. That's the first one on USS. And without that, I think your EBIT has actually recovered very strongly in the segment, whether your margin profile is sustainable. And all the challenges that you had actually guided us over the past year or so in terms of supply chain, chip shortage, is it all over? That's on USS. Just on financial costs, you have actually seen a big improvement in terms of total debt coming down. Whether this would be the run rate that we should be looking at, or are you looking at increasing it? Is there anything that you're spending that will actually bring up your borrowings?
Yeah. I think on the second question, the strong balance sheet allows us to pursue growth when the opportunities come. The strong cash flow, of course, that we'll expect to continue would also allow us to pay down our debt when appropriate. But I think we're not constrained in terms of pursuit of growth using our balance sheet. Maybe I'll let Cedric add a little bit more color to your specific question. And then after that, we get Lee Chew to talk about USS in terms of the surveillance costs for Satcom and then the transformation plan, which is going on well. We expect results to continue to strengthen, given all the work that has been put in. Okay?
First of all, I just want to highlight that the EBITDA is very strong for 2023 at close to SGD 1.5 billion. So it's a good proxy of operating cash flow. It's slightly lower than the EBITDA, but it's a good proxy. So with this operating cash flow, really, the decision before management is, one, do we pay more dividend? Do we pay down debt? Or do we invest? So again, dividend, we have been quite steady at a ratable rate of SGD 0.04 per quarter. We don't really nearly change dividend rate. On paying down debt, I think we have to evaluate together with investment opportunities and what kind of returns we can get. And of course, we'll be sensible about size of investment. Yeah? We are also digesting some of the big M&As.
I would say, on a trendline basis, if we have consistent CAPEX and all that, you may see a gradual reduction in the total debt. Of course, if we have good investment opportunities, then the debt may rise. All this, we will do in the best interest of shareholders.
Okay. So Lee Chew?
Yep. So in the second half, we reported that SGD 6 million was spent on surveillance. Going forward, we will be managing our resourcing needs in line with our business. So it will be taken as required when we execute to the business requirements. The question on whether EBIT is going to be improving. So first of all, in 2023, we have one-off divestment of Satixfy. Vincent also mentioned that the transformation is progressing well. So we continue to double down and focus. We believe that there will be and we expect steady improvement of that as we stay focused on the execution. Obviously, as a result of the right-sizing, our cost base now is already lower than last year.
So as Lee Chew mentioned, Satisfy in itself is a one-time minus a negative SGD 24 million impact. We won't see that in 2024. So straight-off, EBIT effects will be better off by 2024, the absence of this investment. And surveillance is always, I think, based on business case, and it's always based on savings that you expect to get. So we cannot give you any forecast at this time. But it's in the normal cost of the business we think that there needs to be, then it's going to be justified based on net cost savings anyway.
Yeah. Hi.
Thank you. Lorraine?
Yeah. Thanks. I just have a few questions, starting maybe with a follow-up on TransCore. Just curious what the order book is for TransCore, whether you can indicate whether there were any additional wins in 2023 and as of now. Also, and on that note, on the Satcom side, whether the transformation in terms of transformation, what areas of growth are you potentially looking at going forward for that business? Second question for DBS is, I noticed that the digital sorry, is it digital and cybersecurity? The growth is pretty good, 10%. Just wondering whether that is the expected outlook going forward. And also, given that the EBIT margin was also pumped up because of the absence of Marine, whether that would be the new normal we should be looking at for the segment. And yeah, I may have a follow-up, but I'll stop there for now.
Okay. Well, we'll come back to you if you have follow-up. So I'll let Lee Chew talk about TransCore, what kind of win momentum we had in 2023. And then, of course, Satcom, which areas of growth which are actually, as we shared before, Satcom is really a growth sector globally. And then we'll move on to Ravi to talk about digital and cyber revenue growth, which is we are very pleased with the growth momentum and then EBIT margin trend. All right. Lee Chew, maybe to you first.
Okay. We have been including TransCore's wins and order book in our quarterly updates. If you look at our 2023 reports over the various quarters, you will see that we reported new contracts of about $2 billion over the course of 2023. TransCore projects are really a part of that. We don't specifically call out all wins or announce deal value of all wins. During the acquisition, we did say that our contract renewal rates for TransCore is high at 95%, and the recurring business of TransCore is more than 50%. As we look at the projects for TransCore, there's obviously a part of that business that's from existing customers that we continue to do maintenance and operations. Then there's the other part of the business where we look at taking on new projects. That's TransCore.
And the question on Satcom was, where are the growth opportunities? Is it Lauren? Yep. So in the Satcom world, and we've constantly said over the last, especially, 12-18 months, that the whole industry is going through a big shift and a big evolution. And we are seeing, actually, some of the NGSOs coming in to disrupt the market. Having said that, the aerospace as well as the maritime market has also improved with the whole aero industry improving. And when we look at in-flight connectivity from the aerospace side and when we look at the maritime business now recovering out of COVID, I think those are the two areas we see continue opportunities. And we continue to be a market leader in these two spaces. We also see that cellular backhaul and what we call land mobility becoming interesting for our industry and our market.
Think about this against the backdrop of why our next-generation platform is focused on multi-orbit and is focused on integrating with 5G because the expectation of connectivity is going to be that no matter where you are, you want to be able to connect to the people and the rest of the world. Even in announcements that we made in 2023, you'll see that we went into cellular backhaul opportunities in Argentina. We are looking at broadcast opportunities in Peru. You will see that as we take satellite beyond just connectivity in those two main areas, some of the subsegments like cellular backhaul that has been very fragmented in the past and land mobility will become interesting and important.
Yes. It's for the growth potential in this Satcom sector that we are developing our next-generation platform with multi-orbit compatibility and cloud virtualization, which we mentioned about in Cedric's presentation. We're very excited that we'll very soon be unveiling our NGP brand in not too distant a future. This all underscores the growth potential in this particular industry. Of course, for TransCore, we are very heartened by the pipeline of projects, both in our core business in TransCore and also the synergistic ones in this region and also the ability for us to synthesize our solutions together within a group to address new market opportunities, more to come as we have more projects to share in due course. Maybe I'll move on to Ravi.
So Lorraine, thank you for your questions. So firstly, on the growth of digital systems and cyber, as you noted, we've grown by more than 10%. And as Cedric shared, our digital business, which is cloud, software, AI, as well as cyber, has actually grown by 20%. And we are on track to actually exceed the target which we set for ourselves, which is to achieve SGD 500 million by 2026. So the momentum is there. And I think at the recent air show, for those of you who went down, we demonstrated many of our new capabilities, the AGIL Ops Hub as well as the AGIL Vision. So we're beginning to implement AI as well as generative AI into our solutions. So we think that, of course, there are a lot of opportunities in that space.
Certainly, on the cyber side, I think we have announced we are acquiring D'Crypt, and we are going to close that acquisition soon. So we're also building our cyber business. I think the capabilities that we are putting together with the D'Crypt acquisition is going to really help our cyber business to be well-positioned for future growth. So overall, I would say that we're quite optimistic. There are many opportunities as you see with the digital revolution. Our businesses have continued to invest and build up capabilities in new technologies, especially in AI, in cloud, in software, and cyber. This then puts us in a good position. We also believe that the market demand, as we saw during the air show, is there for the digital system and cyber business. So we expect that growth.
On the margins, DBS margin was about 9.5% last year, and now we've crossed double-digit. So the margin growth, I think there are two components as we have shared in the past. I think first, the avoidance of loss because of our divestment of Halter Marine. So that's, I think, one big part. And the other part really is from our growth and also the way our projects are being managed and also cost-cutting. So I would say that we do intend to strive to continue with double-digit margin for DBS business. And if you look at our order book, in fact, this year, we achieved new orders. This year, 2023, we secured SGD 7.7 billion of new orders. And if you look three years back, I was looking over the last three years, on average, it's about SGD 6.5 billion of orders.
So of course, defense and public security projects are longer term. It takes a couple of years to deliver them. But there is actually a strong momentum. If we can deliver those orders that we have in our order book well, then I think the DBS business can certainly maintain the rate we are going. And certainly, we are focused on making sure that we get good margins for the business and for the group.
So we are really pleased with the progress that we have made for our defense and public security segment. Just to add to what Ravi said and second-validate, it's very positive comments. So we are very pleased.
Now, I invite our online analyst participant to ask a question. Sean from JP Morgan, we now omit your line. Please ask your question.
Hi. Hi, Management. Thank you so much for the presentation. I think I just have three questions, very quick one. One is on order book. Do we think that the current order book, given its strength, has still further legs to go? Maybe I think the question we really wanted to ask is, do we have enough capacity to take on additional orders? Earlier, you talked about MRO, capacity expansion, but what about the other segments across the group? The second key thing is on aerospace. We have seen OEMs implementing price hikes globally since last year. Do we expect to implement similar price hikes to our customers this year and therefore have a positive contribution to margins? And then I think on the third thing is on defense. We secured a lot of international defense contracts last year.
We showcased a lot of new products in a recent air show. Maybe you can provide an outlook for 2024 in terms of defense. Do we expect defense contract wins this year to be similarly strong, similar to last year, or even stronger? And will we see even more overseas orders? And for overseas, which category are we targeting? Is it cyber munitions, or is it naval vessels? Thank you.
Sean, can you repeat your question on order book? You asked whether we have enough capacity to take on new order, but there's a second part of that question. Can you remind me, please?
Oh, I think it's just more about capacity, whether we have sufficient capacity across all three segments to take on additional orders.
The answer is yes. We are very happy to take on new orders. But of course, it's done in a very well-thought-through fashion. We increase our, of course, team size, expand our capacity to take on new orders. As you see over the years, as our top line and bottom line improved. So yes, we do have capacity to take on the growth in each of the three segments. But of course, it has to go through a very thoughtful planning process in terms of equipment, in terms of our human resource manpower, which we have been expanding. Our workforce has also gone up. So I think that's to your question, Sean, your first question. Second question on OEM price hikes, similar hikes, but we also in the OEM businesses, certain parts of our business are in OEM. And of course, we have MRO, we have system integration.
Of course, we always try to pass through the cost increases to the market very conscientiously. So yes, pricing is being managed at all times. In fact, in contracts that we sign, we always, to the extent possible, bill in escalation factors based on inflationary factors. So we do that a fair bit across all our business lines. Okay? For international defense business outlook for 2024, will it be similarly strong in terms of new orders, especially for overseas, and which category? Perhaps I can get Ravi to give a little bit more color.
First, Sean, thank you for the question. On international defense business, we've explained previously that we have been making some concerted effort. You can actually see it in the air show. I think first, products. Actually, we've been building new products.
During the air show, we launched a few new products, the Extrem V, which is also the HEV version of Extrem V. 40mm munition, we have one of the world's first rocket-assisted round. If you haven't seen it, I'll be happy to talk to you about that. And then, of course, in terms of the command and control systems you are building. So you see a lot more products because we recognize that that's the way to go forward in the international defense business. That's one. Two is a lot of we've also started building a lot of partnerships. Typically, in the defense business, there's always a desire, especially post-Ukraine. There's always a desire and COVID-19. Post-Ukraine and COVID-19, there's a lot of concern about supply chain.
Most countries are beginning to recognize that they actually want some of the work to be done in-country or at least the support can be done in-country. We've been working with partners in different countries, in different regions to build capacity so that the end customer is assured that in the long term, they have support. The third, of course, is building up our marketing teams and putting people overseas and finding the right people who can help us who are familiar with this market. I think we've done that. Last year, we secured for defense and public security, we secured close to SGD 500 million of new contracts. I just want to give you a flavor of some of this so you get a sense of what we are doing.
So for example, for the 40 we managed to sell to three new Eastern European countries, Poland, Slovenia, and Romania. We mentioned also, I think, we are doing the C-130 upgrade for Tunisia. And we've actually been successful in selling autonomous mortars to two Middle Eastern countries recently. And we've delivered last year the Extrem V to a customer in Germany, actually German Army, Mexico, and then during the air show to a customer in Sweden. Okay? So I think I just want to share this with you because, first of all, defense, as Vincent has always said, takes a long gestation period, is a long time. And then, of course, the approval process, the budgeting takes some time.
So these are early indicators of the, I guess, the indicators of the outcomes of the effort that the teams have put in, which I think is good. What's our outlook? We are actually working on quite a few major projects. But defense business is defense business. Until you cross the line, it's not yours. So there's always many, many considerations beyond price and performance. So we have quite a few opportunities we are pursuing, including in the marine business, ammunition, in platforms, and so on the cyber side and the digital system side. So we have been pursuing these opportunities. Some of this, we believe, should come in. I mean, 40 we are the world leader in 40. And I think the team has done well. We continue to see a lot of repeat orders. We are very confident. In terms of platforms, we are chasing quite a few.
With Extrem V, you can see the momentum is building. We are pushing the team to do more and to increase the numbers. Naval programs take a bit longer. Typically, they are larger and they take a couple of years to get started and to create the opportunity for us to win the deals. But we are also working on them. Our focus really in terms of opportunities right now is a lot in Europe, in Eastern Europe, Northern Europe, and of course, in the Middle East. I think that's where the demand has been strong in the last year and we think in the next couple of years. That's where we are going to focus on.
Yeah. So it's actually quite we are really quite optimistic about our continued progress in the international defense business. Maybe I'll just add one more point to the question on price hikes. When you have inflationary pressures and higher costs, what we do, yes, we pass through costs to the market. We also try to increase our price. We build in inflation protection factors in our projects, in our contracts. We also take costs out of our equation, productivity savings, cost savings, which explain why in the last couple of years, when inflation pressures were high, we maintained a very good margin resilience across the group for those reasons. So thanks, Sean, for your questions. May I maybe ask Ziwei because I think Ziwei has a few questions.
Yes. Thank you, Vincent. Congratulations on your strong set of results. I have three questions. First question is a bit of housekeeping. Notice under your segment report for the second half of 2023, there's a non-operating income of about SGD 16 million on the DBS. And what is that? And then after that, smaller one is, is this a gain on ineffective cash flow hedges that seem to have popped in the second half of 2023? What's that also? Second question is capital gains. Didn't see a mention of a number in your slides. How much is left? Third question is on aerospace, commercial aerospace margins. Using second half as a fair comparison, right? EBIT margins, excluding your associates in JVs, was 6.1% in 2022 and became 6.3% in 2023. Now, PTF also turned positive in second half of 2023. You likely had some aircraft sales in second half as well.
I'm a bit surprised that, given this turnaround between a year, your EBIT margin didn't expand much more than, I mean, it didn't expand more than 1 percentage point. It's small. So, wondering how to reconcile that delta. Thanks.
Okay. So thanks for your questions and also your well wishes. Thanks for that. The segment non-operating income, we have the very simple answer for you. Cedric will take you through. And then on the question on hedges and keylog gain, we know more we don't have any more T-Locks in our balance sheet, as we mentioned. So that has been fully flushed out in 2023. And then we can talk about commercial aerospace. Let Jeff talk about it. As I mentioned, project timing sometimes has bearing. I won't read too much into the near-term EBIT margin, but I think we are really on a good trajectory. But I'll let Jeff give you a little bit more color. So maybe I'll let Cedric talk about your two questions.
Yeah. DBS has non-operating income. That's because we had a favorable settlement on the sale of U.S. marine business where, at post-closing, we have to look at the net working capital settlement because, in a typical M&A, you have a target net working capital and the actual, which will happen post-closing because you don't have the results at the date of closing. In the end, it was settled in our favor. That was the reason for the other income. It's a positive thing. Yeah.
And then there's a question on hedges.
Yeah. Keylogs have all been taken in 2023, right? Yeah. So in 2023, there is some keylog gains which account to about SGD 24 million.
So that's the one. Okay.
They're all taken already. Going forward, you won't see the keylogs, but you'll see hedges.
Yeah. I think we will continue to keep you posted. We did share those information along the way. Jeff?
Yeah. Thank you. So as we said, project mix and project timing, it also crosses these quarterly and half-yearly timelines. In addition, we also said earlier we continue to invest in capability and capacity. If you just look at the number of projects we have executed last year, including the LEAP licensing for the future, including Changi Creek Hangar investment for the future, as well as all our other capacity expansion projects that we're doing that Vincent alluded to, from a capability point of view, LEAP is going to bring significant growth in top line and bottom line in the coming years.
We also have invested in additional capability for the new aircraft types, for example, the A320neo, the 737 MAX, the A350, and nacelle MRO capabilities that we're expanding for the A320neo in particular across all our MRO sites. So you can see the activity level. We didn't just keep up. We actually increased the activity level for investments in the future. And all this comes with tooling, training, and so on. So really, I think you have to look at commercial aerospace as a growth business. And we continue to scale our PTF conversion. So, for example, last year, we added three new sites to PTF conversion. So, as Vincent also alluded to, we continue to expect the PTF margins to improve in the coming years.
It's all a combination of the high number of activities we're doing as well as all the investments we continue to make.
Thanks for the answer, Jeff. Just one follow-up on that. So I take your point that there is a bit of capacity expansion that's suppressing your margin. If I reverse that out, how much margin percentage points would that cost you?
Well, I certainly hope it'll be. We are working towards expanding margins, okay, in the coming years. We are working towards expanding revenue, expanding margins, scale synergies, and certainly a lot of growth. Okay? That's my short answer.
PTF, we already said that last year, we had low single-digit EBIT margin. This year, we'll get to mid-single-digit. Next year, we'll be high single-digit. So you'll see the traction. PTF revenue is actually quite a substantial part of our commercial aerospace business. We do expect margin to be quite robust.
We have come to the end of our Q&A session. Do you have one last?
Okay. Maybe we'll let Rahul ask a question. And then after that, we'll see if we have further questions. If not, we can always take it offline later on. Come.
Yeah. Thank you, Rahul, from HSBC. Thanks for taking my question. I want to get back on the point that you mentioned about dividends, stable dividend 2023. I want to understand how you're thinking about using the future cash flows between new investments, dividends, and paying out debt. Is there any priority in your mind, or you're trying to maybe have a balance between all the three? Second question is on the USS division. Could you talk more about the subsegment urban solutions? Obviously, great. TransCore became earnings accretive. Congratulations on that. But if we strip out TransCore in that subsegment, how is the business going on? Because it appears that it may not be growing or the margins might be low. I know you normally look at it on a combined basis, but I'm just trying to understand what is happening on the ground in that particular subsegment. Thank you.
Yeah. Well, thanks for the questions. These are good questions. Let me just talk about how we use our cash. And then after that, of course, Cedric can weigh in. And then we'll let Li Qiu talk about our urban solutions business, which there's a lot of good projects in the pipeline, including our mobility projects in Taiwan that will kick into full gear very soon. So actually, the momentum is quite good. I'll let Li Qiu talk a little bit about that.
So when we talk about our management of our cash, whether it's dividend or whether it is continued investment, the reality is that because our balance sheet is very strong, it remains to be very robust. It gives us a lot of flexibility.
If you look at our track record of dividend payout over the years, even in the deepest or most difficult times in COVID, we did not cut dividend. We maintained at SGD 0.15. Two years ago, from 2022 onwards, we started moving it to SGD 0.16, SGD 0.04 a quarter, showing the confidence of us being able to return value to shareholders minimally through our dividend in a ratable fashion. There's no pla n to change that. Our balance sheet is strong enough that beyond paying dividend, our cash flow is strong enough that beyond paying dividend, we can still invest in growth, which is what we have been doing.
In the last few years, we have really transformed or we have been working very hard and I think very successfully in transforming this company to not just being a dividend-yield company but also one that is growth given the very strong order book that we have recorded. We now have to execute those order books with the margin that we expect. We have a lot of flexibility. Dividend payout, we want it to be very stable and very ratable. We have no plans to change in the near term.
Sorry. When you say dividend payout, do you mean as a percentage of profit, or you're talking about absolute dividend? In the past, it has always been absolute.
Absolute. So SGD 0.04 a quarter is what we are doing now. And we have no plan to change this kind of ratable dividend payout on a quarterly basis in a level that is ratable and predictable. No plan to change that.
Okay? You want to add any more?
Okay. Then we talk about subsegment URS. I suppose it's so yes, you hit the nail on the head. We now look at TransCore and the rest of Urban Solutions as one Urban Solution. TransCore is now our base business. This is third year. Or rather, we're coming to the end of second year of ownership. And I'm very glad to see that the teams are really working as one team. I'll let Li Qiu talk about the other aspects of Urban Solutions.
Yeah. Thanks, Rahul. So outside of TransCore, the Urban Solutions business is healthy and progressing well. I think during the presentation today, you saw that we are making progress on the road front with Abu Dhabi project. We have also talked about our platform screen door wins across multiple sites globally. There are a few projects that perhaps in the beginning of 2023 and the end of 2022 that have contributed significantly to our order book. And maybe I can just kind of flag them up here. So you remember the yellow line, which is our first turnkey project awarded to us towards late 2022 at SGD 1.4 billion? We continue to execute to that across 2023 and obviously in the forward-looking years. We also announced a SGD 450 million contract for our Kaohsiung Red Line extension in the beginning of last year as well.
In that same measure, we talk about our communications and control system project that we won with LTA about $200 million in the beginning of 2023. So you can see that the over $2 billion order book that I was referencing in 2023 is going to give us a good solid foundation for us to deliver our revenue. And even on the because if you look at our smart city focus, there's smart mobility, there's smart infrastructure and utilities, and then there is smart security. If you were at the Astro, you would have seen us launch our product on smart building energy efficiency. That whole system is going to meet some of the needs that we know customers are looking for in terms of managing their resources in building even as we add to the smart city OS that we have been developing previously.
Then on the smart security side, so the win that we flagged today about the airport security in Indonesia is an indication that we continue to double down on that. So there are many projects that we're working outside of TransCore. Obviously, TransCore's accretion is a big milestone for us. We're very excited about it. But we're also very positive about the opportunities that we are seeing across the other aspects of the business. So hopefully, that helps.
Yes.
So we will take. Thank you, Rahul. We'll take one last question, please.
Hi. This is Douglas from BH. I just have one question, and it's regarding the commercial aerospace segment, which is with the recent sort of interest generated on sustainable aviation fuel, SAF. Are there sort of any plans by ST, or is SAF an area of interest for ST? I know back in 2022, there was an MOU signed with Safran to sort of study the use of SAF on helicopter engines. So since then, is there an update on that? Thank you.
All right. Jeff?
Okay.
Thanks for the question.
Yeah. So firstly, at a broad level, sustainability is one of our key focus areas. Certainly, if you look at the work we've done around reducing our carbon footprint as well as using greener energy, we have actually done a huge amount of work. In fact, last year, we won the national award by NEA for our efforts in sustainability. And so if you look at SEF, the use of SEF, it will primarily be driven by our customers because we would use SEF in testing these engines in the test cell or even on wing based on our customer requirements. So kind of unlike the airlines which consider using SEF and asking our passengers to pay, we use it in a more limited scope through the testing of engines. And we certainly have provided the option to our customers.
So based on their interest level and, of course, also their willingness to contribute to the cost of SEF, then we would adopt it in our facilities. So the answer is yes. We will move as fast as our customers would like us to. Yeah.
So.
Thank you.
So, Douglas, thanks for the question. In the area of sustainability, we see ourselves as a responsible corporate citizen. So we do our part in making our own business operations sustainable, including using solar energy. We have run out of rooftops across the group to fix any more solar. In fact, solar energy accounts for more than 10% of our group electricity needs. But at the same time, we see sustainability as opportunities for us to use our solutions to help and support our customers, for example, smart energy-saving solutions for buildings. And as Jeff talked about in the area of sustainable aviation fuels, and we have many other solutions within the group that help cities manage their carbon footprint, for example, smart traffic management that will reduce traffic congestion and therefore reduce fuel burn, including congestion pricing solutions.
We continue to see where are the other opportunities for us to add value to our customers using our technology and innovation.
Thanks for your question. This is very relevant and very topical. Maybe on that note, we'll bring the Q&A to a close. We thank you very much for attending today's session, including those who joined us online virtually. We look forward to further engagements with you as the months proceed in 2024. Thank you very much. Thank you.