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SIA Engineering Company Ltd’s Latest Earnings: Are Things Looking Up?

SIA Engineering Company Ltd (SGX: S59) reported its fiscal third quarter earnings for the year ending 31 March 2016 (FY15/16) yesterday evening. The reporting period was for 1 October 2015 to 31 December 2015.

SIA Engineering is a leading player in the aircraft maintenance, repair, and overhaul (MRO) sector. Its engineering services can be divided into the line maintenance segment and the repair and overhaul segment. SIA Engineering is also a subsidiary of the carrier Singapore Airlines Ltd (SGX: C6L).

You can read more about SIA Engineering in here or catch up with the results from its fiscal first quarter here.

Financial highlights

The following’s a quick summary of SIA Engineering’s latest financial figures:

  1. Revenue for the reporting quarter was $275.2 million, a 3.7% increase compared to the same quarter last year. This is a turnaround from the revenue decline that the company posted in the first half of FY15/16.
  2. Share of profits from associated and joint venture companies was up strongly, increasing 31.2% year-on-year. The sizable increase was due to one-time restructuring gains.
  3. For the reporting quarter, profit attributable to shareholders was $49.4 million, up 6.7% compared to the previous year’s comparable quarter.
  4. Subsequently, earnings per share (EPS) for the reporting quarter came in at 4.39 cents per share, a 6.5% increase from the 4.12 cents recorded a year ago.
  5. Cash flow from operations came in at $22.4 million with capital expenditures clocking in at $10.4 million. The lower capex gave the MRO outfit $12 million in positive free cash flow; this is a slight decline from a year ago when free cash flow was at $13.7 million ($24.6 million in cash flow from operations and $10.9 million in capex).
  6. As of 31 December 2015, SIA Engineering had $335.7 million in cash and equivalents and borrowings of about $38 million. The MRO outfit’s balance sheet had weakened compared to a year ago when it had $364.9 million in cash and equivalents and borrowings of $29.5 million.

In short, SIA Engineering appears to have turned the corner in this quarter, reporting an increase in revenue and profit. The firm also registered positive free cash flow and a solid balance sheet (although both were down slightly compared to a year ago, as already mentioned).

Operational highlights

For the reporting quarter, revenue rose due to higher sales from fleet management and line maintenance. Speaking on its current challenges and the outlook ahead, SIA Engineering’s management added the following commentary in the earnings release:

“The operating conditions for the MRO industry remain challenging and the Company will continue its efforts to control costs and strengthen efficiencies. Reduced shop visits and lower work content will impact the performance of the engine shops, resulting in declining contributions from the associated and joint venture companies.

Ongoing initiatives to streamline and rationalise our core businesses will enhance the Group’s overall competitiveness and service offerings going forward.

Supported by a strong balance sheet, the Group will continue to pursue strategic partnerships with leading industry players to capitalise on emerging opportunities in the region.”

Foolish take away

At its closing price yesterday of $3.41, SIA Engineering traded at 22 times trailing earnings and has a trailing dividend yield of 4.2%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.