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Latest Earnings from SIA Engineering Company Ltd: An Uninspiring Performance

Last evening, SIA Engineering Company Ltd (SGX: S59) had released its earnings for the quarter and fiscal year ended 31 March 2016 (FY15/16).

Before we take a look at the company’s performance, here’s a quick background for some context later: SIA Engineering, or SIAEC for short, specialises in aircraft maintenance, repair, and overhaul (MRO) services. It currently provides its services to over 80 international airlines around the world.

With that, let’s return to SIAEC’s earnings.

Financial highlights

The following’s a quick summary of some of the latest financial figures:

  1. Revenue for the reporting quarter came in at S$294.2 million, up 6.6% from the same quarter a year ago. For the whole of FY15/16, revenue decreased by 0.7% to come in at S$1.11 billion.
  2. Profit attributable to owners for the quarter was flat at S$41.4 million. On a full-year basis, the MRO services provider saw its profit dip by 3.7% to S$176.6 million
  3. The firm’s earnings per share (EPS) followed suit, remaining flat at 3.69 Singapore cents for the quarter while dropping 3.8% to 15.74 Singapore cents for the full year.
  4. As of 31 March 2016, SIAEC had S$393.9 million in cash and cash equivalents and only S$33.3 million in debt on its balance sheet. This is a step back from the net cash position of S$430.5 million seen a year ago (cash and cash equivalents of S$463.7 million and debt of S$33.2 million)
  5. For the whole of FY15/16, SIAEC had positive free cash flow (FCF) to the tune of S$36.1 million (operating cash flow of S$77.1 million and capital expenditure of S$41 million). This was lower than FY14/15 when FCF stood at S$46.6 million (operating cash flow of S$96.1 million and capex of S$49.5 million).
  6. Lastly, SIAEC declared a final dividend of 8 Singapore cents a share for the reporting quarter, bringing the full-year dividend to 14 Singapore cents. This is down by 3.4% from the 14.5 Singapore cents declared a year ago.

Operational highlights

The decrease in revenue for the whole of FY15/16 was due to lower airframe and component overhaul revenue that overwhelmed sales increases from line maintenance and fleet management activities

SIAEC also saw its share of profits from associated and joint venture companies falling by 11.4% for the year to S$94.2 million. The drop was due to lower contributions from the engine repair and overhaul centres as a result of lower work content on the engines serviced by Singapore Aero Engine Services.

Outlook

SIAEC’s management team mentioned the following in the company’s earnings report:

“The operating environment for the MRO industry remains challenging. We will continue to invest in new competencies and capabilities to meet the changing technological demands as airlines replace their older fleets with the new-generation Airbus A350 and Boeing 787. With the lower work content and longer check intervals of these technologically advanced fleets, measures to strengthen competitiveness, gain market share and manage costs will remain our key priorities.

The recent joint ventures with Boeing and Airbus are significant strategic moves, important to the Group’s continued and long-term growth. While they may not be accretive in the initial years, these joint ventures will leverage on the combined strengths of the companies to access a larger market.”

SIAEC last traded at $3.79 on Tuesday. This translates to a trailing price-to-earnings ratio of 24 and a trailing dividend yield of 3.7%.

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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 Esjay does not own shares in any companies mentioned.