The Good And The Bad: What Investors Should Know About SIA Engineering Company Ltd’s Latest Results

SIA Engineering Company Ltd (SGX: S59) provides aircraft maintenance, repair, and overhaul (MRO) services to over 80 international airlines around the world.

In late July, the company reported its first quarter results for its fiscal year ending 31 March 2018 (FY17/18). There are both positive and negative takeaways from the company’s latest earnings that investors may want to learn about. Let’s take a look, starting with an overview of the numbers:

1. The overall result

Here are the important numbers from the income statements for SIA Engineering for the first quarters of FY17/18 and FY16/17:

Source: SIA Engineering FY17/18 first quarter results announcement

We can see that the company’s revenue was marginally higher on a year-on-year basis. But, operating profit and profit attributable to owners were down by 8.1% and 4.7%, respectively, if one-off items are excluded.

2. The positives

Firstly, SIA Engineering’s share of profits from associates and joint ventures increased by 1.9% in the reporting quarter. Higher contributions from Eagle Services Asia Private Limited helped, though it was offset by lower contributions from Singapore Aero Engine Services Pte Ltd due to lower work content of engines shipped.

Secondly, the company’s balance sheet remained strong. As of 30 June 2017, SIA Engineering had S$628.7 million in cash and equivalents, and total debt of around S$27.2 million.

Lastly, during the reporting quarter, the company embarked on two new ventures that might drive growth in the future. The first is to form an engine overhaul joint venture in Singapore with GE Aviation while the second is to provide line maintenance services in Osaka, a key airport in Japan.

3. The negatives

Firstly, operating costs for the quarter grew faster than revenue, resulting in the aforementioned 8.1% decline in operating profit despite the 0.4% increase in revenue. A big culprit was an increase in staff costs.

Secondly, the company expects the conditions in its MRO industry to remain challenging.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.