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How Did SIA Engineering Company Ltd Perform in the Latest Financial Year?

SIA Engineering Company Ltd (SGX: S59) is an aircraft maintenance, repair and overhaul firm. Yesterday, the company announced its financial results for the fiscal year ended 31 March 2018. Here are 10 things investors should know from the earnings announcement:

1. Revenue for the year came in at S$1.09 billion, down 0.8% year-on-year. The fall was attributed mainly to lower fleet management revenue.

2. However, operating profit rose 6.1% to S$76.4 million on the back of lower expenditure. Expenses fell largely due to decrease in staff and subcontract costs, offset partially by foreign exchange loss in the latest year as compared to a gain in the previous year.

3. Share of profits of associated and joint venture companies, net of tax, improved by 13.8% to S$109.8 million. This was due to higher share of profits from the engine and component centres, partially offset by lower contributions from the airframe and line maintenance segment. SIA Engineering has 25 ventures with original equipment manufacturers and strategic partners in eight countries.

4. Net profit plunged from S$332.4 million last year to S$184.1 million in the latest period, a fall of 44.6%. The decline was mainly due to a one-off divestment gain seen in the previous year. Excluding this gain, net profit would have increased by 7% year-on-year.

5. Consequently, diluted earnings per share came in at 16.42 Singapore cents, down from 29.57 cents clocked in a year ago.

6. Let’s turn our attention to the balance sheet now, which weakened over the year. As at 31 March 2018, the aircraft engineering firm had S$499.7 million in short-term deposits, cash and bank balances, and S$21.9 million in total loans. This gives a net cash position of S$477.8 million. In comparison, at the end of March last year, it had S$575.8 million in net cash.

7. Return on equity for the financial year ended 31 March 2018 stood at 12.3%, down from 21.4% one year back. This metric gives more colour to a firm’s profitability by showing how much profit it generates with the money shareholders have invested in it.

8. Operating cash flow for SIA Engineering dwindled by 58.8% year-on-year S$54.3 million. With capital expenditure coming in at S$31.6 million in the latest period as compared to S$38.3 million a year ago, free cash flow tumbled from S$93.5 million to S$22.7 million. Generally, a firm’s free cash flow is used to pay dividends, reinvest into the business, make acquisitions, buy back shares, and pay off debt. The higher the free cash flow generated over the years, the higher the amount of dividends that can be paid out to investors.

9. The board of directors is recommending a final dividend of 9.0 cents per share for the fourth quarter. Together with the interim dividend of 4.0 cents per share already paid out, the total dividend payment for the latest financial year will be 13.0 cents per share. In comparison, a year ago, total dividends of 18.0 cents (including a special dividend of 5.0 cents) was paid out.

10. As for its outlook, SIA Engineering said:

“To strengthen our position as a leading MRO, the Company has embarked on a transformation journey to enhance productivity, streamline processes and increase competitiveness. At the same time, we will continue to invest in innovation and technology to stay at the forefront of the industry.

Our portfolio of joint ventures further augment the Group’s business, enabling us to gain access to new products, markets and technology. During the year, we have expanded our portfolio with the entry of joint ventures with GE Aviation and Stratasys Ltd.”

Shares of SIA Engineering ended yesterday at S$3.30, giving a price-to-earnings ratio of 20 and a dividend yield of 3.9%.

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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 Sudhan P doesn’t own shares in any companies mentioned.