In late June this year, SIA Engineering Company Ltd (SGX: S59) published its annual report for its financial year ended 31 March 2018 (FY2018). Given that reading an annual report is one of the best ways to keep up with a company’s developments, I decided to go through SIA Engineering’s latest annual report to understand the company’s prospects. But first, let’s look at how the company performed in FY2018.
How the company fared
As a quick introduction, SIA Engineering provides aircraft maintenance, repair, and overhaul (MRO) services to over 80 international airlines around the world.
In FY2018, SIA Engineering’s revenue declined by 0.8% to S$1.09 billion, mainly due to lower revenue from its Fleet Management business. But, operating profit improved by 4.4% to S$76.4 million, and SIA Engineering’s share of profits of associated and joint venture companies jumped by 13.8% to S$109.8 million as a result of better performance from the Engine and Component Centres segment. Yet, net profit declined by 44.6% year-on-year to S$184.1 million. This was largely due to the absence of a divestment gain of S$178.0 million in FY2016/17.
SIA Engineering recommended a final dividend of S$0.09 per share. Including an interim dividend of S$0.04 per share, the company’s total dividend for FY2018 was S$0.13 per share, down from S$0.18 a year ago (but unchanged if the special dividend of S$0.05 per share for FY2017 was excluded).
In SIA Engineering’s annual report, management provided the following useful comments on the company’s prospects:
“While the MRO industry remains challenging with intense competition, the Group continues to see growth opportunities. The Group will maintain its pursuit of new capabilities to meet the changing technological demands of the next generation aircraft, while creating higher levels of productivity and operating efficiency.
The recent joint venture with Stratasys Ltd. on additive manufacturing, and collaborations with Safran Analytics and CaseBank Technologies in the field of Data Analytics, are key strategic moves to build capabilities that will be integral to the Group.
The Group continues to expand its current portfolio of 25 joint ventures with the world’s leading aircraft, engine and component manufacturers.
The new partnerships with GE Aviation and Moog will contribute strategically to the Group’s competitiveness and strength, while opening access to the global OEM markets.These investments will position the Group well for long-term growth.
In the near term, the Company will benefit from a new comprehensive service agreement signed with SilkAir (Singapore) to provide MRO services for its 37 Boeing 737 MAX aircraft for a term of 12 years, with an option to renew for a further five years. The total revenue of this agreement is about $484 million over the 12-year term.”
SIA Engineering had a positive performance in FY2018 with its growth in operating profit and share of results from associated and joint-venture companies. For the whole of FY2019, SIA Engineering also appears to have a positive outlook.
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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.