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, and how management thinks about the business.
Generally, when reading an annual report, I will pay close attention to the letter to shareholders that the company’s chairman and/or CEO writes. In this article, I want to look at an area that I found interesting: the company’s investments in innovation and technology.
As a quick introduction, SIA Engineering provides aircraft maintenance, repair, and overhaul (MRO) services to over 80 international airlines around the world.
In SIA Engineering’s annual report, its chairman, Stephen Lee Ching Yen, wrote that the company has been investing in innovation and technology to increase its competitiveness. He then gave examples of the investments the company has been making. Let’s look at a number of these.
Here’s Lee on SIA Engineering setting up its Innovation & Technology Group:
“To enhance our capabilities, we have set up our Innovation & Technology Group in 2016 to accelerate adoption of new technologies. We launched an innovation drive to invest up to $50 million over five years on innovation initiatives and technology adoption projects.”
The company has also invested in automation, robotics, and digital technologies to improve its efficiency:
“Our investments in automation, robotics and digitalisation are progressively being implemented in the daily operations to enhance the efficiency and agility of our workforce.”
There is also 3D-printing:
“We inked a joint venture agreement with Stratasys Ltd. to establish an additive manufacturing centre in Singapore that will leverage cutting-edge 3D-printing technology to produce aircraft cabin parts, and provide engineering and certification support.”
Last but not least, here are some insights on SIA Engineering’s efforts with data analytics and software:
“In the field of data analytics, we are collaborating with Safran Analytics to research and develop predictive maintenance software that will improve aircraft maintenance planning and reduce disruptions to aircraft revenue service. We are also working with CaseBank Technologies to develop advanced diagnostic software programmes that will improve the troubleshooting process during maintenance and reduce aircraft downtime and component removal costs. These initiatives are an integral part of our efforts to reduce maintenance downtime and increase cost savings for our airline customers.”
In sum, SIA Engineering is making investments in innovation and technology to improve its competitiveness over the long term. These investments are particularly important for SIA Engineering to position itself for growth, given that the company’s profit has fallen by about 30% in the last five years.
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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.