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SIA Engineering Reports Drop In Earnings

SIA Engineering Company Ltd (SGX: S59) or SIAEC for short, reported a drop in revenue and earnings due to one-time events from joint-venture companies.

SIAEC specialises in aircraft maintenance, repair, and overhaul (MRO) services. Specifically, SIAEC provides complete MRO services in airframe, component, engine, aircraft conversions and modifications to 80 international airlines worldwide. SIAEC released its third-quarter results for the fiscal year ending 31 March 2019 last evening.

Financial highlights

The following is a quick summary of the financial figures:

  1. Gross revenue for the quarter came in at S$255.9 million, down 5.6% from S$271 million the year before.
  2. Profit attributable to owners stood at S$33.1 million, declining 40.1% from S$55.6 million year on year.
  3. Following suit, earnings per share came in lower (EPS) stood at 2.95 cents, pulling back by 40.4% for the reporting quarter.
  4. Net asset value (NAV) per unit was reported at S$1.33 – flat compared to 31 March 2018.
  5. For the quarter ending 31 December 2018, SIAEC had S$471.4 million in cash and cash equivalents and only S$20.3 million in debt. This meant that SIAEC was comfortably in a net-cash position of S$451.1 million. SIAEC’s cash position saw a pullback of 5.6% compared to 31 March 2018, when its net cash position stood at S$477.8 million (cash and cash equivalents of S$499.7 million and debt of S$29.1 million)
  6. SIAEC had negative free cash flow (FCF) to the tune of S$0.1 million (Operating cash flow of S$5.3 million and capital expenditures of S$5.4 million). This was a step down from the same period in the previous year when FCF stood at positive S$4.7 million (Operating cash flow of S$12.6 million and capital expenditure of S$7.9 million).

Operational highlights

The decrease in revenue was due to lower airframe and fleet management revenues, this was partially mitigated by higher line maintenance revenue. Expenditure’s also reduced in tandem due to lower material cost with the lower workload.

Profit from associated and joint venture companies reduced due to one-time events, as explained by management below –

“1) revision in the fee structure of an engine shop in 2018 that evened out its revenue over the year instead of a lump sum adjustment in the third quarter of the last financial year;

2) a foreign exchange adjustment made for the functional currency change of an associated company; and

3) a one-time tax charge booked by certain associated companies in the current quarter.”

Foolish summary

SIAEC is currently trading at S$2.52. This translates to a price-to-earnings ratio of 15.3 and a dividend yield of 4.76%.

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The Motley Fool Singapore writer, Esjay, contributed towards this article.

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 SIA Engineering. Motley Fool director, David Kuo, does not own shares in SIA Engineering.