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5 Charts from Singapore Airlines Ltd’s Annual Report

Singapore Airlines Ltd (SGX: C6L) had a mixed financial year, with revenue reaching new highs but earnings per share dropping by nearly 50%. The group, which counts Scoot, SIA Engineering Company Ltd (SGX: S59), and SilkAir as subsidiaries, released its annual report for the year ended 31 March 2019.

In it, there were five charts that highlighted some of the significant trends over the year.

Operating expenses

Source: Singapore Airlines 2019 Annual Report

The chart above shows the breakdown of operating expenses. As you can see, the biggest expense came from fuel costs, which made up 30.1% of total operating expenses.

Fuel price trend

The chart below shows fuel cost trends over the last eight quarters.

Source: Singapore Airlines Ltd 2019 Annual Report

The most obvious pattern is the steady increase in fuel prices starting from the second quarter of financial year 17/18, which has caused the group to suffer higher expenses. That said, fuel prices dropped in the fourth quarter of 18/19. 

If fuel prices continue to decline, operating expenses could decrease this year.

5-year operating profit and margin

Another important chart is this one, showing the company’s operating profit and operating profit margin over the last five years.

Source: Singapore Airlines 2018/19 Annual Report

As you can see, operating profit and operating profit margin have been very erratic. This is not unusual for airline companies, which are highly susceptible to changes in fuel prices. However, one thing to note is that despite higher fuel prices this year, operating profit and margin held up well, and both were higher than in the three years prior to FY17/18.

Cash flow

Cash is the lifeblood of a company. This is especially so for a capital-intensive company like Singapore Airlines. The group has been quite consistent in this regard, generating healthy cash flow from operations each year. The chart below shows internally generated cash flow, which includes sales of assets.

Source: Singapore Airlines 2018/19 Annual Report

Net cash position

Lastly, it is essential to monitor the financial strength of a company. The chart below shows the net liquid assets, or net debt position, of Singapore Airlines over the last five financial years.

Source: Singapore Airlines FY18/19 Annual Report

Despite good operating cash flow in the past five years, Singapore Airlines’ financial position has deteriorated. Its net liquid asset position turned negative in 2018 and widened in 2019.

The weaker balance sheet is largely due to the group’s heavy capital expenditures over the last two years. In the two years, the group spent close to S$11 billion on aircraft, spares, and engines.

Putting it all together

The first things investors should have noticed from these charts is that Singapore Airlines, like other airline companies, is highly susceptible to changes in fuel prices. 

Despite higher revenue this year, the group ended the year with lower profit and lower profit margins. 

It also spent heavily on capital expenditures over the last two years, which weakened its balance sheet. However, the new aircraft, spares, and engines will hopefully serve to improve the company’s profit and cash flow generation over the next few years.

Investors will have to keep an eye on revenue, profit, and cash flow over the next few years to see if these investments have paid off.

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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 Jeremy Chia does not own shares in any of the companies mentioned.