SIA Engineering Company Ltd’s Latest Earnings: A Special Dividend for Shareholders
Last Friday, SIA Engineering Company Ltd (SGX: S59) reported its fourth quarter and full year earnings report for its fiscal year ended 31 March 2017 (FY2016-17).
As a quick background, SIA Engineering is a leading player in the aircraft maintenance, repair, and overhaul (MRO) sector. The firm’s engineering services can be divided into the line maintenance segment, and the repair and overhaul segment. SIA Engineering is also a subsidiary of Singapore Airlines Ltd (SGX: C6L).
You can catch up with the results from SIA Engineering’s fiscal third quarter here.
The following’s a rundown on some of the latest financial figures for SIA Engineering:
1. Revenue for the fourth quarter was $295.4 million, a 0.4% increase compared to the same quarter a year ago. For FY2016-17, SIA Engineering had revenue of $1.10 billion, 0.8% lower than FY2015-16’s revenue of $1.11 billion.
2. For the fourth quarter, profit attributable to shareholders was $45.9 million, up 10.9% compared to the fourth quarter in the last fiscal year. For the full year, profit attributable to shareholders came in at $332.4 million, up 88.2%. SIA Engineering’s profit in FY2016-17 was boosted by a divestment. Without the divestment, profit for the year would have just been $172 million.
3. Diluted earnings per share (EPS) for the fourth quarter was up 10.8% to 4.09 cents in the reporting quarter. SIA Engineering’s FY2016-17 EPS was 29.57 cents, up 88.3%.
4. For the full year, cash flow from operations was $131.8 million and capital expenditure was $38.5 million. The lower capex gave SIA Engineering $93.5 million in free cash flow, nearly triple the $36.1 million in free cash flow seen a year ago.
5. As of 31 March 2017, SIA Engineering had $601.7 million in cash and equivalents and borrowings of about $25.9 million.
SIA Engineering closed its financial year a small decline in revenue and profit (excluding the divestment gain). The MRO services provider also generated solid free cash flow and boasts a strong balance sheet.
A final ordinary dividend of 9.0 cents per share and a special dividend of 5.0 cents per share was recommended. With the interim dividend of 4.0 cents per share, this adds up to a dividend payout of 18 cents per share for FY2016-17. This is an increase from the 14.0 cents per share in dividend paid out in FY2015-16.
Operational highlights and what lies ahead
For the full financial year, the repair and overhaul segment saw its revenue decline by 9.4% to $591.1 million. SIA Engineering’s management cited fewer heavy checks as the reason for the decline. Meanwhile, line maintenance revenue rose 11.5% to $513 million.
Share of profits of associates gained 28.8% to $64.9 million in FY2016-17. But, SIA Engineering’s share of profits of joint venture companies fell 27.9% to $31.6 million.
SIA Engineering’s management offered this outlook in the earnings release:
“In spite of global uncertainties and the challenges the Company already faces in the maintenance, repair and overhaul sector from excess capacity and aggressive pricing, there remain growth opportunities. The Company continues to invest in strategic partnerships and advancing innovations, and maintain vigilance on costs.
During the year, a Joint Venture Agreement was signed with Moog Incorporated to establish a joint venture for repair and overhaul services of Moog’s products on the new-generation Boeing 787 and Airbus A350 aircraft. This followed earlier strategic tie-ups with Boeing on fleet management and Airbus on heavy maintenance business.
We also signed a Memorandum of Understanding with Stratasys Ltd., a leading 3D printing and additive manufacturing solutions company, to offer design, engineering, certification support and parts production to our global network of airline customers. These investments are not expected to be accretive in the near term.
These initiatives will strengthen the Group’s core competencies and service offerings, and position us well to seize emerging opportunities for long-term growth.”
SIA Engineering’s shares closed at $3.98 each today. At that price, the company trades at 13.5 times earnings and has a dividend yield of 4.5%.