SIA Engineering posts net profit of S$7.7m in Q3, propped up by government grants

SIA Engineering, the maintenance arm of Singapore Airlines, posted a net profit of S$7.7 million for the third quarter ended Dec 31, 2020, down 85.7 per cent from the same period a year ago, it said in a business update.

The group recorded revenue of S$104.6 million for the quarter, down 58.5 per cent year-on-year as all business segments continued to be adversely affected by low flight activities and the reduction in the number of active aircraft.

It said that the adverse impact of Covid-19 on its financial performance for the third quarter continued to be partially cushioned by grants from government support schemes, particularly the Jobs Support Scheme. Without this, the group would have recorded a loss of S$44.7 million.

Even with cost-cutting measures and grants from government support schemes, operating profit still dived 93.2 per cent to S$1.1 million for the quarter.

Share of profits of associated and joint venture companies was S$12.3 million, down 68.9 per cent year-on-year. Contributions from associated and joint venture companies were similarly impacted by the reduction in flying hours and extended maintenance intervals, but partially offset by cost saving measures and government support.

SIA Engineering also took an impairment charge of S$11.8 million during the quarter on its investment in an engine programme.

As at Dec 31, 2020, total assets stood at S$1.79 billion, down 10.6 per cent from March 31, 2020.

Meanwhile, basic earnings per share and net asset value per share as at Dec 31, 2020 were 0.69 Singapore cents and 135.8 Singapore cents respectively.

In its update, the group said that the number of flights handled by the Line Maintenance unit at its Singapore base in the third quarter was 19.3 per cent of the same quarter last year, but up 3.3 percentage points quarter-on-quarter.

The reduction in flying hours and lower work volume continued to have an impact on the fleet management business as well as its engine and component joint venture companies, said SIA Engineering.

It noted that demand for aircraft maintenance checks remained weak, with most checks having lighter work content, and the group "remained disciplined" in managing costs.

Earlier measures include the release of contract staff, release of staff under voluntary no-pay leave and early retirement, salary cuts and furlough have mitigated manpower surpluses and reduced operating costs. Non-critical capital expenditure continued to be deferred to conserve cash and maintain liquidity, said the group.

In its outlook, the group said that the progressive rollout of Covid-19 vaccines offers hope of a gradual recovery of the aviation industry and the aircraft maintenance, repair and overhaul (MRO) services business.

It is accelerating Phase 2 Transformation efforts to boost competitiveness in the post-Covid-19 MRO landscape with investments in digitalisation, technology and automation, it said.

"We will continue to closely review the rationalisation of our portfolio of joint ventures and subsidiaries in the current environment, and concurrently explore new investment opportunities for capability expansion," the group added.

SIA Engineering's shares ended at S$1.90 on Friday, down three Singapore cents or 1.55 per cent prior to the announcement.