SIAEC records net loss of S$19m in H1, Covid-19 impact cushioned by govt grants

SIA Engineering Company (SIAEC), the maintenance arm of Singapore Airlines, swung into a net loss of S$19 million the first half of its financial year, the mainboard-listed company said in an exchange filing on Tuesday evening.

This is a year-on-year decline of S$106.6 million, with the group reversing the S$87.6 million net profit it recorded in the April-to-September period in 2019.

Revenue fell by 56.5 per cent to S$223 million, while group expenditure slid 47.4 per cent to S$250.2 million. The group incurred an operating loss of S$27.2 million compared with an operating profit of S$37.3 million in the same period last year.

SIAEC said this is due to a reduction in the group's business activities as a result of fewer flights and massive grounding of aircraft amid the Covid-19 pandemic.

It said: "The adverse impact of Covid-19 on the group's financial performance for the first half was cushioned by grants from government support schemes, most significantly, the Jobs Support Scheme. Without this support, the group would have recorded a loss of S$114.6 million."

Shares of profits of associated and joint venture companies declined by 46.8 per cent to S$28.4 million. The engine and component segment saw a profit of S$37.9 million, while the airframe and line maintenance segment recorded a loss of S$9.5 million. SIAEC said contribution from associated and joint venture companies continued to be affected by reduction in flying hours and extended maintenance intervals, although they were partially offset by cost savings and government support.

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Meanwhile, the group also recognised a non-cash impairment loss on its base maintenance unit's assets of S$35 million.

This is due to "significant decline in hangar revenue projections brought about by lower flight hours, large number of aircraft taken out of operation and parked, and the likelihood that some of the parked older generation aircraft will not return to operation", it said.

"As the recovery outlook remains uncertain, we will continue to monitor the situation and make additional impairment if required," SIAEC said.

Basic loss per share amounted to 1.69 Singapore cents, compared with an earnings per share of 7.82 cents in the corresponding period a year ago. Net asset value per share as at Sept 30 was S$1.371, comparable with the value in 2019 at S$1.374.

The number of flights handled by its line maintenance unit in Singapore was only 14 per cent the amount handled in the corresponding six-month period last year.

In the second quarter, the number of flights fell to 16 per cent of last year's level. This was 3 percentage points higher than in the first quarter, indicating a continued but slow recovery rate, the company said.

With the weaker recovery outlook, deeper salary cuts were implemented in addition to other cost-management measures such as furlough, voluntary no-pay leave, voluntary early retirement, release of contract staff and scheduled shutdown of maintenance shops, it said.

As part of the review of its investment portfolio, SIAEC restructured its investments in the Philippines, as well as Heavy Maintenance Singapore Services, and proceeded with the dissolution of its joint venture, Line Maintenance Partnership (Thailand), in Q2.

The group said recovery of its maintenance, repair and operations business is contingent on the recovery of the aviation industry, which continues to remain uncertain. However, it said it is encouraged by the efforts of Singapore and other countries to revive air travel through the use of green lanes and air travel bubbles, and is hopeful this would stimulate travel into Singapore.

"We will stay flexible and nimble to adapt to the changing market environment while continuing to manage our expenditure and cash flow with prudence. Our strong balance sheet with low borrowings provides support for eventual recovery as well as our search for opportunities to strengthen existing or bring new capabilities to the group," SIAEC said.

It is now working closely with its joint-venture companies to ensure they overcome operating challenges for sustained growth.

In the meantime, it is continuing with its transformation efforts, which it said has yielded positive results so far.

SIAEC's shares closed at S$1.67 on Tuesday, up 4 Singapore cents or 2.5 per cent.