SIA Engineering Group has reported a 55.4 per cent drop in revenue for the full year ended 31 March, to $443.0 million.
Low flight activities and widespread grounding of aircraft resulted in a “sharp and severe” reduction in business volume, the company said.
In the second half of the year, group revenue was down 54.3 per cent year-on-year to $220 million, with the pace of recovery of flight activities remaining slow.
Full year group expenditure fell 49.5 per cent to $468.0 million year-on-year, due to grants from government support schemes and cost-saving measures. Staff costs and subcontract costs fell as a result of actions taken to match manpower requirements to lower business volume.
Government wage support resulted in a further reduction in manpower costs. Non-manpower related costs fell due to tight control over expenses and deferment of non-critical expenses.
Full year profit dropped from $67.7 million in the previous financial year to a loss of $25 million. Operating profit in the second half of the year was down 92.8 per cent year-on-year to $2.2 million.
Share of profits of associated and joint venture companies over the course of the year was 68.8 per cent lower year-on-year, to $39.9 million, with a positive contribution of $49.8 million from the engine and component segment but a loss of $9.9 million from the airframe and line maintenance segment.
SIA Engineering largely attributed the decline in performance to a reduction in business volume as a result of low flying hours and an extension of aircraft maintenance intervals. A one-time increase in tax provision in the fourth quarter contributed to the reduction in the share of profits from the engine and component segment.
The adverse impact of Covid-19 on the aerospace industry also resulted in provisions being made for impairment of asset values during the financial year, the company noted, with the most significant being a $35 million impairment provision made on its base maintenance unit’s assets and an $11.4 million impairment provision on the investment in an engine programme.
Assessing the impact of Covid-19 on its full year performance, SIA Engineering noted that the start of the financial year saw the most severe impact on flight activities with a record low number of flights handled in April and May 2020. Since then, the number of flights handled has been recovering, albeit at a slow pace, it said. All business segments were “gravely affected” throughout the financial year.
The total number of flights handled by the company’s line maintenance unit in Singapore was only 18.5 per cent of the flights handled in the previous year. Looking at base maintenance activities, SIA Engineering said fewer aircraft maintenance checks were performed “as low flight activities and the grounding of aircraft by airlines resulted in the extension of maintenance intervals and hence lower base maintenance activities”.
Work volume for its fleet management business and engine and component joint venture companies also fell sharply as a result of low flight hours.
Looking ahead, SIA Engineering commented: “With the progressive step-down in government support from the JSS, cost management remains a high priority. We have maintained measures taken earlier to mitigate manpower surpluses and manage operating cost, and will continue to be prudent with capital expenditure, without losing focus on opportunities to invest in capability and capacity expansion to lay the foundation for future recovery and growth.
“The profound impact of the Covid-19 pandemic on the aviation industry has put our resilience, collective strength and agility to the test over the last financial year. With the solidarity and tenacity of our employees and unions, the SIAEC Group has judiciously strengthened safety measures and processes, transformed in response to the new MRO landscape and supported our airline customers, OEM partners and the aviation community.”
SIA Engineering noted that the path to recovery for the aviation and aerospace sector was “still fraught with risks”. “Amid the uncertainties and challenging operating environment, we will continue in our pursuit to emerge stronger through investment in new capabilities, technologies and services to expand our market reach,” the company stated. “We will also accelerate the pace of our digitalisation, automation and adoption of Lean frameworks under our ongoing Transformation programme.
“To position ourselves for the post Covid-19 aviation landscape, we will continue the diligent review and rationalisation of our portfolio of companies as well as seek out new opportunities, such as the recently-announced potential acquisition of SR Technics Malaysia, to expand our capabilities and geographic reach.”