Positioning for the Future
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POSITIONING FOR THE FUTURE SIA Engineering Company Annual Report 2015/16 CORPORATE PROFILE Listed on the mainboard of the Singapore Exchange in 2000, SIA Engineering Company is one of the world’s leading maintenance, repair and overhaul (MRO) organisations. SIA Engineering Company’s one-stop maintenance facility in Singapore offers world-class MRO services to a client base of more than 80 international airlines and aerospace equipment manufacturers. Complementing its full spectrum of MRO services is its growing portfolio of 26 joint ventures in 8 countries, forged with strategic partners and leading original equipment manufacturers. The Company holds certifications from 29 national airworthiness authorities worldwide. 2 Chairman’s Statement 4 Board of Directors 5 Key Executives OPERATING REVIEW 6 The Year in Review 7 Business Segments 12 SUSTAINABILITY 16 Corporate Calendar 17 Statistical Highlights 18 Corporate Governance 57 Financials 174 Shareholding Statistics 175 Share Price and Turnover 176 Notice of Annual General Meeting Proxy Form FY2015/16 AT A GLANCE • Incorporation of SIAEC/Boeing fleet management joint venture. • SIAEC and Airbus signed an agreement to form an airframe maintenance joint venture. • Rolls-Royce appointed SIAEC as On-Wing Services Provider for Trent Rolls-Royce engines. • SIAEC and Moog signed an MOU to form a joint venture. • Investments in innovation initiatives and technology adoption projects. 2 Chairman’s Statement REVENUE 4 Board of Directors 5 Key Executives OPERATING REVIEW $1,112.7 Million 6 The Year in Review 7 Business Segments 12 SUSTAINABILITY NET PROFIT 16 Corporate Calendar 17 Statistical Highlights 18 Corporate Governance $176.6 Million 57 Financials 174 Shareholding Statistics 175 Share Price and Turnover DIVIDENDS PER SHARE 176 Notice of Annual General Meeting Proxy Form 14 cents* *includes final ordinary dividend of 8 cents per share, which is subject to shareholders’ approval 2 CHAIRMAN’S STATEMENT SIA Engineering Company CHAIRMAN’S STATEMENT Dear Shareholders, In FY2015/16, the aviation industry developing solutions to address their support to operators of the latest- continued to face challenges from immediate business issues. These generation Airbus aircraft. the persisting uncertainties of the include restructuring and merger of major economies. associated entities and development These tie-ups with the world’s leading of capabilities to support new- aircraft manufacturers are key strategic Within the aviation industry, airlines generation aircraft. moves, important to the Group’s have been replacing their ageing fleets continued and long-term growth. While to take advantage of the enhanced We remain committed to strengthening they may not be accretive in the initial reliability of new-generation aircraft our linkages with airlines and original years, these joint ventures will leverage and engines. As a result, the demand equipment manufacturers (OEMs). on the competitive advantage and for maintenance, repair and overhaul This business model has given the customer base of our OEM partners to (MRO) services declined due to Group strength and resilience in both access a larger market. extended maintenance intervals and financial performance and market lighter MRO work scope. In response to competitiveness. In recent years, In the initial years of our Pratt & these developments, the Company has the Board and Management have Whitney and Roll-Royce joint ventures, been investing in new competencies been devoting efforts to extend this almost all their work came from and capabilities to meet the changing successful model to the airframe Singapore Airlines (SIA). Today, work needs of the industry. OEMs, namely Boeing and Airbus. from the SIA Group airlines forms I am delighted that we made the about 22% of their business, with Against this backdrop, the Company breakthroughs this year. the remaining volume coming from returned a creditable set of results in third-party airlines. In like manner, as FY2015/16. Operating profit rose 24.3% In October 2015, we incorporated a our new airframe OEM joint ventures to $104.4 million. Share of profits joint venture company with The Boeing grow, we are confident they will access from associated and joint venture Company to provide fleet management the larger global OEM market and companies, however, declined 11.4% services. Serving airlines in Asia Pacific contribute to the Group’s profitability to $94.2 million. Overall, net profit for and beyond, the joint venture dovetails and growth in the longer term. the Group decreased 3.7% to $176.6 Boeing’s aircraft manufacturer million on a revenue of $1,112.7 expertise with our MRO experience. In February, Rolls-Royce appointed SIA million, which was 0.7% lower than the While the joint venture offers fleet Engineering Company as its approved preceding year. management solutions to buyers of On-Wing Services provider within the Boeing 737, 747, 777 and 787 aircraft, Rolls-Royce Trent Service Network. This Despite the operating difficulties, SIA Engineering Company will have will enable us to bring added value it has been an eventful year as SIA a strategic, competitive advantage in to our customers, leveraging on our Engineering Company made timely securing MRO business at the point of international line maintenance network moves to position itself for the future. aircraft purchase. at 35 airports in seven countries. In the same month, we signed a Positioning For The Future Another strategic initiative was Memorandum of Understanding Since the Company’s listing on the unfolded in February 2016 – the to form a joint venture with Moog Singapore Exchange in 2000, it has signing of an agreement with Airbus Incorporated, a world-leading flight steadily built up a portfolio of joint to form a joint venture in Singapore, control components OEM, to serve ventures, which to date stands at 26 which will be positioned as Airbus’ operators of new-generation aircraft. companies located in eight countries. Centre of Excellence for Airbus While the more mature joint ventures A380 and A350 heavy maintenance Apart from accessing technology are affected by product life-cycle in Asia. The agreement, pending through OEM collaborations, with the changes and other challenges, regulatory approvals from the relevant support of the Singapore Economic working with our partners, we are jurisdictions, will enhance our technical Development Board, we are investing 3 CHAIRMAN’S STATEMENT Annual Report 2015/16 STEPHEN LEE CHING YEN Chairman “A CHANGING ENVIRONMENT PRESENTS OPPORTUNITIES FOR THOSE WHO ARE READY TO MAKE THE MOVES. WE ARE LEVERAGING ON OUR HOME BASE IN THE SINGAPORE AVIATION HUB, STRATEGIC PARTNERSHIPS AND STRONG BALANCE SHEET TO POSITION THE GROUP FOR THE FUTURE.” in innovation initiatives and technology Appreciation Company’s corporate governance adoption projects in aerospace On behalf of the Directors, I thank framework and practices. I wish them maintenance, repair and overhaul. shareholders, customers and business all the best in their future endeavours. These investments are aimed at associates for your confidence and developing innovative solutions to support. To management, staff and Market conditions remain challenging enhance customers’ fleet efficiencies unions, I extend my appreciation as the MRO industry transitions and reliability, while generating of your dedication and cohesive through structural changes brought higher productivity and process teamwork. I would also like to about by technology and market improvements in our businesses. thank my fellow Directors for their forces. A changing environment commitment and service to the presents opportunities for those who More remains to be done. While the Company. As part of the Board are ready to make the moves. We seeds of future growth have been renewal process, our long-serving are leveraging on our home base in planted, the key to success lies with Directors, Mr Ron Foo (Chairman of the Singapore aviation hub, strategic the excellence in execution. I am the Audit Committee till 21 July 2016) partnerships and strong balance sheet encouraged by the progress made thus and Mr Oo Soon Hee (Chairman of to position the Group for the future. far and we must continue to work hard the Board Safety & Risk Committee Adaptability and resilience have been to build on the pace and momentum. and the Nominating Committee till 21 our hallmarks. We will continue to seize July 2016), both of whom had joined opportunities in the dynamic landscape Dividends the Board in 2007, will be retiring at to achieve enhanced value for our The Board of Directors is the next Annual General Meeting shareholders, sustainable growth for recommending a final ordinary on 22 July 2016. On behalf of the the Group and value creation for our dividend of 8 cents per share. Together Board, I thank Ron and Soon Hee customers. with the interim dividend of 6 cents for their invaluable contributions to per share paid at mid-year, the total Board deliberations and dedicated STEPHEN LEE CHING YEN payout for FY2015/16 will be 14 cents services to SIA Engineering Company. Chairman per share. Their stewardship of the key Board Committees has strengthened the 4 BOARD OF DIRECTORS SIA Engineering Company BOARD OF DIRECTORS Stephen Lee Ching Yen Goh Choon Phong Ron Foo Siang Guan Chairman Director Chairman, Audit Committee Chairman, Compensation & HR Committee Oo Soon Hee Ng Chin Hwee Manohar Khiatani Chairman, Director Director Nominating Committee Board Safety & Risk Committee Chew Teck Soon Christina Ong Tong Chong Heong Director Director Director 5 KEY EXECUTIVES Annual Report 2015/16 KEY EXECUTIVES Png Kim Chiang Chief Executive Officer Ivan Neo Seok Kok Anne Ang Lian Choo Executive Vice President Senior Vice President Operations Finance & Chief Financial Officer Zarina Piperdi Wong Yue Jeen Senior Vice President Senior Vice President Human Resources Partnership Management & Business Development 6 OPERATING REVIEW SIA Engineering Company THE YEAR IN REVIEW SIA Engineering Company earned an operating profit of $104.4 million for the financial year ended 31 March 2016, a 24.3% increase from the preceding year, while profit attributable to equity shareholders decreased 3.7% to $176.6 million.