STAYING FOCUSED 2008/09 ANNUAL REPORT mission statement SIA Engineering Company is engaged in providing aviation engineering services of the highest quality, at competitive prices for customers and at a profit to the company. company profile As a leading maintenance, repair and overhaul (MRO) organisation with a reputation for technical and operational excellence, SIA Engineering Company offers TOTAL SUPPORT solutions to an expanding client base of international air carriers. Coupled with the specialised technical expertise developed over the years, SIA Engineering Company offers its customers a high level of service and commitment, with faster turnaround and better cost efficiencies. The Company also actively seeks alliances and partnerships with industry specialists and original equipment manufacturers to extend the breadth and depth of its services in Singapore and beyond. Certified a “People Developer” by Spring Singapore, SIA Engineering Company places high priority on attracting, developing, motivating and retaining its human capital. The Company holds certifications from more than 25 airworthiness authorities worldwide, including the Civil Aviation Authority of Singapore, the Federal Aviation Administration, the European Aviation Safety Agency and the Japan Civil Aviation Bureau. Table Of Contents 01 Statistical Highlights 02 Chairman’s Statement 04 Staying Focused 06 Integrating Core Competencies with Strategic Collaborations 08 Achieving Excellence Through Our People 10 Board Of Directors 13 Executive Management 14 Operations Review 17 Corporate Data 18 Corporate Governance 38 Financials 125 Corporate Calendar 126 Notice of Annual General Meeting 131 Proxy Form 01 statistical highlights FINANCIAL STATISTICS R1 2008-09 2007-08 % Change Group ($ million) Revenue 1,045.3 1,009.6 +3.5 Expenditure 932.7 906.7 +2.9 R1 SIA Engineering Company’s financial Operating profit 112.6 102.9 +9.4 year is from 1 April to 31 March. Profit before taxation 300.7 285.5 +5.3 Throughout this report, all financial Profit attributable to equity holders of the Company 260.6 253.8 +2.7 figures are in Singapore Dollars, unless stated otherwise. Share capital 255.6 245.0 +4.3 R2 Return on equity holders’ funds is the Reserves profit attributable to equity holders General reserve 971.9 937.5 +3.7 of the Company expressed as a Share-based compensation reserve 39.6 28.5 +38.9 percentage of the average equity Fair value reserve (1.8) 2.7 nm attributable to equity holders of the Foreign currency translation reserve (36.4) (88.4) -58.8 Company. Equity attributable to equity holders of the Company 1,228.9 1,125.3 +9.2 R3 Net liquid assets is derived by Return on equity holders’ funds (%) R2 22.1 23.9 - 1.8 pt offsetting current loans against liquid assets. Total assets 1,502.2 1,413.5 +6.3 R3 R4 Earnings after tax per share (basic) is Net liquid assets 371.7 437.2 -15.0 computed by dividing the profit attributable to equity holders of the Value added 757.3 755.5 +0.2 Company by the weighted average Per Share Data number of ordinary shares in issue. (cents) Earnings before tax 27.9 26.7 +4.5 R5 Earnings after tax per share (diluted) Earnings after tax - basic R4 24.2 23.7 +2.1 is computed by dividing the profit - diluted R5 24.1 23.3 +3.4 attributable to equity holders of the Net asset value R6 114.0 104.7 +8.9 Company by the weighted average number of ordinary shares in issue Dividends (cents per share) after adjusting for the dilutive effect Interim dividend 5.0 4.0 +25.0 on the exercise of all outstanding Proposed final dividend 11.0 16.0 -31.3 share options granted to employees. Company ($ million) R6 Net asset value per share is computed Revenue 992.9 967.2 +2.7 by dividing the equity attributable to Expenditure 886.6 865.9 +2.4 equity holders of the Company by the Operating profit 106.3 101.3 +4.9 number of ordinary shares in issue at Profit before taxation 237.3 223.9 +6.0 31 March. Profit after taxation 217.5 203.1 +7.1 Value Added 677.6 678.4 -0.1 PRODUCTIVITY AND EMPLOYEE DATA Employee Productivity – Company Average number of employees 5,621 5,550 +1.3 Revenue per employee ($) 176,641 174,265 +1.4 Value added per employee ($) 120,555 122,226 -1.4 Employee Productivity – Group Average number of employees 6,259 6,116 +2.3 Revenue per employee ($) 167,013 165,071 +1.2 Value added per employee ($) 120,999 123,528 -2.0 Staying Focused 02 chairman’s statement Stephen Lee Ching Yen Chairman Dear Shareholders, Since my message to Shareholders last year, at Clark International Airport, Philippines. Adopting a holistic approach for their the financial and economic turmoil that To be ready in mid-2009, this hangar is the engineering needs, airlines are increasingly started in 2007 continued to challenge the forerunner of more offshore facilities outsourcing management of their fleets to aviation industry. In the midst of this planned for the future. While Singapore MRO suppliers with comprehensive difficult environment, we turned in a will remain our main base of operation, capabilities. Leveraging on this trend, our creditable set of results for FY2008/2009, catering to high value-add, skills-intensive Fleet Management Programme (FMP) lifted by the strong contributions from our maintenance, repair and overhaul (MRO) competency continued its impressive 23 ventures spread across nine countries, a work, the expansion overseas will give the momentum, securing long-term contracts testimony of the strengths of our business Group added capacity at lower-cost with Airbus, Gulf Air, V Australia and Great model and strategic partnerships forged jurisdictions, and sharpen our global Wall Airlines, with a total value of more with some of the world’s leading original competitiveness. than S$600 million. The Gulf Air deal has equipment manufacturers and industry given us an important presence in Bahrain, players in the region. February 2009 saw us making further and access to the aviation markets of the inroads into the Asian MRO market when Middle East and Europe. With our FMP The year ahead is fraught with uncertainties. we inked an agreement with Saigon Ground footprint covering Asia, Australia, Middle As we chart the course forward, the Group Services to establish a jointly owned line East and the US, we currently have nine FMP is staying focused on both its short-term maintenance facility at Tan Son Nhat customers with a combined fleet size of 175 and long-term objectives – dealing International Airport in Ho Chi Minh, aircraft. effectively with the immediate challenges Vietnam. Plans are in the pipeline to expand while continuing to tap opportunities to other airports in Vietnam and, when Over the years, the Company has refined emerging in the industry. conditions are right, to scale up operations its business focus and adopted strategies to provide heavy maintenance. that have enabled it to advance in the right Breaking New Ground for Long-Term direction. Underpinning this growth is the Growth commitment and hard work of our staff. The MRO landscape continues to be shaped But today, we face a different set of On 6 November 2008, we commenced by the expectation of airlines for sustained challenges in a climate of intense global construction of our first narrow-body hangar improvements in fleet operating efficiencies. competition. All else being equal, it is the SIA Engineering Company Annual Report 2008/09 03 chairman’s statement (continued) quality of the workforce that will be the key economic conditions threaten to further Group airlines, is greatly appreciated. I also differentiator in today’s realities. As such, derail the aviation industry. In these trying take this opportunity to thank our we continue to invest in the partnership and unprecedented times, we will maintain shareholders and business partners for of the staff and unions to innovate and a tight rein on expenditure and explore all reposing confidence in SIAEC. As we revamp the work environment to meet these avenues to cut costs. Navigating the course continue to build value propositions to challenges. This symbiotic collaboration will test our mettle to the fullest. With differentiate ourselves in the global MRO will accelerate the momentum to reinforce staff and unions understanding the arena, we remain focused in delivering long- best practices and work structures in an challenges before us and working in co- term benefits to our stakeholders. atmosphere of mutual understanding and operation with management, I am confident trust. the Group will weather these difficult times. Awards Notwithstanding the current slowdown, we remain committed to the strategy of SIAEC was voted ‘2008 Best Asia/Pacific strengthening our global footprint through Airline MRO Operation’ by Aviation Week, collaborations with key airline customers, an international aviation publication, in equipment manufacturers and strategic recognition of the success of the Group’s players. This will further strengthen our international growth strategy and its fundamentals and give us a sustainable Stephen Lee Ching Yen engineering achievements. competitive edge. Chairman We are committed to upholding the best Appreciation values in corporate governance. For the fifth time since our listing in 2000, we emerged I warmly appreciate the contributions from runner-up in the ‘Most Transparent my colleagues on the Board who, despite Company’ Award conferred by the Securities their busy schedules, have devoted Investors Association of Singapore. substantial time and energy to participate actively in Board and Board Committee Dividend discussions. Their vast and varied experience have greatly enriched Board deliberations The Board remains focused on delivering a and provided sound guidance to steady dividend payout for shareholders. management. Your Directors are recommending a final dividend of 11 cents per share for I am grateful for the unstinting dedication FY2008/2009.