GEARING UP FOR GROWTH
ANNUAL REPORT 2022/23
CORPORATE
PROFILE
Listed on the mainboard of the Singapore Exchange in 2000, SIA Engineering Company (SIAEC) is one of the world's leading maintenance, repair and overhaul (MRO) organisations.
SIAEC's one-stop maintenance facility in Singapore offers world-class MRO services to a client base of more than 80 international carriers and aerospace equipment manufacturers. Complementing its full spectrum of MRO services is its portfolio of 23 subsidiaries and joint ventures in 8 countries, forged with strategic partners and leading original equipment manufacturers (OEMs). The Company holds certifications from 29 national airworthiness authorities worldwide.
MISSION
SIAEC Signed a $120.8 Million
Services Agreement with Scoot
SIAEC Signed a $1.14 Billion Services
Agreement with Singapore Airlines
SIAEC and Institutes of Higher Learning Collaborate to Develop Next Generation of Skilled Professionals
REVENUE | |||
SIAEC Secured a Component Support | |||
$796.0 | |||
A320 Aircraft | |||
Agreement for MYAirline's Fleet of | |||
MILLION | |||
SIAEC Extended its Maintenance | |||
Agreement with Hawaiian Airlines | |||
FY2022/23 | |||
AT A GLANCE |
CONTENTS
STATEMENT
SIAEC is engaged in providing aviation engineering services of the highest quality, at competitive prices for customers and a profit to the Company.
SIAEC Completed the Acquisition
of 75% of the Share Capital of
SR Technics Malaysia
SIAEC and Honeywell Signed an
Agreement for 737 and 787 Air Data Inertial Reference Unit Repair Capability
SIAEC Signed an MOU for Hangar
Facilities in Subang, Malaysia
SIAEC Won Aviation Week Network's
2022 Asia MRO of the Year -
Airframe Award
SIAEC Won Airline Economics
Magazine's 2022 Asia-Pacific MRO
of the Year Award
NET PROFIT
$66.4
MILLION
- Chairman's Statement
- Corporate Calendar
- Board of Directors
- Key Executives
- The Year in Review
- Business Review
- Growing Component Services Capabilities
- Continuous Improvement
- Corporate Governance
- Risk Management
- Sustainability at SIAEC
- Statistical Highlights
- Financials
- Shareholding Statistics
- Share Price and Turnover
- Notice of Annual General Meeting
- Additional Information on Directors Seeking Re-election Proxy Form
SIA ENGINEERING COMPANY | 1 | ANNUAL REPORT 2022/23 |
CHAIRMAN'S STATEMENT
CHAIRMAN'S STATEMENT
Dear Shareholders,
The past few years have been turbulent for the MRO industry. The absence of flights, owing to border closures, led to
a plunge in MRO activity that impacted many aerospace companies. With many countries having pivoted to an endemic COVID-19 new norm in 2022, FY2022/23 saw a strong recovery in air travel which had, in turn, benefitted the MRO industry and the SIAEC Group.
Airlines progressively reinstated passenger flights over the course of the year amid strong pent-up travel demand and the full reopening of borders. In Singapore, flight activities recovered to 79% of pre-COVID-19 levels by March 2023. That resulted in a strong uptick in MRO activity. Thanks to Transformation-led productivity and capacity enhancements across our operations, the SIAEC Group was able to scale up and capitalise on this demand recovery and reap better cost efficiency.
The number of flights handled by our Line Maintenance unit in Singapore more than doubled to 105,139 in FY2022/23, compared to 47,885 in FY2021/22. Maintenance checks at our Singapore and Clark bases also registered double-digit percentage increases, compared to the previous year. The successful adoption of Lean practices at our Base Maintenance unit yielded additional capacity, enabling the unit to take advantage of the increase in demand with new customer contracts secured during the year.
Similarly, Component Services and fleet management work volume increased as flight activities continued to ramp up. In addition, our Engine Services business saw a progressive increase in engine inductions since completion of the first CFM LEAP-1Aquick-turn delivery in the early part of the financial year, followed by the LEAP-1B delivery. Our portfolio of joint venture (JV) and associated companies also rebounded in line with the industry recovery.
Riding this strong wave of recovery in MRO activity, our revenue rose 40.6% to $796.0 million in FY2022/23, compared to $566.1 million a year ago. The Group recorded a net profit of $66.4 million despite the reduction in government wage support. Excluding the impact of the prior year's onetime tax write-back and the lower wage support, our net profit improved by $102.6 million year-on-year.
In light of the recovery, the Board is pleased to recommend a final ordinary dividend of 5.5 cents per share for FY2022/23, the first since the onset of the pandemic. The final dividend reflects the Board's confidence that the worst is behind us. Payment of the final dividend on 11 August 2023, which amounts to approximately $61.7 million, is subject to shareholders' approval at the Annual General Meeting on 20 July 2023.
TANG KIN FEI
Chairman
CAPTURING GROWTH BEYOND RECOVERY
While a rising tide lifts all boats, we recognised early on that merely banking on the broad industry recovery is not enough. The improving demand for MRO services could be derailed by an interplay of macro factors, namely, geopolitical tensions, a looming economic slowdown in many major economies, supply chain disruptions, and persistent high inflation. Moreover,
the pace of recovery beyond 80% of pre-pandemic levels is expected to be slower, as airlines face constraints in returning fully to pre-pandemic flight levels.
To ensure that SIAEC emerges stronger and gears up for growth beyond recovery, we have built on our multi-faceted strategy to invest in new capabilities and reshape our business to drive long-term sustainable growth. To this end, we expanded our capabilities and services for new generation aircraft through investments in our own shops and acquisitions, broadened the scope and capabilities of our JV companies through new acquisitions and partnerships, and extended our geographical presence to capture new markets and customers. This strategy, including the setting up of our Engine Services Division and Component Services Division, positions SIAEC to expand into new business segments and seize opportunities from the recovery of the MRO industry.
This is supported by our new centralised Sales and Commercial unit and the establishment of regional sales offices to enhance customer intimacy and drive the growth of third-party business. Revenue is expected to grow alongside the expansion of our customer base.
As part of the regular review of our JV portfolio to focus on building next-generation aircraft capabilities, we exited JVs that no longer align with our strategy and established new
ones for growth. During the year, we ceased operations at our 49%-owned JV, Boeing Asia Pacific Aviation Services by mutual agreement of the shareholders due to the changing business environment.
We plan to expand our regional base maintenance footprint beyond Singapore and Philippines and had signed a non- binding Memorandum of Understanding in April 2022 for the potential lease of hangars in Subang, Malaysia. These two hangars will boost SIAEC's regional network offering of the current six hangars in Singapore and three hangars in Clark, Philippines, and enable us to cater to the varying needs of our customers. We had also announced our plans to acquire a stake in POS Aviation Engineering Services, which has line maintenance operations at 10 stations in Malaysia. When those transactions are completed, the growth in Malaysia will complement the capabilities of our Singapore hub.
In May 2022, we acquired a 75% stake in SR Technics Malaysia, which was subsequently renamed Asia Pacific Aircraft Component Services (APACS). This acquisition added component repair and overhaul capabilities for more than 600 part numbers for Airbus and Boeing aircraft, creating further opportunities for Component Services business growth. Our component MRO capabilities were further expanded through a 10-year licensing agreement with Honeywell for the repair of the Air Data Inertial Reference Unit on Boeing 737 and 787 aircraft, which will be performed at APACS.
Our efforts in acquiring new capabilities and winning new customers are also progressing well in other areas of our business. For instance, our Engine Services unit expanded its Rolls-Royce Trent On-Wing engine repair capabilities to include boroblending and fan blade reprofiling, and continued to work closely with partners to ramp up capacity and expand capabilities of its Aircraft Engine Services facility. Our Engine Test Facility was also upgraded and its capabilities expanded to include LEAP-1A engine testing. At Base Maintenance, we extended our maintenance agreement with Hawaiian Airlines for its A330-200 fleet, covering additional checks for 11 aircraft into 2027. We secured a new customer, MYAirline, a low-cost airline based at Kuala Lumpur International Airport, under our Inventory Technical Management Programme. In addition, we signed new Comprehensive Services Agreements with Singapore Airlines and Scoot. These agreements, which have a two-year term with a one-year extension option,
will see SIAEC provide a broad spectrum of MRO and fleet management support services to both airlines.
The agreements are worth an aggregate of $1.26 billion.
RAMPING UP MANPOWER FOR OPERATIONAL RESILIENCE
To gear up for growth, it is crucial to have sufficient manpower. We were able to retain most of our skilled engineers and
technicians during the pandemic, thanks to the Jobs Support Scheme provided by the Singapore Government, coupled with our manpower cost mitigation measures and the support from the unions.
Even so, we have been actively ramping up our workforce ahead of the recovery. Advance recruitment efforts have enabled us to keep pace with the strong recovery in MRO activities and ensure operational resilience. Despite the tight labour market, we will continue to closely manage our manpower resources to keep pace with Changi Airport's recovery to pre-COVID levels.
FROM TRANSFORMATION TO CONTINUOUS IMPROVEMENT
Alongside our growth strategy, we continued to focus on Transformation. To grow beyond recovery from the pandemic, it was imperative for us to scale up Lean initiatives, advance digitalisation and technology adoption, and sustain an innovation culture, so as to strengthen our organisational capabilities, create value for our key stakeholders, and boost our competitiveness. SIAEC's Transformation Phase 2 efforts made good progress in FY2022/23, generating greater value and higher efficiencies.
The introduction of Lean, digital and other technical skillsets across the Company has strengthened our planning and operational efficiency. We are more agile and better positioned to deal with disruptions and drive improvements. A strong and active innovation culture in SIAEC has also allowed us
to harness the increasing number of staff idea submissions, develop ground-up initiatives and encourage experimentation in artificial intelligence, machine vision and optimisation tools.
The integration of Lean and digitalisation into our operating systems has resulted in shorter turnaround times and in turn, improved aircraft availability and operational resilience for our airline customers. For our staff, investment in automation and assistive tools has provided a safer and less physically strenuous working environment, leading to enhanced productivity and job satisfaction. These transformation outcomes have earned us awards from customers and recognition from the aviation industry. SIAEC was conferred the "Asia-Pacific MRO of the Year" award by Airline Economics magazine for the second consecutive year, and the "Asia MRO of the Year - Airframe" award by Aviation Week Network, in 2022. SIAEC was also included amongst the top 200 best employers in Singapore by The Straits Times and Statista.
The strengthening of our maintenance planning and execution has boosted our competitiveness, generating higher asset utilisation to increase our revenue from new and existing customers. These initiatives have resulted in improved profitability, service levels and productivity.
SIA ENGINEERING COMPANY | 2 | ANNUAL REPORT 2022/23 | SIA ENGINEERING COMPANY | 3 | ANNUAL REPORT 2022/23 |
CHAIRMAN'S STATEMENT
CORPORATE CALENDAR
Following the successful conclusion of the Transformation Phase 2 programme, we will transition to the Continuous Improvement programme which was just launched in May 2023. This programme demonstrates our commitment to embed the culture of continuous improvement in our corporate DNA for the sustained pursuit of operational excellence. We not only aim to enhance the value we deliver to stakeholders amid an evolving MRO industry, but also create lasting value for Singapore's aviation ecosystem.
BUILDING A FUTURE-READY WORKFORCE AND THE NEXT GENERATION OF TALENTS
We have been continually upskilling and reskilling our workforce with Lean, digital and other technical skillsets. It is necessary for our workforce to acquire new skills and competencies beyond just aerospace engineering to meet the evolving needs of the aerospace industry.
In March 2023, SIAEC signed MOUs with seven Institutes of Higher Learning (IHLs) with the aim to build an agile and future- ready workforce through continuing education and training; to nurture students who are the next generation of talents for the aerospace engineering industry; and to foster greater industry- academia collaboration through knowledge exchange and joint projects. While historical collaborations with academia were largely confined to the aerospace engineering field, new initiatives under the MOUs will focus on attracting talents from diverse disciplines relevant to the demands of the business.
SUSTAINABILITY INITIATIVES
As a sustainability-centric MRO service provider, SIAEC continues to support the aviation industry's goal of net zero carbon emissions by 2050. In the medium term, we are committed to halving Scope 1 and 2 carbon emissions by 2030, from the baseline year of FY2019/20.
To move closer toward these goals, SIAEC is investing in energy-efficient equipment and cleaner vehicles, such as the progressive upgrading of air compressors at our hangars and scaling up the adoption of electric tractors. With 18% of our current electricity needs being fulfilled by existing solar panels, there are plans to expand our use of renewable energy with the installation of additional solar panels. All SIAEC-owned buildings are also certified as PUB Water Efficient Buildings.
In recognition of our sustainability efforts, our scores have been upgraded by sustainability rating agencies, such as Sustainalytics and S&P Global. Going forward, we intend to take further steps to decarbonise our operations whilst enhancing our sustainability disclosures and deepening our engagement with stakeholders.
Furthermore, the introduction of a Board Diversity Policy articulates our belief and commitment to building a diverse,
inclusive and collaborative culture that will enhance decision- making and set an example for the organisation.
APPRECIATION
On behalf of the Board of Directors, I would like to express our deepest appreciation to Mrs Christina Ong, who retired as a Non-Executive and Independent Director at the end of 2022 after serving on the Board for nine years. Mrs Ong's guidance and contributions were invaluable to the strong governance practices and success of the Group during her tenure. I wish her a happy retirement.
I would also like to take this opportunity to extend a warm welcome to Ms Chong Chuan Neo and Ms Tan Tze Gay, who were appointed as Non-Executive and Independent Directors on 1 October 2022 and 28 October 2022, respectively. Their extensive experience and expertise will serve us well in charting the strategic direction of the SIAEC Group.
Mr Ng Chin Hwee will be retiring as Chief Executive Officer (CEO) of SIAEC with effect from 1 October 2023 and will relinquish his Directorship on the same date. I would like to convey the Board's sincere appreciation to him for bearing the daunting task of leading the Group through the MRO industry's greatest crisis during the COVID-19 pandemic. His excellent leadership and steady grip have enabled the Group to not only survive but navigate a smooth path towards recovery. I wish him a happy retirement ahead.
At the same time, I warmly welcome Mr Chin Yau Seng, who was appointed as CEO-Designate with effect from 1 June 2023 and will succeed Mr Ng as CEO on 1 October 2023. Mr Chin was formerly Senior Vice President Cargo of Singapore Airlines Limited, and has extensive experience in aviation, business and operations garnered through various senior executive positions held across the SIA Group.
He remains on the Board of SIAEC as a Non-Independent and Executive Director.
To the SIAEC team, your hard work and perseverance to ensure that the Group emerges stronger from the pandemic have never ceased to amaze me. A special word of thanks to all our staff, unions and Management for your contributions and commitment to the transformation and success of the Group.
Lastly, I wish to convey our heartfelt gratitude to all shareholders, customers, business partners, government agencies, stakeholders and friends for your continued support and trust in us.
TANG KIN FEI
Chairman
21 FEB | 21 JUL |
Announcement of | 40th Annual General Meeting |
FY2021/22 third-quarter | 25 JUL |
business updates | |
5 MAY | Announcement of |
FY2022/23 first-quarter | |
Announcement of | business updates |
FY2021/22 full-year financial | 1 NOV |
results | |
6 MAY | Announcement of first-half |
FY2022/23 financial results | |
Analyst briefing on | 2 NOV |
FY2021/22 full-year financial | |
results | Analyst briefing on first-half |
22 JUN | FY2022/23 financial results |
Website publication of Notice | |
of Annual General Meeting | |
and FY2021/22 Annual | |
Report |
2022
2023
17 FEB | 20 JUL |
Announcement of | 41st Annual General Meeting |
FY2022/23 third-quarter | 25 JUL |
business updates | |
8 MAY | Announcement of |
FY2023/24 first-quarter | |
Announcement of | business updates |
FY2022/23 full-year financial | 11 AUG |
results | |
9 MAY | Payment of FY2022/23 |
final dividend | |
Analyst briefing on | 2 NOV |
FY2022/23 full-year financial | |
results | Announcement of first-half |
21 JUN | FY2023/24 financial results |
3 NOV | |
Despatch of Notice of | |
Annual General Meeting to | Analyst briefing on first-half |
shareholders and website | FY2023/24 financial results |
publication of Notice of | |
Annual General Meeting and | |
FY2022/23 Annual Report |
SIA ENGINEERING COMPANY | 4 | ANNUAL REPORT 2022/23 | SIA ENGINEERING COMPANY | 5 | ANNUAL REPORT 2022/23 |
BOARD OF DIRECTORS
BOARD OF DIRECTORS
MR TANG KIN FEI | MS CHUA BIN HWEE | MR LIM KONG PUAY |
Chairman, Board of Directors | Chairman, Audit Committee | Chairman, Board Safety & Risk Committee |
Chairman, Compensation & HR Committee | Member, Executive Committee | Chairman, Board Sustainability Committee |
Chairman, Executive Committee | Member, Board Sustainability Committee | Member, Audit Committee |
Chairman, Nominating Committee | Non-Executive and Independent Director | Non-Executive and Independent Director |
Non-Executive and Independent Director |
DR RAJ THAMPURAN | MR GOH CHOON PHONG | MR NG CHIN HWEE |
Chairman, Technology Advisory Committee | Member, Compensation & HR Committee | Member, Executive Committee |
Member, Audit Committee | Member, Executive Committee | Member, Technology Advisory Committee |
Member, Board Safety & Risk Committee | Non-Executive and Non-Independent Director | Member, Board Sustainability Committee |
Non-Executive and Independent Director | Non-Independent Director and Chief Executive Officer |
MR TANG KIN FEI, 72
Chairman, Board of Directors
Chairman, Compensation & HR Committee
Chairman, Executive Committee
Chairman, Nominating Committee
Non-Executive and Independent Director
Mr Tang Kin Fei was appointed Director and Deputy Chairman on 8 May 2017 and subsequently, as Chairman on 19 July 2018. He was the Group President and Chief Executive Officer of Sembcorp Industries Ltd from 1 May 2005 until his retirement on 31 March 2017. He then remained as an Advisor and a Non-Executive Director on the Board of Sembcorp Industries until 31 May 2017.
Mr Tang, who was previously with the Sembcorp Group for 30 years, has been credited with driving its transformation into an international energy, water, marine and urban development group. Prior to his appointment as Group President and Chief Executive Officer, Mr Tang headed Sembcorp's utilities business on Jurong Island in Singapore, which grew into a global energy and water player with a sizeable portfolio of assets and capabilities. Before joining Sembcorp, Mr Tang was the Managing Director of Wescon Asia and a project engineer in Esso Singapore.
With effect from 15 May 2023, Mr Tang was appointed as the Executive Chairman of Metis Energy Limited, Chairman of Singapore LNG Corporation Pte Ltd and Singapore Cooperation Enterprise. He is also a Director of Athena Energy Holdings Pte Ltd, Metis Solar Pte Ltd, Summit Power International Ltd, Thermodynamics Technology Asia Limited, Thermodynamics Technology Pte Ltd, Red Dot Energy and Technology Asia Pte Ltd and Vietrof RE Pte Ltd, Vice Chairman of the Kwong Wai Shiu Hospital, a charitable hospital which provides care for needy patients.
Academic and Professional Qualifications:
- Bachelor of Mechanical Engineering (1st Class Honours), University of Singapore
- Advanced Management Programme, INSEAD, France
Directorships/Appointments in the past 5 years
Organisation/Company | Title | |
1. | Singapore Chinese Chamber of | Council Member |
Commerce and Industry | ||
2. | National Research Foundation | Board Member |
3. | Ngee Ann Polytechnic | Council Chairman |
MS CHUA BIN HWEE, 66
Chairman, Audit Committee
Member, Executive Committee
Member, Board Sustainability Committee
Non-Executive and Independent Director
Ms Chua was appointed Director on 1 April 2021. She was the Vice Chairman of PricewaterhouseCoopers ("PwC") Singapore where she had been an audit partner for over 25 years. Ms Chua held global and regional positions, including Deputy Markets Leader of PwC Asia Pacific and Americas, and was a member of the PwC Global Markets Leadership Team and PwC Asia Pacific Executive Team. Ms Chua has extensive experience in statutory audits, corporate governance, corporate restructuring, fraud investigations, business and finance.
Ms Chua is currently a Director of the Boards of CapitaLand Integrated Commercial Trust Management Limited, Certis Cisco Security Pte Ltd and Marelli Holdings Co., Ltd. She is also a Board member of Gardens by the Bay and the National Heritage Board.
Ms Chua was previously President of the Singapore Anti- Narcotics Association, Deputy Chairman of the National Volunteer & Philanthropy Centre, and a Board member of Housing & Development Board, Duke-NUS Medical School, Maritime and Port Authority of Singapore and the Health Promotion Board. In recognition of her community service, she was awarded the Public Service Medal in 2012 and the Public Service Star in 2017. She was also conferred Justice of the Peace in 2018.
MR WEE SIEW KIM | MR MAK SWEE WAH | MR CHIN YAU SENG |
Member, Board Safety & Risk Committee | Member, Board Safety & Risk Committee | Member, Executive Committee |
Member, Compensation & HR Committee | Member, Nominating Committee | Member, Technology Advisory Committee |
Non-Executive and Independent Director | Non-Executive and Non-Independent Director | Member, Board Sustainability Committee |
Non-Independent Director and CEO-Designate |
MS CHONG CHUAN NEO | MS TAN TZE GAY | MRS CHRISTINA ONG |
Member, Audit Committee | Member, Audit Committee | Chairman, Nominating Committee |
Member, Nominating Committee | Member, Board Sustainability Committee | Chairman, Board Sustainability Committee |
Member, Technology Advisory Committee | Non-Executive and Independent Director | Member, Audit Committee |
Non-Executive and Independent Director | Non-Executive and Independent Director | |
(until 31 December 2022) |
Current Directorships In Other Listed Companies
Company | Title | ||
1. | Metis Energy Limited | Executive Chairman | |
Other Principal Commitments | |||
Organisation/Company | Title | ||
1. | Singapore LNG Corporation Pte Ltd | Chairman | |
2. | Summit Power International Ltd | Director | |
3. | Singapore Cooperation Enterprise | Chairman | |
4. | Kwong Wai Shiu Hospital | Vice-Chairman | |
5. | Kwong Wai Shiu Hospital Foundation | Chairman | |
6. | Athena Energy Holdings Pte Ltd | Director | |
7. | Vietrof RE Pte. Ltd. | Director | |
8. | Metis Solar Pte Ltd | Director | |
9. | Thermodynamics Technology Asia | Director | |
Limited | |||
10. | Thermodynamics Technology Pte. Ltd. | Director | |
11. | Red Dot Energy and Technology Asia | Director | |
Pte Ltd |
Academic and Professional Qualifications:
- Bachelor of Accountancy (Honours), University of Singapore
- Chartered Accountant, Institute of Singapore Chartered Accountants
Current Directorships In Other Listed Companies
Company | Title | |
1. | CapitaLand Integrated Commercial | Director |
Trust Management Limited | ||
Other Principal Commitments | ||
Organisation/Company | Title | |
1. | Certis Cisco Security Pte Ltd | Director |
2. | Gardens by the Bay | Director |
3. | National Heritage Board | Director |
4. | Marelli Holdings Co. Ltd | Director |
SIA ENGINEERING COMPANY | 6 | ANNUAL REPORT 2022/23 |
SIA ENGINEERING COMPANY | 7 | ANNUAL REPORT 2022/23 |
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SIA Engineering Company Ltd. published this content on 21 June 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 June 2023 01:50:05 UTC.