SIA Annual Report 2010

SIA released its annual report recently for the financial year 1 April 2009 to 31 March 2010 (FY10).

 

During financial year FY10, the Great Recession 2008/09 was at its peak during the first quarter FY10. Management warned then that SIA may post a loss for the whole year for the first time as a public listed company. The global recession gradually recovered in the second half of FY10. SIA managed to turn in a net profit attributable to the shareholders of $216 million for the whole year.  This was a significant drop from $1,016 million profit achieved in FY09 (-80%).

 

Operating Results

 

When revenue dropped 20.6%, SIA controlled expenditures and reduced it by 16.2%. It cut capacity and routes and reduced manpower costs through wage cuts. Staff costs was reduced 15.2% while fuel costs, the biggest component costs, was reduced by 34.6%.

 

 

2009/10

2008/09

% Change

Total Revenue

$12,707 m

$15,996 m

– 20.6

Total Expenditure

$12,644 m

$15,092 m

– 16.2

Staff costs

$2,159 m

$2,545 m

– 15.2

Fuel costs

$4,194 m

$6,408 m

– 34.6

 

Financial Position and Ratios

 

Return on Equity (ROE) dropped as a consequence of poorer operating profits. It was 1.6% compared to 7.3% in FY09. Despite a drop in earnings per share (EPS) to 18.2 cents, SIA is proposing dividend per share at 12.0 cents which is 0.66 times EPS, which is higher than 0.44 times FY09.

 

Total debt over equity dropped to 0.10 times from 0.12 times which indicates that debt was reduced in the current financial year. Its cash and bank balances rose 16% to $4,471m from FY09. Overall the debt and cash position of SIA were healthy despite poor operating condition.

 

 

2009/10

2008/09

Return on Equity

1.6%

7.3%

Earnings per share (cts)

18.2

89.6

Dividend per share (cts)

12.0

40.0

Total Debt/Equity (times)

0.1

0.12

Cash and bank balances

$4,471 m

$3,848 m

Net asset value per share ($)

$11.30

$11.78

Closing share price at year end

$15.20

$10.00

Price to Book (times)

1.35

0.85

 

Net asset per share was flat dropping marginally to $11.3 from $11.78 in FY09. What is interesting to note was that on 31 March 2009, the last traded share price was just $10.00 which was 0.85 times Net asset per share (i.e. below book value). The sentiment then was that SIA would be badly hit by the ensuing global financial crisis. This was an oversold situation and at 31 March this year, SIA was trading at 1.35 times book value at $15.20. This brought back some normalcy in the share trading of SIA.

 

Operating Statistics

 

 

FY10

FY09

FY08

Passenger Load factor

78.4%

76.5%

80.3%

Cargo Load factor

63.4%

59.4%

62.2%

Overall Load factor

69.2%

66.3%

69.3%

 

From the overall load factor, SIA had regained what was achieved in FY08. The passenger load factor had yet to reached 80.3% attained in FY08, though it had improved from FY09. Cargo load factor surpassed that of FY08 which was good, hence raised the overall load factor.

 

Significant events

 

On 1 September 2009, SIA divested SATS wholly by giving out dividend in specie to its shareholders.

 

SIA Engineering Company (SIAEC), which was 80.5% owned by SIA, brought in significant profits to the group for the year.

 

SilkAir, which 100% owned, had profit after tax rising 32.7% to $41 m, which was a good performance.

 

Temasek Holdings is still the major shareholder holding 54.14% of SIA.

 

Comments

 

SIA had weathered the global financial crisis pretty well and still made positive profit for the financial year in review. The management and staff were able to pull together in a single-minded fashion to keep SIA flying high. Since SIA had shown that it can rise to the challenges of poor global economic climate, one can be optimistic that it will be able to do well when the economy improved in the next few years.

 

Copyright © 2010, the author known as LKT in Singapore.

 

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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