SIA Engineering : FY2021/22 Annual Report

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G R O W I N G

S U S TA I N A B LY

CORPORATE PROFILE

Listed on the mainboard of the Singapore Exchange in 2000, 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 27 national airworthiness authorities worldwide.

MISSION STATEMENT

SIA Engineering Company

(SIAEC) is engaged in providing

aviation engineering services

of the highest quality, at

competitive prices for customers and a profit to the Company.

FY2021/22

AT A GLANCE

SIAEC launched Lean Academy to upskill workforce and boost competitiveness

SIAEC signed Maintenance

Agreement with Hawaiian Airlines

SIAEC established

1. S$1,000,000,000 Euro Medium Term Note Programme

SIAEC signed

Component

Agreement with

Thai VietJet

SIAEC extended

collaboration

with Iacobucci HF

Aerospace with

Spares Distribution

Agreement

02	Chairman's
Statement	CONTENTS
05	Calendar
	Corporate
06	Board of	Risk	73
Directors	Management
15	Key		78
Executives	Sustainability
18	The Year	Statistical	80
in Review	Highlights
20	Business		81
Review	Financials
25	Transformation	Shareholding	205
and Innovation	Statistics
28	Expanding Engine	Share Price	207
Services Capabilities	and Turnover
30	Corporate	Notice of Annual	208
Governance	General Meeting
		Additional Information	216
		Re-election
		on Directors Seeking

	Proxy
SIAEC formed	Form
component
maintenance, repair and
overhaul joint venture
with SR Technics in
Malaysia

SIAEC signed	SIA Engineering
CFM LEAP Engine
(Philippines)
Test Agreement with
Corporation signed
Safran Aircraft Engines
agreement with North
SIAEC signed Line
American Aerospace
Maintenance and
Industries to provide
In-Field Service
aircraft recycling
Agreement with
solutions
Rolls-Royce
SIAEC sets up
new Component
Services Division to
grow component
maintenance, repair
and overhaul
business

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SIAEC conducted

successful trial using sustainable aviation fuel for engine tests

SIAEC opened

Aircraft Engine Services

Facility to provide

engine maintenance services for CFM LEAP -1A and -1B engines

REVENUE

$566.1

MILLION

NET

PROFIT

$67.6

MILLION

S I A E N G I N E E R I N G C O M P A N Y

CHAIRMAN'S STATEMENT

CHAIRMAN'S STATEMENT

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DEAR

SHAREHOLDERS,

At the start of FY2021/22, recovery of the global aviation industry from the COVID-19 pandemic seemed slow. In the last six months, however, green shoots of recovery began to sprout more quickly as vaccination programmes gained traction and traveller confidence returned. As more and more countries transitioned to endemic handling of COVID-19, travel restrictions were lifted with the opening of borders and resumption of international travel.

Singapore was amongst the first few countries in the region to transition to an endemic phase. Our city state established the Vaccinated Travel Lane (VTL) with many countries, permitting quarantine-free travel for fully vaccinated travellers to resume in September 2021. This was subsequently replaced by the Vaccinated Travel Framework, which fully re-opened Singapore's borders to the world on 1 April 2022.

As a result of this recovery trend in international air travel and the increase in flights, SIAEC saw an increase in MRO activity in the second half of the financial year. The number of flights handled by the Company's Line Maintenance unit in Singapore surged 73% to 47,885 in FY2021/22, compared to 27,727 in FY2020/21. The Group's maintenance checks at its Singapore and Clark bases also registered double-digit percentage increases, compared to the low numbers in the previous year. Fleet management work volume, which is largely driven

by flight activities, showed signs of improvement in the fourth quarter.

The increase in activity lifted SIAEC's performance. For FY2021/22, the Group posted revenue of $566.1 million,

up 27.8% year-on-year. The share of profits from associated and joint venture companies also increased to $79.1 million, mainly from a one-time writeback of tax provisions by certain associated companies, compared to a one-time tax charge a year ago. There were also improvements in business volume across several associated and

joint venture companies. Overall, the Group recorded a net profit of $67.6 million, reversing the loss of $11.2 million in FY2020/21. The improved bottom line was boosted by government wage support, and the absence of a one-off impairment provision which impacted the Group's FY2020/21 performance. Excluding the wage support, the Group would have reported a loss.

Even though the volume of flight activities is clearly recovering, it is far from pre- pandemic levels, and there remain challenges to the pace of recovery. In view of this, the Board of Directors will not be recommending a dividend for FY2021/22.

THE ROAD TO RECOVERY

While we welcome the promising pace of recovery, we know that risks still exist, and we remain ever vigilant.

New COVID-19 variants have emerged and could cause an unexpected resurgence in infections and temper travel sentiments. Also, not all countries' borders have fully opened, such as China, Hong Kong, Taiwan and Japan. The limited accessibility to these Asian markets could prolong the recovery in the regional aviation industry, which is important for us. The conflict between Ukraine and Russia has further strained an already fragile global economy. Operating costs are soaring as inflation accelerates across many markets, owing to the disruption to crude oil supplies and supply chain crunches. As a result, the propensity to travel could be dampened by the risk of stagflation in many countries that are potentially facing slower economic growth.

We are deeply grateful to the Singapore Government and its institutions for the wage support schemes in support of businesses and the aerospace industry. In the absence of wage support from the Government, which will taper off in July 2022, and with the recovery of the aviation sector still some way off from pre- COVID-19 levels of activity, our financial performance will be highly dependent on

TANG KIN FEI

Chairman

the degree of revenue recovery vis-à-vis rising costs.

Despite these challenges, we are confident of a quality recovery. Our strategies to strengthen our core competencies and to build new capabilities for new-generation aircraft in the last two years have made SIAEC stronger and more resilient. This has placed the Group on a solid footing for sustainable growth after the recovery.

BUILDING NEW CAPABILITIES AND BUSINESSES

In April 2021, we established the Engine Services Division to enhance our integration into the engine MRO value chain; strengthen our engine services eco-system; and increase our value to OEM partners and airline customers.

SIAEC secured a 10-year agreement with Safran Aircraft Engines (SAE) to provide engine test services for its CFM LEAP-1A and -1B engines in December 2021. This is in addition to an existing long-term engine maintenance services arrangement for SIAEC to provide engine Quick Turn and modification embodiment services for these engines.

In February 2022, we opened a new $9.0 million Aircraft Engine Services (AES) facility in Singapore that is custom- designed with state-of-the-art equipment and technology to perform at least

60 Quick Turns per year for the CFM LEAP engines, and additional 50% capacity

to cope with surge demands. We also offer on-site support and boroscope inspection services. While the AES facility currently serves SAE exclusively, we will seize opportunities to extend such engine services to the wider market as global air travel continues to recover and demand increases for Quick Turn maintenance and shorter engine turnaround.

We also signed a 10-year agreement in January 2022 to provide line maintenance and in-field services for Rolls-Royce Trent 7000, 1000, 900, 800, 700, 500 and XWB engines. This expanded SIAEC's existing on-wing care services to include new capabilities for the Trent 7000 and Trent XWB engines.

Aside from engine services, another area of growth for SIAEC is the component MRO business. We established the Component Services Division to capitalise on the anticipated upturn in this market. All our existing component repair and fleet management services, including inventory technical management services, were integrated together under the Component Services Division since 1 April 2022. This new division, with its focus on broadening our capabilities and strengthening our partnership network, will boost our ability to provide an even wider range of customised and flexible solutions to cater to the needs of our airline customers and OEM partners.

One of the major milestones for the component services business, and a significant step in our strategic plan, was our acquisition of a 75% stake in SR Technics Malaysia (SRT Malaysia), to form a component MRO joint venture company. SRT Malaysia provides component repair, testing and overhaul services with a focus on the Airbus A320, A330, A340 and the Boeing 737NG aircraft in the Asia-Pacific region and beyond. We are excited as SRT Malaysia will not only complement our existing portfolio of engine and component joint ventures with leading OEMs, but also allow us to broaden

our component repair and overhaul capabilities for new-generation aircraft.

We further expanded our range of component services through a collaboration with Iacobucci HF Aerospace S.P.A (IHFA), an Italy-based cabin interior OEM, in December 2021. Under a long-term agreement, we will distribute and sell spare parts required for the aftermarket activities of IHFA's galley insert products for premium cabins of current and next generation aircraft in the Asia-Pacific region. In May 2022, we also obtained from Honeywell the licensed repair capability for the Air Data Inertial Reference Unit on Boeing 737 and 787 aircraft.

Alongside these capability-building initiatives, we also continued to focus on strengthening our core business. Under Base Maintenance, SIAEC is potentially expanding its network to include two hangar facilities in Subang, Malaysia,

which have a combined capacity of six simultaneous aircraft checks. This follows the signing of a non-binding Memorandum of Understanding with a wholly-owned subsidiary of Malaysia's sovereign wealth fund, Khazanah Nasional Berhad, for the potential lease of these hangars. Together with our acquisition of SR Technics Malaysia and the recently announced plan to acquire a stake in Pos Aviation Engineering Services to form a line maintenance joint venture, our growth in Malaysia will complement the capabilities of our Singapore hub. Expansion of our Line Maintenance International network to South Korea

is also in the pipeline with the recently announced plan to form a joint venture with Air Innovation Korea.

STRENGTHENING COMPETENCIES THROUGH TRANSFORMATION

Our Transformation Phase 2 programme, with Lean, Digitalisation and Technology, and Innovation Culture as core thrusts, continued to gather momentum during the year.

We introduced a series of impactful Lean initiatives to optimise work processes over the course of FY2021/22, which created significant additional capacity via improved turnaround times and higher task accomplishment rates across SIAEC's operations. As a result, we had greater capacity to perform more checks at Base Maintenance. We also launched our landmark Lean Academy in September 2021, reflecting SIAEC's focus on the re- skilling, upskilling and development of our workforce to enhance competitiveness. By early 2023, we hope to have 100%

of our workforce trained in Lean, and to extend Lean training to the wider aerospace MRO community in the longer term. Meanwhile, additional investments in digital technologies, applications and workflow, and digital infrastructure were also made in FY2021/22 that enabled our workforce to improve productivity, operational efficiency, and take on higher value work.

We expect more pervasive enterprise- wide application of Lean and adoption of Digitalisation and Technology, particularly as work volume ramps up with the

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CHAIRMAN'S STATEMENT

CORPORATE CALENDAR

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recovery trend. Our Transformation efforts continue to yield positive results and we foresee this to be an on-going journey for SIAEC as we strive towards sustainable business growth.

GROWING SUSTAINABLY

SIAEC remains committed to support the aviation industry towards its net zero carbon emissions goal by 2050. Our readiness is reflected in a number of important sustainability-related achievements announced in FY2021/22.

In February 2022, SIAEC's engine test facility successfully performed engine tests using blended sustainable aviation fuel that produced 32% lower carbon emissions compared to conventional fossil jet fuel. In the same month, SIA Engineering (Philippines) Corporation (SIAEP), our wholly-owned subsidiary, signed an agreement to provide sustainable, end-to-end aircraft recycling solutions to North American Aerospace Industries (NAAI), an aircraft part-out specialist. These capabilities broaden SIAEC's array of green MRO services.

Efforts, meanwhile, were also made to reduce our carbon footprint through the electrification of our fleet of vehicles in the operational environment. We successfully completed trials of electric tractors in FY2021/22 and plan to increase their adoption in FY2022/23. Moreover, two of our hangars in Singapore have been certified Green Mark (Platinum, Super Low Energy Buildings) and PUB Water Efficient Buildings.

In April 2022, the Board Sustainability Committee was established to provide oversight and guide SIAEC's sustainability strategy. To lead our efforts in enhancing sustainability, we concurrently appointed our Executive Vice President Operations as our Chief Sustainability Officer to drive and accelerate SIAEC's Environmental, Social and Governance initiatives.

PRIORITIES AHEAD

Going forward, we will keep a lookout for opportunities to invest in new capabilities and services for new-generation aircraft to broaden the Company's range of service offerings to airline customers

and OEM partners. We will also seize opportunities for growth by leveraging existing strong capabilities and deepening long-standing relationships with OEM partners to strengthen our joint ventures portfolio.

At the same time, we will remain agile, vigilant and prudent in managing the increase in costs, whilst balancing the need to invest in capabilities and capacity expansion to lay the foundation for recovery and growth.

During the downturn of the past two years, protecting jobs and retaining talents were our key concerns. With recovery gathering pace, our focus on employee retention is serving us well as we were able to swiftly ramp up operations to support our airline customers. To ensure that SIAEC has adequate manpower for further flight recovery, we are ramping up recruitment.

Under our Transformation Phase 2 programme, we will continue to build on the momentum achieved in FY2021/22 by further investing in digitalisation, automation, optimisation and decision support capabilities. We will also continue to scale up our Lean initiatives across the Company to raise productivity.

APPRECIATION

I would like to take this opportunity to extend a warm welcome to Mr Lim Kong Puay, who joined the Board of SIAEC as a Non-Executive and Independent Director in August 2021. His extensive experience will serve us well in charting strategic directions and enhancing operational excellence for the Company. I would like to thank my fellow Board members for their continued guidance in steering the Group through another challenging year, and for continuing their voluntary reduction in Directors' fees.

On behalf of the Board of Directors, I would also like to express our deepest appreciation to Mr Manohar Khiatani and Mr Chew Teck Soon, who retired as Independent and Non-Executive Directors of SIAEC after serving on the Board for nine years each. Both Mr Chew's and Mr Khiatani's extensive

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experience and invaluable contributions have enabled the Group to navigate

a steady course, especially during the turbulence caused by the COVID-19 pandemic. I wish them a happy retirement.

The SIAEC team has again demonstrated tenacity and perseverance in overcoming challenges during these unprecedented times. I wish to express my heartfelt gratitude to our staff, unions and Management for their immeasurable sacrifices, teamwork and commitment to the Company to ensure business continuity and success of the Group. Truly, the Group would not be where it is today without our people, who are indeed our greatest asset. We are humbled and pleased to be ranked among Singapore's Top 200 Employers in 2022, as published by The Straits Times and global data firm Statista in April 2022.

Our collective efforts have been recognised again with the recent award of the 2022 Asia-Pacific MRO of the Year, our second in two consecutive years, by leading aviation publication Airline Economics. We are delighted, yet challenged, by these accolades to emerge stronger and achieve sustainable growth for the future.

Lastly, I wish to convey our profound and heartfelt gratitude to all stakeholders and friends, including our shareholders, customers, business partners and government agencies, who have journeyed with us through another difficult year. Thank you for your continued support and trust in us.

TANG KIN FEI

Chairman

		2022
	21 FEB
	Announcement of	2021
	FY2021/22 third-quarter
5 MAY	business updates	29 JAN

Announcement of FY2021/22 full-year financial results

6 MAY

Analyst briefing on FY2021/22 full-year financial results

Announcement of FY2020/21 third-quarter business updates

4 MAY

Announcement of FY2020/21 full-year financial results

5 MAY

Analyst briefing on FY2020/21 full-year financial results

22 JUN

Website publication of

Notice of Annual General

Meeting and FY2021/22

Annual Report

21 JUL

40th Annual

General Meeting

25 JUL

Announcement of FY2022/23 first-quarter business updates

1 JUL

Website publication of Notice of Annual General Meeting and FY2020/21 Annual Report

23 JUL

39th Annual General Meeting

23 JUL

Announcement of FY2021/22 first- quarter business updates

5 NOV

Announcement of first-half

FY2021/22 financial results

1 NOV	8 NOV
Announcement of first-half	Analyst briefing on first-half
FY2022/23 financial results	FY2021/22 financial results
2 NOV
Analyst briefing on	first-half

FY2022/23 financial results

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S I A E N G I N E E R I N G C O M P A N Y

BOARD OF DIRECTORS

BOARD OF DIRECTORS

TANG KIN FEI

Chairman, Board of Directors

Chairman, Compensation & HR Committee

Chairman, Executive Committee

Non-Executive and Independent Director

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	CHRISTINA ONG		CHUA BIN HWEE		LIM KONG PUAY
T
R	Chairman, Nominating Committee		Chairman, Audit Committee	Chairman, Board Safety & Risk Committee
O
Chairman, Board Sustainability Committee	Non-Executive and Independent Director	Non-Executive and Independent Director
E P
Non-Executive and Independent Director
R
A N N U A L

GOH CHOON PHONG

NG CHIN HWEE

DR RAJ THAMPURAN

WEE SIEW KIM

Non-Executive and

Non-Independent Director and

Chairman, Technology Advisory

Non-Executive and Independent

Non-Independent Director

Chief Executive Officer

Committee

Director

Non-Executive and Independent

Director

MAK SWEE WAH	CHIN YAU SENG	MANOHAR KHIATANI	CHEW TECK SOON
Non-Executive and	Non-Executive and	Chairman, Board Safety & Risk	Chairman, Audit Committee
Non-Independent Director	Non-Independent Director	Committee	Non-Executive and Independent
		Non-Executive and Independent	Director
		Director	Until 30 April 2022
		Until 31 March 2022

TANG KIN FEI, 71

Chairman, Board of Directors

Chairman, Compensation & HR Committee

Chairman, Executive Committee

Member, 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.

Mr Tang is currently the Chairman of Metis Energy Limited and a member of its Nominating Committee and Remuneration Committee. He is also the Chairman of Singapore LNG Corporation Pte Ltd, a Director of Summit Power International Ltd, a Board Member of Singapore Cooperation Enterprise, the Council Chairman of Ngee Ann Polytechnic and 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

Current Directorships In Other Listed Companies

	Company	Title
1.	Metis Energy Limited	Chairman
Other Principal Commitments
	Organisation/Company	Title
1.	Singapore LNG Corporation Pte Ltd	Chairman
2.	Summit Power International Ltd	Director
3.	Singapore Cooperation Enterprise	Director
4.	Ngee Ann Polytechnic	Council Chairman
5.	Kwong Wai Shiu Hospital	Vice Chairman
6.	Athena Energy Holdings Pte Ltd	Director
7.	Vietrof RE Pte. Ltd.	Director

Directorships/Appointments in the past 5 years

	Organisation/Company	Title
1.	Shenzhen Chiwan Sembawang Engineering	Chairman
	Company Limited
2.	Penglai Jutal Offshore Engineering Heavy	Vice Chairman
	Industry Co. Ltd
3.	Defence Science & Technology Agency	Board Member
	Board
4.	Nanyang Technological University	Chairman, College
		Advisory Board
5.	Climate Change Network, National Climate	Member
	Change Secretariat
6.	Singapore Chinese Chamber of Commerce	Council Member
	and Industry
7.	National Research Foundation	Board Member

CHRISTINA ONG, 70

Chairman, Nominating Committee

Chairman, Board Sustainability Committee

Member, Audit Committee

Non-Executive and Independent Director

Mrs Ong was appointed Director on 1 January 2014. She is Chairman and Senior Partner of Allen & Gledhill LLP, where she has headed the Financial Services Department for many years. Her areas of practice include banking, securities offerings, securities regulations, investment funds, capital markets and corporate finance. She has been involved in a broad range of debt and equity issues. She provides corporate and corporate regulatory and compliance advice, particularly to listed companies.

Mrs Ong is currently a Director of Oversea-Chinese Banking Corporation Ltd, Singapore Telecommunications Ltd, Hongkong Land Holdings Limited and Epimetheus Ltd. She is also a Director of Allen & Gledhill Regulatory & Compliance Pte Ltd, Eastern Development Pte Ltd and Eastern Development Holdings Pte Ltd (companies associated with Allen & Gledhill LLP). Mrs Ong is a member of the Corporate Governance Advisory Committee, which is a standing committee established by the Monetary Authority of Singapore, a member of the Supervisory Committee of the ABF Singapore Bond Index Fund, and a member of Civil Aviation Authority of Singapore. She is also a Trustee of the Stephen A. Schwarzman Scholars Trust.

Academic and Professional Qualifications:

• Bachelor of Laws, LLB (Honours) (Second Upper), University of Singapore
• Member, Law Society of Singapore
• Member, International Bar Association

Current Directorships In Other Listed Companies

	Company	Title
1.	Oversea-Chinese Banking Corporation Ltd	Director
2.	Singapore Telecommunications Ltd	Director
3.	Hongkong Land Holdings Limited	Director

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