SIA Group Financial Report Analysis: Net Profit Decline of 48.5%

Business Description

The Singapore Airlines (SIA) Group is an international airline group comprising the Parent Airline Company, Singapore Airlines, and its subsidiaries, joint ventures, and associated companies. The Group operates passenger and cargo air transportation services globally. SIA’s fleet includes various aircraft types, with significant investments in modernizing its fleet, such as the A350-900 retrofit program announced in the report. The Group’s geographic footprint covers 127 destinations in 36 countries and territories.

Industry Position and Competitors

SIA is a leading player in the global airline industry, known for its service excellence, product leadership, and network connectivity. Its main competitors include other major international airlines such as Emirates, Qatar Airways, and Cathay Pacific. SIA maintains a strong market presence through its premium service offerings and strategic partnerships, such as the impending Air India-Vistara merger.

Revenue Streams and Customer Base

The Group’s revenue streams primarily include passenger flown revenue and cargo flown revenue. For the first half of FY2024/25, total revenue was \$9,497 million, with passenger flown revenue contributing \$118 million and cargo flown revenue contributing \$42 million. SIA serves a diverse customer base ranging from premium business travelers to budget-conscious passengers through its subsidiary, Scoot.

Financial Statement Analysis

Income Statement

For the first half of FY2024/25, SIA reported a total revenue of \$9,497 million, a 3.7% increase from the previous year. However, total expenditure rose by 14.4% to \$8,702 million, leading to a significant decline in operating profit by 48.8% to \$796 million. The net profit also decreased by 48.5% to \$742 million.

Balance Sheet

As of 30 September 2024, the Group’s shareholders’ equity stood at \$13.7 billion, a \$2.6 billion decline from 31 March 2024, mainly due to the redemption of Mandatory Convertible Bonds. Total debt remained stable at \$13.2 billion, increasing the debt-equity ratio from 0.82 to 0.96 times. Cash and bank balances decreased by \$2.2 billion to \$9.0 billion.

Cash Flow Statement

The Group generated \$1.9 billion in net cash from operations. However, significant cash outflows included \$1.7 billion for MCB redemption and \$1.1 billion for the final dividend payment for FY2023/24.

Dividend

The Company declared an interim dividend of 10 cents per share, payable on 11 December 2024.

Key Findings and Investment Recommendations

Strengths

• Robust demand for air travel with a 10.8% increase in passengers carried.
• Strong cargo performance with a 4.7 percentage point increase in cargo load factor.
• Strategic initiatives like the Air India-Vistara merger and A350-900 retrofit program.

Risks

• Increased competition and capacity leading to yield moderation and lower operating profit.
• Rising fuel costs and general price inflation impacting expenditure.
• Macroeconomic uncertainties and geopolitical tensions.

Special Activities

SIA is undertaking several strategic initiatives to enhance profitability, including the Air India-Vistara merger and a S\$1.1 billion investment in the Airbus A350-900 retrofit program.

Recommendations

If Currently Holding the Stock: Hold. While there are short-term challenges, the Group’s strong financial position and strategic initiatives offer potential for long-term growth.

If Not Currently Holding the Stock: Consider a cautious approach. Monitor the Group’s performance in the next few quarters, especially the outcomes of the strategic initiatives and market conditions.

Disclaimer

This analysis is based on the financial report provided and does not constitute financial advice. Investors should conduct their own research and consider their financial situation before making investment decisions.

Report Date and Financial Year

The report is dated 8 November 2024, covering the financial performance for the first half of FY2024/25.