Hong Kong Aircraft Engineering (HAECO) recorded a HK$127 million ($16.3 million) operating profit for the year ended 31 December 2016, down nearly 70% from the previous year.
Revenue for the year rose to HK$13.7 billion from the previous HK$12.1 billion, while operating expenses for the MRO group rose 16.8% to HK$13.6 billion.
The MRO says the substantial reduction principally reflects the impairment charges on goodwill recorded with the acquisition of TIMCO, and in respect to plant, machinery and tools at its landing gear services unit.
Excluding the impairment charges, improved results at HAECO Hong Kong, Taikoo Engine Services Xiamen and HAECO Xiamen were largely offset by higher losses from HAECO Americas’ cabin and seats business.
Net profit doubled to HK$975 million, which included a of HK$805 million on Hong Kong Aero Engine Services' (HAESL) disposal of its stake in Singapore Aero Engine Services (SAESL).
HAECO Xiamen recorded a 36.2% gain in profit to HK$94 million. Fewer airframe services manhours were sold, but hourly rates were higher while there was an increase in line maintenance.
Excluding the profit on disposal of its interest in SAESL, HAESL recorded a 43.1% increase in attributable profit to HK$522 million. More work was done per engine, while volumes were steady at 114.
HAECO adds that HAESL is expected to have a similar level of workload this year, overhauling more engines but doing less work per engine. Its results will however be adversely affected by higher depreciation and training costs associated with developing the capability to overhaul Rolls-Royce Trent XWB engines from 2018.
Taikoo Engine Services Xiamen turned in a 31.5% improvement on its net profit to HK$196 million. It completed 48 engine performance restorations and 42 quick turn repairs on General Electric GE90 engines, compared to 30 engine performance restorations and 59 quick turn repairs in 2015.
On the group’s business prospects,HAECO chairman John Slosar said that it was expecting some airframe services work to be deferred by clients, however line services are expected to be firm. Its component and avionics overhaul business is expected to improve gradually with the development of new capabilities.
Demand for HAECO Americas' airframe services is expected to increase in the year ahead. “However, its airframe services results will depend on the outcome of efforts to improve efficiency and work flow,” Slosar adds.
HAECO Xiamen is expected to conduct more airframe work, while HAESL overhaul services are expected to be stable in 2017 and have a similar workload as that to 2016. Meanwhile, HAECO Landing Gear Services is expected to do more work in 2017, but to continue to make losses.