Swire Group

Haeco profit rises 27pc on demand for maintenance services

PUBLISHED : Wednesday, 05 March, 2008, 12:00am
UPDATED : Wednesday, 05 March, 2008, 12:00am

Hong Kong Aircraft Engineering Co (Haeco) reported a 27 per cent rise in net profit to HK$1.07 billion for last year on strong demand for its aviation maintenance and repair services.

The company is expanding in Hong Kong and Xiamen, but an appreciating yuan will increase its labour costs because almost a third of its profit comes from the mainland.

There was profit margin improvement at the company because of strong demand, said Cazenove analyst Andrew Au, adding that 'earnings were in line with market consensus'.

Earnings per share increased 26.7 per cent to HK$6.45 on a 20.2 per cent increase in sales, which reached HK$4.6 billion with the first full year of operations for its second hangar at Hong Kong International Airport.

The company recommended a final dividend of HK$2.20 per share, but will not distribute a special dividend because of heavy planned capital expenditure.

A third hangar in Hong Kong and a sixth hangar in Xiamen are under construction. Both facilities are scheduled to come on stream as early as mid-2009.

The company said it continued to look at opportunities to expand its aviation maintenance and repair services.

Line maintenance operations in Hong Kong would see moderate growth from additional flights at Hong Kong International Airport, the company said. However, profit growth in Xiamen would be slowed by cost increases in an inflationary operating environment, it said.

The outlook for the industry remained good, said Mr Au. 'The initial phase of the economic downturn won't hurt the industry as airlines squeeze in more time to do maintenance when the market is not good.'

Demand for heavy airline maintenance services allowed the Hong Kong division to sell 2.53 million man-hours of services in 2007, up from 1.85 million in 2006. Line maintenance saw a moderate 6 per cent rise in business per day last year.

Sales soar

Haeco reported a 20.2 per cent jump in sales last year to, in HK$: $4.6b