HAECO Group2013 Interim Results

Analyst Briefing

13th August 2013

Interim Results

2

2013 2012 Change

HK$M HK$M

(Restated)

Attributable profit 359 455 -21.1%

Turnover 3,222 2,899 +11.1%

Earnings per share (HK$) 2.16 2.74 -21.1%

1st interim dividend

per share (HK$) 0.80 0.88 -9.1%

30th Jun 31st Dec

2013 2012

Net borrowings 433 261 +65.9%

Total equity 6,892 6,807 +1.2%

Gearing ratio 6.3% 3.8% +2.5%pt

Six months ended 30th Jun

2

Movement of Profit Attributable to

the Company’s Shareholders

455-194 +160

+357 -187

-325

+23

+70 359

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3

Profit Attributable to the

Company’s Shareholders

2013 2012 Change

HK$M HK$M

(Restated)

HAECO 44 178 -75.3%

TAECO 62 46 +34.8%

Share of:

HAESL and SAESL 255 254 +0.4%

TEXL (13) (34) +61.8%

TALSCO (11) 1 -1,200.0%

Other subsidiary and joint

venture companies 22 10 +120.0%

359 455 -21.1%

Six months ended 30th Jun

4

HAECO

Profit decreased by 75.3% to HK$44M and turnover reduced by

11.0% to HK$1,571M.

Airframe maintenance and component and avionics overhaul

services were adversely affected by shortages of labour, which

resulted in significant reductions in capacity.

Sold manhours in airframe maintenance dropped by 17.5% to 1.32M.

Component and avionics overhaul workload reduced by 7.3%.

Demand for line maintenance services increased by 2.2% to 326

aircraft handling per day.

Operating expenses decreased by 2.0% reflecting lower material

costs in line with the decrease in business volume partly offset by

higher staff costs.

5

TAECO

The Group’s share of profit from TAECO increased 34.8% to

HK$62M with a 19.6% growth in turnover.

Sold manhours in airframe maintenance for the 1H 2013 were

1.95M, 10.2% increased from that of same period last year.

There was higher revenue from cabin modification work.

Line maintenance aircraft movements (combined with STA)

increased by 15.3% to 83 per day.

Manufacturing and training performed better in the first half of

2013.

6

HAESL and SAESL

The Group’s share of HAESL profit, including SAESL, increased

0.4% to HK$255M.

HAESL recorded a 2.0% decrease in profit. The results were

adversely affected by reduced demand for engine overhaul

services resulting from the early retirement of Boeing 747-400

aircraft belonging to Cathay Pacific which was mostly offset by

increase in demand for overhaul of Trent 700 engines.

SAESL’s profit increased 10.2% reflecting more work being done

per engine.

7

TEXL

The attributable loss reduced 61.8% to HK$13M reflecting higher

engine output and more work being done per engine.

Revenue increased significantly as TEXL completed 17 quick

turn (QT) repairs and 5 performance restoration (PR) repairs, as

compared to 11 QT and 2 PR completed in 1H 2012.

The company made a positive EBITDA in 1H 2013.

8

TALSCO

TALSCO reported a loss in 1H 2013. It has undertaken no

overhaul work since the fire at its premises in November 2012.

Additional provisions of HK$19M for impairment and other losses,

net of expected insurance receivables, have been made on the

basis of revised estimates of rebuilding and repair costs and of

the corresponding insurance receivables.

Work preparatory to reconstruction of TALSCO’s premises is

being done, with a view to partial resumption of operations in the

early part of 2014.

9

Other Subsidiary and Joint Venture

Companies

HXITM increased total fleet size to 213 aircraft and made a small

profit in 1H 2013.

SHAECO performed well in 1H 2013. However, following the

expiry of the contract with a major customer in May 2013,

SHAECO is expected to record a loss for the year overall.

STA handled an average of 39 aircraft movements per day in 1H

2013. Profits were satisfactory.

Taikoo Spirit achieved significant revenue growth which resulted

in a reduced loss in 1H 2013.

10

Airframe Maintenance Sold Manhours and

Line Maintenance Aircraft Movements

2013 2012 Change

Airframe maintenance sold manhours (in millions)

HAECO 1.32 1.60 -17.5%

TAECO 1.95 1.77 +10.2%

Line maintenance aircraft movements (per day)

HAECO 326 319 +2.2%

TAECO and STA 83 72 +15.3%

Six months ended 30th Jun

11

Operating Expenses

2013 2012 Change

HK$M HK$M

(Restated)

Staff remuneration and benefits 1,470 1,283 +14.6%

Cost of direct material and job expenses 1,108 783 +41.5%

Depreciation, amortisation and impairment 211 234 -9.8%

Other operating expenses 285 294 -3.1%

3,074 2,594 +18.5%

Six months ended 30th Jun

12

Number of Staff

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Jun-13

Other subsidiary and joint venture companies in which HAECO and TAECO own at least 20%

HAESL TAECO HAECO

13

Property, plant and

equipment46%

Leasehold land and land use

rights3%

Intangible assets

5%

Joint venture companies

11%

Current assets33%

Others2%

31st Dec 2012(restated)

HK$10,468M

Assets

Property, plant and

equipment44%

Leasehold land and land

use rights3%

Intangible assets

5%

Joint venture companies

11%

Current assets36%

Others1%

30th Jun 2013

HK$11,222M

14

Net Borrowings Movement

15

HK$M HK$M

Net borrowings at 1st Jan 2013 (261)

Operating activities 155

Dividends received 254

Dividends paid (364)

Net capex

- ITM investment in rotable spares (182)

- HAECO/TAECO/TEXL property, plant

and equipment (101)

- Others (2) (285)

Other investments 45

Other movements 23

Net borrowings at 30th Jun 2013 (433)

Liquidity

30th Jun 31st Dec 31st Dec 31st Dec

Loan facilities as at 2013 2013 2014 2015

HK$M HK$M HK$M HK$M

Available 5,584 4,246 2,878 1,529

Committed 3,972 3,972 2,878 1,529

Uncommitted 1,612 274 - -

In or

In In beyond

2013 2H 2014 2015

HK$M HK$M HK$M

Capital commitment

Payment profile 624 183 271

16

Maturity Profile of Total Available

Loan Facilities

HKD 1,338 HKD 1,368 HKD 1,349

HKD 529

HKD 1,000

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2nd half of 2013 Year of 2014 Year of 2015 Year of 2016 Year of 2017

HK

$ m

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17

2013 In Review

AIRFRAME MAINTENANCE:

HAECO was ranked second in the “Top 10 Airframe MROs”

published by Aviation Week & Space Technology in June.

TAECO is expecting to complete its first cabin configuration of a

corporate jet in 2H 2013.

18

2013 In Review

LINE MAINTENANCE:

TAECO received approvals from the Department of Civil Aviation

of Mauritius to do line maintenance on Airbus A330 and A340

aircraft at Shanghai Pudong International Airport. TAECO’s in-

flight entertainment workshop was approved by the US Federal

Aviation Administration (“FAA”) and the European Aviation

Safety Agency (“EASA”) in 2013.

SHAECO is developing its capability to do line maintenance on

Boeing 787 aircraft.

In January, HAECO completed the acquisition of 26%

shareholdings in STA which enabled the Group to acquire

majority control of 75% of STA.

19

2013 In Review

ENGINE OVERHAUL:

TEXL expects to have completed work on its 100th engine

and to have obtained a C7 component repair rating from

EASA, before the end of 2013. This rating will allow TEXL to

repair certain GE90 module components being removed from

engines by other facilities.

20

2013 In Review

COMPONENT OVERHAUL:

Dunlop Taikoo received approvals from various civil aviation

authorities to retread more products of the Dunlop, Bridgestone,

Goodyear and Michelin companies.

Taikoo Spirit can now repair the full nacelle bar and the common

nozzle of CFM56-7, Trent 800 and GE90 engines and expects to

be able to do work on CFM56-5B engines, enabling it to work on

both engine types installed on Airbus A320 aircraft.

21

2013 In Review

INVENTORY TECHNICAL MANAGEMENT:

HXITM entered into an agreement with Boeing in relation to its

GoldCare programme to provide inventory technical management

services for Boeing 747-8 aircraft.

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THANK YOU