DESTINI Annual Report 2018

BUSINESS PERFORMANCE REVIEW AVIATION MANAGEMENT DISCUSSION AND ANALYSIS BY PRESIDENT AND GROUP CHIEF EXECUTIVE OFFICER Defence • Destini’s aviation defence business segment recorded a revenue of RM78.2 million in FY2018 from RM277.6 million in FY2017. The business segment recorded a lower PATNCI of RM12.49 million from RM33.1 million in FY2017. • This was due to a reduction of MRO activities and the rescheduling of the delivery of six Multipurpose Armed Reconnaissance Helicopters for the Armed Forces to 2019. • However, a positive development saw Destini receiving its second contract extension along with an additional ceiling value of RM138 million for its existing contract with the RMAF. This is a testament of the Government’s trust in Destini to continuously maintain the nation’s military assets. • Existing contracts for the provision of MRO services to the RMAF, the Royal Malaysian Navy and the Royal Malaysian Police continues to contribute to the Group’s recurring income. • The Group is confident of the successful delivery of the Multipurpose Armed Reconnaissance Helicopters in 2019 which will enable Destini to extend its existing MRO capabilities to include rotary-wing aircraft. • The Government is expected to reduce its spending on the procurement of new assets within the defence sector with an increased emphasis on maintaining its existing assets. Destini is well positioned in this regard as it has the capabilities and track record in maintaining the readiness of the nation’s military assets. • Destini will continue to strengthen its position by continuously improving its capabilities and performance as well as introducing new products and services. Commercial • Destini’s commercial aviation business segment recognised a revenue of RM5.4 million from RM4.7 million in 2017. This business segment remained in the red with LATNCI of RM5.2 million in FY2018 from a LATNCI of RM3 million the previous year. • The Group diversified its commercial aviation capabilities into Ground Handling and secured its first customer at the Kota Kinabalu International Airport in Sabah. • Destini secured a license from the Civil Aviation Administration of China for line maintenance work on China’s aircrafts that flies to Malaysian Airports and is the first Malaysian company to have obtained this license from China. • The Group has implemented an aggressive sales strategy to expand its Ground Handling customer base as well as increasing its coverage to other major airports inMalaysia. This will contribute positively towards the segment by enabling the Group to fulfil the market demand for a full- fledged technical and ground handling service operator. • Through its 50:50 joint venture company with UK-based Avia Technique Ltd, DAT began offering MRO services for commercial airline slide rafts. Currently, DAT services aircraft safety components for Malaysian Airlines, AirAsia, AirAsia X and Lion Air. • Leveraging on its UK counterpart, DAT is en route to obtaining its European Union Aviation Safety Agency (“EASA”) certification. The company also plans to secure licenses from the Civil Aviation Authority of Thailand and Civil Aviation Authority of Singapore to enable it to service a wider range of customers while expanding its presence regionally. • Malaysia sees an increase in airline passenger volume every year. In 2018, 99.03 million passengers passed through the country’s 39 airports, a 2.5% increase from the previous year’s passenger volume of 96.64 million. The increasing air traffic at Malaysian airports would provide more MRO opportunities for Safeair and DAT. DESTINI BERHAD ANNUAL REPORT 2018 44