DESTINI Annual Report 2019

PERFORMANCE 03 BUSINESS PERFORMANCE REVIEW AVIATION DEFENCE • Destini’s defence aviation segment recorded a decline in revenue of RM43.01 million in FYE2019 from RM89.46 million a year before. Its profits also slipped into the red to a LATNCI of RM36.70 million from a PATNCI of RM0.70 million in FYE2018. • The Group’s defence aviation business which is highly dependent on Government contracts saw a decline in revenue due to slower progress in its projects and delays in the decision on project continuities a result of the transition of the Government. In addition, budgetary cutbacks also resulted in a reduction in billings from Government agencies. • The transition also saw the postponement in the execution and completion of the MD530G helicopter project which in turn translated to higher operational and administration expenses including additional interest expenses of RM14.88 million incurred by the Group. • In December 2019, the Malaysian Government gave its approval for theGroup to continue executing the remaining contract obligations with the MD350G program. The helicopters are scheduled to be delivered in 2020. • TheGovernment reduced its spending on the procurement of new assets within the defence sector. It however maintained its expenditure on the maintenance of its existing assets, which can be seen from the two MRO contracts that the Group secured during the year. • Destini is well positioned for this as it is one of the only companies in Malaysia that is maintaining the RMAF’s safety and survival related equipment. The Group will not remain complacent and will continuously find innovative ways of expanding its capabilities to further strengthen its market position. COMMERCIAL • Destini’s commercial aviation business recorded a 10.39% increase in revenue to RM5.96 million in FYE2019 from RM5.40 million the previous year. Despite the increase in revenue, this segment continues to bled red from a LATNCI of RM5.19 million to a LATNCI of RM12.28 million • This was due to higher than expected operational costs, provisions of doubtful debts and impairments of its assets. • The Group saw less Ground Handling works as planned during the year despite its aggressive sales strategy. The Group’s Ground Handling business only started to pick up in the fourth quarter of the year. • On the other hand, the Group’s Technical LineMaintenance works saw an increase in work orders, however, there were unbudgeted expenses that was incurred which resulted to losses in its books. • During the year in review, the Group has entered into an agreement with Malindo Airways Sdn Bhd and Thai Lion Mentari Co Ltd through DAT. This new venture was to expand Destini’s civil aviation scope of services in supply, test, repair and overhaul activities on aircraft safety equipment. • The Group remains cautiously optimistic on this business segment as the business environment remains challenging with intense competition and as global airline traffic faces short-term uncertainties. • In 2019, Destini captured 70% of the total maintenance work for narrow-body aircrafts that flew into Malaysia. Moving forward, the Group aims to expand its capabilities into servicing wide-body aircrafts. MANAGEMENT DISCUSSION AND ANALYSIS ANNUAL REPORT 2019 041