SATS Ltd.

Welcome to SED's first quarter financial year 2021-2022 business update conference call. Before we begin, SED would like to remind you that certain comments made during this call may contain forward-looking statements. Many of these forward-looking statements can be identified by the use of words such as may, will, expect, anticipate, estimate, assume, continue, project, Plain and similar words and phrases. The company's actual results and future financial conditions may differ materially from those expressed in any such forward-looking forward statement as a result of many factors that may be outside the company's control, including but not limited to the changes in the business environment. The company does not undertake any obligation to update its forward-looking statements. I will now hand over the call to Karen Kueh of SETS. Please go ahead.

Thank you, Stenglok. Hi, good evening, everyone. Welcome to Set Spread Cards. Very quickly, we come to the end of our first quarter of the new financial year. Together here with me are Alex Hungate, PCAO, and Mampresya, CFO, who will take you through the results. I will now hand over the floor to Alex to start the ball rolling. Alex, over to you.

Thanks, Carolyn, and welcome, everybody. Thank you for joining us this evening. This is the first quarter update, so let's start with the slide which shows the volume changes in the first quarter. If you look across the first row, you will see the year-on-year comparison. But, of course, the year-on-year comparison compared to first quarter last year showed that everything increases because, if you recall, the first quarter last year was really the low point in the pandemic in Asia. And so this marks an increase from a low point. Probably more informative is to look at the quarter-on-quarter statistics on the second row. And let's go one by one. So we're starting with flights handled. You can see that there was a small increase in flights handled. Some recovery from the drop in the fourth quarter at 21. But still only about 25% of the pre-COVID volumes in Singapore. And actually below that in Malaysia where the movement control order has been extended. A relatively flat picture in terms of flights handled. In terms of meals served, there has been an increase, not driven by aviation recovery. In fact, there has been a small decrease in the number of aviation meals served in line with the drop in passengers handled. But actually, the increase is driven from China, where we are seeing an increase from our growth in non-travel related food solutions, which we've been embarking on for the last few years. So we're getting good traction there. and also from the subsidiary that we acquire called Nanjing Guizhou, which services both the domestic aviation market across about 85 airports in China, and the domestic aviation volumes in China are quite healthy at this time, as well as some non-aviation revenues. It hasn't just handled, as I mentioned, although it looks like it's jumped up materially from a year-on-year perspective, it's still... much below where it would be pre-pandemic. The pre-pandemic scale, obviously, is not on this graph, but as an example, in Singapore Changi Airport, only about 3% of the normal passenger flow through the airport at this point in time, so still quite low. And in Malaysia, with the movement control order, also quite low. Cargo tonnage continues. sequential increase, quarter on quarter. Now it's running at about 80% of the pre-pandemic levels, and at the end of the quarter was above 85%, at about 80% as an average during the quarter. And then the last column is the only one showing decreases, but that's because it's the number of employees. As you know, we've had to reshape the cost base quite materially, especially on the aviation services market side. So the number has come down again this quarter, slightly below 11,000 at this point, down about 3% quarter-on-quarter, down 18.5% year-on-year, as you can see, down about 38% since before the pandemic in the fourth quarter of 19-20, when it was about 17,600 full-time equivalents. Looking to the next slide, this is the IATA data on the global air cargo ton kilometers flown. And you can see that actually this is the highest it's ever been. So it's now exceeded the pre-COVID level, driven by the same megatrends that we've talked about in the past, so the growth of e-commerce, the focus on medical supplies and vaccine post-pandemic, and also the demand for fresh food across the various cities in Asia as they start to increase in terms of wealth and demand for healthy food. So we expect this picture to continue. As I've said in prior discussions, probably supply constrained as much as anything at this point because of the lack of belly hole capacity in the market. All of our cargo associates were profitable. in the quarter. That's something that we talked about last quarter, and it's something that we expect to continue because of the strong demand, despite the fact that passenger volumes are low, the continued strong demand for air cargo. Turning to the next slide, we need to give you an update on the non-travel-related businesses. You know that we're not sitting around waiting for aviation to recover. We are driving growth in the non-travel-related businesses in the meantime and continuing to get good traction. You'll recall that year-on-year, last year, we increased this category by 38%, and in this quarter we continued that progress with a further 22.6% growth year-on-year. And at this point, in the first quarter, almost half of the group revenues came from non-travel-related businesses, 46%. So new security contracts in Singapore, where we have one of the three licenses to operate a police force. The productization work we're doing with SMEs to create retail products. In this case, Keck Seafood going into retail distribution via our food distribution subsidiary called Country Foods, taking over the supply of bakeries into some of the major supermarket chains here in Singapore, and then continuing to grow in China, as I mentioned earlier, where we're starting to see quite welcome increases in number of meals served and revenues from our two subsidiaries in that market. So you'll see I'll continue to focus on this. Most recently, you would have heard the announcement of our acquisition of the Food City facility in Bangkok, which we acquired 85% of from the seller Bangkok Ranch. Bangkok Ranch will remain a 15% shareholder, but it will become a subsidiary of Sats. And we will use that large-scale frozen food capability nicely integrated into the the food ecosystem in Thailand to increase our productivity and to improve our supply of frozen food across our supply chain. The next slide focuses on sustainability. It is a topic that we are taking very seriously. Our management team have targets based upon achieving sustainability targets, and you will have seen our commitments in our sustainability report, which we published just this month. So three categories of activity. The first is developing smart infrastructure, which has a direct impact on our carbon footprint. And you should be aware that we're actually one of the leaders installing solar paneling. We intend to install another 6,000 megawatt hours of capacity, which will pretty much double our capacity and make us one of the bigger producers This not only reduces our carbon footprint, it also reduces our costs because our off-take rates are below the rates that we can get on the open market and makes use of the roof space that we have on our facilities both at the cargo terminals and also in the kitchens. We've already begun to electrify our ground service equipment fleet and almost a third of it now is electrified and we intend to continue that drive over the next nine years to achieve 100% electrification by 2030. Our carbon footprint has come down quite a bit this year from the baseline. Some of that is volume related, though, so I won't go too much about it, but some of it, as you can tell, is from changes in infrastructure and introducing solar and more efficient equipment in both our kitchens and our freight terminals. On the food packaging waste, We're doing waste tracking now for the first time using AI. We're also investing in food waste to energy conversion, which again will help us to reduce our cost base, our energy usage. And then we're very proud of the work we've been doing with the benefit of the capability we acquired when we bought Montez in March 2020. Montes Bakehouse is the world leader in sustainable packaging for aviation food, and we've made use of that to introduce some sustainable food packaging this year, particularly on short-haul flights for some of our biggest customers, and the customer reaction to that has been very positive, measurably so, because in the customer surveys, we've started to see a significant increase in the customer satisfaction with those meals served in this new packaging. And then the last one which has always been important to SAP but continues to be a source of investment for us is investing in our people. So we've been reskilling and upskilling our people so we can continue to harness technology to increase productivity which is important because labor costs we believe will continue to increase in the major cities in Asia. And then importantly to enhance the services we provide to our customers. For example by creating the The software and the service linkage between our different cargo terminal operations across Asia to provide better track and trace for the forwarders and the shippers. With that, I'll hand over to Manfred and he'll take you through the financial results of the quarter. Thank you, Manfred. Thank you, Alex. Good evening, everyone.