SATS Ltd.

Good morning, everyone. Thank you for joining us today for SATS full year 24 annual results briefing and strategy update. My name is Didier Louvet. I'm the head of investor relations. Very happy to see all of you here. I'd like to run you rapidly through the morning schedule. We'll start with a short introduction from our president and CEO, Kerry Mock. We'll hand over to our CFO, Manfred Seeha, for the This will be followed by a strategy update from Cary focusing on our integration progress to date and our ongoing growth strategy. After the speaker's remarks, we will open up for a Q&A session for investors and analysts. Present with us today to assist Kerry and Manfred with the Q&A is basically our entire group management board. So we have Francois Mirallier, Deputy CEO of WFS. Mike Simpson is CEO of Americas for WSS. John Batten is a CEO of EMEA for WSS. Shi Wei. I just met Shi Wei. We have Shi Wei as our human capital head for the group. Henry Lo is our chief operating officer. Veronique Cremades is our head of strategy and commercial. Bob Shee is in charge of our gateway services, and Stanley Goh is in charge of our food solutions. So they will all join for the Q&A session to respond to your questions. After the Q&A session, we will move next door for lunch, where you can interact with the group management board. Meanwhile, for the press, we'll have a separate Q&A session with Carrie and Manfred in this room. Before we start, just for the record, please note during the call we will make forward-looking statements related to operational, financial and market trends. For future periods, these are based on management's current views and assumptions. These statements are subject to risks, uncertainties and other factors which could cause actual results to defer materially from those projected or implied in such forward-looking statements. Please exercise caution when using this information to make any investment decisions. We hereby undertake no obligation to publicly release any revisions to these forward-looking statements. With this said, I will now hand over to Kerry.

Thank you, Didier, and very good morning. Welcome to the Arts House for our Global Innovation Hub here. I think some of you have been here before. It gives me great pleasure to actually have all my management team be part of this briefing. This is actually how we operate as a global company and we really interact very well as one team and we're starting to deliver a lot of the promises that we have made to our shareholders and investors at the start of this whole acquisition that we did. I want to say thank you for people also attending online. Appreciate you taking time to come and listen to us. I will share a little bit of where we've come from and where we're heading. And later on, Manfred will share more details around our performance for the half year as well as the full year results. And then I'll come back again to share with you our strategy going forward and what's our trajectory, what's our ambition. And that will lead into year end where we will have a capital markets day where we share more details around some of the initiatives that we have planned in mind. Can I just go to the next slide, please? Thank you. We thought painting this picture gives everybody a sense of where we came from, and there's three kind of segments in SAD's history. Now, at the start, based on 2010, when we were listed, you can almost see very, very flattish growth in revenue. And in fact, some of the comments in the past was that our revenue is not growing as fast as it should be. But of course, profit was good. We continued to deliver on good profits in those years. When COVID came, it was a complete different animal altogether. And I shared before in the past, when you went from 100% thinking that aviation will continue to grow, we invested a lot of resources and assets in anticipation of continued growth, especially out of Changi, it dropped to just 2%. And it really forced us as a company to really look at Where do we want our company to be? And of course, at the time, it was very difficult. We had to rely a lot on government reliefs, in fact, government support to actually get us, tide us over the hump. And since then, obviously, a lot of recovery has been a rebuild of the business. I mean, when you lost 50% of your workforce, and as we all know, COVID requires a lot, most people did not come back to the old jobs. It was a literally rebuild of a company. And it took us a while to quickly get back. Pleased to say during those times, we helped support Changi Airport's growth. And I think fair to say, in fact, we were awarded the best ground handler of the year, both for Asia-Pac as well as globally, two years in a row. And this is just a testament to the people and the team that we have that really supported the growth for Changi Airport. And since then, we decided to diversify and create more resilience in our business, which is why we went ahead and did this huge transformational acquisition. And that is the trajectory of taking off, which is what you'll see the results from now. The past one year, I think, went by very quickly. A lot of things being done, a lot of initiatives that we implemented. I'll share some of that later. Some very good development across the world, not just in Asia, but in Europe and in America, which I'll share later. And integration has been going well. And I think if you can look around the room, In terms of the management team, it's really well integrated. We have people exchanging roles and coming to Singapore. We send people over to Europe and US. So it's starting to come. There's more to be done. And we're now at the cusp of the transform and perform and you know we do have a strong aspiration of bringing the growth and the company bring forward. Next slide and I'll share more details what we're going to share and you can see from the numbers here pre-COVID FY20 that's just at the start of COVID we're about almost 2 billion in revenue we're now 5.15 so that's been a big trajectory in terms of revenue growth EBITDA, we used to be 356 at pre-COVID. We're now almost 900 million in EBITDA. EBIT, we had strong EBIT in the past, but a lot of those EBIT came from Singapore. And if you look our share later, 80% of our revenue and all that all came from one country, which is Singapore. Today, what we have is 354. It's recovering. It's not where we want to end. There's a lot more we can do. But I think it just shows the trajectory. And integration has been good because we are starting to deliver a lot of the value creation that we have anticipated through the acquisition. PAMUI is 168, now it's back up to 56. I think the first quarter when we first integrated, it was a loss, but we've since shown three quarters of profitable growth. A lot more to be done because as I mentioned, Travel Recovery is coming back, we rebuilt the company, We got a lot of new hires in there. Operational productivity is not where we still need to be. There's a lot more training that we need to do to continue to drive the productivity growth. But we are in a good spot and momentum is very important. And momentum will allow us to continue the path going forward. Now with that, I'll let Manfred take you through the results and I'll come back again later on our strategy. Thank you.

Thanks, Kerry, and thank you for attending this morning's session, both on virtual as well as present. I'm just very, very pleased to share this set of results. Finally, we are out of the woods, the first profitable year, and I can assure you that over the last 12, 15 months, the team here has exerted all efforts to deliver our commitment to all our shareholders. So there are two stack of numbers here. The FY24 numbers and then the light blue is actually the fourth quarter numbers. Let's start with the fourth quarter. We came in at about $1.34 billion. It's slightly lower than the third quarter, but that's kind of expected because of seasonality of our business, particularly with the WFS heritage business. Fourth quarter is always a low season. Moving on, you see EBIT, there's expansion of margin. You can see that last quarter we came in about 6.6% margin compared to a full year of about 4.7%. Glad to say that both companies now, WFS Heritage as well as SETS, both are operationally profitable. The share of results continues to come in very strongly. We closed the year at 110 and you can see the run rate of about 31 million. Likewise, for EBITDA margin, EBITDA here includes the share of results. Again, you can see that the margin, this expansion of margin. I have a slide that shows you an eight-quarter trend. Quarter-on-quarter sequential improvement is actually quite stark. PapMe, of course, came in in 1956. We reversed almost 83 million favourable variants from a loss of about 26 million the year before. The stack below shows the key drivers of our business. Maybe start with the set stand alone. You can see that flights, air cargo, packs all coming back beyond 80%. In fact, flights alone for Changi is already passing about 92% and going towards about 95%. So there's clearly very robust travel recovery. Likewise for air cargo, once we layer over the WFS volume, you can see that compared to pre-COVID, for flight volume is 160%, and then air cargo has returned about 4.3 times that. Moving on. Next slide, please. Okay, just a quick slide. Top half of this slide, you can see that year on year, clearly the increase in volume, particularly on the ground and cargo, you can see that there's a very, very sharp increase. Even for food, there is an increase of about 70% aviation food year on year. Non-aviation meals actually grew about 10% there about. The charts on the bottom, we have layer over WFS heritage volume. You can see there is a very sharp increase. Aside from the seasonal fluctuation, year-on-year, all the volume has shown very sharp increases. So as pointed out by Carrie in the earlier slide, this was a transformational acquisition and it has actually transformed SETS into having a global footprint to operate from. Next slide please. Alright, here I just want to point out that in terms of financial metrics, you can see that the top half of here, revenue EBITDA and PADME year-on-year. Revenue is about three-fold increase. EBITDA plus is about five-fold increase. PADME, of course, we reversed at 83 million favourable variance, close at about 56 million. What is actually interesting here is you look at operating cash flow. Operating cash flow has grown from 80 million last year to exceeding 512 million. I've inserted operating cash flow Q on Q trend at the bottom right hand side. You can see that for the last two quarters, the operating cash flow has been extremely strong. Just to point out, if we take out free cash flow after lease payment, you will see that for FY24, while it's still a negative of $48 million, I have a slide later to show you that on the last two quarters, the free cash flow after lease payments have indeed been positive. Last quarter, fourth quarter, after lease payment, free cash flow came in about $118 million positive. So next slide please. Here I will just call out that compared to last year, previous year obviously there is no consolidation of WFS and the very sharp increase is actually due to number one, the consolidation of WFS numbers, number two, very robust travel recovery growth. You can see those numbers actually have improved very sharply. Right at the bottom EBITDA plus SOJV so you can see that our run rates now we close the year with 900 million of EBITDA plus and we will soon cross the 1 billion mark which we are looking forward towards. The next slide, I will just leave you to read this. This shows the fourth quarter versus third quarter and there is a seasonality factor here. Revenue a slight dip. Nonetheless EBIT is still favourable. simply because of the operating leverage coming in on the third and fourth quarter. Fourth quarter, we have initiated quite a few cost savings initiatives which have resulted in positive operating leverage. We have done this cash flow really just for lay people to be able to understand it. It is non-variate accounting. We try to summarise it as much as possible. It starts with operating cash flow, $512 million versus $80 million the year before. And then you will see that at the bottom there, free cash flow before lease payment for the year came in about $326 million. And after lease payment, it's a negative of $48 million. But I can assure you that on the right-hand side, you can see bottom right-hand side, the last two quarters actually we came in at about $45 million and $119 million respectively. We believe that this trajectory can actually be sustained. This shows how our balance sheet has transformed. Total assets, total liabilities all stepped up because of the acquisition of WFS. We started to consult the numbers only in FY24. Cash position actually increased to $659 million as we speak now. Our cash is in excess of about $700 to $750 million. Total debt including leases came in about $4.1 billion, but if you strip out the leases, our debt is about $2.7 billion. Gross debt EBITDA, this is watched very closely by our rating agency. This is gross debt equity, this is about 1.6 times, but gross debt equity EBITDA, we came in about 4.6 times and this is trending towards 4 times that we are looking at trading 12 months forward. I thought I put in this slide to show you the quarterly trending over eight quarters. I will just call out the EBIT. You can see that the EBIT margin expanded very nicely on a sequential basis, all the way to about 6.6% in the last quarter. And then for EBITDA, we closed in at about 16.9%. But if you layer over the share of net results, the EBITDA actually came in about 18.8%. So our target is continuing to grow this to exceed the 20% mark. Next slide please. A quick diagram just to show you the five streams of work that is ongoing in parallel to continue to create sustainable value for our shareholders. First one is scaling up our revenue. Other than the consolidation of WFS revenue, we are also working on the commercial synergies, the network benefit to grow our revenue. We do have a slide which Carrie will cover afterwards, additional revenue that we have generated simply by actualising the network benefits. The second stream here is ready to right cost the operations in terms of cost takeout, in terms of productivity enhancement, operational excellence. We'll continue to drive this. I'm actually encouraged to tell you that we did a program last year. The management team got together. We met in Bangkok and we actually set a target for ourselves and we actually met that very well. So as a result of that, we dropped the cost where it's necessary to do so without sacrificing quality, safety and security of our business. The next slide, as you can see, we also have a very A valuable portfolio of joint ventures, associates, investments overseas. Today we have a run rate of about 110 million. This is where management and board continuously look at how to assess, how to evaluate This portfolio to sharpen it and also if necessary to reduce that, those that are non-core in nature, monetize that, recycle the capital. This is part and parcel of our financial management and capital management strategy. The next stream of work is really deleveraging. So here we have guided that that's one of the three R's, repayment of debt to pare down our loans and to actually strengthen our balance sheet. So that is ongoing. The last one is of course delivering on our commitment to reward our shareholders through a resumption of dividend which I'm very happy that the board has endorsed that. and we are declaring a 1.5 cents dividend to resume that for shareholders' approval. So those are the three Rs. The whole purpose is really to restore investors' confidence back into SETS. And at the last AGM, I remember very clearly our Chairman actually set out a goal for the management team, let's restore profitability. And once we restore profitability, we will optimise our cash, and then we will deploy the cash for paring down of debt, for reinvesting into sustainable growth, and the last one is the resumption of dividend. I'm just pleased, very very pleased and I thank all my colleagues here, all the GMB members here and of course our staff that work very very hard to be able to deliver this commitment to our shareholders. I got one more slide, I'm going to hand it over to Carrie. One more please. Oh no, so it's yours again.