SATS Ltd.

Good morning, everyone. Thank you for joining us today at SACS Group First QFY Learnings Briefing. I'm Carolyn from Corporate Affairs. Just to let you know, we are using a new system today, so if you want to ask questions, please click on the red button on the top right of your screen. I hope you have time to review the highlights of our results. We have about an hour here, so I appreciate if you could repeat your questions for others to ask questions. For the record, please note that during the call, we made forward-looking statements related to operational, financial and market trends for future periods, which are based on management's current views and assumptions. The actual results will differ materially from this projected or implied in such forward-looking statements, so please exercise caution when using this information. I will now hand you over to Carrie President and CEO to start off the presentation. And then it will be followed by Manfred, our CFO, to take you through the results. So over to you, Kerry.

Thank you, Carolyn. A very good morning, everyone. Again, thank you for taking time to come to our first quarter presentation. Let me just jump straight into some of the key highlights. I think as you saw from the press release, First quarter net profit has jumped to 65 million. That is a significant improvement compared to last year of negative 29.9. So it's a 95 million jump in net profit and really attributed to a few things. Clearly from a cargo volume perspective, we are really benefiting from tailwinds of the growth in cargo volume. And that's over a few factors. One, obviously, port congestion, as we all know. The continued rate sea challenge in there. And of course, which I think is very pleasing, is the continued growth of e-commerce shipments, particularly from Asia into Europe as well as the US. So that has really helped drive the continued growth of our cargo business. and in many of our stations we actually have good operating leverage to benefit from the increase in our profitability. Second one obviously is aviation meals. We have seen an increase in the consumption of aviation meals not just in Singapore but also in Japan as well as domestically in China as well. Our unit Nanjing Weizhou is coming back And we continue to see good growth momentum in the domestic market. So all these helped us to increase our volume in aviation meals. You can see that almost 27% in volume year-on-year. And this led to a 15.5% growth year-on-year. Again, a lot of those growth that you can see dropping a lot into the bottom line itself. Very teasingly, it's also EBITDA. We continue to show improvement in the EBITDA margins. As you know, we do have a target to try and hit into the 20s, but it's showing good momentum in the growth of EBITDA margins. And of course, cash flow, we continue to have good positive momentum. So this quarter itself is an increase of almost $126 million to about $37 million in pre-cash flow. So from a financial standpoint, it is a good first quarter. We are pleased with the results and with a lot of momentum in what we've done over the last year, paying off in this quarter itself. Let me move on to the next slide. This slide, very important commercial and operational updates. You know, once we write on the volume growth that we see, tailwinds in cargo and some of the food business, I think it's important that we continue to establish a strategic growth initiative for ourselves. And this slide here really shows what we're doing to establish those future growth plans for SETS. The Mitsui partnership, which you read as well, this is a very strategic partnership to allow us to get channel access. And Mitsui being one of the largest trading company in Japan, combining together with us, leveraging on our food technology and our food know-how, and through a very targeted demand generation And that is going to help us increase our utilization of our food factories that we have established in China, India, as well as in Thailand. So that is something for the future, which we believe will put us in good state. They will also open up channels to us in Japan. And that's, I think, going to help us also with our business development of opportunities in Japan. Japan is one of the biggest market for really good meals and we believe having a presence there and being able to craft a market together with Mitsui will put us in a very good position. The second one I want to highlight is more of the shrimp phone side, which again, as we know, when we did the acquisition of WFX, e-commerce was a targeted segment for us. And as we start to leverage on the network, we are targeting a lot of the e-commerce players and we do want to form a more strategic partnership with them. And not just the usual handling of the e-commerce, but looking at how we can provide more value or specialized sending services for all these e-commerce players. So with this MOU with Shunfeng, we are expanding our relationship with them beyond Asia. And Liege, which as you know, is our Facebook hub in Europe. That is also where we manage China's volume as well. So with Shunfeng in there, I think the collaboration and all that in the e-commerce space is gonna help fill up our space as well. The next one, Cooknago. In fact, this is something that we signed in October last year. I'm pleased to say that we are now moved on to quite a few POCs. But this particular C2 air trials is an important one. You know, with a lot of supply chain destruction, having an alternate mode where you're combining ocean and air, it's a product that I think is starting to gain a lot of traction. And we've started a trial in Long Beach to LAX and that's proven to be successful. We're also now starting some trials here in Singapore as well. And if these trials work, hopefully that converts into a actual product that Quinn Nagel can sell to their customers. And it's all going to help drive efficiency, but I think importantly give consumer or customers in alternate supply chain mode where they can balance cost versus their speed of supply chain. The next one is the formation of SyncHub. Again, you've seen the announcement in there. This is an important shift for us. to continue to grow Singapore Changi Airport. This is our home base. It's important we continue to be best in class in Singapore and continue to support the growth of the Changi Aviation ecosystem, and partly the airport as well as our largest customer as well. But I think at the same time, it gives us an opportunity to have a team to now really focus on really growing the business in Asia. And then that allows us to form a global network that's complete with both Americas and EMEA together with AsiaPAC. So a team under my colleague Bob will be tasked to really take a handle and grow this APEC business going forward. And I just want to show the terminal that we have in Madrid. As you know, Madrid and Spain is one of the buses growing for us. In fact, it's driven a lot by e-commerce as well. We have been operating in a stressed environment in a sense that volume is huge in Madrid and we are running out of space. So this fifth cargo terminal in Madrid is going to give us additional capacity to grow more business in Spain. And hopefully that will translate to a higher growth trajectory for us as we have more capacity being put in place. Now, the bottom of the chart that shows you an update of where we are in terms of synergy. As you know, 100 million was a target when we did the acquisition. Please to say here today, or at least from the time we acquired this more than a year, we have now closed 51 million out of 100. So I have to say very good progress, both from a commercial and operational standpoint. Clearly there's more to go. We are going to shoot for more where possible, but this is what's on the run board at the moment. And financial fiscal savings, you heard at our year end results, $50 million is there. We do have still some initiatives to try and take out more costs in that, but those are plans that we have going forward. Next slide, please. A bit of foreboding here in terms of what we have done, but I think it's also important to recognise that our associates are getting recognised for the good work they have done. I think being the largest is one, but I think we need to make sure that we do well and service our customers in terms of good performance and quality. So AI sets for what they've done in the airport in Delhi, As you know, AAT, we are number three cargo handler in Hong Kong, but I'm pleased to say that they've been recognized as a service provider here in Hong Kong itself. So kudos to the AAT team. On the food side, we continue to be recognized for what we've done, particularly around authentic Asian cuisine. For the sixth year in a row, we have been recognized as the Allocator of the Year. for Asia. So good recognition of what the team has done for airline customers. And then the last one, I think, again, something that we are very proud of, recognized as being the most transparent company in SGX. So this is clearly a recognition for both the finance, legal, and comms team in how we actually show our information to all our shareholders as well. So with that, I will pass it on to Manfred to take us through the financial results.

Thank you, Kerry. Good morning, this is Manfred here. I'll take you through some very high-level numbers. You would have had the benefit of, you know, the results from last night's release. I'd like to devote more time for Q&A to make this meeting a bit more purposeful. In the executive summary slide five here, you can see that the three highlights are set up at the top of this slide. Revenue 1.37 billion, that's about 15.5% growth. We did VIDDA of 249 million, which is about 18.2% margin. EBIT actually grew about 13 times, and we'll go into another slide that will show you where our operating leverage kicks in. Share of results, 35.6. Even if you back out the one-off, about 7.3 million. It still represents a 33% year-on-year growth. PACME came in at about 4.7% margin. This is about 95 million favorable variance compared to same time last year. We have set up some notes here. I'm going to leave it for you to read and suffice to say that both Gateway as well as Food have also grown in tandem. Now at the bottom of this slide here, key operating statistics, I'd like to call out Cargo growth, air cargo growth of 19%. This outpaced industry growth reported by IATA for the six months of about 13.4. Aviation news coming very strongly, and we grew at about 26.8%. All three major catering businesses all firing up at the same time. SETS Catering, TFK, as well as Nanjing Weizhou in China. Next slide. I won't dwell too much into this except to just give you the orientation here. I've covered the year-on-year growth for the group. We have also included the Singapore data here just to give you a sense of how Singapore is also faring. The blue bubble here actually shows the the level of recovery compared to pre-COVID. So you can see that we are almost at 100% of pre-COVID already. And then the bottom of this slide shows you a sequential quarter and quarter uptake. You can see that all the metrics have grown, albeit that the last box here shows the headcount. We today have a group headcount of about 51,000, which is about 2000 increase compared to the same time last year, given the volume that we have to handle. Slide seven. A quick slide here to show you segmental growth. The year-on-year change, you can see that revenue increased about 15.5%. Cargo grew 17%, ground 3.3%, and then food solution grew 29.3%. Now, cargo today for the first quarter is now representing 51% of our total revenue. This actually increased from 50% recorded in the fourth quarter of last year. Okay, Singapore contributed 34%. You can see that the Asia Pacific 11%, both India and America combined came in about 54%, 55%. Yeah. Next slide. I'll just run through this very quickly. I just want to maybe focus on the last column. You can see revenue 15.5%, OPEX actually grew 8.7%. You can see the huge positive draw here. As a result of that, the EBIT expanded by 13 times from 0.7% margin all the way to about 8.2%. And then I mentioned that share of results, SOAJV, even if we back up 7.3, it still suggests that there's a 33% growth year on year. And PatMe, we actually grew by 95 million, reversing a loss of 29.9, our first quarter last year to about 65. Next slide, please. Cash flow, just want to call out the operating cash flow and free cash flow. The top and the bottom, you can see that there's a variance, positive variance of about $124 million, $125 million. And this, we are very pleased with this. We were able to reverse a negative free cash flow of $89 million to this quarter of $36.7 million. Okay, next slide. This basically gives you a pictorial illustration of how quarter-on-quarter the cash flow is. There's seasonality in our business. As a result of that, every quarter there will be a different Due to timing of collection payments as well as net working capital management. Not to mention also the lease, the leases have varying period of payment. One slide on the balance sheet. Very quickly, you can see that the total debt today is about $4 billion. We made a repayment of about $68 million. I forgot to call out earlier. We committed that we will repay up to about $200 million this year. We already done about $68 million, and with the increase in cash flow, we're confident that we should be able to meet that commitment of repayment of $200 million. Cash position stood at about $684 million, which is a slight increase of $25 million. Now, there are three metrics here which are annualized in nature, so I just want to call out to qualify it. ROE of 10.8% is on an annualized basis. Likewise, for the gross debt, the ratio coming off from 4.6 to about 3.5 times, that is also on an annualized basis. Big note. One slide on the quarterly trending, slide 12. Just to call out the sequentially, you can see that both EBIT as well as EBITDA after leases, you can see there's a very nice trending upwards. And that goes to show the operating leverage kicking in. I mentioned that the revenue grew 16%. OPEX grew half of that and for more profitability is actually falling through down to the operating level. As a result of that, margin had expanded from 0.7% operating margin all the way to about 8.2%. And we believe that there's still some way to go here as operating leverage continue to work in our favor with the scaling up of revenue. Share of results, you can see that it's very nicely consistently above a 30 million mark, which can suggest that there's a run rate of about maybe 110 to 120 million per year. And EBITDA, our margin before leases came to about 18.2%. Our own expectation has always been that we want this to scale beyond the 20% mark. And then after leases is 10%. Again, we would want to continue to focus on quality of earnings and then move this beyond the 10% mark after. Next slide. I thought we include two slides here to just give you a sense of the progress. Most of you would have recognized this flight path slide that we showed in the last quarter. Maybe I'll ask, can we maybe go to the next slide? I'll touch a little bit on on the entire transformation journey. A recap on our industrial logic. We have always, always believed that the acquisition of the WFS is the right thing to do. And we are the right food owner simply because we believe that, you know, by combining with the largest cargo player allows us To diversify our base, number one. Number two is actually to chart a new growth path for the company. And we are truly a global aviation services platform today. And largest global air cargo handler with leading position in key strategic hub in the developed market, Europe, North America, and Asia Pacific provide that growth path. and we are now in trade routes responsible for more than 50% of the global trade flow. So the industrial logic and the entire investment thesis is playing out and we are very glad that integration is progressing well. with Synergy tracking the target that we have set for ourselves. So today we are more than 50% of the 100 million that we targeted. This is without counting the 50 to 60 million of annual financing as well as fiscal savings. The combination of WIFS with SACS, you know, provide us a very, very scalable business and operating model. You can see that in Kerry's earlier slide explaining all the different initiatives, commercial initiatives that we are doing. This is a result of, you know, who we are today and, you know, the network that we have, the advantages, the competitive advantage that we have. And operating out of the resilient markets, this will provide us with significant growth opportunity. And the last point here is management remains committed to continue to drive value, to continue to drive shareholders return, and hopefully to be able to deliver on our commitment of restoring profitability to the rightful level, as shown in the earlier flight path. Now, with this, I'm going to hand you over to Kerry to cover the outlook, and then we're going to Q&A. Thank you, Mehud.