SATS Ltd.

Good afternoon, everyone. Welcome to the SADS second quarter results briefing for financial year 2026. I'm David Bui, Group Head of Strategic Communications at SADS. Before we begin, I turn your attention to the forward-looking statement now on screen. I would also like to share a safety reminder. Whether you're joining us from the office, from home, outdoors, on the road, please be aware of your surroundings at all times. Please make your safety a priority before joining this call, a recording of which will be available on our website. With me today are Kerry Mock, SETS President and CEO, and Timothy Tan, PANG CFO. I will hand over to Kerry to take you through the business update. Kerry, please.

Thank you, David. Good afternoon, everyone. Thank you for joining this call. Traditionally, it's always in the morning, night, evening, so this time around in the afternoon. Let me just quickly just go through what's happened in the last quarter. Basically, we have been on track in terms of our performance. FY29 target in terms of revenue, EBITDA and ROE, we believe this quarter kind of proven we're the right path. We have been taking on good market share in the air cargo side and of course a lot of work being done also in Singapore to continue our hub status and our service offering here in Changi and all our specialized services that we are working on is starting to take fruit and this quarter quite a few also awards recognize our work in the food side as well. So next slide. I'll go straight into some of the key highlights. Year on year, it's been growth across all lines of business. You know, one point to highlight the volume that we see growth in the cargo side, we believe part of it is driven by fund loading by some of the customers, but also a large part is also driven by our ability to implement new customer wins that we have won over the past half a year. So for the 8th straight quarter, we have outperformed IATA's numbers. APAC and EMEA in particular has been a star performer in our cargo business. And that's been able to offset some of the decline that we see in the Americas due to the tariff and of course the removal of the de minimis. But with key customers win, that's helped us to maintain our momentum in terms of our growth. And our free cash flows also improved compared to last year by almost $52 million. And that's driven by obviously strong operational performance, better profits and also better working capital management. When you look at our segment performance, gateway services, this has been a record month for us in terms of tonnage for this quarter itself. So it's almost 2.4 million tons. Flights handled is flat. There's some growth here in Asia, but generally we do see US declining slightly. Hence, we are seeing a flat number of flights handled. EBITDA continued to expand this quarter from 18.3 to 19.6. We're very pleased with this effort. Basically, you know, positive draw and then, you know, more dropping through from the revenue to the profit line. And our PME has grown almost above 13% now to almost 79 million. And this quarter, we are announcing an interim dividend of 2 cents per share. Likewise, on the food side, you can see aviation meals as a stable demand, almost a third percentage growth. But we do have some increase in non-aviation meals. In particular, we managed to break into Starbucks in China with some good product that we are launching across the whole of China. Next slide. Just some commercial and operational update. Very proud to be Riyadh Air's hub operator for cargo in Saudi Arabia. With Riyadh Air, we believe we strike a very nice partnership with them. As they grow overseas, we believe we are in the best position to also support them as they expand their network overseas. We've also secured a Turkish airline in multi-station in the US. So as I mentioned, whilst the US general volumes dropped, but all these new winds are helping us to cover some of the decline in organic volume. And we have also invested in new facilities in Copenhagen. This is to expand our specialized e-commerce and freight forwarder handling. So this is a specialized services that we've been talking about for some time now. So this allows us to capture more volume, sorry, more revenue for the same volume that we are managing. I'm closer to home, Marina Bay Cruise Centre, we've announced a $40 million upgrade. This is to allow us to almost double the passenger throughput. As you all know, this has been done to actually accommodate Disney Cruise. Unfortunately, it's been delayed till March, but when Disney Cruise comes on board, this place will be quite full with a lot of cruise passengers. So we're looking forward to welcoming Disney Cruises. And in Singapore, we've also announced our Hub Handler of the Future program. This program is about reimagining the way we run our hub operations using automation, AI, and obviously workforce innovation. And whatever program we launch here, we will be able to use this in overseas hub operations too. So we're really looking forward to that. I think it will secure our position here in Changi, but also allow us to drive more productivity growth Here in Singapore, we do have a shortage of workforce and therefore this is an important program that we are launching. On the food side, you may have seen we have first time unveiled our defense logistics capability in Exercise Wallaby. This is an end-to-end solution. Beyond food, we are helping with logistics and even transport maintenance in Queensland. And as SCF continues to expand its This is an important capability and important business that we have that allows us to support SAF beyond Singapore. Then on the governance side, we are proud to say that we have topped the Singapore Governance and Transparency Index. This is for the second consecutive year. I think it's a testimonial to the strong governance accountability as well as disclosure practice that we have here at SETS. Next slide. Just the usual key business drivers, I've already highlighted. Tanishq-wise, you can see year-on-year, year-to-date, it's all grown. Even our AG associates and joint ventures, I've also seen above 8% growth. So this really has been a record quarter for us. Flights handle, again, both ourselves as well as AGV have shown slight growth as well in terms of flights handle. Meal served aviation year-on-year 4% growth and our associates have also grown almost 3%. What you see in terms of non-aviation meal served is primarily when you compare against last year is primarily due to the fact that we have consolidated one of the kitchens in China into Tianjin. And last but not the least, you see the employee side. We remain very focused on managing our number of headcounts. So that drop in there is actually coming a lot from the US side. As we mentioned, as US volume continues to soften, we need to actually manage that headcount to just balance out the cost as well. So this is something that we continue to take a big focus on as we progress through the rest of the year. A slide here to show the growth and the tonnage. Some of you may be asking why is there two lines in there. 7.1 is the official number that we are seeing the growth. The 9.9% is just to reflect a particular shift in the contractual model where we're still performing the service but then it's not counted within our books. So that's why we just want to give you a sense of the volume. It's not that we have tapered off, that's really changed in the model. But the good news is on a non-like-for-like basis, you can see a very strong 6% growth that we have presented. And you know, in our cargo business, we are present in 16 out of the top 30 cargo station. And this has helped us a lot as we manage the changes in the trade flows with all the tariff situation. With that, I will hand over to Tim to take us through the financial highlights.

Okay, thanks, Gary. Hi everyone, good to be on a call again for our Q2 earnings and I think obviously start off by saying that it's been a pleasing set of results for Sats globally and obviously in particular the growth that we're seeing in almost every part of the world outside of America at this stage given a little bit of the softness there. I think I obviously won't go into repeating Kerry's main notes but But perhaps just a couple of other points to add additional colour. Number one, I think it's good to note that there is no major difference in constant currency versus reported currency results. So I think for those of you who are tracking that, just a data point that you'll be able to use. I think if you dive within the segment... segment performance. We do obviously continue to see great performance in Gateway. If you look at the results across the regions, we certainly do see weaknesses in America, and ultimately, actually sequentially, we do see softer results as the quarter went on. So while overall revenue actually still grew in America's We are seeing that more contributed from July and August results as opposed to sort of September, and that does lead to us looking forward into Q3 and seeing that that is likely to continue at this stage given the overall economic environment there in Americas. But the main thing to note is that certainly we do see that the rest of the region volumes continue to make up the shortfall within the Americas region there. Food-wise, obviously great performance around the results and even on a solo growth. I think from a profitability standpoint, year on year, it is just worth reminding everyone that we did have a one-off catch-up revenue adjustments from, or profit adjustment actually, from FY25. And if you excluded the one-off adjustment catch-up from last year, profitability actually is still growing in the single digits. Over to the next slide, please. I think much of this continues from what I've already noted. I think maybe one interject here on the IATA number that Kerry has spoken about. It is worth noting that while the cargo tonnage numbers have, we've shown the adjustments on an IATA number, that change in reporting actually doesn't necessarily impact the revenue. So it is only a tonnage-based adjustment with that sort of some contractual arrangement that we have. Otherwise, then, as you look through the revenue, then that obviously continues to flow through on the cargo business unit standpoint. That is point number one. I think secondly, the context around the IATA number, just to highlight also, is that there are certainly some comparative differences between the way IATA reports the APAC number in particular, given that our number does not include our AJVs that continue to be performing very, very strongly. That's outside of our reported TANIS number there. But if you look across then, the rest of the results, obviously very, very pleasing, as I noted at the bottom there, even while America is, despite the continued challenges in the overall volume. The revenue continues to grow. And if you look within that America's number, we have noted this in the past, it is that whilst the core cargo is obviously impacted with ongoing tariffs and in particular, some of the de minimis impact, what we are seeing is that domestic e-commerce and our exposure to Amazon in that market is really... offsetting some of that weakness in the international e-commerce going into the US. Okay, I'll take you on to the next slide. I think jumping on to a bit more on the detail into the P&L here then, and I'll leave, I'll obviously jump into a little bit of the year-to-date performance as well because Kerry's already covered the quarter. I think obviously you can see from, if you sort of aggregate the second quarter performance that you can see on the screen with Q1, Ultimately, what we're seeing is that that trend on revenue is actually very, very similar to our Q1 growth. I think you'll all see as you look through the details. And then, likewise, from a PACME standpoint, we've had a very, very strong quarter in overall growth in profitability. And as we talked about the adjustments, and I think I'm sure this will be one of the questions, we have mentioned in the past that there was a profitability or the catch-up SQ adjustment that we had last year. If you look underneath the normalised results, Barring all the one-off adjustments on both years, actually the normalised profitability growth is almost the same as the reported patented growth. So therefore actually from an adjustment standpoint, no major impact in terms of overall trend of our business. Just one quick word on SOAJV while we're here. I think the decline there is due to a one-off ramp up in costs, in particular in relation to One of our JV partners, where we are taking on a significant new customer. So this is sometimes obviously the flip side of us being successful in securing new customers. So we obviously, as we now continue to get more ramped up and ultimately improve the efficiency of the overall handling there, we do not expect this to continue in the same quantum as we move forward. Lastly, a quick word on tax. Ultimately, we did have an adjustment that impacted slightly this quarter's tax reported tax number from an overall standpoint, but we don't expect that to be an ongoing impact that will will affect our longer-term tax trajectory and our guidance around the tax rates continues at around this 27% as we move forward. Certainly can get into more details later. One thing we always know with the tax rate though is that our business obviously continues to change. We are getting significant positive results coming out of Europe. So therefore that does have a upward pressure on our overall tax rate given the European exposure. But of course that comes with a significant profitability that we are driving within the market given our market share growth. Next slide please. Okay, so on this one, there's no, I won't touch too much on the left-hand side top part, and cash flow itself, I'll wait until the next slide. But just a couple of words on the right-hand side. I think Kerry's already mentioned, we are obviously very pleased with both the growth in itself, especially, and in particular, also the margin improvement that we continue to drive through the business and leveraging both our network, as well as obviously, Our utilization of our facilities in both food and on the warehouse, on the Gateway side with our warehouses. No doubt that yes, there is some thought forward impact that we do see that ultimately improved our margin somewhat in the second quarter, but the trend, the underlying trend continues. And we do see that as something that we are proud of in terms of growing our business. The only one that probably stands out here is the cash conversion number. But ultimately, I think if you look through the details, they're primarily what is driven that decline on a year-on-year. It's really just a CapEx difference between the two years. We are continuing to invest in the growth of our business, both in new warehouses as well as our Renew program in Singapore in particular. And if you excluded that difference in capital expenditure, Our cash conversion actually would have been close to 70%, which does reflect the improvement in overall operating performance as well as the working capital management that we continue to work through from an organisation standpoint. Next one, please. Yes, so now a few final words on the cash flow. I think ultimately you can see that the cash flow Ultimately, cash flow is improving. If you look within the operating cash flow, obviously a significant improvement. This is a better metric, look at a year-to-date standpoint. Within that, a significant part of it obviously comes from the operating performance, which we're very pleased of. I think one thing on the Ultimately, our overall borrowings and debt profile, we do continue to pare down our debt and we intend to continue to do so throughout the remaining of this year as well. It is something that we believe is a core part of our capital allocation. Having said that, ultimately, we are continuing to judge the right balance here because we do see our funds contributing towards capital extension and any potential bold on M&A activities that may continue to drive our capital and our earnings accretion. So overall, our strategy continues to be that finding the right balance between obviously the pairing down as our debt as our priority, but at the same time, committing our funds to grow for the organisation as well as then returning the funds to shareholders by the way of dividends, our dividend progression. Obviously, as Kerry noted, we're very pleased to announce a 33% increase or a half percent increase in our dividend per share over last year, which does signal our continued effort to return our funds to our shareholders and in the way of a consistent and growing dividend from that standpoint. Okay, so I think I'll pass it on to Kerry for the outlook.