SATS posts $33.2m loss in Q2

Outlook remains tough with travel restricted; group says it's ready to assist vaccine distribution.

SATS reported a $33.2m loss for Q2, extending albeit at a narrower pace its Q1 decline, the group’s latest results showed. Revenue contracted 53.5% YoY to $231.1m during the same quarter compared to Q2 2019.

Earnings before interest, tax, depreciation and amortization (EBITDA) dropped 80.8% YoY to $20.5m over the same period.

For the first half of FY2020-21, SATS recorded a $76.9m loss, whilst revenue dropped 54.2% YoY to $440.5m. EBITDA also plunged 106.5% to a $13.4m loss.

SATS noted that the pace of air travel recovery continued to be slow and uncertain, with many countries having imposed stricter entry restrictions and border closures to stem the spread of the coronavirus.

But global air cargo demand continued to be resilient, with overall decline in cargo tonne-kilometres (CTKs) improving from a year-on-year decline of 14.4% in July to 12.6% in August. SATS’ air cargo improved with 22.5% QoQ volume increase in Q2 compared to Q1.

However, between July and September, global passenger and cargo movements increased only marginally, moving IATA to downgrade its global 2020 passenger traffic forecast to a sharper decline of 66% from 63% previously.

Group expenditure for the quarter saw a reduction of $201.3m, or 46.6% YoY, to $231.1m, as SATS continued to reshape its cost base. Staff cost was significantly reduced by $142m or 61.3% due to government reliefs, as well as lower contract services and headcount, it added.

For the first half of the year, group expenditure has fallen by $364.2m or 43.3% YoY to $476.5m, with staff costs dropping by $278.9m mainly due to government reliefs and right-sizing of workforce.

But whilst the decline in group revenue continue to outpace the reduction in group expenditure after taking into account government reliefs, SATS reported that it achieved operating break-even for the current year, compared to an operating profit of $65m for the same quarter last year.

As of 30 September, SATS reported a total equity decrease of $97.5m to almost $1.71b compared to 31 March, hit by losses for the period. Non-current assets are down $112.9m on the back of lower property, plant and equipment, as well as investment in associates and joint ventures. SATS also recorded a  total impairment charge of $31.6m to an associate and long-term investment.

Meanwhile, current assets of the group rose to $275m primarily due to higher cash and short-term deposits and inventories, partially compensated by lower trade and other receivables. Current liabilities was up $9.3m mainly due to higher term loans, and non-current liabilities increased by $250.3m mainly due to higher term loans.

SATS holds a cash balance of $818.5m as of 30 September with net cash generated from operating activities and capital expenditure of $19m and $25.8m for the period, respectively. Debt-to-equity ratio has increased to 0.58 times.

Looking forward, SATS said the outlook remains challenging with flight and passenger volumes still heavily constrained by pandemic-related travel restrictions, although demand for air cargo continues to be more resilient.

Flight, passenger and cargo volumes have all climbed from their lows in April 2020, but the trajectory of the recovery remains uncertain with COVID-19 resurgent in some countries, the group added.

In its latest results, SATS added that it is “ready to assist airlines, shippers and forwarders in the distribution of COVID-19 vaccines across its network of certified pharma-handling cold chain operations” once the vaccines have become available.

On 9 November, Pfizer announced that its coronavirus vaccine candidate achieved a 90% effectiveness in preventing COVID-19.

SATS added that it would also continue to grow in new customer segments such as foodservice, fast-casual restaurants and supermarkets with a wider range of products and services.

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