Sats Q1 net loss widens to S$30 million on WFS integration costs

FOOD solutions and gateway services group Sats sank deeper into the red as it reported a net loss of S$29.9 million in the first quarter ended June 2023.

This compared to a net loss of S$22.5 million in the corresponding year-ago period.

The group said in a bourse filing on Tuesday (Aug 15) that the higher losses were due to one-off costs related to the integration of Worldwide Flight Services (WFS) – an air cargo logistics business it finished acquiring in April this year.

Excluding integration-related one-off expenses, underlying core loss after tax and minority interests narrowed to S$17.4 million, compared to a loss of S$19.5 million in the same period last year.

Group revenue for the period soared 219.2 per cent on the year to S$1.2 billion in the first quarter, up from S$375.5 million in Q1 last year.

Sats attributed this primarily to the revenue contribution from WFS and an increase in the number of flights handled, which it said has recovered to 81 per cent of pre-pandemic levels.

At the group’s earnings briefing, chief executive and president Kerry Mok said the group has seen signs of an inflection point in the cargo tonnage it handles.

Cargo tonnage excluding WFS’ contribution rose to 540,000 tonnes in the quarter ended Jun 30, 2023, from 509,000 tonnes in the previous quarter.

While Mok expects a slight increase in cargo volumes for the rest of the year due to the year-end festive season, he said the group will only likely see a full recovery in 2024.

The group has also been looking to raise its rates to reflect inflationary pressures, he said.

“Of course, not every account we’ve been successful (at raising rates), but by and large, in Europe and the US, we’ve been able to do that. In Asia, we’re also starting to adjust our prices to reflect the inflationary pressures,” he said.

Loss per share climbed to S$0.02 for the quarter, from S$0.016 a year earlier.

The group said it has refinanced some of its debt to deliver interest savings of S$40 million annually. Mok promised to “continue to realise synergies and drive value creation from the group’s enlarged global network”.

For the first quarter of FY2024, these include new contract wins in excess of S$15 million in additional annual revenue across the globe.

Mok said the customers that the group serves may also have operations in the US, where WFS has a presence. This allows the group to provide value-added services, such as improved visibility of their cargo.

“Because we have the network and we are all in the key markets, we’re able to offer a service offering that is value-adding to the customer.

“Instead of managing an origin provider and a destination provider – and there are always handoffs between the two – now we have one provider like us that can manage the end-to-end service for them,” he said. He added that efficiency and productivity gains can be made when both providers share information with each other.

As for the exit of former WFS chief executive Craig Smyth, Mok said that the integration of WFS into Sats has “accelerated” since his departure.

The company had earlier announced that its gateway services business segment will be managed by three regional chief executives who will report directly to Mok.

He said the company is now focused on promoting talent from both WFS and Sats to take on global appointments to drive business growth.

Shares of Sats ended Tuesday down 1.1 per cent or S$0.03 to S$2.62, before the announcement.