SMRT re-states maintenance cost

WITH the bill for SMRT Corp's rail maintenance set to eat up half of its rail revenue, the operator has re-categorised operating expenses to highlight aggregate maintenance-related expenses (MRE) in a bid to better illustrate its total maintenance cost.

As a result, repair & maintenance (R&M) cost in the third quarter ended Dec 31, 2015, almost trebles from 11.3 per cent of S$303.0 million in operating expenses, to 30.9 per cent.

Group CFO Manfred Seah explained that this was done to "give better resolution of what the total maintenance looks like for the group''.

"(Otherwise), the public may misunderstand that we are not putting focus on that area,'' he said during SMRT's financial results briefing on Tuesday.

On Monday, SMRT announced that third-quarter net profit had jumped 63.5 per cent to S$36.86 million, helped by its improving non-rail businesses. Group revenue rose 4.6 per cent to S$327.56 million on broad-based growth across most segments.

Q3 R&M was S$34.3 million, up 17.1 per cent from the previous corresponding quarter.

But when re-stated as MRE, the Q3 amount was S$93.7 million, up 8.2 per cent from a year earlier.

"In the past, we categorised by nature,'' said Mr Seah. "Now we streamline into function.''

Taking staff costs as an example, he said it "captures all the staff manpower costs in one bucket''.

"But staff costs include R&M activities. To represent it better, we re-categorised it into MRE.''

Equipment depreciation related to maintenance and repair is also moved into this bucket.

As expected, the bulk of Q3's MRE was for SMRT's rail operations; rail maintenance-related expenses of approximately S$74 million accounted for 43 per cent of about S$172 million in Q3 rail revenue. It had been between 41 and 45 per cent in the preceding four quarters.

But going forward into Q4 and the next financial year, SMRT expects MRE for rail to hit 50 per cent as rising maintenance costs outpace revenue. This is because operating expenses will continue to climb with the ageing network, while the 1.9 per cent fare reduction will impact fare revenue.

To manage this, Mr Seah said the group is looking at enhancing productivity.

Rail MRE accounts for about a quarter of SMRT's total operating expenses. In Q3 FY2016, it was 24 per cent of S$303.0 million, up marginally from the previous corresponding period's 23 per cent of S$295.9 million.