SINGAPORE (Apr 30): Airline gateway services and food solutions provider SATS is expecting to record a “material decline” in profit for 4QFY2019-20 ended March as the Covid-19 pandemic continues to stall air travel.
In a regulatory filing on Thursday, the group says it is now expecting its 4Q profits to plunge by approximately 60% to 70% compared to last year. This will correspondingly result in a reduction of up to 25% for the group’s full-year results.
To be sure, SATS appears to have prepared for this.
In an outlook update on Mar 9, the group had reported that the pandemic was leading to a significant drop in demand for air travel globally, which would in turn impact its revenue and profitability adversely.
Since then, SATS says that things have taken a turn for the worse as countries around the globe have taken to imposing extensive travel restrictions to curb the spread of the virus. This has, as a result, caused the group’s aviation volumes to drop sharply.
Looking ahead, SATS says the pandemic will continue to impact the group through FY2020 as the operating volumes of flights, passengers handles and meals have plunged 95% compared to pre-Covid 19 levels.
As guidance for the first quarter of the financial year ending March 2021, SATS is estimating to book losses of $50 million to $70 million after accounting for consideration grants received from governments.
Thereafter, the group says its business and financial performance will continue to be affected depending on the duration of the pandemic, as well as how soon the demand for air-travel is restored.
“While SATS is not able to predict when business conditions will improve, the board and management are putting appropriate cost and risk management measures in place during this extraordinarily difficult period while still preserving and building its capabilities for the future,” says SATS.
While the group has issued what appears to be a dire warning, it also warns that this is solely based on a preliminary review of its unaudited quarterly financial results, and reflects the management’s current views and expectations of the prevailing economic and market conditions in light of the pandemic.
“This may be subject to changes depending on risks and uncertainties that may cause actual results to differ materially from any future results expressed or implied herein,” says the group.
On a more optimistic note, SATS says it remains in a positive net cash position, and has recently secured aggregate debt financing of about $500 million to fund its working capital needs, contingency cash reserves and strategic growth initiatives.
Based on the waiver announced by the Singapore Exchange on Apr 22 that grants companies an automatic two-month extension for the release of full year results, SATS is expected to release its results on or before July 30.
Shares in SATS closed 21 cents higher, or 6.8% up, at $3.28 on Thursday prior to the announcement.
