Welcome to SET First Quarter Financial Year 2021 2022 Business Update Conference Call. Before we begin, SETs would like to remind you that certain comments made during this call may contain forward looking statements. Many of these forward looking statements can be identified by the use of words such as may, will, expect, anticipate, estimate, assume, continue, project, plan and similar words and phrases. The company's actual results and future financial condition may differ materially from those expressed in any such forward looking forward statement as a result of many factors that may be outside the company's control, including but not limited to the changes in the business environment. The company does not undertake any obligation to update its forward looking statements.
I will now hand over the call to Karen Q of SEDS. Please go ahead.
Thank you, Stengel. Hi, good evening, everyone. Welcome to SEDS webcast. Very quickly, we come to the end of our Q1 of the new financial year. Together here with me are Alex Hargett, PCO and MAPFRECIER, CFO, who will take you through the results.
I will now hand over the floor to Alex to start the ball rolling. Alex, over to you.
Thanks, Carolyn, and welcome, everybody. Thank you for joining us this evening. This is a Q1 update. So let's start with a slide which shows the volume changes in the Q1. If you look across the first row, you will see the year on year comparison.
But of course, the year on year comparison compared to Q1 last year shows that everything increases because if you recall, the Q1 last year was really the low point in the pandemic in Asia. And so this marks an increase from a low point. Probably more informative is to look at the quarter on quarter statistics on the 2nd row. And let's go 1 by 1. So we're starting with flights handled.
You can see that there was a small increase in flights handled. Some recovery from the drop in the Q4 of 2021. But still only about 25% of the pre COVID volumes in Singapore and actually below that in Malaysia where the movement control order has been extended, a relatively flat picture in terms of flights handled. In terms of meals served, there has been an increase not driven by aviation recovery. In fact, there has been a small decrease in the number of aviation meals served in line with the drop in passengers handled.
But actually the increase is driven from China where we are seeing an increase from our growth in non travel related food solutions, which we've been embarking on for the last few years. So we're getting good traction there. And also from our the subsidiary that we acquire called Nanjing Weizhou which services both the domestic aviation market across about 85 airports in China and the domestic aviation volumes in China are quite healthy at this time as well as some non aviation revenues. Passenger Handles as I mentioned although it looks like it's jumped up materially in the from a year on year perspective is still much below where it would be pre pandemic. The pre pandemic scale obviously is not on this graph.
But for as an example in Singapore Changi Airport only about 3% of the normal passenger flow through the airport at this point in time, so still quite low. And in Malaysia with the movement control order also quite low. Cargo tonnage continues its sequential increase quarter on quarter. Now it's running at about 80% of the pre pandemic levels and at the end of the quarter was above 85%, at about 80% as an average during the quarter. And then the last column is the only one showing decreases, but that's because it's the number of employees.
As you know, we've had to reshape the cost base quite materially, especially on the aviation services market side. So the number has come down again this quarter slightly below 11,000 at this point, down about 3% quarter on quarter, down 18.5% year on year as you can see, but down about 38% since before the pandemic in the Q4 of 2019 2020 when it was about 17,600 full time equivalent. Moving to the next slide. This is the IATA data on the global air cargo ton kilometers flown. And you can see that actually this is the highest it's ever been.
So it's now exceeded the pre COVID levels, driven by the same megatrends that we talked about in the past. So the growth of e commerce, the focus on medical supplies and vaccine post pandemic and also the demand for fresh food across the various cities in Asia as they start to increase in terms of wealth and demand for healthy food. So we expect this picture to continue. As I've said in prior discussions, it's probably supply constrained as much as anything at this point because of the lack of belly hole capacity in the market. All of our cargo associates were profitable in the quarter.
That's something that we talked about last quarter and it's something that we expect to continue because of the strong demand despite the fact that passenger volumes are low, the continued strong demand for air cargo. Turning to the next slide, we need to give you an update on the non travel related businesses. You know that we're not sitting around waiting for aviation to recover. We are driving growth in the non travel related businesses in the meantime and continuing to get good traction. You'll recall that year on year last year we increased this category by point in the Q point in the Q1 almost a half of the group revenues came from non travel related businesses, 46%.
So security new security contracts in Singapore where we have one of the 3 licenses to operate a police force. The productization work we're doing with SMEs to create retail products. In this case, Keg seafood going into retail distribution via our distribution food distribution subsidiary called Country Foods, taking over the supply of bakeries into some of the major supermarket chains here in Singapore and then continuing to grow in China as I mentioned earlier where we're going to see quite welcome increases in number of meals served and revenues from our 2 subsidiaries in that market. So you'll see us continue to focus on this. Most recently, you would have heard the announcement of our acquisition of the Food City facility in Bangkok, which we acquired 85% off from the Selah Bangkok Ranch.
Bangkok Ranch will remain a 15% shareholder, but it will become a subsidiary of Sats. And we will use that large scale frozen food capability nicely integrated into the food ecosystem in Thailand to increase our productivity and to improve our supply of frozen food across our supply chain. The next slide focuses on sustainability. It is some a topic that we are taking very seriously. Our management team have strong targets based upon achieving sustainability targets and you'll have seen our commitments in our sustainability report, which we published just this month.
So 3 categories of activity. The first is developing smart infrastructure, which has a direct impact on our carbon footprint. And you should be aware that we're actually one of the leaders installing solar paneling. We intend to install another 6,000 megawatt hours of capacity, which will pretty much double our capacity and make us one of the bigger producers. This not only reduces our carbon footprint, it also reduces our costs because our offtake rates are below the rates that we can get on the open market and makes use of the roof space that we have on our facilities both at the cargo terminals and also in the kitchens.
We've already begun to electrify our ground service equipment fleet and almost a third of it now is electrified. And we intend to continue that drive over the next 9 years to achieve 100 percent electrification by 2,030. Our carbon footprint come down quite a bit this year from the baseline. Some of that is volume related though, so I won't crow too much about it. But some of it as you can tell is from changes in infrastructure and introducing solar and more efficient equipment in both our kitchens and our freight terminals.
On the food packaging waste, we're doing waste tracking now for the first time using AI. We're also investing in food to energy or food waste to energy conversion, which again will help us to reduce our cost base, our energy usage. And then we're very proud of the work we've been doing with the benefit of the capability we acquired when we bought Montes in March 2020. Montes Bakehouse is the world leader in sustainable packaging for aviation food. And we've made use of that to introduce some sustainable food packaging this year, particularly on short haul flights to some of our biggest customers.
And the customer reaction has been very positive, measurably so because in the customer surveys, they've started to see an increase, a significant increase in the customer satisfaction with those meals served in this new packaging. And then the last one, which has always been important to Sats, but continues to be a source of investment for us is investing in our So we've been reskilling and upskilling our people, so we can continue to harness technology to increase productivity, which is important because labor costs we believe will continue to increase in the major cities in Asia. And then importantly to enhance the services we provide to our customers. For example, by creating the software and service linkage between our different cargo terminal operations across Asia to provide better track and trace for the forwarders and the shippers. With that, I'll hand over to Manfred, as he'll take you through the financial results for the quarter.
Thank you, Manfred.
Thank you, Alex. Good evening, everyone. And I shall take you now through the 1st Q financial starting objective summary. SaaS 1Q revenue improved by 31.6 percent to $275,600,000 backed by stronger business volume for both our travel and non travel business. We recorded a PATMI of $6,400,000 making this the 2nd consecutive quarter of positive results for Sats since the pandemic outbreak.
For the quarter, we recognized total relief net of tax of $42,000,000 without which our 1Q PATMI would have been a loss of $35,600,000 Share of losses from associates and JVs has reduced to $1,200,000 an improvement of about $30,200,000 versus 1Q last year. SaaS 1Q EBITDA remained positive at 32,900,000 dollars and our EPS improved by $0.045 to 0.06 dollars per share. On this summary P and L, revenue grew 31.6% with overall increase in aviation volume. Travel related revenue grew 41.9% year on year, while non travel related revenue grew 22.6% as Alex has mentioned earlier. Just to be clear, travel related revenue comprises all revenue related plus cruise revenue, while non travel related revenue consists of non travel non aviation food and non aviation security services.
Compared to revenue, OpEx increased at a slower pace of 10.9% to $272,000,000 This is after taking into account government release of $45,400,000 which is $28,700,000 lower compared to 1Q FY 2021. I have a separate slide for OpEx, which I shall come back later to. As a result, SaaS EBIT improved by $39,500,000 to $3,500,000 compared to 1Q last year. As I mentioned, share of losses of associates in joint venture improved by $30,200,000 as we see better performance of our associates and JVs especially our cargo units. In the next slide, we look at the quarterly trending over the past 5 quarters.
All financial metrics registered significant improvements and favorable variances. 1Q FY 2021 was the worst hit quarter with 209 point $4,000,000 revenue and PATMI loss of $43,700,000 Since then, we see sequential quarterly improvement in our financial results in line with the recovery of aviation volume, albeit modest, growth in our non travel businesses business activities as well as group wide cost measures taken by management early and proactively to resize our cost base and our grew by 8.4% and 77.4%, respectively. However, we'll continue to register sequential Q1Q growth while security revenue expanded through COVID related projects and also diversification into non aviation security services. By sector, travel revenue improved 41.9% and accounted for 53% of the group revenue, while non travel grew 22.6 percent to $127,600,000 and made up 46% of group OpEx for 1Q increased 10.9% led by higher staff costs due to higher contract services resulting from the implementation of additional safety measures at Changi Airport, increased business volumes and lower grant support. The cost of raw materials, license fees and other costs rose in line with higher revenue.
Premise cost and depreciation Premise costs and depreciation and amortization were lower generally resulted from cost measures taken by management. Slide 14 shows the staff's share of revenue and share of losses of associates and joint venture for the period. COVID has adversely affected all Saks associates and joint ventures in the region. However, we are seeing gradual improvement to the share of associates and JV results especially the cargo units. On Slide 15, I have two points to make here.
One is, the share of revenue improved by 26.8% to 353,700,000 dollars and Fannie wise, Singapore is profitable at $16,100,000 while the rest of the region are still in loss position. And having said that, their losses have reduced considerably against last year. Slide 16 shows our financial position as at 30th June 2021. Total equity and total assets stood at RMB1,700,000,000 and RMB2,900,000,000 respectively. That's total cash amounted to RMB753,000,000 If we back out the RMB571 1,000,000 of borrowings, we are still in a net cash position of RMB222 1,000,000.
In April this year, we actually repaid RMB150 1,000,000 term loan, which resulted in our D and E our DE ratio dropped from 0.44 times to 0.34 times. This is excluding the IFRS 16 lease liabilities. ROE for the quarter turned positive for the period. For the next slide, I shall you to read on your own. This is actually the group balance sheet.
Lastly, debt cash flow statement on Slide 18. Overall, debt cash flow cash position declined by $127,000,000 to $753,000,000 for the period ended 30th June, 2021. This is after the repayment of the $150,000,000 term loan. Higher CapEx is mainly due to the construction of cargo terminal and a central kitchen in China. Free cash flow for 1Q FY 2022 remained positive at $7,900,000 which is significant improvement compared to 1Q FY 2021.
With that, I shall hand you back to Alex to take us through the outlook.
Thank you very much, Andre. So we wanted to provide an outlook statement even though it's just a 1Q update because obviously there's a lot of uncertainty related to travel restrictions. So we feel that while mass vaccination programs are still being rolled out in all of the world's major economies, the emergence of the new variants of the virus continue to create uncertainty about when those travel restrictions will be lifted. To the changes in this environment by reshaping our cost base and building new capabilities to support future growth. For example, the acquisition in Thailand that I mentioned that gives us much higher volume frozen food production out of the Thai ecosystem.
And also the Montes Bakehouse acquisition, which has given us the innovative capability to work on sustainable packaging and other product design capabilities. I mentioned also earlier this cloud based cargo handling system, which is proprietary to SaaS and it does give us an advantage as we believe we're the only cargo terminal operator that is linking together cargo terminal operations digitally certainly across this region. And that will allow us to improve service standards for the shippers and the forwarders and also to allow us to provide temperature information for some of the medical related cargoes like vaccines. And then finally, a very important topic for us is we must continue to invest in our people upskilling and reskilling so that we can continue to reshape and redesign the jobs to make them more productive and to provide rewarding careers for our people, as well as to help them to harness technology as they adopt it to improve productivity and service levels. So I hope that's a useful sense of what the outlook is and how SaaS is preparing for that future.
Now we would love to hear your questions. So hand back to the operator to take your questions. Thank you.
Thank you. Now we'll begin the question and answer session. Your first question from Yodhikomad Dallata. Please go ahead.
Yes. Hi, this is Ajith. Hi, Alex and Manfred. Several questions from me. Perhaps I'll start off with some accounting related question.
So for 1st Q, was there a tax credit that was recognized? And if so, perhaps you could share that with us? Secondly, is pertaining to the term loans, the repayment of the term loans of €150,000,000 or so. So can we expect additional debt repayment? So these are my 2 accounting related questions.
As for a follow-up question on this on the travel related revenue. You mentioned earlier on, this is for Alex and I guess for Manfred as well. For the non travel related revenue, you mentioned security related revenue. Am I correct to assume that this is not related to airport related revenue, meaning that COVID checks at the airport. So perhaps you could clarify that.
Next question is relating to Food City acquisition. When can we when is that expected to be completed? Follow-up question on that. Would sets be planning to distribute non frozen foods or some of its own product line via Food City? And I've actually got one more final question.
Actually, this is about Impossible Food. What's your plan for that in terms of bringing it outside Singapore and so forth? Yes. So these are my questions. Thanks.
Thanks very much, Ajit. That's as usual, we got some good questions, a whole bunch of them. So I'll let Manfred take the first two please. So Manfred, the tax credit and term loan repayments. Hi, Ajit.
Hi, Manfred. For the tax credit, indeed, we actually recognize some of the tax credits. This is pertaining to the losses that we have experienced. Now for the term loan, we are actually quite comfortable with our cash position at this point. As you can see that the COVID situation still remain very uncertain.
And as a result of that, we will continue to monitor our liquidity. And until such time where we are more comfortable, perhaps we can consider that. But at this point, no action is required. Thanks, Manfred. And then I'll take the last two questions.
So non travel related security
is indeed not at all related to airlines or airport work. So it's work. To airlines or airport work. So it's work that depends upon the capabilities that people have in terms of technology and technology enhanced security, which we've done quite a bit of in the airport. And both government and non government customers are hiring SAT Security.
In the past, we've only really pitched to airlines and airport related assignments. But obviously with the volumes there having dried up, we are pitching to customers which are not related to aviation. And it seems that the combination of the technology enhanced services that we've developed for aviation plus the fact that all of our security people are trained in customer service skills, seems to be a differentiator. And so we'll continue we have a pipeline that will allow us to continue to grow that business. And your last question was about the FoodSiggy acquisition.
When do we expect to close it? There are a few bits of paperwork that we need from the authorities in Thailand before we can formally close. So we can't put a definitive date on that, but we're not expecting it to be a very long time, perhaps a couple of months. Will we distribute via Food City? It's really intended to be more of a production facility for us to create highly productive cost efficient frozen meals and we would then export them outside of Thailand mainly.
We might have an option to distribute in Thailand, but that's not the main focus for that acquisition. One of the benefits of that acquisition is that there are export licenses already in place, so we can quickly do that once we make the once we close the acquisition.
My final question
is on Impossible Foods, yes.
About alternative proteins. Well, you said specifically Impossible Foods, but maybe I'll make the answer more general and talk about alternative proteins. Country Foods distributes Impossible plus a bunch of other well known alternative protein providers like GrowthWell, etcetera, Fable. And these are this is a category where because we are strong in distribution of conventional proteins, we intend to leverage that distribution for the growth of alternative proteins. So you should expect to see us distribute a number of the leading market leading players, whether they originate from Asia or from the U.
S. Or Europe through our Asian distribution. And then using the culinary skills of our chefs to create menus and uses for those alternative proteins that actually are appealing to the consumers here in Asia. That's worked very well so far where we've managed to use that to win market share in ready to eat meals for Commerce Free Kitchen, Central Kitchen for the food service customers that we have as well as to enhance the sell through into retail. So it seems to be a good combination and one would make us an attractive partner for some of these alternative protein providers.
Okay. Thanks, Ajit. Thanks.
Thank you, Ajit. Next question from Wong Yoo Kian from CLSA. Please go ahead.
Hi, Alex. Can you hear me?
Yes. You Kyung, carry on with the question.
Yes. Firstly, it's on grants. Can you remind us how much more grants
we can expect
for the remaining of this financial year? And given that government is also talking about another some more support for due to the situation in Singapore, is that going to be eligible for this round of additional grants coming up? That's related on grants. The second question is on Food Solutions. The $147,000,000 this quarter, how much is it not related to travel?
Because you've been talking about expanding the Food Solutions segment. So I just want to know ex travel, how has this segment been performing? The last question is on non travel related. You talk about the security business, but out of that $127,600,000 how much does it contribute?
That's it from me. Thanks.
Okay. Thank you, Kyung. I'll ask Manfred to pick up the point on the grants remaining. And then the question about whether we qualify going forward?
Hi, Yucian. On the grant, I think we've guided in the past that the quarter on quarter, the government support, the gross value for SaaS is on a decline. And we also actually mentioned that we will recognize all the job support grant and all the other grants all the way to end of the FY. So you will still see grants for the next three quarters albeit on a declining basis.
Yes. We don't know of course yet how the government how or whether the government will extend the JSS. They are talking about this, but we don't know the details of the scheme. Obviously, we very much hope that aviation will be taken into account as it has been in the past given the very low volumes of passengers traveling through Changi Airport.
So for the current financial year, how much government grants can you get for the current financial year?
You can refer it again. Last financial year, we took in the grant of a total of RMB247 1,000,000. This financial year, you will expect to substantially reduce even more than half of that, yes. But I can't give you the exact amount because we don't guide as yet for the next three quarters.
Okay. Thanks. And on the Food Solutions and Travel Security stuff?
Yes. So 48% of the revenue in the quarter was from non travel related as I mentioned earlier, 46% sorry, 46% of the total revenue of the group was non travel related. And you're asking for further information on the breakdown of the food and how much of that is non travel. Is that right, Yoo Kyung?
No. I'm asking for the non travel, the 46% that you mentioned. How much of it is the security business that you talked about?
Okay, Yigal, maybe I can try that. Of the non travel security actually represents up to about I think 7% if I'm not wrong, so of the total. And if you assume that non travel is half of that, then it will actually expand to about 15% above.
15% of sorry, 7% of total revenue of the $275,000,000 is it?
Just to check, double check here. No, so this is you can't, I beg your pardon, sorry. I got the number mixed up. So non travel security is actually about 1% of total. And if you like, then that translates to about 2% of the non travel.
And then can you comment on the Food Solutions? How much of that is related not related to travel? That means the stuff that you're working on the QSR side and distribution in Singapore.
Okay. So the of the non travel, the food side will contribute almost about 76%, 75%, 76%. So non travel predominantly is 3 quarter of that is actually food related.
Okay. Okay. Thanks. Thank you, Youkam. Next question is from Rachel Tan, UBS.
Please go ahead.
Hi, good evening. Thanks for hosting the operating update. So I have a couple of questions. So first one being, in previous quarters, we note that there was almost linear quarter on quarter improvement in net profit to the tune of €20,000,000 to €30,000,000 per quarter. Could you explain why this net profit has kind of stagnated at about €36,000,000 ex grant losses, even though cargo is up and your non travel is actually contributing so much to your total group revenue?
So that's my first question. My second question would be how much would you say out of your current cargo volumes, is the tonnage comprises of PPE and medical vaccine related equipment? And my third question is for the JVAs that are doing mixed ground and cargo handling, have they returned to profitability as well?
Hi, Rachel. Thanks very much for your questions. There are some handling requirements that we're currently having to do both for cargo and packs, which have increased the cost burden in terms and reduced our productivity in the quarter because of the COVID restrictions. So although we're still handling the passengers, the complication is there and it's actually more manpower intensive temporarily because of that. That's been one of the issues.
And there are similar issues on the cargo side. And in fact, as you know, there have been a couple of outbreaks that do involve the airport and those have created some disruption in the by taking people out into quarantine. So, overtime expenses in the quarter. So I think that gives you some flavor that this is not kind of business as usual type operations in this interim phase as things pick up. Yes Rachel, Margaret here.
Could you elaborate on what some of these like what is this increased cost burden? And has it normalized already given that the Changi cluster has been closed?
Some of it's normalized. Yes, the cluster itself doesn't exist any longer. So that was well managed by the airport community. So that part is normalized. But the handling the special handling requirements to avoid or to minimize the chances of any infections coming from passengers transiting from higher risk countries.
Those are still in place. And those are that before means that our passenger operations are not particularly productive. That won't last forever, but it's still ongoing at this point in time. And then similarly on the cargo side, the management of the certain aircraft types for cargo is not that productive either. So that's not helping in terms of the profitability track record that you were pointing to earlier.
And I think Manfred wanted to make a comment also on this topic.
Hi, Rachel. I think quarter on quarter, we saw because of the heightened alert, we saw a drop in the institutional catering side. So that has kind of impacted quite a bit on our 1st Q results. Other than that otherwise, you will see that the trending is in the right direction. We are improving gradually, but unfortunately, last few weeks, we are affected by the heightened alert.
Okay. All right. Thank you, Rachel. Wait, so I believe I have like a couple more questions. The maybe the one on your JVAs that are mixed ground and cargo handling, have they returned to profitability?
Okay. Thanks. Yes, Rachel, I was about to answer your second and third question. So the second question was how much of the cargo tonnage is related to PPE? At this point, not that much.
There is still significant amount of vaccine trans shipments going on, but not so much PPE as there was maybe a year ago when there were large discrepancies and shortages across the world. And your last question is the JVAs associates, yes. Yes, so anything any of the associates which have cargo handling are now making money, including those that have ground handling components where they have a mix of ground handling and cargo. So it shows that there is demand for cargo and it is it does drive the apron activities as well as the pure cargo handling.
Okay, thanks. If you don't mind, I have a final question.
Yes, that's right.
You've mentioned in the past that your non travel, the food side, the net margins on an optimal basis can be about 10% to low teens percent. So you said that you're on 75 percent to 76% of your non travel revenue was actually food related. So can we assume that there was a 10% net profit on that part of the revenue. Is this something we can assume? Hello?
Hi, Rachel. Manfred here. The a chunk of the non travel food is actually on the more on the distribution side, the sourcing and distribution side. So to expect double digit margin is not realistic. That over time, the scale of which will make up for the margin, the lower margin.
So the answer is no, it won't be 10% net of the entire 75%. It will be a blended and we hope to drive it to a high single digit kind of margin.
Okay. Thank you very much. I have no more questions.
Thank you, Rachel. Next question from Neel Sinha from CLSA. Please go ahead.
Hi, Alex, Manfred. Thanks for the call. I've got 3 questions, all non aviation related. But what is your sense of the non aviation food solutions growth trajectory that you would expect over the next 4 to 6 quarters, I suppose, because I mean, the aviation side is a wild card until the market comes back to semblance of normalcy. Specifically on non aviation food, do you would you have any update on the China commercial kitchens like Kunshan or let's see other one Tianjin I think, right?
And where are these parked? I've not attended your briefing for a few quarters, so apologies for that question. Are they parked under the Beijing Beijing Kitchen subsidiary? My second question is, again apologies if this has been answered in a previous quarterly call. CapEx outlook for the year, should we think about this at the same run rate as this quarter?
And what are you spending on and where? Is it mostly maintenance? I suppose it's not capacity increase. And the 3rd would be, if I exclude financing activity, can I assume that the cash flow pre financing at the current level of operating activity should remain stable for the rest of the year?
Hi, Neil. I hope you're well. Let me answer these questions. So we don't guide on growth trajectory, but we have in the past said that we would seek to drive the top line for the non aviation food to become a significant proportion of the overall group's food revenues over the next several years. So you can tell that over the last 15 months we've been doing that.
This is now quite a substantial part of the revenue of the group. And we will try to make sure that we keep that kind of level of momentum going. So without giving you any guidance, you can tell that's a very important target for management to keep growing that. And in fact, my view is we don't have any other choice. We can't, as I said earlier, wait around for the aviation food revenues to recover.
So we have to continue to drive it. You'll remember about 3 years ago, we invested in the Kunshan Kitchen and that kitchen has contributed quite well to our non aviation meals growth. I mentioned earlier that although the aviation meal volume had dropped quarter on quarter, there was you can still see on that first slide that I showed that there's been an increase in total meals served and that's driven by China. That China revenue is a China Sats China, which is a subsidiary, is not going to come through any of the associates. So it's 100% owned by Sats.
So hopefully that answers your first question. 2nd question, CapEx we have given guidance for CapEx. We've said that will be around €60,000,000 per year. That's down from where we were before the pandemic when we were between €80,000,000 to €100,000,000 in terms of annual CapEx. So we've cut back on everything except the essential CapEx.
And the essential CapEx is that which we think can help us continue to transform the business through digital initiatives for example. And then the last question you seem to be asking for guidance on cash flow through the year. We haven't given that guidance either. So I think you're going to have to structure your own models around that and make your own estimates.
Right. Alex on the thanks Alex. On the cash flow question, if I can rephrase that. If I stripped out the financing activities component, I suppose what I'm trying to drive at is what we saw this quarter, it's a positive number. But is that at risk?
Are you seeing raw materials, input component inflation, etcetera?
I see. If you're viewing
the same level of yes, I suppose that's what I was driving at like what's the pressure points at the current level of operating activity.
Got it. Okay. Well, in fact from a cash flow generating perspective, Sats remains a strong cash flow generating company. We only dipped into a negative EBITDA in 1 quarter, which was the Q1 of last year. And since then we've been positive EBITDA.
We were $70,000,000 over in EBITDA last year. And this year in the Q1, we are already generating more than $30,000,000 So I think though what you have to bear in mind is that those numbers are boosted by the government relief. So obviously without government relief, we couldn't have claimed that positive cash flow. So it's not so much about the current situation. It's more about what will happen on the relief side.
We will continue to drive the revenue for non aviation, but we've got to anticipate hopefully that if aviation remains poor in terms of volumes then we will get some government relief to offset the cost base. If aviation volumes pick up of course then we won't need those kind of reliefs. It will be a self solving equation. So that's kind of the judgment call I think you'll have to make if you want to look at that more broadly as a question.
Okay. All right. Thanks, Alex. Thanks, Ashwin.
Thanks, Neil.
Thank you, Neil. Next question is Chu Ping from OCBC. Please go ahead.
Hi, hello. My first question is on the government relief. Can I clarify that for the government relief this quarter, was it RMB42 1,000,000 or RMB45.5 million? Then my second question is on the non aviation revenue. I think just now I'd like to mention that it's likely to make up a significant portion of the total revenue.
I'm just wondering if you could share whether it's likely to be over half or still below? Then my last question is on Japan. Can you provide some updates on Japan business? Do you see any improvement or demand from Japan on the Olympic this year? Yes.
Thanks.
Okay. Thanks. That's great. So Manfred, just confirm the Q1 release number, please?
Yes. The difference is actually the tax. 42 is after tax. Yes. 45.5% is a gross number.
That makes sense.
Thank you. Yes. So the non aviation revenue is already 46%. So it wouldn't take much to go over half. But of course, that's based on a very low travel related.
So aviation in particular very low and cruise is also low at this point in time. So I think the I can't see it going over half. It may go over half very soon if aviation doesn't pick up. But actually I think in I was talking more about a medium term target where we think that actually there could be a we could easily reach a fifty-fifty balance between aviation and our travel and non travel related food revenue. We and in fact, we have reached as high as the 46 percent now and we'll see what happens in the next quarter because we intend to continue the growth of the non aviation in the short term at these kinds of rates.
Japan, TFK is benefiting from a small increase from the Olympics. Obviously, most of the people traveling are the teams, but nonetheless that has helped. There is some domestic travel in Japan as well as a relatively large market. So quarter on quarter there was an increase in the meal served aviation. In addition, they are also trying to penetrate some of the convenience stores in the Japanese market.
They made some progress there probably not as fast as the progress we're making in China, but there has been also an increase in the non aviation meals for TSK as well.
Okay, thanks.
Thank you.
Thank you, Shu Ping. Next question is Glyn Siewski from CMB Research. Please go ahead.
Hi, Evelyn. Can we just go 1 by 1 in terms of the question? Can I just check how much is the cargo contribution to revenue? Is it similar to previous quarters?
Yes. Hi, Suki. Yes, cargo forms about 15% of the group's revenue, 1.5%.
Thank you. And for gateway, so I think I have to actually go back to your answers on the previous question. So I wanted to ask in gateway how much is COVID related? Do we still have COVID related revenue in gateway?
Yes, we do. In fact about of our non travel related revenue, about 15% coincidentally same number about 15% is related to COVID in some way. Of the non travel related
And then I take
If you remember non travel related So it's about 7% of the total.
Okay. So this will probably taper off by the end of the year? How long will this contract last?
Well, it will taper off at the same time as the aviation revenue comes back, right? So that will be
a that
will be overtaken hopefully by the aviation revenue once that goes away. I think there'll be a similar timing.
Okay. Okay. So and then you mentioned that you had the police force contract. That is the security contract that we're talking about which is non COVID and non travel, right?
Yes. What I said was that SAS has 1 of 3 licensed police forces in Singapore. As a matter of fact, we do the police force is one of the clients, but that's not what I had mentioned earlier. I did mention that we have some government contracts.
Okay. So the government contract, I take it that it's also over a few years. Is it significant, the government contract? This is I guess it's something new, this government contract
that's involved? Yes. That's one of the customers that we've done very well with over the last year or so. And hopefully, we'll continue to grow our market share of both government and non government contracts.
Okay. And these contracts, how long do they last? A year or 2?
There is. Some of them are quite long term and others are more short term.
Okay. And also for associates, the Food Solutions associate had done quite well as well in terms of the improvement in narrowing in losses. Any can you just give us some color on that?
Yes. Most of that is the result of the reshaping of the cost base. So in some countries, it's taken us a bit longer to because of different labor laws involved etcetera. But you can tell that the aviation catering volumes are not returning fast. And therefore it's important that we took steps to reshape the cost base to get them in line with the new passenger volumes.
However, there's also some positive impact from each of them beginning to sell more into the non aviation, non travel related markets. Working with the teams in Singapore and China who obviously made quite a bit of inroads into these markets to understand what kind of how to do the productization and the working with positioning for these new segments. So you can start to see some of that getting traction as well as the cost reduction measures.
On the non location one which are the countries that do have that impact?
The biggest ones are Japan, of course, which we talked about earlier China and India.
Okay. And then I have just 2 more questions. One is Food City is in was in lost position. How do you plan to actually turn it around? And when would it be
reckoned?
Yes. So it's we're going to be using that facility in an entirely different way than the current owners. So it will be using it to slot into our supply chain and driving very cost efficient export of frozen food out of Thailand. So the current owners use it primarily to process duck products and freeze those duck products also for export. So they have export licenses in place.
But ours will be ready to eat meals basically both for aviation and non aviation, which is quite a different way of using the facility. We haven't made any guidance externally about when we will about what we expect the financial characteristics of that facility to be. But obviously, we're expecting to be able to create value from that. And we're very happy with the acquisition cost that we managed to enter to get that asset. We think it's a very good entry cost for us.
Okay. So you will use the facility to export or first you have to reconfigure do some of the reconfigurations and then you will export and use it to create ready to eat meals and export. Is that right?
That's correct.
Export the ingredients for you to do ready to eat meals elsewhere?
Yes. In some cases, they could be assembled elsewhere. In some cases, they'll be intact ready to eat meals that we could use for aviation and also non aviation demand.
Okay. Thanks. And my last question is, how much is tax credit?
Shuky Manfred here. The tax credit amounted to somewhere below between RMB 3,000,000 to RMB 4,000,000.
Okay. And also sorry, I think I maybe actually asked the question on the repayment of the term loan. And yes, so just wanted to hear a point of view of is that you reckon you would actually continue to do that? Or this is just opportunistic that you is due and then you just pay
Okay.
Why? I think it's quite impressive that you still manage to actually pay.
Yes. So, Suki, we maybe we backtrack a little bit. We took the loans very early for two reasons, right? One is actually for contingency and the other one is to ensure that we have sufficient liquidity for deals, right? So it really depends on how this situation recovers.
And quite frankly speaking today, there's a lot of uncertainty. While we still have very comfortable cash position, we also want to monitor the situation before we take any action. It also depends on the pace of the transactions that we close going forward. Yes. In fact that takes us probably to the next question, Suki.
Unless you
have other questions, I'll take a question from online, because Jeffrey from the Edge is asking.
Okay. Thanks.
Thanks, Suki. Yes, thanks for the questions. He's asking, SaaS has a healthy pile of cash. I quote, will the company continue to embark on acquisitions or conserve cash to service existing debt? So Manfred, he just indicated, of course, having assembled the cash at the start of the pandemic to deal with any to make sure we had strong liquidity.
We were able to pay down the $150,000,000 quite confidently. Now we're balancing the continued slow recovery of Aviation. Although we are EBITDA positive even then, we have uncertainty over government reliefs etcetera and also the pace at which we can regrow which we can grow the non aviation to balance. But we are looking at a pipeline of acquisition opportunities. So to talk directly to Jeffrey's question, we are continuing to look for acquisitions.
The acquisitions that we will target are either cargo terminal operations in larger cargo hubs air cargo hubs around the region and or central kitchens. So like the Food City acquisition that we just made in Thailand, We do think that this is a good time to look for assets which are undervalued. And I think the Food City acquisition is just that kind of a situation. It might also be a good time to look for undervalued cargo handling assets as well. Although as we've all seen cargo turned out to be a highly resilient part of the aviation value chain.
But nonetheless it could be that there are airlines that are restructuring their holdings which might mean that some of these assets become available. So those are the 2 categories of acquisitions that we're looking for. If we don't find those acquisitions at the right value, of course, then we would be able to pay down more of the debt. And if we generate cash or if we continue to generate cash at the kind of levels that we are now or better even as the government release taper off then of course that will make us more ambitious on the acquisition side as well. Okay.
So that's Jeffrey's question. We have another question from Louis, I think.
Look, we are now back to audio questions.
Your next question is to reach out. Please go ahead.
Hello, good evening, Alex and Sinfurt. Thanks for your patience. I'll just ask questions 1 by 1, 2 if I may. First, I noticed there's a change in terminology for your segments. I mean travel versus non travel versus aviation, non aviation in the past.
I don't think it's a very material change in numbers, but I just wanted to get the understanding of the thinking around it.
Chris, you want to ask all your questions first before we answer them?
Okay. It works as well. So if I just this is related to what I think Rachel has also asked. I understand on the cost side there were some increases. But if I just look at it purely on the revenue side, since the Q1 last year sequentially or the way until the Q1 this year, if I look at your aviation related revenues, that has been increasing steadily since 1Q FY 2021, notwithstanding that passenger volumes, flight volumes have been quite muted, but cargo has been increasing.
And this has presumably driven the aviation revenues. But this quarter, we saw that the aviation revenues has actually come off quarter on quarter. So just wanted to understand the drivers there, whether or not there's any change in your product mix or ASPs or anything along those lines. The other question is in terms of the non travel revenues. So if I just backtrack a bit, if I look at the Q4 of FY 2021, I think back then there was a $20 odd 1,000,000 increase in revenues Q on Q, which if I recall correctly is because of the MHA contract as well as increase in the securities services contracts that you have won.
But I understand from the question earlier today that if I look at the non aviation related security, I think that was just about 1% of group revenues. So again, if I look at this $127,000,000 of non travel revenues, the increase that came about the $20 plus 1,000,000 increase that came about last quarter, what was it really driven by? If it's given that it's not really from your security services, I think that's on a historical basis. And going forward, I think Alex, you mentioned that you are looking at pipeline. Basically you have a pipeline to grow the business in terms of the security tech enabled security services.
So at this point in time, are there any new contracts that you have already won that you expect to contribute to revenues in the next couple of quarters? Or are these still in the tender stage and haven't been awarded yet? And final question, sorry, Mansford, I know you can't really guide on to JSS, but if I look at the Q on Q decline in JSS, I think that's about $10,000,000 or so decline. How much of that is really due to your the way that you accrue for your JSS? And how much of it is due to the declines in the headcount that has happened over the last 1, 2 quarters?
Thank you.
Okay. Louis, thanks for the questions. Manfred will cover the first one which is the definition of travel, non travel and the thinking behind that.
Yes. Louis, thanks for the question. On the travel, non travel, we actually redefine from aviation to non aviation simply because to give a better reflection of our business and the way that we are pursuing, if you like, the new food sector. And we want to be sharper in terms of being able to define that. So with the non travel, we'll exclude all the aviation catering business.
And in fact, all the Aviation side, we regard that as travel. And then plus the cruise business is also a travel. Then everything else is non travel except for corporate revenue, if you like. So corporate revenue is very, very small, it's negligible. So with that as a redefine, we are then able to segmentize our non aviation catering business better if you like, yes.
Thanks, Manfred. Your second question was about the travel related revenue and why hasn't gone up more considering that cargo is climbing. It's quite simply because the passenger volumes and the number of meals served to those passengers has declined. So both of those declined. We have a decline quarter on quarter in aviation meals and then we have also a decline in number of passengers.
The decline in aviation meals is disguised on that slide where I show the quarter on quarter volume evolution. That actually goes up, but that's all driven by non travel related food revenue. So that gets really to your third question, because you note that the security, the non travel related security is actually quite small. And therefore, you're saying how is it that travel revenues have gone up? That's driven by the food business.
So there has been good growth in particular in China for selling into from Kunshan Kitchen selling into non travel related customers. And then there's also been growth from the some of the aviation associates, who as I mentioned earlier in this call have been pivoting to sell to non aviation customers. So people like TFK, Bike, Nanjing, Weizhou, TajSat, they've all managed to increase their non travel related food sales during the quarter, which is in line with our longer term strategy. So we're very pleased to see those developments. You asked about the pipeline also your 4th question the pipeline for the next couple of quarters for security.
We are engaged in some RFPs currently and the results are not yet known. So it's really the latter case, which is that we're they're in the pipeline, but we can't there's nothing to tell you at this point in Okay. Thanks very much, Louis.
Hi, Luis. So, thanks to your last question on the JSS, it's on the decline. And you were saying that sorry, can you just verify a question so that I can answer it better please?
Yes, because I think you have been seeing sequential declines in your headcount. So to what extent is that $10,000,000 Q on Q decline in the GSS you recorded attributable to your accounting recognition versus the decline in actual headcount? Thank
you. Thank you for clarifying that. It is more due to not so much the headcount because we try to continue to preserve the jobs of the locals as much as possible. It is more of the percentage that's being granted to us. Because aviation, if you like, at the onset of the pandemic, we have a 75% support and then it goes on a decline.
And when it got to the final round, the last 6 months is actually quite a low number. So as a result of that, it declines according to that percentage, yes.
Okay. And with that, this is Carolyn. Okay. This is Carolyn. Sorry, Louis.
With that, I think we come to the end of today's session. Thank you everyone for tuning in. If you have more questions, please send it to us. We'll reply you via email. I will also take a note of some questions that have come in and we will next quarterly session and stay safe.
Bye.
Thank you. Bye bye.