Good afternoon, everyone. Welcome to the SATS second quarter results briefing for financial year 2026. I'm David Boey, Group Head of Strategic Communications at SATS. Before we begin, I turn your attention to the forward-looking statement now on screen. I would also like to share a safety reminder. Whether you're joining us from the office, from home, outdoors, or on the road, please be aware of your surroundings at all times. Please make your safety a priority before joining this call, a recording of which will be available on our website. With me today are Kerry Mok, SATS President and CEO, and Timothy Tang, CFO. I will hand over to Kerry to take you through the business update. Kerry, please.
Thank you, David. Good afternoon, everyone. Thank you for joining this call. Traditionally, it's always in the morning, in the evening, so this time around in the afternoon. Let me just quickly go through what's happened the last quarter. Basically, we have been on track in terms of our performance. FY 2029 target in terms of revenue, EBITDA, and ROE, we believe this quarter kind of proven we're the right path. We have been taking on a good market share in the air cargo side. Of course, a lot of work being done also in Singapore to continue our hub status and our service offering here in Changi. All our specialized services that we are working on are starting to take fruit. This quarter, quite a few also awards recognize our work in the food side as well. Next slide.
I'll go straight into some of the key highlights. Year -on- year, it's been growth across all lines of business. One point to highlight, the volume that we see growth in the cargo side, we believe part of it is driven by fund loading by some of the customers. A large part is also driven by our ability to implement new customers' wins that we have won over the past half year. For the eighth straight quarter, we have outperformed IATA's numbers. APAC and EMEA, EMEA in particular, has been a star performer in our cargo business. That has been able to offset some of the decline that we see in America's due to the tariff and, of course, the removal of the de minimis. With key customers' wins, that's helped us to maintain our momentum in terms of our growth.
Our free cash flows also improved compared to last year by almost SGD 52 million. That is driven by, obviously, strong operational performance, better profits, and also better working capital management. When you look at our segment performance, gateway services, this has been a record month for us in terms of tonnage. Sorry, for this quarter itself. It is almost 2.4 million tons. Flights handled is flat. There is some growth here in Asia, but generally, we do see U.S. declining slightly. Hence, we are seeing a flat number of flights handled. EBITDA continued to expand this quarter from SGD 18.3 million to SGD 19.6 million. We are very pleased with this effort. Basically, [positive jaw] and then more dropping through from the revenue to the profit line. Our PACMEA has grown almost above 13% now to almost SGD 79 million. This quarter, we are announcing an interim dividend of SGD 0.02 per share.
Likewise, on the food side, you can see aviation meals as, I mean, stable demand and about almost a percentage growth. But we do have some increase in non-aviation meals. In particular, we managed to break into Starbucks in China with some good product that we are launching across the whole of China. Next slide. Just some commercial and operational update. Very proud to be Riyadh Air's hub carrier, I mean, hub operator for cargo in Saudi Arabia. With Riyadh Air, we believe we have struck a very nice partnership with them. As they grow overseas, we believe we are in the best position to also support them as they expand their network overseas. We've also secured Turkish Airlines in multi-station in the U.S.
As I mentioned, whilst the U.S. general volumes drop, all these new wins are helping us to cover some of the decline in organic volume. We have also invested in new facilities in Copenhagen. This is to expand our specialized e-commerce and freight forwarder handling. This is the specialized services that we've been talking about for some time now. This allows us to then capture more revenue for the same volume that we are managing. Closer to home, Marina Bay Cruise Center, we've announced a SGD 40 million upgrade. This is to allow us to almost double the passenger throughput. As you all know, this has been done to actually accommodate Disney Cruise . Unfortunately, it's been delayed till March. When Disney Cruise comes on board, this place will be quite full with a lot of cruise passengers.
We are looking forward to welcoming Disney Cruise s. In Singapore, we have also announced our hub handler of the future program. This program is about reimagining the way we run our hub operations using automation, AI, and obviously workforce innovation. Whatever program we launch here, we will be able to use this in overseas hub operations too. We are really looking forward to that. I think it will secure our position here in Changi, but also allow us to drive more productivity growth here in Singapore. In Singapore, we do have a shortage of workforce, and therefore, this is an important program that we are launching. On the food side, you may have seen we have for the first time unveiled our defense logistics capability in Exercise Wallaby. This is an end-to-end solution. Beyond food, we are helping with logistics and even transport maintenance in Queensland.
As SGF continues to expand its training overseas, this is an important capability, an important business that we have that allows us to support SGF beyond Singapore. On the governance side, we are proud to say that we have topped the Singapore Governance and Transparency Index. This is for the second consecutive year. I think it's a testimonial to the strong governance accountability as well as the disclosure practice that we have here at SATS. Next slide. Just the usual key business drivers I've already highlighted. Tonnage-wise, you can see year-on-year, year to date, it's all grown. Even our AG associates and joint ventures have also seen above 8% growth. This really has been a record quarter for us. Flights handled, again, both ourselves as well as AGV have shown a slight growth as well in terms of flights handled. Meal serve aviation year-on-year, 4% growth.
Our associates have also grown about almost 3%. What you see in terms of non-aviation meal serve is primarily, when you compare against last year, it's primarily due to the fact that we have consolidated one of the kitchens in China into Tianjin. Last but not the least, you see the employee side. We remain very focused on managing our number of headcounts. That drop in there is actually coming a lot from the U.S. side. As we mentioned, as U.S. volume continues to soften, we need to actually manage that headcount to just balance out the cost as well. This is something that we continue to take a big focus on as we progress through the rest of the year. A slide here to show the growth on the tonnage. Some of you may be asking why is there two lines in there.
7.1 is the official number that we are seeing as a growth. The 9.9% is just to reflect a particular shift in the contractual model where we're still performing the service, but then it's not counted within our books. That is why we just want to give you a sense of the volume. It's not that we've tapered off, but it's really changed in the model. The good news is on a non-like-for-like basis, you can see a strong, very strong 6% growth that we have presented. In our cargo business, we are present in 16 out of the top 30 cargo stations. This has helped us a lot as we manage the changes in the trade flows with all the tariff situation. With that, I will hand over to Tim to take us through the financial highlights.
Okay. Thanks, Kerry. Hi, everyone. Good to be on the call again for our Q2 earnings. I think, obviously, start off by saying that it's been a pleasing set of results for SATS globally. Obviously, in particular, the growth that we're seeing in almost every part of the world outside of America at this stage, given the little bit of the softness there. I think I obviously won't go into repeating Kerry's main notes, but perhaps just a couple of other points to add additional color. Number one, I think good to note that there is no major difference in constant currency versus reported currency results. For those of you who are tracking that, just a data point that you'll be able to use. If you dive within the segment performance, we do obviously continue to see great performance in gateway.
If you look at the results across the regions, we certainly do see weaknesses in America. Ultimately, actually sequentially, we do see softer results as the quarter went on. While overall revenue actually still grew in America's, we are seeing that more contributed from July and August results as opposed to sort of September. That does lead to us looking forward in the Q3 and seeing that that is likely to continue at this stage given the overall economic environment there in America's. The main thing to note is that certainly we do see that the rest of the region volumes continue to make up the shortfall within the America's region there. Food-wise, obviously, great performance around the results and even on a slower growth.
I think from a profitability standpoint, year-on-year, it is just worth reminding everyone that we did have a one-off catch-up revenue adjustment from, or profit adjustment, actually, from FY 2025. If you excluded the one-off adjustment catch-up from last year, profitability actually is still growing in the single digits. Over to the next slide, please. I think much of this continues from what I've already noted. I think maybe one interject here on the IATA number that Kerry has spoken about. It is worth noting that while the cargo tonnage numbers have, we've shown the adjustments on an IATA number, that change in reporting actually does not necessarily impact the revenue. It is only a tonnage-based adjustment with that sort of some contractual arrangement that we have. Otherwise, as you look through the revenue, that obviously continues to flow through on the cargo business unit standpoint.
That is point number one. I think, secondly, the context around the IATA number, just to highlight also, is that there are certainly some comparative differences between the way IATA reports the APAC number in particular, given that our number does not include our AJVs that continue to be performing very, very strongly. That is outside of our reported tonnage number there. If you look across, then the rest of the results, obviously, very, very pleasing. As I noted at the bottom there, even while America's, despite the continuing challenges in the overall volume, the revenue continued to grow.
If you look within that America's number, we have noted this in the past, it is that whilst the core cargo is obviously impacted with the ongoing tariffs and in particular, the de minimis impact, what we are seeing is that domestic e-commerce and our exposure to Amazon in that market is really offsetting some of that weakness in the international e-commerce going into the U.S. Okay. I'll take you on to the next slide. I think jumping on to a bit more on the detail into the P&L here then, and I'll obviously jump into a little bit of the year-to-date performance as well because Kerry's already covered the quarter.
I think, obviously, you can see from if you sort of aggregate the second quarter performance that you can see on the screen with Q1, ultimately, what we're seeing is that that trend on revenue is actually very, very similar to our Q1 growth. I think you'll all see as you look through the details. Likewise, from a PACMEA standpoint, we've had a very, very strong quarter in overall growth in profitability. As we talked about the adjustments, and I think I'm sure this will be one of the questions, we have mentioned in the past that there was the profitability or the catch-up SQ adjustment that we had last year. If you look underneath the normalized results, barring all the one-off adjustments on both years, actually, the normalized profitability growth is almost the same as the reported PACMEA growth.
Therefore, actually, from an adjustment standpoint, no major impact in terms of overall trend of our business. Just one quick word on SOA JV while we're here. I think the decline there is due to a one-off ramp-up in costs, in particular, in relation to one of our JV partners where we are taking on a significant new customer. This is sometimes obviously the flip side of us being successful in securing new customers. We obviously, as we now continue to get more ramped up and ultimately improve the efficiency of the overall handling there, do not expect this to continue in the same quantum as we move forward. Lastly, a quick word on tax.
Ultimately, we did have an adjustment that impacted slightly this quarter's reported tax number from an overall standpoint, but we do not expect that to be an ongoing impact that will affect our longer-term tax trajectory. Our sort of guidance around the tax rates continues around this sort of 27% as we move forward. Certainly, can get into more details later. One thing we always note with the tax rate, though, is that our business obviously continues to change. We are getting significant positive results coming out of Europe. Therefore, that does have an upward pressure on our overall tax rate given the European exposure. Of course, that comes with very significant profitability that we are driving within the market given our market share growth. Next slide, please. Okay.
On this one, I will not touch too much on the left-hand side top part and cash flow itself. I will wait until the next slide. Just a couple of words on the right-hand side. I think Kerry has already mentioned we are obviously very pleased with both the growth in itself, especially and in particular, also the margin improvement that we continue to drive through the business and leveraging both our network as well as obviously our utilization of our facilities in both food and on the warehouse on the gateway side with our warehouses. No doubt that, yes, there is some forward impact that we do see that ultimately improved our margin somewhat in the second quarter, but the underlying trend continues. We do see that as something that we are proud of in terms of growing our business.
The only one that probably stands out here is the cash conversion number. Ultimately, I think if you look through the details, they're primarily what has driven that decline on a year-on-year. It's really just a CapEx difference between the two years. We are continuing to invest in the growth of our business, both in new warehouses as well as our renew program in Singapore in particular. If you excluded that difference in capital expenditure, our cash conversion actually would have been close to 70%, which does reflect the improvement in overall operating performance as well as the working capital management that we continue to work through from an organization standpoint. Next one, please. Yes. Now a few final words on the cash flow. I think ultimately, you can see that the cash flow ultimately cash flow is improving.
If you look within the operating cash flow, obviously, a significant improvement. This is a better metric. Look at a year-to-date standpoint. Within that, a significant part of it obviously comes from the improved operating performance, which we're very pleased of. I think one thing on the ultimately our overall borrowings and debt profile, we do continue to pare down our debt, and we intend to continue to do so throughout the remaining of this year as well. It is something that we believe is a core part of our capital allocation. Having said that, ultimately, we are continuing to judge the right balance here because we do see our funds contributing towards capital expenditure and any potential bolt-on M&A activities that may continue to drive our capital and our earnings accretion.
Overall, our strategy continues to be that finding the right balance between, obviously, the paring down our debt as our priority, but at the same time, committing our funds to grow for the organization, as well as then returning the funds to shareholders by the way of dividends, our dividend progression. Obviously, as Kerry noted, we're very pleased to announce a 33% increase or a half percent increase in our dividend per share over last year, which does signal our continued effort to return our funds to our shareholders and in the way of a consistent and growing dividend from that standpoint. Okay. I think I'll pass it on to Kerry for the outlook.
Thank you, Tim. This time around, we're going to split out into three different segments. While we believe the broader cargo trend remains supportive of the growth path that we are seeing, this quarter, coming quarter, is a traditional quarter peak. Whilst I think in the U.S., you may see some softness, we think both Europe and Asia continue to show good momentum in terms of the third quarter peak. We believe we will continue to well position the outperformed IATA benchmark in terms of the tonnage growth. Our network itself has proven to be resilient in capturing the shifting flows. We are seeing very good e-commerce volumes into Europe now and, of course, in the Middle East as well. This is a pleasing aspect of the network and allowing us to capture the volumes no matter where they flow.
On the ground handling side, Asia-Pac is a fastest-growing region. We do expect traffic to grow year-on-year. Of course, right now, the year-end peak, we'll see more travels coming through. Outside of the U.S., the growth is very stable. The U.S. remains challenging, particularly in domestic passenger travel. We hope the year-end peak will help expect to drive high utilization across all our regions. The ground side, coming to the year-end peak, hopefully, it's a good quarter again for us. On the food side, really, it's driven out of the growth in passenger in Asia. International travel continues to outpace domestic growth. That's only good news for our food because every time it's a long-haul international, we actually carry 2.5x the meals for long-haul international.
All right. I think that's it with the outlook. Thank you, Kerry and Tim.