SINGAPORE: Public transport operator SMRT on Monday (Aug 8) reported a 22.9 per cent fall in profit for the first quarter of its 2017 financial year.
In a media release, SMRT said its profit after tax and minority interests came in at S$15.5 million, compared to S$20.1 million in the same period a year ago. Revenue for the quarter dropped 2 per cent to S$313.9 million. SMRT said its operating expenses rose 0.8 per cent in the quarter to S$311.5 million, mainly due to higher staff costs and repairs and maintenance costs – but this was partially offset by lower energy expenditure and other operating expenses.
SMRT attributed the lower profit to a higher operating loss of S$9.4 million in its rail business, compared to a loss of S$5.3 million in the same period last year, “as a result of lower revenue due to lower average fare”.
This comes after a 1.9 per cent fare reduction which came into effect in December 2015. SMRT added that there was a “cannibalisation effect of Downtown Line 2 operations”, and added that higher staff costs and repairs, as well as maintenance-related expenditures were causes of the losses reported in its rail business.
Downtown Line 2 is operated by competitor SBS Transit. Among what it terms its non-rail businesses, which includes bus and taxi services as well as rental and advertising, SMRT posted a 12.3 per cent decrease in operating profit for the quarter at S$29 million. It said the drop was largely due to “lower profitability” in its bus and taxi segments.
According to SMRT, its bus operations posted a lower operating profit of S$0.2 million in the quarter – compared to S$1.5 million a year ago – because of higher staff costs and lower revenue due to lower average fares, as well as the launch of Downtown Line 2. These were partially offset by higher training grants and lower diesel costs, SMRT said.
Its first-quarter taxi operating profit saw a 17.9 per cent drop to S$4.5 million, compared to S$5.5 million a year ago, “due mainly to lower revenue from a smaller hired-out fleet, higher repairs and maintenance and depreciation, partially offset by lower accident claim expenses and lower special tax on diesel vehicles”, SMRT said.
Its engineering services also saw an operating loss of S$2.7 million in the first quarter, “due mainly to Singapore Rail Engineering’s provision for costs associated with the suspension of works relating to the end-of-life refurbishment of trains pending decision by the authorities”. It had recorded a loss of S$0.5 million in the same period last year.
SMRT’s other services, including charter services and external maintenance, saw a huge jump of 164.2 per cent in operating profit to S$1.4 million, it said. The public transport operator, which is the subject of a S$1.18 billion proposed buyout by Temasek, had previously announced that it would transit to the new rail financing framework (NRFF) in October this year.
SMRT said that under the NRFF, it would pay a licence charge to the Land Transport Authority (LTA) for the right to use the operating assets and operate the North-South, East-West and Circle Lines, and the Bukit Panjang Light Rail Transit.
“The licence charge has been structured by LTA to enable SMRT Trains to achieve a composite (fare and non-fare) Earnings before Interest and Tax (EBIT) margin of about 5 per cent,” SMRT said, adding that an Extraordinary General Meeting will be held on Sep 29 to seek shareholders’ approval for the proposed asset sale as part of the NRFF transition.
Looking ahead, SMRT said the Group expects to incur higher operating costs – particularly in staff costs – to meet higher capacity needs and reliability requirements, as well as more manpower needed for the commencement of the Tuas West Extension, which will be part of the East-West Line.
As for its bus business, SMRT said its buses will transit to the new Government Contracting Model from Sep 1 this year. “The Group is finalising the contracting terms with the authorities,” said SMRT, adding that it would participate in the bid for the next tender package in Seletar.