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Welcome to SATS First Quarter Financial Year 2020-2021 Earnings Conference Call. Before we begin, SATS 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 statement as a result of many factors that may be outside the company's control including, but not limited to 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 Carolyn Khiu of SATS. Please go ahead.
Thank you, Serena. Hello, everyone. Good morning. Welcome to another session of SATS webcast. This morning, we released our results for the first quarter FY 2021. With me here are Alex Hungate, President and CEO of SATS; as well as Manfred Seah, CFO of SATS. They will take you through the results today.
Now let me hand you over to Alex.
Good morning, everybody. Thanks for joining us bright and early on this Monday morning. It's a very unusual quarter first of all because we've made a loss, the largest loss in SATS history, but also because there's so much change in the environment. So we hope to use this opportunity, which is a business update as you know, the SGX reporting format has changed. We decided as a company that we want to continue to do quarterly business update. But we've given quite a lot of financial information during the business update. There's no official outlook, but of course, I'm happy to talk later about how we see the market. In fact, one of the early slides will be a specific discussion about COVID and its impact on the company.
So let's move into the slides. If you look at Slide 4, it's a very unusual picture of the volume changes year-on-year in this first quarter. The first-line is telling, and you can see that the passengers handled -- the volume has almost evaporated down to only 200,000 across the network. It's just indicative of the almost total shutdown in passenger flights during the -- this particular last quarter and reflects the very many restrictions that were in place at that time between the various countries on international travel and indeed, on domestic travel in most countries at that time as well. That has impacted the number of meals served.
But as you can see, we are just below 50% of meals served. And the difference, of course, is not the aviation meals but it's the non-aviation meals, and I'll talk later about how the company has dramatically increased the amount of non-aviation catering that we've been doing in the quarter.
Flights handled drops, not quite as precipitously as the number of passengers handled because a lot of the corridors were kept open by governments at that time for evacuation flights and other reasons.
The cargo handled is probably the relative bright spot. You can see it's about 50% of the volume that it was before. So it's held up much more resiliently than passengers and flights. All of the freighters in the market are absolutely at capacity, and many of the passenger aircraft have been repurposed during this period to carry cargo in the whole, primarily, but some of them even in the cabin was well strapped into the seats.
Number of countries is similar, but of course we've got an additional operation in the U.K. which reflects the Monty's Bakehouse acquisition. And then we've eliminated the UAE, which is -- reflects the sale of FASSCO in the period. So that's a one-for-one swap. Employees show 13,500, quite a big drop from 16,700 about a year ago. That number will continue to drop because there are cost-saving initiatives which are still ongoing in second quarter. So you'll see that number coming down progressively. But you'll also see that fall in headcount reflected in the control of operating expenses, when Manfred talks about operating expenses year-on-year as well.
Moving on to Slide 5 now, I did say that we would have a discussion about COVID and its impact. The graphic here is from IATA. These are the IATA cumulative forecast based on all of the member airlines inputs into IATA. You can see that they've downgraded the forecast of when the industry will return to normal on an RPK basis. This is now out to 2024. So unfortunately, it's a lower for longer picture as a base case. The 75% recovery for 2021 is in there, but you can see that some range of uncertainty in those levels.
What is -- what looks like, is certain though is that it looks like April is the low point. So if you look at 94.3% drop in April on a global basis, in terms of RPKs, started to climb already into May, up to 91.3% and seems to be climbing in June and subsequently in July as well.
Same pattern for cargo. Cargo was at the lowest point in April and has been climbing since then. In Singapore terms, April was about 50% and now in June, we saw an increase up to about 60%, and that continues to be the picture in July.
Some of the domestic markets that we operate in have had a stronger pattern. So domestic China has been relatively stronger. You remember we've got our Nanjing Weizhou investment there from last year, which is doing a good job of disrupting, frankly, the aviation catering market in China by using frozen food to provide multiple airports in the second and first tiers. Most recently, it's taken that asset-light model into Ganzhou and Weizhou as well.
Let's move on to the COVID-19 emerging slide. You can see that, and I think you're aware that SATS has done a lot of work to repurpose our capacity to support community during this difficult period. But I think you're probably asking yourself how much of that is sustainable? So for example here in Singapore, where we were feeding some of the migrant workers, as the migrant workers return to work, obviously, that volume drops off. However, we have not been focusing only on COVID-related business. The Monty's Bakehouse acquisition that we made in March had genuinely turned out to be a really useful acquisition because their ability to design low-touch packaging that can minimize the contact between the flight crew and passengers is something that's perfect for this environment. We've taken that capability on the road and talked to nearly all of our major airlines in Asia, and many of them are now taking up this new capability and serving SATS meals but with Monty's designed sustainable packaging, which we hope will help us win market share as things come back.
There's been a lot of work on taking the opportunity of the lower operating volumes for us to accelerate the implementation of our digitalization projects and to train our people to make sure that we can adjust the processes -- operating processes to make ourselves more productive and to improve our services to customers. So we will be maintaining our CapEx at a slightly lower level of about $60 million to $70 million to support the digitalization projects going forward.
And then we have made some moves already for our freight terminals to put solar panels on, but we'll be extending that successful initiative to other properties as well. There has been quite a large drop in other operating expenses this quarter, as you can see. Some of that will be sustainable even after the volumes come back because it relates to these more efficient, sustainable sources of energy that we've been putting in place.
Let's move on to the next slide, Slide 7. As I mentioned, we've been pushing to non-aviation growth into new segments of the food market. And here are some examples of how we're using the Country Foods entity, which we acquired last -- just over a year ago. To increasing volumes of both food trading and also distribution into retail channels and to the food service industry.
So here in Singapore, we've used Country Foods as a vehicle to expand into some of the food service industry. These are some of the same names that you'll notice that we're also serving through SATS China, where we've been working with market leaders like Yum China, Alibaba, [ Herman ] and also new customers like the German ALDI retail chain, which is expanding fast into the Chinese cities as well.
Overall, our non-aviation revenue grew by 73% year-on-year and the margin of that non-aviation revenue is about 10%, which is slightly higher than the high single-digit guidance that we gave you for our expectation for the non-aviation food market. That's an after tax margin.
And then moving on to Slide 8, we've also been introducing new products into the market through Country Foods. Europastry is a very well-established producer that we're bringing into the region, and that's done very well through the retail channel during this period. Maybe people are eating more donuts during Circuit Break or lockdown, but it seems to have appeal for the market. And then we've also been expanding our own brand, Farmpride, which is owned by SATS to expand the range of ready-to-eat frozen foods based upon our long-standing popular brand there. So these are things that you should expect us to see that continue to do both in Southeast Asia and China. And then in the future, as we've indicated, we believe that this opportunity will also exist in India. And we're building a central kitchen in India to help us do that.
All right. At this point, that's the end of the kind of context and the environmental situation.
Now I'll hand over to Manfred Seah, the CFO, who will take you through the financial numbers. Manfred?
Thanks, Alex. Good morning to all of you. I'll shall take you through the financials very quickly. We are on Slide 10. First, first quarter revenue dropped 55% to 209 million. This is due to what Alex has mentioned is a sharp drop in the aviation volume. Net loss for the quarter reached about $43.7 million of which the group's associates and joint venture contributed about $31 million of the losses. First Q EBITDA was negative $33.9 million and loss per share recorded at about $3.9 cents.
Moving on to the financial highlights. Group revenue declined $255 million to $209 million due to the sharp decline in aviation volume. Aviation revenue dropped by 73% or roughly about $300 million as overall aviation meal volumes and flights handled declined by 95% and 88%, respectively.
Group OpEx decreased $163 million to $245 million, the most significant reduction being staff costs, which declined by about 58.7% to $96 million. This is due to a combination of government grants and also the cost containment measures taken by management to reduce employment costs. As a result, the reported operating loss reached $36 million. Now as we know, the COVID-19 pandemic has also affected staff associates and joint ventures in the region. And this has -- which recorded an aggregate share of loss of $31.4 million fourth quarter.
Overall, group PATMI dropped $98 million year-on-year to a net loss position of $43.7 million.
Turning over to the next page on segmental revenue, you can see that the Food Solutions as well as Gateway revenue declined by 43.7% and 67.9%, respectively. By industry, Aviation dropped by 73% or about $300 million. And non-aviation actually increased by the same percentage point. And as a result of that, the net increase is about 55%.
Moving on to group expenditure on Slide 13, group OpEx was 40% lower at $245 million. Except for depreciation and amortization and raw materials, all cost categories actually came in lower with staff costs showing the biggest reduction of about 59%. The increase in depreciation and amortization cost is mainly due to consolidation of new subsidiary and addition of right-of-use assets due to SFRS 16 and also the new digital platforms being implemented.
Now on the higher cost of raw materials is due to the consolidation of Country Foods and Nanjing Weizhou, offset by lower aviation volume. In line with lower aviation revenue, license fees actually declined by about $18.9 million to $3.5 million for the quarter.
Slide 14. This is actually on associates and joint venture. I shall leave you to pick up a reading on this.
And if I move on to Slide 15, this actually shows the SATS share of revenue by region. Our first quarter SATS share of revenue declined about 56.9% to $279 million in tandem with the decline in SATS consolidated revenue of about 55% to $209 million.
As mentioned earlier, the pandemic has affected all regions, with Japan and ASEAN being the most affected. And at the PATMI level, Singapore remained profitable at about $4.3 million. This is due to our SATS non-aviation business as what Alex has mentioned, which is operating business as usual. This pertains to the institutional catering and Food Services business of SFS, Country Foods and also the essential projects that we have been engaged to do.
Moving on to balance sheet on Slide 16. Total equity and total assets stood at about $1.8 billion and $3.2 billion, respectively. You can see that our cash position as at 30th June was at $724 million. This is partly due to the additional drawdown of bank facilities during the period. And that has increased our debt-to-equity ratio to 0.42x without taking into account the lease liabilities. As a result, total liabilities increased by about 230 million, in line with the additional borrowings taken during the quarter.
Now on the next page, Slide 17. This is the group balance sheet, which I've covered earlier. I shall leave this slide for you to read. Moving on to financial indicators on Slide 18. All profitability indicators are negative due to the net loss position for the quarter. As I mentioned earlier, the E ratio has increased 0.2 -- 0.42x due to the additional borrowings taken to enhance our liquidity position at this point.
Now moving on to Slide 19 now, this is my last slide. This covers the cash flow position of the group. As mentioned earlier, overall cash position has increased by about $322 million to $724 million for the quarter, mainly due to net cash from financing activities, which has increased by about $244 million due to the facilities drawn down.
Now, this completes my financial presentation, and we can proceed to the Q&A session. I'll hand you over to Carolyn.
Serena, we can start with the questions. Anybody calling in for questions?
[Operator Instructions] Our first question we have Rachael from UBS.
Thanks for having this business update. I have a couple of questions. First, on your liquidity side. Where do you see the greatest cash requirement for the rest of the year? Maybe we'll go through the questions one-by-one.
Rachael, thanks for your question. We feel overall that we have good control over our costs. So we are sizing costs appropriate to the new shape and size of the aviation industry. It's hard to predict that trajectory. So we're trying to retain some flexibility with a focus on retaining core capabilities in each market. The overall, as you can see, we're still in a net cash position. So we raised a lot of debt at the end of the last financial year and right at the beginning of this financial year.
On a net basis, we haven't used that debt. So we're still net cash positive, which indicates that the cash flow controls, the cost controls are largely effective, even given the evaporation of demand on the aviation side.
We are working very closely with all of our joint ventures and associates, where, in some cases, we have, as you know, we have seconded key individuals to manage those entities. So we're taking a similar efforts to control costs and shape costs for the new lower-for-longer picture that we see for aviation.
So broadly speaking, we feel like the cost position of the joint ventures associated both are largely under control. There are a couple of jurisdictions where it's harder to reduce employment costs quickly. And those are the ones where they're using a bit more cash than we are using, for example, in our subsidiaries, where we can control those costs and the legislation allows us to take -- to move on cost faster. In those entities, there may be -- the first option is to have them seek financing locally. And -- but we are keeping an eye on a number of them to see whether they might require cash in the medium term. If so, it will be relatively manageable in the context of our overall balance sheet with that very large built up funding that we did at the start of the year. So I won't mention any -- maybe Manfred wants to add to that.
Rachael, perhaps 2 things that you may want to take a look at on Slide 19, we actually showed our net cash used from operating activity. It is negative $61 million. And then there's a free cash flow of above negative $72 million. Those -- I think those 2 points are actually relevant now. If you look at our cash position today of about $724 million at this point is actually a little bit higher because we have been able to collect our debt well. And if you look at that kind of cash towards the quarter, we have resources to go up to about anything between 10 to 12 quarters, if the situation doesn't improve.
Okay, the next question would be, how much revenue did the consolidated entities add for first quarter?
The consolidated revenue is about $204 million -- $204 million.
Sorry, the newly consolidated entities because in your release that -- yes, the new entities?
Okay, sorry, beg your pardon. It's about $46 million. Three of them, Country Foods, we have Nanjing Weizhou as well as the Monty Bakehouse, yes.
So among those 3, which was the largest contributor?
By far, Country Foods, yes.
Okay. And I guess, my next question would be on employment cost. Are you able to give a breakdown between the cost savings coming from grants, contract services and workforce reduction? And in your staff costs, do you actually incur any one-off current reduction expense, i.e. like early retirement or rightsizing, et cetera?
Yes, so staff costs drops, as you can see, 58.7% or $136.9 million. You can see that on Slide 13. Of that, the majority were cost reductions that management -- based on initiatives that management took. So the majority is not COVID relief. There is quite a large government relief number in that, which I think -- Manfred, do you have?
Yes, so Rachael it's actually set out in Slide 13. The total amount that we received from government reliefs is about $62 million. For all intents and purposes, you can assume that the rest are actually due to management effort across the region to reduce our employment costs, yes.
Okay, those are all my questions.
Now, sorry, to your question on whether there's one-off redundancies and things like that, we've been managing this on a very delicate way. And I -- pleased to say that there was not very material in this respect as we have engaged our labor force in a very -- I would say, conservatively, and we have always enjoyed good relationship with these people.
Our next question with Yew Kiang from CLSA.
Alex and Manfred, I just have 1 question on staff costs. Would it be right to sort of project this $96 million as -- for modeling purposes, would this be the right level to look at for the next few quarters? And given that you are also looking at further rationalization, I'm just trying to see how much this can fall lower. Because I notice you're -- in terms of your staff headcount, you've fallen by about 20% year-on-year. But obviously, business have been down by much more of that. So I'm trying to see, how much more staff costs you can actually bring down further?
Yes. Thanks, Yew Kiang. Good question. What you're seeing here, of course, is effectively an average for the quarter. It doesn't necessarily represent the exit run rate for the end of the quarter. So the exit run rate in June would represent a lower run rate than this average and therefore, you should expect it to continue to come down into the second quarter.
Okay, okay. Is there a range? So I'm just trying to gauge like how much -- would it be another 10%, 20%?
We're not going to give guidance on that. But I mean, I think if you think about the initiatives when they were implemented during the quarter, you can get yourself an idea of how the trend line should look. I think in many cases, we made announcements at various markets. You can try to follow that.
You can get -- it is Manfred, here. Just to be absolutely clear, this $96 million, this is net of the job support scheme. Now if the job support schemes work out obviously, we're not able to maintain this kind of level. Obviously, if that -- if there's no longer job support scheme, we may, may not need to take more drastic action going forward.
But the current job support scheme you're [ entitled through ] to the end of your financial year, right?
Yes. There's just been a further announcement in Singapore. Remember, the government release cover several markets that we operate in. But for the Singapore JSS specifically, as you know, there was just an announcement of a further set of JSS starting in September and extending out from there. So that won't impact our second quarter. It will impact the second half of the year and potentially into next year depending upon how the guidelines from the ISS are released. I think ISS is currently working on what the guidelines will be for recognition of those release. But they do specify that they begin in September. So that would be a third quarter onward impact, which is, of course, very welcome and will help us to retain our core capabilities.
Okay. And lastly, you mentioned that some other countries where you operate are also receiving some grants. But can you give us in terms of like, staff headcount, would it be bulk of it in Singapore?
Yes, as you know, if you look at our consolidated operations, the bulk is still Singapore. So other large subsidiaries are in places like Japan, where the government also announced significant support for retention of jobs, which TFK can benefit from and is benefiting from.
So do you have a split like in terms of staff costs, how much of the $96 million is actually attributable to Singapore? Because I'm just trying to see how much the JSS can help you guys.
You can -- maybe we won't give you specific guidance. Maybe we'll give you some numbers, right? Today, our ending headcounts were about 13,500. We have above 2,000, its Malaysia. We've got about 1,006 in Japan. So the rest are actually in...
Yes, specifically was thinking about it, the proportion of the headcount. And in that combination -- now some of our associates and JVs will obviously get support as well, but that would just come in at the PATMI contribution level.
Our next question is from Siew Khee from CIMB.
Can I just go question-by-question? First question is just to follow-up on the JSS. Last quarter, for the JSS or rather government relief or 2 months you can say that you recognized about $22 million. And then this round, we have much more about $62 million. I reckon the increase is because of other countries as well. Can we get that confirmation? If I would just use 2 months, $22 million, I won't get $62 million for this quarter.
Yes, you're right, Siew Khee. So there's 2 things going on. Firstly, the way in which the JSS is recognized in Singapore. And secondly, the addition of government reliefs from other countries. In some cases, those started a bit later than the Singapore government. Singapore government was very prompt with their support. In other cases, the government took a bit longer to announce and to clarify the reliefs. So you see both of those impacts.
And can I just confirm whether other countries is also, is not a one-off thing in first Q and will continue as well until end of the year?
Siew Khee, Manfred here. The 1 other country is actually Japan, okay? So yes, you are right. There's a recurrence scheme that's been adopted. Now you will not be able to kind of extrapolate from the fourth quarter into the first quarter and try to work out the -- simply because the way we have allocated it is based on a very conservative way, and we will only recognize it as a grant as soon as -- once we are able to establish that there is no claw back mechanism. So if you like, the grants, the JSS was actually announced through, excluding the most recent one, across the full budget. So if you like -- take it [indiscernible] piece, you know, which has 3, accordingly. Now that gives you later months or later quarters, we'll get a little bit more than earlier ones.
In addition to the JSS, in the government relief is included also a foreign worker's levy. And we mentioned about the other job support scheme that comes from Japan, yes.
I also saw -- yes, I've got 3 more questions. Alex, just now -- I could have missed it. You said that the Singapore utilization or capacity, when you were referring to the IATA slide. June for Singapore was 50%. July was also 50%. Was that right?
For cargo, do you mean, Siew Khee?
The 1 that you said, April was the worst. Yes, I wasn't sure whether you were talking about...
April was the worst for aviation overall. For passengers, the number of passengers was close to 0 but even in April, the cargo volume was around 50%, 5 0. Subsequently, from May and then June onwards, the trend on both flights, passengers and cargo has improved. So it looks like April was the [ nadir ] of the trend. The cargo volumes have gone from 50% to around 60% in Changi by June. You're probably...
Okay. And then you saw the 60% as well in July.
Yes. It's holding up and tried improving marginally into July. And you probably recall, because I know you follow the seasonality of SATS quite closely. The peak period for cargo starts in September. So September, October, November usually is the peak period.
Okay. And also for the associate, the losses, did it include any credit losses or any impairment for Gateway and Food Solutions?
Yes, there are some, but it's not in a material way. We have taken quite a bit of that in the fourth quarter. So this is basically in line with entire aviation sector across because most of our associate joint ventures overseas are actually aviation sector.
Our next question, we have Louis from Crédit Suisse.
A few questions from me. I think the first is, again, sorry to draw on the JSS again, but I understand that previously, you mentioned that JSS will be recognized over 11-month period up to December. So can you give us a sense of how much of your JSS has already been recognized in the last 5 months versus for the rest of the financial period up to December?
Okay, Louis. Yes, I think what I will do is, I won't give you the actual quantum because it's kind of sensitive. We will -- because it's been recognized for over a period of 11 months to December, so today, what is outstanding is perhaps, maybe about 5 months left, right, from the existing JSS. Now the new extended JSS, which was announced last week by DPM that has not been taken into account, yes. So if you like, we have taken in 7 out of the 11 -- 6 out of the 11 months. So there's existing 5 more months by proportion.
I understand that. But I mean in terms of the proportion, based on the -- that your conservative way of recognizing it, will you be able to share some guidance? Because that will probably not be in line with the number of months.
I think it's fair to assume that whatever that we have given out -- whatever that we disclosed this quarter, the $62 million, right? And by and large, that will carry on for the next quarter or so. The extended JSS, which was announced by DPM last week, we are holding that in the bay and a pending consultation with our auditors, as well as the board guidance in terms of how we should recognize that. I think, these guys are probably going to come up with new guidelines on this, and we will be clearer on this in the next quarter.
Got it. And also in terms of the -- again, in relation to staff cost, in terms of the fall in the headcount, does this include those that were put under voluntary no pay leave or will these reductions in headcount can be treated as being permanent reduction, so to speak?
Louis, maybe I'll pick that up. So the -- this is the headcount as a snapshot at the end of June. There are further measures going on. So as I said, in line with the employment expense, it will start to drift down a little bit further based on what were some of the initiatives we're still taking. If the aviation volumes start to increase by end of this financial year to around -- maybe to around 50%, then we will start to recall some of the people who are on no paid leave, currently. The no paid leave, people are still in the headcount number.
Okay, okay, so the reduction is in a way those who are of your rough spending?
Yes, that's right. The quickest -- we're not paying those people and that accounts for the fact that the employment expense has gone down more steeply than the headcount number.
Got it. And just a last one from me in terms of the financials. Your EBIT was negative $36 million and the share of results of negative $31 million. But in between, would you be able to share, if there were any one-off nonoperating items or tax incentives that led to the better value?
Not at all, Louis. So you're absolutely right. Good observation. The overseas side is contributing to a greater portion of the losses.
Yes. So that goes to what I was saying earlier, Louis that we feel like we have good control over our operating costs in the subsidiaries, where we've been able to move relatively early, I think, in the cycle, having seen impact in China, and we move very quickly into the -- in our other operations to reduce costs.
In some other markets because of the employment law situation, where we're unable to move quite as fast to reduce cost. And that's why you see that there's been some lag in the performance of the JVs and associates. But we are addressing that and we hope that, that number will start to come back in line over the next quarter or so.
And just to add to what Alex is saying, Louis, sorry, if you compare the -- our investments overseas, if those are cargo-related, obviously, they are faring better than those that are food-related. Similar to the Singapore situation, cargo is more resilient even in our overseas units.
Actually I was referring to the arithmetic behind in terms of the EBIT -- was minus $36 million and associates was minus $31.4 million. So that gives me about $67 million of loss versus the $44 million of the PATMI?
Yes. So how you should think about it is, there's the tax credits that has helped buffer that.
Our next question, we have [ Patrick ] from [ Citicorp ].
I have a question which relates to the strategy, right, if any around associates? So in Singapore, it's about the pivot to non-aviation, more food products, cost, managing costs but for the associates, mainly, which have actually have sort of specific purpose entities, right? So what is the strategy around trying to manage the level of negative operating leverage at the associates around the region?
Thanks, Patrick. Well, we're taking very similar measures at the overseas associates and joint ventures to make sure we have full control of costs, given the uncertainty in terms of line of sight of the trajectory of the aviation volumes. So you should consider that we'll take exactly the same measures to reduce the variable costs. And in some cases, look at fixed costs in the medium-term also is variable to try and reduce those. So in line with what we've been doing in Singapore. The only issue, as I mentioned to Louis earlier is the timing of that in some overseas jurisdictions, it takes a bit longer to do that. And therefore, you see a bit of a lag in terms of the continued losses in this quarter for those overseas ventures.
If you look at the makeup of the share of revenue, the majority, around 90%, is from Gateway. And as Manfred just mentioned, a good number of those have their main focus as cargo. So we feel like we should be able to -- with some -- with the 50% to 60% volume levels that we're seeing in cargo and in some cases higher, whether domestic markets like in India, those volumes are higher. In those cases, we think that there should be a better line of sight to turning around the losses.
Okay, so just a quick follow-up because when I look at the share of revenue, I mean, maybe about 1/3 or so is coming from China. And of course, China seems to be grappling with the pandemic a little bit better than the rest in the region. So is the operating characteristics of your associates in Greater China, right, the $72 million share revenue, will that have a better trajectory in the next 6 months?
Yes. So there's -- if you look at the configuration of our Greater China entities, they're based around -- mainly around Beijing and Hong Kong. In Hong Kong, it's -- the majority of the volume is based around cargo. And therefore, there's a good line of sight there to some improvement. In Beijing. We -- you recall, we just released -- we just opened in the new Daxing International airport as well as our historical operations in the capital airport.
Both airports are very large. So there's a lot of volume, a lot of flights handled in normal times, plus a lot of cargo. But the issue is that the Daxing airport has been closed by the central government. And while they focused on movement through capital airport. And so the new investments in Daxing find and -- found themselves for significant parts of the first quarter with no revenue at all. So there's a specific distortion happening in the Beijing part of the operations in Greater China.
All right. I think we will take some questions that have come in from the off-line channel.
I'll read the first one, which is from [ Regan Wang ] regarding the JSS, do employees who move from Gateway Services to Food Solutions be reclassified accordingly, and as a result be allocated like JSS?
Right, I'm guessing that [ Regan ] is trying to understand from the redeployment activities that we've been undertaking, whether there's a move that would reduce JSS. The answer is, no, basically, because the -- a large parts of the Food Solutions are also aviation covered by the higher JSS quantum. So the aviation kitchens have been supplying non-aviation customers, but the entities producing that food are still aviation entities, and therefore, they qualify for the higher JSS. So the answer to that one is, no.
Okay. The next question is from Ajay from UOB.
Could you share how much Country Foods contributed in terms of revenue?
It is about $41 million, $42 million thereabout.
And 1 more question here, Jeffrey from the Edge.
Could you please share how much of a priority it is to grow the non-aviation revenue, given the aviation sector is expected to take a few years to recover back to pre-COVID levels?
Yes, Jeffrey, I think this is a key part of our strategy. There are 2 things that we're very focused on at the moment. The first is making sure that we reshape the organization to a lower cost base. That's in line with the expected volumes in aviation over the next couple of years. And that's something that we feel we have good line of sight of, and you can see the results already in this quarter.
The second part is to try to pivot to new sources of revenue, to new customer segments for food. That's in line with the strategy that we've been implementing over the last couple of years. So we're very pleased that we have a basis from which to make that move. It would be difficult to do it from a standing start. And we are putting considerable amount of resources now into accelerating that. So the SATS China business has been growing its customer base quite aggressively, and we're pleased with that progress. It's a huge market and there's lots of upside for us.
The -- here in Southeast Asia, the acquisition of Country Foods has allowed us to grow into the food services industry and the retail business faster. And then in India, in Malaysia, in Indonesia, some of the associates are also making that pivot with guidance from places like Singapore that are already making good progress with that list of market leader brand names. And indeed in Japan as well, where they're making progress into retail channels. So you can see we're making -- we're able to make that acceleration. We're determined to make that acceleration. At the same time, with a 73% improvement in that category year-on-year, that's absorbing the reduction that we're seeing in cruise. So part of non-aviation revenue, that line item has been the cruise industry which came with good revenue growth and very good margin as well because we were getting good operating leverage from the cruise center. So our growth in non-aviation food -- our growth in non-aviation is net of a higher level of growth in non-aviation food. After you net off the loss of revenue and a loss of margin from cruise.
And as I mentioned in my introductory slides, the overall post-tax margin for non-aviation is around 10%. So that's after netting off the loss of the cruise center margin year-on-year. So we are pleased with the progress, and we're going to do everything we can to move faster.
Yes, Serena, over back to you to take online questions.
Our next follow-up question, we have Rachael from UBS, over to you.
I have a question about your cost savings for staff. You mentioned that the reduction in costs was the average of 3 months. So perhaps, if we look across April, May and June, do you have a trajectory? For example, of the month like of the year-on-year decline in staff costs month by month?
Well I think there was a similar question asked earlier by Yew Kiang. So we're not giving the trajectory. But what I would direct you to is to think about is that the cost initiatives as they were announced in some of our -- for example, in the Singapore subsidiaries were at the end of March, early April. And so we then progressively, they were implemented across the quarter. Some of the other cost initiatives in other markets were took a bit -- a bit longer to do because of the different legislation there, so employment law. So you can use that maybe, Rachael, to give some idea of what the trajectory might be.
Okay. And then the final question I have will be, understand that freight rates across the board has increased. But have you benefited from that? Have you seen an increase in your own freight handling rates on your end?
What we have seen is a business mix shift to perishable handling and medical supply handling. With relatively low price sensitivity in those categories because, as you recall, SATS has been investing in those for several years because we saw it as a growth area. It turns out that COVID has accelerated that trend. So we are seeing even higher proportion of the cargo airfreight that is in those categories. Looking -- and so that gives us better yield. Looking forward, I think most commentators would suggest that those 2 categories will remain very important categories post-COVID. The stock and supply chain concept and the resilient supply chain concepts suggest that airfreight will play an important role for both medical supplies and perishables.
Okay, but in terms of the rates, I mean, the rates that you charge, I would presume that medical supply and perishables will be higher than your -- than the average of all the cargo. Do you see that rate increasing, should the demand for these categories of supplies increase?
So yes, you're right. The yields from those categories are higher than general cargo. And we feel that our pricing power is higher than those categories because our services are more differentiated from the competition across the region.
Your last question we have Siew Khee from CIMB.
Just wanted to follow-up on the EBITDA. So if cargo is getting better and is going to remain at this level, coupled with your group cost control we then would be expecting a better performance in terms of EBITDA line, right?
Okay, so we don't give guidance going forward, Siew Khee, as you know. But what I would ask you to consider is take a view on the trend rate on the volumes that you see in the marketplace and then take into account what we've said about our line of sight over cost measures, which we feel confident about. And then maybe take that into consideration as you look forward into the year.
Okay. So also the other one is, associates, I guess, we should also be expecting that this might be the worst that we have seen, given that everything else is -- and mainly the market supposed to just gradually improve. Some of them, actually, also -- are you still worried of associates?
There's still uncertainty about the trajectory of aviation volumes. So it's quite possible that there'll be W-shaped recoveries and things could get worse again. But I think you could take my answer from the last -- the first part of your question and apply it to the associates as well, although the lead time for the cost controls is a bit longer, as we referred to earlier in this call. We are confident that we're getting line of sight over how those costs can be contained. And then the volumes in the markets are published, and you can see from China to India how those are emerging. In general, you're right, they are improving in April. It's the lowest that we've seen in this reporting quarter that we're talking about now. And in the trading level so far in 2Q, the volumes look to be continuing on the upward trend.
Okay, and my last 1 would be non-aviation because you would have some short-term contracts probably from government in deploying some of the staff to -- like, for instance, housing the foreign workers, deploying to other ministry, which the economy is starting to hopefully open the drop-off in non-aviation revenue in the coming quarters. Is it material?
Yes, so you're right. So there were some of those contracts were temporary in nature, supporting the community while during the depths of the crisis. I'm pleased to say that we are moving out of the depth of the crisis, but that means that those revenues will drop off. We always anticipated that. That's why we've been targeting the more sustainable revenues in food service and food supply chain business, which we believe can replace the loss of those other revenues.
In many cases, the work that we were doing for government was not high-margin in any case. So I think we feel confident that we can move -- we can replace and supersede that revenue with the more strategic sources of revenue in the medium-term in the coming quarters.
All right. We come to the end of our session today. If you have more questions, you can e-mail us. Thank you all for calling. Have a good day.
Thanks, everybody.
Thank you.
Bye-bye.
Thank you. Ladies and gentlemen, this now concludes today's meeting. You may now disconnect.