SATS : Minutes of SATS 48th Annual General Meeting

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SATS LTD.

MINUTES OF THE 48TH ANNUAL GENERAL MEETING

HELD ON THURSDAY, 22ND JULY 2021 AT 10 AM

BY WAY OF ELECTRONIC MEANS

PRESENT

Board of Directors

In Attendance:

Ms. Euleen Goh (Chairman)

Mr. Alexander Charles Hungate (President and Chief Executive Officer)

Via live webcast:

Mr. Achal Agarwal

Ms. Vinita Bali

Mr. Chia Kim Huat

Mr. Michael Kok

Ms. Jenny Lee

Mrs. Deborah Ong

Ms. Jessica Tan

Mr. Tan Soo Nan

Mr. Yap Chee Meng

Mr. Yap Kim Wah

Shareholders who attended via live webcast or audio-conference

As set out in the attendance records maintained by the Company

Chief Financial Officer (Via live webcast)

Mr. Manfred Seah

Company Secretary (In Attendance)

Ms. S. Prema

By Invitation (Via live webcast or audio-conference)

Mr. Quek Shu Ping, Ms. Tan Chia Chee, Mr. Chin Han Liang and Mr. Tay Li Yang, KPMG LLP Ms. Yap Lune Teng and Mr. Daniel Tan Cheng Hiong, Allen & Gledhill LLP

Mr. Jacob Tan, AON Hewitt

Mr. Raymond Ang, RHT Governance, Risk & Compliance (Singapore) Pte Ltd

1. WELCOME ADDRESS

1. Chairman, Ms. Euleen Goh, welcomed the shareholders to the Annual General Meeting ("AGM") of SATS Ltd. ("SATS" or "Company").
2. Chairman informed the shareholders that due to the COVID-19 situation in Singapore, the AGM is being conducted by electronic means. She thanked shareholders for taking the time to join the Meeting and for the questions they had submitted.
3. Chairman updated the shareholders that the performance of SATS in the financial year ended 31 March 2021 ("FY20-21") had been severely impacted by travel restrictions. While conditions were challenging, the leadership team, employees and the Board of Directors have been working hard to resize costs, whilst retaining core capabilities in

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order to be ready for the rebound and to accelerate the Company's transformation towards its strategic future. The effect of all the actions taken saw SATS improve in financial performance quarter on quarter, with the fourth quarter returning to profit, albeit with much needed government support.

1. Chairman assured shareholders that the Company has been working towards being independently profitable, although much would depend on the uncertainty of the continuing impact of the pandemic on travel conditions. She added that the President and Chief Executive Officer ("PCEO"), Mr. Alex Hungate, would share more on what had transpired in the past year and the outlook of the Company's future during his presentation.
2. Chairman informed the Meeting that a quorum was present and called the Meeting to order at 10.03 am.
3. Chairman introduced the Board of Directors, the PCEO, the Chief Financial Officer and the Company Secretary.
4. Chairman informed the Meeting that representatives from the Company's auditors, KPMG LLP, the Company's legal advisors, Allen & Gledhill LLP, the Company's remuneration consultant, AON Hewitt and the scrutineers of this Meeting, RHT Governance, Risk & Compliance (Singapore) Pte Ltd have also joined the Meeting via webcast.
5. Chairman added that the Company has responded to all substantial and relevant questions on the resolutions to be proposed at this Meeting which have been submitted by shareholders prior to this Meeting. The Company has also responded to all the questions raised by the Securities Investors Association (Singapore) ("SIAS") in relation to the Company's Annual Report for FY20-21. The questions and responses were published on the Company's website and on SGXNET on 20 July 2021.
6. Shareholders were invited to submit questions by text via the audio-visual webcast platform. Questions submitted would be answered in line with the resolutions concerned.

2. VOTING

1. Chairman informed that she has been appointed by the shareholders as their proxy to vote on their behalf at this AGM. She would be voting or abstaining from voting, in accordance with shareholders' specified instructions on each resolution. She added that voting would be conducted by poll and there would be no live voting during the Meeting.
2. As all proxy forms have been submitted 72 hours before the AGM, the number of votes for and against each motion had been computed, checked and verified by the scrutineers. The verified results of the poll for each resolution will be announced during the course of this Meeting.
3. As Chairman of the AGM and proxy for shareholders, she advised that she would be proposing all the resolutions to be tabled for shareholders' approval at this Meeting, with the exception of Ordinary Resolution 7, which relates to the Directors' fees for the

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financial year ending 31 March 2022, which would be proposed by Mr. Alex Hungate who is also a shareholder.

3. PRESIDENT AND CHIEF EXECUTIVE OFFICER'S PRESENTATION

3.1 Chairman invited the PCEO to give his presentation. PCEO reviewed the progress of the Company during FY20-21 and shared the measures that Management has taken to protect the Company and the community during this COVID-19 pandemic. He also discussed the development of new revenue streams and the efforts made to accelerate the Company's transformation. Details of the PCEO's presentation can be found in the PCEO's Presentation for AGM 2021 Transcript which was published on the Company's website and on SGXNET on 22 July 2021.

4. RESPONSES TO QUESTIONS OF COMMON INTEREST

1. Chairman thanked PCEO for his presentation. To allow shareholders time to submit their questions, Chairman briefed shareholders on the Company's responses to three questions of common interest that had been raised by shareholders and/or SIAS.
2. PCEO addressed the first question on how Management is reprioritising the Group's capital expenditure to balance the need to maintain a healthy level of liquidity/cash flow and the need to develop capabilities and increase productivity. He explained that three key actions have been taken by Management.
3. 1. The first was to reprioritise the Group's capital expenditure ("CAPEX") by reducing all non-essential spending. However, the Company continued CAPEX investments for transformational projects that would increase efficiency and productivity in the future and improve services for customers. The Company had a CAPEX spend of S$63 million in FY20-21, which was much lower than the CAPEX spend of S$83 million in FY19-20 and S$90 million in FY18-19.
   2. The second action which Management took was to maintain healthy liquidity throughout the crisis. The Company had a net cash position of about S$200 million at the end of FY20-21 and managed to generate positive EBITDA (earnings before interest, taxes, depreciation, and amortisation) for each of the last three quarters. The debt-equity ratio was 0.56 times, but would have been 0.44 times if we had excluded the impact of adopting the Singapore Financial Reporting Standards (International) ("SFRS(I)") 16 accounting standard. He added that this ratio is very low compared to peers in the same industry.
   3. Finally, as discussed during the PCEO's presentation, Management also managed to execute the growth strategy by ring-fencing key capabilities that would allow the Company to increase productivity in the future and to improve customer service. The Company successfully integrated Nanjing Weizhou, a central kitchen serving aviation food across 85 airports in mainland China, which was acquired in the prior financial year. The acquisition of Monty's Bakehouse, the leader in the aviation industry for sustainably packaged snacks, was also integrated and the Company has built on this acquisition and launched new services for sustainable packaging for our airline customers across Asia during the pandemic.

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1. The next question was on whether the Board has evaluated the Group's financial position and set a limit to the Group's leverage. Chairman assured shareholders that besides closely monitoring financial ratios and implied target credit ratings, the Board also reviewed and scrutinised the balance sheet to ensure alignment with the strategic direction of the Company. PCEO highlighted the criticality of cash and added that the Board has been closely monitoring the Company's net cash balance and debt-equity ratio. He added that the debt-equity ratio has been further reduced in the current quarter to 0.34 times, down from 0.44 times in FY20-21(excluding the impact of adopting SFRS(I) 16), after the Board and Management became more confident about the Company's cash flows and proceeded to reduce liabilities by paying down a term loan of S$150 million.
2. With regard to question three on whether SATS declared dividends for 2021, Chairman replied that the Company was not able to declare dividends due to the uncertainties and significant challenges faced in the operating environment caused by the pandemic. The Board has decided that the Company should conserve cash in order to preserve more jobs and capabilities to support its customers, and to pursue strategic opportunities for future growth.

5. NOTICE OF ANNUAL GENERAL MEETING

Chairman informed the Meeting that the Notice of the AGM had been published on the Company's website and on SGXNET on 30 June 2021 and proposed that the Notice be taken as read.

ORDINARY BUSINESS

6. RESOLUTION 1:To receive and adopt the Directors' Statement and Audited Financial Statements for the financial year ended 31 March 2021 and the Auditors' Report thereon

1. Chairman informed the shareholders that the first item on the Agenda was to receive and adopt the Directors' Statement and Audited Financial Statements for FY20-21 and the Auditors' Report thereon.
2. Chairman proposed the motion and proceeded to address the questions which were submitted by shareholders in relation to the resolution.
3. A shareholder asked if SATS had ignored the non-aviation food sectors over the years. Chairman highlighted that the Company has actually been developing the non-aviation food sector for some time and the traction gained from the development helped to contribute to the revenue growth this year, even during the pandemic. PCEO added that SATS has been investing in growing non-travel-related revenues even before the pandemic. This has allowed the Company to have a certain amount of momentum to compensate for the drop-off in revenues from travel-related services, even with the onset of the pandemic.
4. PCEO elaborated that the Company had built its first kitchen dedicated to non-travel related catering services in Kunshan, China three years ago. Revenues from this kitchen have continued to grow during the pandemic and it is now cash flow positive. It has been serving large customers like YUM China. The Company has also used the

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knowledge gained in operating Kunshan kitchen across aviation kitchens in Singapore and around the region, including those owned by its associates. This has allowed SATS to generate a 38% growth in non-travel related revenues in the year, which showed the good traction being generated from the non-travel related food segment. He further elaborated that currently almost half of the Company's revenue was non- travel related, as SATS was able to accelerate the momentum of growth in these new segments much faster than other industry players whose businesses were less diversified.

1. A shareholder asked when SATS would start paying dividends again. Chairman replied that SATS would continue to follow the policy of paying progressive dividends on a sustainable basis. The Board will consider this carefully, taking into account the financial capacity of the Company, and more importantly, when there are clear insights on how the uncertainties and challenges arising from the pandemic would turn out. Chairman assured shareholders that the Board would like to start paying dividends as soon as it is possible, but at the current stage it would be difficult to determine this with any certainty. PCEO added that the Company would consider paying dividends when the Company is making profit and cash flow is positive without support from government reliefs.
2. A shareholder enquired on the length of time SATS could sustain itself before it needs to raise cash from investors, like what Singapore Airlines Limited and SembCorp Marine Ltd have done. Chairman suggested that while it would be difficult to predict the vagaries of the pandemic, the Board believed that the Company could sustain itself without needing to raise cash from investors. As the PCEO has reported earlier, SATS is cash flow positive. PCEO agreed with the Chairman and expressed confidence that SATS could sustain itself without requiring equity injections from investors. He emphasised that SATS has maintained a very flexible and strong capital structure, and has plenty of capacity to raise debt, if required, but the Company has instead reduced its debt. He reported that SATS has established a S$2 billion medium term note programme, of which only S$300 million has been drawn down. SATS has also repaid a S$150 million term loan in April 2021, because it has managed to get its cash flow into a relatively strong position despite the reduction in aviation volumes.
3. A shareholder asked how the uncertainty in global travel demand would impact SATS' business and the international cruise business in Singapore, and what strategy would the Management undertake to ensure that the cruise business remains viable in the longer term. PCEO replied that SATS has actually been operating the cruise centre for Singapore-based passengers, i.e. there are no stops at overseas ports. The ships leave and return to Marina Bay Cruise Centre. This turned out to be a very popular type of vacation during the pandemic, and so the demand for the cruise business has been strong since it was reopened for domestic use. Hence, under the current operating status, the cruise business has been viable and cash flow positive. PCEO added that the demand for cruises would increase when cruises are allowed to visit other countries, and this would allow the cruise business to return to the point where it would make a strong contribution.