SMRT is key to the functioning of Singapore. Source: Wikimedia
SMRT Corp, Singapore’s biggest metro operator, has announced a 23-per-cent decline in first-quarter profit as the company spent more on repairs and maintenance of ageing rolling stock and major overhauls.
Net income dropped to S$15.5 million (US$11.5 million) in the second quarter, from S$20.1 million a year earlier, SMRT revealed. Revenue dropped by 2 per cent to S$313.9 million.
The operator is carrying out a transfer of rail assets to the official regulator and a buyout by Singapore’s state investment firm Temasek Holdings. Shareholders will vote on September 29 on the asset-transfer plan after numerous disruptions to transport services since 2011 brought criticism from a customer base not used to delays. Temasek’s S$1.2 billion offer to take SMRT private is being considered.
“The proposed scheme will allow SMRT to better fulfill its role as a public transport operator without the pressure of short-term market expectations,” CEO Desmond Kuek announced. “It also provides the opportunity for minority shareholders to monetize their holdings.”
The shares have climbed 10 per cent this year.
SMRT’s taxi subsidiary posted an operating profit of S$4.5 million, 18-per-cent lower, while that from bus services plummeted by a crushing 86 per cent to S$200,000. Net gearing was 67 per cent at the end of June versus 64 per cent the previous year.
The service disruptions damaged the rail operator’s standing and drove the authorities to reinforce rules on maintenance and supervision.
The Transport Minister Khaw Boon Wan appointed an engineer last October to advise on transforming railway operations. As part of the revamp, rail operators were told to concentrate on services instead of also having to build up, replace and operate services, leading to the proposed asset transfers to the regulator.
SMRT runs three Singaporean rail lines while SBS Transit runs two. A sixth subway line, which will start operations in 2019, is being constructed as part of its plan to double the already-extensive rail network in the next 10 years.
Temasek currently owns 54 per cent of SMRT and last month reported the first drop in the value of its stakes in seven years. It has trimmed exposure to traditional banks as part of a major portfolio overhaul.