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SAS Group Interim report November 2012-April 2013

June 12, 2013 08:00

Robust measures generate lower unit costs and will strengthen SAS’ financial positionSAS continues to deliver on its established 4XNG strategy plan. The unit cost fell 10.7% and the yield development was good. After yet another eventful quarter tangible effects on the earnings can be noticed. Focus is still on implementing the strategy plan and the forecast of achieving positive income for the full-year remains firmly in place. SAS is on the right way with the launch of 50 new routes and the development of the new standard for service onboard and on the ground with the introduction of SAS Go and SAS Plus.

February – April 2013

· Revenue: MSEK 9,933 (10,070)
· Traffic: up 1.0%
· Passenger revenue adjusted for currency: up 4.4%
· Income before tax and nonrecurring items: MSEK 57 (-629)
· EBIT margin: -0.9% (-4.8%)
· Income before tax: MSEK ‑306 (‑734)
· Net income for the period: MSEK ‑388 (‑429)
· Earnings per share: SEK ‑1.18 (-1.30)
· Cash flow from operating activities MSEK 1,235 (1,148)

November 2012 – April 2013

· Revenue: MSEK 19,530 (19,369)
· Traffic: up 2.5%
· Passenger revenue adjusted for currency: up 5.3%
· Income before tax and nonrecurring items: MSEK -744 (-1,285)
· EBIT margin: -3.4% (-7.5%)
· Income before tax: MSEK -1,129 (-3,420)
· Net income for the period: MSEK -1,018 (-2,970)
· Earnings per share: SEK -3.09 (-9.03)
· Cash flow from operating activities MSEK 794 (486)

“SAS is now putting yet another eventful quarter behind it and is continuing to deliver on its established 4XNG strategy plan. It is gratifying to state that the extensive restructuring effort is now starting to create tangible effects – the underlying trend shows a continued lower unit cost and a better yield trend than expected. Income before tax and nonrecurring items improved approximately MSEK 700 and contains a positive, nonrecurring effect of about MSEK 450 as a result of the robust measures linked to renegotiated pension terms.

We acted rapidly and vigorously to strengthen our financial position – the divestment of Widerøe will generate sales proceeds (of approximately SEK 2 billion when the transaction is completed.

We were also aggressive in terms of our customer offering and have now set a new standard for onboard service and service on the ground with the introduction of SAS Go and SAS Plus.

At the same time, we must state that the earnings level is not yet satisfactory but completely in line with our expectations and our plan. Our focus is directed to fully completing the restructuring measures and the forecast of achieving positive income for the full-year remains firmly in place,” says Rickard Gustafson, SAS President and CEO.
Comments by the CEO

February – April 2013

· Income before tax and nonrecurring items improved MSEK 686 to MSEK 57
· The unit cost, excluding jet fuel, fell 10.7%, compared with the year-earlier period and 3.6% excluding effect of changed terms for early retirement pensions
· Good yield trend
· Divestment of Widerøe resulting in sales proceeds of about SEK 2 billion when the transaction is completed
· Launch of SAS Go and SAS Plus
· SAS started operating 18 new routes this year and another 32 routes will be launched during the summer

SAS is now putting yet another eventful quarter behind it and is continuing to deliver on its established 4XNG strategy plan. It is gratifying to state that the extensive restructuring effort is now starting to create tangible effects on income. Year-on-year, income improved almost MSEK 700. Income was impacted by a positive, nonrecurring effect of MSEK 450 as a result of the robust measures linked to renegotiated pension terms. The unit cost, excluding jet fuel, fell 10.7%. Adjusted for the effect of early retirement pensions, the unit cost declined 3.6%. At the same time, we must state that the earnings level is not yet satisfactory but completely in line with our expectations. Accordingly, our focus is directed to fully completing the restructuring measures and the forecast of achieving positive income for the full-year remains firmly in place.

We acted rapidly and vigorously, which has strengthened our financial position. A sale and leaseback transaction for spare engines took place during the quarter, with a liquidity effect of slightly more than MSEK 700. At the start of May, an agreement was signed to sell 80% of Widerøe, with the option of full divestment in 2016. Under the agreement, SAS will receive about SEK 2 billion when the transaction has been completed. The transaction is expected to reduce the previously announced negative impact on shareholders’ equity of amended reporting rules for pensions by approximately SEK 1.0 billion from SEK 7.9 to SEK 6.9 billion.

In addition, extensive rationalizations in administration are continuing. During the quarter, the number of full-time positions had already been reduced by about 300, with the aim of a total reduction of about 1,000 for the full-year. SAS’ total payroll expenses were also reduced by approximately 10% during the quarter, adjusted for the positive effect of early retirement pensions and restructuring costs. Recently, we also signed a new agreement for delivery of IT services to SAS, entailing a decrease of about 15% in IT costs.

At the same time as the company is implementing extensive restructuring measures in the operations, SAS’ employees are delivering a high level of service and quality. We are in the midst of an aggressive phase in the development of our customer offering and we are now setting a brand new standard for service onboard and on the ground with the introduction of SAS Go and SAS Plus. Over the course of the year, we will launch 50 new routes, of which to date we have started 18, with a further 32 routes set to open during the summer.

The implementation of a new IT system began in February, which impacted production during the start-up phase and led to reduced punctuality. The difficult winter weather also contributed to reduced punctuality for the quarter. Robust measures are now being taken to correct these initial IT problems and thus is it satisfying to state that these measures quickly generated results and punctuality in May was at 89.3%.

With the continued restructuring of SAS and aggressive measures for our customers, we are creating, step by step, a more competitive company with a more stable financial situation.

On condition that no significant unexpected external events occur, the SAS Group deems that a positive EBIT margin, exceeding 3%, and a positive EBT is possible to achieve for the full-year 2012/2013.

Stockholm, June 12, 2013

Rickard Gustafson
President and CEO

SAS discloses this information pursuant to the Swedish Securities Market Act and/or the Swedish Financial Instruments Trading Act. The information was provided for publication on June 12, at 8:00 a.m.

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