SGS liquidity sufficient to overcome impact of flight suspension until 2021-end: executive

Saudi Ground Services Co. (SGS) is sitting on nearly SAR 1.3 billion worth of cash and cash equivalents, as well as equity market investments, Mohammed Mazi, the company’s executive vice president of finance, told Argaam in a telephone interview.

The finance agreements signed by the company last September at a total value of SAR 1.5 billion will help it overcome the COVID-19 pandemic fallout even in the worst conditions, such as extension of international flights suspension until the end of 2021.

The resumption of domestic flights has directly bolstered SGS’ revenue, along with other factors, including the overall cost restructuring process that will run through 2020-end and 2021. The cost restructuring was among the key reasons that contributed to cutting losses significantly, which will help the company return to profitability at the earliest.

The size of the company’s operations increased from 18% by the end of Q2 2020 to 43% by the end of Q3 2020 ahead of rising to 53% by October-end, Mazi explained, expecting it to grow amid the resumption of international flights and Umrah.

Saudi Arabia received on Nov. 1, the first group of international Umrah pilgrims, which will boost SGS revenue in Q4 2020.

The initiatives launched by SGS to rationalize consumption enabled it to reduce costs by 43%, or SAR 207 million, in Q3 2020, when compared to the same period last year. The ground handling services company will continue cost cutting to reach the target level of SAR 520 million by year-end.

For changes in the value of SGS equity market investments in Q3 2020, Mazi pointed out that the company’s investments in Saudi Aramco’s initial public offering (IPO) reached SAR 162 million by the end of Q3 2020.

The company incurred net losses of SAR 86.8 million in Q3 2020, Argaam reported.