Transport operator SMRT Corp has, for the first time, lost money on its core business of operating trains and buses.
Yesterday, it reported a loss of $25 million on its fare businesses for the financial year ended March 31, pulling down its overall net earnings to an 11-year low of $61.9 million.
The Temasek-owned group's once lucrative rail business continued to be battered by rising costs, while its moribund bus unit continued to bleed.
Even though train services saw a 2.9 per cent increase in ridership, operating profit dropped sharply from $65.1 million the year before to just $5.5 million.
This was because higher operating costs "to meet heightened ridership demands and regulatory standards" could not be covered without "commensurate fare adjustments", SMRT explained.
Fares for public transport were last adjusted in October 2011. Although the Public Transport Council has approved a fare increase of 3.2 per cent for trains and buses, this took effect only from April 6 this year.
Meanwhile, losses from operating the LRT also doubled from $1 million the year before to $2.1 million.
And despite a 4.6 per cent increase in ridership and productivity gains, bus operations continued to register a sizeable loss of $28.4 million.
Other government schemes, such as free travel into the city area before the morning peak hour, resulted in higher operating expenses, said the transport operator.
Staff cost also shot up by 17 per cent to $462.4 million as the company beefed up its maintenance arm. Rail accounted for the bulk of this, as the group struggled to play catch-up with the crippling effects of an ageing system, ballooning demand and rising service standards.
As SMRT paid for 17 new trains that increased peak-hour train frequencies, cash in hand plunged from $546.3 million to $155.5 million. Net gearing also rose, from 8 per cent to 60 per cent.
Better performance by its taxi, retail space rental and advertising divisions failed to offset the disastrous results of its core business.
SMRT's taxi business posted a 49.7 per cent rise in operating profit to $9.6 million - possibly its best ever.
Rental income from retail spaces in its train stations emerged again as the biggest profit churner. It made $73.4 million, up from $67 million previously.
Advertising income was runner-up with $20.8 million, up from $18.4 million.
Even engineering services performed better, doubling its operating profit to $3.8 million.
Looking ahead, the group expects its fare business to continue to be challenging "unless there are commensurate and timely fare adjustments".
SMRT expects impending changes to its rail financing and bus operating models to address the sustainability of its fare business here. The group is said to have submitted a proposal for the Government to buy back its rail assets and take over the capital cost of replacing the assets.
Meanwhile, SMRT chief executive Desmond Kuek said the group will "continue to grow our non-fare business, with new commercial and overseas opportunities".
Despite the weaker performance, directors still managed to recommend a final dividend of 1.2 cents per share, bringing the total return for shareholders for the financial year to 2.2 cents.
This was slightly down from the 2.5 cents per share paid last year.