SATS Ltd’s Latest Earnings: What Investors Should Know

SATS Ltd (SGX: S58) reported its fiscal fourth-quarter earnings earlier today. The reporting period was for 1 January 2015 to 31 March 2015.

SATS has two major divisions, namely, Food Solutions and Gateway Services. The first division covers airline catering, food distribution, industrial catering and other services. Meanwhile, Gateway Solutions is involved in ground handling services of passengers, flights, and cargo.

You can look up SATS’ fiscal third-quarter earnings here.

Financial highlights

The following’s a rundown on the company’s latest financial figures:

  1. Quarterly revenue for SATS slipped by 2.2% to $425.1 million on a year on year comparison. For the financial year ended 31 March 2015 (FY14/15), SATS’s revenue had dipped by 1.9% to $1.75 billion.
  2. For the fourth quarter, net profit attributable to shareholders rose by 20% to $51.6 million when pitted against the same quarter a year ago. SATS’s net profit for the whole of FY14/15 had climbed by a healthy 8.5% to $195.7 million. Lower cost of raw materials had helped boost the company’s profit line here.
  3. Earnings per share (EPS) followed suit with a strong 21.1% increase from 3.8 cents in the fourth-quarter last year to 4.6 cents per share in the reporting quarter. For FY14/15, EPS came in at 17.4 cents, a good 8.7% increase compared to the EPS of 16 cents a year ago.
  4. For FY14/15, cashflow from operations came in at $236.4 million with capital expenditures clocking in at $61.3 million. The low level of capex gives SATS a nice $175 million in free cash flow. Unfortunately, these figures are all a small step backwards compared to FY13/14; back then, SATS had cashflow from operations of $246.9 million, capital expenditures of $57.1 million, and free cash flow of $189.8 million.
  5. To round off the financial year, SATS’s board of directors declared a final dividend of 9 cents per share (up 12.5% from 8 cents per share a year ago). Together with the interim dividend of 5 cents per share (unchanged from last year), FY14/15’s annual dividend stands at 14 cents.
  6. SATS ended FY14/15 with a balance sheet that had strengthened considerably from a year ago. As at 31 March 2015, SATS had $410.9 million in cash and equivalents and $105.3 million in debt; at end-March 2014, the selfsame figures were $340.8 million and $114.2 million, respectively.

In all, SATS saw its profit rise nicely despite having stagnant revenue. The food distribution outfit boasts a healthy balance sheet and has also generated a good amount of free cash flow. It remains to be seen if SATS can boost its top-line in the quarters to come though.

Operational highlights

For the whole of FY14/15, revenue from the Food Solutions business segment was down 4.7% year on year to $1.05 billion due to a weaker performance from its Japanese subsidiary (TFK), and the loss of contributions from its divestment of its Australian subsidiary (Urangan Fisheries).

On the flipside, SATS’s Gateway Services segment had enjoyed a 2.8% uptick in revenue to $607 million for FY14/15.

To round out the year, management provided the statement below in SATS’s earnings release about the firm’s future outlook:

“The business environment remains challenging with lower economic growth, competitive pressures in the regional aviation sector and rising manpower costs. However, the demand for travel, high quality food and e-commerce will continue to grow, driven by the fast pace of urbanisation in Asia.

We are progressing well in our strategy of improving productivity through scale and connectivity in our existing business. We are also launching new ventures that will bring valuable, innovative products and services to the market.”

Foolish summary

At its opening price today of $3.20, SATS traded at around 18.4 times its trailing earnings and has a historical dividend yield of 4.3% (based on its dividend of 14 cents per share for FY14/15).​

For more (free!) stock analyses and investing tips, sign up here for your FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock SingaporeIt will teach you how you can grow your wealth in the years ahead.

Like us on Facebook to follow our latest hot articles.

The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.