SATS Ltd’s Latest Earnings: What Investors Should Know

SATS Ltd (SGX:S58) reported its second quarter earnings for the financial year ending 31 March 2016 (FY15/16) yesterday. The reporting period was for 1 July 2015 to 30 September 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 also look up the fourth-quarter earnings here.

Financial highlights

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

  1. Quarterly revenue for SATS slipped by 4.4% to $422.7 million year on year.
  2. For the second quarter, net profit attributable to shareholders rose by a strong 26.8% year on year to come in at $59.7 million. Lower cost of raw materials helped to lift its profit line.  
  3. SATS’s earnings per share (EPS) also rose by 28.6% from 4.2 cents per share in the second quarter last year to 5.4 cents per share in the reporting quarter.
  4. For FY15/16’s second quarter, cashflow from operations came in at $29.5 million with capital expenditure clocking in at $10.1 million. The lower level of capex gave SATS $19.4 million in free cash flow.  
  5. As of 31 September 2015, the group had $402.9 million in cash and equivalents and $108.7 million in debt. This is an slight decrease from the $429.7 million in cash and equivalents and $105.3 million in debt that SATS reported on 31 March 2015.

In all, SATS saw revenue dip but profit rise strongly. The food distribution giant boasted a healthy balance sheet with a good amount of free cash flow. The board of directors declared an interim dividend of $0.05 per share, unchanged from the previous year.

Operational Highlights

Revenue from its Food Solutions segment was down 9.2% year on year, due to a weaker Japanese Yen and the loss of contributions as a result of its divestment of its Australian subsidiary (Urangan Fisheries). This was offset by a stronger showing in SATS’s Gateway Services segment, which saw a 2.9% revenue growth year on year.

Management provided the statement below in SATS’s earnings release about the firm’s future outlook:

“The operating environment for SATS continues to be challenging with slower regional economic growth, competitive pressures in aviation and increasing manpower costs.

“However, we remain confident in the long-term growth prospects for aviation and food solutions in Asia.

“We are successfully raising productivity by adopting new technologies and driving economies of scale. We are also growing into adjacent businesses and geographies, as demonstrated by our offer to buy a 49% equity stake in Brahim’s Airline Catering Holdings.”

Foolish summary

At its closing price yesterday of $3.80, SATS traded at around 19.8 times trailing earnings and a trailing dividend yield of 3.7%.

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.