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SATS Ltd’s Latest Earnings: Wrapping Up a Solid Year

SATS Ltd (SGX: S58) just reported its financial results for the quarter and fiscal year ended 31 March 2016 (FY15/16) this morning.

As a brief background, SATS has two major business divisions, namely, Food Solutions and Gateway Services. The first division covers airline catering, food distribution, industrial catering, and other services. Meanwhile, Gateway Solutions provides ground handling services for passengers, flights, and cargo.

You can look up the results from SATS’s previous quarter in here.

Financial highlights

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

  1. For the fourth-quarter, SATS’s revenue slipped by 1.8% year-on-year to $418 million. For the full fiscal year, SATS’s revenue was down by 3.1% to $1.70 billion. If we exclude the food distribution revenue (which was transferred to SATS BRF Food) and the Urangan Fisheries divestment, SATS’s revenue would have been up 3% for the full year.
  2. Net profit attributable to shareholders in the quarter also dipped by 1.7% year-on-year to end at $50.7 million. For FY15/16, net profit was up nearly 13% to $221 million.
  3. Consequently, SATS’s earnings per share (EPS) fell by 2.2% from 4.6 cents in the fourth quarter last year to 4.5 cents in the reporting quarter. For the full fiscal year, SAT’s EPS was up by 13.7% to 19.9 cents.
  4. For FY15/16, cash flow from operations came in at $273.1 million with capital expenditure clocking in at $51.1 million. This resulted in SATS generating $222 million in free cash flow, a 27% increase from the $175.1 million in free cash flow seen in FY14/15 ($236.4 million in cash flow from operations minus $61.3 million in capex).
  5. As of 31 March 2016, SATS had $490 million in cash and just $110.7 million in debt. This is a healthy improvement from the $410.9 million in cash and equivalents and $105.3 million in debt that SATS reported a year ago.

In all, SATS saw lower revenue in FY15/16 but higher profit. The food catering outfit also managed to strengthen its balance sheet and generated higher free cash flow.

SATS’s board of directors proposed a final dividend of $0.10 per share. Together with the interim dividend of $0.05 per share, SATS’s total dividend for FY15/16 would amount to $0.15 per share. This is a slight improvement from the $0.14 per share in dividends paid out in the previous fiscal year.

Operational Highlights

For the fourth-quarter, the Food Solutions segment revenue was down 7.4% year-on-year due to a weaker Japanese Yen and the aforementioned transfer of a food distribution business to SATS BRF, a joint venture company. The segment recorded revenue of $232 million for the reporting quarter and $967 million (down 8%) for the full fiscal year.

Elsewhere, the Gateway Services segment experienced a 6.2% hike in revenue in the fourth-quarter to $183.8 million. For the full fiscal year, the segment’s revenue managed to climb by 4.1% to $725.9 million.

Alex Hungate, SATS’s chief executive, had given some comments in the earnings release on the company’s results and future outlook:

“Our financial performance in FY15-16 was strong, considering the challenging economic environment and intense competition. Strategic investment in technology has helped us to improve productivity and enhance services while scaling the business. We generated underlying revenue growth of 3% and achieved 12.7% increase in profit.

Our aviation business in Singapore remains a pillar of strength for SATS. In line with our vision to feed and connect Asia, we are also leveraging new opportunities created by the growth of tourism in the region as well as the demand for safe, high quality food from the burgeoning urban populations of Asia to pursue non-aviation business and expand beyond Singapore.”

At its current price of $4.24, SATS trades at 22 times trailing earnings and has a dividend yield of 3.5%.

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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.