SATS Ltd’s Latest Earnings: Profits Up Strongly

SATS Ltd (SGX: S58) reported its first-quarter earnings for its financial year ending 31 March 2017 (FY16/17) yesterday. The reporting period was for 1 April 2016 to 30 June 2016.

SATS has two major business segments, 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 of passengers, flights, and cargo.

You can also look up the results from the company’s previous quarter in here as well.

Financial highlights

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

  1. For the fiscal first-quarter, SATS’s revenue rose by 1.8% year-on-year to $424.2 million.
  2. Net profit attributable to shareholders grew much faster, increasing by 29.2% from $49.6 million a year ago to $64.1 million.
  3. Consequently, SATS’s earnings per share (EPS) rose by 28.9% from 4.5 cents in the first-quarter of FY15/16 to 5.7 cents.
  4. For the first-quarter of FY16/17, cash flow from operations came in at $85.3 million with capital expenditure clocking in at just $19.5 million. This resulted in SATS generating nearly $66 million in free cash flow, up significantly from the $21 million seen a year ago ($26.9 million in operating cash flow and $5.9 million in capex).
  5. As of 31 June 2016, SATS has $563.8 million in cash and $121 million in debt. This is a healthy improvement from the $490 million in cash and equivalents and $110.7 million in debt that SATS reported in the previous quarter.

In all, it looks like a solid set of results from SATS. The firm recorded a slight increase in sales (more on the sales growth later), but had sharply higher profits. It also strengthened its balance sheet and increased its free cash flow.

Operational highlights

For the first-quarter of FY16/17, revenue from the Food Solutions segment was down 0.5% year-on-year to $240 million. The dip in revenue came from the transfer of a food distribution business to SATS BRF, a joint venture company.

Excluding the transfer, Food Solutions revenue would have increased by 11.4% year-on-year instead. In fact, SATS’ total quarterly revenue would have grown by 8.6% if not for the transfer of the food distribution business.

Elsewhere, SATS’s Gateway Services segment saw a 4.7% year-on-year increase in revenue to $182.9 million.

Investors should note that SATS recorded a gain of $9.3 million from the sale of its Senoko property on 30 June 2016. There was also some one-off losses totaling $0.7 million in the reporting quarter. Underlying profit (which excludes one-off gains and losses), still rose by 17.8% nonetheless from $47.1 million in the first-quarter of FY15/16 to $55.5 million.

A future outlook

On the topic of its outlook, SATS commented in its earnings release:

“We will continue to focus on improving our productivity by harnessing technology. This will position us well to weather the global economic and political uncertainties as well as intense competition. Airline load factors are improving but yields remain under pressure.

We continue to seek new opportunities in our core aviation business, building on our strong portfolio in Singapore and the region. At the same time, we are developing new business in the non-aviation space driven by demand for high quality safe food and increased travel.

The continued growth of the middle class in Asia will create new opportunities for us, as we work towards our vision of feeding and connecting Asia.”

At its closing share price of $4.35 yesterday, SATS traded at 21 times trailing earnings.

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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.