How Has SATS Ltd’s Productivity Changed Over The Last 5 Years?

There’s a way to categorise businesses into two groups: Those that can grow their profits by increasing prices, and those that can grow their profits mainly by controlling costs well.

In the first group are generally businesses that have strong brands or great products. In the second group are generally businesses that offer products whose cost matters the most to customers.

For SATS Ltd (SGX: S58), a company providing catering services and gateway services, I believe it falls into the second category. As such, it’s important that SATS manages its costs well if it wants to grow its profits.

In this article, I want to look at SATS’s productivity trend over the last five years. The idea is simple: The higher SATS’s productivity is, the more efficient its cost structure is likely to be, which in turn, would allow it to offer its services to customers at low prices.

Here’s a table showing SATS’s productivity in its last five fiscal years:

Source: SATS annual report

There are both positive as well as negative takeaways.

On the negative part, SATS’s staff costs per employee has been rising over its last five fiscal years. Yet, despite the higher staff costs per employee, revenue per employee has declined marginally.

On the positive part, value added per employee has grown over the years, a result of growth in SATS’s value added from S$1.02 billion in FY2012-13 to S$1.14 billion in FY2016-17. Moreover, the value added per employment cost has grown slightly from 1.48 times to 1.54 times.

Given what we’ve seen, it would appear that SATS’s overall productivity has improved over its last five fiscal years.

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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 Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has a recommendation for SATS Ltd.