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The Good And Bad That Investors Should Know About SATS Ltd’s Latest Quarterly Earnings

Source: SATS

SATS Ltd (SGX: S58) is a company with two business segments, namely, Food Solutions and Gateway Services. The former covers services such as airline catering, food distribution, and industrial catering. The latter is involved in ground handling services of passengers, flights, ferries, and cargo.

In early November, SATS announced its second quarter results for its financial year ending 31 March 2018 (FY17/18). There are both positive and negative takeaways that investors may want to learn about. But first, let’s run through the company’s numbers.

The results

Here’s a condensed income statement from SATS for the second quarter of its FY17/18:


Source: SATS FY17/18 second quarter earnings press release

We can see that SATS’s quarterly net profit to shareholders grew 16.3% year-on-year, despite a 0.8% decline in revenue.

The positives

Firstly, SATS’s Gateway Services segment posted a 2.3% year-on-year growth in revenue to S$244.8 million for the reporting quarter. This came despite the deconsolidation of a subsidiary’s revenue following the sale of a majority stake in said subsidiary by SATS in July 2017. Excluding the disposal, Gateway Services’ revenue would have grown by 6.8% year-on-year instead.

Secondly, SATS’s major operational metrics (passengers handled, flights handled, cargo/mail processed, gross meal produced and ship calls handled) all came in stronger on a year-on-year basis for the first half of FY17/18.


Source: SATS FY17/18 second quarter earnings presentation

Thirdly, SATS’s share of results of associates and joint ventures increased by a strong 56.5% year-on-year due to improvement in both Food Solutions’ and Gateway Services’ associates and joint ventures.

Fourthly, operating cash flow more than doubled from S$19.8 million a year ago to S$44.0 million. As a result, SATS’s free cash flow increased significantly from S$2.3 million to S$18.6 million.

The negatives

Firstly, the operating margin for the reporting quarter declined from 14.5% a year ago to 14.1%. This was mainly due to an increase in license fees as a result of the cessation of rebates by the Changi Airport Group.

Secondly, the Food Solutions segment saw a decline in quarterly revenue by 3.1% year-on-year.

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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. Motley Fool Singapore has a recommendation for Sats Ltd.