SATS Ltd’s Full-Year Earnings: What Investors Should Know

This morning, SATS Ltd (SGX: S58) released its full-year earnings for the financial year ended 31 March 2018 (FY17/18). Here are 10 things investors should know from the earnings announcement:

1. Revenue for the year slipped 0.3% year-on-year to S$1.72 billion. Revenue from Food Solutions decreased 2.7% to S$946.6 million while Gateway Services’ revenue rose 2.9% to S$776.5 million. The latter’s revenue improved due to strong cargo tonnage and flights handled. Excluding the deconsolidation impact of SATS Hong Kong (now accounted for as an associate) in July 2017, the overall revenue would have gone up by S$25.8 million or 1.5%, while revenue from Gateway Services would have risen S$52.5 million or 7.3%.

2. Share of results of associates and joint-ventures (net of tax) rose 9.2% to S$71.2 million. The better performance from Gateway Services’ associates/joint ventures was partially offset by a weaker performance from Food Solutions’ associates/joint ventures.

3. Profit attributable to shareholders increased 1.4% to S$261.5 million. The rise was on the back of healthy contribution from associates/joint ventures and increased non-operating gains, partially offset by lower operating profit.

4. Underlying net profit increased 0.8% to S$236.1 million. The underlying net profit excludes any one-off gains.

5. For FY17/18, diluted earnings per share came in at 23.2 cents versus 23.0 cents clocked in a year ago.

6. As at 31 March 2018, SATS had S$373.3 million in cash and equivalents, and S$106.4 million in total borrowings. This gives a net cash position of S$266.9 million. The balance sheet slightly weakened over the year. Exactly one year ago, the firm had S$505.8 million in cash balance and S$108.6 million in total debt, which translates to S$397.2 million in net cash.

7. Return on equity was stable at 16.2% for the year, compared to 16.7% last year.

8. Operating cash flow for FY17/18 was S$245.5 million, down from S$308.9 million a year back. With capital expenditure increasing from S$88.1 million to S$99.2 million, SATS’ free cash flow fell from S$220.8 million to S$146.3 million.

9. The board has recommended a final dividend of 12 cents per share. Including the interim dividend of six cents per share already paid out, the total dividend for the year would increase 5.9% year-on-year to 18 cents per share. In comparison, a year ago, SATS paid out a total dividend of 17 cents per share (interim dividend of six cents per share and a final dividend of 11 cents per share).

10. Alex Hungate, president and chief executive of SATS, commented on his company’s latest performance and the growth ahead:

“The Group has gained ground this year despite a challenging operating environment. Our investment in new technologies helped us to alleviate price pressures, as we handled higher operating volumes with better productivity, and enhanced our reputation for service and innovation. In FY17-18, we remained resilient and increased net profit by 1.4%, as well as maintained strong return-on-equity at 16.2%.

Digitising our operations is an important step towards a seamless network that will better serve our clients, business partners, and passengers as we continue our expansion into the key aviation hubs in the region. We will build momentum through constant innovation and talent development to support our next phase of growth.”

SATS shares ended the day at S$5.28 apiece, giving it a trailing price-to-earnings ratio of 22.8 and a trailing dividend yield of 3.4%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of SATS Ltd. Motley Fool Singapore contributor Sudhan P owns shares in SATS Ltd.