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SATS Ltd’s Historical Financial Performance: What Investors Should Know

SATS Ltd (SGX: S58) is a provider of food solutions and gateway services solutions. Under the food solutions business, it provides services such as in-flight catering and institutional catering. Under the gateway services solutions segment, it is involved in ground handling, security services, and baggage handling, among others.

In its latest annual report, SATS gave a summary of its financial performance from FY2013-14 to FY2017-18 (the firm has a 31 March year-end), including its dividend history. Here are some highlights.

Revenue and net profit

In FY2017-18, revenue inched down by 0.3% year-on-year to S$1.72 billion, but net profit rose 1.4% to S$261.5 million.

Over the longer term, SATS’ revenue has been on a downtrend generally whereas its PATMI (profit after tax and minority interests, which is another term for net profit) has been on an uptrend. The trends can be seen from the chart below:Source: SATS FY2017-18 annual report

In FY2013-14, SATS had revenue and PATMI of S$1.79 billion and S$180.4 million respectively. In FY2017-18, revenue came in at S$1.73 billion while PATMI was S$261.5 million.

As the PATMI increase more than offsets the revenue decline, SATS’ net profit margin has climbed from 10.2% in FY2013-14 to 15.4% in FY2017-18. The improvement is commendable, as an increasing net profit margin could signal a widening economic moat. One of the reasons for the improving net profit margin could be lower operational costs with the use of technology.

In its FY2017-18 earnings release, SATS said that “the deployment of technology has enabled us to handle the growing traffic with increased productivity and helped to offset ongoing price pressure” at Changi airport.

SATS has an extensive network of joint ventures and strategic alliances in many countries. Right now, the company has a presence in 60 airports and 62 cities across Asia and the Middle East. The share of results of associates and joint-ventures (net of tax) has been rising from S$47.2 million in FY2013-14 to S$71.2 million in FY2017-18, which translates to an annualised growth rate of 10.8%.

Earnings per share and return on equity

The next chart shows SATS’ earnings per share (EPS) and return on equity (ROE) over the past five years:Source: SATS FY2017-18 annual report

In line with the increasing PATMI seen earlier, EPS has also improved from 16.1 cents in FY2013-14 to 23.4 cents in FY2017-18, rising 9.8% annually.

Its ROE has also generally been on an uptrend, which is pleasing to see. SATS has managed to increase in ROE with very little debt; SATS’ debt-to-equity ratio ranged from just 0.07 to 0.08 times in the last five years. The improving ROE with negligible debt demonstrates the competency of SATS’ management team.

Dividend per share

With better profitability over the years, SATS has been able to consistently increase the dividends paid out. This can be seen from the chart below:Source: SATS FY2017-18 annual report

Dividend has increased from 13 cents in FY2013-14 to 18 cents in FY2017-18, giving an annual growth of 8.5%. The dividends are also well-covered. As an example, in FY2017-18, dividend cover was 1.3 times while the dividend payout in terms of EPS was 76.9%.

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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.