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.
The company recently published its annual report for its financial year ending 31 March 2018 (FY2018). Given that reading an annual report is one of the best ways to keep up with a company’s developments, I decided to go through SATS’s latest annual report to understand the company’s prospects, and how it had performed in FY2018.
Generally, when reading an annual report, I will pay close attention to the letter to shareholders that the company’s chairman and/or CEO writes. In this article, I will look at an area that I found interesting: SATS’s innovations and use of technology to meet challenges and grow its business.
SATS’s management first set the stage by describing the company’s business landscape, the challenges it is facing, and how it is tackling the issues:
“Global air passenger volumes grew 7.2%, with the Asia Pacific region leading the way at 9.0% growth. However, persistent overcapacity and higher oil prices have constrained airline profitability, resulting in pricing pressure on SATS. We continue to manage this challenging environment by innovating new capabilities with our customers and using technology to gain more productivity from our scale.”
Management then gave some concrete examples of how it has been innovating and applying technology to solve its problems. Let’s start with digitalization and automation:
“For instance, we have digitised many of our processes to enable quicker turnaround, greater accuracy, and efficiency. Our highly automated eCommerce AirHub reduces the processing time of airmail packages by 50% and can handle as many as 1,800 mail bags a day…
…Food Solutions is reducing the cost of preparing high quality, authentic food by automating production and logistics processes. For example, they launched an award-winning, automated guided food delivery trolley that requires only a single person to deliver several carts to airport lounges at one go.
Next, there is the use of smart devices:
“We are deploying augmented reality smart glasses across our ramp operations with the goal of reducing cargo and baggage loading time by 25%. In our cargo operations, we have also launched an innovative Smartgate Volumetric Scanner that allows the weight and volume of shipments to be measured and recorded simultaneously within seconds…
…Our smart wheelchair deploys a similar technology [as the automated guided food delivery trolley above] to allow a convoy of wheelchairs with only one person leading them to take travellers in need of assistance around the airport.”
Then, there is also the deployment of new apps:
“With greater convenience for travellers in mind, we have launched a mobile app, Ready To Travel, to enrich their travelling experience. The app provides useful and timely information to help them navigate within 12 airports (with more to come) and integrates customised service options such as airport lounge access, concierge services, insurance coverage, and overseas data connectivity to enhance the travellers’ experience.”
Looking at all the above, SATS operates in a challenging business environment that limits the company’s pricing power if it chooses to stand still. Thus, it is important that the company continues to explore innovations and technologies that can help it improve its efficiency and customer service. And as we’ve seen, this is something SATS has been doing.
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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.