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

SATS Ltd (SGX: S58) is a company providing food solutions and gateway services solutions. The Food Solutions covers airline catering, food distribution, industrial catering whereas Gateway Solutions is involved in ground handling services of passengers, flights and cargo.

On 19 July, SATS announced its first quarter results for its financial year ending 31 March 2019 (FY18/19). 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 first quarter of FY18/19:

Source: SATS’ Results Presentation

Overall, we see that both sales and profit after tax and minority interest (PATMI) were better than those of the same period last year.

The positives

Firstly, revenue was up across the board. Food Solutions revenue grew 2.7% year-on-year to S$239.5 million while Gateway Services grew its revenue by 3.4% year-on-year to S$199.6 million.

Secondly, operating expenditure grew at a slower pace as compared to revenue. This resulted in an expansion of operating margin from 12.5% last year to 14.8% in this quarter.

Thirdly, free cash flow for the quarter was S$72.3 million, up from S$27.7 million in the same period last year, mainly due to the higher operating cash flow.

Lastly, SATS’ balance sheet remained strong with cash and short-term deposits of S$439.7 million and debt of S$106.1 million, as at 30 June 2018.

The negative

There is only one negative point that investors should from the latest earnings update, which is the weaker performance in SATS’ associates and joint ventures. Associates and joint venture’s profit after tax contribution declined marginally by 1.3% to S$15.3 million. The fall was mainly due to weaker performance from Gateway Services, where profit after tax came down by 8.3% to S$11.1 million.

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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.