Blue-chip companies have been handing in their latest earnings report card this month.
Keppel Corporation Limited(SGX: BN4)announced a good set of financial numbers for 2022 while maintaining its annual dividend of S$0.33.
Just last week, Singapore’s largest bank, DBS Group(SGX: D05), reported a stellar performance with a record-high net profit and a special dividend of S$0.50 per share.
This week, SATS Ltd(SGX: S58) has provided an update on its latest fiscal 2023 third quarter (3Q FY2023) earnings.
The airline food caterer cum ground handler saw passenger and air cargo volumes surge as air travel returned with a bang.
It also foresees a sustained recovery as China reopens its borders and shareholders gave their approval for the acquisition of Worldwide Flight Services(WFS).
Here are five highlights from SATS’ earnings that investors should find interesting.
1. Higher revenue with a small net profit
SATS saw its revenue surge by 54.5% year on year to S$475.7 million for 3Q FY2023 as flight volumes reached 71% of pre-pandemic levels.
Revenue for both its Food Solutions and Gateway Services divisions rose year on year, while the consolidation of a new subsidiary, Asia Airfreight Terminal, contributed S$30.5 million to the group’s revenue.
The group, however, incurred a minor operating loss of S$1.1 million, down from the S$9.5 million reported a year earlier.
Core net profit came in at S$0.5 million, a drop from the S$5.1 million booked in 3Q FY2022.
To be sure, this number was propped up by continued government relief.
Excluding reliefs, the net loss would have been S$13.7 million, less than half of the S$33 million net loss that SATS booked a year ago.
2. Net cash position but cash flow still negative
As of 31 December 2022, SATS held total debt of around S$420 million against cash of S$590.1 million.
Net cash stood around S$170 million for the ground handler.
Despite the better all-around financial performance, operating cash flow remained negative.
For the first nine months of fiscal 2023 (9M FY2023), SATS generated a negative operating cash flow of S$19.1 million, a reversal from the S$5 million in 9M FY2022.
Capital expenditure jumped from S$54 million to S$85.6 million over the same period.
As a result, SATS generated a negative free cash flow of S$104.7 million for 9M FY2023.
3. A surge in business volumes
Business volume had risen sharply in 9M FY2023 as air travel returned with a vengeance.
SATS handled 164,000 flights in 9M FY2023, more than double the 58,200 in 9M FY2022.
Flight numbers continued to rise quarter on quarter, chalking up 62,000 flights in 3Q FY2023 compared with 55,700 in 2Q FY2023.
Passengers handled soared more than six-fold year on year to 37.1 million in 9M FY2023 while meals served rose 25.2% year on year to 49.1 million over the same period.
Cargo tonnage jumped 37% year on year to 1.74 million for 9M FY2023, though it dipped slightly by 2.2% quarter on quarter.
SATS also had to sharply ramp up its number of employees to handle the increase in business volumes, with staff strength rising from 12,000 a year ago to 17,000 at present.
4. Travel segment still dominates group revenue
For the quarter, travel-related revenue took up slightly more than three-quarters of group revenue.
This high percentage was in contrast to 3Q FY2022 when travel revenue took up just 56.4% of group revenue.
Singapore continued to make up the bulk of revenue, coming in at 80.5%.
Greater China saw a higher contribution to revenue for 3Q FY2023 at 8.1% versus just 3.6% a year ago.
This proportion is expected to increase further as flights between China and Singapore were a significant contributor to volume in the pre-pandemic days.
5. A bright outlook
SATS provided a sanguine outlook despite macroeconomic weakness and an uncertain aviation recovery across the region.
With China’s reopened borders, flight and passenger volumes are expected to continue rising.
Kerry Mok, CEO of SATS, believes that the WFS acquisition can help SATS to build geographic and business resilience as the group embarks on its next growth phase.
Funding for this acquisition also includes a proposed rights issue, the details of which will be announced when it is launched.
Get Smart: Snagging a multi-modal cargo hub contract
Just before the release of its earnings, SATS announced that AISATS, its joint venture with Air India, has been selected to design, build, finance and operate an integrated multi-modal cargo hub (MMCH) at the upcoming Noida International Airport in Uttar Pradesh.
The airport will be completed in 2024 and the MMCH will help to facilitate seamless cargo transportation and enhance the efficiency of the region’s supply chains.
AISATS expects to sign a finalised concession agreement with the vendor, Yamuna International Airport Private Limited, in the coming weeks.
This development will further boost SATS’ presence in the Asia-Pacific region and gives the group a stake in the latest aviation developments within India.
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