SATS Limited (SATS)
SATS is a regional provider of Gateway Services and Food Solutions. The company caters to the aviation sector, government, hospitality, food, healthcare, freight and logistics industries. SATS was established in 1972, as a separate, wholly-owned subsidiary of Singapore Airlines.
FY 2018/19 Financial Highlights:
Source: SATS FY 2018/19 Annual Report
- SATS’ revenue for the financial year ended 31 March 2019 (FY 2018/19) rose by 6% year-on-year to SGD 1,828 million.
- FY 2018/19 expenditure was 5.5% higher than the previous financial year at SGD 1,581 million. The increase was mostly driven by volume and revenue growth, as well as the consolidation of a number of its entities during the fourth quarter.
- Overall operating profit for SATS grew 9.1% year-on-year to SGD 247 million.
- However, net profit attributable to owners of the company dropped by 5% to SGD 248.4 million due to one-off gains. If the one-off gains were excluded, underlying net profit year would have been 2.2% higher year-on-year.
Source: SATS FY 2018/19 Annual Report
Both of SATS’ main businesses – Food Solutions and Gateway Services – experienced volume growth during the financial year and contributed to the company’s 6% increase in FY 2018/19 revenue.
Performance Drivers (Positive Factors)
- Food Solutions
SATS’ Food Solutions business accounted for 54.1% of total revenue for FY 2018/19. This segment covers inflight catering, institutional catering, chilled, frozen and retort food manufacturing, hospitality services, as well as airline linen and laundry services.
Food Solutions revenue increased by 4.4% year-on-year to SGD 988.2 million for FY 2018/19. This growth was driven by higher contributions from Japanese subsidiary TFK Corporation (increase of SGD 8.7 million or 3.6%), as well as the non-aviation business in China (increase of SGD 4.9 million or 140%). Further, the volume of meals served, including SATS subsidiaries, joint ventures and associates, increased 3.7% to 167 million.
- Gateway Services
SATS’ Gateway Services business accounted for 45.8% of total revenue for FY 2018/19. This segment covers airport and cruise terminal services, including ground and cargo handling, passenger and security services, baggage handling, apron services and cargo logistics services.
Gateway Services’ revenue rose by 7.9% year-on-year to SGD 837.8 million in FY 2018/19, on the back of volume growth in flights handled, better performance in cruise terminal operations, as well as the consolidation of Ground Team Red Holdings and Ground Team Red (collectively known as “GTR entities”) effective from January 2019. The consolidation of the GTR entities contributed to 20.6% of the SATS’ overall growth.
Meanwhile, operating volumes – including SATS subsidiaries, joint ventures and associates –improved across all segments of the business. Passengers handled increased by 17.8%, flights handled rose by 3.2%, cargo tonnage grew by 14.9%, while ships calls surged by 65.1%.
Performance Drivers (Negative Factors)
- Associates/Joint Ventures
SATS’ share of results from associates/joint ventures decreased by 62.9% to SGD 8.9 million in FY 2018/19. The associates/joint ventures of both Gateway Services and Food Solutions contributed lower earnings for the financial year.
- Operating Expenditure
Total operating expenditure rose by 5.5% year-on-year to SGD 1,581 million, driven by higher volume of business activities as well as the consolidation of the GTR entities. Staff costs increased due to new Terminal 4 operations and reduced employment credits. Depreciation and amortization went up due to new projects and assets, while the rise in company premise and utilities expenses was mainly due to additional rental space and higher utility rates. SATS also faced higher fuel costs and IT expenses, as the company invested in technological initiatives to improve service and productivity.
Source: SATS Annual Report FY 2018/19