SATS has been on the radar of many investors since global air travel rebounded following the pandemic.
In 2023, it completed the acquisition of global air cargo logistics provider Worldwide Flight Services (WFS) for $1.8 billion.
This acquisition was closely watched, with investors waiting to see if the combined entity would benefit from greater scale.
The company’s results for the first half of its financial year ended March 2026 (1HFY2026) suggest that its recovery is gaining pace.
A Stronger First Half: Growth Across the Board
SATS has two main divisions: gateway services and food solutions.
Generally, its business is benefiting from a recovery in global air travel and cargo volumes, as well as improving operating leverage.
Revenue in 1HFY2026 was 9.1% higher than in the first half of FY2025, at $3.1 billion.
The company’s EBIT margin expanded from 8.5% in 1HFY2025 to 9.2% in 1HFY2026, contributing to an 11.2% rise in profit attributable to shareholders of $149.8 million.
The company attributed the stronger bottom line to “volume growth and continued operational efficiency gains.”
The former included gains in cargo carried, flights handled, and meals served, while the latter included measures from automation to job redesign initiatives.
Notably, SATS’s rising income also led to a significant turnaround in its operating cash flow, which rose by 58% to $356.8 million in 1HFY2026.
This means that the company was able to organically fund an increase in CAPEX, as well as continue to pay down the debt it incurred to acquire WFS.
Free cash flow, which is the company’s operating cash flow after lease payments and less CAPEX, improved from negative $52.8 million in 1HFY2025 to just negative $1.1 million in the same period in FY2026.
One of the contributors to this was improved cash generated from operations, which resulted from improved management of working capital, among other factors.
For a business like SATS, which had taken on debt to acquire WFS, cash provides it with greater flexibility for debt management, paying out dividends, and reinvesting in its business.
Gateway Services Leads the Recovery
SATS’ growth was driven by its gateway services segment.
In 1HFY2026, revenue from this unit reached $2.4 billion, up by 11% year on year (YoY), compared to overall revenue growth of 9.1%.
One factor for this was strong growth in cargo volume, which grew by an adjusted 9.9% YoY for the second quarter of FY2026 (2QFY2026), outpacing the IATA global benchmark – which grew by 4.2% – for the 8th consecutive quarter.
A majority of this growth in 2QFY2026 was the result of the WFS acquisition, with non-like-for-like growth expanding by 6%, while organic, like-for-like growth came in at 3.7%.
As a result of its global scale, SATS was able to secure new customers including Riyadh Air and Turkish Airlines.
It also inaugurated a new facility in Copenhagen to cater to specialised e-ecommerce & freight forwarder handling services.
SATS’s ability to ramp up operations in European and American markets demonstrates the benefits of the WFS acquisition, which gave it a foothold in those regions.
Food Solutions Provides Stability
Meanwhile, SATS’ food solutions business also expanded sales to $0.7 billion in 1HFY2026, albeit at a slower pace of 3.2%, compared to the same year-ago period.
This was supported by a 3.1% increase in aviation meals served.
While the food solutions segment is smaller and growing more slowly than gateway services, it does provide SATS with some diversification.
Looking ahead, international travel growth is expected to outpace domestic growth, leading to higher demand for full-service meal offerings.
The food solutions business is roughly as profitable as gateway services.
In 1HFY2026, it had an EBIT margin of 10.7%, compared to the latter’s 10.9%.
However, since it is a smaller business, the ultimate amount of profit was smaller as well.
Dividend Growth Signals Confidence
For 1HFY2026, SAT’s board of directors declared an interim dividend of S$0.02 per share.
This was a third higher than the $0.015 per share dividend declared for the same period last year.
The most recent dividend amounts to around 20% of the company’s earnings per share of S$0.099 over the same period, which suggests that there is room to raise the dividend further going forward, especially after SATS has brought down the debt on its balance sheet.
What Could Hold the Share Price Back
SATS Singapore-listed shares were up by just 4.7% in 2025, compared to the STI Index’s 22.7% return.
However, its performance in the second half of 2025 tells a different story: they rose by 24.1%, indicating that the market has already priced in some recovery.
Other factors to bear in mind include the level of debt on its balance sheet, which it had to take on to fund the WFS acquisition.
As at 30 September 2025, SATS carried $2.4 billion of notes and borrowings, and cash and cash equivalents of $0.7 billion.
Further, global trade uncertainty in 2026 could weigh on cargo flows, and this would have an even bigger impact on SATS because of its elevated debt level.
Notably, management said that the US market remains challenging for its ground handling business, with “continued softness in domestic passenger volumes.”
Get Smart: Recovery Is About Cash, Not Just Growth
SATS’ latest results show its main gateway services business is moving into a phase that could be marked by high-quality margin expansion and stronger cash generation.
To justify further increases in the share price, it will have to consistently deliver earnings growth, cash generation, and higher dividends to investors, while continuing to pay down its debt.
These are the metrics investors watching SATS should focus on, along with its ability to execute on its plans.
When the market is unpredictable, where can you park your money with confidence? Our latest FREE report reveals 5 Singapore dividend-payers built to withstand global storms. Get it now and see what’s still worth holding.
Follow us on Facebook, Instagram and Telegram for the latest investing news and analyses!
Disclosure: Silas H. does not own shares in SATS.
