The surge in air travel and strong demand for holidays have benefitted the airline, travel, and hospitality sectors.
Several beneficiaries include Singapore’s blue-chip carrier Singapore Airlines Limited (SGX: C6L) and maintenance, repair and overhaul (MRO) specialist SIA Engineering Ltd (SGX: S59).
SATS Ltd (SGX: S58) also reported a robust set of earnings for its latest fiscal 2024 (FY2024) results ending 31 March 2024.
The airline ground handler and food caterer turned in a sparkling report card and also resumed paying dividends.
Here are five highlights from the group’s latest FY2024 earnings report.
A surge in profit and free cash flow
Revenue for FY2024 nearly tripled year on year to S$5.1 billion, a record, contributed mainly by the consolidation of Worldwide Flight Services (WFS), an increase in air cargo volumes, and the ongoing travel recovery.
Operating profit came in at S$244.2 million, reversing the operating loss of S$48 million a year ago.
Net profit stood at S$56.4 million, a sharp turnaround from the net loss of S$26.5 million in FY2023.
Excluding one-off items, SATS’ core underlying net profit for FY2024 was S$78.5 million, a more than fourfold year on year increase from S$18.2 million.
The stellar set of earnings was possible because SATS reported a more than 10-fold year on year increase in net profit for the second half of FY2024, boosted by government grants and significantly better results from its associates and joint ventures.
SATS also saw a sharp increase in its operating cash flow, jumping from S$79.6 million in FY2023 to S$512.1 million in FY2024.
Free cash flow clocked in at S$326.5 million for FY2024, reversing the free cash outflow of nearly S$40 million in the prior year.
The group also resumed its dividend payments with management declaring a final dividend of S$0.015 to be paid on 8 August.
A diversified business mix
With the acquisition of WFS, SATS now boasts a more diversified business mix.
Previously, in FY2020, more than half of the group’s revenue came from Food Solutions while ground handling took up 34% of the pie.
Around 80% of revenue came from Singapore alone, with the remainder from the APAC (Asia-Pacific) region.
Fast forward to FY2024 and Cargo Handling now takes up nearly half of the group’s revenue, with Food Solutions contributing shrinking to just 22%. Ground handling made up the remaining 29%.
For the regional mix, SATS also enjoys a more diversified contribution with Singapore taking up just 34% of the pie.
APAC makes up 36% while EMEA (Europe, Middle East and Africa) and the US occupy 20% and 10% of the total revenue pie, respectively.
Operating metrics soar
SATS also saw its operating statistics soar with the surge in demand for air travel.
The number of flights handled more than doubled year on year to 600,000 for FY2024.
The group also handled around 7.8 million tonnes of cargo, up sharply from just 2.2 million tonnes back in FY2023.
In the aviation industry, SATS served up a total of 54 million meals, nearly 69% higher year on year.
The group also reported improvement in its non-aviation food catering arm, with 42 million meals served in FY2024, up from 37 million a year ago.
Encouraging commercial wins for Cargo
For its Cargo division, SATS reported several encouraging commercial wins.
Etihad Airways expanded its cold chain cargo handling with WFS to three additional airports.
SATS also snagged a cargo handling contract with Air China in Los Angeles.
After resuming flights to Singapore, Air Canada awarded passenger, ramp, and cargo handling contracts to SATS.
In total, more than S$180 million of annualised revenue in new contracts were secured in FY2024.
SATS will continue to focus its business development efforts on the top 20 global customers to drive more business flow.
A promising market for Food Solutions
Over at Food Solutions, management has pioneered a three-tier production system to disrupt the aviation food solutions sector and help SATS enter new market segments.
A network of factory and central kitchens was established in Bangkok, Tianjin, and Bengaluru to boost scale production and deliver enhanced food safety standards.
The aim is also to ramp up annual aviation production capacity in Singapore to 53 million inflight meals by 2025.
Currently, SATS has a 14% market share in the S$6 billion aviation food services market which is growing at 6% annually.
The addressable Asian market stands at more than S$450 billion for ready-to-eat meals, providing SATS with ample opportunities to capture more business for its Food Solutions division.
Get Smart: Three Rs of value creation
SATS delivered a sparkling set of earnings for FY2024 and has resumed dividend payments after suspending them during the pandemic.
Looking ahead, management intends to drive value creation through three strategic priorities (“3 Rs”) for the business.
They are – repaying loans, reinvesting in capital expenditure, and resuming dividends.
SATS provided a bright outlook and believes its business will be further bolstered by a robust e-commerce sector along with growing demand for specialised, value-added services which provide better yields.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
