SATS – BT

SATS profit surges as revenue hits record

Full-year results get boost from SFI consolidation and offshore associates

FULL consolidation of Singapore Food Industries (SFI) and stronger contribution from offshore associates boosted the results of mainboard-listed Singapore Airport Terminal Services (SATS) during a year when its aviation business was under pressure.

The company, which ceased to be a Singapore Airline (SIA) subsidiary in September last year and is now 44 per cent owned by Temasek Holdings, yesterday unveiled record revenue of $1.54 billion for the year ended March 31, 2010.

This was a 45 per cent rise from the previous year’s $1.06 billion, and was due to some $634.4 million in contribution by SFI, which SATS acquired in February last year.

Net profit was up 24 per cent to $181.2 million, from $146.7 million, boosted by strong contribution from overseas businesses, especially ground-handling associates in Indonesia and Hong Kong.

During its January-March final quarter, the company boosted its net profit by 10 per cent to $46.5 million, on a 20 per cent rise in revenue to $390.6 million. The previous corresponding quarter’s numbers included two months of contribution from SFI.

The company had $196.4 million in cash, with free cashflow up 22 per cent to $190.1 million. Having prematurely paid down its outstanding $200 million MTN facility several months ago, it had virtually no debt.

SATS declared a final dividend of 8 cents per share, which when added to the 5 cents interim payout, totalled 13 cents for the year – 30 per cent more than the previous year and a record payout ratio of 78.1 per cent for normal dividend.

Besides the fact that food is becoming an increasingly huge portion of SATS’ business, what was striking about this set of results was the fact that its overseas associates – in which SATS had patiently placed a lot of faith for so many years – started paying off.

During the fourth quarter, contribution by overseas businesses – including associates – rose a whopping 225 per cent to $13 million. For the full year, their contribution grew by 89 per cent to $41.9 million.

The overseas business accounted for 27.3 per cent of revenue, almost four-fold from the previous year’s 7.5 per cent.

CEO Clement Woon pointed out that SATS’ Indonesian business did well as the country’s aviation industry remained largely unscathed by the industry slowdown last year. Meanwhile, the Hong Kong cargo handling business continued riding on the East Asian economic recovery.

With SFI now fully integrated and with its UK-based Daniels Group business a market leader, food now accounts for 67 per cent of SATS’ revenue, leaving aviation with just 32.2 per cent (the rest is corporate business). But in terms of segmental business, aviation is 56.7 per cent, down from 86.6 per cent a year earlier. Non-aviation business accounts for 43.1 per cent.

Mr Woon also expressed confidence that SATS’ joint venture in India with Air India will soon deliver on its promise by clinching airport contracts around the country.

‘We are now positioned to bring in the business,’ said Mr Woon, who has been instrumental in charting the transformation of the erstwhile SIA subsidiary.

Going forward, he expressed confidence that SATS was well positioned to ride the pickup in the global aviation market in particular, and the global economy in general.

Separately, SATS yesterday also announced that it has secured a 5-plus-5 year A$224 million contract from Singapore Armed Forces to provide logistics and support services in Australia.

SATS shares closed trading yesterday at $2.78.

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