SATS – BT

SATS Q4 net profit rises 9% to $50.7m

Operating revenue jumps 29.3%; final dividend payout of 12 cents per share proposed

SATS Ltd announced strong operating numbers all round and unveiled a generous final dividend payout of 12 cents per share yesterday.

The January-March quarter saw attributable profits rise 9 per cent to $50.7 million, from $46.5 million a year earlier. Operating revenue for the quarter increased 29.3 per cent to $504.9 million on the back of higher level of activities and the consolidation of Japan-based TFK Corporation (TFK). TFK contributed revenue of $72.6 million.

However, the ground services operator, which counts Japan Airlines as its main customer accounting for 60 per cent of its revenue, took a hit from the March earthquake and tsunami.

For the full year to end-March, SATS’ attributable profit rose 5.6 per cent to $191.4 million, from $181.2 million. Excluding jobs credit of $17.1 million received in the preceding year and the $6 million in M&A expenses, the underlying profit would have increased 20.3 per cent to $197.4 million.

Revenue rose 12.4 per cent to $1.73 billion, from $1.54 billion. The figure could have been higher if not for some exchange rate translation impact.

For example, SATS’ topline would have been $37 million higher if not for a 9 per cent decline in the value of the UK pound versus the Sing dollar.

Associates and joint ventures contributed some $61.2 million for the year, a 46.1 per cent increase from the $41.9 million a year earlier. Gross dividends from associates/joint ventures peaked at $39.5 million for the year, up 58 per cent from the previous year.

The company is paying a total dividend of 12 cents per share, comprising final dividend of 6 cents plus a special dividend of another 6 cents. Together with interim dividend of 5 cents already paid, total dividend for the year is 17 cents per share. This raised the total payout ratio to 98 per cent.

One of the key challenges the company faced, especially during the final quarter, was material cost inflation, though CEO Clement Woon said the company managed to mitigate the full impact of this via a savvy purchasing strategy.

Cost of raw materials surged 41.1 per cent to $143.9 million during the January-March 2011 quarter. Staff costs rose 35.1 per cent to $193.7 million, mainly due to the absence of job credits.

Operating expenditure for the quarter rose 29.8 per cent to $454.7 million, which was higher than the quarterly revenue of $390.6 million SATS chalked up during the January-March 2010 period.

For the full year the rise was 14 per cent to $1.54 billion – a figure equal to the previous full year’s revenue.

Operating margin for the final quarter shrank to 9.9 per cent, from 10.3 per cent, largely due to the absence of the ‘job credits’ effect. For the full year, operating margin narrowed to 10.7 per cent, compared to 12 per cent in FY2009/10.

The company had cash of some $296.1 million at end-March, compared to $195.8 million a year earlier. Its debt/equity ratio rose to 0.12 from 0.02 a year earlier.

Aviation continued to be its biggest business, contributing to 59.2 per cent of revenue. Food solutions accounted for 46.1 per cent of revenue, while gateway solutions was 31.8 per cent, and its UK foods business accounted for 21.5 per cent. Singapore accounted for over 60 per cent of its topline.

Flights handled rose 7.7 per cent during the year, while passengers handled rose 7.2 per cent. The company saw a significant increase in catering demand for the premium ‘front cabins’, which portends better margins and yields.

Going forward, SATS said it will focus on strengthening its Japan operations by leveraging on the combined competencies within its aviation network.

While it maintained that TFK will not have a material effect on its performance in FY2011-12, it added it would remain vigilant over the ’emerging situation in Japan’ and take appropriate actions should the situation deteriorate.

‘TFK and recent joint ventures, AISATS and Adel Abuljadayel Flight Catering (AAFC) in Saudi Arabia underscore SATS’ continuous efforts to strengthen its international network to serve key airline customers in more locations,’ the company said.

AISATS and AAFC are also expected to be earnings accretive in FY2011-12.

In Singapore, SATS said it would mitigate general cost inflation with more productivity enhancement projects.


 

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