SATS – BT

SATS Q2 profit slips 11.3%

Profit at $40m on $424m revenue; group continues to fight food inflation

AIRPORT services giant SATS Ltd posted a $40.1 million net profit attributable to shareholders for the second quarter ended Sept 30, down 11.3 per cent from $45.2 million a year earlier as it continued to battle inflation, while contributions from associates and joint ventures slipped.

But underlying profit was flat at $44.6 million, compared to $45.2 million as its Japan-based TFK venture started contributing.

Topline revenue for the July-September quarter rose 32.3 per cent to $424.2 million, compared to $320.6 million.

Earnings per share (EPS) for the quarter was 3.6 cents, compared to 4.1 cents last year.

For the first half, the company posted profit attributable to shareholders of $82.6 million, down 7.7 per cent from $89.5 million. Revenue for the April-September 2011 period rose 30.3 per cent to $809.8 million.

EPS for the first half was 7.5 cents, versus 8.2 cents a year earlier.

The company, sitting on cash of some $163.4 million (prior to the sale of UK-based Daniels Group), announced an interim dividend of 5 cents per share.

SATS, which accounts for 80 per cent of the market at Changi Airport, saw expenditures rise 36 per cent, largely as food inflation and staff costs soared during the first half.

Still, its operating margin (net of Daniels) was steady at 10.7 per cent, while underlying net margin was 10.5 per cent.

SATS recently announced that it was divesting UK-based, non-aviation food unit, the Daniels Group, to Hain Frozen Foods UK for £pounds;159 million (S$321.8 million).

The Daniels Group – which manufactures and sells chilled drinks, ready-to-eat meals as well as fresh fruit and pudding – was acquired by SATS in 2009 as part of the latter’s takeover of Singapore Food Industries (SFI).

Asked if the company could make a special payout to shareholders from the Daniels sale proceeds, chief executive Tan Chuan Lye said that SATS was continuously seeking acquisition opportunities with the cash it had. ‘Whether or not we pay shareholders will be a matter to be discussed later,’ he said.

Over the last year or so, SATS has made numerous investments such as taking up a 40 per cent stake in Saudi-based Adel Abuljadayel Flight Catering Company as well as a 50.7 per cent stake in Japan-based TFK Corporation.

The company saw associates and JV contribution fall 16 per cent during the quarter, largely due to the declining fortunes of the cargo segment in South-east Asia.

Some 84 per cent of its revenue came from aviation side, while food solutions accounted for 56 per cent of sales. Some 65 per cent of revenue was from Singapore operations. Japan’s contribution was 14 per cent, from virtually nil last year, as TFK started firing up.

The company has also recovered 80 per cent of the cost of acquiring SFI via post-acquisition profits over the last 32 months.

Mr Tan noted that Changi’s newest and third ground handler, US-based Aircraft Service International Group, had yet to secure any new business during the period under review.

Meanwhile SATS acquired the inflight catering contract for Lao Airlines, and in Hong Kong and Japan, it got the ramp handling for Hong Kong Airlines and Hong Kong Express. It also renewed contracts with Japan Airlines, JetstarAsia, Tiger Airways and TNT Airways, and retained other clients.

SATS serves seven of the nine budget carriers operating out of Changi.

The company is awaiting the tender results for the contract to operate the Singapore International Cruise Terminal, which it expects shortly. The multi-million-dollar facility will officially start operating in April next year.

The latest results boosted SATS’ net tangible assets per share to around $1.01-$1.04 (based on the Daniels sales), up from 81 cents before.

Mr Tan said that despite the prevailing uncertainties in the operating environment, SATS would continue to grow and strengthen its core business and enhance shareholder value.

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