SATS net profit dips slightly in fourth quarter

Airport terminal services operator SATS yesterday reported net profit fell 1.2 per cent in its fiscal fourth quarter from the corresponding period in the previous year to S$50.1 million despite revenue rising 7.8 per cent to S$433.3 million.

SATS said turnover benefited from growth in passenger volumes and flights, with operations at its Tokyo Flight Kitchen unit recovering from the triple disasters in Japan.

But net profit fell because it had benefited in the previous period from a contribution from Daniels Group, whose operations had since been discontinued. Excluding that item, net profit rose 11 per cent, it said. For the full fiscal year ended March 31, net profit fell 12 per cent to S$170.9 million even as revenue grew 24.1 per cent to S$1.68 billion.

Looking ahead, SATS said passenger traffic at Changi Airport would likely increase on the back of growing regional traffic as the Singapore Tourism Board has projected moderate growth in visitor arrivals of between 13.5 million and 14.5 million this year.

However, SATS warned that weakness in cargo demand would likely continue, especially for the next two quarters.

It added that a stronger Singapore dollar might affect the performance of some overseas associates and joint ventures.

SATS shares rose 2.4 per cent to S$2.61 yesterday after the results announcement.

SATS acting CEO named president, CEO

Tan Chuan Lye’s promotion takes effect from April 1 and comes after an eight-month global search

AFTER an eight-month global search, SATS Ltd has confirmed acting CEO Tan Chuan Lye as its president and CEO with effect from April 1.

In an announcement yesterday, SATS said it had decided to retain and promote Mr Tan ‘following a rigorous selection process involving a number of outstanding internal and external candidates for this role’.

Mr Tan took over as acting CEO and executive vice-president, food solutions, of SATS, following the sudden and unexplained departure of previous CEO and president, Clement Woon, in July last year.

Mr Woon, who came to the company in November 2007 after a 10-year stint in Switzerland with spatial surveying company Leica Geosystems AG, cited his decision to ‘pursue personal interests’ at the time.

Under Mr Woon’s stewardship, SATS broke away from its erstwhile parent Singapore Airlines (which owned 81 per cent of SATS) and created its own branding and identity. Instead of focusing only on the aviation business which was highly cyclical, it decided to diversify its business. In 2009, the company acquired Singapore Food Industries, a food manufacturer and supplier.

Mr Tan is himself a seasoned veteran of the aviation industry, and has been with SATS since 1976.

In a career spanning 35 years, he has held managerial and key decision-making positions in SIA Ground Services and SATS Airport Services, and was responsible for both SIA and SATS’ Changi Terminal 2 operations. He was appointed senior vice-president for catering in 2000 and was promoted to executive vice-president, food solutions, in 2009 to oversee and grow SATS’ aviation and non-aviation food businesses.

SATS chairman Edmund Cheng said the company was pleased to select Mr Tan to helm it.

‘Since he assumed the position of acting CEO in July 2011, Chuan Lye has demonstrated strong leadership capabilities and was ably supported by his management team and staff,’ he said. ‘Over the years, he has been closely involved in growing and transforming SATS to what it is today.’

SATS reported a 25.4 per cent drop in net profit to $38.2 million for the third quarter to end-December 2011 due to rising costs, falling contribution from joint ventures and associates, and a weaker US dollar.

For the nine months ended December 2011, SATS posted net profit of $120.8 million, down 14.1 per cent from $140.7 million a year earlier.

In October 2011, SATS announced the disposal of Daniels Group in the UK, recognising a loss on disposal of $5.5 million.

The company now faces a second competitor at Changi with the emergence of US-based Aircraft Service International Group, while the aviation sector is flying into turbulence due to high fuel costs and flattish yields.

Its Singapore International Cruise Terminal venture, where it has a 60 per cent stake in a partnership with Creuers Cruise Services holding the remaining share, is not expected to be profitable until the end of next year.

SATS acting CEO named president, CEO

Tan Chuan Lye’s promotion takes effect from April 1 and comes after an eight-month global search

AFTER an eight-month global search, SATS Ltd has confirmed acting CEO Tan Chuan Lye as its president and CEO with effect from April 1.

In an announcement yesterday, SATS said it had decided to retain and promote Mr Tan ‘following a rigorous selection process involving a number of outstanding internal and external candidates for this role’.

Mr Tan took over as acting CEO and executive vice-president, food solutions, of SATS, following the sudden and unexplained departure of previous CEO and president, Clement Woon, in July last year.

Mr Woon, who came to the company in November 2007 after a 10-year stint in Switzerland with spatial surveying company Leica Geosystems AG, cited his decision to ‘pursue personal interests’ at the time.

Under Mr Woon’s stewardship, SATS broke away from its erstwhile parent Singapore Airlines (which owned 81 per cent of SATS) and created its own branding and identity. Instead of focusing only on the aviation business which was highly cyclical, it decided to diversify its business. In 2009, the company acquired Singapore Food Industries, a food manufacturer and supplier.

Mr Tan is himself a seasoned veteran of the aviation industry, and has been with SATS since 1976.

In a career spanning 35 years, he has held managerial and key decision-making positions in SIA Ground Services and SATS Airport Services, and was responsible for both SIA and SATS’ Changi Terminal 2 operations. He was appointed senior vice-president for catering in 2000 and was promoted to executive vice-president, food solutions, in 2009 to oversee and grow SATS’ aviation and non-aviation food businesses.

SATS chairman Edmund Cheng said the company was pleased to select Mr Tan to helm it.

‘Since he assumed the position of acting CEO in July 2011, Chuan Lye has demonstrated strong leadership capabilities and was ably supported by his management team and staff,’ he said. ‘Over the years, he has been closely involved in growing and transforming SATS to what it is today.’

SATS reported a 25.4 per cent drop in net profit to $38.2 million for the third quarter to end-December 2011 due to rising costs, falling contribution from joint ventures and associates, and a weaker US dollar.

For the nine months ended December 2011, SATS posted net profit of $120.8 million, down 14.1 per cent from $140.7 million a year earlier.

In October 2011, SATS announced the disposal of Daniels Group in the UK, recognising a loss on disposal of $5.5 million.

The company now faces a second competitor at Changi with the emergence of US-based Aircraft Service International Group, while the aviation sector is flying into turbulence due to high fuel costs and flattish yields.

Its Singapore International Cruise Terminal venture, where it has a 60 per cent stake in a partnership with Creuers Cruise Services holding the remaining share, is not expected to be profitable until the end of next year.

Possibility of higher dividends

Slightly below. SATS’ 3Q12 headline net profit came in at $38.2m, down 25.4% but underlying profit was an 8.6% decline to $43.7m after adjusting for the disposal of Daniels, including a one-off write-down of $5.5m. Core earnings were slightly below our forecasts, as TFK’s recovery was slower than expected, and costs have not come off significantly as yet. On balance, however, the numbers were still solid. SATS remains a Buy with a target price of $2.70. Basic dividend yield is attractive at 5%, and we do not exclude the possibility of a special dividend derived from the proceeds from the sale of Daniels.

Revenues remain robust. 3Q12 revenue grew 32.3% YoY. On a sequential basis, revenue grew by 4.2%. Gateway services notably recorded a 10.5% YoY growth in revenue due to the growth in flights, while revenue from food solutions rose 49% YoY. TFK’s revenue was $82m for 3Q12. This remained a steady improvement over 2Q, as operations continue to recover from the Japan earthquake. Operating profit remained in the $1.5m range, as the recovery in earnings is taking longer than we had expected. Despite this, we expect TFK to be a far more significant contributor to earnings in the future.

Costs flat, but not softened. Staff costs have been well contained despite the growth in revenue. Raw material costs have also remained flat, but this is actually a slight disappointment as our expectation was that food prices would start to come off by now. However, management remains optimistic that raw material costs can still be contained with better management for the moment. We still anticipate some softening of this in the coming months.

Target price still $2.70. We adjust our FY12 forecasts solely for the reconsolidation. Management has raised the possibility of paying out some of SATS’ $421m net cash hoard, (enlarged by the proceeds from the sale of Daniels), by way of additional dividends. Nevertheless, our base dividend yield already stands at an attractive 5%. We maintain our Buy recommendation and target price of $2.70.