SATS Ltd. Financial Analysis: Significant Net Profit Growth in 1H FY25

Business Description

SATS Ltd. is a Singapore-based investment holding company listed on the Singapore Exchange Securities Trading Limited (SGX-ST). The company operates in five main segments:

• Food Solutions: Provides inflight and institutional catering, food processing, distribution services, and airline laundry services in the Asia Pacific region and the United Kingdom.
• Gateway Services APAC: Offers airport and cruise terminal services in Asia Pacific (excluding WFS Thailand and WFS India) and the Middle East.
• Gateway Services EMEAA: Provides airport terminal services in Europe, Thailand, India, and South Africa, including trucking services connecting major airports across Europe.
• Gateway Services Americas: Offers airport terminal services and trucking services in North and South America.
• Others: Comprising corporate activities not allocated to the other segments.

The company is well-positioned within the industry with a broad geographic footprint and a diverse range of services.

Industry Position

SATS Ltd. operates in a competitive industry with significant players in the inflight catering and airport services sectors. The company has a strong market presence in Asia Pacific, Europe, the Middle East, Africa, and the Americas. Key competitors include Gate Gourmet, dnata, and LSG Sky Chefs. SATS Ltd.’s extensive network and strategic acquisitions, such as WFS Global Holdings SAS, bolster its market share and competitive advantage.

Revenue Streams and Customer Base

The company’s revenue streams are diversified across its business segments. Revenue for 1H FY25 increased by 14.8% YoY to \$2.82 billion, driven by growth in both Gateway Services and Food Solutions segments. Key customers include airlines, airports, and institutional clients.

Financial Statement Analysis

Income Statement

For the half year ended 30 September 2024, SATS Ltd. reported a substantial increase in net profit to \$142.3 million, compared to a loss of \$9.0 million in the previous year. This improvement is attributed to higher business volumes, rate increases, and effective cost management.

Key Metrics:

• Revenue: \$2,821.1 million (up 14.8% YoY)
• Operating Profit: \$240.1 million (up from \$72.0 million YoY)
• Profit Before Tax: \$201.0 million (up from \$4.7 million YoY)
• Net Profit: \$142.3 million (up from a loss of \$9.0 million YoY)

Balance Sheet

As of 30 September 2024, total equity increased to \$2.69 billion, reflecting the company’s profitability in 1H FY25. Non-current assets decreased due to depreciation and amortisation, while current assets reduced mainly due to lower cash balances.

Key Metrics:

• Total Equity: \$2,687.1 million
• Total Assets: \$8,270.4 million
• Total Liabilities: \$5,583.3 million
• Net Asset Value per Share: 167.4 cents

Cash Flow Statement

Net cash inflow from operating activities increased significantly to \$208.9 million, driven by higher operating profit. Net cash used in investing activities was \$11.4 million, primarily due to capital expenditure and investment activities. Net cash used in financing activities was \$323.3 million, mainly due to loan repayments and dividend payments.

Dividend

The company declared an interim dividend of 1.5 cents per share, payable on 6 December 2024.

Key Findings and Recommendations

Strengths

• Significant net profit growth and improved operating profit margin.
• Diversified revenue streams across multiple business segments and geographic regions.
• Strong market position and strategic acquisitions enhancing competitive advantage.

Risks

• Exposure to foreign exchange fluctuations affecting intercompany loan balances.
• High levels of borrowings and lease liabilities.

Special Activities

SATS Ltd. is focusing on scaling its business, improving operational efficiency, and investing in innovation to drive sustainable growth. The company is also leveraging its expanded global network to introduce new product offerings.

Investor Recommendations

For Current Investors

Hold onto the stock. The company has demonstrated significant improvement in profitability and maintains a strong market position with promising growth prospects.

For Potential Investors

Consider investing in the stock. SATS Ltd.’s strong financial performance, strategic growth initiatives, and attractive dividend yield make it a compelling investment opportunity.

Disclaimer

The recommendations provided are based on the financial report for the half year ended 30 September 2024 and are for informational purposes only. Investors should conduct their own research and consider their financial situation and objectives before making any investment decisions.