SATS Swings into the Black: 5 Highlights from the Airline Caterer’s FY2022 Earnings

SATS Ltd (SGX: S58) is finally seeing light at the end of the tunnel.

Just as Singapore Airlines Limited (SGX: C6L), or SIA, recently reported an operating profit for its fiscal 2022’s second half (2H2022), the ground handler has also announced an improved set of financial numbers for FY2022.

Border reopenings along with strong pent-up travel demand have led to a surge in travel volume, lifting the airline caterer’s outlook.

Aviation-related stocks such as SATS and SIA are enjoying a breath of fresh air as more people take to the skies.

Here are five highlights from SATS’ latest FY2022 earnings that investors should take note of.

1. Swinging from a loss to a profit

SATS chalked up revenue of S$1.18 billion for FY2022, up 21.3% year on year from S$970 million.

The group saw a broad-based recovery in 2H2022 as border restrictions eased, particularly in the first three months of 2022.

As a result, both of SATS’ divisions saw revenue grow year on year – Gateway Services’ revenue increased 19.5% year on year to S$275.2 million while Food Solutions’ revenue grew by 10.8% year on year to S$330.6 million.

However, the ground handler incurred a significantly higher year on year increase in operating loss to S$46.6 million.

The reason behind the operating loss was the higher costs related t ohigher fuel costs and lower lower government grants.

For FY2022, with the help of a tax credit worth S$31.4 million and a gain on the disposal of an associate of S$28.9 million, SATS reported a net profit of S$20.4 million, reversing the S$78.9 million a year ago.

If one-off items were excluded, then the core net loss would have been S$8.5 million, lower than the S$23.9 million in FY2021.

2. A jump in operating statistics

On the operating statistics front, SATS saw sharp improvements for almost every category that the group is tracking.

The number of flights handled surged 73.3% year on year to 95,500 for FY2022.

The fourth quarter of FY2022 (4Q2022) alone saw 37,300 flights handled, the highest in eight quarters.

Meanwhile, meals served climbed by 20% year on year to 52.4 million while passengers handled more than doubled year on year to 10.4 million, reflecting a surge in the number of people flying.

For the cargo side, SATS logged around 1.7 million tonnes for FY2022, up 45.2% year on year, demonstrating healthy demand for its cargo division.

In line with the ramp-up in operations, staff strength inched up by around 7% from 11,400 employees to 12,200.

3. Balance sheet and cash flow remain healthy

Despite the losses incurred over the last two fiscal years, SATS still has a robust balance sheet with S$800.6 million in cash and long-term investments as of the end of March 2022.

Debt stood at S$210.8 million of loans and S$300 million of notes payable.

The group is thus sitting on a comfortable net cash balance of S$289.8 million.

On the cash flow front, SATS continues to generate an operating cash inflow of S$62.3 million, although this was down from the S$117.7 million a year ago.

Free cash flow, however, was negative at S$15.6 million versus a positive free cash inflow of S$56.2 million in the prior fiscal year.

4. Boosting its Food Solutions division

SATS has been continuously investing in its Food Solutions capabilities over the years to reduce its reliance on aviation-related revenue.

Some initiatives the group has taken up include the SATS Global Innovation Centre, SATS Food Hub, and FoodFlix.

SATS is developing its SATS Food Hub at a total cost of S$150 million within the Jurong Innovation District, and the aim is to provide an open innovation platform to test new products and services.

FoodFlix is SATS’ venture arm’s brand accelerator program to take hawker brands regional.

5. Powering its twin growth engines

The group plans to tap on its twin growth engines in Singapore and overseas to grow the business further and to ride on the recovery in aviation.

Back home, SATS intends to take the lead on food innovation while strengthening its capabilities along the food chain from processing and production to distribution.

Outside of Singapore, SATS plans to accelerate food production in various markets in Asia and grow adjacent businesses such as e-commerce and perishable handling.

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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

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