Sats H2’s bottom line down 16.7% to S$6 million as higher expenses eat into profits

IN-FLIGHT caterer and ground handler Sats on Monday (May 29) reported earnings of S$6 million for the six months ended March 2023, down 16.7 per cent year on year as expenditures exceeded revenue and inflation started to bite.

This comes despite a 57.1 per cent increase in revenue to S$953.8 million in the second half of FY2023 from S$607.3 million in H2 FY2022 – partly on the back of a recovery in aviation, said the group in a bourse filing.

Operating expenditure jumped 46.7 per cent year on year to S$959.5 million during H2 FY2023, in tandem with increased activity from the aviation recovery and inflation. Meanwhile, job-support grants declined.

As a result, Sats had an operating loss of S$5.7 million for H2 FY2023. But a 71.6 per cent surge in its share of earnings of associates and joint ventures helped spare it from registering a net loss.

Still, excluding government reliefs, the bottom line would have been in the red by S$26 million. This was, however, an improvement from the S$46.6 million net loss in H2 FY2022.

Earnings per share for H2 FY2023 were S$0.005, marginally lower than the S$0.006 for the year-ago period.

No dividend was proposed, because the Sats’ board believed it would be “prudent” to not make a payout until the company was profitable without government reliefs. Not declaring a dividend would also enable the funding of the company’s operational and working capital requirements, said the board.

Sats ended the full year with a net loss of S$26.5 million, a reversal from FY2022’s net profit of S$20.4 million. This was in part due to professional fees incurred for merger and acquisition, as well as greater operating loss.

Net asset value per share as at end-March was S$1.569, compared to S$1.428 as at end-March 2022.

Sats’ chief executive Kerry Mok told The Business Times at a post-results media briefing on Monday that the firm has put in additional headcount to support the aviation recovery. Air travel demand is robust and its earnings before interest, tax, depreciation and amortisation was improving. Also, the rise in costs would be mitigated when it is passed on to customers upon contract renewal.

The restoration of appetisers by its key customer Singapore Airlines (SIA) from June is expected to raise Sats’ top line as the in-flight caterer handles about 60 per cent of the flag carrier’s food volume, Mok said.

“Of course, our top line will grow for sure. And we welcome that… because that allows us to sell more per flight. Yes, we were happy with this change,” he said.

He was unable to quantify the magnitude of the expected uplift from SIA appetisers to Sats’ revenue, but added that whatever increases SIA is expecting, “we will get about 60 per cent of that increase”.

The national carrier stated last week that its economy class meals on medium, long-haul and ultra long-haul flights will include an appetiser from June, along with a bread roll, a main course, cheese and crackers, and a dessert.

Similarly, all meals served on short-haul flights, which are between 1.5 and 3.5 hours, will include a bread roll and butter, served with a main course and a dessert.

Shares of Sats closed down 2.8 per cent or S$0.08 to S$2.75, before the release of its results.