Sats narrows H1 loss to S$7.8 million following aviation recovery, consolidation of Worldwide Flight Services

IN-FLIGHT caterer and ground handler Sats on Friday (Nov 10) posted a net loss of S$7.8 million for its first half of FY2024 ended September, narrowing from its net loss of S$32.5 million in the corresponding year-ago period.

For the second quarter of the financial year, the mainboard-listed group delivered S$22.2 million in net profit – its first earnings without government relief since the pandemic struck in early 2020. 

It had recorded a net loss of S$29.9 million for Q1. 

The improvement in financial performance came on the back of a year-on-year increase in the top line of about 7 per cent, to about S$1.3 billion, based on bourse filings made by Sats on Friday.

At an earnings call after the results release, chief financial officer Manfred Seah attributed the better quarterly performance to an increase in business volumes, yield management as some cost increases have been passed on to customers, and productivity enhancements.  

As at the end of September 2023, flights handled and aviation meals served had returned to 82 per cent and 83 per cent of pre-Covid levels, respectively.

No interim dividend will be paid out, said Sats’ board of directors, as it believes it would be prudent not to pay one for FY2024 until Sats is able to return to profitability.

The board pointed out that not paying an interim dividend this time will enable the group to conserve cash to fund its operational and working capital requirements, as well as to reduce leverage as soon as possible.

“Restoration of dividend payout is the next thing that we’re looking for,” said Kerry Mok, chief executive, during the call.

Sats’ gross debt-to-equity ratio jumped to 1.66 times as at end-September, from 0.59 times as at end-March.

Current liabilities rose by S$1.1 billion to S$1.7 billion, mainly from the addition of Worldwide Flight Services’ (WFS) lease liabilities and trade and other payables. 

WFS is an air cargo logistics business that Sats had acquired in April.

Non-current liabilities of the group increased by S$2.6 billion to S$4.2 billion, also mainly due to higher borrowings and WFS’ lease liabilities.

Meanwhile, free cash flow was still at a deficit of S$20.7 million for H1 FY2024, though this marked a narrowing from S$87.4 million for the year-ago period.

Mok said the integration of WFS and Sats was “progressing well”, adding that the group is realising “internal and commercial synergies” which are reflected in its half-year financial results.

Revenue for H1 FY2024 more than trebled year on year to S$2.5 billion from S$804.5 million. This was driven primarily by the consolidation of WFS – which contributed S$1.4 billion to group revenue.

Excluding the contribution by WFS, revenue growth for H1 FY2024 was bolstered by the recovery in the aviation sector, said Sats, with both the group’s food solutions and gateway services segments recording higher revenue year on year.

Group expenditure increased to S$2.4 billion for H1 FY2024, from S$846.8 million in H1 FY2023. This was in line with revenue growth and the consolidation of WFS, Sats noted.

Excluding the consolidation of WFS, the rise in expenditure was due to the increase in business activities resulting from global travel recovery and inflationary cost pressures, the group added.

Loss per share stood at S$0.005 for H1 FY2024, down from S$0.024 a year ago.

Net asset value per share was S$1.56 as at end-September, compared with S$1.57 as at end-March.

Shares of Sats closed flat at S$2.56 on Friday, before the results release.