Flight services firm Sats reported improved third-quarter earnings as lower expenditure and higher profit share from associates gave the bottom line a fillip even though turnover was flat.

Net profit rose 7.4 per cent to $65.1 million in the three months ended Dec 31. But total revenue of $440.9 million was just a tad lower than the $441 million a year earlier.

"Group expenditure decreased $5 million or 1.3 per cent to $374.2 million, due to reductions in most expense categories except staff costs and depreciation and amortisation charges," Sats said in its results announcement yesterday.

Sats handles airfreight, baggage and passenger services such as providing inflight meals. It services 47 airports across 14 countries in Asia and the Middle East.

The third-quarter performance was mixed across the two main business lines, with food solutions revenue - 56 per cent of the group's total - sliding 1.8 per cent to $246.4 million.

The gateway services revenue, which accounted for 44 per cent of the total revenue, added 2.2 per cent to $193 million.

However, its share of profits from associates and joint ventures in the two segments rose 9.5 per cent to $12.7 million.

Third-quarter earnings per share was 5.8 cents, up 5.5 per cent from a year earlier. Net asset value was 138.6 cents as at Dec 31, up from 134.4 cents as at March 31.

Its nine-month revenue was up 1.8 per cent to $1.3 billion, while net profit jumped 12.6 per cent to $191.3 million.

The period saw Sats reaping a disposal gain of $9.3 million from the Senoko property divestment completed in June. But a $0.2 million loss was incurred from the divestment of its interest in associate firm International Airport Cleaning, while another $0.5 million loss came from the dilution of shareholdings in Beijing Airport Inflight Kitchen.

Sats' cash and short-term deposits dropped $65.1 million to $424.8 million, mainly due to dividend payouts. But the nine months still generated free cash flow of $117.6 million, with debt to equity ratio at 0.07 times.

Sats expects a challenging operating environment ahead, as airline margins come under increasing pressure.

"In line with our strategy of feeding and connecting Asia, we are expanding our inflight catering facilities in Singapore to handle larger batch sizes for the expected increase in volume at Changi Airport.

"We are also extending our cargo network into the Middle East with projects both in Dammam, Saudi Arabia and Muscat, Oman."

Sats shares closed nine cents or 1.78 per cent lower at $4.98, ahead of the results announcement.