Sats' Q1 profits up with higher productivity

Sats has about 80 per cent of Changi Airport's ground-handling market and expects continued growth in its key overseas markets.
Sats has about 80 per cent of Changi Airport's ground-handling market and expects continued growth in its key overseas markets.PHOTO: SATS

14.5% year-on-year rise also due to cheaper raw materials, higher foreign contributions

A focus on productivity and innovation has helped Sats to cut headcount and boost profits. The firm now has about 14,000 employees - 550 fewer than a year ago.

Lower raw material costs and higher contributions from foreign associates also drove up net profits in the three months ended June 30 by 14.5 per cent year-on-year to $49.6 million.

The improved performance came despite a 4.2 per cent drop in group revenue to $416.9 million, Sats reported yesterday.

Operating expenditure declined 5.7 per cent year-on-year to $372.9 million, mainly on the back of cheaper raw materials and lower staff costs.

Overall, operating profits for the quarter improved 10.8 per cent to $44 million.

  • AT A GLANCE

  • REVENUE: $416.9 million (-4.2%)

    NET PROFITS: $49.6 million (+14.5%)

    DIVIDEND: Nil

Looking ahead, Sats said that despite slower economic growth and rising manpower costs, the structural growth prospects of Asia remain strong with rapid urbanisation and growth of the middle class.

Speaking during a media teleconference, Sats president and chief executive Alex Hungate said he was pleased with the performance.

While there was some decline in business at Changi Airport after the loss of the Jetstar contract, the work has now gone back to Sats.

In October last year, the low-cost carrier ended its contract with Sats in favour of the US-based Aircraft Service International Group (Asig).

But the partnership did not work out and, with effect from Wednesday, the contract to handle 40 flights a day is back with Sats.

The firm will not need additional manpower to handle the work, Mr Hungate said.

"We have hired everyone we need... We expect to keep the headcount pretty much where it is now and absorb the Jetstar volume."

Despite Asig losing Jetstar, which was its only airline customer at Changi, the market remains competitive, Mr Hungate said.

"Even with two players, it is a highly competitive market. We have some advantages based on our scale and expertise," he said.

Sats controls about 80 per cent of Changi Airport's ground handling market while Dnata has the remaining 20 per cent.

Outside Singapore, the firm expects to continue to grow in key markets such as Indonesia, the Philippines and Japan.

Sats reported earnings per share of 4.5 cents from 3.9 cents a year earlier, while net asset value per share inched up to $1.34, compared with $1.30 as at March 31.

A version of this article appeared in the print edition of The Straits Times on July 24, 2015, with the headline 'Sats' Q1 profits up with higher productivity'. Print Edition | Subscribe