Sats Q4 profit falls 23.7% on absence of one-off gains, buying stake in China airline food company

Excluding one-off items, underlying net profit for the three months ended March 31, fell 5.4 per cent to $48.7 million.
Excluding one-off items, underlying net profit for the three months ended March 31, fell 5.4 per cent to $48.7 million.PHOTO: ST FILE

SINGAPORE - Fourth-quarter net profit for ground handler and in-flight catering services provider, Sats dropped 23.7 per cent to $49.9 million, from $65.4 million a year ago, mainly due to the absence of one-off gains, the company announced on Friday morning (May 17) before the market opened.

The results translate to an earnings per share (EPS) of 4.5 cents for the quarter, compared to an EPS of 5.9 cents last year.

Sats shares closed at $5.22 on Thursday, up one cent, or 0.19 per cent.

One-off items in the year-ago quarter included a $2.3 million gain on disposal of assets related to Sats' Japanese unit TFK Corp, as well as a $11.6 million surplus arising from the finalisation of valuation of the group's associate, Evergreen Sky Catering, a company spokeswoman told The Business Times.

In comparison, Sats only recorded a $1.2 million gain from one-off items in the quarter under review from a write-back in tax provision related to a gain from the disposal of DFASS Sats to KrisShop in its fiscal third-quarter.

Excluding one-off items, underlying net profit for the three months ended March 31, fell 5.4 per cent to $48.7 million.

Revenue grew 11.3 per cent to $471.5 million, thanks to higher contributions from its food solutions and gateway services businesses.

For the full year, net profit was down 5 per cent to $248.4 million on the back of lower one-off gains, while revenue rose 6 per cent to $1.83 billion.

EPS for the full-year came in at 22.3 cents, compared to EPS of 23.4 cents in the year-ago period.

The board has recommended a final dividend of 13 cents, up one cent from a final dividend of 12 cents last year. Including an interim dividend of six Singapore cents, unchanged from the preceding year, total dividend amounts to 19 cents per share.

Sats noted that the proposed final dividend will be tabled for shareholders' approval at its upcoming annual general meeting to be held on July 18. If approved, the final dividend will be paid on Aug 8, with book closure date set for July 31.

Looking ahead, Sats noted that while the global economy faces challenges, demand for aviation services and high quality food in Asia-Pacific continues to grow.

The group added that it has secured a long-term contract with Singapore Airlines to support them in their transformation plans, and that it will continue to invest in new opportunities in Asia-Pacific's major cities, especially since its recent investments in India and Malaysia are showing steady growth, it said.

Alex Hungate, president and chief executive of Sats, said: "Our investments in regional expansion and new capabilities are bearing fruit... Net profit declined due to the absence of one-off gains from our overseas operations, but operating profit continued to improve year on year, both for the quarter and the full year."

Separately on Friday, Sats announced that it is purchasing a 50 per cent stake in China food company, Nanjing Weizhou Airline Food Company for $31.2 million, in a bid to gain immediate market access and frozen food production capabilities in China.

Under the deal, Sats China Co (SCC) will acquire a 45 per cent stake in the food company for about $25.5 million, and another 5 per cent through the subscription of new shares for about $5.7 million. SCC will have majority board control and key management positions in Nanjing Weizhou following the transaction. The agreement also includes an earn-out incentive for achieving certain financial targets over a three-year period, Sats said.

Nanjing Weizhou is an independent aviation food manufacturer in Jiangsu province that produces frozen food and related food components to aviation companies in China. It has an network of 12 cold storage facilities or distribution channel partners across China, and serves 80 airports there. As at end December 2018, it had a book value of 58.3 million yuan (S$11.6 million).

Luo Bo, chairman and general manager of Nanjing Weizhou, noted that China's aviation industry is growing exponentially and now has 229 airports across the country, with passenger throughput exceeding 1.1 billion.

"Nanjing Weizhou has been serving the China aviation industry for the past 19 years, and is now a leading supplier of frozen meals to airlines in China. We are excited to partner Sats to help us build upon our existing strong foundation to further enhance our level of service," he added.

Completion of the deal is subject to certain conditions being fulfilled.