SINGAPORE (Nov 12): Airline gateway services and food solutions provider SATS reported earnings of $60.7 million for 2Q19-20 ended September, some 7.6% lower than earnings of $65.7 million a year ago.
The decline comes despite a 9.8% rise in revenue to $497.4 million, which was outpaced by higher expenditure during the quarter.
Revenue growth was driven by both its food solutions and gateway services business segments. Food solutions revenue grew 8.0% to $271.0 million, while gateway services revenue climbed 12.1% to $225.9 million.
Food solutions growth was driven by core aviation entities and the consolidation of Country Foods, which contributed $13.9 million to the increase in revenue. The growth was partially offset by the absence of revenue from the divested Food and Allied Support Services Corporate.
Gateway services’ revenue growth was also driven by the consolidation of GTR entities, as well as a slight volume growth in flight and passengers handled. This was partially offset by lower cargo volume and ship calls in this quarter.
Expenditure rose $45.3 million, or 11.7%, to $432.4 million, due to the consolidation of the two companies. This exercise accounted for $35.2 million of the increased expenditure.
Other costs also rose $9.7 million due to higher maintenance and hiring costs for ground support equipment and IT expenses relating to IT infrastructure to support digitalisation projects. Excluding the consolidation, expenditure would have been a 3.8% increase, or $14.4 million higher.
SATS is also maintaining an interim dividend of 6 cents per share, payable on Dec 11.
“The company targets to provide sustainable dividend payout that take into account cash flow generation and balance sheet strength, along with projected capital requirements and investments,” SATS says in a statement.
In their outlook statement, SATS notes the slowdown in trade and economic growth, which has resulted in weaker cargo volumes. Nevertheless, the company is continuing to invest in growth opportunities such as Country Foods and the GTR entities.
“Even in this difficult environment, SATS continues to generate revenue growth. We also continue to invest in enabling infrastructure for the longer term such as new kitchens, supply chain capabilities, digital control centres for ground handling and new cargo handling facilities,” says SATS.
Shares of SATS closed flat at $5.09 on Nov 12.
