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Sats completes turnaround with better-than-expected FY2024

Douglas Toh
Douglas Toh • 4 min read
Sats completes turnaround with better-than-expected FY2024
Sats CEO Kerry Mok has heaped praise on the smooth integration WFS over the past year. Photo: Albert Chua/ The Edge Singapore
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In line with the rebound of the global aviation industry following the pandemic, ground handler Sats on May 29 reported FY2024 earnings of $56.4 million, soundly reversing from the loss of $26.5 million recorded in the year-earlier period ended March 2023.

In the most recent 4QFY2024, core patmi, excluding reliefs, reached $47.3 million, a big jump from $4.1 million recorded in the year-earlier period. Free cash flow after lease repayment reached $119 million in 4QFY24, marking a dramatic improvement from negative $167 million recorded in the preceding 9MFY2024.

“4QFY24 earnings beat consensus expectations; strong free cash flow performance was also a pleasant surprise,” according to DBS Group Research on May 30. To top it off, Sats has resumed paying dividends, with its 1.5 cents per share payout equivalent to 39% of its earnings.

In response, investors sent Sats shares up by as high as $2.82 before closing the day at $2.79, up 6.08% for the day, valuing the company at $4.17 billion.

While Sats enjoyed the strong organic recovery, its record FY2024 revenue of $5.15 billion — up three-fold— included a lift from consolidating Europe-based cargo handler Worldwide Flight Services (WFS), which it acquired last April for some $1.9 billion, even before it fully put the wear from the pandemic behind.

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According to Sats, the integration of WFS is on track and has delivered an annualised $40 million of the expected $100 million ebitda synergies, helping to form what president and CEO Kerry Mok calls a “nice trajectory” for the company’s growth.

“This acquisition was a big pivot for us, and I know previously people were worried about whether or not a Singapore company could go overseas,” says Mok at a briefing on May 30.

“We now have a very international team, people with global experience and exposure to take this company to the next level, and we are building long-term resilience.”

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Although challenges from running a global business such as supply chain issues are the norm, there were “no surprises” from the integration of WFS. “We knew that we acquired it from a private equity company, and that the debt level was high. But we know that part of the synergy we could bring was our sound credit rating and we were able to lower the cost of capital very quickly,” says Mok.

For Sats, the acquisition of WFS will help diversify its revenue source between flight handling and air cargo.

Standalone, its FY2024 air cargo and flights handled operating numbers were just 93% and 82% of pre-pandemic levels. Counting the addition of WFS’ volume however, the company’s air cargo and flights handled numbers stand at 429% and 162% of pre-pandemic levels.

The acquisition of WFS has also helped build new revenue sources in other markets outside Singapore. “If we are very focused on just one country, then you’re actually very exposed. Now, especially, with the geopolitical challenges and the de-coupling of supply chains, we are in the right spot and we have the network to benefit from any changes,” says Mok.

Sats has laid down an ambitious growth target of achieving revenue of $10 billion in 2028 and beyond and to restore its ROE back to the mid-teens, back to where it was before the pandemic.

According to group CFO Manfred Seah, Sats will also focus on paring down its debt levels further, strengthen its ebitda margins and reinvest for sustainable growth. “Our ebit margin expanded very nicely on a sequential basis, all the way up to about 6.6% in the 4QFY2024, and for the ebitda, we came in at about 18.8%. So our target is to continue to grow this to
exceed the 20% mark,” says Seah.

While the bulk of new revenue growth came from cargo handling, Sats is eyeing further growth from its food business too, which accounted for around half its business pre-pandemic.

Sats says it already has a 14% market share in this market worth some $6 billion and it is eyeing further growth via its new facilities, such as the one located in Bangkok, which specialises in preparing so-called “fresh frozen” meals, which offers better shelf life than “fresh” meals. Mok recalls serving the frozen-fresh food at a facility opening and guests were impressed.

If he can have his way, Mok will carry on with improving Sats’ capabilities, and ultimately its service to customers. “We suffer from different challenges everywhere in the world, but I think it’s our management mindset, that our people on the ground will solve problems and bring them forward, and I think that is the mark of a great company,” he says.

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