The surge in air travel and strong growth in vacation demand have greatly benefited the aviation, tourism, and hotel industries. Singapore blue-chip companies Singapore Airlines Limited (SGX: C6L) and maintenance, repair, and overhaul (MRO) specialist company Singapore Aero Engine Services Private Limited (SGX: S59) are among the beneficiaries.

Singapore ground handling services provider SATS Limited (SGX: S58) also reported robust performance in its latest fiscal year ending March 31, 2024 (FY2024) with a significant increase in profits. The aviation ground handling services provider and food supplier presented an impressive performance report and resumed dividend distribution. Here are the five highlights from the group's latest FY2024 financial report.

Surge in Profit and Free Cash Flow

FY2024 revenue nearly tripled to SGD 5.1 billion, reaching a new high, mainly attributed to the contribution from the merger with Worldwide Flight Services (WFS), increased air cargo volumes, and continued recovery in the travel industry.

Operating profit amounted to SGD 244.2 million, reversing from an operating loss of SGD 48 million a year ago. Net profit reached SGD 56.4 million, marking a sharp turnaround from a net loss of SGD 26.5 million in FY2023. Excluding one-off items, SATS' core underlying net profit for FY2024 stood at SGD 78.5 million, more than quadrupling from SGD 18.2 million a year ago.

The outstanding performance was attributed to SATS reporting over tenfold growth in net profit for the second half of FY2024, benefiting from government grants and significant improvements in its associates and joint ventures. SATS' operating cash flow also significantly increased from SGD 79.6 million in FY2023 to SGD 51.21 million in FY2024. Free cash flow for FY2024 amounted to SGD 32.65 million, reversing from a free cash outflow of nearly SGD 40 million the previous year. The group also resumed dividend payouts, with management announcing a final dividend of SGD 0.015 per share to be paid on August 8.

Diversified Business Portfolio

With the acquisition of WFS, SATS now possesses a more diversified business portfolio. Previously, in FY2020, over half of the group's revenue came from food solutions, with ground handling services accounting for 34%. Approximately 80% of revenue came from Singapore, with the rest from the Asia Pacific region. Fast forward to FY2024, cargo handling now occupies nearly half of the group's revenue, while the contribution from food solutions has shrunk to only 22%. Ground handling services account for the remaining 29%.

In terms of regional composition, SATS' contributions are also more diversified, with Singapore accounting for only 34% of total revenue. The Asia Pacific region accounts for 36%, while Europe, the Middle East, and Africa (EMEA), as well as the United States, each represent 20% and 10% of total revenue, respectively.

Soaring Operational Metrics

As air travel demand soared, SATS' operational metrics also surged. By the end of the 2024 fiscal year, the number of flights handled by SATS doubled year-on-year to 600,000. The group also handled approximately 7.8 million tons of cargo, a significant increase compared to 2.2 million tons in the 2023 fiscal year.

In the aviation sector, SATS provided a total of 54 million meals, representing a nearly 69% year-on-year increase. The group also made progress in non-aviation catering businesses, providing 42 million meals in the 2024 fiscal year, up from 37 million a year ago.

Successful Cargo Operations

For its cargo segment, SATS reported several encouraging commercial achievements. Etihad Airways expanded its cold chain cargo handling business to three additional airports. SATS also signed cargo handling contracts with Air China in Los Angeles. Upon resumption of flights to Singapore, Air Canada awarded SATS contracts for passenger, ramp, and cargo handling.

By the end of the 2024 fiscal year, SATS secured annual revenue exceeding SGD 180 million from these new contracts. SATS will continue to focus on its top 20 global customers to drive more business volumes.

Bright Prospects for Food Solutions

In the food solutions segment, management has innovatively introduced a three-tier production system to disrupt the aviation food solutions industry and help SATS enter new market areas. A network of factories and central kitchens has been established in Bangkok, Tianjin, and Bangalore to scale up production and provide higher food safety standards.

The goal also includes increasing Singapore's annual aviation production capacity to 53 million meals by 2025. Currently, SATS holds a 14% market share in the SGD 6 billion aviation food service market, which is growing at a rate of 6% annually. The addressable market size in Asia exceeds SGD 450 billion, providing ample business opportunities for SATS' food solutions segment.

3 Key Strategic Focus Areas

SATS delivered excellent performance in the 2024 fiscal year and resumed dividend distribution after suspending it during the pandemic. Looking ahead, management intends to drive value creation through three strategic focus areas: debt repayment, reinvestment in capital expenditure, and dividend restoration. SATS believes its business will be supported by strong demand from the e-commerce industry and the need for specialized, value-added services offering higher returns.