An Overview of SATS Cho Wee Peng, CFO SIAS Corporate Profile & Investment Seminar 30 November 2013
Forward Looking Statements This presentation may contain forward-looking statements regarding, among other things, the Company's outlook, business and strategy which are current as of the date they are made. These forward-looking statements are based largely on the current assumptions, expectations and projections of the directors and management of SATS about our business, and the industry and markets in which we operate. These statements are not guarantees of SATS future performance and are subject to a number of risks and uncertainties, some of which are beyond the Company's control and are difficult to predict. Future developments and actual results could differ materially from those expressed in the forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forwardlooking information will prove to be accurate. SATS does not undertake to update these forward-looking statements to reflect events or circumstances which arise after publication. 2
Today s Agenda SATS At A Glance Investment Thesis Summary 3
SATS At A Glance 4
Our Business Food Solutions Airline Catering Gateway Services Passenger Services and Lounge Management Institutional Catering Ramp and Baggage Handling Food Distribution and Logistics Airfreight Handling and Logistics Airline Linen Laundry Aviation Security Cruise Handling and Terminal Management 5
Key Figures Revenue 1 PATMI 1 Total Assets 2 Cash and Cash Equivalents 2 S$1.82bn S$184.8mn S$1.96bn S$394.5mn Debt-to-Equity 2 ROE 1 Market Capitalisation 3 Headcount 2 0.09x 12.7% S$3.5bn ~14,700 (1) For the twelve months ending 31 March 2013 (2) As at 30 September 2013 (3) As at 28 November 2013 6
2Q13/14 Highlights Revenue $452.1m -2.0% Revenue in 2Q declined 2% year-on-year due to lower food revenue (-5.9%), offset partially by higher gateway revenue (+5.1%). Operating Profit $46.6m -10.6% Share of results of Associates/JVs, net of tax $11.8m +13.5% PATMI $48.7m -3.2% Compared to revenue, operating expenditure declined at a slower pace of 1%. Hence, operating profit fell 10.6%. Better performance reported by associates in India and Indonesia saw share of results of Associates/JVs increased 13.5%. PATMI was 3.2% lower than a year ago. 7
1H13/14 Highlights Revenue $886.6m -1.4% Operating Profit $87.3m -4.5% Share of results of Associates/JVs, net of tax $24.3m +10.0% PATMI $94.9m +3.6% Debt-to-equity 0.09 times Revenue in 1H declined 1.4% year-on-year due to lower food revenue (-5.7%), offset partially by higher gateway revenue (+6.5%). Operating profit fell 4.5% on rising employment costs. Better performance reported by associates in India and Indonesia saw share of results of Associates/JVs increased 10%. PATMI rose 3.6%. The Group benefitted from write-back of tax provision of $4m for prior years which was partially offset by impairment provision of $1.7m for assets held for sale. Excluding one-off items, underlying net profit was $96.6m. Debt-to-equity ratio remained healthy. Cash and cash equivalents as at 30 September 2013 was $394.5m. Free cash flow generated in the first six months was $60.1m. 8
Road Map - To Expand Beyond Aviation & Singapore By Business By Industry By Geography FY1999 Corp 1.5% Gateway Services 50.9% Aviation 100.0% Singapore 100.0% Food Solutions 47.6% 1H FY2014 Corp 0.3% Gateway Services 38.1% Non- Aviation 18.8% Corp 0.3% Aviation 80.9% Japan 15.4% Others 4.6% Singapore 80.0% Food Solutions 61.6% 9
Investment Thesis 10
Investment Thesis 5 1 Unique Business Model 2 Strong Market Position 3 Positive Growth Prospects 4 Sound Operating Fundamentals Resilient Cash Flows & Strong Balance Sheet 11
1 Unique Business Model Twin engines of growth in gateway services and food solutions Largest aviation services network in Asia 10 Countries 38 Airports Jilin Flights (1) 441,958 Passengers (1) 65.1m Jeddah Riyadh Male India Beijing Hong Kong Macau Ho Chi Minh City Singapore Tianjin Shenyang Kaohsiung Taipei Manila Tokyo Medan (Narita & Haneda) Batam Balikpapan Jakarta Surabaya Yogyakarta Denpasar Manado Makasar Lombok Timika Meals (1) 80.0m Airfreight (1) 4m tons Amritsar Delhi Kolkata Mumbai Hyderabad Goa Chennai Mangalore Bangalore Trivandrum Indonesia Rockhampton Hervey Bay Brisbane Gateway Services Food Solutions Gateway Services and Food Solutions (1) Based on FY12/13 aviation statistics for Singapore and overseas operations 11
2 Strong Market Position Singapore aviation: first-choice service provider for close to 60 scheduled airlines at Changi Airport DNATA 26% Gateway Services (1) Ground & Cargo Handling Aviation Food Solutions (1) DNATA 15% Airline Catering ASIG 0% SATS 74% SATS 85% Singapore non-aviation: leading institutional caterer with the largest capacity Regional aviation: majority of subsidiaries and JVs are either No. 1 or 2 service provider in the airports where they operate (1) Source: Changi Airport Group; market share based on number of scheduled flights. 13
3 Positive Growth Prospects Growing demand for air travel in Asia 2013 GDP forecasts: China 7.6% and India 3.8% (1) YTD Passenger traffic on Asia Pacific airlines grew 7.2% against global average of 5.0% (2) Asia-Pacific airlines remain one of the biggest contributors to global aviation industry profit (3) Singapore - An established international hub Changi Airport is Asia s leading air hub; 2012 passenger traffic +10.0% to 51.2m T4 s completion in 2017 will bring Changi Airport s capacity to 82m; T5 (to be operational in mid 2020s) will double existing capacity to 135m Singapore s cruise passenger throughput is expected to grow from 913,000 in 2012 to 1.5m by 2017 (4) Beneficiary of tourism growth in Singapore Visitor arrivals +9.1% to 14.4m in 2012; target to reach between 14.8.m to 15.5m in 2013 (4) (1) Source: World Economic Outlook Update (Oct 2013) (2) Source: IATA Air Passenger Market Analysis (Sep 2013) (3) Source: IATA Financial Forecast (Sep 2013) (4) Source: Singapore Tourism Board 14
3 Positive Growth Prospects Proposed acquisition of Singapore Cruise Centre Grow SATS gateway business both in Singapore and Asia Pacific Positive prospects for cruise in Singapore Immediately accretive to earnings Currently awaiting regulatory approval. Once these are obtained, we shall proceed to convene an EGM to seek shareholder approval. 15
4 Sound Operating Fundamentals Strong customer focus and consistently high service standards Economies of scale Steady focus on improving productivity Operating Margins SATS vs. global peers (1) 10.6% 9.1% 7.0% 5.3% 4.3% 3.2% 3.0% SATS BBA Compass Sodexo Autogrill John Menzies gategroup Airport Service Providers Aviation Food Solutions Food Solutions (1) Calendarised to March-year end; Source: FactSet, Company information as of latest financial year 16
S$ m 5 Resilient Cash Flows & Strong Balance Sheet Strong cash generative businesses with short cash cycle Healthy cash reserves of S$394.5m and low debt-to-equity ratio of 0.09x (1) Strong financial flexibility to seek strategic opportunities Dividend Payout Ratio (2) FCF & Dividends Paid (2) 289 168.8% 73.5% 78.6% 98.4% 90.3% 156 108 190 142 132 188 104 208 167 63.7% 71.4% 66.2% FY08/09 FY09/10 FY10/11 FY11/12 FY12/13 Ordinary dividend Special divdend FY08/09 FY09/10 FY10/11 FY11/12 FY12/13 Free Cash Flow Dividends paid (1) As at 30 September 2013 (2) Includes special dividends of S$0.06 per share, S$0.15 per share and S$0.04 per share for FY11, FY12 and FY13 respectively 17
Summary Food Solutions and Gateway Services are our core businesses Our strategy is to grow our businesses, organically and through value creating acquisitions Our strong financial position provides funding capacity for acquisitions 18
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