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A Quick Look At VICOM Limited’s Second Quarter Earnings

Ser Jing - Three Growth Shares Sharing Their Earnings With You (pic)

VICOM Limited (SGX: V01) released its second quarter results yesterday and saw revenue rise 2.4% year-on-year while net profit grew 5.5%.

The firm is the largest technical testing and vehicle inspection company in Singapore and is more than 60% owned by land transport company, ComfortDelGro Corporation (SGX: C52). On top of providing vehicle inspection services, Vicom provides other testing and inspection services under its SETSCO subsidiary for various industries such as aerospace, marine and offshore, biotechnology, oil and petrochemical, building construction, and electronics manufacturing.

Revenue came in at $27.3 million for the second quarter of 2014 as compared to S$26.6 million in the previous year due to higher business volume. Net profit increased 5.5% to S$7.2 million as VICOM’s growth in expenses occurred at a slower pace than revenue;  for instance, to support the increase in revenue, operating expenses had inched up by only 1.8% to S$18.6 million.

On a half-year basis, VICOM’s revenue went up 2.9% to S$54.2 million while net profit increased 6.5% to S$15.2 million. Net profit margin was at 28.1% versus 27.2% seen in the first half of 2013.

As of 30 June 2014, the firm had a cash balance of S$80.1 million, without any borrowings. This was an improvement from the end of last year where it had a cash hoard of S$78.5 million and zero debt.

VICOM’s stronger balance sheet can be traced to its higher cash flows. Net cash flow from operations for the first half of 2014 surged 23.5% year-on-year to S$16.9 million. Meanwhile, free cash flow was at S$14.2 million, rising from S$12.2 million seen in the previous year.

Shareholders will be given an interim dividend of 8.75 Singapore cents per share, a 9.4% uptick from the dividend of 8.0 Singapore cents declared a year ago. Second quarter dividends have been increasing steadily at Vicom over the past few years – it was just 6.3 Singapore cents in 2010.

Going forward, VICOM gave some comments on its future outlook that should be very familiar with long-time observers of the company:

“The demand for the vehicle testing services is expected to moderate as more vehicles are expected to be deregistered in the year. The non-vehicle testing business is expected to grow despite the keen competition.”

Shares of the testing and inspection outfit closed at S$6.65 on Monday, representing a trailing price/earnings ratio of 20.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P owns shares in Vicom Limited.