Challenger Technologies Limited’s Latest Earnings: Are Improvements in Sight?

Challenger Technologies Limited  (SGX: 573) reported its fourth-quarter earnings for the year ended 31 December 2014 yesterday. The reporting period was for 1 October 2014 to 31 December 2014.

The business of Challenger Technologies is fairly straight forward. It is primarily an IT products and services retailer with more than 40 stores around Singapore. It also has two other smaller business segments in electronic signage as well as telephonic call centre and data management services.

You can catch Challenger Technologies’ second quarter earnings here and read more about the company in here and here.

Financial highlights

Here’s a rundown on the company’s latest financial figures:

  1. Overall revenue for the fourth quarter rose by 11% year-on-year to $104.6 million. Challenger Technologies finished the year 2014 with $355.1 million in sales, about 8% below 2013’s revenue of $385.4 million.
  2. For the fourth quarter, profit attributable to shareholders was $4.95 million, up by 9% compared to the same quarter last year. For the full year, profit came in at $14.8 million, down some 14% from last year.
  3. Earnings per share (EPS) followed suit with an 8.3% rise from 1.32 cents in the fourth quarter last year to 1.43 cents in the reporting quarter. Challenger Technologies’ 2014 EPS was 4.28 cents which was a 9.2% decrease from last year’s EPS of 4.96.
  4. For the full year, cash flow from operations came in at $23.7 million with capital expenditures clocking in at $7.2 million. The low capex gave the IT retailer a steady $16.5 million in positive free cash flow, up from $12.7 million a  year ago.
  5. As of 31 December 2014, Challenger Technologies had $52.6 million in cash and equivalents and no debt. This is an improvement from a year ago when the company had S$42.9 million in cash and equivalents and no debt.

Putting it all together, Challenger Technologies managed to grow its revenue for the quarter, which is a good sign. This may have been contributed by higher mobile related sales. Meanwhile, the company had also embarked on initiatives to reduce staff costs, as my fellow Fool Sudhan P had pointed out.  We will have to observe if Challenger Technologies’ efforts are sustainable, both on the revenue and cost side of things.

A final dividend of 1.25 cents per share was also recommended. This adds up to a total dividend of 2.35 cents per share for the whole of 2014, down 6.7% from last year’s payout of 2.52 cents per share.

Operational highlights

The closure of retail operations in Malaysia saw revenue in the country fall drastically from $16 million in 2013 to $4 million in 2014. Meanwhile, revenue from Singapore also fell from $369 million in 2013 to $351 million in 2014.

On the business segment side, sales from IT products and services segment was the main culprit behind the revenue decrease, falling from $380 million to $348.5 million.

Loo Leong Thye, the Chief Executive Officer of Challenger Technologies, added the following commentary for the company’s outlook ahead:

“Retail sales for December 2014 surpassed our expectations and reversed a 9-month long slide with a solid year-end performance.

Although we continue to face industry-wide challenges such as higher manpower costs, escalating operating costs and increasing store rentals, we will continue to evaluate viable store locations for future growth opportunities in Singapore.

Our 2014 mobile handset sales shot up five times compared with 2013. Most recently, we have already seen a positive retail response by our customers and vendors to our new 2000 square feet Android Zone at our flagship Funan megastore, which is Singapore’s only location to house the latest Android devices, accessories and related products under one roof.

Success in this concept has signaled the right direction for us to ride on this growing mobility trend with new initiatives like Online-to-Offline sales (O to O).”

Foolish take away

At its closing price yesterday of $0.44, Challenger Technologies traded at around 10.3 times its latest trailing earnings and carries a dividend yield of 5.3% (based on the company’s total payout of 2.35 cents per share for 2014).

If you'd like to keep updated on the latest company and financial news, sign up for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore

Also, like us on Facebook to follow our latest hot articles.

The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.