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OSIM International Ltd’s Latest Earnings: What’s Next After a 53% Fall in Profit?

OSIM International Ltd  (SGX: O23) reported its fiscal first-quarter earnings report yesterday evening. The reporting period was for 1 January 2015 to 31 March 2015.

For a quick introduction, OSIM is a leading purveyor of well-being and healthy lifestyle products, such as its namesake massage chairs and TWG Teas. You can read more about the company here and catch up on the firm’s previous earnings report here.

Financial highlights

Here’s a rundown on OSIM’s latest set of financial figures:

  1. Overall revenue in the reporting quarter for OSIM was $150 million, down a hefty 13% on a year over year comparison.
  2. Consequently, profit (after tax) for the period fell by 53% from a year ago to about $14 million.
  3. OSIM’s earnings per share (EPS) followed suit with a 55% decline from 4 cents in the same quarter last year to 1.8 cents in the reporting quarter.
  4. On a brighter note, cashflow from operations came in at $18.4 million for the first quarter of 2015 with capital expenditures clocking in at $3.5 million. This gives OSIM a positive free cash flow of $14.9 million for the reporting quarter, down from $19.95 million a year ago.
  5. As of 31 March 2015, the company had $445.6 million in cash and equivalents and S$189.8 million worth of debt and convertible bonds. This gives the company a healthy net cash position of $256 million, an improvement from the figure of $156 million seen a year ago.

In all, OSIM’s revenue was down and profit was halved for the quarter. On the other hand, OSIM generated positive free cash flow and was able to strengthen its balance sheet. Management also proposed a dividend of 1 cents per share for the reporting quarter, unchanged from last year.

Operational highlights

Revenue for OSIM fell due to softer markets across the region. For the reporting quarter, revenue from the North Asia region fell by about 14.2% while revenue from the South Asia region slipped by 13.7%.

The company ended the quarter with 560 OSIM outlets (selling massage chairs and other wellness products), 233 GNC/Richlife outlets (selling mainly nutritional supplements), and 44 TWG Tea outlets (retail stores for luxury tea products) for a total outlet count of 837. This is lower compared to the 855 total outlets that OSIM had in the same quarter a year ago.

Management at OSIM added some commentary on the reporting quarter’s results:

“This has been a challenging quarter where retail sales across the core countries has been soft and there have been no new major OSIM product launches. Despite these challenges, our dominant brand has enabled us to maintain a stable gross margin and highly cash generative business. We are continuing to invest for growth supported by a strong balance sheet”

A quick look ahead

Like last quarter, China was OSIM’s number one market with 252 outlets in 45 cities. The company also launched a new massage chair uMagic in April to a favorable response.

On the TWG Tea side of the business, OSIM had invested $3.5 million to open new outlets, upgrade existing outlets, and expand stores in North Asia. The company is planning to open 15 new TWG Tea outlets in the current year.

Foolish summary

At its closing price yesterday of $1.93, OSIM traded at around 17.5 times its trailing earnings with a dividend yield of 3.1% (based on its dividend over the last 12 months).

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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 Chin Hui Leong owns shares in OSIM International Ltd.