Vicom Limited’s Latest Earnings: Revenue and Profits Keep Chugging Along

Vicom Limited (SGX: V01) reported its fiscal first-quarter earnings yesterday evening. The reporting period was for 1 January 2015 to 31 March 2015.

The company, which is majority-owned by land-transport giant ComfortDelGro Corporation Limited (SGX: C52), is a leading provider of technical testing and inspection services with operations primarily in Singapore.

You can catch up with Vicom’s fourth-quarter earnings here.

Financial highlights

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

  1. Overall revenue for the quarter for Vicom rose by about 5.2% to $28.2 million on a year on year comparison. This was driven by higher business volume.
  2. Consequently, net profit for the first quarter increased by 5% year on year to $8.5 million.
  3. Earnings per share (EPS) followed suit with a 5% climb from 9.05 cents in the first quarter last year to 9.5 cents.
  4. Cashflow from operations came in at $8.1 million for the first quarter of 2015 with capital expenditures clocking in at $581,000. The low capex gives Vicom a healthy $7.6 million in free cash flow, up 20% from the figure of $6.33 million seen a year ago.
  5. As of 31 March 2015, Vicom had $98.4 million in cash and equivalents and no debt. This is a healthy improvement from a year ago when it had a net cash balance of $84.9 million.

In short, Vicom’s quarterly revenue and profit has continued to chug along – not unlike the previous quarters last year. The test and inspection outfit boasts a healthy balance sheet and generated a copious amount of free cash flow.

Operational highlights

For the quarter, the management team provided an outlook statement that has been repeated for some time now:

“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 even though competition remains keen.”

Vicom is typically light on the operational details of its business on a quarter to quarter basis.

But, what we do know is that the business of Vicom can be divided into two major buckets. The first deals with vehicle inspection and testing services. The second bucket, which is provided by Vicom’s SESTCO subsidiary, is involved in providing testing, calibration, inspection, certification, consultancy, and training services to a wide range of industries. This second bucket is what the management team refers to as the “non-vehicle testing business”.

In contrast to the vehicle-related business, the non-vehicle testing operations may be the space where Vicom can drive revenue growth in the foreseeable future. However, as the management team notes, competition is more keen in that area.

Foolish summary

At its closing price yesterday of $6.22, Vicom traded at around 18 times its trailing earnings and has a dividend yield of 4.3% (thanks to its annual dividend of S$0.27 per share in 2014). With the current health of the company’s balance sheet and its ability to generate abundant free cash-flow, it may be reasonable to expect that the dividend payout will at least remain at current levels in the year ahead.

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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 Vicom Limited.