OSIM International Ltd’s Latest Earnings: Revenue Falls 13% (Again!)

OSIM International Ltd  (SGX: O23) reported its fiscal second-quarter earnings report yesterday. The reporting period was for 1 April 2015 to 30 June 2015.

As a quick introduction, OSIM is a leading purveyor of well-being and healthy lifestyle products, such as its namesake massage chairs, health supplements, and luxury tea products under the TWG Tea brand.

You can read more about the company in here or catch up with the previous quarter’s earnings here.

Financial highlights

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

  1. Overall revenue for the quarter for OSIM was down a hefty 13% year over year to $159 million. The percentage decline in the reporting quarter was the same as the first quarter of 2015 (hence the title of this article); back then Osim’s revenue fell from $173 million in the first quarter of 2014 to $150 million.
  2. Consequently, profit (after tax) for the reporting quarter fell by 24% to $22 million.
  3. Earnings per share (EPS) followed suit with a 23% plunge from 3.9 cents in the second quarter last year to 3.0 cents in the reporting quarter.
  4. On a brighter note, cashflow from operations came in at $12 million for the quarter with capital expenditures clocking in at just $3.4 million. This gives OSIM a positive free cash flow of $8.6 million for the reporting quarter. This is down from the free cash flow of $29.7 million that was seen a year ago though.
  5. As of 30 June 2015, the company had $404.5 million in cash and equivalents and borrowings of $188 million in debt and convertible bonds. This gives a healthy net cash position of $216.5 million.

In all, OSIM has endured two quarters of back-to-back 13% year over year declines in revenue. That said, OSIM continues to generate positive free cash flow and maintain a strong balance sheet. Its cash war chest may play an important role in helping it to engineer a turnaround in its fortunes.

Management also proposed a dividend of 2 cents per share for the reporting quarter, unchanged from a year ago.

Operational highlights

Similar to the previous quarter, revenue for OSIM fell due to softer markets across the region. For the reporting quarter, revenue from the North Asia region fell by about 10% while revenue from the South Asia region fell by 14%.

OSIM ended the quarter with 560 OSIM outlets (selling the massage chairs and related products), 220 GNC/Richlife outlets and 47 TWG Tea outlets. These give a total outlet count of 827, down from the selfsame figure of 849 in the same quarter a year ago.

The management at OSIM added a quick bite of commentary on the current quarter’s results:

“This has been another challenging quarter where retail sales across the core countries have been soft. Despite these challenges, our dominant brand has enabled us to maintain a stable gross margin and cash generative business. We are continuing to invest for growth supported by a strong balance sheet.”

A quick look ahead

China remains as OSIM’s number one market with 251 outlets in 45 cities. OSIM believes that it can sustain its dominant position in its market. On the TWG Tea side of things, OSIM has opened four new outlets in the first half of 2015. The company is planning to open 11 new TWG Tea outlets in the second half of the year.

Foolish summary

At its closing price yesterday of $1.46, OSIM traded at around 14.2 times its trailing earnings with a trailing-12-months dividend yield of 4.1%.

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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.