OSIM International Ltd’s Latest Earnings: Revenue Dives, Again.

OSIM International Ltd (SGX: O23) reported in its third-quarter earnings report yesterday. The reporting period was for 1 July 2015 to 30 September 2015.

As 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 or catch up with the previous quarter’s earnings here.

Financial highlights

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

  1. Overall revenue for OSIM was down a 11% on a year on year comparison, coming in at $142 million for the third quarter of 2015.
  2. Consequently, profit (after tax) for the period fell by sizable 62% to just $6 million.  
  3. As such, earnings per share (EPS) was sliced by 62% , plunging from 2.1 cents per share in the third quarter a year ago to just 0.8 cents in the reporting quarter.   
  4. Cashflow from operations came in at $1.4 million for the third quarter of 2015 with capital expenditure clocking in at $3.3 million. This gives OSIM negative free cash flow of $1.9 million for the reporting quarter.
  5. As of 30 September 2015, the company had $384 million in cash and equivalents and borrowings of $191.6 million in debt and convertible bonds. This gives OSIM a healthy net cash position of $192.4 million.

This is the third time in as many quarters that OSIM has experienced double digit revenue declines. Furthermore, OSIM fell into negative free cash flow territory. On the other hand, the massage chair purveyor still maintains a strong balance sheet. The war chest may be important for the company to engineer a turnaround in its fortunes.

Management proposed a dividend of 1 cents per share for the reporting quarter, unchanged from last year.

Operational Highlights

It was another challenging quarter for OSIM. Retail sales continues to be soft in markets across the region. Revenue from the North Asia region and the South Asia region fell by 7.5% and 10.4% respectively.  

The company ended the quarter with 546 OSIM outlets, 214 GNC/Richlife outlets and 49 TWG Tea outlets. The total outlet count was 809, lower compared to the 833 outlets it had in the same quarter a year ago.

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

“This has been another challenging quarter where retail sales across the core countries have been soft. This quarter has seen further challenges from gyrating markets and currency turmoil in the region. Despite these challenges, our dominant brand has enabled us to maintain a stable gross margin and cash generative business with cash and cash equivalents growing again in the quarter. We are using our strong balance sheet to invest in new products and continuing our marketing activities.”

A quick look ahead

OSIM’s number one market is China with 244 outlets in 45 cities. OSIM believes that it can sustain its dominant position in the market.  

On the TWG Tea side of business, OSIM has opened six new outlets in the first nine months of 2015. The company is planning end 2015 with 52 TWG outlets.

Foolish summary

At its closing price on Tuesday of $1.62, OSIM traded at 18 times trailing earnings with a trailing twelve months dividend yield of 3.7%.

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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.