Challenger Technologies Limited’s Latest Earnings: What Investors Should Know

Challenger Technologies Limited (SGX: 573) reported its third-quarter earnings report yesterday. The reporting period was for 1 July 2015 to 30 September 2015.

The business of Challenger Technologies is fairly straightforward. It is primarily an IT products and services retailer with over 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 read more about the company here and here.

Financial highlights

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

  1. Overall revenue for the third quarter rose by 7% year on year to $88.2 million.
  2. For the third quarter, profit attributable to shareholders was $3.5 million, which was down 5% compared to the same quarter last year.
  3. Earnings per share (EPS) also saw a 4% decline from 1.05 cents in the third quarter last year to 1.01 cents.
  4. Cash flow from operations was $7.8 million with capital expenditure clocking in at $1.2 million. The low capex gave the IT retailer $6.6 million in positive free cash flow.
  5. As of 30 September 2015, the group had $38.4 million in cash and equivalents and no debt. This is a decline from the $42.9 million in cash and equivalents recorded a year ago.

In all, Challenger Technologies’ topline grew but profits fell. Profit, though, is still up for the first nine months of the year. The company clocked in positive free cash flow and maintains a solid balance sheet at the end of the third quarter.

Operational Highlights

Challenger Technologies’ topline grew largely due to an improved performance from tradeshow and corporate sales. In terms of business segment, sales from IT products and services segment was the main driver behind the revenue increase, ending the quarter with $87 million.

Loo Leong Thye, Chief Executive Officer of Challenger Technologies, added the following comments:

Q3 retail sales continued to be sluggish after a slow Q2. Overall, retail demand continued to be weak. Some factors include bad weather and major local events happening that brought retail sentiment down.

However, Q4 is traditionally a good quarter for retailers like us, and we are looking forward to the seasonal uplift.

Manpower constraints and higher store rentals continue to be our main challenges. While we try to manage costs to increase profitability, we are also finding ways to accelerate our growth.

Over the next five years, we will grow our Digital Lifestyle Ecosystem with offline and online ecommerce offerings, e-payment options, software technology development, call centre and extended warranty services, marketplace platforms for valuation and certification of mobile devices, logistics, e-Human Resources and other strategic investments within the digital landscape.

Challenge Ventures is a wholly-owned subsidiary set-up for this purpose. It will house the strategic investments that Challenger Technologies pursues.

It is still early days for Challenge Ventures. Even as we have injected two of our subsidiaries which were formerly held by Challenger, we are looking at suitable businesses for investments.

Foolish take away

At its closing price yesterday of $0.465, Challenger Technologies traded at around 10.3 times trailing earnings with a dividend yield of 5.1%.

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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 doesn’t own shares in any companies mentioned.