Vicom Limited’s Latest Earnings: Revenue Shifts into Reverse

Vicom Limited (SGX: V01) released its fiscal third-quarter earnings yesterday evening. The reporting period was for 1 July 2015 to 30 September 2015.

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

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

Financial highlights

The following’s a quick take on Vicom’s latest financial figures:

  1. Revenue came in at $25.4 million for the third-quarter, down 6% from the same period a year ago. This result may not be surprising, given the caution that the management team had sounded in the previous quarter.
  2. Although revenue for the test and inspection firm went in reverse, net profit for the third quarter had increased by 3% year-on-year to $7.5 million. Vicom’s bottom-line had benefitted from sharply lower operating costs and higher interest income.
  3. Earnings per share (EPS) also went up by 3% from 8.08 cents in the third quarter last year to 8.32 cents in the reporting quarter.
  4. Cash flow from operations came in at $9.3 million for the third quarter of 2015 and capital expenditures clocked in at $1.2 million. The low capex gave Vicom $8.1 million in free cash flow, down slightly from the free cash flow of $10.7 million seen a year ago ($11.4 million in cash flow from operations and $658,000 in capex).
  5. As of 30 September 2015, Vicom had $91 million in cash and equivalents and no debt. This is an increase from the net cash balance of $83.1 million recorded a year ago.

In short, Vicom’s top-line growth went into reverse but its bottom-line rose despite the fact that it managed to (1) generate healthy amounts of free cash flow and (2) its cash on the balance sheet had also increased compared to the previous quarter and from a year ago.

Operational highlights

In the second-quarter, Vicom’s management team had painted a dour outlook for the future (emphasis mine):

Demand for vehicle testing services is expected to moderate as more vehicles are expected to be deregistered during the year. Demand for non-vehicle testing services is expected to fall as growth in some industries slows.

The updated outlook in the third quarter does not look promising, either.

Demand for vehicle testing services is expected to be lower with more vehicles likely to be deregistered during the year. Demand for non-vehicle testing services is expected to fall with the slow down in some industries.

The higher rate of vehicle deregistration at the moment may affect Vicom’s vehicle testing business. This may be the first of a few tough quarters ahead for Vicom.

Foolish summary

At its closing price yesterday of $6.03, Vicom traded at 17.7 times its latest trailing earnings and carried a trailing dividend yield of 4.5%.

If you'd like to keep updated on the latest company and financial news, sign up for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

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.