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OSIM International Ltd’s Latest Earnings: Revenue Declines, But Less

OSIM International Ltd  (SGX: O23) reported its fiscal fourth-quarter earnings yesterday evening. The reporting period was for 1 October 2015 to 31 December 2015.

As a quick introduction, OSIM is a leading purveyor of well-being and healthy lifestyle products. The company’s product suite includes its namesake massage chairs and luxury teas under the TWG Teas brand. You can read more about the company in here or catch up with the previous quarter’s earnings here.

Financial highlights

The following’s a quick summary of OSIM’s latest financial figures:

  1. OSIM’s revenue for the fourth quarter was down 5% year-on-year, coming in at $169 million. For the full year, revenue was down by 10% to $620 million.
  2. Profit (after tax) for the reporting quarter fell by two-thirds to only $6 million. For the full year, profit had halved to $51 million.
  3. Consequently, earnings per share (EPS) was sliced by 63% in the quarter, plunging from 3.5 cents in the fourth quarter a year ago to just 1.3 cents. OSIM ended 2015 with 6.8 cents in EPS, down by 50%.
  4. Cash flow from operations came in at $18.3 million for the fourth quarter of 2015 with capital expenditures clocking in at $4.1 million. This gives OSIM positive free cash flow of $14.2 million, though that’s down from the $36.9 million seen a year ago ($38.7 million in cash flow from operations and $1.8 million in capex). For 2015, OSIM registered free cash flow of around $35.6 million, which is a big decline from the $90.5 million seen in 2014 ($108.5 million in cash flow from operations and $17.9 million in capex).
  5. As of 31 December 2015, the company had $358 million in cash and equivalents and borrowings of $185.9 million. While this gives OSIM a healthy net cash position of $172.1 million, it’s a decline from the net cash position of $242 million at end-2014.

In all, OSIM managed to end the year with a smaller decline in revenue. This comes after experiencing double-digit revenue declines in the first three quarters of 2015. Unfortunately, its inventory had also increased during the quarter (a 9% year-on-year increase), despite the drop in revenue.

Meanwhile, OSIM recovered to positive free cash flow territory after going negative in the previous quarter. The massage chair purveyor still has a strong balance sheet. This cash war chest may be important for the company as it attempts to engineer a turnaround in its fortunes.

The board of directors had proposed a dividend of 2 cents per share for the reporting quarter, unchanged from the previous year. This brings OSIM’s total dividend for 2015 to 6 cents per share, again unchanged from 2014.

Operational highlights

2015 has been a tough year for sales at OSIM. Retail sales across all its core countries had been soft. Revenue from the North Asia region and the South Asia region fell by 6.7% and 11.2%, respectively, in the year. There was a bright spot where revenue from North Asia inched up by 3% year-on-year for the fourth-quarter. It remains to be seen if this positive trend is sustainable.

Elsewhere, profitability for 2015 was hobbled by a $10.1 million charge in legal fees and a one-off $5.6 million loss on ONI Australia.

The company ended 2015 with 534 OSIM outlets, 197 GNC/Richlife outlets and 52 TWG Tea outlets. The total outlet count was 783, lower compared to the 842 outlets it had a year ago.

OSIM continues to target new outlets for its namesake stores, while rationalising the existing ones. It is looking to open five to eight GNC/Richlife outlets and 15 to 20 outlets for TWG Tea in 2016.

Foolish summary

At its closing price of $0.94 on Thursday, OSIM traded at 13.8 times trailing earnings with a trailing dividend yield of 6.4%.

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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.