ComfortDelgro Corporation Limited’s Latest Earnings: Growth Seen, But Challenges Lie Ahead

Last Friday, ComfortDelgro Corporation Limited (SGX: C52) reported its earnings for the quarter and year ended 31 December 2015.

For a brief introduction, ComfortDelgro is a global land transport giant with operations mainly in Singapore, Australia, the United Kingdom, and China. The company has a total fleet size of over 46,650 buses, taxis, and rental vehicles. It is also the majority owner of two other Singapore-listed companies: The test and inspection outfit Vicom Limited (SGX: V01) and bus and rail operator SBS Transit Ltd  (SGX:S61).

You can learn more about ComfortDelgro in here and here. You can also look up the results from the company’s previous quarter here.

Financial highlights

The following’s a summary of the latest financial figures from ComfortDelgro:

  1. Revenue for 2015 rose by 1.5% to $4.11 billion.
  2. Net profit attributable to shareholders increased by 6.5% to $301.9 million.
  3. Subsequently, earnings per share (EPS) increased by 5.9% from 13.29 cents in 2014 to 14.07 cents in 2015.
  4. For 2015, cash flow from operations was $600.2 million with capital expenditures clocking in at $387.7 million. This gives ComfortDelgro positive free cash flow of $212.5 million, up from $168.1 million ($639 million in cash flow from operations and $470.9 million in capex) seen a year ago.
  5. As of 31 December 2015, ComfortDelgro had $787.8 million in cash and equivalents and $558.6 million in debt. This is an improvement compared to a year ago when the company had $825.8 million in cash and equivalents and $737.1 million in debt.

In summary, ComfortDelgro saw minimal top-line growth, but was still able to grow its bottom-line at a respectable high single-digit rate. This is a familiar pattern for the company for the most of 2015. In other positive developments, the land transport firm reported positive free cash flow and had strengthened its balance sheet for the year.

ComfortDelgro had proposed a final dividend of $0.05 per share for the fiscal year 2015. Together with the interim dividend of $0.04 per share, the company’s total dividend for the year is at $0.09 per share, up from the dividend of $0.0825 seen in 2014.

Operational highlights

Bus operations revenue was $2.12 billion for 2015, an increase of 3.1% from 2014. While there was growth, it was hampered by currency exchange headwinds from the weaker Australian dollar.

For 2015, Taxi operations also grew revenue by 3.4% to $1.33 billion. Top-line growth was the strongest in Rail operations, up 8.4% to $213.4 million.

The Automotive Engineering Services business provided the biggest drag on ComfortDelgro’s total revenue growth. The segment saw a 13.6% decline in revenue as a result of lower prices for the sale of diesel to taxi hirers.

Looking ahead, ComfortDelgro expects to see growth from its Rail business. The segment is expected to benefit from the opening of the Downtown Line Stage 2 Mass Rapid Transit (MRT) network in Singapore. There could be room for some worry though, as ComfortDelgro expects some of its business segments to see lower revenue in 2016. Here’s a summary of the company’s outlook for the year ahead:

Segment Revenue expectation in 2016
Bus (Singapore) Decrease
Bus (Australia) Maintain
Bus (UK) Increase
Rail Increase
Bus Station Decrease
Taxi Maintain
Automotive Engineering Services Decrease
Driving Centre Maintain
Inspection & Testing Services Decrease
Car Rental & Leasing Maintain

Source: ComfortDelgro’s earnings release

ComfortDelgro also commented that “[k]een competition and cost pressures will continue to be felt” throughout its various businesses.

Foolish summary

At its closing price last Friday of $2.79, ComfortDelgro traded at 20 times trailing earnings and has a dividend yield of around 3.2%.

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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 Vicom Ltd.