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Q & M Dental Group (Singapore) Limited’s Latest Earnings: What Investors Should Know

Q & M Dental Group (Singapore) Limited (SGX: QC7) reported its results for the year ended 31 December 2015 yesterday night.

As a brief background for context later, Q & M Dental Group runs a chain of dental clinics mainly around Singapore. It also owns dental supplies and equipment distribution companies in Singapore and Malaysia. The company operates with three business segments, namely Primary Healthcare, Dental Equipment & Supplies Distribution, and Dental Supplies Manufacturing.

Financial highlights

The following’s a rundown on the latest financial figures:

  1. For 2015, revenue rose by 24% to $124 million.
  2. Net profit attributable to shareholders for the full year was up 33% to $11.4 million compared to the previous year.
  3. For the full year, Q & M’s diluted earnings per share (EPS) came in at 1.39 cents. This compares with the diluted EPS of 1.20 cents recorded in 2014.
  4. Cash flow from operations for 2015 was $10.9 million with capital expenditures coming in at $13.5 million. This put the dental care provider in a negative free cash flow zone to the tune of $2.6 million. This compares with the negative free cash flow of $6.7 million recorded in 2014 ($10.6 million in cash flow from operations and $17.3 million in capex).
  5. As of 31 December 2015, Q & M had $64.9 million in cash and equivalents and $80.2 million in debt. This compares with the cash and equivalents of $35.6 million and debt of $32.2 million that it had at the end of 2014.

In summary, Q & M Dental Group saw both its top-line and bottom-line growing at a healthy pace for the year. But, the dental care provider also registered negative free cash flow and had picked up more debt in the process, weakening its balance sheet from a net cash position to a net debt position.

The company has declared a final dividend of 0.42 cents per share. Together with its interim dividend, the full year dividend in 2015 adds up to 0.84 cents per share.

Operational Highlights

Full-year sales at its Primary Healthcare segment rose 16% to end at $97.8 million. The segment was lifted by higher revenue from existing and new dental outlets and through multiple acquisitions. Q & M Dental Group ended the year with a total of 65 dental outlets, three medical outlets and one aesthetic centre in Singapore. It also had eight dental outlets in Malaysia, and three dental hospitals and four dental outlets in China. The table below shows how the company’s network has grown between 2014 and 2015:

QM Dental Group outlet count
Source: Q & M’s earnings release

Meanwhile, the Dental Equipment and Supplies Distribution segment’s revenue was relatively unchanged at $9.6 million for 2015. Elsewhere, the Dental Supplies Manufacturing segment had benefitted from the full year contribution from Aidite, a Chinese dental supplies manufacturing company that was acquired by Q & M in August 2014; revenue in the segment had spiked by 151% to $16.7 million.

Ng Chin Siau, Q & M’s chief executive, added the following short comments in the earnings release on the company’s performance in 2015 and the outlook ahead:

“Even with the uncertainty in the economy, 2015 represented an exciting year for the Group with the completion of several local acquisitions and the announcements of two separate spin-offs for the Group’s overseas businesses. Amidst such backdrop, we are pleased to deliver record earnings.

Looking ahead, 2016 will be a special year as Q & M celebrates its 20th anniversary and the Group will remain focused on executing its expansion strategy and to pursue new growth opportunities in the region.”

Investors should note that Q & M Dental Group is planning to spin-off and list Aidite on the New Third Board of the People’s Republic of China. It also announced the completion of the acquisition of Lee & Lee (Dental Surgeons) on the same day of its earnings report.

Foolish takeaway

At its closing price yesterday of $0.70, Q & M Dental Group traded at 50 times trailing earnings and has a trailing dividend yield of 1.2%.

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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 doesn’t own shares in any companies mentioned.