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Challenger Technologies Limited’s Latest Earnings: Slowdown Bites into Sales and Profits

Challenger Technologies Limited  (SGX: 573) reported its third-quarter earnings results yesterday. The reporting period was for 1 July 2016 to 30 September 2016.

The business of Challenger Technologies is fairly straight-forward: It is primarily an IT products and services retailer with 44 stores around Singapore. You can read more about the company in here and here.

You can also catch up with the results from the company’s previous quarter here.

Financial highlights

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

  1. For the third-quarter, Challenger Technologies’ sales fell by 16% year-on-year to $74.4 million.
  2. Profit from continuing operations was $1.75 million, down 50% compared to the same quarter last year.
  3. Earnings per share (EPS) was down almost 50% from 1.01 cents in the third-quarter last year to 0.51 cents in the reporting quarter.
  4. Cash flow from operations was $627,000 with capital expenditure coming in at $985,000. As such, the IT retailer generated $360,000 in negative free cash flow. This is a decline from the $6.6 million in positive free cash flow ($7.80 million in cash flow from operations and $1.20 million in capex) the company generated in the same period a year ago.
  5. As of 30 September 2016, Challenger Technologies has $39.1 million in cash and equivalents and just $18,000 in debt. This is roughly unchanged from the S$38.4 million in cash and equivalents and zero debt seen a year ago.

Overall, it looked like a tough quarter for Challenger Technologies. The IT retailer reported lower sales and sharply lower profits. The firm also generated negative free cash flow. On the other hand, Challenger Technologies maintained only a minimal level of debt on its balance sheet.

Operational highlights and a future outlook

Challenger Technologies’ top-line fell due to weaker performance from its IT products and services business. Sales were soft in tradeshow activities, corporate sales, and retail operations.

The company’s online market place, Hachi.tech, recorded $11.7 million in sales – this revenue number could be worth tracking as Hachi.tech is Challenger Technologies’ attempt to take advantage of the eCommerce trend.

Commenting on Challenger Technologies’ current performance and future plans for growth, Loo Leong Thye, the company’s chief executive, said:

“Local retail consumption was weak and we saw a slowdown in Q3 retail sales due to worsening economic sentiment

To stimulate growth opportunities for us and mitigate the impact of this weak economy, we will continue to enhance our omnichannel offerings to allow us to reach our offline and online customers faster.

One way is through our online dedicated tech marketplace Hachi.tech. Another way is improving our O2O [online to offline] experience so that our offline store customers can understand the convenience of online shopping anytime, anywhere even when the physical store is not opened during operating hours.

Profit for this quarter was lower as we had to make a one-off full impairment provision for our investments in a last-mile delivery provider. We now move on to focusing on our omnichannel approach so that our online and offline customers enjoy an improved shopping experience.”

At its closing share price of $0.48 yesterday, Challenger Technologies traded at around 8.5 times trailing earnings with a dividend yield of 5.9%.

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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.