Vicom Limited’s Latest Earnings: “Less Bad”

Vicom Limited (SGX: V01) released its 2016 third-quarter earnings yesterday evening. The reporting period was for 1 July 2016 to 30 September 2016.

As a quick background, 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 Ltd  (SGX: C52).

You can catch up with the results of Vicom’s second-quarter here.

Financial highlights

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

  1. Revenue for the third-quarter came in at $25.4 million, up a slight 0.1% from the same quarter a year ago.
  2. But net profit for the reporting quarter fell by 7.8% year-on-year to $6.9 million.
  3. Earnings per share (EPS) was 7.67 cents in the reporting quarter, down 7.8% from the EPS of 8.32 cents recorded last year.
  4. Cash flow from operations came in at $8.15 million for 2016’s third-quarter and capital expenditures was around $1.15 million. The low capex gave Vicom $7.1 million in free cash flow, down 13.8% from the free cash flow of $8.1 million seen a year ago ($9.3 million in cash flow from operations and $1.16 million in capital expenditures).
  5. As of 30 September 2016, Vicom has around $96 million in cash and equivalents and no debt. This is a slight increase from the net cash balance of $91 million recorded a year ago.

In all, Vicom experienced a near-8% profit decline while revenue barely budged. This isn’t a great result, but it is an improvement compared to the 6.9% decline in sales and 12.6% decline in profit seen in the previous sequential quarter. Vicom’s balance sheet remains strong.

Operational highlights

Vicom’s management left its outlook unchanged from the second-quarter of 2016. It does not expect its non-vehicle testing services to improve anytime soon:

“Demand for vehicle testing services will continue to be impacted as more vehicles will be deregistered during the year. Demand for non-vehicle testing services is not expected to improve with the continuing slow-down in the industries that we serve.”

I had previously mentioned that the higher rate of vehicle deregistration may affect Vicom’s vehicle testing business. Vicom’s business is not expected to pick up, based on its outlook.

Foolish summary

At its closing share price of $5.65 yesterday, Vicom trades at around 17.4 times trailing earnings and carries a trailing dividend yield of 4.7%.

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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.