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Vicom Limited’s Latest Earnings: A Year of Declines

Yesterday, Vicom Limited (SGX: V01) released its earnings for the quarter and year ended 31 December 2016.

As a quick background, Vicom is a leading provider of technical testing and inspection services for vehicles and a wide range of industries. Its operations are primarily in Singapore and it is majority-owned by land transport giant ComfortDelGro Corporation Ltd  (SGX: C52).

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

Financial highlights

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

  1. Revenue for the fourth-quarter came in at $25 million, down 2.9% from the same quarter a year ago. For the full year, Vicom recorded $101.2 million in sales, a 5.2% decline from a year ago.
  2. Net profit for the fourth-quarter decreased by 7% year-on-year to $7.5 million. For 2016, Vicom’s bottom-line posted a 10.3% year-on-year decrease to $28.2 million.
  3. Earnings per share (EPS) was down 7.6% from 9.07 cents in the fourth-quarter of 2015 to 8.38 cents in the reporting quarter. For the full year, Vicom recorded an EPS of 31.77 cents, down 10.4% from a year ago.
  4. In the fourth quarter of 2016, cash flow from operations and capital expenditures came in at $10.5 million and $1.1 million, respectively. The low capex gave Vicom $9.4 million in free cash flow for the quarter, up 5.7% from the free cash flow of $8.9 million seen a year ago ($10.2 million in cash flow from operations and $1.2 million in capital expenditures). For the whole of 2016, Vicom generated free cash flow of $29.2 million, down from the $32.6 million seen in 2015.
  5. As of 31 December 2016, Vicom had $105.7 million in cash and equivalents and no debt. This is a minor increase from the net cash balance of $100.1 million recorded a year ago.

Vicom’s revenue fell again in the fourth quarter to complete a year of declines. The company’s profit also slipped by over 10% during the year. Despite the setback, Vicom managed to strengthen its balance sheet compared to the year before and it actually generated better free cash flow (on a year-on-year basis) in the reporting quarter.

The board of directors also proposed a final dividend of 8.5 cents per share and a special dividend of 10 cents per share. This is a 6.3% decline from the final dividend of 9.5 cents per share and special dividend of 10.25 cents per share paid out last year. Together with an interim dividend of 8 cents per share, Vicom would be paying out 26.5 cents per share in dividend for 2016, down 7% from 2015’s total dividend of 28.5 cents.

Operational highlights

There isn’t too much to look forward to with Vicom at the moment. Like for past quarters in the year, the company’s management offered a cautious outlook. In the latest earnings release, management said:

“Business conditions are expected to remain difficult for both the vehicle and non-vehicle testing businesses.

The vehicle testing business will continue to face challenges posed by the high de-registration rate although this will be offset partially by an increase in the number of Certificate of Entitlement (COE) revalidations.

The non-vehicle testing business will continue to weaken with the general slowdown in the industries that we serve.”

Although the outlook sounds dour, there is a possibility that the vehicle testing business might decline less in 2017.

Vicom’s shares closed at a price of $5.69 each on Wednesday. That gives the company a trailing price-to-earnings ratio and dividend yield of 18 and 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.