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Challenger Technologies Limited’s Latest Earnings: What Investors Should Know

Yesterday, Challenger Technologies Limited  (SGX: 573) reported its earnings for the quarter and year ended 31 December 2016.

As a quick background, Challenger Technologies is an IT products retailer with 43 stores around Singapore. The firm also operates the online tech marketplace hachi.tech. You can catch the results from the company’s third quarter here.

Financial highlights

The following’s a rundown on some of Challenger Technologies’ latest financial figures:

  1. Fourth quarter revenue fell by 13% year-on-year to $83.4 million. Challenger Technologies completed 2016 with $339.4 million in revenue, about 4% below 2015’s revenue of $352.2 million.
  2. For the reporting quarter, profit from continuing operations was $4.19 million, down 44% compared to the same quarter a year ago. For the full year, profit from continuing operations came in at $13.3 million, down some 27% from 2015.
  3. Earnings per share (EPS) for the reporting quarter fell from 2.22 cents a year ago to 1.20 cents. Challenger Technologies’ 2016 EPS was 3.89 cents, down by 26% from 2015.
  4. For the full year, cash flow from operations came in at $21.5 million with capital expenditure clocking in at $2.4 million. The low capex gave the IT products retailer $19.1 million in free cash flow, a big improvement from the free cash flow of $1.9 million generated in 2015.
  5. As of 31 December 2016, Challenger Technologies has $52.3 million in cash and equivalents and no debt. This is an improvement from the $41.7 million in cash and no debt that the company had at the end of 2015.

Challenger Technologies experienced softer consumer demand which led to lower sales in 2016 and the reporting quarter. The firm said that online sales from hatchi.tech, which was launched in April 2016, helped offset the loss. Despite the fall in sales and profit, Challenger Technologies remained free cash flow positive and still maintains a strong balance sheet.

Challenger Technologies recommended a final dividend of 1.60 cents per share. Together with its interim dividend of 1.10 cents per share, 2016’s total dividend works out to be 2.70 cents per share, 1.9% higher than in 2015.

Operational highlights and a future outlook

It has been a tough year for retail. Challenger Technologies’ chief executive, Loo Leong Thye, commented on the year:

“FY2016 was about building a strong foundation with our online expansion. This year, we will work on enhancing Hachi.tech’s capabilities and functions in order to create a better online experience for our members.”

Challenger Technologies is looking forward to opening its new flagship store in May 2017. Loo said:

“This is the answer to what our loyal customers have been asking for, ever since we closed our previous flagship store in June 2016. We look forward to providing an even more immersive omni-channel shopping experience with the new flagship.”

The company will also be closing a number of non-performing outlets in 2017 and expects the closures to have a positive impact on its bottom-line.

At its closing share price of $0.48 on Wednesday, Challenger Technologies trades at 12.3 times trailing earnings and has a dividend yield of 5.6%.

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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.