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These 3 Companies Recently Reported Weaker Financials In Their Latest Quarterly Earnings

Photo credit: Rafael Matsunaga. Licence: http://creativecommons.org/licenses/by/2.0/

We’re back in the earnings season again!

As is common with every earnings season, there will be some companies posting growth, some companies posting flat numbers, and some companies experiencing declines. So, which are the companies that have recently reported weaker financials in their latest results? Let’s look at three of them:

1. Vicom Limited (SGX: V01) released its results for the quarter ended 31 December 2016 last week. The company may be familiar to drivers in Singapore as it provides vehicle testing and inspection services here. It also provides an array of technical testing and inspection services to a wide variety of industries.

During the reporting quarter, Vicom’s revenue and earnings per share declined by 2.9% and 7.6%, respectively, when compared to the same quarter a year ago. Its final dividend of S$0.085 per share is also 6.3% lower than the S$0.10 per share seen in the fourth quarter of 2015. But, the company managed to end 2016 with a strong balance sheet – Vicom has S$105.7 million in cash and zero debt as of 31 December 2016.

Management expects business conditions to remain difficult for both the vehicle and non-vehicle testing businesses. The former will continue to face challenges posed by a high vehicle de-registration rate whilst the latter is affected by a slowdown in the industries that the company serves.

2. Fraser and Neave Limited (SGX: F99) is another company that released its results last week.

As a quick introduction, Fraser and Neave, or better known as F&N, organizes its business into three main segments: Food & Beverage; Dairies; and Printing & Publishing.

In the quarter ended 31 December 2016, Fraser and Neave’s revenue was flat while its net profit fell by 12.1% year-on-year. The company’s balance sheet also weakened drastically (although it is still in a net-cash position) partly due to F&N’s US$500 million purchase of an additional 5.4% stake in Vietnamnese milk products manufacturer, Vinamilk.

F&N’s fall in profit is due to EBIT (earnings before interest and taxes) declines in its Food & Beverage and Printing & Publishing segments. The Dairies’ segment registered EBIT growth, but wasn’t enough to offset the performance of the other two segments. Challenges such as a weaker ringgit (F&N has businesses in Malaysia) and higher operating costs had impacted the profitability of the Food & Beverage segment.

As for F&N’s future prospects, the company expects consumer demand in its Food & Beverage segment to remain subdued in its core markets. The company’s priorities for investment in this segment lies in Myanmar and Vietnam.

3. The third company that reported a weaker performance recently is StarHub Ltd (SGX: CC3).

StarHub, as most people living in Singapore should know, is one of the main telcos in the country. It has five business segments: Mobile, Pay TV, Enterprise Fixed, Broadband, and Sale of Equipment.

The company reported its earnings for the quarter ended 31 December 2016 two weeks ago. During the quarter, StarHub experienced flat revenue. But, its profit attributable to shareholders actually fell by 33.2% year-on-year. Moreover, its balance sheet deteriorated: StarHub ended 2016 with S$285.2 million in cash and S$987.5 million in debt, down from the S$173.4 million in cash and S$687.5 million in debt seen at end-2015.

The company saw a challenging environment for its PayTV and Mobile business segments; both segments reported weaker average revenue per user (ARPU). These weaknesses were partially offset by strong performances from the broadband and fixed services segments.

The company also announced a 20% cut in its dividend for 2017. StarHub has been suffering from weak free cash flow generation over the past few years.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.