The Good And The Bad: Important Takeaways From Vicom Limited’s Latest Earnings

Credit: Simon Cunningham

Vicom Limited (SGX: V01) is a leading provider of technical testing and inspection services with operations primarily in Singapore.

In early May, the company released its 2017 first quarter earnings. There are both positive and negative takeaways from the announcement that investors may want to learn about. Let’s take a look, starting with an overview of the numbers:

1. The overall result

The table below shows some of the important items from Vicom’s income statement for the first quarters of 2017 and 2016:

Source: Vicom 2017 first quarter earnings release

You can see that Vicom experienced mid-single digit declines in its revenue and profit in the first quarter of 2017.

2. The negatives

Firstly, there was a decline in Vicom’s operating margin during the reporting quarter from 33.6% a year ago to 32.9%. Vicom’s operating cost only dropped by 3.9% in the first quarter of 2017 even though its revenue fell by 4.9%.

Secondly, there isn’t much to cheer about when it comes to Vicom’s outlook. Here’s what the company said about its future in the earnings release:

“Business conditions are expected to remain challenging for the Group. The vehicle testing business will continue to be faced with the high de-registration rate although this will be offset partially by the 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.”

3. The positive

Firstly, Vicom ended the reporting quarter with a rock-solid balance sheet. As of 31 March 2017, the company has S$111.5 million in cash and zero debt. This strong balance sheet would help Vicom in sustaining its dividend payments.

Secondly, the company continued producing free cash flow. The first quarter of 2017 saw Vicom generate S$5.9 million in free cash flow.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's weekly investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

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.