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VICOM Limited’s Latest Earnings: Profits Down, Dividends Up

VICOM Limited (SGX: V01) is Singapore’s leading provider of technical testing and inspection services, and is a subsidiary of Comfortdelgro Corporation Ltd (SGX: C52).

Yesterday, it announced its second-quarter earnings for 2017 (2Q 2017). The financial period was from 1 April 2017 to 30 June 2017.

Let’s take a look at the financial figures from the latest quarter:

1. Revenue came in at S$24.1 million, down from S$25.4 million seen in 2Q 2016, translating to a 5.2% decline.

2. Net profit sank 8.3% year-on-year to S$6.1 million. VICOM clocked in a net profit margin of 25.2% for the latest quarter, down from 26.1% last year.

3. Consequently, earnings per share for 2Q 2017 was at 6.85 Singapore cents, as compared to 7.47 Singapore cents in 2Q 2016.

4. As at 30 June 2017, the firm had S$100.9 million in cash with no borrowings. This is a deterioration from the S$105.7 million in cash (with zero debt) that it had on 31 December 2016. Despite the decline in cash position, the firm’s balance sheet is still healthy.

5. Cash flow from operations was at around S$6 million, and S$746,000 was spent on capital expenditure. Therefore, VICOM brought in S$5.2 million in free cash flow for the latest quarter, a slight decrease from S$5.5 million raked in for 2Q 2016.

The woes at the inspection services company are continuing; the most recent quarter’s net profits are lower than 1Q 2017’s earnings.

For the first half of 2017, revenue slumped 5.0% year-on-year to S$48.2 million while net profit tumbled 7.3% to S$12.9 million. Lower business volumes mainly brought about the poor performance for the latest period.

The bright spot is that shareholders will receive an interim dividend of 13.12 Singapore cents per share, up 64% as compared to 8.0 Singapore cents paid out in 2Q 2016.

VICOM announced that with immediate effect, the dividend policy had been revised to a payout ratio of 90% of net profit, from the previous payout of 50%.

In closing, the firm provided the following outlook:

“Business conditions are expected to remain challenging for the Group. The vehicle testing business will continue to face a 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.”

Shares of VICOM closed at S$5.69 yesterday. This gives a trailing price-to-earnings ratio of around 19 and a dividend yield of 3.8%.

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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 Sudhan P owns shares in VICOM Limited.