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Kingsmen Creatives Ltd’s Latest Earnings: Humpty Dumpty Had a Great Fall

Communication design and production group, Kingsmen Creatives Ltd (SGX: 5MZ), announced its second-quarter of 2017 (2Q 2017) earnings yesterday. The financial period was from 1 April 2017 to 30 June 2017.

Here’s a quick rundown on the financial figures from the latest quarter:

1. Revenue came in at S$78.8 million, a decrease of S$9.1 million or 10.4% year-on-year. Revenue from Exhibitions & Thematic and Alternative Marketing business divisions declined, offset by revenue increases from Retail & Corporate Interiors and Research & Design business divisions.

2. However, net profit dropped by a larger amount, coming down 25.7% year-on-year to S$2.4 million.

3. Consequently, earnings per share for the quarter was at 1.19 Singapore cents for 2Q 2017, down from 2Q 2016’s figure of 1.61 Singapore cents.

4. As at 30 June 2017, Kingsmen had S$44.5 million in net cash. This is a deterioration from S$65.1 million in net cash that it had on 31 December 2016. Despite the decline in net cash, the firm’s balance sheet is still robust.

5. Cash flow from operations was at S$1.5 million and S$3.4 million was spent on capital expenditure. Therefore, the firm had negative free cash flow for the latest quarter, a poorer showing as compared to 2Q 2016’s free cash flow of S$1.4 million.

All-in-all, it was a poor quarter for Kingsmen Creatives. Having said that, its balance sheet is still healthy, and this should allow it to sail through the headwinds it sees from the high-end luxury retail sector. The group provides interior fitting-out services to retailers from that sector, among others.

Shareholders will receive an interim dividend of one Singapore cent per share, unchanged from a year ago.

The firm provided the following outlook:

“The Group expects to continue its growth, given the pipeline of contracts and demand for the Group’s services. The Group’s entry into the new intellectual property development and ownership business areas also provide new and exciting possibilities and earning streams for the Group.

As at 31 July 2017, the Group has secured contracts of S$245 million, of which S$232 million is expected to be recognised in FY 2017. Its strong fundamentals and innovative culture continue to position the Group well, to capitalise on opportunities in the region and beyond.”

Mr Andrew Cheng, Group Chief Executive Officer of Kingsmen, explained about the company’s foray into new areas:

“We have also explored new and exciting areas, and have now incorporated two entities; Kingsmen Ventures in Singapore and Kingsmen Xperience in USA to pursue these opportunities.

Kingsmen Ventures will be exploring opportunities for us to enter into strategic acquisitions and partnerships as we push to expand our geographical reach and services that we can offer to our clients.

Kingsmen Xperience will pursue opportunities to create and own media/entertainment themed licenses, and also develop and market intellectual property for themed attractions and lifestyle parks.

This move is the step forward in our strategy to expand into new and engaging experiential segments, even as we continue to enhance our core offerings. This new area of business holds much promise and demonstrates our confidence in developing and growing it.”

Shares of Kingsmen Creatives closed at S$0.615 on Thursday. This translates to a trailing price-to-earnings ratio of around 10 and a dividend yield of 4.1%.

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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 Kingsmen Creatives Ltd.