MENU

3 Things Investors Need to Know About Sarine Technologies Ltd’s 2017 Earnings

Sarine Technologies Ltd (SGX: U77) is involved in the development and production of evaluation, planning, processing, and finishing systems used in the diamond industry.

On 25 February 2018, the company announced its financial results for the full year ended 31 December 2017. Let’s look at three main aspects of the announcement here.

Show me the money

Revenue for the year tumbled 19.1% to US$58.6 million due to lower sales of capital equipment on the back of a slowdown in diamond manufacturing activities, and illegal competition in India. Recurring sales accounted for slightly under half of 2017’s revenue.

Net profit for 2017 plunged 67.9% to US$5.8 million, mainly due to lower gross profit and higher general and administrative expenses. Consequently, earnings per share fell from 5.14 US cents (6.87 Singapore cents) to 1.64 US cents (2.19 Singapore cents). The net profit margin for 2017 stood at 9.8%, down drastically from 24.8% seen one year back.

As at 31 December 2017, Sarine had US$29.1 million in cash and bank deposits, with zero debt. In comparison, at the end of 2016, it had a higher cash balance of US$38 million. 2017’s return on equity (ROE) stood at 8.2%, a fall from 2016’s ROE of 22.7%.

Cash flow from operations for the year plummeted 51.4% to US$10.8 million. With capital expenditure coming in at US$3.3 million in 2017, free cash flow was US$7.5 million. This pales in comparison to the free cash flow of US$17.9 million raked in one year ago.

Ka-ching!

The board has proposed a final dividend of 1.5 US cents per share. Together with the interim dividend of 2.0 US cents already dished out, the total dividend for 2017 would be 3.5 US cents per share. In 2016, the company paid out a total dividend of 4.50 US cents per share.

The following shows the dividend trend from 2013 to 2017:Source: Sarine Technologies Ltd’s 2017 earnings presentation

What the future holds?

As for its outlook, Sarine said:

“Going forward, the Group expects sentiments in the midstream industry to improve, as the year-end holiday season sales reduced inventories significantly (to the point of decided shortages of certain categories of goods), and expectations are upbeat for robust Chinese New Year and Valentine’s Day sales. The Group will continue with its active efforts in patent and copyright enforcement to defend its intellectual property rights. On the retail front, the Group’s target for 2018 is to double the number of stones scanned in 2017.”

Meanwhile, are you worried about the overall state of the market? Do you know the 1 thing you should never do in the stock market? The Motley Fool Singapore’s new e-book lays out a plan to handle market crashes, details the greatest advantage you have as an investor, and looks at decades worth of market data to bring you the smartest insights on investing. You can download the full e-book FREE of charge—Simply click here now to claim your copy

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 doesn’t own shares in any companies mentioned.