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VICOM Limited’s 2017 Annual Report: 3 Things I Learnt from the Chairman’s Statement

VICOM Limited (SGX: V01) is a leading provider of technical testing and inspection services in Singapore.

The firm released its annual report for the financial year ended 30 December 2017 (FY2017) late last month. I learnt a few things as I was reading through the Chairman’s statement, one of the many sections of the report. Here are three things that stood out for me.

Market leadership

Due to a large number of vehicle de-registrations, the number of vehicles inspected by VICOM in 2017 fell 4% year-on-year to 468,807 vehicles. Even then, the company managed to improve its market share in the vehicle inspection market slightly.

VICOM’s chairman, Lim Jit Poh, said:

“Despite the challenges, VICOM continued to retain its leadership position with a 74.5% share of the vehicle inspection market through continuous innovative marketing campaigns, new partnerships and improved customer service experience.”

To get a feel of the market share in 2016, I looked through that year’s annual report and found that in 2016, the firm had a market share of 74.4%. The 0.1 percentage point improvement in 2017 is not huge, but it is still commendable.

Increase in fees

In 2017, VICOM announced a fee hike. Lim explained about the increase:

“In terms of inspection and test fees, there was some adjustment upwards that was effected in November 2017. Fees for vehicle inspection and the chassis-dynamometer smoke test for smaller and larger vehicles were raised by $2. Both tests have not seen a fee increase since January 2007.”

The fee increase is not too steep, in my opinion, and this should help improve the revenue for VICOM in 2018 and beyond. A quick Google search shows that VICOM’s latest fees are similar to STA Inspection’s charges. STA Inspection is the only other vehicle inspection provider in Singapore.

Growth ahead

Lim said that the rate of vehicle de-registrations is expected to slow down this year, which is excellent news for shareholders. He added that together with the “introduction of a new high idling emission test for petrol vehicles, we expect the vehicle inspection business to remain stable”.

As for VICOM’s non-vehicle inspection and testing arm, SETSCO, Lim gave his take on its outlook going forward:

“SETSCO’s performance will largely be dependent on the general economic condition – both in Singapore and globally. We will continue to develop new product offerings and build new testing capabilities arising from future industrial demands.”

For the year, SETSCO launched two new services. They are: 1) certification services to companies which seek compliances to the requirements of different systems like ISO 9001, ISO 14001 and ISO 18001; and 2) consultancy services to provide investigation, evaluation, analysis and advisory to the clients that it serves.

The Foolish takeaway

2017 was a downer for VICOM as its revenue declined by 4.1% year-on-year to S$97.0 million while its net profit attributable to shareholders tumbled 5.9% to S$26.5 million. However, in 2018, things should stabilise with an improved outlook for the company’s businesses.

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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 of VICOM Limited.