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How Did Q & M Dental Group (Singapore) Limited Perform in 2017?

Q & M Dental Group (Singapore) Limited (SGX: QC7) is a healthcare services provider that specialises in dental services. It operates a network of 85 dental clinics and four medical clinics located in Singapore, Malaysia and China.

The group recently announced its financial results for the full year ended 31 December 2017. Here are the key takeaways from the report.

Operational Performance

In 2017, Q&M’s revenue declined 20.3% year-on-year to S$123.5 million. The fall was mainly due to the loss of revenue, following the spin-off of its subsidiary, Aidite in 2016.

Consequently, its net profit for 2017 also dipped by 16% to S$23.9 million from S$28.3 million a year ago. The company had recorded a one-time gain from spinning off Aidite in 2016. Excluding that, the group said that profit attributable to owners of the parent would have instead increased 23% to S$14 million in 2017, from S$11.4 million in 2016.

Earnings per share for the latest year came in at 3.0 Singapore cents per share, down from 3.56 Singapore cents recorded in 2016.

Balance sheet

As of 31 December 2017, the group had assets totalling S$219 million, including cash and cash equivalents of S$37 million. It had total liabilities of S$104.9 million. With financial liabilities totalling S$84.8 million, it had a debt-to-asset ratio of 38%.

Another thing worth highlighting is the group’s current ratio. The current ratio is calculated by dividing the current assets by the current liabilities. A current ratio below one may suggest that the group might have difficulty meeting its near-term debt obligations. Q&M had current liabilities of S$78 million and current assets of only S$62 million. That translates to a current ratio of 0.8.

The group did, however, secure an additional S$60 million bank facility in January to pay off its near-term debt obligations. It might be useful for investors to continue to keep a close eye on the group’s debt management in the future.

Positive free cash flow

The group managed to achieve positive cash flow from its operations of S$16 million, albeit slightly lower than the S$18.9 million seen a year ago. Together with lower net capital expenditure of S$8.2 million, the group achieved S$7.8 million in free cash flow.

The Foolish takeaway

Going forward, Q&M has said that it intends to continue actively pursuing acquisition opportunities in a bid to expand its clinic network in its three main markets of Singapore, Malaysia and China. The management team also stated that it believes the group is well positioned to cater to the rising demand for primary and high-value specialist dental healthcare services.

That said, with a weak balance sheet and tepid operational performance, it is vital that the group does not try to expand its business at the expense of its balance sheet. An overstretched balance sheet might lead to short-term cash flow issues and will have dire consequences for the group and, consequently, its shareholders.

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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 Jeremy Chia doesn’t own shares in any companies mentioned.