Venture Corporation Ltd’s Profit Falls Hard In 2018’s Third Quarter

Venture Corporation Ltd (SGX: V03) released its 2018 third quarter earnings update last Friday and reported a big drop in profit. As a quick introduction, the company is a global provider of electronics manufacturing services that span marketing research, design and development, product and process engineering, supply chain management, and more.

Let’s take a closer look at Venture’s results.

Financial highlights

The following are the key financial numbers from Venture:

1. Revenue for 2018’s third quarter decreased by 27.4% year-on-year to S$770.4 million. The decline was mainly attributable to customers’ planned transition to new replacement products, and some customers’ M&A (merger and acquisition) activities for the quarter.

2. Net profit attributable to shareholders followed suit, falling 27.9% to S$80.8 million. The net profit margin remained stable at 10.5%.

3. Similarly, earnings per share were down by 28.5% to S$0.278 for the reporting quarter.

4. Venture generated operating cash flow of S$102.59 million for 2018’s third quarter while capital expenditure came in at S$5.83 million. This resulted in free cash flow of S$96.76 million, down 41.1% from S$164.32 million a year ago (S$173.61 million in operating cash flow, and S$9.29 million in capex).

5. As of 30 September 2018, Venture’s borrowings stood at S$42.37 million while its cash and bank balances stood at S$740.2 million, giving it a net cash position of S$697.8 million.

The road ahead

The company commented on its outlook in latest earnings update:

“The Group anticipates that new product introductions from several customers are expected to drive healthy revenue improvement sequentially in the next quarter. As Venture continues to deepen its existing collaborative partnerships, it is concurrently working on broadening its strategic alliances across its diversified portfolio of new and adjacent ecosystems.

The Group also expects to capture revenue contribution from several new customers in the next quarter, with improving traction in subsequent reporting periods. Furthermore, customers’ M&A transitions are still in progress and the Group believes that business momentum should pick up again after the M&A integration processes are completed”

Venture’s share price is currently S$16.26, which gives the company a price-to-earnings (PE) ratio of 12.7.

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The Motley Fool Singapore contributor Esjay contributed to this article. Esjay does not own shares in any companies mentioned.The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore writer Chong Ser Jing does not own shares in any companies mentioned.