VICOM Limited (SGX: V01) reported its second quarter financial results recently. Revenue was down 6.9% from $27.3 million to $25.4 million. Net profit attributable to shareholders also fell 12.6% q-o-q to $6.6 million. Earnings per share was 7.47 cents, down 12.6% from the 8.55 cents recorded in the same quarter last year. What happened?

Before I dive into the reasons why VICOM’s financial results declined, here’s a quick recap of the company’s business model:

  • VICOM has two business segments – vehicle inspection and a non-vehicle inspection company, SETSCO
  • SETSCO provides a wide range of non-vehicle testing services, a one-stop inspection company for accreditations
  • Vehicle inspection is mandated by the government and companies doing the inspection are regulated, giving high barriers to entry
  • VICOM’s vehicle inspection segment dominates 75% of the market with seven out of nine vehicle inspection centres in Singapore

So why …