Challenger's blowout FY2020 earnings a cautionary tale about big fiscal initiatives

The company's stronger profitability, fuelled by Covid-19 subsidies, underscores why it's time for a fiscal pullback

Ben Paul

Published Mon, Feb 15, 2021 · 05:50 AM

SHAREHOLDERS of Challenger Technologies are likely to have been pleasantly surprised by the consumer electronics retailer's earnings report for FY2020, which was unveiled this past week.

Revenue declined nearly 18 per cent to S$270.8 million, because of the absence of a trade show and lower sales as a result of the restrictions on movement imposed by the government during the year to counter the Covid-19 pandemic.

Yet, Challenger reported blowout earnings of 6.73 cents per share - up 32 per cent versus the 5.11 cents per share it reported for FY2019. Profit before tax from continuing operations increased by almost S$5.6 million to more than S$26.8 million.

What accounted for the company's sharply increased profitability? In a nutshell, it was the result of the government's efforts last year to shield businesses and their emplo…