Red Star Express: Growing balance sheet for improved shareholders returns
By Kayode Tokede
Red Star Express Plc, the number one listed courier and package Delivery Company in the country in its audited result and accounts for full year ended March 31, 2021 recorded growth in assets quality despite numerous challenges that faced the sector during the lockdown.
Although Red Star, recorded a decline in its profits, its percentage growth in the balance sheet has given an edge as a company that is succeeding.
The negative impact of COVID-19 pandemic can be seen in the company financial performance and yet the management declared dividend.
However, the company’s balance sheet improved on the heels of investment in proprieties as the need to drive profit and grow dividend demand proactive actions by the management.
The company has been consistent with growth trajectory, investments and innovations over the years.
Assessing its performance 2021 financial, it is evident that the company is viable, stable, and profitable enough to warrant a monetary investment which is expected to drive share price and dividend payout to shareholders going forward.
In the company’s financial year ended March 31, 2021, the Board of Directors proposed a dividend payment of 15 kobo per share, five kobo cash payment and 10 kobo bonus in proportion of one new share for every 33 shares previously held.
The amount translates to a total dividend payment of N139 million for 2021 financial year.
Since financial health is one of the best indicators of a business potential for long term growth, one can categorically say that the company is financially healthy, given the evaluation of the Red Star business despite the thick and thin that stemmed from the COVID-19 pandemic within the period under review.
Shortly before the pandemic, Red Star Express raised N1.3billion by way of Rights Issue, part of which was used to shore up its asset base to improve efficient service delivery.
At the Board of Directors’ meeting last year, the Board passed a resolution to raise additional capital through right issue through creation of additional 336,855,291 ordinary shares of 50kobo each issued at N4per share.
The company’s initial authorized share capital was N7million comprising of 7million ordinary shares of N1.00 each and subsequently increased at various stages.
The shares were sub-divided into ordinary shares of 50 kobo each in 2006, then in January 2020 when the company raised capital by allotment of 336,855,291 shares. Presently, the company’s total allotted shares stand at 926,352,051 ordinary shares of 50kobo each.
However, for the period under review, the listed courier company on the Nigerian Exchange Limited (NGX) grew total assets by nearly three per cent to N7.5billion in 2021 from N7.33billion recorded in full year result and account for period ended March 31, 2020.
The company’s investment in Property, plant & equipment rose by 87.1 per cent to N2.55billion in 2021 from N1.36billion recorded in 2020 to contribute 34 per cent to the company’s total assets.
The breakdown of total assets revealed that total non-current assets with the contribution of property, plant & equipment closed 2021 at N3.05billion, 56.3per cent increase against N1.95billion in 2020 as total current assets dropped by per cent to N4.49billion in 2021 from N5.38billion recorded in 2020.
The company’s principal financial assets comprises trade and other receivables, cash and short term deposits that arise directly from its operations; while the principal financial liabilities comprises of lease liabilities, trade and other payables and borrowings.
During 2021 financial year, the Red Star Express recorded N89.09million and N76.2 million as as short term lease expense for the Group and the company respectively, compared to N136.5million and N107. 87million recorded in 2020.
Similarly, N719.45 million and N250.7million were recognized as an expense for inventories carried at net realizable value in 2021 compared to N729.6million and N237.9millon in 2020 respectively.
Also, Red Star Express’s investment in property is N95.8million in 2021 compared to N98.1 million in 2020. Its investment in shares in 2021 is N3.44million compared to N2.99million in 2020. FGN Bond in 2021 is N585.45million compared to N547.4million in 2020.
On liabilities position, Red Star Express recorded 12 per cent increase in total liabilities to N3.31billion in 2021 from N2.95billion in 2020.
The breakdown of total liabilities showed that Total current liabilities gained three per cent to N2.72billion in 2021 from N2.64billion in 2020 while non-current liabilities closed 2021 at N586million from N308.8million in 2020.
However, total equity dropped by 3.3 per cent to N4.23billion in 2021 from N4.38billion in 2020. The major factor Red Star Expressed recorded decline in total equity was the group’s six per cent decline in retained earnings to N2.33billion in 2021 from N2.48billion recorded in 2020.
Expanding courier, freight business frontier despite competition
The report reviews the score-card of Red Star Express for the year ended March 31 2021 as it maintained revenue despite completion in the courier. Generally, the performance of the 2021 year out-weighed the performance of the previous year despite the COVID-19 effects.
Prior to the outbreak of Coronavirus, the logistics industry was one of the fastest-growing sectors in the country. According to the 2018 Logistics and Supply Chain Industry Report, Nigeria’s logistics sector value was capped to be around N250 billion.
However, like many other industries in Nigeria, the logistics industry was faced with some challenges due to the COVID-19 pandemic in 2020.
Business lines contributing to the Group revenue are Courier services, mail management services, Freight services, Logistics, Ware housing and general haulage.
In the year under review, Red Star Express recorded revenue of N9.46billion as against N10.55billion recorded in prior year.
Analyzing revenue for 2021 indicated that courier services closed at N5.3billion from N6.29billion in 2020 while Logistics dropped to N1.39billion in 2021 from N1.49billion in 2020.
Other breakdown of revenue showed that freight moved from N1.27billion in 2020 to N1.28billion in 2021 as Support services dropped to N1.46billion from N1.49billion in 2020.
In a move to drive revenue, the management of Red Star Express in the year under acquired lands for logistics business, addition of significant number of trucks and trailers to its fleet and acquisition of over 300 new motor bikes.
Cost of sales dropped by 9.4 per cent to N7.12billion in 2021 from N7.86billion in 2020 to position gross profit at N2.34billion in 2021 from N2.69billion reported in 2020.
From the profit & loss figures, administrative expenses, dropped by 2.01 per cent to N1.98billion in 2021 from N1.48billion recorded in 2020.
On finances, finance income dropped to N12.63million in 2021 from N17.79million in 2020 as finance expenses closed 2021 at N40.89million from N60.5million in 2020.
The company recorded a Profit Before Taxation (PBT) of N220.79 million in 2021 from N750.08million in 2020. A total of N150.07million was reported as the Profit After Tax (PAT) for the year ended which was lower than the N468.99million recorded in preceding year.
The company recorded basic Earnings Per Share (EPS) of 16 kobo per 50 kobo share which is 77 per cent lower than the preceding year.
Higher profitability remains our short-medium term strategy- Obabori
The Group Managing Director Red Star Express, Dr. Sola Obabori disclosed that : “The strengthening of our core businesses with capacity for revenue generation and higher profitability remains our short-medium term strategy in the face of rising costs of operation and continuous devaluation of the Naira.
“Our post-COVID-19 mantra centres on “Accelerated Recovery and Growth” which will be driven through service optimization, cost minimization, asset utilization and revenue generation. A blueprint was developed by all the subsidiaries, departments and the Group as a whole, to monitor and execute the plan.
“In addition, resourcing our new growth platforms such as the e-commerce business unit through rapid customer acquisition and onboarding, is being aggressively driven whilst we are also expanding our partnerships for the General Services Agency with the airline industry.
“Expansion of trucking activities for large manufacturing companies, improved brand expression and brand enhancement initiatives; Staff realignments, motivation and trainings and Customer Loyalty Programmes are also some of the tools being deployed accordingly,” he said.
He added that: “further to the successful Rights Issue completed in 2020, the investment in a new warehouse facility at the Murtala Muhammed International Airport (MMIA), The Vehicle Service Centre on Lagos-Ibadan Expressway and the investment in our ICT infrastructure would have been fully actualized in the new financial year with more visible impact on productivity in the medium-long term.”
On future outlook, he said : “A recovery in global trade after the recession last year, offers an opportunity for emerging markets and developing economies to bolster economic growth.
“Trade costs are on average one-half higher among emerging markets and developing economies than advanced economies and lowering them could boost trade and stimulate investment and growth.
“We will also continue to pursue initiatives to cut carbon emission by adopting eco-friendly initiatives and strategies.
“Just as our company has always delivered on its promises, we would not relent in our commitment, dedication, ethical business dealings and promotion of your business. Together, we shall succeed on these qualities and take the business to greater heights.”
