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FCMB Group PLC: Impressive performance in gross earnings, drive profit

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By Philemon Adedeji

FCMB Group plc, a full-service banking institution that provides  market-proven solutions that drive digital transformation in  bank has been maintaining growth trajectory in various measures

FCMB Group recorded profitability in most of the parameters. For its unaudited financial results for the period ended 30th June 2022 released, announced an impressive performance in gross earnings seen on upward trajectory.

The bank recorded a 33.9 per cent increase in gross earnings, this signifies that the rate of sale in half year (H1) 2022 grew more than the rate of sale in half year (H1) 2021.

It is worth noting that 33.9 per cent growth rate in gross earnings can be recognised as a good performance when contrasting with the bank average for the same period under review.

Obviously, Profit After Tax (PAT) reported by the group increased to a 80.8 per cent to N13.7 billion in its  (H1) unaudited results for the period ended June 30th, 2022 compared to N7.6 billion reported in the corresponding year.

The financial institution listed on the Nigerian Exchange Limited (NGX), also grew its Profit Before Tax  by 73.1 per cent to N15.428 billion in H1 2022 from N8.910 billion in H1 2021.

Its unaudited results announced on the floor of Nigerian Exchange Limited (NGX) revealed net fee and commission income grew by 31.5 per cent to N17.001 billion in the half year H1 2022 from N12.933 billion derived in the corresponding year 2021

Another top-line performance in the unaudited financial statement ended 30th June, net interest income which gained a 39.9 per cent to N60.167 billion in the half year H1 2022 from N42.997 billion in half year H1 2021.

Earnings per share recorded by the group during the period under review rose significantly to N0.69 in H1 2022 compared to N0.38 reported in H1 2021, representing  a growth of  81.6 per cent

From the balance sheet position, FCMB emerged with stronger total assets amid growth in total liabilities emerged in impressive performance

The group total assets increased to N2.652 billion as of June 30th, 2022 N2.493 billion recorded in full year ended December 31st  2021.

The results also revealed 6.6 per cent increase in total liabilities to N2.399 billion as of June 2022 from N2.249 billion achieved in 2021 financial year.

The rate at which the bank offer loans and advances to customers increased by 5.4 per cent to N1.120 trillion offered as of June 30, 2022 from N1.063 trillion in 2021.

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Story behind the figures

Honeywell Flour Mills Plc: A tough year

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By Folakemi Emem-Akpan

Introduction

Honeywell Flour Mills Plc went the way of most other Nigerian companies in 2023, recording lower turnover. It went one step further and recorded downright end of the year losses. Because of the losses, the company did not have good profitability ratios and seems to be floundering. All in all, it was a tough year for the company.

Growth indices

Honeywell followed the general rule of earning more income in 2023 than it did in 2022. The growth in gross earnings, at 8.0 percent, was however lower than most other companies recorded. Gross earnings stood at N147.3 billion, a little higher than N136.4 billion in the prior year. Even though the company was careful to curtail cost of sales, it couldn’t quite do the same for operating expenses (inclusive of advertising and promotion, distribution, administrative and interest expenses). These grew much faster collectively in 2023 than in 2022.

For the second year in a row, Honeywell recorded a loss rather than a pre-tax profit. Loss before tax obligations for 2023 stood at a staggering N8.9 billion, a deeper loss than the N170 million pre-tax loss recorded in the prior year. After-tax loss was N260 million for the 2023 financial year, still a loss, but better than the N980 million loss recorded in 2022.

Total assets deployed by the company for the 2023 year grew to N165 billion, 11 per cent more than the N148.7 billion assets deployed in 2022. Meanwhile, shareholders’ funds declined by 27.5 per cent to N32.0 billion in the review year.

Profitability ratios

Not only did Honeywell record losses instead of profitability on a stand-alone analysis basis for the 2023 financial year, all parameters also showed a regression when compared to its preceding years’ result. First to achieve a regression was the profit margin of the company. Instead of a profit margin, there was a loss margin of 6.0 percent, meaning that for every N100 earned by the company in the course of the year, N6.00 of it translated to loss. This is as compared to a loss of 10 kobo in 2022.

Also to record a decline was return on assets (ROA). Loss on assets was 5.4 percent, as compared to a loss on assets of 0.1 percent in the erstwhile year. For the 2023 financial year, Honeywell deployed equity valued at N32.9 billion and for every N100 equity deployed, the company made an after-tax loss of 78 kobo.

The operating margin (which measures what proportion of turnover a company spends on operations and which must be kept as low as possible without compromising standards) was one of the reasons for the company’s bad results for the year. This is because such operating margin was 6.9 percent, higher and worse than the 5.2 percent recorded in the prior year.

Staff matters

As regards staff matters, pre-tax loss per employee stood at N10.9 million on the average. This is as compared to the N204 million pre-tax loss employees contributed on the average to the company’s pre-tax loss in 2022.

Average staff cost then increased significantly to N8.84 million from N5.99 million within the course of 12 months. This means that there was a N2.85 million addition to what an employee earned (on the average) between 2023 and 2022.

Perhaps, because it increased its staff costs, Honeywell did not succeed in deflating its staff costs as a proportion of income earned. Staff costs as a portion of turnover grew to 4.4 per cent in 2023, higher than 3.6 percent in 2022.

Other ratios

At 0.9 times, Honeywell’s current ratio was a little lower than the industry average for 2023. What this means is that for every N1.00 of short-term obligations, the company had 90 kobo in short-term assets, and was not fully able to meet short term debts from short term assets.

Having a debt-to-equity ratio of 4.0 shows that the company is using N4 of liabilities in addition to each N1.00 of stockholders’ equity. In other words, the company is using N5.00 of total capital for every N1.00 of equity capital, higher than it did in 2022.

Honeywell Vs Flour Mills: Still a loss

We have established that Honeywell did not improve its lot when its results are compared on a year on year basis. We can also establish that Honeywell did not compete favourably against other companies in the flour milling business for the 2023 FY. A comparison against Flour Mills buttresses this point.

While Flour Mills is easily the bigger of the two companies (in fact, it is the parent company of Honeywell), a bigger size does not automatically translate into better profitability. For the 2023 review year, Flour Mills was also the clear leader in terms of performance. Of six profitability ratios examined, Flour Mills led in all.

Turnover growth rate

For the 2023 financial year, Flour Mills had a turnover growth rate of 32.8 percent, as compared to Honeywell’s turnover growth rate of 8 per cent for the same period under review. Analysis shows that Flour Mills was the winner in this respect.

Pre-tax profit growth rate

For the year, Flour Mills’ profit before tax grew by a mere 1.5 percent. Yet, this was much better than the 5,074 percent decline Honeywell recorded. However, it is also important to note that while Flour Mills witnessed an actual growth, Honeywell had a pre-tax loss of N8.9 million.

Between turnover and profit

For the 2023 financial year, pre-tax profit margin (which measures a company’s ability to squeeze as much profit as is possible from turnover) for Honeywell was actually a pre-tax loss margin of (6.1) percent. Flour Mills, on the other hand, had a better pre-tax profit margin of 2.6 percent.

Return on equity

Flour Mills led its peers in terms of return on equity (ROE), recording an ROE of 13.1 per cent. Analysis shows that while every N100 worth of equity deployed by Flour Mills earned it N13.10 in after-tax profit, such N100 equity deployed earned Honeywell 78 kobo as after-tax loss.

Return on assets

ROA for Flour Mills was 3.7 percent, down from 5.9 percent in the prior year. This means that of every N100 worth of assets deployed by Flour Mills, N3.70 accrued to it as pre-tax profit while Honeywell recorded a N5.40 pre-tax loss from every N100 worth of assets employed.

Pre-tax profit per employee

For the 2023 financial year, Flour Mills recorded a pre-tax profit per employee of N6.72 million, much better than Honeywell’s N10.9 million pre-tax loss per employee.

Conclusion

Honeywell’s loss for its 2023 financial year shows how events beyond a company’s control can have an effect, either negative or positive, on its bottom line. It is clear that the economic recession Nigeria has been experiencing had a severely limiting effect on Honeywell’s revenues and performance. It remains to be seen what the 2024 FY will hold for the company.

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PZ Cussons Plc: A commendable outing

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Introduction

A thorough analysis of PZ CussonsPlc current financial report shows that it is yet growing. It was able to step up the level of its business activities as shown by a growing turnover base. It was also able to increase profit during the course of the year. Profitability ratios for the year were a progression over the preceding year’s. Profit margin improved, as did return on assets, return on equity, and pre-tax profit per employee.

Truth be told, the conglomerate’s results for the 2023 financial year was extremely commendable, given the stressful operational environment in Nigeria for the review year.

Growth indices

For its 2023 financial year, PZ Cussons recorded a level of growth in all of its major parameters. First to receive a boost was the company’s gross earnings. Gross earnings for the year stood at N113.96 billion, 14.5 percent higher than the N99.5 billion recorded in the preceding year. This 14.5 percent growth rate is as compared to a higher growth rate of 20.5 per cent in 2022.

Because direct costs grew at a slower pace than turnover did, gross profit advanced by 35.6 percent to N32.9 billion. After deducting operating expenses from the gross profit and adding other income (including interest income), PZ Cussons was left with a pre-tax profit of N20.46 billion, a whopping 104.4 percent higher than the N10.01 billion pre-tax profit recorded in the erstwhile year. This 104.4 percent growth rate is as compared to a pre-tax profit growth rate of 213.8 percent in the preceding year.

After-tax profit (which was also the same as distributable profit) grew over the preceding year’s by as much as 114.2 percent to N14.35 billion. For the first time in a while, the conglomerate chose not to dedicate any portion of its distributable profit to dividend.  Thus, shareholders did not receive any dividend.

Total assets for the year stood at N166.38 billion, up from N109.47 billion in 2022 and translating into a 52.0 percent growth rate. Total liabilities also grew by 64.5 per cent to N118.0 billion from N71.73 billion while shareholders’ funds grew by 28.1 per cent to N48.36 billion from N37.74 billion in the erstwhile year.

Profitability ratios

For the year, operating margin (which calculates what proportion of turnover is used to finance operations) was 21.7 percent, slightly lower and therefore better than the 24.7 percent that was recorded in 2022. What this means is that the probable margin for PZ Cussons to be profitable expanded, albeit slightly during the course of the year.

Perhaps because of this, the profit margin for the year increased. Profit margin for 2023 stood at 18.0 percent, higher than 10.1 percent in the preceding year. What this means is that N18.00 made it to the profit position for every N100 earned in 2023, up from N10.10 in 2022.

Return on assets (ROA) followed the same pattern. ROA for the year increased to 12.3 percent from 9.1 percent in 2022, meaning that every N100 worth of assets deployed contributed N12.30 to the pre-tax profit for the year, higher than the N9.10 recorded in 2022.

Also, return on equity (ROE) grew to 29.7 percent from 17.8 percent, meaning that every N100 worth of equity employed contributed N29.70 to the after-tax profit in 2023, up from N17.80 in the prior year.

Our examination of this conglomerate’s profitability ratios shows that the company recorded quite a profitable year in 2023, which was not the case for many other manufacturing companies in Nigeria.

Staff matters

In terms of staff matters, the conglomerate did not do too shabbily for the year ended December 31 2023. On the average, each employee contributed N20.54 million to the company’s pre-tax profit, commendably up from N9.63 million in the prior year.

To this end, PZ Cussons reciprocated by increasing its staff cost per employee. On the average, wages and salaries earned by each staff increased to N8.04 million during the course of the year, up from N7.23 million in the preceding.

It is however worthy of note and laudable that despite increasing average staff costs, the company did not actually put itself out more than was necessary. Staff costs as a proportion of turnover decreased (and by so doing, improved) to 7 per cent.

Other ratios

For the year, PZ Cussons’ short-term assets increased to N148.1 billion while its short-term liabilities increased to a collective N94.68 billion. The interplay between these two had an upping effect on its current ratio. At 1.6 times (higher than 1.4 in the preceding year), current ratio was on par with industry standards. What this means is that for every one Naira of short-term obligations, the company had N1.60 in short-term assets, and was more than able to meet obligations as at when due.

The company had a debt-to-equity ratio of 2.4 and this shows that the company is using N2.40 of liabilities in addition to each N1.00 of stockholders’ equity. In other words, the company is using N3.40 of total capital for every N1.00 of equity capital.

PZ Cussons Vs Nestle: PZ Cussons larger and superior

PZ Cussons Plc and Nestle Nigeria Plc are competitors, and both have been operating in the Nigerian conglomerate scene for years. While Nestle is currently the bigger of the two in terms of sales generation and assets employment, PZ Cussons is better when it comes to profit retention. Of the six profitability ratios we examined, Nestle only took the lead in turnover growth rate, while PZ Cussons took the lead in the remaining five.

Sales generation and profit retention

As usual, Nestle recorded more sales in 2023 than PZ Cussons did. Also, Nestle’s growth rate for the year was much better than PZ Cussons.’ This said, PZ Cussons excelled better in translating its sales into profit. It had a positive pretax profit growth rate as compared to Nestle’s decline rate. It also had a profit margin, as compared to Nestle’s loss margin for the year under review.

Returns

PZ Cussons recorded better returns on assets and on equity for the 2023 financial year. Return on assets (ROA) and return on equity (ROE) were 12.3 percent and 29.7 percent respectively. Meanwhile, Nestle had negative returns. For Nestle, ROA was negative 17.9 per cent while ROE was negative 101.9 per cent.

Conclusion

In an operating environment where most companies recorded either negative or slowed down profitability ratios, PZ Cussons is an exceptional, a very laudable one. Its ability to not only generate sales but also to maximise profits for the 2023 financial year is indeed commendable.

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University Press Plc: Slow-paced profitability

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Introduction

University Press’ result for the 2023 financial year was not as great as that of 2022, both in absolute growth terms and in terms of profitability ratios. The company’s sales generation ability slowed down a bit, as did its profit retention capabilities.

Also, profitability ratios were not as sterling as those of the preceding year’s, even though these ratios were in and of themselves applaudable. This slowed profitability is keeping in trend with what most other Nigerian companies experienced for the 2023 FY.

Growth indices

Growth indices for the 2023 financial year were not very impressive. For instance, there was a six percent decline rather than a growth in the company’s ability to generate sales. Gross earnings for the year stood at N2.17 billion in 2023, less than N2.3 billion in the erstwhile year. This is as compared to a 62.5 percent increase in sales revenue the year before.

The company also recorded a lower level of pre-tax profit for the year under review than it did in the prior year. Pre-tax profit was N222 million, about 38.5 percent less than the N361 million profit recorded in 2022. After-tax profit followed the same pattern, dipping by 31.4 percent to N142 million.

Despite these lower growth rates, the company paid its shareholders dividend for the year, showing consistency in dividend payouts. Also, the dividend declared was higher than the dividend declared in the preceding year.

Total assets deployed by the company for the 2023 year (N4.24 billion) was also lower in size than in 2022 (N4.28 billion), although the percentage decrease was very low (1.2 percent). Total liabilities the year were also collectively lower than that of 2022, while shareholders’ funds grew by 3.1 percent to N3.27 billion.

Profitability ratios

The company recorded profitability in 2023 but at a lower rate than it did in 2022. For instance, while the company still retained its ability to effectively translate revenue into profit, it was at a slower rate. As per profit margin, the company made a pre-tax profit of N10.20 from every N100 sales made, high enough in its own right but lower than the N15.70 made in the preceding year.

When it comes to return on assets, every N100 worth of assets employed by the company for the 2023 financial year yielded N5.20 in pre tax profit, high enough, but lower than the N8.40 in the prior year.

This trend was repeated in return on equity. Each N100 block of shareholders’ funds yielded N4.30 in after tax profit, lower than N6.50 in the prior year.

The company spent a relatively higher portion of total revenue on operating expenses in 2023 than it did in 2022, which could be a contributing reason for its lower profitability ratios. Proportion of operating expenses to total revenue for the year was a whopping 52.4 percent, higher than the already high 43.3 percent in 2022.

Staff matters

The company did not do as well when it comes to employee productivity for 2023. Pre-tax profit per employee stood at N0.936 million on the average. This is as compared to the N1.467 million employees contributed on the average to the company’s pre-tax profit in 2022.

Meanwhile, the company expended more on its employees in 2023. Average staff cost rose to N2.346 million from N1.764 million during the year, translating into an additional N0.582 million to what an employee earned on the average. As such, University Press incurred a higher proportion of staff costs as a proportion of income earned. Staff costs as a portion of turnover was 25.6 percent in 2023, much higher than the 18.8 percent spent in 2022.

Other ratios

University Press had an impressive current ratio in 2023, just like it had in 2022 and 2021. Its current ratio stood at 2.9, which means that for every N1.00 of short-term obligations, the company had N2.90 in short-term assets, and was more than able to meet short term debts from short term assets.

Its debt-to-equity ratio was however a little low. At 0.3, the company used 30 kobo of liabilities in addition to each N1.00 of stockholders’ equity. In other words, the company had access to N1.30 of total capital for every N1.00 of equity capital it had.

University Press Vs Learn Africa: No comparison

Ask any Nigerian to mention well known press companies in the country and they are likely to mention University Press and Learn Africa.

In terms of size, Learn Africa is the bigger of the two, and while the 2023 FY was not entirely one of growth for Learn Africa as well, it fared better than University Press in many respects.

Turnover growth rate

University Press had a turnover decline rate of 6.0 percent. Learn Africa also recorded a lower level of turnover, such turnover declining by 6.1 percent as well. Both companies are rated equally in terms of turnover growth rate because they recorded comparative decline rates instead of growth rates.

Pre-tax profit growth rate

For the year, University Press’ profit before tax declined by as much as 38.5 percent. This is way worse than the 5.6 percent growth rate Learn Africa recorded. While University Press’ profit before tax shrunk, that of Learn Africa expanded.

Profit margin

When it comes to profit margin, Learn Africa also outperformed University Press. Its profit  margin stood at 17.5 percent, higher than and better than University Press’, which stood at 10.2 percent.

Returns on equity and assets (ROE and ROA)

Learn Africa was also the clear winner when it comes to return on equity and return on assets. Its return on equity was 11.3 percent, meaning that every N100 worth of equity contributed N11.30 to the after-tax profit. This was much higher than University Press’ N4.30 contribution.

Learn Africa’s return on assets was also much higher than University Press’. Learn Africa recorded an ROA of 11.3 percent, much higher than University Press’ 5.2 percent.

Employee contribution to profit

For the 2023 financial year, Learn Africa was also the leader in terms of employee contribution to profit. Its employees contributed N3.348 million each on the average to its pre tax profit, higher and better than the N0.936 million University Press’ employees did.

Conclusion

University Press’ slow paced profitability ratios is not reason enough to classify it as not performing. While the company did indeed slow down when it came to profitability, this was to be expected, as this was the case with many other manufacturing companies in Nigeria.

 

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