University Press Plc: Slow-paced profitability

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.