Courteville Business Solution (CBS) plc recorded a 13.73 percent rise in profit to end 2014 financial year as spiralling production and operating costs continue to erode income margin.
The 2014 audited financial statement showed profit before tax rising by 13.73 percent to N457.03 million from N403.03 million the same period of the corresponding year (FY) 2013.
Data from the financial statement also showed sales increase by 5.46 percent to N1.35 billion compared with N1.28 billion the preceding year.
The single digit increase in sales was due to a slight increase in Motor Vehicle Administration Document (MVAD), which makes up over 90 percent of total sales.
MVAD is a business solution platform designed to address the inefficiencies in vehicle administration.
CBS had operating profit swallowed by spiralling total production costs that left it with slim profit margins.
Total production cost to sales ratio was as high as 72.57 percent, which means the company spent N0.72 on every N1 it generated from sales.
However, CBS was able to effectively manage direct costs attributable to projects as gross profit increased by 61.08 percent to N824.06 million in 2014 from N752.30 million last year. Goss profit margin increased to 61 percent in 2014 as against 58.85 percent in 2013.
Firms in Africa largest economy Nigeria are operating under a tough operating environment that makes rising production costs inevitable.
Most firms spend huge amount of money in the acquisition and maintenance of plants to run factories as power from the grid is unstable. Also, a lot of money is budgeted for diesel oil to power such plants.
Nigeria’s rising inflation that pressures consumer spending and the continued devaluation of naira will exacerbate the already anaemic position of firms like CBS.
These challenges have hindered CBS from taking advantage of the growth opportunities in the Nigeria macro-economic environment.
The company’s current ratio, a measure of liquidity, reduced to 99.05 times in 2014 compared with 1.18 xs last year, though lower than the 2.1x industry average.
Return on average equity (ROAE) in the review period was 10.27 percent while the return on average assets (ROAA) was 10.27 percent.
Net margin, a measure of efficiency and profitability, remained flattish at 23 percent as tough operating challenges continue to crimp bottom-line growth.
The company is unrelentingly investing in property with a view to generating more profits and dividends as property plant and equipment in the balance sheet moved by 80.60 percent.
CBS share price closed at N0.50, while market capitalisation was N1.77 billion.
BALA AUGIE
