Introduction
We predict that the 2017 financial year will be a slightly more profitable one for Courteville Business Solutions Plc than the 2016 financial year was. Despite the fact that the 2016 year was uncertain for many Nigerian companies, Courteville stood its ground a little bit better than other companies did. While it suffered the lower turnover that many other companies did and while this led to a lower profit, the company however managed to escape the loss that many other companies did.
Its lower profit however adversely affected profitability ratios, and this affected dividend payment to shareholders.
Available unaudited results show that the 2017 FY year should be a better year for the company in terms of profitability and for shareholders in terms of dividend.
Core operations
Courteville earned less income in 2016 than it did in 2015, and revenue for the year was N1.32 billion, and this was 11.4 per cent less than the N1.49 billion recorded in 2015. Despite the reduction in sales made, costs associated with sales during the review period shot up, and this increase in cost of sales, coupled with a significantly less income from other non-core business operations, caused the company’s pretax profit to be much less than what was recorded in 2015. Pretax profit for the year was N39 million, a whopping 78.8 per cent less than the N184 million recorded in 2015. After tax profit for the period also fell by 43.1 percent to a profit of N37 million, as compared to a profit of N65 million in the erstwhile year.
The company then had an earnings per share (EPS) of 1.04 kobo and this is as compared to an earnings per share of 1.7 kobo in the preceding year.
As was to be expected, the company did not dedicate any of its profit to dividend payout for the year, and chose instead to retain all profit made.
Profitability ratios
Because of the lower income earned and profit retained for the year under review, profitability ratios were lower than those of the preceding year. To start with, Courteville recorded a profit margin of 3.0 per cent during the course of the year, as compared to 12.3 per cent in the prior year. This means that every N100 worth of turnover made a profit of N3.00, as compared to N12.30 in the prior year.
As per return on assets (ROA) and return on equity (ROE), the company also had lower results in 2016 than it did in the prior year. ROA for the year was a mere 1.0 per cent, down from 4.2 per cent in the prior year. This means that every N100 worth of assets contributed N1.00 to the pretax profit, as compared to N4.20 before. Meanwhile ROE was 1.2 per cent in 2016, down from 2.1 per cent in 2015. This means that every N100 worth of equity deployed contributed an after tax profit of N1.20, as compared to a profit of N2.1o in the erstwhile year.
Earnings per employee improved to N16.5 million on the average, up from N15.6 million in 2015. This is not exactly indicative of employee productivity and company efficiency, as the company employed fewer employees during the course of the year.
Other ratios
While Courteville have a higher capital adequacy in 2016 than it did in the prior year, the result still fell a little short of industry standards for the period under review. At 50.4 percent, and higher than the 47.4 per cent result recorded in the prior year, the company’s result is a little low and suggests that its financial strength in the future is not as strong as it should be.
As per the liquidity position of the company, it is still able to convert assets into needed funds as quickly as it did in the prior year, recording a current ratio of 1.09 times in 2016, almost at the same level as the 1.08 times recorded in the preceding year. This suggests efficiency of the company’s operating cycle and its ability to turn its products into cash.
The company had a debt to equity ratio of 0.26, and this shows that the company is using only 26 kobo of liabilities in addition to each N1.00 of stockholders equity. In other words, the company is using N1.26 of total capital for every N1.00 of equity capital.
Sustainable growth
Courteville recorded a profit margin of 3.0 per cent during the course of the year, as compared to 12.3 per cent in the prior year. This means that every N100 worth of turnover made a profit of N3.00, as compared to N12.30 in the prior year. For the review year, the company recorded an after tax profit of N37 million, and chose not to declare a dividend. With a profit margin of 3 per cent, a retention ratio of 1, an asset turnover of 0.33 times and an asset to equity ratio of 1.26, the company had a sustainable rate of 1.2 per cent. This means that using only the resources it generated, the company had a 1.2 per cent capacity for growth at all during the course of the year. It however declined, instead of growing.
Unaudited results
Courteville’s half year results for the 2017 year shows a little promise, in respect to profitability. Not only did the company manage to earn a higher revenue this period than it did in the last, it was also able to significantly grow its after tax profit level. Revenue for the period was N672 m7 billion, 8.7 per cent higher than N618 million before while profit after tax was N52 million, a whopping 940 percent better than the N5 million before.
If the company continues in this vein, it might have a better showing come year end 2017 than it did in 2016.
Unique strategies
Courteville Business Solutions Plc is one of the biggest e-business Solutions Company in Nigeria today and renders data capture service all over Sub-Sahara Africa. The company has grown from a mono product company to be in 24 states in Nigeria, as well as in Guinea, Zimbabwe, and Jamaica, evolving into a company with a portfolio of multiple solutions and services that cut across various industries ranging from e-government to Customized enterprise solutions. The company has a solution for Law Enforcement Agencies and other services targeted at SMEs and vocational education.
Conclusion
We are impressed with Courteville’s results and its ability to weather Nigeria’s economic recession and still turn a profit rather than a loss, even though the profit was lower than what was recorded in the prior year. We are even more impressed with the company’s half year results for 2017, and expect that this year will be a much better year for it than 2016 was.
*Source: Courteville’s 2016 financial report
*Courteville’s 2017 half year unaudited results
*The Nigerian Stock Exchange