Multiverse Mining and Exploration Plc: An abysmal year

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Introduction

The 2016 financial year was quite the disastrous one for Multiverse Mining and Exploration Plc. There were no growth indices and profitability ratios to speak about. Instead, there were decline indices and losses all around. It is important to note that this company was weighted down by its finance costs during the course of the year, and these finance costs were even higher than the revenue earned by it during the course of the year.

 

 

Core operations

The company earned much less revenue in 2016 than it did in 2015. Revenue for the year was a mere N26 million, 55.2 per cent less than the N58 million recorded in 2015.

The company then recorded disastrous pre and after tax losses, in continuation of the preceding year’s trend. Loss before tax was N584 million, as was loss after tax. It is important to note that this company’s administrative expenses was about twice the size of its revenue for the year. Even worse, its finance costs for the period under review was easily 20 times the size of its revenue.

Loss per share, at 14 kobo, was not surprisingly worse than that of the prior year. This loss per share (in lieu of an earnings per share) was 55.6 per cent worse than the loss per share of 9 kobo recorded before. Of course, the company declared no dividend.

 

 

Profitability ratios

Because of these declines and losses, the company recorded a loss margin rather than a profit margin (which measures a company’s ability to squeeze as much profit as is possible from income). Loss margin was a whopping N2,246 and this means that the company lost N2,246 for every N100 invested during the course of the year.

It is important again to note that the company was primarily crippled by unbearable finance costs during the course of the year.

The company performed very badly in 2016, especially in terms of return on assets (ROA) and return on equity (ROE) when its results are compared with those of the prior year.  Instead of returns, the company made losses, and such losses were much worse than those of the prior year.

Loss on assets for the period was 12.7 per cent, worse than the loss on assets of 8.6 per cent recorded in the prior year. Loss on equity also followed the same pattern, worsening to 96.8 per cent in 2016 from 30 per cent in 2015. These results were also much worse than what most other companies recorded for 2016.

This means that the company’s assets and equity contributed considerably to pre and after tax losses.

In terms of staff matters, the company did not do very well for the year ended December 31 2016. On the average, each employee contributed only N5.26 million to the company’s earnings, down from N11.56 million in the prior year.

 

 

Other ratios

Multiverse did not do well in terms of capital adequacy during the course of the review year, as capital adequacy in 2016 was lower than that of the prior year, and also did not compete favourably against industry standards for the period under review.  At 33.0 percent, and lower than the 49.9 per cent result recorded in the prior year, the company’s result is not yet high enough to suggest that its financial strength in the future is better.

As per the liquidity position of the company, it one of the least liquid companies operating in the Nigerian business space today. During the course of the review year, its current ratio worsened to 0.019 times, worse than the already low 0.0065 times before. This suggests inefficiency of the company’s operating cycle and its ability to turn its products into cash.

Having a debt to equity ratio of 6.62 indicates that the company is using N6.62 of liabilities in addition to each N1.00 of stockholders equity. In other words, the company is using a total capital of N7.62 for every N1.00 of equity capital.

 

Sustainable growth

Multiverse recorded a loss margin of 2,246 per cent during the course of the year, as compared to a loss margin of 700 per cent in the prior year. For the review year, the company retained a hundred per cent of its loss. With a loss margin of 2,246 per cent, a retention ratio of one, an asset turnover of 0.006 times and an asset to equity ratio of 7.63, the company had a sustainable rate of negative 102.8 per cent. This means that using only the resources it generated, the company had no inherent capacity to grow at all. It didn’t grow as expected, experiencing a decline rate of 55.2 per cent during the year under review.

 

Unique strategies

Multiverse Mining and Exploration Plc was incorporated in 2002, and was listed on the Nigerian Stock Exchange in 2008. The company specializes in solid minerals with focus on mining of Zinc Ore, Copper Ore, Gold Ore, Lead Ore, Tantalite Ore, Tin Ore and Barite Ore. In year 2005, the company commenced granite quarrying operation in its first site at Oloparun, Obafemi Village, Ogun State with installed capacity of 600,000 tons per annum which was upgraded by the addition of another production line, in 2007, with production capacity of 400,000 tons per annum making the site installed capacity to 1 million tons per annum.

Since 2008, the company has been actively involved in its core areas of businesses developing and deepening its operations. It now has an installed capacity of one million tons of granite production in three locations across the country. The company is currently developing its Zinc and Lead mine site at Abuni in Awe Local Government Area of Nasarawa State. As part of the expansion of its mine properties the Company has obtained exploration licenses to cover Tin Ore, Tantalite Ore and Copper Ore.

 

Conclusion

Our analysis shows that this was a terrible year for Multiverse. It is still heavily weighed down by the weight of its accumulated losses, and will take a couple of years or more for it to engineer a turnaround to profitability.

*Source: Multiverse’ 2016 financial report

*The Nigerian Stock Exchange

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