Tantalizers Plc: A good year all around

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Introduction

The 2017 financial year was a good one for Tantalizers Plc, and it seems to be slowly evolving itself into a profitable company, after many years of losses. It was able to grow profit significantly. The company benefited from this growth, as did investors, as it was able to give its shareholders a dividend per share of 2 kobo, and this was the first time investors would receive a dividend since 2012.

 

Core operations

Tantalizers was unable to record a growth in turnover for its 2017 financial year but this had absolutely no ill effect on  its profit level for the year. Turnover for the year under review was N1.75 billion, and this was a decline of 9.8 per cent over the preceding year’s N1.941 billion level. Because cost of sales did not climb as steeply as turnover did and because the company had a loan written off to the tune of N604 million, the company had a pre tax profit rather than the loss it recorded in the prior year. The company’s pre tax profit was N450 million, and this was 144.7 per cent better than the loss of N1.01 billion recorded in the prior year.

After tax profit was also much more better than that of the preceding year. After tax profit grew by as much as 143.6 per cent than the loss that was recorded in the prior year.

Total assets employed during the review period was lower than the level it was in the preceding year while the equity level also decreased over the prior year’s.  While assets deployed was a lower N4.04 billion (as compared to N4.98 billion), equity employed was also a lower N665.6 million (as compared to N739 million).

Predictably, earnings per share was higher than what was recorded in the preceding year, and the company recorded an EPS of 2 kobo per share, better than the loss per share of 32 kobo recorded in the prior year. The company was then able to give its shareholders a dividend per share of 2 kobo, and this was the first time investors would receive a dividend since 2012.

 

Profitability ratios

The company’s profitability ratios were on the up and up for its 2017 review year. It recorded a profit margin of 25.7 per cent during the course of the year, as compared to a loss margin of 51.9 per cent in the prior year. This means that every N100 worth of turnover made a profit of N25.70, as compared to a loss of N51.90 in the prior year.

As per return on assets (ROA), the company also performed better in 2017 than it did in 2016. It had a return on assets of 11.2 per cent, as compared to a loss on assets of 20.3 per cent in the prior year. Meanwhile, return on equity was 66.6 per cent in 2017, as compared to a loss on equity of 137.6 per cent in 2016.

Analysis shows that the company recorded a pretax profit of N11.20 on every N100 worth of assets employed and an after tax profit of N66.60 on every N100 worth of equity employed. Both are as compared with a pretax loss of N20.30 and an after tax profit of N137.60 respectively in the prior year.

In terms of staff matters, the company also performed well for year ended December 31 2017 as it did in the prior year. On the average, each employee contributed N3.53 million to the company’s pre-tax profit, up from N3.05 million in the prior year. It is important to note that the company decreased its workforce during the course of the year, employing a total of 495 employees in 2017, as compared to 636 employees in 2016.

 

Other ratios

In terms of capital adequacy, Tantalizers performed better in 2017 than it did in 2016, as its result for the year was higher than the preceding year’s. Its shareholders’ funds could finance about 52.9 per cent of its total capital, higher and better than the 39.1 per cent ratio recorded before.

A common feature of the manufacturing industry for the 2017 financial year is that most companies had high current ratios, having the ability to meet short term liabilities with short term assets. Tantalizers was not exception, having a not so adequate current ratio of 0.39 times, as compared to an already low 0.15 times in the preceding year.

Having a debt to equity ratio of 5.07 shows that the company is using N5.07 of liabilities in addition to each N1.00 of stockholders equity. In other words, the company is using N6.07 of total capital for every N1.00 of equity capital.

 

Sustainable growth

For the review year, the company recorded an after tax profit of N443 million, and retained 86 per cent of it. With a profit margin of 25.7 per cent, a retention ratio of 0.86 times, an asset turnover of 0.43 times and an asset to equity ratio of 6.07, the company had a sustainable rate of 58.2 per cent. This means that using only the resources it generated, the company had a 58.2 per cent inherent capacity for growth during the course of the year. It however declined, recording a decline rate of 9.8 per cent in its turnover.

 

Stock value

As at July 6 2018, Tantalizers’ stock traded at a mere 36 kobo, and our analysis shows that the stock was overvalued, even at this low price.

As at analysis date, the company had a net assets per share (NAPS) value of 21 kobo, and this was significantly lower than the 36 kobo at which it traded on the floor of the stock exchange. Also, the company had a book value of N665 million and a market capitalisation of N1.16 billion, putting its book value/market cap ratio at less than one. Traditionally, a book to market value ratio less than one indicates an overvalued stock.

Not only has this been determined to be overvalued, we do not classify it as one that can bring capital appreciation to investors, and we don’t see its share price rising dramatically any time soon. It is also not a stock takes dividend payment seriously, and investors were lucky to get a dividend of 2 kobo per share for its most current year.

 

Unique strategies

Tantalizers Plc was originally established in 1997 as a fast food company (Limited Liability Company) with the promise to deliver full value for money for an increasingly discerning target audience.

The status of the company changed to a PLC in 2008 and its shares were subdivided into 50 kobo shares from the original N1. The principal activities of the company are the provision of quick service restaurant and outdoor catering services.

 

 

Conclusion

The 2017 financial year was a great one for Tantalizers as it was able to turn its fortunes around, but it remains to be seen if its luck would continue into 2018.

*Source: Tantalizers’ 2017 financial report

*The Nigerian Stock Exchange

Nmillion 2017 Percentage change 2016
Turnover 1750.5 -9.8 1941.4
Profit pre tax 450.6 144.7 -1008.4
After tax profit 443.4 143.6 -1016.5
Total assets 4041.0 -18.5 4958.8
Equity 665.5 -9.9 738.5
Liabilities 3375.4 -20.0 4220.3
Kobo
Earnings per share 14 143.8 -32
Dividend per share 2 0
Core operations
Turnover growth rate -9.8 0.5
Profit growth rate 144.7 -44.7
Profitability ratios
Profit margin (%) 25.7 -51.9
Return on assets (%) 11.2 -20.3
Return on equity (%) 66.6 -137.6
Earnings profit per employee (Nm) 3.53 3.05
Other important ratios
Capital adequacy 52.9 39.1
Current ratio 0.39 0.15
Debt to equity ratio 5.07 5.71
Actual Vs sustainable growth
Profit margin (%) 25.7 -51.9
Retention ratio 0.86              1.00
Asset turnover (times) 0.43 0.39
Assets/Equity (times) 6.07 6.71
Sustainable growth 58.2 -136.5
Actual growth -9.8                 0.5

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