By Folakemi Emem-Akpan
Introduction
We predict that the 2017 financial year will not be a profitable one for Tripple Gee (and by extension its shareholders), a marked difference from 2016. While it made a profit in 2016, the profit made was much lower than what was recorded in the preceding year. Retained profit was lower, as was dividend payout to shareholders. But there was still a profit.
As things stand today, the company might make a loss rather than a profit at the end of its 2017 FY. If this is the case, there will be no retained profit for the company and no dividend for shareholders.
Core operations
Tripple Gee did not have a very good year in 2016 operation-wise, as was the case with many other companies in Nigeria. While it was able to make more revenue for the year under review, it could not sustain the momentum up to the profit level. Turnover for the year grew by a mere 3.8 per cent to N806.4 million. This low growth in turnover can be traced to the reduced purchasing power of Nigerian consumers.
While it managed to retain the same level of cost of sales that it did in the preceding year, it couldn’t effectively curtail its administrative expenses and finance cost. The company therefore declared a pre-tax profit of N36.9 million and an after-tax profit of N27.7 million. Both were significantly lower than the levels recorded in 2015. Pre-tax profit had declined by 31.5 per cent while after-tax profit declined by 32.1 per cent. These declines are as compared to growth rates of 143.9 per cent and 163.2 per cent respectively in the prior year.
Earnings per share, was as expected lower than that of the preceding year. Earnings per share was 5.59 kobo, as compared to an earnings per share of 8.23 kobo before. Dividend per share in 2016 was 3 kobo, slightly lower than the 4 kobo recorded in 2015.
Profitability ratios
While the company’s ability to generate revenue increased albeit infinitesimally, its ability to retain whatever revenue earned dipped drastically. For the year, it recorded a profit margin of 4.6 per cent, lower than 6.9 per cent in 2015. Analysis shows that for every N100 earned by the company in the course of the year, it recorded a profit of N4.60, as compared to a profit of N6.90 in the preceding year.
Assets deployed also fetched a lower return in 2016 than it did in 2015. Return on assets for the year stood at 1.9 per cent in 2016, as compared to a return on assets of 3.0 per cent in 2015. The same scenario was repeated in the case of return on equity. For the 2016 financial year, Tripple Gee deployed equity valued at N1.13 billion and for every N100 equity deployed, the company made an after-tax profit of N2.40, a decline from the profit of N3.60 made in 2015.
Other ratios
Tripple Gee’s shareholders’ funds could still finance the same level of its total capital for its 2016 financial year as it did for the preceding year. Capital adequacy for the period was a high and commendable 73.9 per cent, and this competed favourably against the industry standard for the period under review.
A common feature of the manufacturing industry for the 2016 financial year is that most companies had high current ratios, having the ability to meet short term liabilities with short term assets. Tripple Gee followed the trend, recording a current ratio of 1.87 times. The company however bucked the trend in terms of debt to equity ratio, recording one of the lowest in the manufacturing industry for the period.
Having a debt to equity ratio of 0.70 shows that the company is using only 70 kobo of liabilities in addition to each N1.00 of stockholders equity. In other words, the company is using N1.70 of total capital for every N1.00 of equity capital. This was however a little higher than the 0.60 ratio the company recorded in 2015.
Sustainable growth
For the review year, the company recorded a profit of N27.7 million, and chose to pay shareholders a lower level of dividend than it did in the prior year. Despite this, it retained a proportionally lower proportion of its profit.
Meanwhile, profit for the year was 4.6 per cent, down from 6.9 per cent. This means that the company was able to get a profit of N4.60 from every N100 sales made in 2016, as compared to N6.90 in the prior year.
With the same level of asset turnover as 2015, the company recorded a sustainable growth rate of 1.5 per cent, meaning that it had the capacity to grow by only that 1.5 per cent using on the resources it generated. It however actually grew by a higher 3.8 per cent.
This is as compared to the preceding year when the company declined rather than experience a growth.
Unaudited results
The 2017 financial year does not look like it’s shaping up to be a great one for Tripple Gee and its shareholders. It recorded a much lower turnover level than the corresponding period in 2016, and yet had a higher cost of sales. Loss for the period was therefore N16.1 million, a sharp departure from the profit of N2.6 million recorded in the corresponding period in 2016, and translating into a 719 per cent decline rate. Loss margin was 3.6 per cent as compared to a profit margin of 1.6 per cent in the corresponding period in 2016.
Instead of earnings per share, there was a loss per share of 3.26 kobo. This will most likely affect investors with regards to dividend receipt come end 2016.
Unique strategies
Tripple Gee & Company Plc is unique because it is one of Nigeria’s very few manufacturers of financial instruments, secure and commercial documents, labels and flexible packaging materials. Its range of products and services are instrumental across industry sectors from the banking industry, government regulatory bodies and oil and gas, to pharmaceuticals and FMCG manufacturers. With over 36 years in the print business and a solid track record working with financial institutions, multi-national organizations, governments and research institutes, Tripple Gee has evolved and improved the security and quality of transactional and commercial instruments space. Incorporated in 1980 as a private limited liability company, the pre-incorporation business model of the company was influenced on one hand by the prevailing national drive for self-sufficiency on print products and services and the booming business environment in Nigeria at the time, which the company’s founder responded to by setting up the company.
At inception, the company produced general commercial stationery but soon developed its activities to produce specialised paper packaging products for the food and pharmaceutical industries. In 1989, the company took advantage of more opportunities in the print market and in particular diversified into the niche security printing market by investing in technology, state of the art machinery and acquisition of how best to secure both print and print substrates by embedding hard to counterfeit features in them.
Conclusion
While investors may not expect a dividend from their holdings come year end 2017, they will do well to hold on to their investments in hopes of capital gains and appreciation years down the line.
*Source: Tripple Gee’s 2016 financial report
*Tripple Gee’s 2017 Q3 unaudited results
*The Nigerian Stock Exchange