Business

Chams Plc: Held down by high operational costs

High operational cost and other challenges in the economic and business climate have impacted negatively on the earnings of Chams Plc. CHRIS UGWU writes

 

Information technology has revolutionised information management and tremendously increased the value of even the smallest piece of data. All over the world, effects of IT are noticeable in almost all aspects of life. However, in developing countries, the impact of IT is yet to be fully felt to any appreciable extent in some sectors.

 

The Nigerian ICT sector is not an exception. The sector like any other is relatively not successful because of harsh operating environment. In spite of Nigeria developing in the area of ICT, there are still some loopholes, which are affecting its total advancement.

 

One the major challenges is that the use of computer, access to internet and other tools of ICT are limited greatly to the urban areas as most people in the rural areas are yet to know how to use the computer.

 

Some other challenges facing the full ICT deployment in the country include bad road infrastructure in Nigeria which has remains a key problem for ICT providers in the country. Inconsistent government policies in form of multiple taxation, conflicts of interest from government agencies as regulators and operators, duplicity of functions, among others also remained as serious challenge to the sector.

 

There are also no doubt that the security challenges in the northern part of the country with the attendance consequences of loss of lives and properties, domestic constraints such as depletion of fiscal buffers, dwindling foreign reserves, erratic supply of public electricity have also remained a thorn to the business operating environment. Due to the challenges, the Chams Plc, which closed on impressive note during the 2018 financial year has sustained a loss position during the current year.

 

The company had begun the year 2020 with loss in profit that has remained in the red all through the quarters of the year. Market analysts had predicted that the company’s earnings was likely to remain under pressure as operating environment remain unfavourable and competition remain stiffer with the negative impact of COVID-19.

 

Market sentiments for the shares of the company has also titled downwards in response to general share depletion being witnessed in the local bourse despite improved product rebranding and increased market penetration.

 

When the closing bell rang on Friday, the company’s share price stood at 23 kobo per share. Financials Chams Plc had recorded a 130 per  cent increase in its annual profit for the year ended December 31, 2018.

 

The firm, in its financial statement, reported a profit of N380 million, as against the loss of N1.27 billion recorded in the preceding year. The company’s total assets amounted to N5.25 billion, compared with N4.77 billion in 2017, while total liabilities reduced by 14 per cent to N3.60 billion from N4.20 bn in 2017.

 

Chams had in 2018 restructured its operations for global competitiveness, including a change in business model, placing premium on identity management and introduction of innovative products and services. The former Group Managing Director/Chief Executive Officer, Chams, Mr Femi Williams, had attributed the performance to the positive effects of the management’s determination to revamp the company’s operations for enhanced profitability in other performance indicators. He said: “This result is a testament to the group’s dedication to revamping the fortune of the company; coming from a loss position to record this impressive performance is the first step in our arsenal of strategies lined up for deployment this year. “As can be seen from the result, we recorded a growth of 54 per cent in revenue year-on-year, while we grew profit before tax by 124 per cent. I would like to assure all our investors and shareholders that we will not rest on our oars as we will keep firing from all cylinders in order to maintain and surpass this performance by the end of the fiscal year 2019.” However, following operational challenges, the group failed to maintain the tempo of profit margin as Chams ended the 2019 financial year with a 15 per cent drop in profit after tax. The audited financial statement of the company obtained from the Nigerian Stock Exchange showed a profit after tax of N322.624 million for the financial year ended December 31, 2019 in contrast to N380.148 million reported in 2018, representing a drop of 15 per cent. The group recorded a revenue of N3.285 billion during the period ended December 31, 2019 from N3.012 billion recorded in 2018, accounting for 9.06 per cent drop. Cost of sales stood at N2.277 billion in 2019 from N2.226 billion 2018.

 

Chams Plc opened the 2020 fi-  nancial year in the red slipping into loss position with a loss after tax of N33.796 million for the first quarter ended March 31, 2020 as against a profit of N182.843 million reported in 2019. Revenue dropped by 58.23 per cent from N1.259 billion in 2029 to N525.860 million in 2020 while cost of sales stood at N291.755 million in 2020 from N848.446 million in 2019.

 

Chams Plc has recorded a loss of N13.14 million for the half year ended June 30, 2020 as against a profit of N225.96 million reported in 2019. The company in a report obtained from the Nigerian Stock Exchange (NSE) recorded revenue of N910.10 million from N1.96 billion posted in 2019, representing a drop of 53.57 per cent.

 

Cost of sales stood at N456.93 million in 2020 from N1.26 billion in 2019. For the Q3 ended September30, 2020 Chams reported a loss after tax of N125.514 million from a profit of N277.813 million in 2019. Loss before tax equally stood at N125.514 million from a pretax profit of N300.608 million in 2019. Revenue dropped by 57.3 per cent from N2.804 billion in 2019 to N1.196 billion in 2020.

 

The group reported a loss after tax of N64.080 million during the Q4 ended December 31, 2020 as against a profit of N322.624 posted in the firm’s 2019 audited account. Loss before tax was N64.040 million from a pretax profit of N358.859 million in 2019.

 

Revenue dropped by 34.34 per cent from N3.285 billion in 2019 to N2.157 billion in 2020. Looking ahead Chams recently said that it is poised to uphold the sanctity of post listing requirements of the Nigerian Stock Exchange (NSE).

 

The Group Managing Director of Chams Plc, Mr Gavin Young, who spoke during Chams’ courtesy visit to NSE, assured the Exchange of regular provision of its corporate information for enhanced investment decision. Young expressed the company’s preparedness to focus on innovations in the identity space to ensure sustainable shareholder value.

 

He explained that the company would place premium on investment in innovative solutions and software across the commercial, consumer and government sectors of the economy to sustain its competitive edge.

 

Young assured the exchange that Chams would always take the issue of compliance with all the post-listing requirements seriously, saying he was looking forward to a strong relationship with the exchange and would be happy to make input on the best ways of achieving a strong relationship.

 

Speaking on the strategic move to upscale the company’s operations, he stated that “our focus is to perfect and package these solutions so that we can realise value from our investments.

 

As Chams is one of the foremost identity companies in Nigeria, we are also focussing on innovation in the identity space, and particularly verification, as there are now over 40 million National Identity Numbers (NIN) and BVN records to which we can link to provide such verification solutions.

 

“Of course, we are also very involved in the National Identity (NID) enrolment space, via our own network, and through agent and business partnerships, and have a close working relationship with the National Identity Commission (NIMC) and Nigerian Inter Bank Settlement System (NIBSS)

Our subsidiaries are also making good progress and particularly in the Fintech payment space, and we will therefore continue to drive innovative fintech initiatives across the group.” Young said the group was committed to growing its business through strategic partnerships and introduction of innovative products and services that are tailored to the Nigerian and African markets.

 

He said: “An example of an innovative identity verification solution we provide to State Governments, which has made a major difference in improving the lives of state pensioners, is our pensioner verification app.

 

“Pensioners can verify themselves through taking a selfie, which we match against other facial records of the pensioner, including the state pension’s database.” Speaking further,

 

Young said: “ Once verified, the pensioner is good to receive pension payments for another defined period. Prior to the app being introduced, pensioners were required to travel from their rural locations to a bank branch in order to verify themselves through fingerprint biometrics.

 

This was often a long, costly and laborious exercise for the pensioner. “Now, they can perform the verification exercise through using either their own phone or another smartphone, from any location. This is just one way we at Chams are applying simple identity technology to specific customer needs and improving lives.

 

“We are excited with this innovation as it applies across many industries where verifying the identity of individuals is required. In addition to the basic verification technology, we customize the solution for our customers by linking to their own database as part of the verification process.”

 

 

According to him, the solution is extremely flexible in that it could either be offered via Chams’ app, a specific customised app, or though the customer’s own app as an add-on

 

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