R.T Briscoe has continued to witness series of losses in earnings on high costs of operations. CHRIS UGWU writes
Despite efforts by government to create an enabling environment for investment, the exchange rate volatility and its attendant effects have impacted businesses negatively.
The increase in exchange rate has forced manufacturers to borrow at high rate, thereby increasing cost of productions, made worse by infrastructure deficit, which has inevitably transferred the high production cost to consumers.
The development has made manufacturers less competitive, shrinking their profit margin, as naira devaluation takes toll on imported raw materials. It is well known that some of these companies plan their cash flows in advance and they can’t easily adjust to currency fluctuations.
The exchange rate volatility and difficulty in accessing dollars have resulted in companies that are profitable, becoming less profitable and those that are marginal now suffering.
Also, challenges of erratic supply of publicc electricity, weak logistics, insecurity and other high costs of operations attributable to poor infrastructure have continued to make the business operating environment difficult, especially for the real sector of the economy.
R.T Briscoe Plc, like its peers, has for years now being in a loss position as the effect of challenging operating environment and volatility in the economy continue to impact adversely on its operations due to reduction in credit opportunitiess, which in turn has affected the company’s income. Its financials had also remained in the red for over five years, even as the trend of losses has extended into the current year.
Also, according to reports, the journey to this sorry state did not begin overnight. The company made the mistake of investing in only cyclical sectors of the economy and having no competitive moat.
While it started as one of the major dealers in Toyota products, luck soon ran out on it as other companies gradually began to sell Toyota products too.
Ford Motor Company ended its 11-year partnership with Briscoe, saying it did not make commercial sense to have two dealers operating in the same country. Coscharis Motors thus became the sole distributor of Ford vehicles in the country, leaving RT Briscoe stuck with unsold cars and spare parts.
The company, which came from a loss position in 2015 and 2016 in the same trend, ended 2017 unimpressive, finished 2018 with losses in after tax profits and also ended 2019 and 2020 in the red, while finishing the first quarter of 2021 in the negative. When the closing bell rang on Friday, the company’s share price stood also at 20 kobo per share.
Notwithstanding efforts by the management, the group, coming from loss position since 2015, has continued to sustain negative posture.
Though the group closed the year 2018 with 18 per cent increase in revenue from 4.376 billion in 2017 to N5.182 billion in 2018 full year ended December 2018, the firm reported a loss after tax of N2.188 billion in 2018, from N3.160 billion in 2017. Loss before tax stood at N2.168 billion from N3.137 billion in 2017.
According to the company, the automobile industry in Nigeria is currently undergoing very challenging times. Industry monitors revealed that the sales of new vehicles dropped significantly from about 50,000 units in 2013 to below 10,000 units in 2017 as well as in 2018, largely due to the prohibitive costs of imported fully built new vehicles which attract 70 per cent import duties.
“The situation in 2019 as at the time of writing has unfortunately largely remained the same. It is in this light that I review the results of the R.T. Briscoe group for the 2018 financial year. Despite the harsh operating environment, the group recorded an 18 per cent growth in revenue from N4.4 billion in 2017 to N5.2 billion in 2018.
“The significant improvement in revenue was attributable to the activities of the sales functions for motor vehicles and technical equipment which accounted for about 90 per cent of the group’s revenue while the sales of property units and rent from investment properties held by the company’s real estate subsidiary, Briscoe Properties Limited was responsible for the rest,” it noted.
The group began the financial year 2019 with a loss after tax of N214.270 million for the first quarter ended March 30, 2019 from a loss of N994.013 million in 2018. Cost of sales grew by 99 .56 per cent to N1.253 billion in 2019 from N627.868 million in 2018.
Revenue grew by 76.43 per cent from N894.931 million in 2018 to N1.579 billion in 2019. R.T Briscoe continued to be subdued by rising costs during the half year ended June 30, 2019, as its cost of sales grew by 39.84 per cent to close at N2.397 billion in 2019 from N1.714 billion recorded in 2018. Revenue grew by 29.37 per cent to N3.070 billion from N2.373 billion in 2018.
Loss after tax stood at N424.331 million from N1.710 billion reported in 2018. For the nine months ended September 30, 2019, the group reported a loss after tax of N680.677 million from N1.190 billion posted in 2018.
However, its revenue grew by 19.79 per cent to N4.237 billion from N3.537 billion in 2018, but cost of sales rose by 27.78 per cent to close at N3.311 billion from N2.591 billion in 2019. R.T Briscoe also ended the year in the red with a loss after tax of N1.287 billion for the financial year ended December 31, 2019, as against a loss of 2.209 billion in 2018.
The group’s audited financial report obtained from the exchange also showed pretax loss of N1.239 billion in 2019 from N2.168 billion in 2018. However revenue grew by 33.91 per cent to N6.939 billion in 2019 to N5.182 billion in 2018.
Finance cost stood at N1.432 billion in 2019 from N2.294 billion in 2018. The group began 2020 financial year also in the red with loss of N248.913 million for the first quarter ended March 31, 2020, as against loss of N990.887 million reported in 2019. Revenue dropped by 13 per cent to N1.381 billion from N1.579 billion the previous year while cost of sales declined by 12 per cent from N2.253 billion in 2019 to N1.102 billion in 2020.
For the half year ended June 2020, R.T Briscoe reported loss after tax of N618.900 million from loss of N336.531 million in 2019. Revenue dropped by 21 per cent from N3.070 billion in 2019 to N2.420 billion in 2020 while cost of sales stood at N1.946 billion in 2020 as against N2.396 billion recorded in 2019.
The group closed nine months ended September 30, 2020, at a loss after tax of N886.451 million from a loss of N600.940 million in 2019. Revenue declined by 13.85 per cent to N3.650 billion in 2020 from N4.237 billion in 2019. Cost of sales stood at N2.908 billion in 2020 in contrast to N3.314 billion posted in 2019.
The group closed the 2020 finan cial year with a loss of N1.096 billion for the year ended December 31, 2020, as against N1.276 billion in 2019. Revenue dropped by 6.64 per cent to N6.478 billion from N6.939 billion in 2019.
The group’s cost of sales stood at N5.139 billion from N6.285 billion in 2019. However, net finance cost grew by 12.60 per cent to N1.616 billion in 2020 from N1.434 billion recorded in 2019.
The company began 2021 financial year on the red, sinking further to a loss of N498.476 million for the quarter ended March 31, 2021 as against N248.913 million reported in 2020, accounting for a percentage change of 100.3 per cent.
Revenue dropped by 19 per cent from N1.381 billion in 2020 to N1.125 billion in 2021. While cost of sales dropped by 25 per cent to N826.169 million from N1.102 billion in 2020, finance cost rose by 87 per cent to N508.088 million from N272.214 million in 2020.
Acting Chairman of the company, Sir Sunday Nwosu, while addressing shareholders at the 2018 AGM, said the three major threats to the going concern status of the company over the past few years had been its liquidity challenges due to chronic undercapitalisation, the loss-making business situation, including the winding-up petition and another court case, which arose due to the inability of our company to settle its indebtedness to its bankers.
Nwosu noted that the major threats were being firmly addressed and that the results has been slow, but encouraging.
He explained that the board and indeed the shareholders of the company were concerned about the liquidity challenges of the company and were taking steps to resolve the situation.
Also addressing shareholders at the 2019 AGM, Nwosu noted that the future of the company lay in its ability to reposition itself and chart a differentiating course in the very competitive auto industry, which currently accounts for about 70 per cent of our business activities.
“We are currently also focusing upon and developing our technical and real estate businesses, which have shown promising prospects over the years, but have had restricted growth due to limited working capital.
“Our company holds licences (now due for renewal) for the assembling of motor vehicles and generators in Nigeria and in this regard, we are currently reinforcing our relationship with BYD, a global leader in electric automobiles, metro transportation and alternative energy with a new MOU to be executed.
The expected recapitalisation of the company would give the needed impetus for the exponential growth of our various business activities,” he said.
Though operational challenges have remarkably weighed on RT Briscoe, it is important for the company to continue to manage its cost base tightly in order to maintain growth and profitability.