Increasing cost of operations has impacted negatively on the profit margin of R.T Briscoe Nigeria Plc. CHRIS UGWU writes
Increase in exchange rate has forced manufacturers to borrow at a high interesr rate, thereby increasing cost of production, made worse by infrastructure deficiency, which has inevitably transferred the high production cost to consumer.
The situation has also made manufacturers less competitive, shrinking their profit margins, as naira devaluation takes its toll on imported raw materials.
Aside increased cost of raw materials, some manufacturers, especially multinational consumer goods companies, who have taken up foreign currency liabilities, are also groaning under the pressure of increased cost of dollar.
Also, challenges of erratic supply of public electricity, weak logistics, insecurity and other high costs of operations attributable to poor infrastructure, have continued to make business operating environment difficult, especially the real sector of the economy.
R.T Briscoe Plc, like its peers, has, for years now, been in a loss position as the effect of the challenging operating environment and volatility in the economy continue to impact adversely on its operations due to reduction in credit opportunities, which in turn affects the company’s income.
Its financials has also remained in the red for over five years, even as the trend of losses has continued into the year 2021.
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 as other companies gradually began to sell Toyota cars 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.
R.T Briscoe, which came from a loss position in 2015 and 2016 in the same trend, ended 2017 unimpressively, finished 2018 with losses in after tax profits, also ended 2019 and 2020 in the red and finished the first quarter of 2021 negative to what market analysts attributed to heavy cost of servicing bank loans and cost of sales and administrative expenses. When the closing bell rang on Friday, the company’s share price stood at 20 kobo per share
Notwithstanding efforts by the management, the group, coming from loss position since 2015, has continued to sustain same 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 bildropped lion 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 brand 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 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 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 the nine months ended September 30, 2020, in 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 financial 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 the 2021 financial year in 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 bildropped 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. For the half year ended June 2021, the company recorded a 31 per cent growth in revenue from N2.420 billion in 2020 to N3.163 billion in 2021.
Cost of sales equally grew by 31 per cent to N2.541 billion in 2021 to N1.946 billion in 2020. Loss after tax stood at N947.580 million in from a loss of N618.900 million in 2020, representing a growth of 53.1per cent. For the nine months ended September 2021, R.T Briscoe reported a loss after tax of N1.642 billion as against N876.421 million posted in 2020.
However, revenue rose by 60 per cent to N5.844 billion from N3.650 billion in 2020 but the cost of sales grew by 70 per cent to N4,624 billion in 2021 from N2.718 billion in 2020.
Chairman of the company, Sir Sunday Nwosu, had, 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, who noted that the major threats to the going concern status of the company were being firmly addressed with the results slow, but encouraging, explained that the board and indeed the shareholders of our company are concerned about the liquidity challenges of the company and are taking steps to resolve this situation.
Also addressing the shareholders at the 2019 AGM, Nwosu noted: “The future of our company lies 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.”
It is important for the company to focus on developing homegrown solutions that will address the business needs of people and organisations and also ensure a tight management of its cost base in order to maintain growth and return profitability