Business

Tranex hit by cost pressure

The rising cost of sale and administration have continued to impact negatively on the bottom-line of Trans-Nationwide Express Plc. CHRIS UGWU writes

Despite the ravaging COVID- 19 crisis, which has crippled the economy across the globe, the accompanying social networks like Facebook, Twitter, E-mail, WhatsApp, e-transactions and the Global System of Mobile Communications (GSM), bottom line of courier companies in Nigeria have continued to shrink day by day.

 

In addition, bad road networks in Nigeria remains a major challenge facing courier and logistics providers in the country. Others include inconsistent government policies in form of multiple taxation, conflicts of interest among government agencies and regulators, duplicity of functions, poor import and export information on rights, obligations and privileges, among others.

 

The courier industry’s activities have definitely been impacted negatively, majorly by the rising cost of operation, increase in competition and emergence of internet services.

 

With the emergence and increasing popularity of local online retail stores like jumia. com, konga.com, Mystore.com. ng among others, e-commerce has taken a new shape in Nigeria like any other countries of the world.

 

The increase in internet penetration and customer awareness, volume of online trades has also significantly grown, thereby leading to more competition among courier and logistic service providers in the country.

 

Following operational challenges, the financials of Trans- Nationwide Express Plc, which began the year 2020 with appreciable growth in profit, slipped to loss position during the six months ended June 2020 to what market watchers believe was induced by harsh operating milieu and rising direct cost, administrative expenses and COVID-19.

 

However, hope by investors that the profit recorded during the first quarter 2021 will be sustained was a mirage as the impact of rising cost of sales and administration expenses returned the company to loss position at the half year ended June 2021 and also snowballed into the nine months ended September 30, 2021.

 

Financials

 

The company began 2019 financial year with an impressive result, recording 304.28 per cent increase in profit after tax for the first quarter ended March 2019 to N2.923 million from N0.723 million posted in 2018.

 

Profit before tax stood at N2.923 million from N0.908 million reported a year earlier while revenue grew by 22.09 per cent from N174.699 million in 2018 to N213.306 million in 2019. However, administrative expenses grew by 30.22 per cent from N103.086 million in 2018 to N134.242 million in 2019.

 

The courier firm also finished the half year of 2019 on the positive trajectory with 318.31 per cent increase in profit after tax. In a filing with the Nigerian Exchange, the unaudited financial statement showed a profit after tax of N18.590 million as against N4.444 million reported in 2018.

 

Profit before tax stood at N20.840 million from N6.694  million a year earlier, representing a growth of 211.32 per cent. Revenue was from N362.649 million in 2018 to N410.353 million in 2019, a 13.15 per cent growth while admin expenses grew by 14.70 per cent to N235.783 million from N205.558 million in 2018.

 

However, revenue dropped by 10.45 per cent to N191.021 million from N213.306 million in 2019. Direct cost stood at N82.918 million from N75.782 million in 2019.

 

The company slipped into loss in the second quarter with a loss after tax of N78.046 million for the second quarter ended June 30 from a profit of N20.840 million in 2019. Revenue dropped by 22.67 per cent from N410.353 million in2019 to N317.312 in 2020.

 

While direct cost stood at N139.808 million in 2020 from N158.348 million in 2019, administrative expenses was N255.218 million in 2020 in contrast to N235.783 million recorded in 2019.

 

The logistics and courier service company reported a N79 million loss in the third quarter of 2020 as against a profit of N4.674 million posted in 2019.

 

The firm, in a report to the Nigerian Exchange Limited (NGX), also noted that revenue declined by 7.5 per cent year-onyear, from N548.3 million as of the corresponding period last year to N507.17 million this year.

 

The dip, according to report, was largely due to a decline in revenue from courier services, which contributed about 54.1 per cent of the total revenue as of Q3, 2020. The revenue from courier services declined from N326.44 million to N274.40 million for the period under view.

Gross profit declined by 7.1 per cent from N321.23 million to N298.40 million in the period under view. Administrative expenses increased by 17.5 per cent from N321.0 million to N377.1 million within the period under view.

 

The company, however, showed signs of profitability in the first quarter of 2021 with a profit after tax of N.475 million  during the first quarter ended March 31, 2021 as against a profit of N9.591 million reported in 2020. Revenue dropped by 5.91 per cent to N179.726 million from N191.021 million in 2020. In spite of revenue decline cost of sales and admin expenses continued to rise.

 

Cost of sales stood at N91.487 million from N82.918 million in 2020, representing an increase of 10.33 per cent while administrative expenses equally grew by 2.32 per cent to N100.801 million from N98.918 million recorded the previous year.

 

The logistics and courier service company returned to loss position on increased cost pressure during the half year of 2021 with a loss after tax of N48.663 million from loss of N78.045 million in 2020.

 

Revenue grew to N333.987 million from N317.312 million in 2020, accounting for 5.25 per cent growth. Cost of sales rose by 24.47 per cent to N174.026 million in 2021 from N139.808 in 2020, while administrative expenses stood at N255.418 million in 2021 from N255.218 million in 2020.

 

Trans-Nationwide Express Plc, which provides courier services, freight services, logistics, mail room management, haulage and e-commerce from its headquarters in Lagos and other branches finished nine months ended September 30, 2021, with a loss of N42.683 million from a loss of N79.010 million in 2020.

 

Revenue, however, grew marginally by 0.75 per cent to N510.977 million in 2021 to N507.167 million in 2020. But direct cost grew by 107.48 per cent from N208.772 million in 2020 to N433.162 million in 2021.

 

Looking ahead

 

A former chairman of the company, Dr. Oladiran Fawibe had, while addressing shareholders at the 2019 Annual General Meeting, said that the company’s long-term strategy for 2019 set out the operating  strategic objectives of increase in the corporate customer base, efficient management of all levels customer relationship, personnel’s capacity to pursue new business opportunities, and the maintenance of good solvency.

 

“There was obvious recognition of the changing needs and behavior of our customers with the increasing development of technology and the dynamics of respective companies’ business operations.

 

“Responding to these market demands and imperatives is a sine qua non for our continued operations and growth. In this critical period, TRANEX is determined to increase comprehensively the volume of its business, optimize our resource allocations and to significantly improve the expense to sales ratio in order to secure the company’s price competitiveness now and in the future.

 

“Achieving this goal on a continuous basis will require success in increasing the volume of our business and further improvements in the efficiency of processes through automation or digital technology.

 

“In this respect, we have emplaced the digital processes which seek to meet customer demands in regard to online transactions and customers’ service,” Fawibe said.

 

He noted that the board and management have a strong commitment to explore new opportunities for revenue expansion, invest in all necessary and required human and material resources to ensure high standard of efficiency and optimum performance for value creation to the satisfaction of the firm’s shareholders, employees and other stakeholders in our business.

 

Last line

 

Poor infrastructures considered to be the most significant challenge facing logistics provider need to be addressed to enable courier firms tap into the changing consumer behaviour following the impact of the COIVD-19.

 

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