Impairment charge, finance costs and opex squeeze RT Briscoe  

RT Briscoe Plc’s recurring losses call for urgent restructuring as impairment charge, finance and operating costs swallowed all of gross profit of a company struggling to pay banks loans.
For the year ended December 2016, the retail company posted a loss after tax of N2.90 billion as against N4.18 billion the previous year.

Sales dropped by 17.94 per cent to N9.80 billion despite a drop inventory levels.

The loss was due to an impairment loss of N1.13 billion, finance costs of N1.86 billion and total operating expenses of N1.70 billion that wiped out the whole of the N1.56 billion gross profit that resulted in an operating loss of N941.75 million.

The leading provider of automotive product will have to bolster sales and shore up cash flows in order to pay the N4.3 billion owed to two banks.

The car dealer owes N2.5 billion to Diamond Bank, and another N1.8 billion to UBA. Total debt in its books stood at N4.03 billion in the period under review though 31.69 per cent lower than the N5.90 billion figures recorded as at December 2015.

RT Briscoe’s working capital has turned negative, owing to N4.01 billion current assets that cannot cover spiralling accounts payable of N11.41 billion.

Recurring losses have eroded shareholders’ value as the company recorded a negative shareholders fund of N2.94 billion as the share price remain stuck at N0.50 since October 2016. This means investors should take a closer look at the stock before committing their money.

Analysts think that an economic downturn fuelled by a drop in oil price and a severe dollar shortage has led to a dip in importation of semi knocked down parts (SKDs) and fully built vehicles (FBU’s) by 60 per cent.

“Prices of vehicles had doubled as a result of the forex constraint. As auto companies, we buy forex at black markets to increase turnover and avoid loss,’’ said Kunle Ojo, managing director of Toyota Nigeria Limited (TNL).

The Naira closed at N383 to a dollar at the parallel market as of May 16.

While RT Briscoe’s total inventory fell by 67.79 per cent to N5.62 billion in December 2016, there were no corresponding increase in revenue.

This means the company sold down cars it had in its warehouses in the previous periods without replenishing new ones.

“Impairment loss represents an impairment of the Company’s trade and other receivables that are either considered irrecoverable or doubtful of recovery. These balances relate to customer balances, VAT receivables, VAT input and withholding tax receivables outstanding from customers,” RT Briscoe said in note 7c of its 2016 audited financial statement.

 

BALA AUGIE