Reduced costs spur AG Leventis profit growth

Background

The company was incorporated in 1958, as a limited liability company and converted to a public company on November 29, 1978.

The principal activities of the group and company include the sale and servicing of passengers cars, commercial vehicles, agricultural and construction equipment, property letting and management, provision of financial and other specialised services and investment in subsidiaries and affiliated companies engaged in the provision of food, hospitality services of power generating equipment.

The company has 2.64 billion shares outstanding with share holder’s fund of N9.75 billion, as of the end of December 2013.

Financial results for 2013

AG Leventis, a company with investment in automobile, agriculture, real estate and construction equipment, has just posted its full year 2013 on the website of the Nigerian Stock Exchange.

The company was able to drive growth through an efficient and effective cost control mechanism, which helped surge profits.

For the year ended December 2013, AG Leventis revenues increased year-on-year by 8 percent to N11.91 billion from N11.05 billion for the same period in the prior year (FY12). Profit before tax (PBT) for the 12 months period through December 31, 2013, surged by 17 percent to N947.82 million compared with N812.21 billion as of 2012FY.

Profit after tax (PAT) in the review period also surged by 43 percent to N405.075 billion compared with N284.17 billion, as of 2012FY. The impressive results at the bottom-line level can be attributed to reduced input costs as cost of sales margin reduced to 73.66 percent in FY13 as against 76.05 percent as of 2012FY.

As a result of the aforementioned, gross profits were up by 22.8 percent to N3.07 billion in FY13, compared with N2.5 billion as of 2012FY. Gross margin, which measures the efficiency at which management produce each unit of product jumped to 25.77 percent in FY13 as against 23.40 percent, as of 2012FY.

The company has been able to increasingly turn each naira of sales into net profits as net margin increased by 60 basis points to 7.95 percent. Operating expenses in the review period moved by 10 percent year-on-year to N1.92 billion in FY13 compared with N1.75 billion as of 2012FY.

Operating expense, margin OPEX also increased to 16.12 percent in the review period as against 15.80 percent, as of 2012FY.

Earnings per share followed the same growth trend as it increased to 31k in FY13, from 38k as of 2012FY.

Sales turnover moved to 1.22x in FY13 as against 1.08x as of 2013FY. It means that that Leventis is producing N1.22k of sales for one naira capital employed in Net assets. It took the company 104 days to collect money from debtors, which explain the 29 percent reduction in trade and other receivables to N2.92 billion in the review period.

AG Leventis should tighten its credit policy to enhance sales level and improve profitability. Furthermore, delays in collection period could impair liquidity. Total assets for the year ended December 31, 2013, reduced by 10.05 percent to N20.48 billion in FY13 from N22.77 billion as of 2012FY.

Share performance and outlook

The share price of the company has increased by 1.82 percent in the past one year to close at N1.56 on May 2, 2014, on the floor of the Nigerian Stock exchange, and market capitalisation was N4.13 billion on the same day. The company currently trade at price-to-book ratio and price-to-sales ratio of 0.42x and 0.25x, respectively.

BALA AUGIE