EKOcorp’s profits surge 22.13% on reduced costs

Background

The company was established in 1982 by three medical doctors, Alexander Eneli, Sunday Kuku, and Augustine Obiora; the trio merged the first letter of their surnames to form the hospital’s name, EKO. The hospital has grown into a private teaching hospital expanding from Ikeja to Surulere and beyond.

After it became a public liability company in 1991, the hospital’s name was changed to Ekocorp plc in 1994.

It has outstanding shares of 498.60 million with shareholders’ fund of N2.18 billion as of December 2013.

Financial results for 2013

Ekocorp, formerly known as EKO hospital, the first healthcare service company to be quoted on the floor of the Nigerian Stock Exchange ended 2013 financial year on an impressive note, as it was able to translate the stellar performance at the top-line into bottom-line growth.

Based on BusinessDay investigation, the company was able through savvy and astute management of resource cut down operating expenses culminating in double digit growth in profits.

For the year ended December 2013, EKOcorp’s revenue rose by 8 percent year-on-year to N1.21 billion from N1.12 billion in the prior year (FY12).

Profit before tax in the review period surged by 22 percent to N189.32 million compared with N155.02 million as of FY12, while profit after tax also followed the same growth trajectory as it spiked by 16.68 percent to N152.76 million in FY13 as against N130.74 million as of FY12.

Input costs however increased to 60.64 million in FY13 as against 54.84 percent as of FY12, as gross profit margin declined to 39.36 percent in 2013 compared with 45.86 percent in 2012.

The fulcrum of the spike in profitability was the reduction in operating expenses by 19.19 percent to N276.33 million in FY13 from N341.98 million as of FY12, while operating expense margin decreased to 22.71 percent in 2013 from 30.22 percent.

Net margin, a measure of profitability and efficiency move, remained flat at 12 percent in the review period.

Fixed assets turnover, which highlights the effectiveness of management of the Group in generating turnover from investment in assets, stood at 36 xs. This means that EKOcorp was able to translate investment in assets to turnover and subsequently to profits.

The company’s return on average equity (ROaE) was 7.25 percent in the review period, while return on average assets (ROaA) stood at 4.78 percent.

The ability of the company to bolster profits will spike revenue reserves or retained earnings, which could be utilise for future expansion in form of embarking on projects that will maximise shareholders wealth. Earnings per share increased to 61k in FY13 as against 52k as of FY12.

Current ratio, which measures the ability of a company to meet its short-term obligation as at when they fall due, was 1.7 xs which is slightly below the 2.1x industry average.

Bank overdraft surged by 960 percent to N28.024 million in FY13 compared with N2.64 million as of FY12.

EKOcorp’s total assets grew by 7.46 percent to 3.31 billion in the review period from N3.08 billion as of FY12.

Share performance and outlook

The company’s share price closed at N3.72 on May 28, 2014, on the floor of the NSE, and market capitalisation was N1.85 billion on the same day.

BALA AUGIE