Caverton’s H1 profit down 32% on spiralling costs

Caverton Offshore Support Group plc (COSG), the Nigerian company that operates in the maritime, aviation and logistics sector, had its half year profit hit by spiralling operating costs, analysis of the financial shows.

For the first six months of the year, the company’s pre-tax profit fell by 32 percent to N2.60 billion from N3.81billion in the same period of the corresponding year (HY) 2013, while revenue increased by 21 percent to N12.50 billion.

Profit after tax (PAT) came downwards as it reduced by 12 percent to N1.58 billion, compared with N1.79 billion as of HY 2013 on mounting costs.

The fulcrum of the slow growth at the bottom-line level performance was a result of a 183 percent increase in cost-of-sales to N6.02 billion in the period under review from N2.17 billion the preceding year.

Similarly, cost-of-sales margin spiked to 48.10 percent in HY 2014, as against 21 percent in HY 2013, culminating in the lowering of gross margins to 51.84 percent from 79.34 percent last year.

The 46 percent decrease in administrative expenses in the review period and reduction in operating expense margin to 26.32 percent in 2013, from 58.73 percent, and could not boost bottom-line due to 99 percent decrease in other operating income to N12.64 million from N2.09 billion in 2013.

Net margin, a measure of profitability and efficiency, fell to 12.64 percent in HY14, from 17.36 percent as of HY 13.

The spiralling cost may have arisen due to capital expenditure incurred by the company as it seeks aggressive expansion drive into sub-Saharan Africa with a view to maximising shareholders wealth.

However, the lower income margin highlights the need for management to carry out an effective cost control mechanism that will reduce cost and improve profits.

COSG had announced plans to build a 40000 square metres facility at the Muritala Mohammed International Airport in Lagos, for in-country training of pilots, engineers and aircraft maintenance.

Total assets were up by 10.25 percent to N41.91 billion in HY 2014, from N38.01 billion as of HY 2013.

Return on equity (ROE) dropped to 12.60 percent in HY14, from 15.60 percent as of HY 2013, while return on assets (ROA) fell to 3.70 percent in 2014, as against 4.70 percent as of HY 2013.

The company’s share price closed at N6.19 per share on the floor of the Nigerian Stock Exchange.

BALA AUGIE