Burgeoning Opex eclipse airline services Q3 profit

The management of Airline Services and Logistics plc should as a matter of urgency put in place an effective cost control mechanism as burgeoning operating expenses has eclipse the company’s third quarter 2013 profit, culminating in low margins, analysis of the financial statement shows.

For the first nine months through September 2014, the company’s net income fell by 36 percent to N50.87m from N79.29m the same period of the corresponding year (Q3) 2013, while sales reduced by 4 percent to N2.55bn.

The slow growth the bottom-line level was due to huge operating cost margin of 70.38 percent which overwhelmed most of the company’s operating profit. This also means that for every one naira of sales generated by the company, it spends N0.70 on operating expenses.

It should be noted that the huge operating expenses also left the company with a low net profit margin of 2 percent which is lower than the 2.98 percent recorded in the corresponding period of last year. ASL results underscore its weak profitability and efficiency positions which begs for urgent cost control mechanisms.

Analysts attribute the huge operating expenses that swallowed most of operating income to costs incurred on expansion operations with a view to increase its market share.

It will be recalled that recently, ASL expanded its business into Oil & Gas Catering and provision of in-flight catering in Rwanda, East Africa. To expedite such savvy investment drive, the Company has entered into a Joint Venture Agreement with 3rd parties to set up Special Purpose Vehicles (ASL Rwanda and ASL Oil & Gas Logistics Ltd) for the purpose.

Despite the company’s spiralling Opex cost, it was able to keep input costs under control as cost of sales reduced by 5 percent to N947.74m from N995.56 million the preceding year while cost margin, which measures the relationship cost of sales and sales remained flattish at 37 percent. It also means that for every one naira in sales generated by the company, it spent N0.37 on input costs.

ASL’s gross profits were down by 3.15 percent to N1.60bn in the review period from N1.65bn the preceding year which means there isn’t a firm grip on direct costs attributable. Gross profit margin increased by 25 basis point to 62.70 percent.

Total assets were down by 18.78 percent to N4.11bn in the review period to N3.46bn the preceding year.

Airline Services & Logistics PLC (ASL) is the leading provider of catering and hospitality services to international airlines and airports in Nigeria. Since its inception, ASL has consistently delivered premium catering services to tier 1 corporate institution.

Presently, ASL employs over 510 full time staff and caters to 600 flight handlings per month.

Lagos based ASL has invested heavily in its world class catering facility and continues to expand its operations both domestically and internationally.

The company’s share price closed at N1.70 on the floor of the Nigeria Stock Exchange NSE while market capitalisation was N1.07bn.

 

BALA AUGIE