Computer Warehouse H1 profit slows despite reduced costs

Computer Warehouse Group plc (CWG), a technology company, profits slowed in half year (H1) 2014 despite reduced costs, according to analysis of the financials.

For the first six months through June 2014, the company’s net income reduced by 47 percent to N246 million from N465 million as of HY 2013.

Earnings before interest, tax, depreciation and amortisation (EBITDA) reduced by 42 percent to N465 million in HY 2014, compared with N802 million as of HY 2013.

The company was able to reduce expenses as cost of sales reduced by 14 percent to N6.7 billion as against N7.80 billion in the preceding year, while cost of sales margin remained flattish at 79 percent.

Additionally, operating expenses were down to N1.26 billion in HY 2014, as against N1.42 billion last year.

CWG should improve on direct materials attributable to projects as gross profits were down by 23 percent to N1.68 billion as against N2.18 billion in the preceding year, while gross margins remained flattish at 21 percent.

Net margin, a measure of efficiency and profitability, reduced to 2.94 percent in the review period compared to 4.65 percent as of HY 2014. The company has the potential of becoming Nigeria’s Google given the prospect of her business model, CWG 2.0

CWG 2.0 is a subscription business model and driven by the quest to help Small Medium Enterprises (SMEs) grow and make notable social impact.

This includes Openshopen, a website that affords shop owners open their own virtual store online, and SMERP, an enterprise resource planning solution that will help business owners manage their business inventories on a subscription basis.

Turnover, for the six months through June 2014, fell by 16 percent to N8.38 billion in HY 2014, compared with N10 billion as of HY 2013.

The company can spur growth by tapping the immense opportunity of the Nigeria economy which is worth $510 billion (80.22 trillion).

It must be noted that the telecommunication sector was the star performer of the last rebased GDP exercise at it contributed 8.68 percent to the Nigeria economy. This compares with N364.4 billion ($2.3 billion) in the 2012 non rebased GDP time series.

GWG’s total assets were down 3.68 percent to N12.28 billion in HY 2014 compared with N11.84 billion the preceding year.

Current ratio, which measures the ability of a firm to settle short term obligation as at when due reduced to 1.51x compared to 1.42x- the figures are lower than the 2.1x industry average.

Return on average equity ROAE was 7.76 percent in the review period while the return on average assets ROAA stood at 3.25 percent.

The company’s share price closed at N5 on the floor of the Nigerian Stock Exchange, while market capitalisation was N12.62 billion.

BALA AUGIE