It was a torrid 2018 for companies quoted on the floor of the Nigerian Stock Exchange as there were massive sell off by investors as they fret over the uncertainties surrounding the forthcoming election and the vagaries of global macroeconomic environment brought on by the United States Spate with China, and continuous rate hike by the United States Federal Reserve that damped foreign investor appetite for Naira assets.
Of course of great concern was a slow growing economy as GDP expanded by 1.80 percent, lower than the 2.10 percent recorded in the fourth quarter of 2017.
Amid these monumental challenges undermining the growth of the country, some foreign investors are increasing their stakes in companies in which they have seen good prospects.
Abraaj, managers of Aureos Africa Fund, is among investors who have seen value in Nigerian stock market and are consolidating their investment instead of withdrawing. Consequently, Abraaj has decided to convert $10 million (N3.6 billion).
The Aureos Africa Fund had advanced the $10 million unsecured, redeemable, convertible loans stock to C & I Leasing. The loan matured at the end of 2018. However, instead of asking for the repayment of the loan stock, Abraaj said it would be converted to equity in the C & I Leasing, a development financial analysts said is a show of confidence in the company and Nigerian economy.
Commenting decision by convert the loan to equity, the Managing Director/CEO of C & I Leasing, Mr. Andrew Otike-Odibi said: “This development is positive for our business as it improves the capital structure of the company and helps position it favorably for additional capital raise from the market in first quarter of 2019.”
Market analysts said the foreign investors must have seen the positive trend the company has recorded in the recent times and bright future prospects.
Boosting marine business
In an apparent move to boost its marine business, C & I Leasing bought out the 27.5 per cent stake in C & I Petrotech Marine Limited (CPML). As a result of the transaction CMPL became fully owned subsidiary of C & I Leasing Plc.
Otike-Odibi had said the firm’s journey into marine sector as a service provider for the oil and gas sector actually started through CPML joint venture in 2010 and has over the years culminated in the ownership of over 20 vessels consisting of crew boats, pilot boats, patrol boats, and platform support vessels for providing services such as line and hose handling, berthing and escort services, mooring support, fire-fighting, pollution control, security and floating and self-elevating platforms.
“This is clearly reiterate our commitment to growing our marine services business and gaining leadership in the field. It is hoped that this buyout will further the company’s drive to restructuring and repositioning our marine business for enhanced profitability,” he added.
Following the increase in stake in CPML, the company acquired two new Tugboats to its fleet. They are: ‘MV Chidiebube’ and ‘MV Folashade’, both vessels are owned by the company in joint venture agreement with SIFAX Marine Limited and are to be deployed immediately for a long term assignment with Nigerian Liquefied Natural Gas (NLNG).
According to the company, it is committed to becoming the most preferred marine partner for the international oil companies (IOCs) in Nigeria.
“We will continue to follow through on all that needs to be done to meet their needs. These new vessels have been built to specification for the assignment ahead and we are confident they will deliver even beyond expectation. With every new contract and acquisition, we are careful to take the learnings from the past and improve continuously to serve our clients better. We are sure they will be very pleased with MV Chidiebube and MV Folashade, “it said.
Bright future prospects
The company successfully raised N7 billion bonds earlier in 2018 as part of activities aimed at enhancing its overall competitive positioning. The positioning is to take advantage of the growth the leasing industry is expected to witness.
As a popular financing tool, leasing provides an important leverage in modern business. Its flexible nature allows it to compete favourably against traditional finance sources such as bank loans, bonds among others. And the leasing industry is still expected to blossom further owing to various Government initiatives aimed at re-inflating the economy and the increasing relevance of leasing to capital formation.
Also the increasing relevance of leasing to capital formation and focus on agriculture will create an extensive market for the leasing business, as a whole range of equipment would be required across the Agric value chain, from planting, harvesting, processing and storage to distribution.
Analysts said an experienced company such as C & I Leasing will benefit significantly from these business opportunities. According to them, focus on agriculture will create an extensive market for the leasing business, as a whole range of equipment would be required across the “Agric value chain, from planting, harvesting, processing and storage to distribution. Special focus on infrastructure will unlock business opportunities for the leasing industry as specialised and general equipment would be needed to support the massive construction expected to take place in the rail, roads, power, and housing among others.
The manufacturing sector including the micro, small and medium enterprises (MSMEs) presents significant opportunities for leasing, as the demand for assets for productive ventures is expected to continue to increase,” they said.
Another emerging business opportunity lies in the healthcare and education sectors with appreciable inroads already being made at C & I Leasing with contracts to provide school buses as well as ambulance services for clients in education and health sectors.
Demand for the Fleet and Marine Services drive top line growth
Gross earnings for the first nine months through September 2018 increased by 15.6 percent to N19.9 billion from N17.2 billion as at September 2017; driven by the growth in lease rental income by 17.5 percent y-o-y-on the back of volume increase in the fleet and marine business.
Rise in revenue from the fleet and personnel businesses was mainly due to the expansion in existing and new contracts following continuous demand for our services.
Lease rental income was up 10.40 percent to N4.95 billion in the period under review as against N4.49 billion the previous year.
Net operating income followed the same growth trajectory as it increased by 8.6 percent t0 N5.67 billion in September 2018 from N5.22 billion as at September 2017, thanks t0 improvements in all segments.
Increase efficiency and contribution from marine underpins profit
Profit after tax for the first nine months through September 2018 increased by 25 percent to N1.18 billion from N950.02 million as at September 2017.
The growth at the bottom line was due to increased efficiency from all the business units as well as improvement in capacity utilisation of both marine and non-marine assets.
Profit before tax (PBT) increased by 11.4 percent to N1.28 billion in September 2018 from N1.15 billion the previous year; due to strong operating performance across the business segments, effective cost management initiatives and improvement in capacity utilisation of both marine and non-marine assets
Notable improvement in operational efficiency across the Group
C and l Leasing is efficient in reducing costs while contemporaneously magnifying profit as evidence in a reduction in cost to income ratio.
Investors crave for stocks of firms that minimize costs and maximize the profit amid the vagaries of macroeconomic environment.
C and l Leasing operating expenses (excluding foreign exchange loss) dropped by 31.5 percent y-o-y in September 2018 as a results of efficiency in maintenance and fueling cost of our fleet.
Indirect operating expenses were down by 1 percent to N1.85 billion in September 2018 N1.87 billion as at September 2017, thanks to efficiency in fuel and maintenance cost and personnel re-organization.
As a result of the drop in costs, cost to income ratio improved to 27 percent n the period under review from 47 percent the previous year.
Balance sheet growth in line with business expansion
For the first nine months through September 2018, C and l Leasing’s total assets grew by 52.63 percent to N58 billion from N38 billion as of December 2017; largely due to the growth in operating lease assets, proceeds from Bond issuance, trade, and finance leases, as well as other receivables and prepayments
Operating lease asset increased by N35.59 billion in September 2018 from N27.16 billion as at September 2017, due to acquisition of new vehicles and vessels.
Total shareholders’ funds was up by 9.9 percent to N10.01 billion in September 2018 from N9.10 billion as at September 2017, as retained earnings increased.
Total debt grew by 33 percent out of which Interest bearing liabilities grew by a total of 21.1 percent to N35.0 billion in the period und review from N28.90 billion as at December 2017; the growth was largely due to the issuance of the N7 billion Bond and inflow from CP notes. N4 billion of the existing expensive debts has been replaced with a portion of bond proceeds.
BALA AUGIE
