Japual breaks shareholders heart with another massive loss

For shareholders of Japual, the full year result released today is another reminder of how heart wrenching investing can be when it goes bad.

The company released its 2014 FY results posting a massive loss after tax of N2.6billion (2013: N239.7million). For sure, this has done more damage to any hope for dividends in the near future as the retained earnings is now in negative of N6.3billion.

Why the result was poor

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An initial view of the result the problem was from the top and as the saying goes the fish starts to rot from the head. Revenue was down 19% during the year to N10.5billion (2013: N13billion) perhaps buttressing the tough economic conditions facing companies that service the oil industry.

To make matters worse, the company also saw finance cost double to N3.1billion (2013: N1.6billion) as interest on loans took its toll.

Despite the loss before tax of N2.2billion, Japual also incurred a tax expenses of N380 million. Typically companies get a tax write back when they incur pre-tax losses. So its surprising they even had to incur such a tax bill. Perhaps they had expenses that were not tax admissible.

Outlook

Outlook for the company still looks dire considering the downturn in the oil industry and the economy as a whole. The company will fight hard to keep revenues up and cost down a move that it has not been very consistent at. Also, external loans (including finance leases) stand at over N17billion dwarfing the company’s net equity of N13 billion.

Shareholders may also wish to know that the company spent about N3.8 billion on property plant and equipment and another N7.7 billion on debt servicing.