Introduction: Courteville Business Solutions Plc., recently released its half year results. In this interview, Adebola Akindele, the Group Managing Director reviews the prevailing business conditions and events over the last six months.
Question: Courteville Business Solutions has just published its half-year results. Could you provide some context to the company’s performance over the last 6 months?
Adebola Akindele: Since the beginning of the year the economic environment has been very challenging in Nigeria, and indeed around the world. Businesses faced peculiar difficulties arising from tensions and uncertainty in the pre-election period, the sharp drop in oil prices leading to fall in foreign reserves that made it hard to support international trade demands, and a depreciating naira. These drained business confidence and shrunk consumer spending.
With the inauguration of the new administration at the end of May, an uptick has been observed but its impact has not moved the needle yet. Cash flow around the economy remains very tight. As the APC-led Federal Government settles down, I expect that budgets will be freer and the trickle-down effects felt across board.
Notwithstanding the turbulent conditions, Courteville delivered results commensurate with its performance for the same period last year. Courteville’s superior execution, and disciplined resource management helped us weather the storm.
Q: Courteville’s award-winning AutoReg product has attained dominance in its space. Over the 3-5-year horizon how do you see the other Courteville brands faring against competitors?
AA: As at today, Courteville has about ten brands that cut across business management, ecommerce, education, insurance, regulatory supervision, and transportation. In segment leadership, our brands fall into two categories. Those that have attained market leadership positions such as AutoReg, NAPAMS, and CIID, and those that are climbing to the top, for example, Egole, and Webpeople.
In every sphere our strategy is always different from those pursued by our competitors. A lot of careful thought goes into selecting the business areas we enter, and how we position ourselves with compelling customer value. Beyond that, we ensure that resources are used optimally.
For example, in ecommerce, our Egole platform is an aggregator, which saves us the overhead cost of carrying inventory. In fact, Egole has the lowest operational cost among ecommerce sites in Nigeria. We have a large salesforce trained to push all our brands so we do not need to increase the payroll. Again, Courteville’s robust and versatile technology platform means that we will not be spending heavily to scale up our offerings nor wasting valuable time in product development.
Innovation marks every brand in our stable. For example, in education, there is nothing comparable to Courteville’s Relay product in Nigeria. I am confident that in the next 2 to 3 years, all our brands will be in pole position.
Q: Honda, the Japanese automaker, recently announced its intention to commence manufacturing of its popular Accord model in Nigeria. Can local car manufacturing plants meet the demand from Nigeria’s rising middle class?
AA: When speaking of local automobile manufacturing, there are two sides to the demand equation. A lot of the debate has focused on how quickly car manufacturers establishing in Nigeria can ramp up production. It is also important to examine the price appeal of brand new locally manufactured vehicles versus fairly-used imported ones.
Through the AutoReg platform, which manages motor vehicle administration in 22 of the 36 states of the federation and Federal Capital Territory, I have the most accurate and comprehensive database on car registrations in Nigeria.
In the last few years, about a million new cars are added to the AutoReg database every year. I am not referring to renewals, but vehicles being captured for the first time.
If one puts Honda’s planned production of 1,000 per annum beside that figure it is a drop in the ocean. Honda’s entry is a good start and a vote of confidence in the sustainable buying power of Nigerians but it will not make a big dent anytime soon. For the near future, the needs of the majority of car buyers in Nigeria can only be met by imports because these manufacturers’ efforts are mere drops in the ocean.
Q: Within the space of a few months Courteville made two major announcements on international expansion. Could you share the rationale behind these moves?
AA: In 2013, our board adopted a 5-year strategy. Two key parts of the strategy were diversification away from the risks of exposure to a single economy, that is, Nigeria, and the search for new sustainable sources of foreign earnings.
After the board gave the green light, our management team began to scan international markets to find opportunities that match our particular strengths and criteria. Out of a good number of options, we selected Jamaica and Zimbabwe.
In Jamaica, we settled on the acquisition of Priority Loss Adjusters Limited, an existing major player in motor vehicle administration, testing, and loss adjustment, to gain a foothold there. This was the fastest route to market for Courteville, and allowed the company to gain the knowledge-base of a successful local operator. The price was also attractive. Within two months of the purchase, the Jamaica operation broke even.
In Zimbabwe, Courteville has entered a partnership with the Insurance Council of Zimbabwe to offer its insurance documentation and database management software there. We are on the lookout for other attractive international opportunities.
Q: Since the company was listed in 2009, Courteville has consistently paid dividends. Last year was the exception. Does this mark a change in the company’s dividend policy?
AA: Not at all. Courteville has never missed an annual dividend payment. What happened last year was a technical accounting glitch that sprung up in our filing at the Nigerian Stock Exchange. At the time, it was too late to correct that.
The board is resolute that the company maintains its dividend policy, and shareholders compensated for the skip last year. Dividend payments to shareholders are a matter of trust and consistency, which Courteville will continue to honour.
Q: Do you feel that there are aspects of your business that the market has ignored or misunderstood?
AA: Anyone who takes the time to perform a basic analysis of Courteville’s market position and performance will quickly realize that the intrinsic value of its stock exceeds the 50 kobo price at which it trades on most days.
This company has never reported a loss, generates good cash flow, pays dividends regularly, and has a stable management team whose owner-manager status aligns our interests with those of our shareholders. The company’s services are strategically placed as the gateway for different sectors that are growing at an impressive rate such as transportation, healthcare, education, and insurance, to name a few.
To address the gap in perception Courteville has put in place an investor relations program to proactively engage with investors on the value they are overlooking. We are also working closely with the Nigerian Stock Exchange to raise the company’s profile.