Reports reaching Nairametrics suggest Nigeria’s largest travel agency, Wakanow may be facing financial challenges following an economic recession that has ravaged the aviation sector. Reliable sources also indicate that global industry regulator, IATA has threatened to yank Wakanow off their BSP program due to unpaid settlements.
Wakanow is a Private Company and does not make its Financial Statements Public.
According to accounts from sources with knowledge of the matter, Wakanow has found it difficult to meet its payment obligations under the Billing and Settlement Plan (BSP) used by the industry to settle ticket sales and remittances. Being the market leader, it is opined that their failure to meet payment obligations by the end of January may posse collateral damage to the industry as a whole.
Sources also reveal that bankers to Wakanow have taken action to secure their credit facilities to the company and are hesitant to extend further loans to the travel agency. The company is reportedly owing Zenith Bank millions, leading the bank to appoint a Chief Financial Officer (CFO) for Wakanow, part of its plans to safeguard its finances.
Zenith Bank often appoints CFO’s for its obligors if there are reasonable grounds to believe that the management of its obligors are mishandling finances or if they face internal challenges that might affect their ability to meet up with loan repayments. It is understood that the accounts department of the company is more or less manned by employees loyal to Zenith Bank.
Nairametrics reached out to Wakanow to verify some of these claims but did not get a denial or affirmation. In an email sent to the writer, the company stated that
“As Africa’s largest online travel company, we have continued to enjoy a robust relationship with our financial partners, airlines, hotels and relevant regulatory bodies, including IATA. We are currently working with IATA to de-risk the remittance process to airlines so we can offer cheaper tickets to the Nigerian and African travel market.”
Wakanow also revealed that it had revamped is business model
“We recently revamped our business model in response to our commitment to continuously offer the most affordable travel solutions to our customers. We believe our new model will offer even more value and cheaper travel deals to our customers, and would enable us address such issues as refunds within the shortest possible time. “
The company neither addressed the alleged financial challenges or whether it was seeking to raise funds anytime soon. However, it did suggest that it was working hard to address issues around refunds to its customers. Several customers on social media have complained about not receiving bookings on time despite payment. After a long delay, they are then made to pay an additional sum.
What could have led to this ?
According to industry sources, Wakanow may have been the unfortunate victim of the country’s economic crisis last year.The recession in the economy last year and devaluation of the Naira led to many Nigerians either losing their jobs or having to scale down on luxuries. Travel outside the country for many Nigerians is a luxury and travelers cut back on holiday trips abroad.
Airlines operators and travel agents also had difficulty sourcing forex to repatriate ticket sales leading to an increase in ticket prices as a measure to hedge against rising foreign currency risk. Wakanow being the largest travel agent is said to have issued a lot of tickets mostly on credit and at relatively low prices as part of its drive to increase sales. However, this move may have backfired as corporates who transact with the company still owe it millions of naira in unpaid ticket sales.
Devaluation of the Naira?
The devaluation of the Naira against the dollar last year may have put the company under some strain, as it was reluctant to pass on the full cost to customers. Tickets to popular destinations became twice as expensive even though Wakanow is known to offer some of the cheapest deals around. Operators in the aviation industry found it difficult accessing foreign exchange to repatriate their profits and were forced to increase their charges in Naira.
It is also alleged that Wakanow ran a large operations with workforce of around 700 people across the country, Africa, Dubai and in Europe. Sources also allege that a staff re-organisation was recently carried out and may have resulted in downsizing. The company also recently converted some of its retail outlets into Agency arrangements as part of its move to reduce overheads.
Wakanow received a $20 million investment from African Capital Alliance (ACA) a private equity firm in 2014. The firm reportedly spent a huge amount of money marketing in an industry with very thin margin and a small market.
It also devoted significant resources on developing regional tourism and creating resorts around the country. The recession and ensuing economic crisis, threw a spanner in the works.
A dated Pitch document cited by Nairametrics reveals that as at 2013 the company was making over $55 million in ticket sales, 90% of which belongs to Airline operators and other stakeholders. Just last year, it opened Wakanow UK and reported that it had about 10% of the market share that said to be worth about N100 billion as at 2015.
The company planned to list on the NASDAQ this year but may have to push that plan aside as it battles survival. Reports also indicates that it is in discussion with potential acquirers, possible an unnamed South African travel company. The deal may help provide the liquidity required to keep the company afloat and able to achieve its potentials.
Wakanow was founded in 2008, and is Nigeria’s first Online Travel Agent. The company has since expanded to the United Arab Emirates UAE, Ghana, United Kingdom and the United States. The company bought online bus ticketing start-up Oya.com.ng in 2015.
Fidelity Bank to raise N50 billion in bonds in Q4 to refinance existing debts
The new issue will be made to redeem the existing N30 billion bond which was issued at 16.48%.
One of Nigeria’s second-tier commercial banks, Fidelity Bank Plc, has concluded plans to issue up to N50 billion ($131.3 million) in local bonds by the fourth quarter of 2020, in order to refinance existing debts as the yields drop.
The disclosure was made by the Chief Operations and Information Officer, Gbolahan Joshua, during an analyst call on Tuesday, September 8, 2020.
The crash of crude oil price globally, which was triggered by the novel coronavirus pandemic, has led to a decline in bond yields on the local debt market. This has made foreign investors to dump their local assets, leaving excess liquidity in the money market. This has also put a lot of pressure on the foreign exchange market as they look for dollars to repatriate their funds.
The Fidelity Bank top executive disclosed that the new issue will be made to redeem the existing N30 billion bond which was issued at 16.48%.
The global economic situation has seen yields in the debt market drop from as high as 18% about 3 years ago to less than 5% for the one-year treasury bill.
Fidelity Bank had revealed that it expected to see a 15% drop in profit this year when compared to 2019 result due to the coronavirus pandemic. Its profit after tax increased by 21.9% to N12 billion for the half-year 2020.
The second-tier bank also disclosed that its income declined in the second quarter due to a downward review of lending rates on loans as a result of the economic downturn.
Heineken buys more units of Nigerian Breweries Plc
The Dutch firm has invested N276 million in NB since August, to increase its stake in the Brewer by 0.10%.
The major shareholder of the largest brewer in Nigeria, Heineken Brouwerijen B.V, has increased its stake in Nigerian Breweries, with the purchase of 233,110 additional units of Nigerian Breweries shares. This was disclosed by the company in a notification sent to the Nigerian Stock Exchange, which was seen by Nairametrics.
According to the notification, which was signed by the Company’s Secretary, Uaboi G. Agbebaku, the purchase was made on the bourse over two transactions on the 2nd and 3rd of September.
This disclosure is a regulatory requirement that must be reported to the Nigerian Stock Exchange, especially when a major shareholder or director of a publicly quoted company purchases shares in the company they own.
The analysis of these transactions indicates that the purchase consideration for the 233,110 additional units of Nigeria Breweries shares at an average price of N39.94 is put at N9.3 million.
This purchase and previous purchases further cement Heineken Brouwerijen B.V’s status as a major shareholder; the company has accumulated a total of 7,720,236 since 30th June.
As of June 30th, when Nigerian Breweries released its Half-year financial results and reviewed its shareholding pattern, the company had exactly 7,996,902,051 outstanding shares, with Heineken Brouwerijen B.V being the majority shareholder with 3,019,363,804 units, which amount to 37.76% of the total shares of the company outstanding.
Hence, with the current purchase of 233,110 additional units, and previous purchases in August and September 1, which amount to 7,487,126 units, Heineken’s ownership percentage of Nigeria Breweries is now put at 37.85%.
Insider transactions, both sales and purchases, are often an indication of how shareholders perceive a company’s valuation. It could also mean a possible capital raise or that the majority shareholders are strengthening their existing holdings.
In like manners, the purchase of the shares of Nigerian Breweries by Heineken and other majority shareholder has mopped up stray volumes on the bourse, and pushed the stock price higher by 29% or N9, from N31 it closed at on the 3rd of August to its current value of N40 with 38.2x earnings.
About the company
Nigerian breweries is the largest brewing company in Nigeria. It engages in the brewing and marketing of lager beer, stout and non-alcoholic malt drinks, and the bottling of the Schweppes range of soft drinks and Crush Orange. Its brands include Star, Gulder, Legend, Heineken, Maltina, Amstel Malta, Fayrouz, Climax, Goldberg, Malta Gold, and Life. These products are mainly sold in Nigeria and other neighbouring countries.
Key takes on NB’s financials
Nigerian Breweries was affected by the disruption in the global and domestic demand and supply chain, as profit after tax of the largest brewer dropped by as much as 58%, at the back of the adverse impact of the sharp contraction in economic activities.
The knock-on effect of the COVID-19 lockdown, which affected the trade segment of the business, affected the company sales and this triggered the 11% drop in revenue in the first half of the year.
Nestle’s parent company increases stakes in Nestle Nigeria in August
The purchase consideration for the 748,047 additional shares at an average price of N1,174.74 is put at N878.8 million.
Nestle S.A, Switzerland, the parent company of Nestle Nigeria Plc and the majority shareholder of the company, has increased its stake in the Nigerian subsidiary, as it purchased about 748,047 additional shares in August.
This was disclosed by the company in a notification sent to the Nigerian Stock Exchange, which is seen by Nairametrics.
This disclosure is a regulatory requirement which must be reported to the Nigerian Stock Exchange, especially when a major shareholder or director of a publicly quoted company purchases shares in the company they own.
The analysis of this development shows that the purchase consideration for the 748,047 additional shares at an average price of N1,174.74 is put at N878.8 million.
Importantly, this purchase increases the ownership percentage of Nestle S.A, this adds significantly to the multinational’s investment in the company as the parent company now owns 66.27% of Nestle Nigeria Plc.
The 66.27% ownership share of Nestle S.A. total amounts to 525, 307, 504 ordinary shares worth N617 billion out of the 792, 656, 252 shares outstanding.
Meanwhile, insiders’ transactions both sales and purchases are often an indication of how shareholders perceive the company’s valuation. It could also mean a possible capital raise or the majority shareholders strengthening their existing holdings.
About the company
Nestlé Nigeria PLC is one of the largest food and beverage companies in Africa. Nestlé Nigeria Plc engages in the manufacturing, marketing and distribution of food products including purified water. It also exports some of its products to other countries within Africa.
It has three product segments: Food, Beverages and seasoning. The Food segment engages in the production and sale of Cerelac, Nutrend, Nan, Lactogen and Golden Morn. The Beverages segment engages in the production and sale of Milo, Chocomilo, Nido, Nescafe and Nestlé Pure Life. While the seasoning segment engages in the sale of Maggi cubes.
Key takes on Nestle financials
Nairametrics had earlier published after perusing through the company’s half-year unaudited financial report that the increase in the cost of sales, Administrative expenses, low finance income coupled with high costs coloured the bottom line of the company as earnings per share dipped from N33.11 to N27.53.
This shows the knock-on-effect of the pandemic on a giant like Nestle, despite grappling hard to keep revenues flat year on year, the increase in key costs still ebbed earnings.