AG Leventis released its full-year 2017 results to the Nigerian Stock Exchange yesterday. Revenue fell by 10% from N12.7 billion in 2016 to N11.4 billion in 2017. Losses by the group went up 35% from N2.9 billion in 2016 to N3.8 billion in 2017. Losses by the company dropped by 35% from N3.7 billion in 2016 to N2.5 billion in 2017.
At the Group level, the losses were due to the impairment of Plant and Machinery of Leventis Food Limited by N1.6 billion. At the company level, losses were due to the impairments of Investments and Receivables of Leventis Food Limited, Leventis Power Systems Limited and one joint venture, Chrisstahl Nigeria Limited.
Pivoting with new joint ventures The accumulated losses of some of the company’s subsidiaries have completely eroded its shareholders funds. 2017 marked the second consecutive year that all 3 operating segments made a loss. While the A.G Leventis remains a going concern, the group’s current liabilities exceed its current assets by N6.1 billion. In addition, it also has a negative cash flow and retained earnings.
In an apparent move to switch to more profitable areas, the company had gone into several joint ventures.
Chrisstahl Nigeria Limited, which is a supplier of plumbing and industrial goods imported from all over the world made a N21.3 million loss. The company has essentially written off that investment.
Druckfarben Nigeria limited, a partnership with the Leventis Group since 2011, is engaged in the production of ink and decorative paints. In 2017, it made a profit of N44.5 million.
In April 2016, A.G Leventis went into a joint venture partnership with South African retail giant Pick n Pay to set up Pikwik Nigeria Limited. Pikwik Nigeria Limited is 49% owned by the Group and is into retail operations especially with Fast Moving Consumer Goods. Chairman of the company, Ahmed Kazama Mantey, in the annual report, stated that Pikwik would roll out its first store this year.
Will it be second time lucky?
Leventis was one of the pioneers in the retail store space alongside Dominos and Kingsway Stores owned by UTC. The economic travails of the 90s led to the stores shutting down. Dominos remains standing today, albeit with a much reduced scale of operations.
Retail stores depend largely on quick turnover to counterbalance the thin profit margins. A.G Leventis has not stated if the goods that would be sold are either locally made or imported. Imported goods would leave the firm susceptible to foreign exchange volatility.
The stores would also have to deal with infrastructural challenges in the country such as power, bad roads, and difficulties with access to the ports. These issues lead to increased operating costs for retailers.
The retail space is one filled with several operators, from big time chains like Shoprite and Spar, to informal neighbourhood shops across the nooks and crannies of the country.
Though Pick n Pay, the joint venture partner, is experienced, the new venture would have to offer either significant price differentials or products to carve a niche for itself amidst the competition.
If Pikwik does not carve a niche for itself, A.G Leventis could end up with with yet another struggling company in its kitty.
AG Leventis closed at N0.55 on Friday’s trading session on the Nigerian Stock Exchange, down 21.33% year to date.
About A.G Leventis Plc
A.G Leventis was incorporated in Nigeria as a private limited liability company in 1952, and was converted to a public limited liability company in 1978. It was listed on the Nigerian Stock Exchange on the 29th of November 1978.