Arbico Plc

There is no gainsaying that buildings are important to humans. We all live in them, work in them, shop in them, and use them for many other purposes including recreation. Perhaps, this explains why buildings are always in constant demand, with millions of them constructed around the world per annum.

In Nigeria, Arbico Plc is taking advantage of this high demand for buildings. This company is the very focus of our corporate overview today.

Get to know more about this company which has existed for the past 60 years and constructed quite a number of notable landmarks buildings.

About Arbico Plc

Established in 1958, Arbico Plc is one of the oldest companies in Nigeria. It is a building construction/engineering company whose main services entail pre-construction/estimating, designing, engineering, construction management, project management etc.

These services are required by private citizens, governments, and other clients across different sectors such as education, aviation, healthcare, manufacturing etc.

The company has designed and constructed hospitals, hotels, industrial plants, corporate/commercial workplaces, residential estates etc. Examples of some of the famous landmarks constructed by it can be seen below:

  • Park Inn by Radisson
  • NBC Asejire Plant
  • KAFF Building
  • Coleman Factory
  • Feyide House
  • Oba Elegushi Residence
  • Rose of Sharon Centre etc.

Based on its experience over the years, Arbico Plc has come to pride itself as an efficient, safety-conscious, and client-focused corporate entity which uses the most experienced workers and state-of-the-art equipment to deliver quality service to its many clients.

It is one of the oldest construction companies in Nigeria with presence across different parts of Nigeria. Its shares were listed on the Nigerian Stock Exchange (NSE) in 1978.

The ownership structure of Arbico Plc

In terms of the company’s shareholding structure as at December 2017, there are three broad categories of owners – R28 Limited, A.O.G. Limited, and the investing public.

Coronation Research

Arbico’s majority shares are owned by R28 Limited, which owns about 103,900,000 units of shares, representing 69.7%. A.O.G Limited owns 14,850,000 units which represent 10%. Lastly, the remaining 20.3% is owned by the general public.

According to its annual report, in 2014, a decision was taken by the directors of Biswal Limited to convert N1,950,000,000 of the amount due from Arbico Plc into equity through acquisition of more share capital in the later. Biswal is owned by Adebisi Adebutu.

However, due to the inability of Arbico Plc to meet necessary regulatory requirement such as increase in authorised share capital, registration of increase in share capital and allotment of shares, the amount was recognised as deposit for shares in the book of Arbico.

Brief profile of the company’s Chief Executive Officer

Alkimos Makaronidis: He is the company’s Managing Director. He has worked in the construction business for the past twenty years. The Greek native studied Civil Engineering as his first degree, and later acquired postgraduate degrees in Structural Engineering and Energy Production. He has been able to handle wide-ranging and complex building projects.

Other notable directors of the company include Chief Kessington Adebutu, the Chairman of the company and majority shareholder with about 69.9% ownership of the company. He the Patriarch of the famous Baba Ijebu Lotto owned by Premier Lotto Nigeria Limited, one of Nigeria’s largest betting companies and one of the biggest cash-generating entities in the country. His son, Adebisi Adebutu is the managing director of Biswal Nigeria Ltd, a leading telecom support company in Nigeria.

Arbico’s target market

As a full-fledged construction company, Arbico Plc targets a wide-ranging market audience. For example, the company constructs residential buildings for private citizens, factories for companies, hospitals for both private investors and government etc. They have also been contracted by governments for the constructions of public infrastructure.

Which companies are Arbico Plc in competition with?

For quoted companies in the construction sector, there is a very dominant player with whom every other player has to contend with. This is none other than Julius Berger, a company that has entrenched its dominance over the years.

Much like Arbico Plc, Julius Berger is involved in the construction of buildings, industrial facilities and public infrastructure. The company also engages in sales of building materials, furniture products, equipment sales, and marine services. However, it is no match for the construction giant in terms of scale and level of operations.

A quick comparative analysis of both companies’ financial reports for the fiscal year ended December 2017, shows that while Arbico Plc’s revenue stood at about ₦4.8 billion, Julius Berger’s stood at about ₦141.8 billion.

For Arbico, its main competitors are smaller construction companies litered all over the country. Especially those constructing real estate properties in choice areas around the country.

The company’s financial performance over the past five years

Arbico Plc may not be making as much money as Julius Berger, but it has managed to maintain some level of financial consistency over the past five years, even though its profit has recorded steady decline between 2016 and 2017. The company recorded ₦4.8 billion in 2017, ₦3.4 billion in 2016, ₦4.5 billion in 2015, ₦3.7 billion in 2014, and ₦3.3 billion in 2013.

Its profits between 2013 and 2017 is as follows:  ₦278 million in 2013, ₦252 million in 2014, ₦271 million in 2015, ₦7.6 million in 2016 and ₦61.6 million in 2017.

Future of Arbico

If you are a retail investor looking to buy this stock then you may have to reconsider. At N4.79 it has been on this share price since 2016 with little or no trading activity to show for it.

For a company this old and underperforming, it appears the only way up for the company is to recapitalize and continue to be listed or recapitalize and go private (delist) or be bought out. Perhaps the thought that it is owned by the Adebutu’s suggests it has great potentials whenever the billionaires decide to explore its potentials.

Can it be acquired? Perhaps an investor(s) looking for a headstart into the challenging and competitive Nigerian construction sector. Their brand, experience, portfolio and local content status makes it easily attractive for an acquisition.

Any intending acquirer of this company may, however, have to take out the majority shareholder and formidable businessman Chief Adebisi Adebutu. He owns over 100% of this company if you include the N1.95 billion in deposit for shares, perhaps a reason why it is yet to convert the shares to equity.

Chief Adebutu is a serial billionaire and in Baba Ijebu Lotto has a cash-generating machine that can outbid or outfox anyone who dares launch an unfriendly bid.

The company also has just 20% of its equity in free float and is a highly illiquid stock. Making a bid for this company cannot be successful without buying out the majority shareholders.

We believe the future of this company lies squarely in the hands of the current owners who have the financial muscle to turn it into a major competitor for Julius Berger. However, it may wish to achieve this via a possible delisting. it has no business being listed on the Nigerian Stock Exchange in its current form.

 

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