Last week, Vitafoam Nigeria Plc hit a year high of N3.60. Year to date, the stock is up 20%.
The uptick in price also coincides with the company releasing its results for the 9 months ended June 2018. They showed improvement in both the top and bottom line, which hints at the possibility of the company delivering one of its best results in half a decade.
Profit is back up
The Group had consistently made losses in the last three years. Vitafoam made a loss after tax of N71.9 million in 2015, N32 million in 2016 and N127 million in 2017. Results for the 9 months ended June 2018 show that profit after tax stood at N515 million in 2018 compared to N133 million made in the prior year.
The group consists of Vitafoam Plc (the company), as well as subsidiaries controlled by the company, including Vono Products Plc which it merged with in 2015. While Vitafoam (the company) has consistently made profit, its subsidiaries have struggled. Last year’s results show most of them made losses
Was advertising a key factor?
The company, perhaps in a bid to win more customers, doubled down on advertising. Advert expenses jumped from N76.5 million in 2017 to N126 million in 2018. Advert expenses for the full year ended September 2017 show that the group spent N134 million.
Finance costs remain high
Despite the impressive results, finance costs are still on the high side, though they dropped year on year. Results for the 9 months ending June 2018 show that finance costs amounting to N885 million took up 52.1% of the company’s operating profit of N1.1 billion, as against 79% for the corresponding period of 2017.
Full year results for the period ended September 2017, show that finance costs hit N1.3 billion, indicating that the firm may have lower finance costs this full year.
Hopes of a better dividend
Vitafoam has been consistent in paying dividends, despite the swings in profitability. The company paid a dividend of N0.15 per share for the 2017 financial year from earnings of N0.18. Year on year, earnings per share, has increased from N0.16 to N0.62.
Share price is at an all-year high
Vitafoam’s share price has hit a year high of N3.60 per share, though the stock has dipped in inter-day trading.
About the company
Vitafoam was established in 1962 by two giants: British Vita and Unilever. The Nigerian Promoter Decree No. 3 of 1977, mandated companies to sell sixty percent of their share to the Nigerian public, thus in compliance with the decree, Vitafoam became a public company in 1978 and listed on the floor of the Nigerian Stock Exchange in 1978.
In 2008 and 2009, Vitafoam Ghana Limited and Vitafoam Sierra Leone Limited respectively were established. In 2010, Vitafoam became a major shareholder of Vono Products and established two sister companies: Vitapur Nigeria (an insulation products manufacturing company) and Vitablom (fibre processing and soft furnishing company). In 2012, Vitafoam established its youngest inclusion; Vitavisco for production and sales of Viscoelastic foam and Latex products.