It is a well known fact that since time immemorial, logistics has been an integral aspect of all business and commercial activities. It entails the movement of raw materials, goods/services and important documents from one location to another; especially where they are most needed for final usage or industrial processing. In Nigeria for instance, there are numerous companies whose main preoccupation is all all logistics. An example is Red Star Express Plc which, for many years, has been facilitating the overall business/commercial activities in the country. This firm is our company focus the week.
The Nairametrics’ company focus is a weekly column dedicated to the profiling of some of the smaller securities that are listed on the Nigerian Stock Exchange, NSE. The column is important, in that it enables current and prospective investors to keep abreast with their portfolios and the opportunities that abound in the capital market.
In view of the yuletide season which is fast approaching, this article is examining the opportunities that Red Star Express Plc could take advantage of, as well as the competition it would have to grapple with in the process. But before we delve right into that, let us first learn more about the company’s history, its business model, challenges, opportunities, expansion efforts, as well as its recent struggles to maintain profitability.
Corporate overview of the company
Headquartered in Nigeria’s commercial hub, Lagos, Red Star Express was incorporated in 1992, initially as a limited liability company. Its main business operation entailed (and still does entail) the provision of integrated logistics and freighting services.
The company’s operation covers both local and international markets where it delivers parcels that are often classified as “private” and “dangerous”. The transportation of these parcels is often done by air, sea, and road.
Over the years, Red Star Express Plc has diversified its operations by including other forms of logistics solutions to its list of services. These include E-commerce solutions, warehousing, mailroom and document management, as well as general haulage, etc.
Information available on the company’s website says that it has a workforce of about 1,700 all of whom work in some 166 offices across Nigeria. The company also has a fleet size of 700 vehicles and operates in about 220 countries asides Nigeria.
On November 14th, 2007, Red Star Express Plc listed its shares on the main board of the Nigerian Stock Exchange. Today, it has a market capitalization of N2.5 billion and a share price of N4.40.
About the company’s ownership structure
Red Star Express Plc’s substantial shareholding structure as at 2018 is such that only three entities – Stanbic Nominees Limited, Koguna Mohammed Hassan, and Koguna Babura Insurance Brokers Limited –own majority shareholdings.
Stanbic Nominees Limited owns a total shareholding of 151, 257, 636 units which represent 25.7% of all the shareholdings in the company. This is followed by Koguna Mohammed Hassan which holds some 109,419,912 units at 18.6%. Lastly, Koguna Babura Insurance Brokers Limited owns 84,966,028 units which represent 14.4%.
A look at the company’s subsidiaries
Red Star Express Plc’s business model is structured into the following: courier services, freight services, logistics, and support services.
To this end, it has four subsidiaries namely: Red Star Freight Limited, Red Star Logistics Limited, Red Star Support Services, and Red Star Express.
Who is the company’s target market?
According to information made available to the public, Red Star Express’ logistics and freighting services are targeted at different market segments, including companies and individual customers. It facilitates the delivery of parcels and documents to private companies.
Red Star Express also offers packaging and clearing/removal, as well as warehousing services to all companies. In the same vein, it handles the transportation of dangerous/sensitive materials on behalf of companies.
The company also serves the pharmaceutical industry by delivering important medical materials. It offers human capital and asset capital services for companies in the banking, and oil & gas sector. But asides industries, Red Star Express Plc’s courier services also target regular Nigerians. This is because it does door-to-door delivery services. In the same vein, it offers home and office relocation assistance.
Much like is the case with any business in Nigeria today, Red Star Express Plc is faced with its own share of competitors whom it must do everything possible to outperform.
These competitors are basically logistics firms such as GIG Logistics, the logistics arm of ABC Transport Plc, Total Logistics Executive Ryd Limited, Metro Ferry, Mediterranean Shipping Company Nigeria Limited, Ekili Haulage, Global Apex Logistics Limited, Integrated Warehousing Services Limited, etc.
A look at the company’s board of directors
The company’s board of directors is comprised of nine members. They are:
1. Suleiman Barau, the Chairman
2. Mr Peter Olusola Obabori, Group Managing Director
3. Mr Enobong Victor Ukwat, Executive Director
4. Mr Badamosi Auwalu Babura, Executive Director
5. Mr Isaac Orolugbagbe, Non-Executive Director,
6. Mr Sule Umar Bichi, Non-Executive Director
7. Mr Aminu Dangana, Non-Executive Director
8. Mr Suleiman Lawan Koguna, Non-Executive Director
9. Mrs Chioma Sideso, Non-Executive Director
A look at the company’s financial performance
Red Star Express Plc‘s recent financial statements aren’t exactly impressive. For instance, while revenue for the full-year 2018 ended March 31st, 2018 increased to N8.4 billion from N7.2 billion, profit after tax decreased from N426 million in 2017 to N347 million in 2018.
In its latest result for the period ended June 2018 (which is technically for its Q1 2019), profit continued to decrease. This is because even though revenue had increased from N2 billion in Q1 2018 to N2.3 billion in Q1 2019, profit after tax did decline to N111 million from N120 million.
So, can the company take advantage of the season?
It is apparent that Red Star Express Plc’s financials can do with some upgrade. To be fair, the company is already doing everything possible to effectuate the much needed change. Shareholders last year approved a proposal to raise capital.
Moreover, the company is steadily expanding into more West African markets, including the commencement of operation in the neighboring Benin Republic, and Burkina Faso.
Those aside, the possibility of Red Star Express being impacted positively by the special commercial activities of the festive season also abounds. But then again, the company will also have to grapple with the competition posed by other players in the market.
In conclusion, it is expected that all the efforts that have been made by the company will soon yield results and help position it for success, even as shareholders stand greater chances of receiving meaningful dividends.