Around the world, Information Technology (IT) has revolutionised the way people live and work. Here in Nigeria, it is increasingly redefining the business landscape, creating jobs, diversifying the economy, and most importantly, generating wealth. In all these, we must give credit to the companies that pioneered the tech movement in the country. One of them is CWG Plc, our company focus for this week.
The IT Company has been in existence for over two decades, during which time it witnessed expansion and became listed on the Nigerian Stock Exchange (NSE). But while CWG Plc has had its glorious days, it has also experienced some rough patches as you will see later on. We will also look at some of the factors responsible for this, and the measures the company is taking to return to the path of profitability. In the meantime, let’s take a closer look at our company focus.
About CWG Plc: Its incorporation and listing on the Nigerian Stock Exchange
What it does – Formally known as Computer Warehouse Group, CWG Plc is a Nigerian IT company which is specialised in a wide-array of IT services. These include: Communication and Integrated Equipment, Managed and Support Service Segments, and Software. The company basically supplies, installs, integrates, maintains, and provides support for computer equipment.
A look back at its beginning– It was incorporated in 1991, although it began full-time operation in 1992. At the time, it consisted of three companies — Computer Warehouse Ltd, the initial company which commenced in 1992, DCC Networks which was established in 1994, and Expert Edge Software, which was acquired in 1997. DCC Networks served as the communication arm of the company, providing VSAT network services to corporate organisations. Expert Edge Software, on the other hand, provided software solutions and systems training.
How it was incorporated and listed – According to information made available by the company, CWG Plc was incorporated in 2005 and positioned to supervise the aforementioned subsidiaries. By 2012, the three subsidiaries were no longer existing as separate entities. And by early 2013, CWG Plc became a public company. It was also in 2013 that its shares were listed on the Nigerian Stock Exchange. It is currently present in other African countries, namely: Ghana, Uganda and Cameroon.
A look at the company’s segmentation
CWG Plc is segmented into five core areas which are: IT infrastructure services, communications, software solutions, cloud services, and managed support services. Below are some of the products and services that the company offers:
Finacle: This is a banking solution, universal in nature. It avails banks the opportunity to utilise technology towards the transformation of their operations. Over the last 17 years, CWG Plc has offered this service in the country, and by so doing, garnered as much as 60% of the Nigerian banks as customers. Patronage comes from tier one banks like United Bank for Africa (UBA), and First Bank Nigeria, etc.
BillsnPay: This provides electronic bills payment services for customers.
CWG Smart Utility Solution (SUS): This solution enables electricity companies to monitor how much power end users receive, in order to appropriately bill them.
CWG’s e-Government Solution: This solution helps governments to generate revenue even in the face of economic difficulties.
The company also provides data centre co-location services, and ATM services for banks.
CWG’s target market
CWG Plc’s target market cuts across various sectors of the Nigerian economy such as financial services/banking, manufacturing, mining, governments, etc. Some of the company’s notable clients include ExxonMobil, Guinness, Diamond Bank Plc, Airtel, NBC, and Central Bank of Nigeria (CBN).
The company’s ownership structure
Why the NSE said CWG stock is below listing standard – Majority of the company’s shares (about 84%) is held by its top executive and non-executive members, according to information contained in its 2017 full-year financial statements. This leaves the total units of shares available to the general public at just 16%. Therefore, the over-concentration of share ownership in the hands of a few top executives makes the company’s stock free float deficient. And it was for this same reason that the NSE recently classified the stock as below listing standard.
How shareholding is concentrated in the hands of few people – A breakdown of the shareholding is such that its current Vice Chairman, Austin Okere, owns 590,129,287.000 units, representing 23.3%. He is followed by the Chairman, Abiodun Fawunmi who owns 456,077,754.000 shares, representing 18.1%.
Others are Philip Obioha, a Non-Executive Director who also owns 456,077,754.000 units which equal 18.1%. Aureos Africa Fund LLC (Abraaj Capital) owns 517,576,289.000 which is about 20.5%. The company’s immediate past Group Chief Executive Officer, Mr James Agada, owns 101,707,006.000 units, representing about 4%.
Here are CWG’s top executives
Philip Obioha, Chairman of the Board: Obioha studied Electrical Engineer at West Virginia University in the USA, and later studied for a Master’s in Business Administration (MBA) at the International Graduate School of Management (IESE) in Navara, Spain.
He has over twenty years of experience in the ICT industry and is a member of several related bodies including the Institute of Electrical and Electronic Engineering (IEEE, USA), Nigerian Economic Summit Group (NESG, corporate), the Nigerian Computer Society (NCS), etc. He is also a Fellow of the Institute of Directors.
Adewale Adeyipo, Group Chief Executive Director: Mr Adeyipo’s appointment as the company’s new GCEO took effect in December last year, following the resignation of the former Group Chief Executive Officer, Mr James Agada.
Prior to his promotion, Mr Adeyipo headed several top executive positions in the company. He had also held positions in some of Nigeria’s biggest tech companies. He is a graduate of the University of Illorin where he studied Computer Science. He also underwent studies at the Lagos Business School.
CWG is in competition the following companies
Currently, there are many IT companies that are operating in the Nigerian market, some of which are big and others not so big. Examples of such companies are Courteville Business Solutions Plc, eTranzact International Plc, Omatek Ventures Plc, Tripple Gee and Company Plc, NCR Nigeria Plc and Chams Plc. All of these companies are listed on the NSE.
While a number of them have their specialised market targets, their interests often still overlap, thereby leading to competition. As a result, these companies, alongside several others that are not currently listed on the NSE, comprise the competition CWG Plc will have to face every day.
Financial performance over the past five years
In its 2017 financial year report, CWG Plc recorded ₦8.8 billion in revenue. This marked a decline from the ₦10.2 billion that was recorded in 2016. The company’s profit after tax for 2017, however, stood at ₦1.5 billion; an improvement compared to ₦127.6 million recorded in 2016.
In 2015, the company’s revenue was ₦15.6 billion with a profit after tax of ₦1.7 billion. This marked a better performance compared to the company’s 2014 results which recorded a revenue of ₦15.3 billion and a profit after tax of ₦120 million.
The company’s 2013 revenue was ₦20 billion, with a profit after tax of ₦612 million.
As you can see from the foregoing, the company’s revenue has overtime dropped drastically over the years, down to ₦8.8 billion in 2017 from ₦20 billion in 2013. However, it is picking up profit-wise. The audited full-year 2018 result has not been released, but judging from performance in the nine-month period ended September 30th, we can deduce that performance will be better than 2017. Revenue for Q3 2018 stood at ₦2.4 billion as against ₦1.7 in Q3 2017. Also, profit after tax for Q4 2018 stood at ₦408.2 million, as against loss after tax of ₦12.8 million in Q3 2017.
It should be noted that the company’s board blamed this development on losses incurred due to the financial cost implications of non-actualised projects which have adversely affected the company’s estimated earnings and year-end projections.
Hopes for a brighter future
Towards the end of half-year 2018, CWG Plc announced that it had been selected as one of the Meter Asset Providers (MAP) by the Nigerian Electricity Regulatory Commission (NERC). Being a MAP means that CWG can now finance, procure, install, repair and even replace electricity meters. This is a good opportunity that could help the company generate revenue and profit, as well as pay dividends to its shareholders.
The company also announced in September last year that it had secured deals with three Nigerian banks to supply them with Automated Teller Machines (ATMs). This was happening shortly after it announced in August that it had signed partnership agreement with Entersekt, a globally reputed fintech services provider. The partnership empowered CWG Plc to launch Entersekt product line in Nigeria.
The performance of the company’s full-year 2018 financial statements will show whether these moves were impactful (or not) towards ensuring the company’s profitability.