Fidson Healthcare Plc yesterday held a Facts Behind the Figures Session at the Nigerian Stock Exchange. Present at the event were the company’s management led by its founder and Managing Director Fidelis Ayebae.
The company is currently raising about N3 billion through a rights issue of 750 million shares at N4 per share. The issue opened on Wednesday, March 6th, 2019 and will close on April 9th, 2019.
Here are highlights of the event
The company’s Head of Finance and Accounts, Imokha Ayebae shed light on the numbers behind the rights issue.
What will be the proceeds be used for
Proceeds of the rights issue will be used to repay expensive debt and to infuse more working capital.
Why costs spiked in FY 2018.
Imokha stated that the company’s operational costs had spiked in 2018 due to three reasons: cost of evacuating goods from the ports, Naira devaluation, and the cost of APIs
In 2018, cost of sales went up by about 43%., and the reason for that is three fold. The cost of APIs have gone up generally. We saw the Chinese government close down a few of the API manufacturers due to pollution issues, and there was a lot of pressure on those that remained. API prices have continued to go up since then.
Naira devaluation was also an issue
Another reason was that we felt the full impact of the Naira devaluation last year. In 2017 our blended rate was about N330 to the dollar. In 2018, we saw that go up.
The pharma giant, like several other firms, was affected by the logjam at the Apapa ports.
Another key driver was the issues at the port. There was a lot of prot congestion last year. As a result, cost of logistics and transportation, went up by a 1000%. We could not pass on those costs last year since it is a highly competitive space.
Growth post offer
The company expects to maintain a double-digit growth post offer.
We have grown our revenue as a business over the last five years at a CAGR of 13% and that is expected to continue with the new factory that is equipped with seven different lines. We added to the tablet capsule and dry powder, liquid, infusion and ointment, and creams. That has been the key catalyst to our growth over the last two years. In 2017, we did a N14 billion turnover. For last year we did N16.2 billion, and that is set to continue.
Ethical medicines play a huge role in driving growth.
One of the things that has been essential to our growth over the last two years, is in the ethical space. Ethical medicines are basically prescription medicines. We’ve seen growth in 2014 where it was responsible for 37% of our business to now where it is responsible for 56% of our business. The margins are significantly better on ethical products.
Imokha also gave an estimate of the pent up demand the company had been unable to make due to capacity constraints.
We started tracking lost sales last year, that is orders that we were given but we couldn’t fill. That amounts to on average about N250 million on a monthly basis. That is close to N3 billion on an annual basis.
Q1 numbers are better
Imokha also stated that the Q1 2019 results (which would be released shortly) were much better.
The numbers are looking significantly better from a cost perspective. We are also seeing a roll back from the costs at the ports. We have begun to see rollback in the cost of transportation in the ports, What used to cost us N1 million has come down to about N500,000.
FY 2019 as well
MD of the firm Fidelis Ayebae also gave additional reasons why the 2019 results would be much better.
We have a tax holiday which we haven’t started implementing. That will happen in 2019. It’s a tax holiday for three years. That will help us retain working capital, and hopefully share with for shareholders.
There had also been an uptick in government patronage.
We are witnessing an up in terms of government patronage of our products. Hopefully, that trend will continue and we intend to take advantage of our being a wholly indigenous company to ride the waves.
A new key partner
The MD also disclosed a strategic investor had been brought into the company. .
One of the strategic initiatives we have taken in is bringing in a strategic investor.
The investor a pharma giant had maintained a stake in the firm for a while. Ayebae however, declined to name the investor, till after the conclusion of the rights issue.