Computer Warehouse Group Plc first quarter 2019 result, CWG Plc CEO Adewale Adeyipo, CWG Plc Bloomberg

The Chief Executive Officer of CWG Plc, Mr. Adewale Adeyipo, recently explained that the recent increase in the company’s operating cost from N401,554 million in Q1 2018 to N549,048 million in Q1 2019 was due to a one-time investment that is needed to position the ICT firm for growth.

According to the CEO, the investment was done to make sure things are well-placed. He, however, assured that there’s a plan in place aimed at reducing the operating expenses by 30% before the end of Q3 2019.

“One very important thing to voice in 2019, we are looking at over 30% reduction in our operating expenses and we have a clear roadmap on how to achieve that. There will be little reduction in Q2, in Q3, I can assure you there will be a major reduction in terms of our operating expenses.”

How CWG intends to achieve this: The company is looking to tap into its various portfolios to achieve this cut. Nairametrics learned that traveling expenses will also be looked into, restricting trips to the essential ones. So also will diesel consumption and professional services engagements. The company will pursue cost-effective services.

In their drive to cut cost, CWG Plc will also utilise staff optimization, thereby, tapping into staff resources, flexibility, and their potentials which haven’t been nurtured. This will result in the training of certain staff members to brush up their skills for company engagement.

Impact of non-actualised projects: The company had explained that it didn’t meet projected revenue for 2018 financial year due to the non-actualization of projects that were factored in.

Adeyipo said CWG is used to factoring projects into its financials but has learned from the experience.

While explaining the impact of non-actualised projects, Adeyipo gave an example of a state’s internally generated revenue contract which was supposed to be sealed last year; but due to the shakeup in the state’s IGR, negotiations and presentation had to be redone before a conclusion was made this year.

“So we had to go back to the new entity, the new people and we had to present again, and you had to be sure they have the proposal, and they have to get on board with you. We’ve learnt a lot from that.”

CWG’s revenue driver for Q1 2019: The ICT company recorded N1.9 billion in Q1 2019. This is a significant growth when compared to the corresponding period where CWG posted N1.2 billion. According to Adeyipo, the following were the drivers of the recorded growth;

  • Platform business: This contributed 29% of the revenue, making it the all-time highest.
  • Metering business: CWG has signed three new mining services with big multinationals.
  • Mining services: CWG plans to sign with two major oil and gas.
  • Services business

Reasons CWG recorded Growth in Q1: Speaking on the positive financial result for Q1 2019, and the impact of the new management on the result, Adeyipo said such achievement is not a one day work. According to him, the long term investment and groundwork contributed to the Q1 revenue growth.

Deal book 300 x 250
Deal book 300 x 250

To buttress his point, he gave an example of CWG‘s platform business, BillsnPay, which generated about N400 million in the first quarter of 2019. The platform had never made close to that since it was created in 2015.

“We’ve recorded over N400 million worth of transaction between January till date. We didn’t get 200 million from 2015 that we created this bills and pay to 2018, and in four months, we had 400 million, more than what we’ve actually recorded from inception till the end of 2018.

“So, the good news for us is that we beginning to see the reward of some of these investment. We don’t have a problem of business now, we have the problem of getting the right processes and operation in place to be able to deliver. I mean an organization that will deliver over five hundred thousand meters in a year, that’s a bit substantial.

“And we are not getting that five hundred meters in a year because of what we did this, it’s coming out of the main engagement we’ve had in the past. The first metering engagement we had was in 2015, and if I tell you what we’ve earned from 2015 till now, it’s nothing substantial.

“So, without taking all the credit, that it’s because of the new management, I can also tell that we beginning to see the reward of the many engagements and many activities that we’ve done in the past. The only thing I could say could change is, as we building new platforms, there’s focus on the existing platforms also to producing the necessary revenue or generating the necessary revenue.”

Issues concerning dividend payments: Adeyipo said CWG Plc takes the payment of dividend seriously. This is why dividend is in CWG‘s five major pillars which includes: liquidity, growth, profit, and brand.

He said while the company has not paid dividends to shareholders, CWG Plc is making profitable investments that will eventually give shareholders their expected earnings.

“The question is, has their money been well managed, I think it has been well invested, the question then is, at what point do I get the reward of my investment, how was it invested; we felt a particular kind of business will do very well, we will stay in it, but we could raise some other streams of income that could give you the kind of expected earnings that you looking at; that’s where the money has been invested.”

CWG’s future plans: The company is looking to make its portfolios standalone business. With their resources and financial capability, they are at the level each can operate separately from CWG Plc.

Meanwhile, Adeyipo said part of CWG‘s goals is to make banks give up ATM business across Nigeria. The company currently runs deployment and management of ATMs for some banks in Nigeria. The company intends to deploy ATM across Nigeria without customers having to visit banks to withdraw or transfer cash. This is likely to come at a premium price. However, he told Nairametrics that CWG does not intend to place the cost burden on customers.

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