Investors, both local and foreign, are always on the lookout for favourable investment opportunities. It is for this reason that Nairametrics constantly profiles little-known companies on the Nigerians Stock Exchange, with special focus on the opportunities (or lack therefore) available for potential investors. This week, we are focusing on Roads Nigeria Plc, a not-so-popular company that engages in a really viable business venture.
Would you ever consider investing your money in this company? Well, hold your answer until you’re done reading through this piece.
A corporate overview of Roads Nigeria Plc: history, business model, share price, and market capitalisation
The aptly-named Roads Nigeria Plc is a Nigerian civil engineering firm whose business model encompasses the construction of roads, bridges, dams, airfields, and even real estate. The company is headquartered in the Northern Nigerian city of Sokoto and has been operating since 1974 when it was incorporated. The company has a market capitalisation of N165 millionhas a market capitalisation of N165 million and total outstanding shares of 25 million. Note that share price has remained mostly unchanged at N6.60 for many months.
The company’s ownership structure
At this juncture, it is important to mention that Roads Nigeria Plc has not released any financial statement for many quarters. Precisely, no financial statement has been released by the company for three straight years. As such, it is difficult to easily ascertain the ownership structure, seeing as such information is typically contained in the financial statement of quoted companies. That said, Road Nigeria Plc’s ownership structure remains a mystery in the meantime.
Overview of the company’s board of directors
Going by information available in the company’s last-released financial report, the company has seven executives on its board of directors. It is unclear if this number has changed or even if the named executives still retain their positions till date. It would have been easier to verify this information if, at least, Roads Nigeria Plc had a functional website, which it does not. Anyway, the executives are listed below:
1. J. M Dansu: Chairman/Chief Executive Officer
2. P. E Oriwoh: Executive Director (Finance)
3. J. O Obayemi: Non-Executive Officer
4. C.B.J Ribbert: Non-Executive Officer
5. Alhaji Muhammed U Sokoto: Non-Executive Officer
6. Alhaji Musa Suleian Lllela: Non-Executive Officer
7. Hajiya A. Hassan: Non-Executive Officer
The company’s target market
As a civil engineering outfit, Roads Nigeria Plc basically specialises in the provision of infrastructural amenities in cities, towns, and villages. As such, its target audience cuts across the following: real estate agents, architecture firms, local, state, and federal governments, contractors, lawyers, etc. It is unclear how the company has been able to take advantage of its target audiences, considering its lack of financial reports.
The company’s financials
Again, Roads Nigeria Plc has not been up to date with its obligated financial disclosures. The last financial result by the company was released as far back as 2015. The last result, which was for the period ended March 31st 2015, indicated an abysmal performance. Revenue declined by as much as 41.69% from N3.26bn to N1.90bn. Similarly, the company had recorded a loss of N227.7 million for the period under consideration, compared to a profit after tax of N136.9 million for the comparable period in 2014.
Now, it is unclear what exactly is happening to Roads Nigeria Plc. Could the company’s absence of financial reports be as a result of poor performance? And if that is the case, then what could possibly be responsible for the poor performance?
Inasmuch as it is easy to name competition as the factor responsible, an expert who chose not to be named (due to the uncertain nature of the situation), stated the following:
“Roads Nigeria Plc could actually be struggling to find business. As a civil engineering firm, its primary target market is government. Sadly, the government is not exactly spending as much money as it ought to for the construction of roads and other amenities. With a situation like this, it becomes utterly impossible for the company to make money. It doesn’t also help that it seems to be all the way up north, with little or no influence down south.”
The role of competition
Competition is yet another factor that might be affecting Roads Nigeria Plc’s financials. This is because there are a number of other construction firms in the country, including Julius Berger Nigeria Plc, Setraco Nigeria, Interfem Reconstruction Company Ltd, H&M Nigeria Ltd, Dantata & Sawoe Construction Company, a growing list of Chinese construction companies, etc. All of these companies are constantly in competition for the next available government contract.
Would you invest In this company?
Having learnt the basic information there is to know about this company, the question remains – would you ever consider investing in it? Your answer is probably “NO” and it is understandable. First, it is hard to ascertain the opportunities in the company, no thanks to the lack of necessary financial information. No sane investor would ever want to invest in a company without first obtaining full knowledge of such a company’s financial well-being.
More so, Roads Nigeria Plc’s corporate compliance record is rather unimpressive, at least judging by its recent non-compliance to the listing rules of the Nigerian Stock Exchange. No investor wants to invest in a company with this kind of record.
CBN “Naira 4 Dollar Scheme” Explained
What the CBN’s Naira 4 Dollar scheme means for your money.
In what appears to be an attempt to incentivize dollar remittances by all means possible, the Central Bank of Nigeria (CBN) released a circular to Deposit Money Banks (DMBs), International Money Transfer Operators (IMTO), and the General Public, advising that remittances paid into a bank account will attract an additional credit alert for every USD$1 received!
Yes, you read that correctly. The CBN will facilitate a special additional credit alert of N5 for every USD$1 received. In other words,
- if someone sends you $10,000, you get an additional special credit alert for N50,000.
- If someone sends you $100,000, you get an additional special credit alert for N500,000.
Who is eligible?
To be eligible, the diaspora remittances need to be processed and received from one of the registered IMTOs and funds received into a Bank account operated by the DMBs. (So, if you are receiving funds via Crypto sorry you are not eligible).
Additionally, the circular says this “incentive runs from Monday 8th March 2021 to Saturday 8th May 2021″. So, if you have plans to receive dollars, you can plan accordingly.
The circular is not clear how exactly the commercial banks will know which account to pay the extra special credits into. Although, that may be a question diaspora funds recipients will need to ask their DMB accounts officers to clarify for them.
How will this be funded?
The circular notes that the “CBN shall through commercial banks, pay to recipients the N5 incentive for every USD$1”. In other words, it is the CBN funding the cost of this special extra credit.
- One would argue that given the costs of alternative incentives to attract dollars such as the special OMO window for FPI, this may be a cheaper alternative for the CBN.
- But we will need to see the volume of expected remittance to be certain of that. Nigeria attracts about $5billion per quarter in remittances and only trails oil in terms of foreign earnings.
Why this matter to Nigerians?
Following the collapse of US Dollar inflows into the country, the CBN initially tried to balance its current account deficits and avoid an official devaluation by tackling FOREX demand (Think ban of 41 items, etc).
- However, in recent times, CBN is now trying to address the challenge of FOREX supply. In 2019, CBN restricted OMO bills for FPIs, and this year, CBN directed all IMTOs to discontinue the practice of not remitting dollars into the country but keeping it overseas and sending Naira.
- Also, the IEFX rate has been allowed to continually diverge from the official rate. As at close of business on Friday 5th March 2021, the IEFX rate of N412.50 is 8.8% premium to the official rate of N379.
- Some may point out that, if the CBN is looking to have ordinary Nigerians enjoy some benefits from its ongoing FX subsidy largesse then maybe that is “arguably” more palatable than the prior focus on FPIs.
Finally, this short-term Naira-4-Dollar scheme will not be called an official Naira Devaluation. But a question is what do we call the new short-term price of N412.50 + N5.00? Maybe we can call it Naira Modulation.
Nigerian Breweries leveraging, but stacking cash through rising input costs
The marathon continues for Nigerian Breweries with its 2020 financials.
Humanity might need more booze to survive the increasingly daunting intricacies of life, but Nigerian Breweries 2020 financial statement is proof that even the best can get caught up in the reality of changing business lifecycles.
Nigerian Breweries Plc had floored the market providing both alcoholic and non-alcoholic premium quality beverages across the nation. But with brands like Star lager beer launched as far back as 1949, Gulder lager beer launched in 1970, and even the family-friendly Maltina introduced as far back as 1976, it is only natural that both the old and new generation competition gives them a run for their market share.
Much like other old money companies, Nigerian Breweries has done its bit to remain relevant in the industry from creating new variants of existing favoured brands to paying dividends consistently annually for the past few years. Yet within the same period, the company’s financial statements have been a testament to its streamlined market share and reducing profits. The marathon continues with its 2020 financials. The industry giant may as well be setting itself up for a debt quagmire peradventure its projections do not match the true reality of events.
2020 financials: A tale of higher costs & larger debts
2020’s unfavourable financial/ business environment led to the increase in the prices of raw materials and disruptions in logistics for many Nigerian-domiciled businesses including Nigerian Breweries. Raw materials and consumables witnessed a 17% increase despite the marginal growth in revenue.
While the group’s 2020 results revealed a 4.35% increase in revenue from N323 billion in the prior year to around N337 billion, these gains were curtailed by a higher-than-par increase in cost of sales which had risen by 13.9%, from the N191.8 billion expended in 2019 to N218.4 billion as its 2020 financials reveal and interest rates going way up.
The company’s lower operating expenses were not enough to salvage the disruption caused by the raging interest expense following increased charges paid on bank loans and overdraft facilities as well as the significant increase in overall debt. Between 2019 and 2020 alone, long term loans and borrowings increased by 974% from N4.8 billion to as much as N51.8 billion. Even trade and other long term payables increased by 35%.
In its financials, the company noted that it has revolving credit facilities with five Nigerian banks to finance its working capital. The approved limit of the loan with each of the banks range from ₦6 billion to ₦15 billion (total of ₦66 billion) and each of the agreements had been signed in 2016 with a tenor of five years. The Company had also obtained Capital and Working capital finance from the BoI in 2019.
It is no news that the company is involved in diversified lease arrangements. Following reclassifications made in 2019 to some of its lease assets, the 2020 asset base also witnessed significant increase in Right of Use Assets which increased by 288%% from N11.1 billion to N42.9 billion. Yet, the fact that in one year, interest expense on Lease Liabilities rose from N19.7 million in 2019 and to a whopping N4.171 billion shows that the company is taking way more debt than its books require.
But what’s it using all the cash for?
Beyond rising material costs, borrowing costs have been huge and the annual interest payment by virtue of these loans make the possibility of higher profits for the company a mirage. That said, the overall increase in total liabilities might not have been such a bad idea if the funds were being used to increase revenue and profits. But having a huge chunk of all that money in cash creates a different kind of challenge. Cash and bank values in its statement of financial position significantly increased by 377% from N6.4 billion in 2019 to N30.4 billion in 2020.
Is the cash being held to mitigate possible challenges of the volatile economy or are they being used to pay dividends? Even at a share price of N52 per share, the company’s price-to-book value sits at 2.5816, testament of its dire overvaluation. Consequently, there is an ardent need for the company to come up with newer ways to attract the wider market and keep its book in the green with a little less external funding.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- Seplat falls into a loss in FY 2020
- 2020 FY Results: Cornerstone Insurance Plc reports a 61.1% decline in profit
- Ellah Lakes increases operating expenses by 33.36% in HY 2020
- 2020 FY Results: Nigerian Breweries reports a 54.3% decline in profits in 2020
- Abbey Mortgage Bank projects N51.08 million profit in Q2 2020.