Champion Breweries plc has reported a profit before tax of N445 million for the year ended 31 December 2023, representing an 80% YoY decline from the N2.249 billion reported in 2022.
According to the financial statements reviewed by Nairametrics, Champion Breweries reported revenue of N12.704 billion, representing a marginal YoY increase of 3.38% from the N12.289 billion reported the year prior.
Despite the marginal growth in revenue and the decline in profitability, the fact that Champion Breweries has maintained an average revenue growth rate of 18% per year over the past five years indicates a positive trend.
Indeed, the sustained average revenue growth of 18% per year over the past five years is not only promising for investors but also for EnjoyCorp Limited, a prospective acquirer.
On February 28, 2024, Champion Breweries made a corporate disclosure to the investing public, revealing that EnjoyCorp Limited has expressed interest in acquiring the company.
Even though Champion Breweries’ share price has decreased by 10.36% YtD and experienced a 25% decline last year, these declines may have already accounted for some negative sentiment.
The announcement of a potential acquisition could reverse this sentiment and lead to a rebound in the share price.
Recommended Reading: EnjoyCorp Limited to acquire 86.5% stake in Champion Breweries Plc
Key highlights (2023 FY vs 2022 FY):
- Revenue: N12.704 billion +3.38% YoY
- Cost of sales: N7.634 billion +17.84% YoY
- Gross profit: N5.050 billion -12.75% YoY
- Selling and distribution expenses: N3.035 billion +32.77% YoY
- Administrative expenses: N1.531 billion +6.97% YoY
- Operating profit: N604 million -73.41% YoY
- Interest on loan: N151.78 million
- Profit after tax: N370.56 million -73.63% YoY
- Earnings per share: N0.05 -72.22% YoY
- Total Assets: N20.533 billion +33% YoY
- Shareholders’ Funds: N11.195 billion +2.57% YoY
- Cash and cash equivalent: N2.445 billion +11.69% YoY
- Total borrowing: N1.346 billion
What you should know
Despite experiencing an 80% decline in profitability in 2023, largely attributed to elevated costs of sales and operating expenses, it’s noteworthy that the company has managed to maintain profitability since 2018, it reported a loss after tax.
In 2023, the company introduced debt into its capital structure, which typically, is supposed to bolster return. However, the reported low return on equity of 3.31% seems to fall below expectations.
Nevertheless, there are positive indicators. The company’s earnings before interest, tax, depreciation, and amortization (EBITDA) adequately cover its interest expense, as evidenced by its interest coverage ratio of 3.9x
More so, the company appears to have a healthier financial position with lower debt levels relative to equity and assets.
