CWG Plc’s latest full-year 2024 financial results are nothing short of remarkable.
Revenue surged by 97% to N29.5 billion, pre-tax profit jumped 290% to N5.4 billion, and post-tax profit skyrocketed by 428% to N4.7 billion.
These numbers paint a strong picture of a company on a meteoric rise, fueled by its software segment.
However, beneath the impressive growth lie some concerning aspects.
A key driver of CWG’s growth is software sales, which raked in N16.43 billion, with better margins than other business segments.
The demand for software solutions is skyrocketing as Nigeria’s banks and telecom giants invest heavily in digital transformation.
Big names like MTN Nigeria (MTNN), United Bank for Africa (UBA), and First Bank of Nigeria Holdings (FBNH) played a major role in CWG’s success, with MTN alone contributing N19.5 billion.
Beyond software, the company’s diversification across IT infrastructure, communication services, and managed support provides a cushion against market fluctuations.
Even more reassuring is the company’s improved cash flow from operating activities, which rose significantly.
This suggests that despite rising credit sales, CWG is still managing to turn a good portion of its revenue into real cash, rather than just accounting figures.
The credit sales aspect
But this success story is not without its red flags. CWG’s rapid revenue growth has been fueled in part by an aggressive credit sales strategy.
- Trade receivables surged by 45% to N16.8 billion, meaning a significant portion of its revenue is yet to be collected.
- In 2024 alone, unpaid invoices ballooned by N5.07 billion, compared to just N1.5 billion in 2023.
- Meanwhile, trade payables jumped 47% to N15.3 billion, meaning CWG is also delaying payments to its suppliers.
This approach has fueled expansion, but it’s a double-edged sword. If clients keep delaying payments, CWG might struggle with cash flow, forcing the company to rely on external borrowing, which could eat into profits.
Balance sheet strength:
CWG’s balance sheet shows a company that is expanding aggressively. Total assets jumped 68% to N29.95 billion, primarily due to trade receivables and inventory buildup.
Shareholders’ equity nearly tripled to N6.63 billion, reflecting strong retained earnings growth. However, equity still accounts for only 22% of total assets, meaning the company remains heavily leveraged.
One silver lining is the improvement in its gearing ratio, which fell from 83% in 2023 to 63% in 2024.
This suggests a slight reduction in financial leverage, but at 63%, CWG is still carrying significant debt risk.
CWG’s future:
For now, CWG is riding high. But whether this is a lasting transformation or just another tech boom will depend on how well the company navigates these financial and strategic challenges.
- Computer Warehouse Group Plc is a Nigeria-based IT solutions provider offering services across IT infrastructure, communication, managed support, software, and platforms.
- It supplies and supports hardware, networking, and outsourcing services, with a strong focus on software deployment, system integration, and smartcard applications.
CWG also provides digital payment solutions like BillsNPay and Finedge, catering to businesses across various industries.
