[ANALYSIS] Courteville Records Best Quarter Yet But….

Courteville Nigeria Plc released its 2015 Half Year results showing pre-tax profits of N251 and 2% lower than the N257million it reported same period last year. Earnings per share dropped 2.3% to 5.93 kobo for the first 6 months of the year.

Focusing on the second quarter result alone compared to the same period in 2014 (2015 Q2 vs 4014 Q2) the company revenue rose YoY to N464million (+17%). Pre-tax profits also rose to N145m (2014 Q2: N135m). This was indeed the best quarter for Courteville in terms of revenue and pre-tax profits since 2013.

The Auto Reg company has been underperforming in the last two years as it has struggled to increase revenues consistently and in line with our expectations. However, whilst this result provides a silver lining its high debt cost still remains a source of concern.

Despite a good quarter the company still doled out N45m in finance cost or 21% of Operating Profit. Courteville also increased its total loans to N770million from N658 million as at December 2014. Debt to equity now stands at 23%.

For those who don’t get it, Courteville is a company that churns our profits of about N300 million annually. As such, an interest payment of N50 million a lone is a huge threat to their ability to pay dividends and thus improve on their paltry share price of 50 kobo.

We are equally miffed because Courteville seems to spend a lot of the cash it borrowed on Property Plant and Equipment (PP&E),  particularly its over N1 billion Head Office. This year alone it has borrowed about N122.5 million and spent about N316 million on PP&E. It also spent another N115 million on intangibles (which probably relates to its software).

Courteville did not pay any dividend last year and as such spending again on ventures that does not provide shareholders with any meaningful return in the shortest possible time is another drain to shareholder value.

Courteville Business Solution      
  2015 Q2 2014 Q2 %age Change
  N’m N’m  
Income Statement      
Gross Income    464    396 17.2%
Cost of sales (159) (188) -15.2%
Gross Profit    305    208 46.4%
Operating Cost (134) (110) 21.8%
Operating Profit    170      98 74.0%
Other Income 10      51 -79.7%
Finance Cost    (35)    (14) 157.4%
Profit Before Tax    145    135 7.7%
Other Comprehensive Income        –            –     #DIV/0!
Taxation    (16)    (21) -25.7%
Profit after Tax    128    113 13.1%
11% 16%  
Eps (Kobo)            0.04            0.03 13.14%
Outstanding Shares (Million)          3,552          3,552 0.00%
Gross Profit Margin 65.7% 52.6% 24.91%
Operating Profit Margin 36.7% 24.7% 48.53%
Profit Margin 27.7% 28.6% -3.44%
SGA as a %age of Gross Profit 44.1% 53.0% -16.79%
Interest Cost as a percentage of Operating Profit 20.8% 14.1% 47.91%


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