Newrest ASL: Earnings drop on harsh milieu
Newrest ASL Nigeria Plc (formerly Airline Services and Logistics Plc) has continued to post dismal performance following fluctuating unfriendly operating environment.CHRIS UGWU writes
After deregulation of airline services industry in Nigeria, the sector has witnessed a new era of growth and advancement. The deregulation regime offered an increased interest and investment in the dormant Nigerian aviation industry as more airlines entered the market.
The services offered witnessed a turnaround as market-driven innovations came to bear to attract more passengers. This led to the emergent of varieties of services to suit all categories of air travellers, which were never a feature of the industry.
In spite of the improvement and innovation accompanying the deregulation and privatization of airline services in Nigeria, there are still some challenges prevalent in the system. These include inadequate stand for airline users, flight information and public address systems echoes, poor customer relations, flight delay, missing luggage and personal items and security issues, among others.
These challenges and others have indeed hampered the activities of some airline services in the country. Thus, while some companies were able to successfully weathered the storm notwithstanding the difficulty in business environment, others were not.
Consequently, Newrest ASL Nigeria Plc got its fair share from the stiff competition faced by the sector, leading to dwindling in fortunes it has witnessed in recent times.
From the good numbers it showed in 2012, it reported a huge drop in profit in the full year 2013 and also witnessed profit crash during the first, second and third quarters of 2014 as the company remained under attack from both declining revenue and rising costs. Market watchers believe this was induced by harsh competitive environment.
Experts had predicted that the company’s profit and revenue were likely to decline further in full year 2014 following a disappointing start for the year but contrary to expectations, the company made a reversal and returned to profit in the full year ended 2014 – reaping from the benefits of deregulation and globalisation.
Despite that year 2016 presented a lot of challenges as the Nigerian economy officially plunged into recession after the Gross Domestic Product (GDP) contracted in three consecutive quarters, the company managed to come out from loss position in 2015, recording a profit of N1.150 billion for the full year ended December 31, 2016.
However, the 2017 was not the best of time for the company as it had seen consistent decline in bottom line for last three quarters of the year.
But following increase in investors’ confidence, market sentiments for the shares of the company has recorded significant growth. The share price, which closed at N2.50 per share in December 31, 2016 grew to N6.15 when the closing bell rang last Friday, accounting for 146 per cent increase.
Financials
Despite the challenges of the economic landscape, Newrest ASL Nigeria Plc through improved efficiency and restructuring had in 2016 bounced back to profitability with a profit after tax of N1.150 billion as against a loss after tax of N57.260 million recorded in 2015.
Profit before tax equally stood at N1.152 billion in contrast to a loss before tax of N57.260 million posted a year earlier.
The group also recorded increased turnover of 11 per cent to N5.072 billion in comparison with N4.550 billion in 2015.
Based on these results, the company’s board proposed a dividend of 17.7kobo per share for the year ended December 2016.
But hopes that the company will maintain the tempo of profit was dashed as it began the year 2017 unimpressive, recording 28.06 per cent drop in profit after tax for the first quarter ended March 2017.
The company in a filing with the Nigerian Stock Exchange (NSE), posted a profit after tax of N131.004 million as against N167.770 million reported a year earlier.
However, the company’s revenue grew by 15.65 per cent from N1.132 billion as against N1.342 billion recorded in 2016
The declining position was sustained during the Q2 2017 as the group posted 74.92 per cent drop in profit after tax for the second quarter ended June 30, 2017.
Newrest ASL posted a profit after tax of N197.928 million as against N789.057 million reported a year earlier.
The company’s revenue however, grew by 19.32 per cent from N2.340 billion as against N2.792 billion recorded in 2016.
Newrest ASL also recorded 442.68 per cent drop in profit after taxation from continuing operations for the nine months ended September 30, 2017.
According to a filing with the Exchange, the company posted a profit after tax of N189.382 million as against N1.027 billion reported a year earlier, representing a drop of 442.68 per cent.
Its revenue declined by 31.45 per cent from N3.723 billion as against N2.832 billion recorded in 2017.
Profit deflators
Chairman of the company, Mr. Richard Akerele, speaking at its 21st Annual General Meeting, said the aviation industry is plagued with many problems, including derelict infrastructure and inability to access foreign currency for operational needs.
“Recently, the Federal Government took the decision to close down the Abuja International Airport for six weeks for much needed repairs to the runway,” he recalled.
“As access to foreign exchange became difficult, coupled with reduction in passenger numbers, some foreign Airlines took decisions to either reduce the frequency of flights to Nigeria / locations or stopped flights to Nigeria completely.
“Chief amongst those that stopped are United and Iberia, whilst Emirates reduced its flight from three to one. These three airlines are all major customers of your company.
“Overall, activity in the Aviation sector declined both year-on-year and quarter-on-quarter in comparison with previous year in terms of flights and number of passengers.”
Managing Director/CEO of the company, Mr. Laurent Moussard, in the same vein, said the aviation industry had in recent times been marred with series of issues.
“Some airlines namely, United Airlines, Emirates Airline and Iberia, due to the inability to access foreign currencies in order to cater to their operational needs, have had to reduce or out rightly stop the frequencies of the flights into the country and increase costs of tickets to the common man. All these and the incessant government interference and inconsistencies have resulted in the decline in passenger figures.
“As you will imagine, nothing prepares you for this as it took a toll on not just your company but the very dedicated and diligent workforce.”
Outlook
Akerele said: “There is every indication that year 2017 will be challenging for the company as new competitors in the Nigerian Aviation catering industry are poised to start operations
“However, management is determined to rise to the challenges and will continue to implement prudent control of capital and operating expenditure while seeking to take advantage of business opportunities in other segments of the economy.”
He noted that with the support and expertise of the Board, the company would continue to be a clear leader in its sphere of operations and ensure added returns to shareholders.
Moussard said the management of the company are determined not only to retain their clientele but win new contracts and of course, win back the clients who have strayed (we lost in previous years).
“We have also put machinery in place to diversify into fields of play in line with the Newrest group’s multi sector catering in all 55 countries across the continents,” he said.
“We have in the last year improved on quality of service delivery and we are confident that we are positioned to win many more businesses in the coming year. We are still committed to ensuring our company continues to be the leading provider of catering and hospitality in Africa and we believe with the support of our board of directors and shareholders, the sky is the beginning.”
Last line
Though high cost of operations have remarkably weighed down on the airline services sector, it is important for the company to continue to manage its cost base tightly to deliver moderate operating margins for improved growth and profitability.
Culled from New Telegraph
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