7UP BOTTLING PLC: HARD ROAD TO TRAVEL.

According to the half year figures to September released recently, 7up Bottling PLC is currently on a road hard to travel successfully.
From the figures, 7up is taking more short term financial support in other to reduce long term borrowings; beef up inventories; increase trade receivables and prepayments substantially and then, bill up raw cash.
Quite interesting really because it replaces more costly financial support for less costly ones or even for outright interest free outflows
By September, 7up' overdraft stood at N2704.7m, though down from December 2014's N4619.7m, this was more than four times September 2014's N564.6m.
In a slightly different fashion, current loans closed at N14022.7m thus continuing the increase apparent since December's 2014's N11032.8m and September 2014's N7916.5m.
In contrast, non current borrowing dropped by 38.2% to N4893.8m although this September figure was lower than 2014's full year N4433.5m.
On the other hand trade receivables rose from September 2014's N1993.2m to N4421.8m by December and finally N5209.1m by September this year just like current prepayments which at N649.1m by September was 115% up on N306.9m twelve months earlier.
There was no way such route change in favour of more costly funds, will not affect overall cost. Finance cost almost doubled ( 92.3% up) to N1657.3m from N862.4m previously.
Indeed, this was very much instrumental to the easing of 7up's profit margin to 6% from 8.46%. Other factors include 19% increase in selling and distribution costs to N8096.6m; growth in cost of sale well ahead of increase in turnover and decrease in income from other sources.
Main line turnover rose by 3.74% to N39569.5m compared to 15.2% growth in cost of sale to N27641.4m while income from other sources dropped to N35.5m from N52.5m.
If the trend in 2014 holds true this year, the situation may improve in the second half because that is when 7up makes more money in view of Yuletide.
SO:
* So long as the weight of short term borrowings continues to be heavy, the best for 7up Bottling by year end March 2016 will be higher margin in the second half but still short of 2015's 10.6%.
* Provided, of course, that administration cost stays in line with second half trend.

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