LEARN AFRICA: WEAK SHOCK ABSORBER

Finance income which used to be a good shock absorber for Learn Africa PLc is getting weak. Or so the figures for the nine months to September indicate clearly.
By September 2014 as Learn Africa closed with N19.2m operating loss N29.4m finance income  saved the day for a final N10.2m profit before tax.
The same thing occurred in the nine months to last September but finance income chipped in less. This time around  operating loss at N10.7m, was less but finance income came up with only N16.2m which was still enough to allow the company end with N5.59m profit before tax.
The 44.9% drop in all important finance income was understandable. Learn Africa had less cash to play with. The nine month closing figure of cash and cash deposits was N223.2m, down 59.7% on the N553.3m available at the same time in 2014.
Incidentally, cash became less available as receivables grew 23% to N1771.8m from N1440.8m and inventories rose by 15.7% to N1714.4m.
No doubt, should the shock absorber continue to be weak, Learn Africa must learn to turn in more profitable operations. It did achieve a little of that during the third quarter by reporting 20.6% profit margin compared to 19.9% with 2014 third quarter.
However, it did not hold when incorporated into full .nine months figures. Here the profit margin achieved came to 0.43% compared to 0.70% previously.
The main reason being that as revenue from main line decreased by 10.1% costs either dropped out of line or even increased.
Direct cost dropped by only 2.52%  from N536,2m to N522.7m; selling and distribution went down by 8.6% to N246.7m while administration expenses increased by 2.27% to N473.2m from N462.7m.
There was drastic reduction though in other operating expenses from N170.7m to N45m.
SO:
* More work has to be done on overheads.
* Better liquidity management to give more absorptive capacity to the shock absorber is required.

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