VITAFOAM: BURDEN OF LOOKING AHEAD

Vitafoam Nigeria PLC, in the year to September 2015, ended up paying the usual price for looking ahead: Higher cost of funds.
According to the audited figures released last week to the stock market, group finance cost increased by 26.2% to 1015.3m from N804.8m in 2014 even though the company's own rose by only 7.07% to N765.9m from N715.3m.
Apparently, the burden fell more on group accounts because from the look of things, the bulk of money went into new fixed assets for subsidiaries. There was 39.3% increase in fixed assets value for the group from N4173.8m to N5812.6m due apparently to additions as against only 0.24% rise in the company's to N2666.3m.
The burden also reflected the group's greater dependence on more costly short term borrowings at a time the company's own balance in this category dropped by 5.77%.
Instead, the company depended more on longer term funds growing that by 177.7% to N619.8m while group increase came to only 53.3% from N918.8m to N1408.9m.
Of course, the burden affected the group more because it ended the year with 24.7% drop in profit before tax to N534.1m from N709.7m previously as against the company's lower 12.5% decrease to N810.5m from N926.3m.
This was in spite of higher harvest from non core business gains at the group level. Before the burden of finance, group operating profit decreased by only 2.69% to N1469.9m while the company's went down by 8.6% to N1496.8m.
The main contributor was group's income from other sources that trippled to N778.7m from N256.4m compared to near trippling in the case of company's from N254.3m to N732.9m.
Hitherto, the mileage the group gained by managing distribution cost relatively better was lost in 19.5% rise in group administration expenses compared to only 8.22% increase for the company.
For both the group and company, core business income rose only marginally within the period accompanied by higher increase in direct costs. Which explains why income from other sources and cost of funds determined corporate performance of Vitafoam Nigeria PLC within the year.
In the end, even as the company recorded 5% profit margin for the year the group's own closed at nearly half that (2.97%).
SO:
* This is hoping that the look ahead begins to pay off in 2016 financial year.
* Meanwhile, the directors were intent on making shareholders happy by declaring dividend for the year unfortunately, it may be paid while the burden of finance costs is very much still on.

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