SECURE ELECTRONIC TECHNOLOGY: A LITTLE MORE SECURE

Secure Electronic Technology PLC barely ended 2015 more secure than it began the year but there is still a long way to go.
According to the 2015 audited results released recently, the problem was more because Secure Electronic has no way of keeping prizes and winnings within its control and operating margin is low.
For example, gross income for 2015 was N7642.7m up 5.46% on 2014's N7247.1m.
Not bad but the bulk of it went into paying winnings and dealers commission. While prizes and winnings paid came to N4054.1m up 5.42%, dealers commission increased by 6.72% to N2872m. Together they accounted for 95.9% of income leaving only N316.5m as gross profit. The trend was about the same in 2014.
Hence, no good fortune or move from other activities could make great difference. If not. yes. Secure Electronic did hold down administration cost by 9.1% to N259.7m from N285.7m and finance charges did also drop by 59.1% to N0.71m thus ensuring 29% increase in profit before tax to N56.1m from N43.5m.
Good for a tough year but that is beside the point.
The point is that at 0.73% in 2015 the company's profit margin was as close to the loss league as it was in 2014 with 0.60% margin.
Besides, this was achieved without any provision for impairment compared to N280,000 provided for in 2014.
SO:
* Yes it could be a case of slow march to even single digit margin, but obviously it will take a long while before the fear of large winnings stop to dictate the pace.
* Part of the things that could help in this regard is faster pace of improvement in the company's liquidity position in 2016.

SECURE ELECTRONIC TECHNOLOGY PLC (Nm)
                            2015.           2014
Gross Income.  7642.7.        7247.1
Winnings.          4454.2.        4225.1
Dealers Comm. 2872.0.        2691.2
Gross Profit.         316.5.          330.9
Administration.     259.7.          285.7
Finance charges.      0.7.            1.71
PBT.                          56.1.           43.5
Profit margin %       0.73.            0.60
Working capital.   (485.5).     (519.1)

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