GUINNESS NIGERIA'S MIRACLE YEAR

Sometime ago, the pay off for Guinness adverts was Guinness is good for you. Henates can't recall downing a Guinness before and so be in a position to bear testimony but, this much is clear, financial year 2017 was so good, it could in fact be termed a year of miracles.

According to the audited figures for the year to June released recently, it was indeed a year virtually every move Guinness made paid off well and so the company reported N2.66bn profit before tax, representing a 213.4% leap from 2016 N2.34bn loss.

How did this happen? Simple, says the annual report, the tough times delivered 29% increase in cost of sale to N77.6bn that threatened core revenue increase of 23.5% to N125.9bn then unexpected growth in non-core income assisted firm control of overheads to save the day.

The threat posed by cost of sale growth had meant only 15.6% increase in gross profit. In other words, at that point it looked like Guinness should reap worse than it did in 2016, all things being equal.

But nothing remained as in 2016. Other income grew by 57.1% to N847.3m: and finance income rose by 90.1% to N2253.4m to deliver 24.4% increase in total income to N129bn.

Then, wonder of wonders, to achieve all these, marketing and distribution cost rose by only 1.61% to N25.28bn and administration expenses ended the year at N13.68bn, up just 4.92%.

Thus among relatively controllable costs, only finance charges increased by threatening double digit 23% to N9777.6m but when one recalls the higher 90.1% growth in finance income, it too turned out not to be  threatening.

And so, Guinness Nigeria breasted home with 2.06% profit margin in 2017, still low but when compared to 2016's 2.26% loss margin, it is a miracle.

Sure, Guinness Nigeria is yet back to comfortable liquidity position but the miracle year reduced working capital deficit from N19.2bn in 2016 year end to just N6.49bn.

Loans and borrowing had gone down 57.2% to N9.495bn leaving only overdraft up strongly by 156.6% to N7.537bn. Bad for business no doubt in view of its higher cost profile but then, if that was the only weakness 2017 had to offer, good, 2018 is already under way.

It can be noted though that Guinness Nigeria stocked less inventories (up 77.4% to N23.09bn) and beefed up less raw cash (up 195.8% to N6.59bn) there would have been no double digit growth in overdraft.

That way it would have been a 100% miracle year.

GUINNESS NIGERIA: Nm. Full year
                                   2017.            2016
Total income.       129020.5. 103697.5
Core revenue.       125919.8. 101973.0
Cost of sale             77604.5.  60162.6
Gross profit.            48315.3.  41810.4
Other income.             847.3.       539.4
Marketing etc.        25286.7.  24886.6
Administration.      13689.3   13047.5
Operating profit.    10186.3.     4415.6
Finance income.      2253.4.     1185.1
Finance charges.    9777.6.      7948.0
Profit before tax     2662.1.    (2347.2)
Profit margin              2.06.        (2.26)
Working capital   (6492.5). (19239.8)
Loans.                     9495.6.   22195.4
Overdraft.               7537.8.     2938.1
Inventories.           23094.5.  13021.2
Cash.                        6594.5.    2229.2

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