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TSL Limited registered significant decline in profits in the first half to April 2016, weighed down by weak revenue, but fundamentals of the business remain strong.
Profit declined 65 percent to $602 347 from $1,7 million in the same period the prior year on the back of a 15 percent fall in revenue to $20,7 million from $24,3 million the previous year.
In the same vein, earnings before interest, tax depreciation and amortisation (EBITDA) declined by 37 percent to $2,9 million from $4,6 million while earnings per share fell a little more than 100 percent to 0,2 cents from 0,5c last year.
Group chief finance officer Derek Odoteye said that the late start to the tobacco selling season and the effect of drought reduced revenue from agricultural operations by 49 percent.
The 2016 selling season started late due to the late start of the rainy season while poor weather due to the effect of the El Nino drought resulted in low uptake of seed by farmers.
Mr Odoteye said that after the official opening for the selling season was pushed back by 18 days, part of the revenue for the first half was pushed to the second half of this year.
But Mr Odoteye said while the financial performance had slackened, the key fundamentals of the business remain strong while better performance is expected in the second half.
“The first half has been impacted by external factors. When you look at our business and the underlying fundamentals of the business, we are comfortable that the business remains solid. Some of the external factors that have affected us include late start to the tobacco selling season.
“The days were pushed out by 18 trading days, which constitutes 45 percent of the trading time, so that revenue has been pushed out of the first half into the second half,” Mr Odoteye said.
“That had an impact on the reported revenue, profit and cash flows and also because of the negative weather patterns around El Nino that we had this year, the uptake of inputs has obviously been a little slower than expected,” he said.
“But when we say our business is solid, if you look at our financial position, our net asset value is up 4 percent, our total assets have for the first time broken the $100 million barrier.
“Our net borrowings has been reduced by 18 percent, our gearing ratio has been improved from 22 percent last year to 20 percent this year and our current ratio has also improved from 1,3 to 1,5. Of course, that is what carries this message that the group’s financial performance has been affected by negative external factors, but the underlying fundamentals of the business remain solid,” he said.
However, Mr Odoteye said that the group’s logistics and real estate businesses had continued to perform well despite the slowdown in the overall economic activity in the country.
In the tobacco related services, agriculture, revenue went down on the first half of 2015 after it was deferred to the second half due to the late start of the tobacco selling season.
The national crop declined 20 percent although prices firmed.
TSL said its market share increased, which also resulted in an increase in hessian uptake on better pricing and distribution, hence positive prospects for the second half of the year.
The group’s direct involvement in the production of maize, soya and wheat saw improvement in yields and the expanded cropping was in response to demand from the market.
The real estate segment recorded stable performance despite the downward adjustment in rentals in response to the market. Mr Odotoye said voids remained at below 5 percent.
There was overall positive performance in the logistics division in the first half where margin compression was offset by cost rationalisation, as distribution volumes fell in line with low consumer demand in the fast moving consumer goods.
Contribution from the vehicle rental was positive despite a depressed tourism market, but cost containment the focus in the second half, as the group eyes stellar financial performance.
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