Multiverse, the construction materials extraction and supplies company, closed its first quarter operations without generating any sales revenue. Its first quarter figure shows that sales revenue dropped by 100% to zero but operating costs are still running to build another loss. The company is therefore extracting losses for shareholders for the second year.
The company’s business is in a situation that is quite difficult for Mr. Ayedun Fasina, its managing director/chief executive officer to explain to shareholders. In the first quarter of last year, sales revenue fell by 80% to N34.5 million and the company incurred almost N1.55 in cost of sales to generate a naira of the sales. This year, it expended almost N20 million in cost of sales in the first quarter but nothing was sold. With that, the company looks well headed for a bigger loss this year than it posted in 2013.
In addition to the ‘cost of no sales’, the company also paid N20.5 million in distribution/administrative expenses during the period. There was also an interest cost of N33.2 million, an increase of over 52% over the N21.8 million in the corresponding period last year. These expenses added up to a net loss of N73.5 million for the company at the end of the first quarter.
The loss figure has increased from the N66.4 million loss the company recorded in the first quarter of last year. Multiverse closed its 2013 operations with a loss of N294 million, which is higher that its full year turnover figure of N286.2 million. The company’s last profit was the N30.6 million posted at the end of 2012.
The company’s full year position for 2013 shows that the adverse cost-revenue relationship in the first quarter was significantly redressed at full year. Revenue growth accelerated in the course of the year while costs decelerated. Assuming the same pattern for the current year, the sales in respect of which N20 million has been incurred may be expected in subsequent interims.
For instance, while the company incurred cost of sales of N53.5 million in the first quarter of last year, it closed the year with a total cost of sales of N102.4 million. Also its turnover accelerated from N34.5 million in the first quarter to N286.2 million at full year.
The loss in 2013 followed a sharp drop of 57.6% in turnover to N286.3 million. There was a write-off of nearly N100 million of inventories and a loss of about N77 million in sales of assets. Interest income disappeared and interest expenses grew by 12.6% to N174.2 million.
The company incurred a loss per share of N6.90 at the end of 2013 and a further loss of N1.70 has occurred in the first quarter of the current year. The losses have wiped off retained earnings of N393.5 million at the beginning of 2013 and turned it into a negative figure of N963.8 million at the end of the first quarter. The company does not have a track record of dividend payment. Its last dividend was 1 kobo per share it gave its shareholders on 16th July 2010.
The company’s balance sheet shows that assets are dropping while liabilities are growing. Inventories dropped by 31.8% to N377.6 million in the first quarter over the level at the end of last year. Trade debtors and other receivables are down by 57.4% to N23 million and cash/bank balances closed 83.6% lower at N9.0 million over the same period.
Trade creditors and other payables rose by 62.5% to N416.7 million at the end of the first quarter from the closing figure in 2013. Long-term financial liabilities have doubled at N1.06 billion over the same period while net assets have dropped by about 14% to N3.21 billion.
For the company to keep sales revenue at the same level it recorded last year, it needs to generate a minimum turnover of N95.33 million in each of the remaining three quarters of the year. If it keeps cost of sales at an average of N20 million per quarter, it will be able to stretch out gross profit margin for the second year.