Smart Products Nigeria has continued to maintain stable and consistent growth in earnings and dividend payment over the past five years. The small-sized property letting and investing company is showing the kind of resilience on earnings performance that many large companies have not been able to maintain since the financial crisis. Revenue and profit has grown every year since 2009 and dividend payment has been both regular and improved each year since.
The ability to maintain stable growth for shareholders is what Mr. Abiola Aderonmu, the company’s managing director/chief executive officer has to offer. He is maintaining one of the highest dividend pay-out ratios in the entire equities market at 77.2% in 2012 and 84.2% in 2013.
The company improved its total income by 18.8% to N47.51 million in the 2013 financial year. This is a continuing growth each year since 2009 when the company grossed N17.36 million. The company’s principal income line is rental income from properties, which is supported by income from financial asset investments and other income. Dividend income from financial asset investments dropped by 75.7% to N0.48 million in 2013 and other income also went down by 18.6% to N3.15 million. Rental income however countered the drops in those income lines with an improvement of 29% to N44.12 million.
Management kept operating cost in check and achieved significant cost moderation during the year. Personnel expenses increased only marginally at 2.4% to N5.05 million and other operating expenses also grew less rapidly than revenue at N15.3% to N23.36 million. The cost moderation permitted a leap of 30.5% in pre-tax profit during the year. The gains however failed to reach the bottom line with an upsurge of 132% in tax liability to N7.31 million.
Profit for the year amounted to N12.02 million, an improvement of 3.1% from the 2012 figure of N11.60 million. With a drop of 54.2% in appreciation of available for sale financial assets, the company’s total comprehensive income declined by 7.2% in the year.
Net profit margin remains quite good at about 27% in 2013, though a decline from 32.3% in the preceding year. Earnings per share for the 45 million shares of the company improved from 25.91 kobo in 2012 to 26.71 kobo in 2013. Earnings per share has grown consistently over the past five years from less than 8.0 kobo in 2009.
The company has declared a dividend of 22.5 kobo per share for its 2013 operations, improving from 20 kobo per share at the end of 2012. This is a sustained improvement every year from the dividend per share of 9.0 kobo the company paid in 2009. The register of shareholders closed between 3rd and 10th July while payment date is 11th August, 2014.
The company had investment properties worth N80.28 million at the end of 2013, up from N78.89 million in the prior year. Its stock of available for sale financial assets dropped by 51.7% to N3.94 million over the same period. Receivables, led by deposit for shares, swelled by 275.5% to N13.63 million while cash and bank balances fell by 86.9% to N1.59 million during the period. Trade and other payables declined by 7.8% to N10.45 million in the year.
The developments in the balance sheet resulted in cash flow difficulties for the company during the year. The considerable build-up of receivables compelled a sell down of financial assets and explained the dry up of cash resources. There was a net cash outflow from operating activities of N6.07 million in 2013 against a net inflow of N33.26 million in the preceding year.
Management had to scale down purchase of fixed assets and improvement works on investment property in the year and sell down the stock of financial asset investments to generate the needed cash for operations. There was a net cash inflow of N2.73 million from investing activities compared to a net outflow of almost N21 million in 2012.
The company ended the year with a net cash decrease of N10.53 million in 2013, which was covered by an opening cash balance of N12.12 million for the year. Aderonmu needs to swing into action to reverse the changes in the balance sheet that have dried up his company’s cash resources.
A cash deposit for investment of N12.43 million is expected to translate into actual investments and raise investment income in the current year. If the cash flow pressure is not addressed, the company will most likely be compelled to go into interest bearing debts this year.
