Guinness Nigeria's FY 2021 Audited Result: Revenue Rises on the Back of Growing Costs

Proshare

Monday, October 04, 2021 / 10:47 AM / Iyioluwabomi Onakoya, Proshare Research Intern / Header Image Credit: Drinks NG


Guinness Nigeria has recovered from the fatal blow dealt to its bottom line during 2020's pandemic that eliminated dividend payouts in 2020. Its liquidity position also improved significantly during the session evidenced by favorable liquidity ratios and a remarkable rise in cash and cash equivalents by +580.65% in 2021. Though Proshare analysts could not tie the N35.87bn cash to either debt or equity, the beverage company credited it to the remarkable surge in its bank balance and short-term deposits to N30.84bn and N5.02bn, respectively in 2021.


Proshare Nigeria Pvt. Ltd.


A dive into the financial statement of the company shows trade payables were up Y-o-Y by +93.07% while receivables fell by -25.11% in the period which improved liquidity and supports the significant growth seen in cash and cash equivalents of the company.


Improved performance during the year was also reflected in its share price movement as the stock performed remarkably better than both the industry index and the NGX All-Share Index (ASI). This reflects positive investor sentiment on the company's recovery from pandemic woes.


Key Highlights

  • Revenue rose year-on-year (Y-o-Y) by +53.69% from N104.38bn in 2020 to N160.42bn in 2021.
  • Cost of sales accelerated Y-o-Y by +61.45% to N114.71bn in 2021 from N71.05bn in 2020.
  • Profit before tax (PBT) rose by +133.79% Y-o-Y to N5.77bn in 2021 from a loss after tax of N18.07bn in 2020.
  • Finance income grew Y-o-Y by +75.78% to N529.16m in 2021 from N301.04m in 2020.
  • Finance cost rose marginally Y-o-Y by +1.95% to N4.63bn in 2021.
  • Profit after tax profit surged Y-o-Y by +109.98% to N1.26bn in 2021 from a loss after tax of N12.58bn in 2020.
  • Total assets grew Y-o-Y by +17.52% from N144.15bn in 2020 to N169.41bn in 2021.
  • The total debt of the transportation company rose by +37.21% to N1.06bn in H1 2021
  • Guinness Nigeria approved a final dividend worth N1.01bn at N0.46k per 50k ordinary shares in 2021
  • Earnings per share rose by +109.93% to N57 in 2021.


Share Price movement-A Dip and Recovery

Guinness' share price movement was bullish over the first four months of 2021 reaching a resistance (highest) value of N33.90 in April 2021. However also in April 2021, the price dipped to N27.50 before steadying at N29 between May and July 2021. However, its share price has trended downwards since August 2021 to close at N30 as of September 24, 2021. The price dip and recovery reflected positive sentiments resulting from its improved financials and the company's dividend announcement. The year-to-date (YTD) return of the stock was +57.89% compared to the -3.25% of the NGX ASI as of 24 September 2021 (see chart 1 below).


The negative relationship between the ASI and the company's share price is reinforced by the strong negative correlation coefficient of -0.73. When the ASI dips, investors are likely to be more optimistic about the share price of Guinness Nigeria, or at least that is what the negative correlation suggests.


Chart 1: YTD Share Price Movement of Guinness Nigeria Against the NGX ASI as of 24 September 2021.

Proshare Nigeria Pvt. Ltd.
Source: NGX, Proshare research


The share price performance of Guinness Nigeria doesn't reflect the movement of the food and beverage index (sectorial performance), indicating a counter-cyclical movement both against the NGX ASI and the sector index.


The company's share price surged by +57.89% while the index fell by -4.29% (see chart 2 below).


Proshare Nigeria Pvt. Ltd.


Chart 2: YTD Share Price Movement of Guinness Nigeria Against the NGX Food and Beverage Index as of 24 September 2021.

Proshare Nigeria Pvt. Ltd.

Source: NGX, Proshare research


Revenue

The beverage manufacturer's top-line earnings surged Y-o-Y by +53.69% to N160.42bn in 2021 beating pre-COVID-19 levels by +22%. Increased demand fuelled the rise spearheaded by the +54.95% rise in sales within Nigeria reflecting an increase in disposable income of its consumers. Since its domestic earnings account for 99.08% of the aggregate revenue, the -18.21% decline in export earnings barely made a dent in the company's result (see chart 3 below).


Chart 3: Guinness Nigeria's Revenue 2017 - 2021 (N'bn)

Proshare Nigeria Pvt. Ltd.
Source: Guinness Nigeria's Financial statement, Proshare research

 

Profit Before Tax (PBT)

The manufacturer's PBT recovered remarkably Y-o-Y by +133.79% to N5.77bn in 2021. However, profitability is yet to return to pre-covid levels as PBT fell short of 2019's PBT of N7.10bn by -18.78%


This is a direct result of the more than 60% Y-o-Y increase in the cost of sales to N114.71bn in 2021. The +91.66% increase in raw materials and other consumables and the +40.78% rise in marketing expenses led to high operating costs during the session (see chart 4 below).


Chart 4: Guinness Nigeria's Profit Before Tax 2017-2021 (N'bn)

Proshare Nigeria Pvt. Ltd.
Source: Guinness Nigeria's Financial statement, Proshare research

 

Proshare Nigeria Pvt. Ltd. 


Liquidity-Braving the Squeeze

Working Capital

Guinness Nigeria's net-working capital further declined by -22.32% in 2021 as current liabilities swallowed the current asset of the company. The rise in current liabilities during the session was brought on by the +93.11% rise in trade payables which revealed its strong bargaining power with its suppliers (see chart 5 below).

 

Chart 5: Guinness Nigeria's Working Capital 2017-2021 (N'bn)

 

Proshare Nigeria Pvt. Ltd.
Source: Guinness Nigeria's Financial statement, Proshare research

 

Interest coverage ratio

The interest coverage ratio of the company rose by +175.45% to 2.13 in 2021 which reveals that the company can cover its finance cost 2.13 times. The high ratio showed the company's potential ability to grow its operating profit to pre-pandemic levels (see chart 6 below). 


Chart 6: Guinness Nigeria's Interest coverage ratio 2017-2021

Proshare Nigeria Pvt. Ltd.
Source: Guinness Nigeria's Financial statement, Proshare research

 

Quick Ratio

Guinness Nigeria's acid-test ratio recovered nicely Y-o-Y to 0.64 in 2021 from 0.45 in 2020. The rise in the ratio suggests that the company has more liquidity to cover its short-term debt obligations during the session. Although a quick ratio of 1.5 for a manufacturing company is more ideal (see chart 7   below).



Chart 7: Guinness Nigeria's Quick ratio 2017-2021

Proshare Nigeria Pvt. Ltd.
Source: Guinness Nigeria's Financial statement, Proshare research


Proshare Nigeria Pvt. Ltd. 


Leverage ratio-Untangling the Debt Trap

The debt-to-equity ratio of the firm reveals that it is heavily financed through shareholders' equity. Total equity inched up marginally to N74.29bn while total borrowings declined by -29.86% to N15.99bn during the session (see chart 8 below).


Chart 8: Guinness Nigeria's Leverage ratio 2017-2021 (N'bn)

Proshare Nigeria Pvt. Ltd.

Source: Guinness Nigeria's Financial statement, Proshare research


Total Asset Turnover Ratio

As of year-end, the total asset turnover ratio surged to a 5-year high of 1.02 which indicates the beverage manufacturer's ability to maximize its assets in recent times. Revenue and total assets grew by +53.69% and +17.52% reaching record levels for the last 5 years. It generated an income of N1.02bn for every N1bn invested in its total assets in 2021 (see chart 9 below).


Chart 9: Guinness Nigeria's Total asset turnover ratio 2017-2021

Proshare Nigeria Pvt. Ltd.
Source: Guinness Nigeria's Financial statement, Proshare research


From losses in 2020 to increases in its top and bottom-line earnings, as well as key ratios during the period. The beverage maker's performance in 2021 was greatly influenced by the country's improving economic activities.


Although the equity price of the company showed a counter-cyclical movement with the NGX ASI and its sector index, its performance shows a reflection of economic activities in the domestic market.


Proshare Nigeria Pvt. Ltd.


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 Proshare Nigeria Pvt. Ltd.

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