Base effects hold back revenue growth


Tuesday, 4 August, 2014 4.10 PM / DLM Research

1H2014 sales revenue declines by 2.4% y/y. In the six months period to June 2014 results, Fidson Healthcare recorded revenue of N4.57billion, down by 2.5% compared with N4.69billion in the corresponding period of 2013. Also, the period’s revenue is below our estimate of N5.12billion by 10.7%. On a quarterly basis, the company reported sales revenue of N1.87billion in 2Q2014, i.e. a decline of 30.6% and 9.1% against N2.70billion in 1Q2014 and N2.06billion in 2Q2013 respectively. Moreover, the latest quarter’s revenue is below our estimate of N2.42billion by 22.6% and down by 14.0% compared with the past 8-quarters average of N2.18billion. Consequently, we reviewed downward our estimates for the quarters and years ahead.

Input costs drops marginally by 0.2%… For 1H2014, Fidson Healthcare reported cost of sales (COS) of N2.10billion, down by 0.2% against N2.11billion in 2013. The disproportionate y/y decline in COS relative to revenue resulted in a higher COS/revenue ratio of 46.0% relative to 45.0% in 2013. On a quarterly basis, the company posted COS of N889million in 2Q2014, i.e. a decline of 26.8% and 6.9% compared with N1.21billion and N955million in 1Q2014 and 2Q2013 accordingly.

In addition, our analysis revealed that COS/revenue ratio of 47.4% in the latest quarter is higher than 45.0% and 46.3% in 1Q2014 and 2Q2013 in that order. Therefore, gross profit dipped by 4.2% to N2.47billion compared with N2.11billion in the previous year resulting in decline in gross profit margin to 54.0% relative to 55.0% in 1H2013.

…while higher year-on-year decline in operating expenses improves operating profit margins. Fidson Healthcare’s operating expenses of N1.83billion in the period is lower by 8.2% y/y compared with N1.99billion. The lower y/y decline in operating expenses relative to the y/y decline in revenue resulted in operating expenses/revenue ratio of 40.0% relative to 42.6% in 2013.

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