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Logistics sector wobbles under harsh operating condition

By Helen Oji
17 September 2019   |   3:23 am
The logistics industry, like its peers, is faced with various challenges ranging from high-interest rates, operations cost and stringent government regulations.

[FILE PHOTO] Courier service

The logistics industry, like its peers, is faced with various challenges ranging from high-interest rates, operations cost and stringent government regulations.

Indeed, poor transportation infrastructure is considered to be the most significant challenge facing logistics providers, which must be addressed if further business opportunities would be unlocked in the industry.

The above factors have been listed as the major ills militating against the growth of the industry, just as the sector witnessed sustained sliding profiles in the last few years.

For instance, Associated Bus Company Plc, also known as ABC Transport Plc, a Nigerian transportation company has continued to diversify its operations over the years, expanding into such areas as cargo services, haulage services, importation/sale of vehicle spare parts, assembling of heavy-duty trucks, and installation of vehicle speed devices.

But like counterparts, it is currently hit by the harsh operating environment, which has adversely affected its financial performance and stock prices on the Nigerian Stock Exchange (NSE).

A look at the five-year financial reports (2013-2017) for ABC Transport (the company) showed that revenue began to decline in 2016. This is exactly the time GIG Motors had just unveiled its rebranded and refocused business model.

The company’s (group) revenue for full-year 2017 stood at N7.1 billion, against N6.7 billion recorded in 2016. Profit after tax for the group in 2017 was N513 million, compared to N599 million in 2016.

For its first quarter (Q1) 2018 result released earlier this year, revenue stood at N1.4 billion, compared to N1.7 billion reported for the same period in 2017.

In the same vein, profit after tax was N65 million compared to N192 million reported in Q1 2017.

The group, now involved in the hospitality business, with the operation of its City Transit Inn Hotel in Abuja, connects commuters to major ECOWAS hubs such as Ghana, Togo and Benin Republic.

ABC Transport Plc’s road transportation business has not performed well in recent years, due to competition in the sector, coupled with multiple taxations, which unfortunately stifles profitability.

For the financial year ended December 31. 2018, ABC Transport Plc posted revenue of N6.9 billion against N7.2 billion recorded in the corresponding period in 2017.

The Group’s Gross profit stood at N1.3 billion in contrast to N1.6 billion achieved in 2017, with its profit/(loss) before tax standing at N180 million when compared to N253 million recorded in the previous year.

In the same vein, Red Star Express Plc listed its shares on the main board of the Nigerian Stock Exchange on November 14, 2007.

The logistics company’s business model is structured into courier services, freight services, logistics, and support services.

Red Star Express’ logistics and freighting services are targeted at different market segments, including companies and individual customers, facilitates the delivery of parcels and documents.

The company’s revenue increased by 19.73% from N8.4 billion in full-year 2018 to N10 billion in full-year 2019.

Profit before tax also increased to N743.4 million in 2019, up from N610.5 million in 2018, while profit after tax rose from N347.5 million in 2018 to N466.2 million in 2019, indicating 34.15 per cent.

But the latest financial result has not always been the same, as revenue for the full-year ended March 31, 2018, though increased to N8.4 billion from N7.2 billion, profit after tax decreased from N426 million in 2017 to N347 million in 2018.