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UP: A firm on the balance

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By Taofik Salako Deputy Group Business Editor

University Press (UP) Plc recorded decline in sales but improved cost and internal operating efficiency supported the bottom-line, enabling the printing and publishing company to sustain dividend payout.

Audited report and accounts of UP for the year ended March 31, this year showed that sales dropped by 10.8 per cent during the period. However, cost of sales and operating expenses also reduced considerably, with a zero-leveraged balance sheet supporting the profit and loss accounts to overall positive performance outlook.

Underlying profitability and returns ratios were generally positive, with four percentage growth in gross profit margin.

The board of the company has recommended distribution of N64.71billion to shareholders as cash dividend for the business year, representing a dividend per share of 15 kobo.

Financing structure

Total assets dropped marginally from N3.49 billion in 2019 to N3.47 billion in 2020. The decline was due to 5.9 per cent drop in non-current assets from N1.55 billion to N1.46 billion. Current assets had risen by 3.7 per cent from N1.94 billion to N2.01 billion. Total liabilities also declined by 9.2 per cent from N876 million to N795 million. Long-term liabilities had dropped by 18.2 per cent from N134 million to N109 million while current liabilities declined by 7.6 per cent from N741.9 million to N685.4 million. While paid up share capital remained unchanged at N215.71 million, shareholders’ funds rose by 2.4 per cent from N2.61 billion to N2.67 billion.

The underlying financing structure improved during the period. Equity funds/total assets ratio improved from 74.9 per cent to 77.1 per cent. With zero gearing ratio, current liabilities/total assets ratio improved from 21.3 per cent to 19.8 per cent.

Efficiency

Total number of employees increased from 272 persons in 2019 to 281 persons in 2020. Staff costs however dropped from N541.7 million in 2019 to N448.8 million in 2020. Staff cost per employee thus dropped from N1.99 million to N1.60 million. Average pre-tax profit per employee meanwhile improved from N0.61 million to N0.63 million. Total costs of business reduced to 93.5 per cent of total sales in 2020 as against 95.7 per cent in 2019, providing greater margins for profitability.

Profitability

Underlying profitability ratios were generally positive, underlining the advantage of internal and cost efficiency in a sluggish market. Gross profit margin improved from 54.8 per cent in 2019 to 59.1 per cent in 2020. Average pre-tax profit margin- which measures the profit-making capability of the company, increased from 7.1 per cent to 8.6 per cent. Return on total assets rose from 4.7 per cent to 5.1 per cent. Return on total equity inched up from 4.2 per cent to 4.8 per cent.

Basic earnings per share increased from 25.27 kobo in 2019 to 29.48 kobo in 2020. Net assets per share also rose marginally from N6.05 in 2019 to N6.19 in 2020.The board of the company has recommended payment of N64.71 million to shareholders as cash dividend for the 2020 business year, the same amount paid for 2019.

After approval at the Annual General Meeting (AGM), shareholders will receive a dividend per share of 15 kobo, the same rate like the previous year. Meanwhile, dividend cover improved from 1.69 times to 1.97 times.

Total turnover had dropped by 10.8 per cent from N2.32 billion in 2019 to N2.07 billion in 2020. Cost of sales meanwhile declined by 19.2 per cent from N1.05 billion to N845 million. Gross profit reduced by 3.9 per cent from N1.27 billion to N1.22 billion. Operating expenses dropped by 7.2 per cent from N1.17 billion to N1.09 billion. Non-core business income declined by 35 per cent from N66.1 million to N43.2 million. Profit before tax rose by 7.6 per cent from N165.5 million to N178.1 million. After taxes, net profit rose by 16.7 per cent from N109 million to N127.2 million.

Liquidity

UP remains a considerably liquid company with sufficient capacity to meet its operational financing needs, without recourse to creditors. Current ratio- which measures the sufficiency of current assets against current liability, improved from 2.6 times in 2019 to 2.9 times in 2020. Working capital/sales ratio increased to 64 per cent in 2020 as against 51.6 per cent in 2019. Debtors/creditors ratio stood at 216.4 per cent in 2020 compared with 439.2 per cent last year.

Governance and structures

Incorporated in August 1978, UP commenced operations in Nigeria as a branch of Oxford University Press in 1949. The principal activity of the company is mainly publishing, sales and distribution of educational books and materials. With 11,635 shareholders, UP is quoted on the main board of the Nigerian Stock Exchange (NSE). Shareholding analysis indicated that Oxford University Press UK holds 14.10 per cent equity stake while Nigerian investors hold the remaining 85.90 per cent equity stake. The largest Nigerian shareholdings are held by Awhua Resources Limited, 9.31 per cent and former chairman of the company, Dr Lalekan Are, 6.28 per cent.

The 10-man Board of Directors is chaired by Mr. Obafunso Ogunkeye while Mr. Samuel Kolawole remains the Managing Director. Mr. Ganiyu Adebayo is Executive Director for Finance while Mrs. Folakemi Bademosi serves as Executive Director for Publishing. The company complies generally with extant codes of corporate governance and global best practices.

Analyst’s opinion

The printing and publishing industry is facing tough operating environment. Piracy, dumping of substandard materials, declining consumer purchasing power, unstable educational system and insufficient educational budgets across the many tiers of government and lack of fiscal incentives painted a challenging operating environment. This is compounded by fast-paced technological changes that are taking educational books and materials from their traditional commoditised form to global apps and e-forms. First quarter results for the period ended June 30, 2020 showed that sales dropped from N95.94 million in 2019 to N32.01 million. It posted loss of N108.03 million in 2020 as against loss of N144.5 million in 2019. Meanwhile, earnings forecasts for the third quarter ending December 31, 2020 indicated turnover off N1.70 billion, gross profit of N954.59 million, profit before tax of N221.9 million and profit after tax of N151.18 million. These indicate that the company may sustain its bottom-line performance, in spite of the sluggish top-line. UP needs to quickly leverage its existing franchise and foreign interest to take a leading position in the electronic books and education segment, especially in the area of tamper-proof assessment systems.

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