Fidson Healthcare: Pharmaceuticals

THE COMPANY: Fidson Healthcare is a wholly indigenous pharmaceuticals company and a member of the Fidson Group. It is one of the leading pharmaceuticals firms in Nigeria and the West African sub-region. The company, which was formed in 1995, manufactures, markets and exports high-quality pharmaceuticals products in Nigeria. Fidson has its corporate head office in Lagos and a manufacturing plant in Ota.

The company pursues best practices and ethical standards in all of its dealings, including complying with the Securities and Exchange Commission code of conduct and maintaining an amicable relationship with its shareholders. In 2005, it became the first indigenous company to manufacture an anti-retroviral drug. The product, known as Virex Anti-retroviral, was 100% formulated and manufactured in Nigeria.

Shares of the company are listed on the stock exchange under the health care providers sector and pharmaceuticals sub-sector. Outstanding shares stood at 1.5bn, worth N3.02bn ($19.03m). Impressive financials back up the company’s stock performance as it consistently paid dividends in the past financial years.

2013 RESULTS: Underlying revenue trends were impressive, with continuous growth year-on-year. Revenue for Q1 2013 appreciated by 55% to N2.62bn ($16.5m), adding N928m ($5.85m) to the N1.7bn ($10.7m) recorded for Q1 2012, compared to a flat rate of 1% for full-year 2012. Revenue growth was supported by the astonishing advancement in the profit after tax recorded in the full-year 2012, which grew by 272%. Improved sales of drugs and the expansion of distribution channels and facilities across the country also affected the performance and productivity. Cost of sales grew by 56% compared to revenue, with it standing at N1.16bn ($7.31m), compared to N741.5m ($4.67m) recorded in Q1 2012. While distribution and administration expenses slowed over 2012, they appreciated by 58% in Q1 2013 to N1.16bn ($7.31m). Profit before tax for Q1 2013 was N269.56m ($1.7m), up by 55% from the N173.42m ($1.09m) recorded in the previous year. Profit after tax grew an impressive 60% to N194.5m ($1.23m), adding some N73.11m ($460,593) to the N121.39m ($764,757) recorded in the previous year. A decline in other income, which was observed in 2012, continued in the first quarter of 2013 compared to the previous year. At the end of the first quarter, the company’s net profit margin was virtually maintained at 7.3%.

Key developments in the financial position at the end of the first quarter of 2013 include a decline of 10% in inventories from N1.09bn ($6.87m) in Q1 2012 to N983.96m ($6.2m) in Q1 2013; a 41% rise in debtors and receivables, which stood at N2.8bn ($17.6m); and a 41% drop in cash balances. An increase in the debtors balance suggests a goal of improving sales. Fixed assets appreciated marginally by 2% to reach N4.78bn ($30.1m) and shareholders’ funds grew 5% from N5.23bn ($32.9m) to N5.5bn ($34.7m). This translates to a Q1 2013 book value per share of N3.67 ($0.023). Earnings per share (EPS) for full-year 2012 were N0.14 ($0.00088). The company was generous with the payment of a N0.12 ($0.00076) dividend, which represents an 85% payout ratio of EPS, which was the highest in the pharmaceuticals industry and one of the highest on the entire Nigerian stock market. As of Q1 2013, EPS remained at N0.12 ($0.00076). Price to book and price to earnings stood at 0.55x and 16.75x, respectively. Fidson remains underpriced at N2.01 ($0.013) per share (market value); however, the stock has a year-to-date return of 86%.

DEVELOPMENT STRATEGY: The company has devised strategies to weather the storm and make its growth sustainable; leaving no stone unturned in ensuring that it performs optimally and does well in managing all of its deliverables, both in terms of production and sales of products across various regions in Nigeria. This year is looking quite promising for Fidson Healthcare so far. The firm’s improved ability to generate sales revenue in the first quarter was accompanied by an improved ability to convert revenue into profit.

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