By Taofik Salako, Deputy Group Business Editor
Learn Africa is losing market and margin but a strong balance sheet provides a reassuring support for recovery.
Audited report and accounts of Learn Africa for the year ended March 31, 2020 showed double-digit decline in sales and profitability.
Underlying profitability ratios illustrated a slowdown, with returns dropping to lower levels. The company cut dividend payout by two-thirds while shareholders’ net realisable earnings also dropped marginally. It must be noted that the comparable period of last year was a 15-month period as against 12-month period for this year. Notwithstanding, weakening ratios still coloured the overall performance negative.
However, the balance sheet position of the company remains strong with appreciable financing and liquidity capacities. Low leverage and relatively strong cash position could provide a linchpin for quicker gains from market growth.
Learn Africa’s total assets dropped by 9.6 per cent to N5.01 billion in 2020 as against N5.55 billion in 2019. The decline was primarily driven by 19 per cent drop in current assets from N4.68 billion to N3.80 billion. With no long-term liabilities, current liabilities and total liabilities stood at N1.91 billion in 2020 as against N2.41 billion in 2019, a drop of 21 per cent. While the paid up share capital remained unchanged at N385.7 million or 771.45 million ordinary shares of 50 kobo each, shareholders’ funds declined marginally by 1.1 per cent from N3.14 billion to N3.11 billion.
The underlying financing capacity remained considerably strong with equity/total assets ratio improving from 56.6 per cent to 62 per cent. The proportion of current liabilities, which is equivalent to total liabilities, to total assets stood at 38 per cent in 2020 as against 43.3 per cent in 2019. While bank loans rose by 6.7 per cent, the resultant gearing ratio remained negligible with debt/equity ratio of 4.2 per cent and 3.9 per cent in 2020 and 2019.
Total number of employees reduced from 213 persons in 2019 to 200 persons in 2020. Total staff costs also dropped from N468.63 million to N410.26 million. Average staff cost per employee thus reduced from N2.20 million in 2019 to N2.05 million in 2020. Average pre-tax profit per employee also declined from N1.78 million to N1.12 million. Total cost of business, excluding financing charges, improved to about 97 per cent of total turnover in 2020 as against 99 per cent in 2019. This was mainly due to a 37 per cent decline in cost of sales.
Learn Africa recorded decline in actual profit and loss figures and underlying profit-making ratios. With its single business line of sale of titles to customers, total sales dropped by 17.5 per cent to N2.87 billion in 2020 as against N3.48 billion in 2019.
Top-line decline was largely due to drop in office-based corporate sales as well as sales in the northern zone. Significant decline in the two previous segments was moderated by considerable improvement in sales from the southern zone. Cost of sales dropped by 37 per cent from N2.21 billion to N1.39 billion.
This supported 16 per cent growth in gross profit, from N1.27 billion to N1.48 billion. Total operating expenses rose by 13.5 per cent from N1.22 billion to N1.39 billion. Non-core business income dropped by 51.4 per cent from N350 million to N170 million. Interest expenses however jumped by 77 per cent from N21 million to N37 million. Profit before tax thus dropped by 41 per cent from N380 million to N224 million. After taxes, net profit dropped by 50.6 per cent to N80 million in 2020 as against N162 million in 2019.
Basic earnings per share halved from 21 kobo to 10 kobo. The company distributed total dividend of N39 million or a dividend per share of five kobo for the 2020 business year, 66.7 per cent below N116 million or 15 kobo paid for the 2019 business year. Net assets per share also slipped from N4.07 in 2019 to N4.03 in 2020. Dividend cover rode on the back of the cut in payout to 2.00 times in 2020 as against 1.40 times in 2019.
Underlying profitability ratios were mostly negative. Gross profit margin expectedly improved from 36.6 per cent to 51.6 per cent. Pre-tax profit margin however dropped from 11 per cent in 2019 to 8.0 per cent in 2020. Return on total assets declined from 6.8 per cent to 4.5 per cent while return on equity halved from 5.2 per cent to 2.6 per cent.
The liquidity position of the company emerged stronger during the period. Current ratio, which indicates the degree of readiness of the company to meet emerging financing, improved from 1.9 times to 2.0 times. The proportion of working capital to total sales improved from 65.4 per cent to 66.0 per cent. Debtors/creditors ratio stood at 253.1 per cent in 2020 as against 84.1 per cent in 2019.
Governance and structures
Formerly known as Longman Nigeria, Learn Africa was incorporated in August 1961. Its shares were listed on the Nigerian Stock Exchange in July 1996.
Learn Africa’s principal activity is publishing and distribution of educational materials for all levels of learning, including nursery, primary, secondary and tertiary education. Chief Emeke Iwerebon chairs the eight-member Board of Directors while Alhaji Hassan Bala leads the executive management team as Managing Director. While the company complied with relevant codes of corporate governance and best practices, the exclusion of information on board performance assessment, shareholding analysis, share capital history and other non-figure but relevant soft information from its official filed report undermined the comprehensive nature of its disclosures.
The printing and publishing industry is struggling with two main industry-based challenges – piracy and technology. With increasing digitisation of educational materials, the traditional publishers will need to be quicker above the curves to protect existing market and carve out a niche in the emerging tech-driven knowledge environment. The performance of Learn Africa underlined the need for aggressive new market development strategies while improving internal operating efficiency. The first quarter, three-month, results for the period ended June 30, 2020 showed a good start to the new business year with appreciable improvements in sales and profitability.
Three-month turnover rose from N168.6 million by June 2019 to N207.17 million by June 2020. Compared with loss of N188.67 million in 2019, pre- and post-tax profits stood at N25.6 million and N17.93 million by June.