Red Star: Sailing through trying times

L-R: Company Secretary, Red Star Express Plc, Frances Akpomuka; Chairman, Board of Directors, Red Star Express Plc, Suleiman Barau; and Group Managing Director/CEO, Red Star EXpress Plc, Dr. Sola Obabori.

IN a largely turbulent season, Red Star, one of Nigeria’s leading logics companies has recorded more than just a mere credit balance in its financial report this last accounting year. Despite the ravaging effects of the Coronavirus pandemic which forced economies across the world to shut down for a greater part of this year, an incident which has taken a toll on the supply chains in the logistics and transportation industry, the company posted N10.5bn revenue, a five per cent leap from the preceding year.

The firm disclosed this on Thursday October 8, 2020 at its annual general meeting (AGM) in Lagos where it presented its financial report to its shareholders. Giving an overview of the economy, Sola Obabori, the company’s Group Managing Director and Chief Executive Officer, disclosed that, with five consecutive quarterly growths, the Nigerian economy had relished a rebound from the 2016 recession even as the company had entered 2020 with high hopes before the advent of the Covid 19 pandemic which had weakened economic growth with the concomitant devaluation of the naira.

“Average growth for the year was put at 2.3% while the price of oil, which is the mainstay of the Nigerian economy, started out at price of $71.32 per barrel in April 2019 and closed at an all-time low of $18.38 by the end of the business year. The global economy had come under pressure as a result of the Covid-19 pandemic which broke out in China, covering most countries and territories of the World, Nigeria inclusive, with tens of millions of infections and hundreds of thousands of deaths across the world. It also has brought a destabilization of the world economy with large scale job losses”, Obabori said.

Lamenting the inclement global business environment in which businesses are now compelled to operate as the ‘new normal’, Red Star’s GMD said the industry witnessed the entrance of new players across various service offerings of the group, in the year under review. “FinTech, as they are called, also played significant roles in disrupting and reshaping the direction of competition as ride hailing companies with sophisticated applications veered into delivery business in order to salvage their businesses and create new revenue streams in the face of stiffer regulations.

The overall industry performance was hampered by the last quarter of the financial year as a result of the COVID-19 pandemic which saw the total closure of airports to passenger traffic, except for humanitarian and essential services where our industry is categorized and therefore given some level of exemption”, he said.

Many countries, he noted, had seen more than three months of lockdown and most industries had  been adversely affected causing job losses of untold magnitude  necessitating various scales of intervention to stimulate the economies and industries back to life. The most hit industries being aviation, hospitality, travels, tourism and entertainment. “Agriculture, food supply chain, telecommunications, Internet service providers, e-commerce, medicals, pharmaceuticals and diagnostic industries are well positioned to be at the forefront of harnessing the opportunities. The courier, express and parcel industry being a support structure for these industries to reach the markets will benefit immensely in harnessing these opportunities”, observed Obabori.

In his review of the company’s result, the GMD said Red Star’s score card for the year showed positive performance across various indices with growth in Profit Before Tax (PBT) standing at N750m, representing a marginal growth of 0.5% above the preceding year, while Profit After Tax (PAT) stood at N469m representing 0.6% above the preceding financial year.

“The company grew its Balance Sheet size by N1.8billion with Total Assets and Shareholders’ Funds closing at N7.3billion from N5.5billion in the previous year representing a 32.7% growth. Based on these figures, the company is proposing a dividend of N35kobo per share for FY2019/2020 per unit of Ordinary Share. Despite the odds within the year, this performance came out of determination, continuous partnership with the industrial sector, launching of new service offerings, extensive retail outlets to cater to the needs of the Small and Medium Enterprises (SMEs), and continuous digitization of our operations and customer-facing platforms. We are assured that as these efforts continue to mature, more visible impact on revenue and profits will be recorded”, he enthused.

As part of the company’s strategic focus and in line with its PSP (People-Service-Profit) philosophy, Obabori said, Red Star had remained focused on maintaining its leadership position in Nigeria and in building capacity for the African market. “This is being done by hiring skilled workforce who are trained and re-trained in order to continually deliver superior financial performance and wider social impact. In addition, we are committed to strengthening our first-to-last-mile capabilities by expanding our investments in distribution centres and vehicular assets across Nigeria and in our branches within West Africa that will support new business units focused on e-commerce, agro cold chain distribution and partnership with airlines for cargo consolidation operations, among others.”

This is perhaps responsible for the diversification of Red Star’s revenue profile in the year under review, an emerging phenomenon,  its GMD said, would remain a strong growth index for the future. In the course of the year, Red Star opened a new branch in Benin Republic in addition to Niger Republic and Burkina Faso earlier opened and at the core of this performance, Obabori revealed, is a vibrant board of directors with a long-range strategic focus and a management team that is adaptable, resilient and ready to reinvent itself on a continuous basis, “ably supported by a large pool of trained staff and delivery partners across the various locations locally and abroad.” 

In addition to the notable success of the right issue, the company concluded in March 2020, Obabori said, Red Star is well positioned to execute its next phase of growth strategy which would see the expansion of new product offerings across the company and its subsidiaries whilst also investing in strategic assets that will shape the future as the firm seeks to also lead in the digital revolution within the Logistics industry. “All these efforts will produce larger footprints of the Red Star brand in Nigeria and our chosen markets of Africa long into the future. I remain optimistic about the future of our company and the industry, as we pray for God’s grace in all our undertakings.” 

In his assessment of the economy, Red Star’s Chairman, Suleiman Barau, noted that Nigeria’s economic growth was heavily reliant on its oil exports with production levels remaining stable throughout 2019. Happing on the damage Covid-19 did to the global economy, Barau said since the beginning of the year, more and more countries across the globe shut down their borders and limited transportation and travels to contain the coronavirus (COVID-19) outbreak, thus creating impediments to international trade.

“The reality of the times has made the battle for the revival of the plummeting economy to be multi-faceted. The sudden drop in oil prices to its content and a global meltdown resulting from the coronavirus outbreak in key economies have disrupted economic plans and postulations. Across various layers of a more favorable business environment is likely to entice the startup of new businesses and the expansion of existing ones across different sectors of the economy. This, in turn, will boost the output of these sectors and the economy’s total input”, he said.

Lamenting how the pandemic and lockdowns disrupted the economy as a whole and strained operations of every sector in the country, the chairman said the Logistics industry was not left out. The nation, he affirmed, has witnessed a decline in road, rail and flight activities resulting in huge revenue plunge. “As a consequence of the coronavirus outbreak, important supply chains in the logistics and transportation industry are hampered, though differently across air, freight, land and sea with various interpretations of its potential consequences on the entire industry. In the year under review, our company recorded revenue of N10.5billion which is five percent increase from the preceding year.” 

According to him, the 5% increase was made possible as a result of some growth platforms which were established, including the West African branch expansion and the new special business units, championed by the management of the company to take advantage of some opportunities. “We hope to explore this further in the new financial year to minimize disruptions brought about by the Covid-19 impact. The company recorded basic Earnings Per Share (EPS) of 70 kobo per 50 kobo share which is 11 percent lower than the preceding year”, the chairman said.

Speaking on the company’s dividend, Barau asserted that Red Star remained committed to the creation of shareholder wealth irrespective of prevailing economic circumstances, having built a longstanding culture of staying true to its promise of rewarding investors.

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“In view of the company’s Financial Year 2019/2020 performance, the Board is pleased to recommend for your approval a dividend of 35kobo for every 50kobo ordinary share. The amount, if approved, will translate to a total payment of N253million. In August 2017, the company’s shareholders approved the raising of additional capital by the firm through rights issue. In December 2019, the rights issue was a success as it was subscribed to by 102%. The company allotted 336,855,291 ordinary shares of N0.50 each at N4.00 per share to existing shareholders”, he said.

He also disclosed that the company has continued to stand on their promise of remaining steadfast in its policy of ensuring that the social and economic welfare of the firm’s stakeholders are preserved and sustained through the Red Star Foundation. According to him, the company has constantly reviewed activities of the Red Star Foundation, expanding into new areas from continuous award of scholarship to students in public schools in host communities to other aspects of corporate social responsibility.

“Apart from the scholarship, which we have extended to scholars in the Eastern, Western and Northern parts of Nigeria, we have also intervened, from time to time, in the provision of food items and relief materials to some non-governmental agencies. During the financial year, the foundation provided relief items to the Nigerian Red Cross Society in Lagos and SOS homes in several locations including Abuja, Port Harcourt, Kano, Kaduna and Ibadan.” The battle against COVID-19 , he said, was still uncertain, but hinted that Red Star’s top priority remained the health and safety of its employees, customers and its host communities.

“As we journey through 2021, we acknowledge the challenges that may be posed by the ravaging pandemic continuously changing the socio and economic dynamics.” 

He said that the board and management of the company had a solid commitment to continuously explore new opportunities for revenue generation and expansion and also invest wisely in appropriate resources while ensuring a conducive and friendly working environment to encourage its staff to continue to put in their best. “Furthermore, we plan to continuously deliver a strong and sustainable performance that enhances returns to our shareholders, as we march forward in the year with confidence and optimism, knowing full well that our businesses have been strategically repositioned to take advantage of key opportunities as we stay on course while executing our growth strategy.”