Red Star Express Grow Profit, Dividend Despite Competition  

Kayode Tokede

Red Star Express Plc survived a surge in courier/freight/delivery business segment in 2023 financial year, reporting double-digit growth in revenue to boost its profit and declared dividend to shareholders who invested in the company.

The group’s continuous and relentless pursuit of efficiency and cost-effective management impacted profit and translates into shareholders’ return on investment.

In the financial result and accounts for period ended March 31, 2023, Red Star Express declared  N13.87billion revenue, representing an increase of 10.08 per cent from N12.60 billion reported in 2022  FY.

The breakdown showed that Red Star Express generated N7.26billion revenue from Courier in 2023 from N7.4billion in 2022, while revenue from logistics stood at N2.47billion in 2023, an increase of 34.7 per cent from N1.83billion in 2022.

The group declared N2.352billion from freight in 2023, an increase of 37.4per cent from N1.71billion in 2022, while revenue from support services stood at N1.8billion in 2023 from N1.66billion reported in 2022.

In all, revenue from Courier contributed 52.3per cent to N13.87billion revenue in 2023 from 58.7per cent in 2022 financial year.

From the profit & loss figures, Red Star Express reported N10.06billion cost of sales in 2023, an increase of 4.3 per cent from N9.65billion in 2022, driven primarily by N2.45billion international delivery costs in 2023 from N2.23billion in 2022 and N2.06billion vehicle running costs in 2023 from N1.41billion in 2022.

The interplay between revenue and cost of sales positioned Red Star Express gross profit to N3.81bbillion in 2023, a growth of 29 per cent from N2.95billion in 2022. The growth in gross profit brings Red Star Express gross profit margin to 27.5per cent in 2023 from 23.41per cent in 2022.

The group’s administrative expenses increased to N3.22billion in 2023 from N2.51bbillion in 2022, while impairment (loss)/reversal on financial assets dropped to N23.54million in 2023 from N108.36million in 2022 financial year.

Other non-core business transactions stood at N62.71million in 2023 from N153.2million in 2022, as Sundry income dropped to N36.46million in 2023 from N122.5million reported in 2022, while Profit on disposal of property, plant and equipment stood at N17.74million in 2023, representing an 101.9 per cent increase from N8.78million in 2022.

Sundry income relates to recovery of bad debt and insurance claims received.

Operating profit, thus, stood at N636.61million in 2023 from N479.6million in 2022.

Red Star Express announced net finance cost of about N43.19million in 2023, a decline of 34.3  per cent from N65.74million in 2022, amid 38.5 per cent decline in finance cost to N43.7million in 2023 from N71.02million in 2022, while finance income dropped to N505,000 in 2023 from N5.27million reported in 2022.

finance cost breakdown showed a N6.62million interest on bank loans in 2023 fromo N7.3million in 2022, while interest on lease liabilities dropped too oN8.39billion in 2023 froom N49.33milllion in 2022.

In addition to finance cost, Redstar Express declared N28.7millin net exchange loss in 2023 from N14.37million reported in 2022. 

In all, Red Star Express declared N593.42million profit before tax in 2023, an increase of 44 per cent from N413.86million in 2022, while profit stood at N313.9million in 2023, representing an increase of 257 per cent from N87.81million posted in 2022.

With the increase in profit, the management declared 20kobo per 50kobo share as dividend in 2023 financial year from 7.5kobo per 50kobo share declared in 2022. 

Finally, the company’s earnings per share for the period under review was 33 kobo compared to 9 kobo for preceding financial year.

Stronger financial position

Red Star Express in 2022 financial year declared N8.66billion total assets, representing an increase of 11.7per cent from N7.75billion in 2021, driven by per cent growth in current assets.

The Group’s current assets stood at N4.9billion in 2022, a growth of nearly 11 per cent from N4.42billion in 2021, while non-current assets closed 2022 financial year at N3.76billion, a growth of 13 per cent from N3.33billion in    2021. 

Total equity stood at N4.58billion in 2022 from N4.19billion in 2021, driven by N2.58billion retained earnings in 2022 from N2.2billion in 2021.

Also, total liabilities of Red Star Express grew by nearly 15 per cent to N4.08billion in 2022 from N3.56billion in 2021. The group’s non-current liabilities stood at N517.08million in 2022 from N482.67million in 2021, while current liabilities rose by  nearly 16  per cent to N3.56billion in 2022 from N3.088billion in 2021.

The working capital of Red Star Express currently at N1.34billion as of 2022.

Conclusion

Capital market analysts have urged investors to buy Red Star Express stock on Nigerian Exchange Limited (NGX) as the current price remained attractive and the management dividend payout policy.

Recently, the Chairman, Red Star Express, Suleiman Barau said company has always prioritized the creation of shareholder wealth and have maintained a steadfast commitment to rewarding our valued investors.

Speaking on the company’s future prospect at 13th Annual General Meeting in Lagos, Barau said, “As we look ahead to the new financial year, we hold a positive outlook for our company amidst the stabilization of the Nigerian economy.

“We welcome the market principles being adopted by the new government. With the removal of subsidies from petroleum products, improved foreign exchange dynamics, and efforts to control inflation, we anticipate a more stable and predictable business environment that will facilitate better performance and growth opportunities.

“Nevertheless, we are not oblivious to the challenges that may arise due to the opportunities presented by the ever-changing socio-economic dynamics, both domestically and globally. However, the board and management of our company remain optimistic, having strategically invested in various initiatives to strengthen our position in the market.”

Consequently, the Group Managing Director/CEO, Redstar Express, Auwalu Babura maintained that the continuous and relentless pursuit of efficiency whilst engaging in core business activities remains the management’s strategic focus at this time and beyond.

According to him, “Red Star Express will focus on four important areas namely; Service Delivery, Brand Management, Business Expansion and Development and Leveraging on Technology.

“The company has implemented a strategic approach to cost optimization, particularly in response to the volatile increase in foreign exchange rates impacting our international transactions with FedEx. We have now shifted to remitting funds in the local currency, naira.

“This proactive measure aims to mitigate the effects of exchange rate fluctuations, providing us with greater stability and relief from currency-related pressures. This strategic decision reflects our commitment to prudent financial management and reinforces our ability to navigate challenging economic conditions with resilience and confidence.

The company remains a customer led organization. We will continue to optimize our operations and cost management with the goal of improving our customers and consumers experience from the first and to the last mile. The coming year will also see a review and audit of our product lines with the aim of increasing profitability through aggressive marketing support and business expansion into new markets.

“We will also be innovation-driven through the continuous scale of our investments in technology,   business process re-engineering and innovative logistics solutions. We intend to be bigger and above all better in this   coming financial year!.”

On future prospects, he said, “The company is poised to take advantage of the opportunities in the logistics and supply chain market going forward. The company will continuously pursue opportunities in Warehousing, Logistics, Digital and Mobile Commerce while deepening its brand presence and relationship with partners in the traditional courier, express and parcel segments of the industry.”