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ARDOVA PLC Q1'22 Earnings release- Finance costs pressure bottom-line

For its Q1’21 operations, Ardova Plc reported a 50% y/y increase in revenue from ₦41.61 billion to ₦62.9 billion, coming in ahead of our estimate (Vetiva: ₦56.22 billion). Amid the debut of Enyo retail, the company witnessed improved sales volumes from its fuel business, as well as its lubricants segments and this drove excellent topline performance for the company. Turnover from the company’s fuel operations was up 48% y/y, while the lubricants segment posted a 50% growth y/y.

Speaking to margins, the company’s profitability also saw improvements during the period, despite witnessing higher landing costs, as stronger topline growth drove margin expansion. Gross margin for the quarter printed at 9%, rising 1ppt y/y and 3ppts q/q (Q1’21: 8%, Q4’21: 6%). This brought gross profit to ₦5.0 billion, up 62% y/y, and 55% q/q. Also, despite witnessing inflationary pressures, operating results bucked the trend to come in positive during the Q1 period, with operating margin remaining stable at 3% y/y, while recording a 1ppt uptick q/q. This drove operating profit 29% higher y/y to ₦1.8 billion, the highest the company has attained in the last 5 quarters. Meanwhile, as the company recorded higher finance charges during the period, net profit was down 83% y/y. To further expatiate, Ardova’s finance cost was up 5x y/y to print at ₦1.6 billion, due to higher borrowings recorded during the period. For more context, the company’s borrowings was up 43% y/y. Thus, net profit came in lower at ₦193 million (Q1’21: 1.1 billion).