Published On: Thu, Oct 17th, 2013

Fidson Healthcare: Still carrying interest bearing loans

Since its establishment in 1995, Fidson Healthcare plc has relentlessly pursued its goal of becoming a leading player in the pharmaceutical landscape in Nigeria. Ever since, the company has built and cultured an organisational framework that has steadily helped it gain ascendancy in the pharmaceutical industry.

Though not without challenges because in carrying out its activities, the company deploys a number of financial instruments (financial assets and liabilities), which were disclosed in its notes to the financial statements (annual report and accounts 2012) presented to its shareholders recently.

The key financial liabilities of the company comprised bank borrowings and trade payables, which it deployed purposely to finance the company’s operations and to provide liquidity to support the company’s operations.

In the financial year 2012 report, the financial assets of the company included available-for-sale investments, loans and receivables, trade receivables, and cash and short-term deposits also required for the operations of the company. The principal risks that Fidson Healthcare was exposed to as a result of holding those financial instruments include market risk, credit risk and liquidity risk.

The company carried interest bearing long-term loans of Access Bank plc. Access Bank loan of N425 million is Central Bank of Nigeria (CBN) intervention loan granted to Fidson Healthcare at 7 percent for 180 months. The value dropped from N342.242 million in 2011 to N311.893 million in 2012.

A fair value of the loan was obtained using estimated market rate of 18 percent. The loan was granted for the production of drugs and pharmaceutical products. Notes to the financial statements given to shareholders showed that “the difference between the loan rate and market rate accounted for a grant element of N129bmillion, which has been recognised as differed income and will be recognised over the duration of the loan.”

Also, Fidson Healthcare carried the FCMB loan of N400 million granted at 17 percent interest rate for 60 months to part-refinance the completion of Fidson Biotech factory at Otta, Ogun State. The value of this loan rose from N282.869 million in 2011 to N398.990 million in 2012.

Again, is the Bank of Industry (BoI) loan of N1.337 billion intervention loan granted at 10 percent for 72 months for the establishment of an intravenous fluid and Small Volume Parentals (SVP) plant. The value of this loan rose from N811.369 million in 2011 to N1.130 billion in 2012.

“A fair value of the loan was obtained using estimated market rate of 18 percent. The difference between the loan and market rate accounted for a grant element of N211 million, which has been recognised as differed income and will be recognised over the duration of the loan,” the company’s notes to its financial statements, indicated.

The company’s interest bearing loans and borrowings long term rose from N1.436 billion in 2011 to N1.840 billion. The income statement of the company shows revenue grew from N7.127 billion in the 18 months ended December 31, 2011, to N7.168 billion in 2012. Gross profit rose from N4.053 billion in 2011 to N4.073 billion in 2012.

Operating expenses rose to N854.457 million from N560.927 million in 2011. Profit before tax (PBT) rose from N214.264 million in 2011 to N540.080 millionin 2012. Profit after tax stood at N206.889 million in 2012 from N55.590 million in 2011.

Earnings per share rose to 14 kobo from 4 kobo in 2011. The company paid a dividend of 12 kobo per 50 kobo ordinary share for the 2012 financial year, against 10 kobo paid in 2011. The 14 kobo dividend translates to total dividend payout of N180 million in 2012, against N150 million in 2011.

Felix Ohiwerei, chairman, Fidson Healthcare, said at the company’s 14th annual general meeting in Lagos that “Given the substantial achievement in the fight against counterfeiting in the industry, our company decided to focus on brand building through brand extension and re-packaging. The brands affected are Astymin, Tuxil and Gascol. To ensure that we remain focused on succession planning and improved productivity, a considerable number of employees at all levels have received local and international training.”

The senior management staff of the company oversees the management of these risks through the establishment of adequate risk management framework with appropriate approval process, internal control and authority limits.

“We are excited about the future and the positive direction we are taking the company. The acquisition of our new formulation plant in Ogun State will ensure that we can increase our local production to approximately 80-85 percent content from its current 35-40 percent local content. This direction will allow us to impress on the employment rate in Nigeria and also the well-being of our economy. In addition to our new facility, we are fastidiously researching and exploring new products that will be beneficial to the Fidson Healthcare line,” stated Fidelis Akhagboso Ayebae, CEO, Fidson Healthcare.

Listed on the pharmaceutical sub-sector of the Nigerian Stock Exchange, the share price of Fidson Healthcare closed at N2.20 kobo after 2,225,086 shares of the company worth N4.490 million were exchanged in 40 deals.

Analysis of the shareholding as of December 31, 2012, showed that 4,445 shareholders or 83 percent of the 5,378 shareholders held 57,133,677 units; 355 shareholders or 6 percent held 28,118,924 units; 480 shareholders or 9 percent held 142,688,669 units, while only 98 shareholders or 2 percent held 1,272,058,730 units.

As of December 31, 2012, only Fidelis Ayebae with ordinary share 446,534,443 of 50 kobo each held more than 5 percent of Fidson issued share capital. This number of shares he held at that period represented 29.77 percent of the total issued share capital of 1.5 billion units. Indirect interest –Glorious Haven Limited on behalf of Fidelis Ayebae held 5.74 percent or 86.120 million units of the company’s issued share capital.

By: Iheanyi Nwachukwu

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