SCOA Nigeria Plc Q2/H1 Result - Recovery underway, but revenue pressures and fragile working capital require caution

SCOA NIGERIA PLC Q3 Result – Strong Earnings Rebound Driven by Cost Efficiency and Financial Recovery Momentum

Executive Summary

SCOA Nigeria Plc  delivered an impressive turnaround performance for the nine months ended 30 September 2025, as profitability surged on the back of cost optimization, improved financial discipline, and lower finance charges. Despite a moderate decline in revenue, the Company recorded a significant rebound in bottom-line performance, reporting a Profit After Tax (PAT) of ₦295.5 million, a remarkable 1,082% year-on-year increase from ₦25.0 million in the same period of 2024.

The improved profitability was primarily supported by a substantial reduction in distribution and administrative expenses (-50%) and a steep decline in finance costs (-90%), reflecting enhanced cost control measures and a more efficient capital structure. The Company’s net earnings margin expanded considerably, highlighting management’s successful execution of its operational restructuring strategy. On the balance sheet, SCOA recorded a notable expansion in total current assets (+117%), driven by a surge in inventories and receivables, indicating strong sales pipeline buildup and improved working capital deployment. However, increased short-term borrowings elevated current liabilities, resulting in negative working capital of ₦1.64 billion. Despite this, the Company’s net assets remained positive at ₦1.18 billion, underscoring its financial resilience.

Financial Highlights

₦’000 9M 2025 9M 2024 % Δ YoY

Revenue 4,864,177 5,929,777 -18.0%

Cost of Sales (3,772,842) (3,888,805) -3.0%

Gross Profit 1,091,335 2,040,972 -46.5%

Distribution & Admin Expenses (781,638) (1,557,700) -49.8%

Other Income 110,991 143,801 -22.8%

Finance Charges (62,081) (599,954) -89.6%

Profit Before Tax 311,930 27,119 +1,050%

Taxation (16,419) (2,120) +675%

Profit After Tax 295,511 24,999 +1,082%

Basic Earnings Per Share (₦) 0.25 0.08 +212%

Revenue and Operational Performance

SCOA Nigeria Plc reported a moderate revenue decline of 18% YoY to ₦4.86 billion in 9M 2025, reflecting subdued market activity in the automotive and technical equipment segments, as well as delayed project billings. Nevertheless, cost efficiency gains offset the topline weakness, driving improved earnings quality. The Company achieved a gross profit of ₦1.09 billion, down 46.5% YoY, but maintained a healthy gross margin of 22.4% compared to 34.4% in 2024. The reduction stemmed from lower volumes and tighter margins in equipment distribution. Administrative and distribution expenses were effectively halved, falling by 50% YoY, highlighting management’s focus on streamlining operations, renegotiating supplier contracts, and reducing overheads. Additionally, finance charges dropped 90% YoY to ₦62.1 million, reflecting deleveraging efforts and better cost of funds management.

Profitability Analysis

Despite lower revenue, SCOA achieved a remarkable earnings recovery with Profit Before Tax (PBT) rising to ₦311.9 million from ₦27.1 million in the prior year. This underscores the strong impact of financial restructuring and operational discipline.

Key profitability indicators:

• EBIT margin: 6.4% (vs. 0.5% in 2024), supported by lower operating costs.
• Net margin: 6.1% (vs. 0.4% in 2024), reflecting higher financial efficiency.
• Earnings per share (EPS): ₦0.25, representing over 3x growth from prior year levels.

The substantial decline in interest expenses improved net operating leverage, while stable taxation (₦16.4 million) indicates consistent compliance and moderate effective tax rate.

Balance Sheet Overview

₦’000 Sept 2025 Dec 2024 % Δ YoY

Non-Current Assets 3,966,621 3,949,262 +0.4%

Current Assets 17,498,513 8,056,502 +117.1%

Total Assets 21,465,134 12,005,764 +78.8%

Current Liabilities 19,134,794 8,129,980 +135.3%

Non-Current Liabilities 1,151,576 1,139,659 +1.0%

Net Assets 1,178,764 2,736,125 -57.0%

Owners’ Equity 2,617,727 2,116,248 +23.7%

Non-Controlling Interest (1,438,963) 619,877 -332%

Financial Position Analysis

• Asset Growth: Total assets surged 78.8% YoY to ₦21.47 billion, driven primarily by increases in inventories (+106%) and receivables (+515%), signaling stronger trading activity and expanding customer contracts.
• Liquidity Position: Cash and cash equivalents rose 54.5% to ₦6.24 billion, indicating enhanced liquidity management.
• Leverage: Total liabilities rose sharply by 116%, reflecting higher short-term borrowings and trade payables used to finance operational expansion.
• Working Capital: Declined to -₦1.64 billion from ₦1.31 billion in 2024, due to short-term financing reliance; however, strong cash reserves provide partial mitigation.
• Net Assets: Declined to ₦1.18 billion, as liability growth outpaced asset accumulation.

Cash Flow and Liquidity

Although the full cash flow statement was not provided, the balance sheet trends suggest:

• Improved liquidity through higher cash balances and operating inflows.
• Increased trade receivables reflect ongoing projects awaiting completion or payment recognition.
• Growth in trade payables and short-term borrowings signals short-term funding support for inventory buildup and contract execution.

Overall, the Company’s liquidity position remains adequate, though efficient receivables management will be critical to maintaining positive cash flow momentum.

Key Ratios

Ratio 9M 2025 9M 2024 Change

Gross Margin 22.4% 34.4% -12.0pp

EBIT Margin 6.4% 0.5% +5.9pp

Net Margin 6.1% 0.4% +5.7pp

Current Ratio 0.91x 0.99x -0.08x

Debt-to-Equity 8.7x 3.9x +4.8x

Return on Equity (ROE) 11.3% 1.2% +10.1pp

Interpretation:

• Margin recovery demonstrates effective cost optimization and reduced leverage burden.
• Liquidity slightly weakened due to higher current liabilities, though cash reserves improved.
• Leverage increased, but manageable under the current financing structure.
• ROE improved sharply, reflecting strong earnings rebound relative to equity base.

Strategic Insights

• Cost Efficiency Drive: The halving of operating expenses underscores management’s effective cost containment and business restructuring efforts.
• Financial Repositioning: Reduction in finance costs by 90% reflects debt restructuring and lower exposure to high-interest borrowings.
• Revenue Rebalancing: While topline growth slowed, SCOA’s focus on optimizing margins and improving efficiency yielded stronger profitability.
• Working Capital Management: Increased receivables and inventory buildup suggest strong sales prospects but highlight the need for tighter credit and inventory control.
• Stakeholder Alignment: Positive earnings attributable to both shareholders (₦162.1m) and non-controlling interests (₦133.4m) reaffirm the company’s recovery trajectory.

Strengths

• Significant reduction in finance and administrative costs.
• Sharp earnings rebound and improved profitability margins.
• Solid cash balance supporting liquidity.
• Efficient operational restructuring leading to sustainable cost control.

Weaknesses

• Declining revenue base and dependence on a few key business lines.
• Rising short-term liabilities impacting working capital.
• Increased leverage ratio due to higher financial liabilities.
• Negative non-controlling interest position indicating equity imbalances in subsidiaries.

Outlook

The outlook for Q4 2025 and FY2026 remains cautiously optimistic. SCOA’s strong earnings recovery and balance sheet expansion provide a solid foundation for sustained growth. Continued cost optimization, efficient capital utilization, and diversification across key business units are expected to support medium-term profitability.

However, tight liquidity and high leverage pose near-term risks, emphasizing the need for better receivable management and refinancing of short-term obligations into longer-tenor instruments. The company’s focus on strategic partnerships and expansion into industrial equipment and automotive segments will be pivotal to sustaining growth momentum.

Analyst View

“SCOA Nigeria Plc’s strong Q3 2025 results signal a successful turnaround built on decisive cost management and financial restructuring. While revenue growth remains modest, the Company’s profitability rebound and strengthened liquidity provide a solid platform for renewed expansion. The next phase of growth will hinge on optimizing working capital and sustaining financial discipline.”

Conclusion

SCOA Nigeria Plc delivered an exceptional improvement in profitability for the nine months ended September 2025, achieving double-digit earnings growth despite revenue headwinds. The Company’s decisive focus on cost containment, debt management, and financial optimization has yielded strong results, positioning it favorably for future expansion.

Although challenges persist in liquidity and leverage, SCOA’s strategic realignment and operational focus provide a credible path toward sustainable profitability and long-term shareholder value creation.