Nsltech (Secure Electronic Technology Plc) – FY 2025 Financial Review

Analyst: Qudus Adebara (Research Analyst)

Executive Summary

Secure Electronic Technology Plc reported losses for FY 2025, reflecting ongoing operational challenges and lower profitability compared to prior periods.

• Gross income decreased slightly to ₦4.26 billion, down from ₦4.35 billion in FY 2024 (-2.0%).
• Net income improved marginally to ₦341 million from ₦284 million, but administrative expenses rose sharply to ₦507 million, leading to an operating loss of ₦166 million, widening from an FY 2024 loss of ₦86 million.
• After financial charges of ₦5.65 million, the company recorded a loss before tax of ₦171.6 million, compared to ₦91.5 million in FY 2024.
• No tax expense was recorded in FY 2025 due to loss carry-forward utilization, resulting in a net loss after tax of ₦171.6 million, compared with a net loss of ₦121.0 million in FY 2024.

The company continues to face pressure on its cost structure, particularly administrative expenses, which are higher than net income, highlighting ongoing operational inefficiencies.

Statement of Profit or Loss Highlights (₦’000)

₦’000  FY 2025          FY 2024          YoY Change

Gross Income  4,263,363        4,348,884        -2.0%

Net Income     340,573           283,615           +20.0%

Administrative Expenses        (506,526)        (369,260)        +37.2%

Operating Profit/(Loss)          (165,953)        (85,645)          -93.9%

Financial Charges       (5,648) (5,858) -3.5%

Profit/(Loss) Before Tax        (171,601)        (91,503)          -87.5%

Profit/(Loss) After Tax           (171,601)        (121,025)        -41.8%

Observations:

• Operating losses widened significantly due to rising administrative expenses.
• Net income marginally higher than FY 2024, but insufficient to offset costs.
• Gross income relatively stable, indicating revenue generation capacity exists but cost efficiency remains a challenge.

Balance Sheet Overview (₦’000)

₦’000  Dec 2025         Dec 2024         YoY Change

Total Non-Current Assets      4,417,995        4,606,079        -4.1%

Current Assets 222,718           231,484           -3.8%

Total Assets    4,640,714        4,837,563        -4.0%

Equity 3,489,076        3,910,677        -10.8%

Total Liabilities          1,151,638        926,886           +24.2%

Share Capital  2,815,770        2,815,770        0.0%

Accumulated Loss      (2,987,248)     (2,565,646)     -16.4%

Key Takeaways:

• Total equity declined by 10.8%, reflecting retained losses for the year.
• Liabilities increased 24.2%, primarily driven by borrowings, signaling higher financial leverage.
• Strong intangible and property, plant & equipment base provides long-term operational capacity.
• Current assets are limited, especially cash of ₦28.1 million, pointing to tight short-term liquidity.

Cash Flow Highlights (₦’000)

₦’000  FY 2025          FY 2024

Cash from Operations (21,034)          (34,211)

Investing Activities    (3,559) (8,200)

Financing Activities   25,153 20,000

Net Cash Movement   (24,593)          (17,258)

Closing Cash & Cash Equivalents     28,061 52,654

Observations:

• Operating cash flow remains negative, reflecting ongoing operating losses.
• Limited investing activity, focused primarily on maintenance capex.
• Financing activities slightly positive, supported by borrowings.
• Overall, cash position declined significantly, which could constrain operational flexibility.

Key Ratios & Metrics

Metric FY 2025          FY 2024

Operating Margin       -48.8% -30.2%

Net Margin     -40.2% -27.8%

Equity-to-Asset Ratio 75.2%  80.9%

Debt-to-Equity Ratio  0.33x   0.24x

Current Ratio  0.38x   0.38x

Analysis:

• Negative margins indicate unprofitable operations.
• Equity remains high relative to assets, reflecting capital base, but declining due to losses.
• Low current ratio highlights liquidity constraints.
• Debt leverage is moderate, manageable but rising relative to equity.

Strategic Insights

Strengths:

• Stable gross income base, indicating market demand for lottery and electronic services.
• Strong equity base with significant revaluation reserves.
• Limited long-term debt, reducing financial risk.

Weaknesses:

• Operating losses are widening due to rising administrative costs.
• Cash levels are very low, raising liquidity concerns.
• High reliance on intangible assets may limit short-term flexibility.

Opportunities:

• Cost optimization to reduce administrative expenses.
• Digital transformation and expansion of lottery operations could improve revenue.
• Strategic partnerships to access working capital and diversify income streams.

Threats:

• Revenue volatility in lottery and gaming operations.
• Regulatory risks affecting operations and taxation.
• Continued operating losses may erode shareholder equity further.

Outlook

Near-Term (12 months):

• Focus on cost containment to achieve breakeven.
• Strengthening cash management to support liquidity.
• Explore additional revenue streams in electronic gaming.

Medium-Term (3–5 years):

• Potential for profitability if administrative costs are managed and revenues stabilized.
• Possible reliance on external financing for operational support if losses persist.

Conclusion

“Secure Electronic Technology Plc faces significant operational and liquidity challenges, with FY 2025 losses widening. While revenue remains stable, high administrative costs and limited cash resources constrain profitability. Strategic cost management and improved cash flow generation will be critical for the company’s turnaround.”