Caverton Offshore Support Group Plc (CAVERTON) has posted a marked turnaround in its H1 2025 results, returning to profitability after consecutive losses in H1 2024. Despite a strong top-line recovery and favorable foreign exchange gains, the company’s precarious balance sheet and persistent cost pressures warrant a cautious investment stance.
Strengths
- Return to Profitability
- H1 2025 PAT of ₦2.08 billion, compared to a loss of ₦3.7 billion in H1 2024, indicates a significant rebound.
- Quarterly Q2 2025 PAT was ₦753.3 million vs. a loss of ₦2.2 billion in Q2 2024.
- Improved Operational Efficiency
- Operating profit rose significantly by 215% year-on-year to ₦9.01 billion in H1 2025.
- Operating expenses dropped 55% YoY from ₦15.9 billion to ₦7.1 billion.
- Strong Foreign Exchange Gains
- A net FX gain of ₦6.9 billion in H1 2025 helped offset finance costs and boosted the bottom line.
- Liquidity Improvements
- Cash and bank balances increased 271% from ₦448 million to ₦1.66 billion.
- Prepayments rose significantly, suggesting forward positioning on supplier contracts or services.
Weaknesses
- Heavily Leveraged Balance Sheet
- Interest-bearing loans ballooned to ₦63.4 billion, up 15% from ₦54.7 billion in Dec 2024.
- Net finance cost more than doubled YoY to ₦9.5 billion, exerting pressure on earnings sustainability.
- Negative Equity Position
- The company remains technically insolvent with negative shareholders’ equity of ₦52.5 billion as of June 2025.
- Declining Asset Base
- Property, plant, and equipment dropped 9.6% while Right-of-Use assets declined 36%, signaling possible asset disposals or aging infrastructure.
- High Administrative Expenses
- Admin expenses grew marginally to ₦4.9 billion, eroding some of the gains from improved gross margin.
- Short-Term Obligation Pressure
- A 24% rise in current loans and borrowings, along with a large working capital need, may strain future cash flow.
Outlook and Recommendation
Caverton’s financials reflect a business that is tactically managing volatility through cost control and foreign currency exposure. However, the long-term sustainability of profits without further FX tailwinds is questionable, especially with the company’s structurally weak equity position and high debt servicing obligations.
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Disclaimer
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