Chams H1/Q2 Result– Uneven Recovery with Growing Structural Pressure (High Revenue Growth Dampened by Rising Costs and Margin Pressure)

Chams H1/Q2 Result– Uneven Recovery with Growing Structural Pressure (High Revenue Growth Dampened by Rising Costs and Margin Pressure)

Chams Holding Company Plc’s H1 2025 unaudited results show continued growth in topline performance but also reveal worrying signs of profitability strain and cost management challenges. The company remains a digital services provider with a strong asset base and strategic investments in subsidiaries. However, declining margins, rising finance costs, and inconsistent performance at the standalone (company) level highlight the need for operational tightening and strategic realignment.

Key Strengths

1. Strong Revenue Growth:
   • Group revenue rose 18.8% YoY in H1 2025 to ₦9.88 billion (vs. ₦8.32 billion in H1 2024), driven by increased digital service offerings and possibly better contract execution.
2. Solid Asset Backing:
   • Total group assets stood at ₦20.71 billion, showing asset stability. Notably, intangible assets (₦7.36 billion) and PPE (₦2.87 billion) reflect long-term digital infrastructure capacity.
3. Improving Equity Position:
   • Total equity increased by ₦499 million YoY to ₦10.49 billion in June 2025, supported by a ₦270 million profit after tax and retention of revaluation reserves. The group has significantly reduced its accumulated losses from ₦1.79 billion to ₦1.37 billion.
4. Diversified Holdings:
   • Investments in subsidiaries and associates offer long-term growth potential, as shown by ₦4.2 billion investment in subsidiaries and ₦75 million in associates.

Key Weaknesses

1. Profitability Under Pressure:
   • Despite higher revenue, gross profit dropped YoY (H1 2025: ₦1.96 billion vs. H1 2024: ₦2.67 billion), and net profit after tax declined 53.5% to ₦418.96 million from ₦901.34 million in H1 2024, indicating rising cost of sales and operating inefficiencies.
2. High Finance Costs:
   • Finance expense surged to ₦436.65 million in H1 2025 from ₦69.17 million in H1 2024, significantly eroding operating profit and dragging pre-tax profit lower. This is a major threat to profitability sustainability.
3. Poor Standalone Performance:
   • The company-level performance remained weak, recording just ₦404,000 in net profit for H1 2025, despite ₦266 million in operating profit. High finance cost (₦265.9 million) nearly wiped out gains, revealing inefficiencies in debt utilization.
4. Deteriorating Margins:
   • Gross margin declined significantly (19.8% in H1 2025 vs. 32.1% in H1 2024), reflecting rising input costs and possible pricing rigidity.
5. Rising Payables & Borrowings:
   • Trade and other payables remained high at ₦6.16 billion, while total loans (current + non-current) totaled over ₦2.75 billion, suggesting continued reliance on external financing to fund operations.

Chams Holding Company Plc remains a value-holding digital technology company with an asset-rich balance sheet and promising top-line growth. However, rising operational costs, significantly higher finance expenses, and poor standalone performance offset these positives. The growing divergence between group and company-level profitability is concerning and calls for immediate strategic cost controls and possibly debt restructuring.

Investors should hold their current positions but refrain from further accumulation until the company shows evidence of:

• Restored margin stability,
• Reduction in finance cost pressure, and
• Improved earnings at the standalone level.

Key Triggers to Watch:

• Q3 earnings for signs of margin recovery,
• Debt refinancing or capital restructuring announcements,
• Cost optimization initiatives from management.