NBC plc - half year result (Very impressive or what??)

[Apache]

Hi guys,

Have anyone seen the half year result for NBC. =N= 1.68 billion PAT. that was very impressive.
Can pple with info on NBC plc give us more insights. My only regrtes is that i don't have money to buy more units

[c kenneths]

I think I had said this on a previous thread in this forum, NBC is really on an upward trend really, there are serious feelers from the company that things have really changed from the ways of the past.

Since the last time they carried out retrenchments about a year ago, shelving some expenses on staff welfare, to serious cost cutting strategies, aimed at increase in profitability.

Also we cannot forget that the management was recently changed this year, with a more focused board, the finance director is one heck of a man, an indian and an accounting guru, all is looking well there.

I missed an opportunity to mop up some shares of the company and will still go ahead and buy although it will be more expensive from now on, procrastination is dangerous!

[Apache]

Originally Posted by c kenneths

I think I had said this on a previous thread in this forum, NBC is really on an upward trend really, there are serious feelers from the company that things have really changed from the ways of the past.

Since the last time they carried out retrenchments about a year ago, shelving some expenses on staff welfare, to serious cost cutting strategies, aimed at increase in profitability.

Also we cannot forget that the management was recently changed this year, with a more focused board, the finance director is one heck of a man, an indian and an accounting guru, all is looking well there.

I missed an opportunity to mop up some shares of the company and will still go ahead and buy although it will be more expensive from now on, procrastination is dangerous!

you know what, the current GM of NBC - Roland Ebelt was the former GM of where i currently work. He also used to be the GM of P&G Nigeria but left in 2002 to join my current company and he did a solid restructuring and major turnaround and the company now is over performing. Now, he has left us to NBC (which also needs some major restructuring. That guy is a guru and really knows his onions.
During the send forth party that we threw for him on the last day in our company before he left for NBC, I told him that i was so confident in him that i was going to blindly buy NBC shares because i know he will deliver and i bought some units @ =N=35. He just joined some few months ago so i won't attribute this result to entirely his doing but i can assure you that it will keep getting better.
My prayer is that the stock doesn't rise beyond my reach

[c kenneths]

@Apache, I remember running into that tall German,Mr Elbert but can't remember at which function it was.

NBC will be a stock on the run till around next year and I will not be very surprised if they pay some good returns.

I think they should concentrate on more cost cutting measures to stem the tide of over invoicing and unnessesary projects.

[c kenneths]

Somebody just informed me that NBC is planning a large size retrenchment to almost halve the # of their workforce.

I still think this is a positive indicator that will have an impact in the long term performance of the company.

[Apache]

Typical of what roland will do. you see, the guy is marketing - oriented person and believes in growing incremantal profit. I have started building my holdngs of this stock. Though i feel bad for those who will lose thier jobs but this means more cost savings for the company and more profit for the shareholders.
I just pray that the price can come down a bit

[c kenneths]

@Apache, I still have some concerns about the workforce reduction, certainly this is good for the company in the long term, but do you know that most companies need to take loan facilities from the banks to finance the pay off since short term needs will still be met.

In the short term this will tell on the profits, but in the long term, the company gains.

[Apache]

I feel you.
Have you gone to NBC office at any time. It's always very obvious that they were overstaffed. It was beginning to look like a civil service. That they have been able to run it profitably over these years is still a puzzle to me.
I wish NBC all the best and they need it because i have increased my stake in it

[Yusuf]

Originally Posted by Apache

I feel you.
Have you gone to NBC office at any time. It's always very obvious that they were overstaffed. It was beginning to look like a civil service. That they have been able to run it profitably over these years is still a puzzle to me.
I wish NBC all the best and they need it because i have increased my stake in it

The management style of the man is even different compare to his predecessor. I know and am sure he will deliver. The company is changing from viewing his staff as machine to be used and dumped to people focus.

[c kenneths]

There is a feeling I have, NBC has a presence in all states of Nigeria but they do not build houses to accomodate their travelling management.

These managers lodge in five star hotels and accumulate large bills for the management to settle. If they build duplexes and maintain in every state capital, expenses will reduce a lot, thereby translating to profits for us shareholders.

I still wonder what they are thinking about this.

[hispy99]

Originally Posted by c kenneths

There is a feeling I have, NBC has a presence in all states of Nigeria but they do not build houses to accomodate their travelling management.

These managers lodge in five star hotels and accumulate large bills for the management to settle. If they build duplexes and maintain in every state capital, expenses will reduce a lot, thereby translating to profits for us shareholders.

I still wonder what they are thinking about this.

Not sure I support this view...How much does it cost to build a duplex? Remember you have to buy the land first. Let's assume it costs N6 million ( I am sure it will cost more than this) multipled by 36 states, gives about N216 million. That is N216 million in real estate sitting on the company's books earning zero revenue; very soon NBC will start to look like a real estate company and not a beverage company. Then you have to think about building maintenance, generators, security, house cleaning (or do we expect an exceutive to lodge in one of these duplexes and clean the house while he is there?)

If the hotel bills are too high then the company should find a way of cutting this down (instead of staying in a presidential suite, stay in a standard room) and do they have to stay in five star hotels? I am sure there are other good hotels that are not necessarily five star.

[pumping]

I want to agree with Hispy99 here.
A similar issue was raised with NB regarding the accomodation of management trainees in the 90s. These trainees usually have to attend speciality trainings in each of the 5 brewery locations in different states in Nigeria and the training can last for more than 2 years. It means NB has to accomodate each trainee for these 2 years or more.
NB has a handful of guest houses in Lagos ,Ibadan and Enugu within the brewery premises which will be filled up with the first batch of trainees or staff but other trainees and staff will be accomodated in hotels.
Based on the analysis provided at that time, it was cheaper to operate this way than to provide additional infrastructure for accommodating everyone in the company guest houses. Also NB felt their core competency is brewing and not estate managment. In this case though, I can assure you that NB does not use 5 star hotels. So for instance, they use Mainland Hotel in Lagos. Also large companies should be able to negotiate good discounts to bring the bill even lower.

[c kenneths]

@hispy99, pumping,
I must have to agree with you that this company produces beverages and not real estate, I also take your point that it costs money to mainain the houses built.

Let us look at this issue from this point of view, ownership. It should be stated here that estate is also an investment in standing in the name of the company, ask mcdonalds and they will tell you better.

I happen to know that this company have a large prescence in most states and the executives, staff and even trainees move regularly. If there is anyway of finding out how much was paid on hotel accomodation in a year in the whole company, 216 million will look like peanuts money. Note that I said one year.

The properties can always be resold for more money.

This is the main problem of NBC, hiring lands, houses, depots and entire plants for prolonnged use.

I can't see any wisdom in this, they are currently housed in leventis property at oyingbo and they use the house as head office for thirty years, you bet your last kobo they will be paying heavily to leventis, now is leventis a real estate business?

[hispy99]

@C_Kenneths

I do not think that you can compare Mcdonald's and NBC the way you did. I do not think that McDonalds has guest houses for its travelling staff. Mcdonalds has two strategies: a) it owns the restaurants and buildings b) It uses franchises; in which case the franchises own the building and Mcdonalds just collects a percentage of the franchise's revenue. By the way, there has been a lot of debate about Mcdoanalds spinning off the real estate it owns into a separate entity (REIT) and focussing on it's core business - making food.

Also, the restaurants McDonalds owns are used to genarate revenue; your plan is for NBC to build duplexes in 36 states which will generate zero income. If you had suggested that they build strategic depots for their products (if they lease such depots now), then I might agree with you. At least they are in control of the depots and can do whatever they like (expand the building, change the layout) e.t.c.

Having a head office they own is a separate issue from building guest lodges in all 36 states. I can see the sense in having their own head office

[c kenneths]

Thank you hispy99, you are now coming closer, I do not want us to divorce the issue at head off ice and the other states, reason - its the same policy created by top management that works in the whole country.

Let's go a bit further than that, in the eighties NBC rented a bottling plant in makurdi and turned the. Private factory into a plant! They also took over vaku-nak at Aba, the large depot they use at Enugu, oyingbo and many other places are all rented.

They actually rented guest houses years back, only to abolish the idea and go for hotels instead.

It is a policy problem, not a pure business decision, leventis is the majority shareholder in NBC and is using the revenue from NBC to shore up their earnings.

The sooner they do something about it permanently, the better for them.