Redstar Express Positions for Growth

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Goddy Egene writes that Redstar Express Plc is making investment and expanding its service offerings to take advantage of business opportunities in the industry and deliver better returns

Red Star Express Plc is one of Nigeria’s foremost logistics solutions providers, operating through four divisions and business units. The firm specialises in areas such as express delivery, logistics, freight, outsourcing services, supply chain management, e-commerce facilitation, printing and packaging, e-archiving, as well as agro trade logistics.

The company has been doing well over the years, reporting improved results and rewarding investors with good dividends. For instance, Redstar Express posted a revenue of N10.459 billion for the year ended March 31, 2020, up from N10.067 billion in 2019. Cost of sale stood at N7.864 billion compared with N7.290 billion in 2019. Administrative expenses increased from N2.131 billion to N2.164 billion.

Other income got a boost rising from N119 million to N272 million, making the company to end the year with an operating profit of N792.791 million, up from N764.581 million. Finance cost jumped by 60 per cent to N60.496 million as against N33.906 million in 2019.

As a result, profit after tax recorded a marginal growth from N743.469 million to N750.080 million, while profit after tax (PAT) printed at N468.989 million, up from N466.248 million.

Based on the performance, the directors recommended a dividend of N324 million, which translated to 35 kobo per share. Redstar Express Plc grew its balance sheet size by N1.8 billion with total assets and shareholders’ funds closing at N7.3 billion from N5.5 billion.

Commenting on the results, Group Managing Director/CEO of Redstar Express Plc, Dr. Sola Obabori, despite the odds within the year, that performance came out of determination, continuous partnership with the industrial sector, launching of new service offerings, extensive retail outlets to cater to the needs of the Small and Medium Enterprises (SMEs), and continuous digitisation of its operations and customer-facing platforms.

“We are assured that as these efforts continue to mature, more visible impact on revenue and profits will be recorded,” he said.

Obabori explained that the industry witnessed the entrance of new players across the various service offerings of their company in the year under review.

“FinTech, as they are called, also played significant roles in disrupting and reshaping the direction of competition as ride hailing companies with sophisticated applications veered into delivery business in order to salvage their businesses and create new revenue streams in the face of stiffer regulations,” he said.

The GMD/CEO disclosed that the overall industry performance was hampered in the last quarter of the financial year as a result of the COVID-19 pandemic which saw the total closure of airports to passenger traffic except for humanitarian and essential services where our industry is categorized and therefore given some level of exemption.

According to him, the most hit industries being Aviation, Hospitality, Travels, Tourism and Entertainment whilst Agriculture, Food Supply Chain, Telecommunications, Internet Service Providers, e-Commerce, Medicals, Pharmaceuticals and Diagnostic industries are well positioned to be at the forefront of harnessing the opportunities.

He said the courier, express and parcel industry, being a support structure for these industries to reach the markets will also benefit immensely from these opportunities.

Obabori assured that in line with its people-service-profit (PSP) philosophy, the company has remained focused on maintaining its leadership position in Nigeria and in building capacity for the African market.

This, he said, is being done by hiring skilled workforce who are trained and re-trained in order to continually deliver superior financial performance and wider social impact.

“In addition, we are committed to strengthening our first-to-last-mile capabilities by expanding our investments in distribution centres and vehicular assets across the country of Nigeria and in our branches within West Africa that will support new business units focused on e-commerce, agro cold chain distribution and partnership with airlines for Cargo consolidation operations, among others.

“These have no doubt helped to further diversify the revenue profile of our company in the concluded year and will remain strong growth platforms for the future,” he added.

Speaking on the future prospects, Chairman of Redstar Express Plc, Suleiman Barau, said that although the battle against COVID-19 is still uncertain, their top priority remains the health and safety of their employees, customers and the communities they serve.

“As we journey through the new financial year, we acknowledge the challenges that may be posed by the ravaging pandemic which will continuously be changing the socio-economic dynamics.

“However, the board and management have a solid commitment to continuously explore new opportunities for revenue generation and expansion by investing strategically in the appropriate resources while also providing a conducive and friendly working environment to keep the entire staff motivated to deliver their best,” he said.

According to the chairman, they plan to continuously deliver a strong and sustainable performance that enhances maximum returns to our shareholders, as they march forward in the year with confidence and optimism, knowing full well that their businesses have been repositioned to take advantage of key opportunities as we stay on course in the execution of our growth strategy.

“Further to the notable success of the Right Issue concluded in March 2020, the company is well positioned to execute its next phase of growth strategy which will see the expansion of new product offerings across the company and its subsidiaries whilst also investing on strategic assets that will shape the future as we seek to also lead in the digital revolution within our industry,” Barau said.

As part of efforts to boost its bottomline, Redstar Express Plc recently commenced delivery of fresh groceries for its customers in major cities across Nigeria. Customers will now be able to send and receive fresh organic products ranging from fresh vegetables/crops to frozen foods (chicken, beef).

According to Obabori, the service was created in response to changing consumer behavior following the impact of the COVID-19 pandemic.

“We are mindful of how customers’ shopping habits have changed since the pandemic became widespread. Nowadays, most customers are purchasing products online and having these products delivered to them in their homes. To avoid the risks involved in staying in crowded places, less people will be going to the markets to buy food stuffs for their homes. The need to have these items brought to their homes has become vital; making it a challenge that we are looking to provide a solution for with this new service,” he stated.

He explained that with the Express Groceries service, deliveries are made using vehicles that are equipped with temperature-controlled storage units that ensure that groceries are preserved until they are delivered.

Similarly, in another move that will increase its revenue and profitability,Red Star Express Plc, commenced its general sales agent (GSA) services with Azman Air Services Limited. Under this partnership, the company is connecting passenger goods and packages from one airport to another using the airline’s carriers. Cargo goods can now be transported, in a short space of time, to various destinations within Nigeria, including Port Harcourt, Kaduna, Kano, and Abuja.

The company had commenced a similar arrangement with AERO Contractors in June while talks are said to be ongoing with other reputable airlines in the country and abroad.

Obabori said the new development is in line with the company’s expansion drive, especially in the cargo transport and consolidation business.

“We have identified cargo consolidation as a key area to extend our business into. We commenced the partnership with Aero Contractors in June and now we have Azman Air on board as well. Discussions are ongoing with other airlines, especially the international airlines, to achieve similar outcomes. It is our ambition to become the leading provider, especially in this aspect of the logistics industry,” he said.

Redstar Express is also in the forefront of advocacy for the federal government to simply the process of exporting agricultural produce. The company’s GMD/CEO explained that while the country stands to benefit from a simplified process of export such produce, the company has made significant investments so as the also benefit.

“I am aware that there are various efforts going on right now to address this situation. Red Star Express Plc belongs to a number of reputable business associations that hold regular dialogues with the government to reduce the complexities at the ports. I am optimistic that these efforts will soon become fruitful.”

Obabori explained that Kenya, for example, is experiencing growth in its agricultural sector, exporting fresh flowers and many other fresh agricultural products into the European markets and that has helped their economy tremendously.

“In terms of production, Nigeria has a bigger capacity than Kenya. However, with the complications experienced at the airports, our export capabilities are shackled.”

He said, however, the company have made efforts towards providing logistics services to support importers and exporters through the acquisition of new assets. “We have massively invested in new trucks and motorcycles as well as other essential assets. In spite of the Covid-19 pandemic, we have retooled successfully. We have cold-chain trucks that can move fresh produce from the farms to retail stores across the country. For example, if you run a poultry shop and you are producing your poultry products, we can support your company by using our Cold-Chain trucks to move those products from where they are produced to the retail stores where they can be sold to the final consumers,” he said.

The company successfully raised N1.347 billion from existing shareholders through the rights issue early in the year, which has positioned the company to execute its expansion and diversification plans.

Obabori had said the additional capital was to accentuate the growth potential already put in place by the company’s management.

“This move underlines our ambition to maintain the expansion activities undertaken in the last few years. After opening international offices in Niger Republic, Burkina Faso and Benin Republic, we have established new business lines in the Agricultural and Technological sectors of the economy. This right issue represents the next logical step in this regard,” he said.

According to him, the company had a promise to keep towards our shareholders, which was which is to continue providing superior returns on their investment in our business.

“With this additional capital, we will be able to ensure considerable growth of the company; making it more profitable and in a position to continue fulfilling that promise,” he added.