May 06 2019
It was January 2017 and one of Nigeria’s leading aviation company listed on the Nigerian Stock Exchange. Medview Airlines listing on the exchange was the first since Transcorp two years earlier, so as expected it created some buzz.
The stock debuted at about N1.50 upon listing and peaked at over N2 a year later as investors hoped its listing will help it dominate the skylines of a troubled Nigerian Aviation Sector. Two years since listing, Medview Plc is being dominated and about falling out of the skies.
Medview’s many problems
Financial Performance – In 2017, Medview posted revenues of about N36.9 billion and profit after tax of about N1.2 billion. It was it’s the best performance in over 5 years. Rather than sustain this performance, things went South with revenues tumbling down by over 74% to N9.5 billion in 2018.
- The company has three main revenue lines are Hajj Operations, International Operations and Local Operations.
- Apart from its Hajj operations with a gross profit of N758 million, International and Local operations posted gross losses of N2.2 billion and N1.4 billion respectively.
- Revenue from its international operations fell from N13.8 billion to N2.8 billion while local operations fell from N14.8 billion to N3.6 billion.
- The company also made provision for bad debt of over N2.5 billion
- In a nutshell, the company made an N10.3 billion loss after tax in 2018, as against a N1.2 billion profit after tax in 2017.
Why are they in so much trouble? The company explained that the reasons for its financial troubles were as a result of “political tension” and “extremely tight market liquidity.” The Chairman of the company, Sheik Abdul-Mosheen Al-Thunayan also mentioned its depleted aircraft due to “C-Check at the early part of 2018 and reprotection exercise” all contributed to the poor performance.
According to the company: “We are currently experiencing a relentless growth in air passenger travel globally, coupled with high and changing expectations and behaviour from passengers. The airline sector in Nigeria is increasingly becoming highly competitive, with an interesting twist of surpassing one another by the major players. Our new competitors are not necessarily registered airlines, but rather charter services by individual and corporate entities who have interest in aviation. Potential passengers are no longer waiting for airline offers to travel round the world, various groups and organization are putting up irresistible packages for passengers and bringing them to fly with registered airline. This in turn is splitting the revenue to be generated by the airlines in scheduled
What this means: In a nutshell, the airline has admitted that it’s getting obliterated by its competition. Changes in passenger disposable income and preference also mean they can’t charge higher to stay afloat. Imagine facing competition from the likes of Airpeace, Arik, Dana and yet have to contend with local private jet operators? Too much to handle.
EU Ban – In 2017, the EU banned several airlines including Medview from flying into its airspace. To continue to cater to its customers, the airline embarked on a reprotection exercise which basically enables airlines to transfer their passengers to other airlines at an often higher cost than the original ticket amount paid by the passengers. Medview lost the plot to transport its passengers directly to London during this period.
Capital Structure: Last May the company announced a planned investment by Avmax, a Canadian firm. This it claimed would enable the airline to expand its fleet.
- The company’s annual report still lists Abdulmoshen Al –Thunayan, Alhaji Muneer Bankole, Ocean Trust Limited as majority shareholders with 36%, 39.5% and 10.2% shareholding respectively, unchanged from 2017.
- So, while the market cap is still about N17 billion, the company is worth just less than zero in 2019.
- Net Assets have not gone from N7.3 billion in 2017 to negative of N4.1 billion at the end of the first quarter of 2019.
- Medview is thus technically bankrupt.
Liquidity status: Medview’s main lender is First Bank Ltd to which it owes about N1.5 billion. It also banks with Zenith, GTB, FCMB and Ecobank. Medviews main creditors are its trade partners which it owes about N14 billion (it was N6.9 billion in 2017). Medviews trade partners are like banks and even more potent than banks. Without them, the airline can’t carry out its daily operations and could effectively run out of business.
What next? Medview is currently between a rock and a hard place. It’s facing competitive obliteration from the likes of Air Peace and Amcon backed Arik. It will either need to raise capital as soon as possible or face imminent liquidation from its lenders. The company also claims it’s pivoting into the aircraft maintenance space, a venture that could cost it billions of naira to float.
As for its passengers, cheaper fairs and better service will naturally take them away from Medview. Sooner rather than later, the company will be out of business, except it takes a drastic step at improving its cash flow.