Not a core investment [& unlikely to be one in the near future unless performance picks up substantially] but I have a few shares.
FY 2017 has been brutal for most listed (& unlisted) firms. I am glad FTGH managed to make a small profit BUT how it navigates 2018 will be key.
Many manufacturing firms reduced sales (on credit) in 2H 2017 which partially explains the drop in turnover.
Sales to Nakumatt probably went to zero in 2H.
Sales to other distributors was probably reduced (as should be) based on slow payments.
Going into the elections probably slowed down trading as banks also reduced credit.
Farming took a huge hit from the drought, elections (fears of PEV), etc
Until we, as Kenyans, realize the need to encourage local manufacturing, such will be the fate of manufacturing firms that have foreign/import competition. Local manufacturing costs due to structural deficiencies are quite high vs some countries.
FTGH needs to:
- Reduce the receivables even if it lowers the turnover [It's better to make less on reduced turnover than have customers who do not pay!] KK did that successfully e.g. not supplying a certain slow-paying airline.
- Reduce admin costs [increase efficiencies?]
- Generate cash [reduce receivables] to pay down debt.
- Develop new distribution channels [company store, direct sales, online sales]
- Apply for reduced electricity tariffs.
- Scale down acquisitions of marginal businesses
Lots of challenges:
- Higher polymer prices. Oil is at $74 (April 2018)
- Higher fuel costs
- Reduced credit for customers
- Higher electricity charges [KPLC shenanigans]
- Corruption
- Competition
Tough times ahead.
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett