Further to the release of results by Courteville Business Solutions on the floor of the Nigerian Stock Exchange (NSE), Obiora Tabansi Onyeaso, CEO of Customs Street Advisors conducted an interview with Mr. Adebola Akindele, the group managing director, in which he discusses the context of the business performance.

We share with you the details of this Q&A session.

Q: Courteville Business Solutions has just published its half-year results. Could you provide some context to the company’s performance over the last 6 months?

AA: The bottom-line is that since the beginning of the year the economic environment has been very challenging in Nigeria, and indeed around the world. In Nigeria, companies faced peculiar difficulties emanating from tensions and uncertainty in the pre-election period, as well as the sharp drop in oil prices, Nigeria’s main foreign exchange earner. These drained business confidence and shrunk consumer spending.

With the inauguration of the new administration at the end of May, an uptick has been observed but its impact has not moved the needle yet. Cash flow around the economy remains very tight. As the APC-led Federal Government settles down, I expect that budgets will be freer and the trickle-down effects felt across board.

Notwithstanding the turbulent conditions, the company delivered results commensurate with its performance for the same period last year. A majority of the quoted companies are reporting a decline in earnings. Courteville’s superior execution, and disciplined resource management helped us weather the storm. My expectation for the second half of the year is for improved performance and expanded market opportunities. 

Q: Courteville’s award-winning AutoReg product has attained dominance in its space, and is extending its lead to other countries. Over the 3-5-year horizon how do you see the other Courteville brands faring in their different segments against competitors?

AA:     As at today, Courteville has about ten brands that cut across business management, ecommerce, education, insurance, regulatory supervision, and transportation. In segment leadership, our brands fall into two categories. Those that have attained market leadership positions such as AutoReg, NAPAMS, and CIID, and those that are climbing to the top, for example, Egole, and Webpeople.

In every sphere our strategy is always different from those pursued by our competitors. A lot of careful thought goes into selecting the business areas we enter, and how we position ourselves with compelling customer value. Beyond that, we ensure that resources are used optimally.

For example, in ecommerce, our Egole platform is an aggregator, which saves us the overhead costs of carrying inventory. In fact, Egole has the lowest operational cost among ecommerce sites in Nigeria. We have a large salesforce trained to push all our brands so we do not need to increase the payroll. Again, Courteville’s robust and versatile technology platform means that we will not be spending heavily to scale up our offerings nor wasting valuable time in product development. Our track record of win-win outcomes with partners stands Courteville out against competing providers.

Innovation marks every brand in our stable. For example, in education, there is nothing comparable to Courteville’s Relay product in Nigeria. I am confident that in the next 2 to 3 years, all our brands will be in pole position.

Q: Honda, the Japanese automaker, recently announced its intention to commence manufacturing of its popular Accord model in Nigeria. The local plant will have a capacity for 1,000 cars per annum. Other global carmakers have expressed similar intentions. Do you expect that they can meet the demand from Nigeria’s rising middle class?

AA:     When speaking of local automobile manufacture, there are two sides to the demand equation. A lot of the debate has focused on how quickly car manufacturers establishing in Nigeria can ramp up production. What has not received adequate attention is the price appeal of brand new locally manufactured vehicles versus fairly-used imported ones.

Through the AutoReg platform, which manages motor vehicle administration in 22 of the 36 states of the federation and Federal Capital Territory, I have the most accurate and comprehensive database on car registrations in Nigeria.

In the last few years, about a million new cars are added to the AutoReg database every year. I am not referring to renewals, but vehicles being captured for the first time.

If one puts Honda’s planned production of 1,000 per annum beside that figure it is a drop in the ocean. Honda’s entry is a good start and a vote of confidence in the sustainable buying power of Nigerians but it will not make a dent anytime soon.  For the near future, the needs of the majority of car buyers in Nigeria can only be met by imports because these manufacturers’ efforts are mere drops in the ocean.

Beyond the issue of plant capacity, another issue that must be considered is how these carmakers price their output to reflect the purchasing power of the Nigerian car buyers. Their prices must match or, in fact, be lower than what it costs to bring in a fairly used vehicle into the country. The last thing the buyers want is monopolistic pricing due to any tariff disadvantages that imported cars may come against.

Let us not forget that buyers at the luxury end of the market will continue to resort to importation as the likes of Mercedes Benz, BMW, Audi, and Range Rover have no plans of establishing production capacity here.

Q: Within the space of a few months Courteville made two major announcements. The company announced the acquisition of Priority Loss Adjusters in Jamaica, its first cross-border acquisition. It also disclosed its entry into Zimbabwe. Could you share the rationale behind these two international moves?

AA: In 2013, our board adopted a 5-year strategy. Two key parts of the strategy were diversification away from the risks of exposure to a single economy, that is, Nigeria, and the search for new sustainable sources of foreign earnings. As Courteville has grown, the company must manage rising foreign exchange costs in the normal course of its business. These need to be mitigated by earning income abroad.

After the board gave the green light, our management team began to scan international markets to find opportunities that match our particular strengths and criteria. Out of a good number of options, we selected Jamaica and Zimbabwe.

In Jamaica, after we explored different entry options we settled on the acquisition of Priority Loss Adjusters Limited, an existing major player in motor vehicle administration, testing, and loss adjustment, to gain a foothold there. This was the fastest route to market for Courteville, and allowed the company to gain the knowledge-base of a successful local operator. The price was also attractive. I am proud to say that within two months of the purchase, the Jamaica operation has broken even.

In Zimbabwe, Courteville has entered a partnership with a local company to offer its insurance documentation and database management software there. Zimbabwe is the spearhead of Courteville’s entry to other countries in East Africa, and the SADC regions.

In the two countries, our mode of entry was a means to an end. It was to get Courteville in, and permit the company to expand its suite of services over time. Most important, operations in the two countries are going to be generating dollar revenues.

In West Africa, Courteville has reached an advanced stage of talks to begin business in Guinée-Conakry. The company has also received the necessary approvals in Kenya, and will begin operations there in 2016.

Q: Since the company went public in 2009, Courteville has consistently paid dividends. Last year was the exception. Does this mark a change in the company’s dividend policy?

AA:     Not at all. Courteville has never missed an annual dividend payment. What happened last year was a technical accounting glitch that sprung up in our filing at the Nigerian Stock Exchange. At the time, it was too late to correct that.

The board remains resolute that the company maintains its dividend policy, and shareholders adequately compensated for last year’s skip. Dividend payments to shareholders are a matter of trust and consistency, which Courteville will continue to honour.

Q: Early this month the NSE refuted speculation that a new par value rule that would permit stock prices to drop below N0.50 had become effective. Despite its fundamental value and outlook, Courteville’s shares trade at the current par floor. Do you feel that there are aspects of your business that the market has ignored or misunderstood?

AA: Anyone who takes the time to perform a basic analysis of Courteville’s performance will quickly realize that the intrinsic value of its stock exceeds the 50 kobo price at which it trades on most days, not to talk of falling below that price.

This company has never reported a loss, generates good cash flow, pays dividends regularly, and has a stable management team whose owner-manager status aligns its interests with those of shareholders. The company’s services are strategically placed as the gateway for different sectors that are growing at an impressive rate such as transportation, healthcare, education, and insurance, to name a few.

The market response to Courteville’s stock does not reflect the true state of its business fundamentals and outlook. I admit that in the past the company has not been proactive in trumpeting its achievements or engaging with the investment community outside pro forma regulatory requirements such as periodic filings and the annual general meeting. The management team were busy running the company for profitability, which we believed was enough to endear us to investors.

That is changing. Right now, Courteville has an investor relations program in place. We are also working closely with the Nigerian Stock Exchange to raise the company’s profile.