Nairobi Business Ventures (NBV) PLC, a listed commercial company, has reported a significant 107% increase in profit after tax for the financial year ended March 31, 2024, rising to KSh 17.8 million from KSh 8.6 million in 2023. However, this impressive growth masks underlying challenges and strategic shifts within the company.
NBV’s automobile division, historically a key revenue driver, experienced a notable decline. The division’s revenue fell to KSh 420.87 million in 2024 from KSh 550 million in 2023. This downturn appears to have spurred a strategic pivot, with the company focusing on growth in other areas.
In a positive development, NBV’s sodium silicate products emerged as a bright spot, driving overall revenue growth to KSh 412.7 million in 2024, up from KSh 308.3 million the previous year. This significant increase in sales of sodium silicate products played a crucial role in offsetting the decline in the automobile division. Additionally, the aviation division saw promising growth, with revenues nearly doubling from KSh 38.4 million to KSh 73.97 million.
The company’s revenue distribution for the year revealed a relatively balanced mix across its divisions. The trading division accounted for 45.48% of total revenue, while the automobile division, despite its challenges, still contributed 46.37%. The growing aviation division made up the remaining 8.15%, showing potential for further expansion.
NBV implemented several strategic initiatives to navigate the challenging business environment. A key focus was on cost optimization, which led to a dramatic reduction in administrative costs by more than 65%. This move significantly improved the company’s operational efficiency. Furthermore, NBV made substantial progress in debt reduction, with liabilities falling by 55%. This was largely due to a remarkable decrease in finance costs, which plummeted from KSh 151.9 million in 2023 to just KSh 22.6 million in 2024. The company also pursued market expansion efforts, particularly evident in the growth of its aviation and sodium silicate businesses.
These strategic measures contributed to a 44% increase in profit before tax, rising from KSh 25 million in 2023 to KSh 45 million in 2024. In a statement, NBV highlighted the importance of these initiatives: “To navigate these challenges, the company implemented several strategic initiatives including cost optimization measures and market expansion efforts, which played a crucial role in maintaining profitability.”
Despite the overall profit increase, some financial indicators showed mixed results. The company’s net assets saw a modest increase, rising to KSh 670.8 million from KSh 653 million in 2023. However, both current and non-current assets experienced a slight reduction. A more significant change was observed in the company’s cash position, with cash and cash equivalents decreasing dramatically from over KSh 43 million in 2023 to just above KSh 2 million in 2024. This substantial reduction in liquid assets could potentially impact the company’s short-term financial flexibility.
On the tax front, NBV saw its obligations rise from KSh 6.6 million in 2023 to KSh 8.2 million this year. However, the increased tax burden did not significantly affect the overall profit margin, thanks to the substantial reductions in finance costs and other major expenses.
Looking ahead, NBV plans to further optimize costs and diversify investments, with a particular focus on expanding its aviation wing. This strategy aims to offset the declining automobile business and “survive market storms in the incoming financial year.”
The company’s share price closed at KSh 2.34, reflecting a year-to-date loss of 13.3%. This decline suggests investor caution regarding NBV’s strategic shift and its ability to sustain growth and profitability across its diversified business segments.
NBV’s board and management reaffirmed their commitment to executing their strategy, stating, “The board and management remain committed to executing our strategy and focusing on profitable ventures that will deliver value to our shareholders.”
As NBV continues to adapt to changing market dynamics, the coming year will be crucial in determining whether its strategic pivot can successfully steer the company towards sustained growth and profitability. The focus on expanding the aviation division, coupled with the strong performance of sodium silicate products, may provide the diversification needed to weather the challenges in the automobile sector and drive future growth.
