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Back You are here: Home Business Stock Analysis Corporate Focus Resort Savings & Loans Plc: The Drums Ahead

Resort Savings & Loans Plc: The Drums Ahead

IF you one of those expecting very good news to emanate from Resort Savings &Loans PLC by the end of this financial year, do not be surprised that it may not great celebration all the way. Sure, the drums seem set to be rolled out to celebrate but it may still wise for the Board of Directors not to let this translate fully into proportionately higher dividend. That is where the comma seems set to punctuate the year's possible joy.

All these, of course, are based on the company's figures to September released not too long ago to the stock market. According to the interim results, a combination of different factors acting positively had so far, made available N148.1m in distributable profit compared to only N2.02m by the same time in 2010. This resulted from equally impressive in profit before tax to N211.5m.

Three major factors were responsible for this. Firstly, the company's gross earnings was 24.9 per cent up by September at N945.9m from N757.3m previously. Secondly, the decrease in cost of funds that majority of companies enjoyed this year, chipped its own helping hand. This was because the interest payable by Resort Savings dropped by 28.1 per cent to N62.9m from N87.5m.

Lastly, even operating costs pressure grudgingly handed in its own bit. This was because by September,the growth recorded was 19.3 per cent. That is it grew from N563.1m to N671.5m; well behind the increase recorded in earnings.

In the end, according to the figures,  as against a struggling 0.29 per cent profit margin by September 2010, Resort Savings was showcasing 22.4 per cent so far this financial year. That, certainly, was more than enough to raise high hopes for higher dividends come next annual general meetings. Unfortunately, there are caution signs from the liquidity angle.

Resort Savings grew its loans and advances by 42.5 per cent so far, not because its deposits grew that fast, (it actually rose by only 2.24 per cent) but because it drew down money on placement with banks by 81 per cent to N109.6m and as at September end, also had cash that was 34.2 per cent down.. at N163.1m. If this trend continues to year end, it may be wiser not to be too liberal with dividend recommendation in spite of any leap in available profit to share.

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