The Management team at Madison Financial will be proud of
their performance in 2016 thus far. At the halfway mark, they have achieved a
31% improvement in interest income compared to the halfway mark of last year.
This inspired an increase in profit before tax of 1263% which was largely
attributed to improvements made in its operations. However, the macro
conditions (largely increased lending rates, higher exchange rates and
inflation) continued to impact the business as its cost of sales rose by 49%.
Madison has managed to increase its customer deposits by
over 300% and has increased its loans to them by 13%. So far, they have reduced
their debt by 14% signaling a restructuring of its corporate finance strategy (do
we use borrowed funds, liquidate or finance organically?) as noticed by the
sharp decrease in financing activities on their cash flow statement by 88%.
This has also led to a sharp reduction in its comparable gearing from the
previous year by 142%.
Although Shareholders will note that the return on their
funds dropped from 93% to 76%, their funds still grew by 13% (positive equity
growth). However, return on the firm’s capital employed remains stable at 14%
when compared to the same time in the previous year. Furthermore, improvements
in its non-current asset turnover signals that management is working hard to
push their strategy of exploiting their fixed assets. Patience of investors is
also being tested as no announcement of a dividend has been made in the first
half of the year.
Rising operating costs attributed to a higher exchange rate
and inflation will continue to plague the company. In addition, they will have
to contend with quite a bit of impairment attributed by defaulting SMEs (business
is tough these days). Their strategy will definitely be to reduce this impact in
the coming 6 months while also managing the increased leading rates which it is
currently in competition with the main stream banks and other micro leading
companies.
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