Nigerian Aviation Handling Company Plc (NAHCO) has written off N737 million owed to it by Airlines as allowance for expected credit loss as trade receivables surged to N2.32 billion.
The allowance for expected credit loss represents 32 percent of the gross trade receivable balance as at 31 December 2021, according to notes from the financial statements seen by MoneyCentral.
Trade receivables are invoices on ground handling services issued to customer’s net of taxes and allowance for expected credit losses on the debts. The group’s credit policy allows a 30-day credit period for all its customers.
NAHCO Group continues to grapple with uncertainty over the collectability of contract receivables from specific customers. This condition became heightened as majority of the airlines that constitute the Group’s major customers are yet to recover fully from the impact of Covid 19.
The expected credit loss on NAHCO trade receivables were in respect of receivables for which the Group has determined that there are objective indicators of impairment.
Impairment losses have been recognized based on the difference between the carrying amounts and the present value of the estimated future cash flows on these receivables. The Group holds no collateral in respect of its trade receivables. Expected credit loss on trade receivables is recognized in Statement of profit or loss and other comprehensive income.
For trade receivables, the Group applied the simplified approach in computing ECL. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date.
An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit loss (ECL). The provision rates are based on days past due for groupings of various customer segments with similar loss patterns.
When trade receivables are uncollectible, it is written off as ‘administrative expenses’ in the profit or loss. Subsequent recoveries of amounts previously written off are included in other operating income.
The principal activities of the NAHCO Group are the provision of services including aircraft handling, cargo handling, passenger handling, passenger profiling, crew transportation, energy and power distribution and leasing of ground handling equipment.
A dividend in respect of the year ended 31 December 2021 of 41k per share, amounting to N665 million (2020; N203 million) was proposed at the board meeting held on 29 March 2022 and subject to the approval at the Annual General Meeting.
In addition, the Directors recommended a script issue of (1) for every five (5) shares held by the existing shareholders as fully paid-up shares amounting to N162 million (Gross of withholding tax) to be capitalised from retained earnings.