NGX Group: Weakened revenue, high operating cost downsize profit
By Philemon Adedeji
Nigerian Exchan ge Group Plc (“NGX Group” or “The Group”) in its unaudited results for the half year ended 30th June 2023, delivered weak revenue and high operating cost which downsized the profit.
The decline in revenue was driven by 14.6 per cent decline in treasury investment income (27.1 per cent of revenue) to N869 million in June 2023 relative to N1,017.4 million in the comparative period in 2022 primarily driven by a comparative reduction in our treasury holdings year over year.
However, the breakdown of revenue reveal a 21.2 per cent decline in transaction fees (57.2 per cent of revenue) to N1,830 million in June 2023 from N2,320.7 million recorded in June 2022 due to a drop in trading activities in Nigerian Exchange Limited (“NGX” or “The Exchange”).
The revenue generated from listing fees increased by 6.7 per cent to N388.1 million in June 2023 from N363.8 million in June 2022 buoyed by improved listing on the Exchange in the first half of 2023 relative to the first half of 2022.
Revenue generated from Rental income grew significantly, earned from NGX Real Estate lease of office floor spaces. There was a 38.6 per cent increase from N51.8 million in June 2022 to N71.7 million as of June 2023.
Revenue generated from other fees declined by 39.5 per cent to N42.1 million in June 2023 from N69.7 million in June 2022, which represents rental income from the trading floor, annual charges from brokers, dealing license, and membership fees earned by the Group.
Also, the group revenue generated from other income was driven primarily by 30.3 per cent improvement in market data income (59 per cent of other income) to N287.98 million from N220.94 million reported in June 2022, which is made up of technology income, other sub-lease income, and penalty fees.
The group recorded 22.4 per cent growth in other operating income (31 per cent of other income) from N122.5 million in June 2022 to N149.9 million in June 2023.
Total expenses grew marginally by 0.4 per cent from N2.60 billion in June 2022 to N2.61 billion in June 2023 primarily driven by a 3.7 per cent growth in operating expenses (39.3 per cent of total expenses) to N1.02 billion from N991.2 million in June 2022.
This was moderated because of a decrease in the finance cost (46 per cent of total expenses) of N1.21 billion related to a term loan facility. Personnel Expenses (53.9 per cent of total expenses) also grew by 4.1 per cent from N1.35 billion in June 2022 to N1.41 billion during the period under review.
As regarding Operating profit, the group reported a 33.3 per cent decline in Operating profit to N1,076 million in June 2023 from N1,613.1 million in June 2022, as a result of the 16.3 per cent decline in revenue YoY.
Gross earnings recorded a decrease of 12.5 per cent to N3.70 billion from N4.22 billion as of June 2022, while other income increased by 24.9 per cent to N490 million from N393 million in the same period.
Profit before income tax (PBT) declined by 40.6 per cent to N726 million in June 2023 from N1,223.2 million in the corresponding period in 2022 due to a reduction in the top line YoY.
Profit after income tax (PAT) declined by 45.9 per cent to N444.1 million from N820.2 million. This also resulted in a decline in profit after-tax margin to 12.03 per cent from 19.45 per cent recorded in June 2022.
ANALYSIS ON THE BALANCE SHEET
In the unaudited results ended June 30th, 2023, the group total assets decreased by 3.7 per cent to N54.94 billion from N57.06 billion in December 2022, driven primarily by a 33.1 per cent decline in Trade and other receivables to N712.86 million from N1,065 million in December 2022, and moderated by a 5.31 per cent growth in Cash and Cash equivalent to N5 billion from N4.75 billion in Dec. 2022.
While, Total liabilities saw a 12.3 per cent reduction, falling from N20.3 billion in December 2022 to N17.8 billion. This decrease was primarily due to the repayment of a term loan that was used to finance investments in selected associates.
In addition, the group shareholders fund increased nearly 1.0 per cent to N37.2 billion as of end of June 2023 from N36.8 billion accounted in FY 2022.
KEY RATIOS
The group Return on Average Equity (ROAE) declined to 1.2 per cent in H1 ’23 from 2.2 per cent in FY 2022, reflecting a marginal decrease of 46.1 per cent, as Return on Average Assets (ROAA) declined to 1.9 per cent in H1,23 from 2.8 per cent in FY 2022, indicating a significant declined of 32.0 per cent, while EBITDA margin dipped to 33.9 per cent in H1’23 from 44.4 per cent in FY 2022, showing a loss of 23.5 per cent.
Operating profit margin decreased to 29.2 per cent in H1 ’23 from 38.3 per cent at the end of FY 2022, a decrease of 23.8 per cent, while Profit After Tax Margin decrease to 12.03 per cent in H1’23 from 19.45 per cent in twelve months of 2022, reflecting a marginal loss of 38.1 per cent.
Commenting on the results, the Group Managing Director/Chief Executive Officer, Mr.Oscar N. Onyema (OON) said, “While our half-year financial results for 2023 may reflect the impact of economic headwinds, NGX Group demonstrated resilience by recording a profit before tax of N0.7 billion.
“We are optimistic that with market friendly pronouncements already made by the new government, trading and listing activities will continue the positive impact experienced in June 2023.
“Consistent with our strategic objective to maximise shareholder value, the Board of Directors has consented to an interim dividend of N0.25 Kobo per ordinary share of 50 Kobo. This translates to a total payout of N495,532,893 (Four Hundred and ninety-five million, five hundred and thirty-two thousand, eight hundred and ninety-three Naira).
“This initiative underscores better flow through of dividend from an associate company and first-time dividend payment from our flagship subsidiary. It also emphasises our continued commitment to working collaboratively with our shareholders and other stakeholders in creating and distributing value, even in challenging market conditions.”
