NGX Group: PBT emerges strong amid decline in operating expenses

By Philemon Adedeji

Nigerian Exchange Group (NGX Group) Plc in its unaudited first quarter (Q1) results ended March 31st, 2023 reported Profit before Income increased by 21.5 per cent Year-on-Year (YoY) to N412.2 million in Q1 2023 from N339.2 million reported in the corresponding period in 2022 over decline in operating expenses and finance costs.

From the profit and loss figures, the group’s profit for the period grew by 109.0 per cent increase to N310.0 million in Q1 2023 from N148.3 billion in Q1 2022, resulting in significant growth in profit after tax margin to 23.3 per cent in Q1 2023 from 8.9 per cent recorded in Q1 2022.

NGX Group recorded a 14.2 per cent YoY decline in gross earnings to N1.6 billion in Q1 2023 from N1.8 billion in Q1 2022, driven by a 20.5 per cent dip in revenue following a period of high economic and socio-political uncertainty. On the other hand, other income grew by 57.7 per cent, offsetting the drop in revenue.

The Group’s top-line revenue fell by 20.5 per cent to N1.3 billion generated in Q1 2023 from N1.7 billion generated in Q1 2022, driven primarily by reduced business transactions and consumer spending that resulted from the recently concluded general election and the CBN’s attempt to phase out Nigeria’s old higher denomination of banknotes.

Transaction fees, which accounted for 51.5 per cent of revenue, dropped by 30.6 per cent YoY to N685.9 million from N988.1 million accounted in Q1 2022, due to reduced business activities.

Treasury Investment Income (31.1 per cent of revenue) also dropped to N414.7 million in Q1 2023 from N520.5 million in Q1 2022, primarily driven by relatively lower yields on the Group’s treasury investment portfolio owing to the unfavourable market conditions and uncertainties during the general election period.

The Group recorded a 44.6 per cent listing fees growth to N179.2 million in Q1 2023 from N123.9 million in Q1 2022. Growth in listing fees was driven by increased demand for listing services by domestic firms.

Rental income (2.7 per cent of revenue) earned from NGX Real Estate, lease of office floor spaces, recorded a 32.2 per cent increase to N36.0 million in Q1 2023 from N27.2 million recorded in Q1 2022.

Other fees representing rent of trading floor, annual charges from brokers, dealing licenses, and membership fell by 1.2 per cent to N16.5 million in Q1 2023 from N16.9 million generated in Q1 2022.

Other income (14.9 per cent of gross earnings) grew by 57.7 per cent to N233.4 million in Q1 2023 from N148.0 million in Q1 2022 due to increased earnings from sundry, other sublease, and penalty fees which all combinedly accounted for 65.2 per cent of total other income.

Market data income fell by 38.0 per cent to N57.3million in Q1 2023 relative to N92.4 million recorded in Q1 2022.

Technology income recorded as N23.9 million accounted for 10.3 per cent of other income.

Total expenses fell YoY by 10.0 per cent to N1.7 billion from N1.9 billion in Q1 2022, primarily driven by reduced personnel expenses and a fall in finance costs.

As regards to  Operating Expenses, the group reported 13.9 per cent YoY growth to N390.8 million in Q1 2023 from N343.0 million achieved in Q1 2022, generally due to increased operational activities amidst the Group’s preparation for full physical resumption to office.

Personnel expenses were down by 9.95 to N629.0 in Q1 2023 from N698.0 million in Q1 2022: Salaries and other Staff Benefits (93.4 per cent of personnel expenses) decreased by 8.7 per cent YoY to N588.1 million in Q1 2023 from N644.3 million in Q1 2022 due to streamlined operations and improved efficiency.

Earnings Before Income Tax Depreciation and Ammortisation (EBITDA) fell by 30.3 per cent to N545.8 million from N783.5 million recorded in Q1 2022.

Earnings Before Income Tax (EBIT) for the period was N456.1 million, representing a 29.8 per cent decline from N649.9 million recorded in Q1 2022.

Total assets fell marginally by 4.2 per cent year-to-date (YTD) to N54.7 billion from N57.1 billion as of FY 2022. Investment in associates, which accounted for 55.3 per cent of the Group’s total assets, grew by 1.7 per cent to N30.2 billion at the end of Q1 2023 (Q1 2022: N29.7 billion)

Total liabilities recorded a 12.8 per cent YTD drop to N17.7 billion at the end of Q1 2023 from N20.3 billion as of FY 2022 due to a 53.6 per cent and 74.7 per cent fall in other liabilities and deferred tax liabilities, respectively.

Net assets increased marginally by 0.5 per cent driven by the 1.0 per cent YTD increase in retained earnings (86.6 per cent of Total Equity) to N37.0 billion at the end of Q1 2023 (Q1 2022: 36.8 billion).

KEY RATIOS

The group Return on Average Assets (ROAE) increased from 0.21 per cent as of end of December 31, 2022 to 0.42 per cent as of end of March 31, 2023, reflecting an increase of 100.8 per cent, as Return on Average Assets (ROAA) decreased from 0.83 per cent in full year 2022 to 0.49 per cent in three months of 2023, indicating a change of 40.8 per cent, while Earnings Before Income Tax (EBITDA) margin declined to 40.97 per cent in Q1 2023 from 46.73 per cent as of end of December 31, 2022, representing a change of 12.0 per cent

Also, operating profit margin increased to 8.22 per cent in three months of 2023 from 2.18 per cent in FY 2022, indicating a change of 276.7 per cent, but Profit After Tax Margin grew from 8.85 per cent as of end of December 31, 2022 to 23.27 per cent as of end of March 31, 2024, indicating a change of 163.1 per cent

Commenting on the results, the Group Managing Director/Chief Executive Officer, of Nigerian Exchange Limited (NGX) Mr. Oscar N. Onyema OON said, Despite the challenging macroeconomic environment during the quarter amidst cash and energy scarcity, and political tension from the 2023 elections, the Group remained resilient. We are pleased to announce a 109 per cent increase in net profit, achieved through the implementation of cost-saving measures that minimised the impact of revenue reduction, just as we are exploring new and innovative ways to capture more market share and appeal to a broader demographic.

“The Group will continue investing in innovative marketing strategies to appeal to the changing consumer preferences, as well as explore opportunities to expand product line, portfolio mix, and penetrate new markets. We stay committed to our long-term growth strategy and are confident in our ability to navigate the current challenging environment and create value for our stakeholders.”