Africa Prudential: Revenue Losses Keep Profit Off-track For The Second Year
Africa Prudential Plc, a registrar and investor relations service company faces revenue losses for the second year that have pressured profit off track. Revenue is gaining speed downward in the current financial year but the company’s management is keeping costs in check to slow down the pace of profit drop.
A major revenue line of the company – retainership fees was completely lost in the first quarter ended March 2020. Another major income line, fees from corporate actions, fell by 86 percent during the quarter. Also, interest earnings from treasury bills, which was the second-highest revenue source last year, dropped by 54 percent at the end of March.
Management was able to stem the rapid revenue losses in the key income lines by expanding its digital consultancy services and raising interest earnings from deposits. The effort multiplied fees from digital solutions to customers by close to 11 times to N78 million while interest income from deposits – the main revenue line, grew by close to 23 percent to roughly N542 million in the first quarter.
The company held customers’ deposits of N8.7 billion at the end of the first quarter from which it built interest yielding short-term deposits. The investments rose by 31 percent in the first quarter to N1.8 billion from the closing figure in 2019. The company also carries a portfolio of investment securities of N14.8 billion, which is a sustaining drop from the peak figure of N17.5 billion in 2018.
Revenue losses outweighed the gains and the company ended the first quarter with an accelerated drop in gross earnings at over 14 percent. Its revenue had fallen by roughly 13 percent at the end of 2019 from the peak of N4.5 billion in the prior financial year.
Finance expenses disappeared completely in the first quarter, which provided a major cost-saving that moderated the impact of the revenue losses on the bottom line. The company still lost profit at the end of the first quarter but it was a slowdown from a drop of 14 percent in 2019 to 10 percent at the end of the first quarter.
The company closed the first quarter operations with gross earnings of N743, which is a drop of 14.5 percent year-on-year. This is the outcome of loss of major revenue lines during the quarter and an improvement of the company’s main earning source – interest income. Non-interest earnings dropped by 52 percent to over N131 million over the period.
Management kept operating expenses at moderate increases, which however reinforced the drop in revenue. Consequently, the company lost as much as over 25 percent of pre-tax profit – which amounted to N413 million at the end of the first quarter.
A complete absence of finance cost that was as much as N101 million in the same period last year provided a significant cost saving for the company. The company paid off all its interest-bearing debts in the course of last year’s operations.
The cost-saving from the cost of finance countered a good part of the drop in pre-tax profit. At roughly N342 million in the first quarter, after-tax profit recorded a less rapid drop of over 10 percent year-on-year than the 14 percent drop at the end of 2019.
Earnings per share amounted to 10 kobo at the end of the first quarter, a drop from 17 kobo per share in the first quarter of the previous year. The company earned 84 kobo per share at the end of 2019 and gave out a cash dividend of 70 kobo per share to shareholders.
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