Africa Prudential Plc experienced a downswing in the third quarter on both revenue and profit fronts and the company lost the operating momentum it gained in the second quarter. The registrar and investor relations service company recorded an extended drop in revenue in the third quarter and its 5 percent improvement in profit at half-year overturned to a drop of 6 percent at the end of September 2020.
Revenue performance weakened from a marginal decline quarter-on-quarter in the second quarter to almost 15 percent drop quarter-on-quarter at the end of the third quarter. That extended the year-on-year revenue drop from 7 percent at half-year to 9 percent.
The company reported an after-tax profit of over N395 million in the third quarter, a drop of 24 percent quarter-on-quarter. The profit drop reflects the accelerated drop in revenue as management kept costs generally under control.
Retainership fees – a major income line that contributed 24 percent of gross income at the end of 2019 remained completely lost so far this year. It is one of the main drawbacks on revenue performance for the company all the way from the first quarter.
However, an exceptional leap in the digital consultancy fee was sustained in the third quarter. The income line advanced from N82 million to N298 million year-on-year at the end of September. Register maintenance fee accelerated from 33 percent growth at half-year to over 47 percent at the end of the third quarter to stand at roughly N183 million.
The robust growths in the two-income lines enabled the company to moderate much of the impact of the absence of retainership fees this year.
Fees from corporate actions, which grew by more than one and half times in the second quarter, declined within the third quarter. At N379 million, it slowed down from a 35 percent increase at half-year to below 26 percent improvement at the end of the third quarter.
Interest earnings from treasury bills remain the weak point on revenue performance this year with a drop of 46 percent year-on-year to N200 million at the end of September 2020.
The company closed the third quarter operations with a balance sheet size of N19.4 billion, a drop from N23 billion at the end of half-year. The principal assets are debt instruments amounting to over N17 billion that account for 89 percent of total assets. Cash resources have dropped by 65 percent to N535 million from the December 2019 closing.
The drop in assets follows a drop in customer deposits from over N14 billion at half-year to N10 billion at the end of the third quarter. Customer deposits account for over 52 percent of assets.
Africa Prudential closed the third quarter operations with gross earnings of N2.6 billion, which is a drop of 9 percent year-on-year. This has extended revenue drop from 7 percent at the end of half-year.
The drawback came from non-interest earnings, which fell by 29.6 percent year-on-year to about N861 million. Interest income also slowed down from 12.4 percent increase at half year to 5.8 percent to close at over N1.7 billion at the end of the third quarter.
Management kept operating expenses in check but the impact of the extended drop in revenue flowed down to profit. The result is a change of position from a slight gain in pre-tax profit at half-year to a drop of 15.6 percent at the end of the third quarter.
Cost-saving in finance expenses was maintained in the third quarter with an insignificant figure compared to N101 million incurred in the same period last year. The company’s balance sheet remained entirely free of interest-bearing debts.
At N1.4 billion at the end of the third quarter, after-tax profit reversed from a 5 percent increase at the end of half-year to a drop of 6 percent year-on-year. Profit contribution per quarter dropped from N835 million in the second quarter to N329 million in the third or from 59 percent to 28 percent of the closing profit figure at the end of September respectively.
The company earned 71 kobo per share at the end of the third quarter, down from 75 kobo per share in the same period in 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.
The full-year earnings outlook hangs largely on whether the company regains strength in revenue performance or slips further in the final quarter. Any gains in revenue can be expected to boost the bottom line with costs already streamlined.
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