Africa Prudential’s Income Diversification Creates First Quarter Rewards

Africa Prudential Plc has opened the 2022 financial year with N908 million gross earnings, strong first-quarter earnings that are read as a positive signal for triggering growth this year after last year ended with earnings flat. 

The registrar and investor relations service company raised gross earnings by almost 10 per cent year-on-year to N908 million in the first quarter ended March 2022.

The company’s interim financial report for the period also shows an improvement in after-tax profit at 5.7 per cent to N403 million. In a press release, Obong Idiong, the company’s managing director/CEO described the earnings results for the quarter as a positive starting that reflects management’s effort at changing revenue structure from traditional mono-product to multiple income lines.

Idiong also identified innovations in service delivery and cost efficiency adaptations as key success factors in the year’s operations so far. The efficacy of the company’s diversified business model is affirmed by a 212 per cent upsurge in digital technology income, amounting to N310 million for the first quarter.

Idiong said the company is positive about the potential growth of the newly explored digital technology income stream in the coming quarters and in the long term. The improvements in revenue and profit indicate that a year of an upturn in earnings may be in the making for the company for the first time since 2019. Revenue and profit had dropped in 2020 and closed flat in 2021. This year, the revenue numbers are quite upward bound but costs are forecast to increase ahead of revenue.

The company’s second-quarter earnings forecast expects revenue to improve from N908 million in the first quarter to N1.1 billion in the second. That will take the half-year revenue figure to N2 billion, which will be a year-on-year increase of 17.6 per cent from the N1.7 billion gross income the company posted for the half-year in 2021.

The projected revenue increase is expected to come from the new income driver – businesses in digital technology, according to the company’s forecast. This will be supported by earnings from registrar services and product sales. “We also expect that our investment income line will grow significantly in Q2 as given the cyclical nature of our business”, the company’s earnings forecast stated.

The company’s forecast also shows a pre-tax profit of ₦427mn for the second quarter, which will be a drop from ₦552 million pre-tax profit in the first quarter. That can be expected to leave half a year after-tax profit well below the N828 million the company generated in 2021.

The company expects that pressure from cost increases on revenue will be experienced in the second quarter, which explains the drop in profit anticipated for the period. Personnel expenses are expected to grow in the second quarter, which the company’s management said in its forecast is necessary in order to drive the business initiatives and generate the expected income.

Also, operating expenses are expected to claim an increased proportion of revenue in the second quarter, which would raise the operating cost margin from less than 23 per cent in the first quarter to 26 per cent, according to the forecast. The company said the cost increase is necessary to foster improved earnings performance in the period.

Africa Prudential’s half-year operations last year equally ended in a profit drop, which is expected to sustain this year. An upturn in the second half needs to happen in order to activate profit growth functions for the full year.

The company suffered a slip in profit last year from the lowest in four years mark of N1.4 billion it recorded in 2020. Profit numbers are down from the peak figure of almost N2 billion in 2018, dropping to N1.7 billion in 2019, down to N1.4 billion in 2020 and yet further down slightly in 2021.

The company produced earnings per share of 20 kobo at the end of the first quarter, a slight improvement from 19 kobo per share in the same period in 2021. It closed the 2021 full year operations with earnings per share of 71 kobo and declared a cash dividend of 50 kobo per share.

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