Africa Prudential Plc is making a major rebound this year from three years of falling profit to register a 13 per cent growth in after-tax profit to N936 million at the half year. The company’s resort to digital technology income underlies its renewed strength in earnings.
Income from digital services has been on the rise since last year when it grew by 58.5 per cent to N667 million. This year so far has seen a strong acceleration to 355 per cent year-on-year to N562 million at the end of June 2022, according to the company’s half-year report.
In his comment on the company’s performance at the half year, its chief executive officer, Obong Idiong said “the 355 per cent growth in digital technology income highlights the success of our switch to a technology-oriented business and we remain positive about the potential growth from this revenue stream in the medium to long term”.
The registrar and investor relations service company has faced the challenge of underperformance of its core business of share registration in recent years, which compelled its management to embark upon diversification efforts.
According to Idiong, the effort has succeeded in yielding multiple income lines, which are led by digital technology income. Overall, gross earnings grew by over 19 per cent year-on-year to nearly N2 billion at the half year.
This is an upturn from less than a 4 per cent increase in gross income to N3.52 billion for the 2021 full-year operations. Earnings from customer services rose by 79 per cent year-on-year to N928 million at the half year, accelerating from 30 per cent growth at the end of last year.
Powered by the strong growth in revenue, the company’s profit accelerated from N403 million in the first quarter to N533 million in the second, adding up to N936 million for the half year.
The quarterly profit growth rate sped up from 5 per cent in the first quarter to 13 per cent growth at the half year. The improved prospects raise hopes for a turnaround for the company after having lost profit every year since 2019.
The company’s profit went down from close to N2 billion in 2018 to N1.7 billion in 2019, dropped to N1.45 billion in 2020 and slipped further by 2 per cent to N1.41 billion in 2021, marking the lowest profit figure in five years.
The inability to grow other major income lines remains a challenge to management. Other income dropped over the review period by close to 75 per cent to below N22 million.
Interest earnings from investments continue to record disappointing performance, dropping by 8 per cent to N1 billion at the half year. This is extending from a drop of 12.5 per cent to N2.1 billion at the end of last year.
Some improvement in interest income may be expected in view of management’s build-up of the investment portfolio and the general increase in interest rates. Debt instruments holdings have expanded by about 27 per cent to N13 billion at the end of half year after a drop in the preceding year.
Also, a major expansion of the company’s balance sheet by 142 per cent to over N38 billion at the end of June 2022 could further boost earning capacity.
The company also made some cost savings from drops in credit loss expenses and finance costs to compensate for the areas of revenue losses.
With additional cost efficiency achieved in other areas, management was able to improve profit margin from its good record of 40 per cent at the end of last year to 47 per cent at the half year.
The enhanced earnings momentum in the second quarter has raised the company’s outlook for the second half, raising hopes for a turnaround from three years of declining profit.
The company earned 47 kobo per share in the half year, up from 41 kobo per share in the same period in 2021.
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