Custodian Investment Plc has reported an after-tax profit of N11.7 billion for its second-quarter operations against the company’s forecast loss of N5 billion.
The second quarter’s performance was an improvement on the first quarter’s profit of N10.7 billion, adding a robust N22.4 billion to the company’s bottom line at half-year – four times the company’s forecast half-year profit of N5.7 billion.
The extreme divergence between the forecast and actual earnings numbers speaks of the utter unreliability of the company’s own generated earnings forecasts to investors and other stakeholders and how big the investment risk it carries. Even the half-year after-tax profit figure is more than the company’s third-quarter ending target of N16 billion.
The company’s half-year interim result at the end of June 2024 shows that it raked in gross earnings of N42 billion in the second quarter, which added to the N38 billion in the first quarter to stand at N80 billion at the half-year.
The half-year revenue figure is way off the company’s forecast gross earnings of N62.3 billion for the six months of trading. The spur for the strong profit delivery in the second quarter is the investment arm of the business that delivered a result of N26.5 billion in the second quarter, a massive increase from N7 billion in the first quarter.
The biggest income line in the segment is net fair value gains that rebounded from a loss of N3 billion in the first quarter to N11.5 billion in the second quarter – an increase of 19 per cent year-on-year. It is followed by an interest income that rose by 75.8 per cent to N8.6 billion year-on-year.
However, the net realised gains led the growth in investment income from insignificance to almost N3 billion over the period. Investment results swelled by one-half to N26.5 billion for the second quarter.
The underwriting business improved in the second quarter rather than worsened, as per the reading of the company’s forecast.
Insurance service revenue accelerated from 37.8 per cent growth in the first quarter to 56.5 per cent in the second while insurance service expenses slowed down from over 78 per cent rise to a 3 per cent decline over the same period.
The cost savings powered insurance service increased five and half times to N9.7 billion in the second quarter – a big rebound from only a moderate increase of 5.4 per cent in the first quarter.
Financing operations lost steam in the first quarter, as expenses swelled from both insurance and reinsurance contracts. Net finance expenses jumped by 60 per cent to N17 billion in the second quarter, down from net finance income of N2.6 billion in the first quarter.
The company grew net income by 136.5 per cent year-on-year to over N18 billion in the second quarter, pre-tax profit advanced by 244 per cent to N13.8 billion and after-tax profit multiplied close to four times to N11.7 billion for the second quarter.
The half-year position of the investment holding company shows a combination of outstanding earnings deliveries for the first and second quarters.
Investment results amounted to N33.5 billion at the half year, an increase of 84 per cent year-on-year. Insurance service revenue grew by 47 per cent to roughly N61 billion over the same period while net insurance finance expenses rose by 21.4 per cent to N14.5 billion – summing up to gross earnings of N80 billion at the half year.
Insurance service expenses slowed down in the half year from a 78 per cent rise in the first quarter to 24.7 per cent, standing at N24.8 billion at the end of June 2024. This reflects the decline recorded in the second quarter. But reinsurance expenses maintained its high growth at 48.6 per cent to N19 billion over the period.
The cost saving from insurance service expenses powered insurance service results, which went close to doubling at about 97 per cent to N17 billion in the half year. This is a marked acceleration from a moderate increase of 5.4 per cent in insurance service results to N7.2 billion at the end of the first quarter.
Sustained impressive earning deliveries from investing operations and the upturn from insurance services are the high points of the earnings story of Custodian Investment in the second quarter. The improvements added to the increase in net finance expenses and swelled net income by 155 per cent to over N34.6 billion at the half year. Further cost savings from management and other expenses boosted pre-tax profit – which jumped four times to N25.7 billion.
After-tax profit multiplied four and half times over the period to N22.4 billion, already well over the N19 billion profit the company posted for the 2023 full year.
Custodian Investment earned N3.77 per share at the end of the half-year operations in June 2024, rising from 84 kobo per share in the same period in 2023.
Comments are closed.