- Capital Market Experts Caution on Equities Investment
Experts in the nation’s capital market have stressed that the positive rally witnessed in the nation’s equities market last week , following the launch of the Investors’ and Exporters’ FX windows, may not be sustained, unless government implemented policies that would stimulate the macroeconomic environment and improve liquidity in the market.
Indeed, the market performance for last week was one of the best recorded in the last two years, as market indices appreciated by 7.68 percent. The last time the stock market recorded such improved performance was in the week ending April 2, 2015, when the index closed with a week to date gain of 18 per cent, valued at a whopping N2 trillion.
The 2015 gain was due to expectations that followed the election of President Muhammadu Buhari, but some experts who spoke in an interview with The Guardian on the development said the renewed investors’ interest in the market currently was optimism that foreign investors are taking position hoping that the country is working towards stabilising the FX market.
Others attributed it to dividend payout from listed firms for the 2016 year end, noting that such appreciation is not sustainable.
However, they maintained that without favourable monetary and fiscal policies from government and other positive macroeconomic variables, the positive sentiments may not continue and the market will not achieve sustainable rebound.
Specifically, at the close of transactions last week, the All Share Index appreciated by 1,956.83 points or 7.46 per cent to 28,192.46 points, while year-to-date gain increased to 4.90 per cent. Also, the market capitalisation increased by N676 billion to close at N9.746 trillion.
On whether the positive sentiments would be sustained, an independent investor, Amaechi Egbo, in an interview with The Guardian expressed delight over the week on week rally in the market, but stressed the need for investors to be cautious while taking position.
“Appreciation in the market numbers week on week is good for the entire market players but we have to remain optimistic cautiously going forward as the closing are a prudent of mix sentiments and positive macro economic variables and outlook.
“We expect the market to experience some slowing down declines depending whether players see value on prices of equities and Q2 and Q3 performance of listed firms. Ultimately, sustainability will depend on reassuring mix of government monetary and fiscal policies positive in macroeconomic aggregate and action of the regulators,” he added.
The President, Proactive Shareholders Association, Taiwo Oderinde, said the appreciation recorded in the market last week may not be sustained.
“ I believe this is as a result of companies declaring dividend for 2016. Even international rating agencies predicted that it cannot be sustained. When quarterly results are coming out for 2017, and the result of 2nd quarter and others cannot surpass that of 2016, the phenomenal growth will not be sustained. The best we can have is linear growth. “
Agreeing, the President Association For Advancement of Rights of Shareholders, Faruk Umar, maintained that the positive sentiment cannot be sustained, while investment analyst and Managing Director of InvestData Limited, Gabriel Omodion, said sustenance is dependent on the strength of low valuation, improving companies and market fundamentals being propel by recovery macroeconomic environment. It also depends on “improving liquidly in the fx market and also expected impact of budget implementation,” he added.
Union Bank Grows Profit Before Tax by N100 Million
Union Bank Plc, one of Nigeria’s longest-standing and most respected financial institutions, grew earnings by 3 percent to N121.8 billion in the first nine months of 2021.
Profit before tax rose by N100 million to N16 billion in the period under review, slightly above the N15.9 billion filed in the same period of 2020, the bank disclosed in its unaudited financial statements released on Thursday.
Net operating income after impairments rose by 3 percent from N69.3 billion in the first nine months of 2020 to N72.12 billion in the period under review. See highlights for further details.
Union Bank Financial Highlights:
● Profit before tax: relatively flat at ₦16bn (₦15.9bn in 9M 2020).
● Gross earnings: up 3% to ₦121.8bn (₦118.8bn in 9M 2020).
● Net operating income after impairments: up 3% to ₦71.2bn (₦69.3bn in 9M 2020) driven by stronger non-interest income.
● Non-interest income: up 26% to ₦42bn (₦33.4bn in 9M 2020) supported by growth in fees and commission from e-business, credit and trade transactions as well as debt recoveries.
● Operating expenses: up 3% to ₦55.2bn (₦53.4bn in 9M 2020), reflecting higher non-discretionary regulatory costs as well as depreciation and amortisation costs from technology spend.
● Gross loans: up 16% at ₦855.7bn (₦736.7bn in Dec 2020) reflecting increased lending to growth sectors of the economy.
● Customer deposits: up 14% at ₦1.3tr (₦1.1tr in Dec 2020) reflecting gains from our marketing drive for low-cost deposits and deepened customer loyalty.
Commenting on the results, Emeka Okonkwo, CEO said: “We continue to demonstrate the resilience of our business despite the volatility in the macroeconomic environment, growing our gross earnings by 3% and delivering stable Profit Before Tax of ₦16 billion. This stability is underpinned by our strategic focus on deepening our customer engagements and meeting their needs as we grow our core business.
“Consequently, our deposit base is up 14% to ₦1.3 trillion and our loan book has expanded by 16% to ₦855.7 billion driven by our compelling campaigns, new product offerings and effective sales channels. We have also achieved stronger transaction volumes across our businesses and channels, driving growth in fees and commissions, while we ensure robust cost controls.
“As we approach the end of the year, we are focused on building on our efficiency and optimising our core business while deepening our relationships with customers.”
Speaking on the 9M 2021 numbers, Chief Financial Officer, Joe Mbulu said: “We are focused on executing our plans for revenue diversification, driving strong growth in transaction volumes while we continue our strong debt recovery initiatives. These are mitigating the on-going impact of relatively low risk asset margins.
“During the period, non-interest income increased by 26% to ₦42 billion, driven by stronger net fee and commissions which gained 44% to ₦10.3 billion from ₦7.2 billion and recoveries which grew by 163% to ₦13 billion from ₦4.9 billion. We also maintained very strong control over our expenses, which grew by 3.3%, well below the rate of inflation as we continue to realise the benefits of our cost efficiency culture and mindset.
“With our capital adequacy ratio at 15.8%, above regulatory requirements and good asset quality with NPLs at 4.7% despite continued growth in our loan book, we are focused on further optimising our capital structure to support our growth plans as we look towards 2022 and beyond.”
Airtel Africa Posts Strong Growth Across its Units, Revenue Jumps 27.6 Percent
Airtel Africa grew revenue by 25.2 percent in the first half (H1, 2022) that ended September 30, 2021 to $2,272 million with double-digit growth across all regions. In the second quarter (Q2) of the same period, revenue grew by 20.3 percent.
The telecommunications giant stated in its unaudited financial statement released on Wednesday, October 28, 2021. See the company’s financial highlights below.
Airtel Africa Plc Financial Highlights
• H1’22 reported revenue grew by 25.2% to $2,272m with double digit growth across all regions. Q2 reported revenue growth of 20.3%.
• Revenue in constant currency grew by 27.6%.
• Strong double-digit constant currency revenue growth across all regions: Nigeria up 32.4%, East Africa up 25.8% and Francophone Africa up 22.1%; and across all key services, Voice up 19.7%, Data up 36.9% and Mobile Money up 42.0%.
• Underlying EBITDA grew by 35.2% to $1,098m in reported currency and underlying EBITDA margin improved to 48.3%, an increase of 360 basis points led by both revenue growth and improved operational efficiencies.
• Operating profit up 55.1% to $732m in reported currency.
• Profit after tax more than doubled to $335m, largely due to higher profit before tax which more than offset the associated increase in tax charges.
• Basic EPS was 7.6 cents, an increase of 155.9%, as a result of higher profit. EPS before exceptional items increased to 7.5 cents from 3.0 cents in previous period.
• Operating free cash flow was $853m, up 43.1%, and over the last 18 months we have up streamed more than $570m across our operating entities.
• Leverage ratio reduced to 1.5x from 2.2x.
• Customer base grew by 5.4% to 122.7 million, with increased penetration across mobile data (customer base up 10.9%) and mobile money services (customer base up 19.0%). Customer base growth was affected by the new NIN/SIM registration regulations in Nigeria; excluding Nigeria the customer base grew by 13.7%.
• The board has declared an interim dividend of 2 cents per share (1.5 cents in H1’21) in line with an upgraded dividend policy.
The new policy aims to grow the dividend annually by a mid to high-single digit percentage from a new base of 5 cents per share for FY 2022, with a continued focus to further strengthen the balance sheet.
Commenting on the performance of the telecom, Segun Ogunsanya, chief executive officer, said “Our first half financial performance has been strong. The first half of last year, and especially Q1, was impacted by the start of Covid, but even after adjusting for these effects, our revenue growth rates for the half year for the Group and all our service segments are ahead of our FY’21 revenue growth trends, and in reported terms these are all in strong double digits.
“The risks from Covid still remain, with sub-Saharan Africa continuing to experience a third wave of the pandemic. Governments continue to implement balanced measures of lockdowns and restrictions accordingly. But vaccination levels remain low, and we continue to monitor the situation for potential impacts on economies and consumers.
“Operationally we have continued our network modernisation and expansion, aligned with an extension of our distribution capabilities, which have together contributed towards continued strong growth in ARPUs across voice, data and mobile money. We have seen an improvement in our customer growth trends for the Group as we approach stability of net monthly movements in Nigeria.
“Alongside our results we have today launched our sustainability strategy. Airtel Africa has always been a business with a sustainable premise at the heart of our purpose to transform lives across Africa through our promotion of both digital and financial inclusion. Our sustainability strategy builds upon this, extending and more comprehensively articulating our sustainability goals and credentials. I am excited by the new initiatives we have launched and I look forward to reporting back on our developments in this area with our first sustainability report next year.
“As incoming Group CEO, I have inherited the responsibility to build upon a business with solid foundations and as I look ahead, I continue to see huge potential across voice, data and mobile money from low penetration levels across Africa. The continent continues to be a growth story for us despite the pandemic. We will continue to invest in mobile and digital technologies to drive digital and financial inclusion sustainably in Africa. I am pleased with the progress we have made in the last couple of years on delivering value to everyone touched by our network.”
Chemical and Allied Products Plc Reports 51 Percent Increase in Revenue
Chemical and Allied Products Plc (CAP Plc) announced its Financial Results for the third quarter ended September 2021.
Revenue increased by 51 percent increase from N5 Billion in the quarter ended September 2020 to N9 Billion in September 2021. This rise in revenue was driven by an increase in the sale of paint products which rose from N6 Billion in 2020 to N9 Billion in 2021. Although distribution costs also rose during the period under review and this ate into the revenue earned.
Cost of sales however saw a massive increase from about N3 Billion in September 2020 to N6 Billion in September 2021. This was driven by a change in inventories of finished goods and work in progress which rose from N2 Billion in 2020 to N5 Billion in 2021. Royalty fees also increased from N201 Million in 2020 to N307 Million in 2021.
This saw profit for the period fall from N927 Million in 2020 to N613 Million despite the increase in revenue, a 34% drop.
Earnings per share fell from 133 kobo in September 2020 to 78 kobo in September 2021. The company declared no dividends during the period.
CAP Paint Key Financial Highlights
• Revenue of N9.1 billion, higher than prior year by 51%.
• Gross profit of N2.7billion million, with gross margin of 30%.
• Operating expenses of N2.2billion with operating expenses as a percentage of sales of 25%, a 179bps improvement from 27% prior year.
• Other income of N253million, 279% above prior year due to profit from sale of a non-core asset.
• EBIT of N710 million, with EBIT margin of 8%.
• Profit Before Tax of N851 million, with PBT margin of 9%.
• Profit After Tax of N614 million, with PAT margin of 7%.
• Increased working capital deliberately to ensure sufficient raw material availability to continue production, hence inventory increased by N2.8 billion from Dec 2020.
• Trade and other receivables increased by N366 million in line with higher revenue.
• Strong cash position of N3.3 billion, with the key movement from Dec 2020 being the N1.5 billion paid to shareholders as dividends.
Commenting on the performance, Managing Director, David Wright, stated: “The merger between Chemical and Allied Products Plc (CAP) and Portland Paints and Products Nigeria Plc (Portland Paints) was successfully completed on the 1st of July 2021 with CAP being the surviving entity.
The financial results for the third quarter of 2021 reflects the combined entity. Despite the challenging environment, we continue to generate higher sales across our product portfolio.
Revenue improvement has been driven by (i) strong volume growth, (ii) price increases and (iii) new products in our portfolio, following the merger.
Raw material cost escalation remains a key concern and we will continue to carefully assess pricing. In addition to pricing, we will focus on production and operating efficiencies in order to protect margin”.
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