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NGX Group Releases Its Unaudited Results For Half Year Ended 30 June 2022

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NGX, SEC Strengthen Alliance to Further Market Development

Nigerian Exchange Group (NGX Group) Reports 138.3% Growth in Gross Earnings to N4.2 billion for the Half Year Ended 30 June 2022

Olushola Okunlade Writes

Nigerian Exchange Group Plc (NGX Group) has announced its unaudited results for the half year ended 30 June 2022.

Group Financial Highlights 1

Thousands of Naira (N)HY 2022HY 2021% ∆
Revenue3,823,2541,590,257140.42%
Other income392,481178,717119.61%
Gross earnings4,215,7351,768,974138.32%
Personnel expenses(1,354,529)(1,066,821)-26.97%
Depreciation and amortisation(256,937)(176,391)-45.66%
Operating expenses(2,331,066)(702,943)-231.62%
Total expenses(3,942,532)(1,946,155)-102.58%
Expenses (% of gross earnings)93.52%  110.02%n/m
Operating profit/(loss)273,203(177,181)n/m
Operating profit/loss margin6.48%-10.02%n/m
Share of profit-equity accounted for investees949,967699,06635.89%
EBITDA530,140(790)n/m
EBITDA margin12.58%-0.04%n/m
Profit before minimum tax1,223,170521,885134.38%
Minimum tax 
Profit before income tax1,223,170521,885134.38%
Profit before income tax margin29.01%29.50%n/m
Income tax expense(403,003)(72,227)557.97%
Effective tax rate32.95%13.84%n/m
Profit for the year820,167449,65882.40%
Profit after tax margin19.45%25.42%n/m
    
Total assets39,758,81424,867,83159.88%
Total equity22,490,78721,938,2552.52%
Total liabilities17,268,0272,929,576489.44%
    
Return on equity (%)3.65%2.05%160 bps
Return on assets (%)2.06%1.81%25 bps

Commenting, Mr. Oscar N. Onyema OON, the Group Managing Director/Chief Executive Officer, said: “In 2021, we took strategic steps to reorganise our business by laying the foundation for the rebirth of our franchise as we became a fully-fledged for-profit making company with a clear focus on maximizing resources and improving stakeholder returns. Our performance in the first half of 2022 is a testament to our ability to deliver long-term value. We recorded impressive growth in our top line to provide a profit before tax of N1.22 billion despite the peculiar challenges inherent in our operating environment.

Our goal remains to sustain our position as a leading integrated market infrastructure group in Africa, by diversifying our revenue streams, and identifying and investing in new businesses. We remain focused on building formidable businesses through broader and deeper involvement in every sphere of the capital market value chain through informed investments in profitable verticals and enhanced risk management practices, without losing sight of emerging opportunities in unrelated businesses within the Sub-Saharan African region”.

Group Financial Performance Review

· Gross earnings recorded a significant growth of 138.3% to N4.22 billion from N1.77 billion as of June 2021 benefitting primarily from a 140.4% growth in revenue (91% of gross earnings), and 119.6% growth in other income (9% of gross earnings).

· Revenue growth of 140.4% (N2.23 billion) to N3.82 billion in June 2022 from N1.58 billion recorded in June 2021 was driven by:

o   165.1% growth in treasury investment income (26.6% of revenue) to N1,017.4 million in June 2022 relative to N383.7 million in the comparative period in 2021 driven largely by relatively higher yields on the Group’s treasury bills, bonds, and fixed deposit investments.

o   198.4% growth in transaction fees (60.7% of revenue) to N2,320.7 million in June 2022 from N777.7 million recorded in June 2021 due to a significant increase in trading activities in Nigerian Exchange Limited (“NGX” or “The Exchange”).

o   18.6% increase in listing fees (9.5% of revenue) to N363.8 million in June 2022 from N306.8 million in June 2021 buoyed by improved listing on the Exchange in the first half of 2022 relative to the first half of 2021.

o   Rental income[2] (1.4% of revenue) earned from NGX Real Estate lease of office floor spaces recorded a 60.5% increase from N32.2 million in June 2021 to N51.7 million.

o   15.4% decline in other fees (1.8% of revenue) to N69.7 million in June 2022 from N82.4 million in June 2021. This represents rental income from the trading floor, annual charges from brokers, dealing license, and membership fees earned by the Group.

· 119.6% increase in other income (9% of gross earnings) driven primarily by:

o   376.5% improvement in market data income (56% of other income) to N220.94 million from N46.3 million reported in June 2021 which is made up of technology income, other sub-lease income, and penalty fees.

o   15.99% growth in other operating income (31% of other income) from N105.6 million in June 2021 to N122.5 million in June 2022.

· Total expenses grew by 102.6% from N1.9 billion in June 2021 to N3.9 billion in June 2022 primarily driven by a 231.6% growth in operating expenses (59.1% of total expenses) to N2.3 billion from N702.9 million in June 2021. This was large as a result of a finance cost (57% of operating expenses) of N1.3 billion related to a term loan taken during the period. Personnel expenses (34.4% of total expenses) also grew by 27% from N1.01 billion in June 2021 to N1.35 billion during the period under review.

· Operating profit of N273.2 million in June 2022 from an operating loss of N177.2 million in June 2021, resulting from 138.3% growth in gross earnings.

· Profit before income tax grew by 134.4% to N1.22 billion in June 2022 from N521.9 million in the corresponding period in 2021 due to impressive growth in the top line which was more than sufficient to mitigate the impact of the increases in key expense lines.

· Despite an increase in the effective tax rate to 32.95% relative to 13.84% in June 2021, profit after income tax grew by 82.4% to N820.2 million from N449.7 million. This resulted in a decline in profit after tax margin to 19.45% from 25.42% recorded in June 2021.

· Total assets rose by 59.9% to N39.8 billion from N24.9 billion in Dec. 2021, driven primarily by 91.3% growth in investment in associates to N31.99 billion from N14.8 billion in Dec. 2021, and 116.8% growth in Cash and Cash equivalent to N4.3 billion from N2.2 billion in Dec. 2021.

· Total liabilities recorded a 394.7% increase from N3.8 billion in Dec. 2021 to N18.6 billion as a result of a N14.5 billion term loan used to facilitate the increase in investment in select associates.

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Capital Market

Nigerian Exchange Group Holds 61st Annual General Meeting

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NGX, SEC Strengthen Alliance to Further Market Development

Olushola Okunlade Writes

The Nigerian Exchange Group Plc. (NGX Group) held its 61st Annual General Meeting (AGM) in Lagos on Friday, 30 September 2022, where shareholders approved resolutions by the company’s Board of Directors.

Mr. Apollos Ikpobe and Dr. Okechukwu Itanyi retired by rotation and were re-elected as non-executive directors.

Professor Enase Okonedo’s resignation was earlier approved by the board and as such, she was not presented for re-election. Other resolutions adopted at the AGM include the appointment of Ernst & Young as NGX Group’s external auditors; the Board’s authority to fix the Audit Company’s remuneration; the disclosure of NGX Group’s executive remuneration; and the re-election of the Statutory Audit Committee. 

The Group Chairman of NGX Group, Otunba Abimbola Ogunbanjo, who was due for re-election for a period of one year until the next AGM in 2023, voluntarily retired from the board and did not present himself for re-election. While four non-executive directors of the board were re-elected, including Mrs. Fatimah Bintah Bello-Ismail, Mr. Oluwole Adeosun, Mr. Chidi Agbapu, and Mr. Patrick Ajayi.

To allow for wider consultations and further engagement with shareholders, the special business to raise funds of up to N35,000,000,000 (Thirty-Five Billion Naira) for business expansion was not presented.

Commenting at the AGM, Otunba Ogunbanjo thanked shareholders for working assiduously with the Board and Management of the Group in delivering the dividends of demutualisation and enhancing shareholder value and for attaining many firsts during his term in office. He stated, “We released our dividend policy in line with our mandate to shareholders after the completion of our recent extraordinary General Meeting. We also created a revised corporate governance framework, already approved by shareholders and consistent with securities regulations to realign the interests of all stakeholders. In closing, I would like to thank the Board and Management of NGX Group for their support since I assumed office as Chairman of the Group in 2021. As I retire from the Board, I trust that my successor will continue the legacy of service and bring greater accomplishments as the sustainable exchange group championing Africa’s socio-economic growth.”

Oscar N. Onyema, OON, GMD/CEO noted that the Group recorded a 22% increase in profitability, a 13% increase in gross earnings, and 14.9% growth in revenue. He noted that the Group intends to enhance its performance going forward and called for support from all stakeholders.

After the AGM, the Board of Directors appointed Mr. Apollos Ikpobe as Acting Chairman, who said he recognised the enormous responsibility associated with the role. He pledged to work with all stakeholders to ensure the stability and growth of the company during this transition. “On behalf of the board, I thank Mr. Ogunbanjo for his selfless service to the company over the years”. 

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We’ll Continue To Provide An Efficient Market To Enhance Securities Lending – NGX

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We'll Continue To Provide An Efficient Market To Enhance Securities Lending – NGX

Olushola Okunlade Writes

Consistent with its commitment to contribute to the growth and development of the capital market in Nigeria and Africa, Nigerian Exchange Limited (NGX) says it will continue to collaborate with market stakeholders to enhance securities lending transactions and provide an efficient and liquid market for investors.

This is even instructive as the Exchange noted that securities lending presents significant benefits to investors in a bull or bear market – either as lenders or borrowers.

Speaking during the NGX Securities Lending Forum 2022 in collaboration with Stanbic IBTC which was held in Lagos via Zoom, the Divisional Head, Capital Markets at the NGX, Jude Chiemeka, stated that securities lending transactions have become an important element of capital markets all over the globe.

He added that in today’s capital markets, securities seldom lie unutilized, noting that if not being bought and sold in outright market transactions, securities are frequently lent to parties wanting to borrow them, or used as collateral to raise short-term finance.

Quoting a 2021 report done by International Securities Lending Association (ISLA), Chiemeka said the total value of securities made available globally by institutional investors within lending programs stood at $34trillion with about $2.9 trillion on-loan globally across all asset classes; 48 per cent Government Bonds, 39 per cent Equities, 6 per cent, Corporate Debt Securities, 4 per cent, ETFs 3 per cent, Other Fixed Income in December 2021.

He also noted that the global securities lending industry generated $9.28 billion in revenue for lenders in 2021, according to DataLend – a 21.2 per cent increase from 2020, adding that this shows the huge potential available in securities lending transactions.

“Domestically, Nigerian Exchange Limited (NGX), in response to the need for market expansion and development, introduced many products – securities lending being one of them – to give investors (retail and institutional) a wide array of asset classes to choose from. Since the Securities Lending and Borrowing (SLB) services were officially launched in the Nigerian market in December 2015, uptake has steadily risen, though not as robust as envisaged.

According to a report by Nigerian Exchange Limited, in 2020, the market recorded impressive transactions, with about 7.4 million units worth N95.2 million traded. In 2021, while the volume in traded equities fell to about 6.8 million units the value grew to N513 million”, he said.

The Divisional Head explained that from the lender’s point of view, the benefits of securities lending include the ability to earn additional income through the fee charged to the borrower to borrow the security while adding that from the borrower’s point of view, it allows them to take positions like short selling. It also gives investors more options to take different views on the market.

“It is vital in the development of the capital market by providing liquidity, which in turn reduces the cost of trading and promotes price discovery.

The Exchange no doubt remains keen to provide an efficient and liquid market for investors and businesses in Africa, to save and access capital and investments. We promise to continue our collaboration with all market stakeholders, to collectively contribute towards the enhancement of securities lending transactions, and ultimately towards the growth and development of the capital market in Nigeria and Africa at large”, he said.

For his part, the Managing Director of Stanbic IBTC Nominee Limited, Majiyagbe Babatunde while giving a historical breakdown of how securities lending has evolved said the securities lending market which started over 40 years ago has grown, generating about $9.28 billion (N4.2 trillion) in revenue for lenders in 2021 and went up by 21.20 per cent from 2020 globally.

“With Nigeria reporting N600 million in trade value and N5bn assets pledged by lenders, only a few trades have been done in the securities lending universe. Given the size of the capitalization of the equities market and how mature we have now become, the market needs to do more.

“There also needs to be liquidity in the Securities Lending market. Unfortunately, there has been so much reliance on the period when the market goes long without proper planning for when the market goes short. Securities lending will create value for both situations so that even when the market goes short, you borrow and sell off and buy back when the securities have become low. In the end, there are equal benefits for all players in the market with the Securities Lending market”, he added.

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NGX, Stanbic IBTC Set To Hold Securities Lending Forum

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NGX AND STANBIC IBTC SECURITIES LENDING WEBINAR

Olushola Okunlade Writes

Nigerian Exchange Limited (NGX), in partnership with Stanbic IBTC, is set to host a Securities Lending Forum, on Tuesday, 20th September 2022, at 10:00 am.

The webinar is in line with the Exchange’s mandate to promote investors in the Nigerian capital markets, enhance secondary market liquidity, and facilitate the mobilization of savings to spur economic growth.

The virtual event is slated to take place on Tuesday, 20 September 2022 at 10:00 AM on Zoom.

Interested participants, kindly register for the free webinar at https://bit.ly/ngx-sl-stanbic

The Securities forum will bring together investors (both retail and institutional); Pension Funds Administrators; Fund Managers, ETF Issuers, Trading License Holders, Regulators, and intermediaries in the Nigerian capital market to understand the securities lending landscape, the product features, and benefits for investors and intermediaries as well as the Nigerian capital market ecosystem.

It will provide an overview of the Securities Lending framework in Nigeria; highlight the opportunities and benefits available in Securities Lending; build capacity on Securities lending and its role in creating a more efficient market; enlighten market participants on the operational aspects of securities lending and improve market liquidity by increasing the volume of securities potentially available for trading.

Confirmed speakers at the webinar include, Mr. Jude Chiemeka, Divisional Head, Capital Markets, NGX; Babatunde Majiyagbe, CEO, Stanbic IBTC Nominees, and Oyelade Eigbe, Executive Director Vetiva Fund Management Limited.

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