Ingenious Africa Prudential makes N1.41bn in income from treasury bills


March 13, 2018 | 1:13 am
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An ingenious firm is one that judiciously invests shareholders’ money in other investments that generates higher returns.

Africa Prudential Plc has replicated the above as the registrar made N1.41 billion in interest income from short term securities for the year ended December 2017, a figure that is  42.59 percent of total revenue of N3.31 billion.

Africa Prudential is highly reliant on net interest income for profitability and T-bills prove to be a source profit in 2017

Deposit Money Banks (DMO) and some insurance firms in Africa’s most populous nation made money from fixed income on short term government securities when yields were attractive in 2017.

High yields on Net Treasury Bills (NTBs) issued in 2017 (around 13-14 per cent on 90-day bills) had attracted investors and helped to support the naira.

Yields on 30 days, 60 days and 365 days short-term paper stood at 14.70 percent, 15.30 percent, and 15.80 percent on Friday, according to data from FMDQ Website.

However, Nigerian banks may find it more difficult to sustain their profitability this year, given the decline in net treasury bill issuance by the federal government this year.

This mean could the end of free money for Africa Prudential and other registrars that had made money from short term government securities.

“We expect falling treasury bill yields and lower issuance to put pressure on Nigerian banks’ profitability in 2018,” said Flitch.

Analysis of Africa Prudential’s 2017 financial statement shows net profit margin increased to 52.67 percent in December 2017 from 42.23 percent the previous year.

A 52 percent profit margin, then, means the company has a net income of N0.52 for each Naira of total revenue earned.

Profit margin is a profitability ratios calculated as net income divided by revenue, or net profits divided by sales.

Any increase in profit margin is an improvement in profitability.

The Registrar’s net income grew by 69.30 percent to N1.71 billion in December 2017 from N1.01 billion the previous year.

Interest income on treasury bills surged by 121.64 percent to N1.41 billion in the period under review as against N629.15 million as at December 2016.

Africa Prudential also attributed the stellar performance to economic recovery as the country existed its first recession in 25 years in 2017.

The Nigerian capital market ended 2017 as one of the best performing stock globally after a six month bearish trend as total market capitalization increased by 47 percent to close at N4.30 trillion.

The gradual recovery from the bearish trend was due to a positive half year 2017 results by corporates and increased foreign direct investment as the introduction of a flexible exchange rate regime gave impetus to investor confidence.

Africa Prudential’s return on equity (ROE) increased to 24.67 percent to 24.67 percent in December 2017 from 22.19 percent the previous year.

In other words, the management of the Registrar has utilized the resources of shareholders in generating higher profit.

Eniola Fadayomi, chairman of Africa Prudential said that the company will surpass 2017 performance as government expansionary budget plan, election spending and improve oil price will result see more companies tap the capital market to raise mote funds.

“With the relentless determination of the Federal Government to improve Nigeria’s rating on the international Ease of Doing Business Index to facilitate inflow of foreign investments, the outlook for new registrar mandates from companies going public is very bright,” said Fadayomi.

“We are optimistic that your company will rightfully position itself in 20 18 to maximize all the business  opportunities that will arise from the budget implementation by seeking appointment as  registrars from those companies that would be seeking public listing on the Nigeria Stock Exchange,” said Fadayomi summed.

The company’s share price gained 1.36 percent to close at N4.92 as of Tuesday, valuing it at N9.40 billion while year to date returns was (+18.50 percent).



March 13, 2018 | 1:13 am
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