Registrars could lose 60% of revenue to technological trends, regulations
by BALA AUGIE
October 24, 2017 | 1:34 am| | | Start Conversation
Stakeholders and industry players say Registrars operating in the country could lose 60 percent of their revenue to technological trends and a flurry of government regulations.
This is because deposit for dividend and related deposit have so far driven more than half of revenue of operators.
Registrars operating in Africa’s most populous nation and largest oil producer have to be more innovative and look inward and develop more market penetrating products as Securities and Exchange Commission (SEC), aims to end the issuance of physical warrant with a view to mitigating risk associated with physical dividend.
The deadline for discontinuance of issuance of physical dividend warrants has been extended a number of times to allow for full subscription. New deadline is now December 31, 2017.
The Nigerian Stock Exchange (NSE) reports that about 73 percent of share certificates in the Nigerian capital market have been dematerialized. The target is 98 percent.
Hitherto, certificates were issued to investors as evidence of their investment in companies. The old system was exposed to theft, risk of loss and delay in verification of certificates To address these issues, certificates are now to be issued in an electronic form domiciled directly with the CSCS.
The gradual dematerialization resulted in improved customer experience, the velocity of trading, and the security of shareholding and turnaround timelines for settlement of trades.
Speaking at the Africa Prudential Stakeholder Forum 2017, held on Friday October 20, at the Westwood Hotel, Lagos, Nigeria, stakeholders say registrar should review their business model in response to the threat.
In her key note address on the theme “Leveraging Opportunities in an Evolving Capital Market: the Changing Roles of Registrars” Toyin Sanni, Managing Director and Chief Executive Officer (CEO) of United Capital Plc, said that continued regulations could pose significant threat to revenue sources adding that firms in the industry should look for more opportunities even beyond the capital market.
“They must find the new Jobs to be done for clients that will generate revenues for today and the future,” said Sanni.
However, industry players say, with the new technological trend and high regulatory environment, transactions are processed expeditiously.
The changing dynamics are also beneficial to the business of the registrars and must be seen as such, not just as eroding the revenue base, according to the presentation.
“With regulation and technological trends, we have seen enhanced efficiency, increased specialization, encouraged competition and improved service delivery by registrar businesses,” said Sanni.
Africa Prudential Plc, the largest registrar in West Africa, has been unlocking opportunities for shareholder as the company’s innovative products are increasingly contributing to sales.
Africa Prudential’s profit in the second quarter increased to a record on a surge in interest on treasury bills as the company’s margins improve.
Net income for the firm that specializes in creating client-company registers of shareholders surged by 229.09 percent to N864.28 million in the first six months through June 2017, from N262.62 million a year earlier.
The growth in profit was due to a 635.91 percent surge in interest on treasury bills to N668.92 million in the period under review while investment income increased by 57.57 percent to N1.49 billion in June 2017 from N960 million as at June 2016.
Africa Prudential’s operating ratio- a measure of efficiency- dropped to 32.57 percent in June 2017 as against 37.55 percent the previous year.
A low ratio means a firm is able to curtail cost while bolstering profit.
Net margin, another measure of efficiency, increased to 57.98 percent in June 2017 as against 27.32 percent as at June 2016. In this case a higher ratio means a company is efficient.
Africa Prudential has utilized the resources of its owners in generating a higher profit as return on equity (ROE) moved to 17.53 percent in June 2017 from 6.67 percent as at June 2016.
Return on assets (ROA) followed the same growth trajectory has it increased to 4.63 percent in the period under review from 1.56 percent as at June 2016.
“A lot of things are shifting towards technology. In the United States, Tech firms were not the most capitalized but today they are the most valuable companies” said Afolabi Olowookere, Head, Economic Research and Policy Management at Securities and Exchange Commission SEC.
“In the future, we may be talking about start up firms going to the market to list. How will registrars take advantage of such opportunities?,” Olowookere opined.
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