VFD Group Limited recently held its 2nd Annual General Meeting in Lagos, during which the board of directors obtained shareholders’ approval to raise capital for expansion purposes. To better understand the situation, Nairametrics visited the company’s corporate headquarters in Marina, where we had a sit down with the Group Managing Director/Chief Executive Officer, Mr Nonso Okpala. Below are the excerpts of our conversation:
Can you tell us what your set targets were for the year, and how many of them you’ve been able to accomplish?
It seems everyone has been asking me this same question. Most of the interviews I have granted recently contained this particular question. (Laughs lightly)
Just to speak to your question specifically, we set out to achieve a PBT (Profit Before Tax) on the group level, of about a billion. I will say confidently that we are close to it. This year, we set out to achieve total asset in excess of N10 billion. I will say confidently that we’ve achieved that.
This year, we set out to fill up vacancies in key positions of our management team. I will also say that we have significantly achieved that.
Speaking also to some specific areas of government, we set out this year to enhance our board, enhance the profile of individuals on our board as well as to expand the board; to bring in more hands on deck and also to reflect the diverse holdings and interests that we’ve attracted. We’ve been able to do that with the admittance of predominantly Mr Olatunde Busari (SAN), and Dr Samuel Maduka Onyishi, as well as Jewel Okwechime. We also admitted an Executive Director, Mr Niyi Adenubi, who has been assigned a strategic portfolio to cover institutional business as well as investor relations.
The last on all the objectives that we set out was to look at our capital requirements as well as our status as a private company vis-a-vis a public company. During the last AGM, our board proposed to the shareholders and got approval to convert our company from a limited liability to a public liability company. We also got approval to raise N7 billion; N2 billion via equity and the remaining N5 billion via debt. The equity components will be broken down into two: N1 billion of rights and another N1 billion via a private placement.
So, these are specific things that we set out to achieve. To a large extent, I’m confident that we’ve achieved them.
In your annual report, you made mention of plans to take up a stake in a national bank. Why not an international bank?
Our history was that we were always short on capital but very long on skillsets. We are a group of individuals well-placed in the financial services industry; good exposure, good skillsets, but limited capital to execute our targets. Over the last nine years or so, we’ve been able to grow capital to match those skillsets. But we are not yet there.
So, you believe that before you fly, you need crawl, walk, and then run. And that’s the growth process we are going through. But I will assure you that we are not short on ambition. We are quite ambitious as it is.
And we believe that within the next twenty to thirty years, we will significantly reposition the Nigerian economy and restructure it.
Now, to speak specifically to your question, we believe it’s right to start from a regional perspective so that we can first grow skills and expertise. Because when you look at the capital requirements for a regional bank vis-a-vis a national bank, it’s N10 billion as against N25 billion.
We are very particular about our return on investment that we make to our stakeholders. And we think that in the growth phase, it’s very safe to go for a regional banking license which goes for N10 billion as against a national banking license which requires N25 billion.
It’s also a reflection of the mapping of economic activities within Nigeria. We think that the South West geo-political zone has a great deal of commercial opportunities and we can use that advantage to grow.
We are definitely heading for an international bank status, but the objective is to start from a regional banking perspective.
Can you mention the bank that you are hoping to take up stake in?
Well it’s difficult for me to mention. But I’ll assure you that we have various options on achieving it. We have option A, option B, option C, as well as an option D. We also have considerations for the greenfield approach, which is to approach the CBN with the capital required and make an application for a regional bank.
So, in view of the role that your organisation plays in the Nigerian economy, would you be willing to venture into the oil and gas and even agriculture space?
I’ll answer this question from two perspectives. As an investor yes, I’m interested in making investments outside of the financial services industry. On that level, there is a holding company that I, as well as some of my colleagues, have put investments in. Ultimately, that company seeks to make investments outside of the financial services space.
But as the GMD of VFD Group, our objective and ambition are restrained within the financial services sector.
But correct me if I’m not wrong, VFD Group has a subsidiary that is into the auto spare parts business. That is not in the financial services sector; is it?
We have an interest in Germaine Autos as well as interests in real estate. Now, those two investments are very strategic. The objective is simple – we believe that the product of the future and products that will be significant to the financial services sector, are mortgage type products, and auto loan type products.
We think that you can’t successfully and sustainably deploy those products without having these operational components that can support it. So, the real estate company will support your mortgage payment while the auto company will support your auto loan payment. To put it in a very simplistic manner, if you are advising significant auto loans and you have the interest that sell that to your customers, that’s an added advantage for you. If you have a company that in case of default can repossess your vehicle and refurbish it, that is an added advantage. Yes, they are not financial services companies, but on a strategic basis, they serve the group’s interests in the financial services space.
Does VFD Group have any plans to play in the Pension Fund Administration space?
We definitely have plans for that. However, it’s not immediate. I think that will come up during the next AGM. Part of our plan is to have presence in every sector of the financial services industry, and the PFA is one of them. So yes, we have plans to go into it.
Would we see a listing of sub units of VFD such as Germaine or VFD Microfinance Bank?
Based on our current understanding of the opportunities that exist, we think that the first step in respect to listing should be the listing of the group. We think that it’s more aligned with the interests of minority and majority shareholders alike for the group to be the main source of funding of the activities of the subsidiaries. Once that’s done, the next stage of growth would be spinning off these subsidiaries to a point where our stakes are significantly diluted and then given the status to run as independent companies so to speak. At that point, we can consider listing our subsidiaries.
What is your outlook for the coming years, especially being an election year?
Well, most pundits would say that the elections require some form of conservative estimation and forecast. But here in VFD Group, we are quite bullish about next year. We think that with the flexibility of our structure and our partnership, that every situation in itself provides a unique opportunity. So, I would say that we are quite bullish. And depending on how the elections go, I think there will be a revival of the capital market. We also think that the volatility will provide certain opportunities for us. We also think that fixed income instruments might significantly appreciate and for us it’s a good thing because it means increased yield for our investors. It is also worthy to mention that most of the restructuring and developments of our subsidiaries will gain maturity in 2019. So, we are looking at a company like Germaine Auto Centre pushing towards a PBT of a billion naira per annum and our lending business pushing towards a PBT of N20 billion per annum. These are opportunities we see and think will manifest in 2019 and we are delighted about it.
Do you have any Pan African ambitions, expansion-wise?
Part of our thirteen-year strategy — which is broken down into three years, five years and another five years — is to build capacity for an enduring and a maturing company. That first three years will end on the 31st of December 2018. The next five years will be focused on growing our interests within the Nigerian economy while the remaining five years will be focused on exporting the successes that we have recorded to other African countries. That said, we definitely do have ambitions on the continental level. We are excited about the future.