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Quoted Companies post N4.2 trillion combined profits since 2015

Listed companies on the Nigerian Stock Exchange posted a combined profit after tax of about N4.2 trillion between 2015 and 2018.

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stock, shares, Equity Market down by 0.6% on Monday, Quoted Companies post N4.2 trillion combined profits since 2015, Stockbrokers in Lagos are shifting focus to commodities as stocks underperform, Stock Market gains N204 billion, as effects of OMO restriction kicks in , Penalties: NSE makes over N143.6 million from banks, real sector in 2019 , These companies could soon be delisted from the Nigerian Stock Exchange , C&I Leasing, Oando, UBA, two others top gainers chart on Wednesday, 2020 Nigerian Equities Outlook: Breaking the Jinx?, LASACO, AIICO lead gainers on Wednesday, as bourse dips 0.91% , MTN, Zenith, GTBank lead actively traded stocks on Thursday , Equities: Bearish trades cost the Stock Market N403.02 billion in one week, Blue chips outperform, as All-Share Index up by 9.2% since OMO ban 

Listed companies on the Nigerian Stock Exchange posted a combined profit after tax of about N4.2 trillion between 2015 and 2018. The companies also reported tax expenses of about N804.7 billion during the 4-year period. Total revenues during this period were also N36.8 trillion. Nigeria’s President Buhari has been in office since 2015 and presided over the economy during this period.

The data looks at results released over the last 4 quarters for publicly listed companies on the Nigerian Stock Exchange for the combined years 2015, 2016, 2017 and 2018. Some of the increase in revenues recorded over the period was also a result of new listing and not necessarily due to organic growth. This is the breakdown;

Total returns
Quoted Companies results between 2015 - 2018.

Quoted Companies results between 2015 – 2018.

What this means: Over the last 4 years, Nigeria has suffered a drastic recession that reduced growth to an average of 2% per annum. The inflation rate has remained doggedly at double digits, while interest rates remain very high. Government revenues have also fallen significantly during the period and are now accompanied by rising debts and debt service to revenue ratio. Despite strong economic head and tailwinds, it appears that Nigerian companies have continued to perform against all odds and grow their topline revenues.

Important to note that the Nigerian Stock Exchange market capitalization of N13 trillion is about 10% of GDP and does not account for non-listed companies as well as the informal sector. However, it is an important barometer for how the economy has faired over the first 4 years of the Buhari Administration. Because the data is based on revenues from listed companies an important metric to gauge performance will be the profit margin. The data shows profit margin has risen from 10% in 2015 to 15% in 2018. This means companies have kept a higher percentage of their revenues as profits.

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[READ MORE: 5 Nigerian companies with a combined market value of 5% of Nigeria’s GDP]

Annual returns

2015: Companies reported a combined profit of N728.5 billion out of a revenue of N7.6 trillion, representing a 9.6% profit margin. Revenue was dominated by the Consumer Goods and Financial Services sector with a combined N4.9 trillion. As expected banks led the way. COnglomerates continue to struggle, keeping just 1% of revenues as profits. We also see recorded losses for the ICT, OIL ad Gas and Services Sectors, in line with negative GDP recorded over the same period.

Quoted Companies results for the 2015 Financial Year.

Quoted Companies results for the 2015 Financial Year.

2016: This was the year Nigeria got into a crushing recession. Profit was N727.5 billion and revenues, N8.7 trillion. The total profit margin dropped to 8%. Despite the recession, Nigerian banks earned N4 trillion growing by over N400 billion year on year and accounting for much of the revenues. The construction and real estate sector joined the ICT, Oil and Gas and services sectors in recording losses.

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Quoted Companies results for the 2016 Financial Year

Quoted Companies results for the 2016 Financial Year

2017: Nigeria got out of recession in 2017. During the year, companies reported a total turnover of N9.59 trillion and profits of N1.1 trillion. The profit margin was 12%. Agriculture and Financial services led the way with double-digit margins. The Agricultural sector is dominated by the likes of Okomu Oil and Presco Plc.

As Nigerian climbed out of recession, Conglomerates and the Natural Resources sector joined the ICT sector with losses. We also observed that the Oil and Gas sector reported an 8% profit margin as global oil prices picked up.

Quoted Companies results for the 2017 Financial Year

Quoted Companies results for the 2017 Financial Year

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2018: Profit margin improved to N15% at the end of the financial year, with profits rising to N1.6 trillion. Total revenues also hit and crossed the N1 trillion mark, closing at about N10.8 trillion for the year under review. The banking sector alone contributed N4.1 trillion of the revenues in gross earnings. They also reported a profit margin of 21%. The industrial goods sector, dominated by Dangote Cement, also reported a profit margin of 30%.

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Only the real estate sector and services reported losses during the year. The sector also posted revenues of just N201.8 billion from N147 billion in 2015 indicative of how poor growth has been for a sector typically pivotal to economic growth in many countries. The Agricultural Sector also reported an impressive 25% profit margin as Okomu Oil and Presco benefit from the government’s agro policies.

Quoted Companies results for the 2018 Financial Year

Quoted Companies results for the 2018 Financial Year

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[READ ALSO: Some important tips for companies in view of Customer Service Week 2019]

The Future of Nigerian Stock Exchange

At a revenue of N10.8 trillion, Nigerian stocks revenue to GDP is about 8%, one of the lowest in the world. Stocks also have a market cap of about N13 trillion, just 20% more than its revenue (1.2x). Stocks are also priced 8x earnings based on combined profits of N1.6 trillion. We expect revenues for 2019 to be significantly higher with the listing of MTN and Airtel which could boost revenue by over N1.5 trillion.

The Nigerian Stock Exchange has struggled to attract multinationals and large corporations over the years relying on government moral suasion to achieve major listings. For example to major IOC is listed on the country’s bourse while local startups that have achieved maturity stages will rather list abroad than list in Nigeria. Jumia for example, listed on the NYSE and Interswitch is expected to list on the London Exchange. Several reasons for the lack of significant listing is mainly attributed to how shallow the stock market has been over the years.

Retail investor participation is at multi-year lows and the ever reliant foreign investors have reduced their exposure to Nigeria due to its economic policies. Company list on stock markets if they believe their valuations can be rightly priced and can attract significant liquidity and capital whenever they need to. Some analysts believe it could be incredibly onerous to raise as much as $1 billion in equities through the Nigerian Stock Exchange.

Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.

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How Access Bank got Japaul to pay up N37 billion loan that had gone bad

Brute force, Courts, quid quo pro are hallmarks of Access Bank’s debt recovery schemes.

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Access Bank, Scam Alert: Access Bank issues warning to customers over fraudulent acts , Director, West Africa region, IE, Onyekachi Eke, Access Bank lists N30 billion bonds on NSE , Access Bank, Zenith Bank Plc, Access Bank Plc and United Bank for Africa Plc, Zenith Bank Plc, Access Bank Plc and United Bank for Africa Plc, A new BVN guideline to curb e-fraud is coming soon - CBN announces , Access Bank donates 66 laptops to children in underserved communities, Access Bank postpones closed period for 2019 Year-End financial statement, Access Bank dispels rumour about its CEO being arrested, Access Bank set to establish subsidiary in Cameroon after acquiring Kenyan bank, Access Bank finally acquires Kenyan bank, Transnational Bank Plc, Herbert Wigwe: We are clamping down on malaria with the Malaria-To-Zero Initiative, Access Bank to list N15 billion green bond on Luxembourg Stock Exchange 

In 2018 when Access Bank took over Diamond Bank, in what is the largest merger in Nigeria’s banking history, they knew it was not a match made in heaven like their PR agencies will make you believe.

In merging with Diamond Bank and taking over their juicy assets, they had also taken over the lemons that had for years bedeviled the bank who had pioneered mobile banking applications well ahead of its time.

When Access Bank merged with Diamond Bank, the latter had total loans and advances of N787.8 billion out of which N219.9 billion in loans were impaired. Oil and gas-related loans made up a significant chunk of the loans and were estimated at about N302.6 billion, most of them distressed.

READ: Access Bank will no longer accept cheques with logo of defunct Diamond Bank

Included in the oil and gas loans was a $66.4 million in loans owed to the bank by Japaul Oil and Maritime, as they were referred to at the time. The loans had gone bad accumulating unpaid interest of about $11.2 million. By the time Access Bank took over the loans, Japaul agreed to a restructuring rolling over both the principal and interest.

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This is typical of most Nigerian companies burdened with debts they cannot pay. To avoid being run over by the bank, the debtors will negotiate a restructuring, extending the loans by one to three years and if lucky, reducing the interest rates. In return, the bank books new fees (which are often paid in advance of the restructuring) and then gets to avoid huge provisioning mandated by the central bank.

READ: Over 1 million people took loans from banks below 20% interest rate in 1 year- CBN

It is often a ‘win-win’ situation that essentially kicks the can down the road until, like in the case of Diamond Bank, the chicken comes home to roost. But Access Bank is not new to slugging it out with debtors, particularly those who do not pay up. Upon takeover in 2019, Herbert Wigwe, the CEO of Access Bank announced that his bank was going to go after Diamond Bank debtors. In an interview in 2019 he maintained that “we recovered N2.2 billion bad debt in the year under review. Access Bank will intensify effort to ensure that it recovers the debt owed to Diamond Bank. We will go out for Diamond Bank’ debtors and if they are not ready to redeem their debt we will publish their names in the newspapers.”

In 2019, Access Bank swooped on Japaul Plc seeking repayment of their Diamond Bank loans which was now about N37 billion. The bank took over Japaul’s trading assets and integral to the going concern status of the company. Before now, Japaul made money rendering marine services, dredging, mining and construction mostly for the oil and gas companies.

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READ: Access Bank vs. Seplat: Of subterfuge and corporate brutality

But business has been bad for years now leading the company into net accumulated losses of over N50 billion as of 2018. For the 5 years leading to 2018, the company posted back to back losses with revenues going from N5.3 billion in 2015 to about N85.8 million in 2019. External loans had also ballooned from about N18.8 billion to about N38.8 billion. Its share price had also fallen to about 20 kobo per share by the end of 2019. It was nearing bankruptcy and something had to give.

They began a court battle with Access Bank over the loans and the threat of a liquidation eventually settling for a deal. Sources inform Nairametrics that Access Bank is one of the most aggressive banks in the business when it comes to playing dirty with debtors. Unlike Diamond Bank, Access Bank is ready to battle in the courts and is ready to deploy any legal means necessary to recover their loans even if their actions are viewed as uncanny.

READ: Former bankers who stole from Diamond Bank (Access Bank) get jail terms 

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Recently, the bank obtained a Mareva injunction sealing the offices and taking over the assets of Seplat due to a related party loan owed by the latter’s Chairman, ABC Orjiakor. Just like Japaul, the loans owed by ABC Orjiakor were also obtained from Diamond Bank. According to sources, when Access Bank swoops in for their loan recoveries, they deploy all tactics in the books to ensure all or most parts of the loans are recovered from chronic debtors.

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Eventually, Access Bank and Japaul agreed to settle the matter outside the court. In exchange for repaying the N38 billion loan, Access Bank settled for a repayment of N30.9 billion. The deal involves Access Bank taking over two of Japaul’ s Dredgers (12& 13) for N5 billion and a Barge (Beau Geste) for N25.9 billion. Japaul also gave up its land in exchange for working capital of N1.5 billion from the bank.

READ: Access Bank recover N14 billion in bad loans after merger with Diamond Bank

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In return, Japaul gets to clean up its balance sheet erasing what is left of its debt, booking a profit of about N40 billion and wiping off its negative equity of N35.5 billion. However, in one fell swoop. From negative equity of N35.5 billion, the company’s net assets are now N4.69 billion. A win-win for everyone.

We are not exactly sure what Access Bank plans to do with dredgers and barges it took over from Japaul. Interestingly, in the deal, Japaul also gets to lease back the two dredgers for a period of 6 years from Access Bank for a sum of N1 billion paid annually from 2021 – 2026. Japaul got a one-year moratorium on repayment expiring in December 2020.

READ: Nigeria, other African oil-producing countries will lose $1tn oil revenue in 20 years – PWC

Japaul has since changed its name to Japaul Gold and Ventures citing the dwindling oil and gas sector for its reasons. The company believes gold mining and technology are the future and is seeking to raise N25 billion in equity to pursue this course. Its share price has ostensibly risen by 150% since the turn of the new year, the best performing on the stock exchange.

For Access Bank, aggressively going after bad loans have paid off immensely. In 2019 the bank recovered N38.9 billion in bad loans barely a year after taking over Diamond Bank. In the first 9 months of 2019, a total of N24.7 billion was captured in bad debts recovered. It is a strategy that is working and there is no betting against Access Bank doubling down on aggressive recovery this year.

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Champion Breweries, Raysun deal highlights disclosure shortcomings

Is Heineken taking over Champions Brewery?

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This brewer keeps struggling to win as Nigeria’s beer war rages on

Champion Breweries Plc informed the Nigerian Stock Exchange, last week, via a press release that an insider, Raysun, had purchased about 1.9 billion shares at a price of N2.6 per share.

The disclosure was part of the stock exchange’s requirement that listed companies must reveal deals made by insiders of the company for the benefit of shareholders and the investor community.

That’s about how far the press release went. It did not reveal why Raysun was purchasing? Who they purchased the shares from and why the deal is being consummated? In terms of corporate disclosure, this was a dud.

READ: Analysis: Japaul, Ardova, Champion Breweries; What is behind the deals?

Raysun is the largest shareholder and majority owner of Champions Breweries. Raysun is also an entity owned by Heineken, the majority shareholder in Nigeria Breweries Plc – the largest brewer in the country. Thus, Heineken is an indirect shareholder of Champions Breweries.

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These relationships give this deal enough scrutiny to warrant a better disclosure starting from the actual purchase of shares revealed in the press release.

Here are some contexts;

Champion Breweries shares breakdown

  • Champions Breweries has a total of 7.82 million shares outstanding at the time of this purchase
  • Raysun held about 60.4% shares in Champions Breweries according to disclosure in its 2019 annual report.
  • Asset Management Nominees and Akwa Ibom Investment Corporation own 12.3% and 10% respectively. The rest of its shareholders own about 17.3% or 1,351,954 units.
  • At the current share price of N1.12, Champion Breweries is valued at N10.57 billion by the market.
  • However, Raysun’s purchase of 1.9 billion shares at N2.6 per share (valued at N4.9 billion, almost half of the current market capitalization), now values the company at about N20.3 billion.

READ: Court threatens to sell Ecobank and Union Bank branches

Where did the shares come from? This is a vital question and here is why.

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Going by the number of shares they bought last week (24% of equity), they only could have been able to purchase that many shares by buying up all the shares owned by the Asset Nominees (12.3%), all the shares owned by Akwa Ibom Investment Corporation (10%) and another 3% from other regular shareholders.

It could also be that either or both Asset Nominees and Akwa Ibom IC sold part of their shares and then they made up the rest by purchasing some from the market. Why is Heineken, through Raysun, acquiring so many shares? Is there a takeover deal in the offing? Do they plan to merge Champions Breweries with Nigeria Breweries or still keep it as a standalone company? Will Champions Brewery cease to exist if there is a merger or will they delist following this massive acquisition of the shares of their subsidiary?

READ: Champion Breweries gains 32.35% in a week, following Heineken’s indirect acquisition of its shares

The speculation is palpable.

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This is what happens when listed companies refuse to properly disclose transactions involving mega share purchases of this nature. How does a majority shareholder go from 60.4% of shares to 84% and an announcement is not made explaining or clarifying who sold and if this is a takeover bid.

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But investors seem not to mind at the moment, if the momentum of the share price is anything to go by. A 57% year to date gain is a testament to this. It appears investors expect a mandatory takeover announcement to be made anytime soon and are scrambling for the shares ahead of any announcement.

READ: Resort savings raises N4.3 billion, as Camey and Rock acquire majority shares  

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Unfortunately, this is not how markets should work anywhere, and the sooner it stops the better. The Nigerian Stock Exchange has made massive progress with compliance to disclosure requirements and we believe strongly that they will at some point bring Champion Breweries to order and have them disclose all the requisite information about this transaction. Better late than never.

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Downstream players suffer revenue declines due to Covid-19, forex, fuel subsidy

2020 has no doubt been one of the most challenging years for players in the oil and gas downstream sector, having to deal with several issues.

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Nigeria’s downstream oil and gas players are in the midst of one of the lowest revenue declines in their history of operations. In an industry used to the highs and lows of economic and commodity price cycles, 2020 poses one of the greatest challenges to oil and gas companies.

Total Plc, 11 Plc, MRS, Ardova and Conoil are some of the major downstream players (all quoted) that have suffered revenue declines and margin drops in one of the worst years in modern history.

READ: Aviation: Nigerian ground handling firms count revenue losses due to pandemic-induced plunge

  • Conoil Plc, one of the major downstream players reported its 2020 9 months results revealing revenue declined 21.84% YoY t0 N88.1 billion.
  • 11Plc, another major player in the sector, also saw its topline revenues plummet from N141.5 billion in the first 9 months of 2019 to N114.7 billion in the corresponding period in 2020.
  • Total Nigeria Plc, one of the largest players in the downstream sector also recorded declining revenues. In 2019 it reported total sales of N181.6 billion compared to N117.3 billion in 2019. The 35% drop was the largest of the lot.
  • The only outlier of the lot was Ardova Petroleum which somehow managed to record revenue growth with 2020 9 months revenue rising to N116 billion compared to N110.7 billion same period the year before.

READ: Nigeria’s 5,000 BPD refinery will produce 271 million liters of petrol every year

In general, revenues for the major oil and gas downstream players in the country fell by a whopping 21% from N646.8 billion in 2019 (9M) to N514.2 billion in the corresponding period in 2020. What is to blame for these declines? Covid-19!

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The Covid-19 pandemic triggered a nationwide lockdown for most of 2020 that has negatively impacted demand for petroleum products across the country. The lockdown has grossly affected volumes for downstream oil and gas companies hitting their margins and profitability.

READ: Why listing of oil companies will stimulate industry growth – NCDMB

Businesses across the country such as manufacturers, airlines, restaurants, schools, the transportation sector and motor vehicle owners have all reduced their demand for fossil fuel.

The downstream sector has also struggled to take advantage of the drop in oil prices as they still need to deal with the multiple devaluation of the naira and being able to gain access to foreign exchange. Their inability to access the forex market leaves them with little choice but to continue to rely on NNPC, the sole importer of petroleum products for their inventories.

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READ: Jitters as Nigerian banks brace up for more loan provisioning

In a recent comment, the Chairman of Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Mrs. Winifred Akpani, lamented that “the inability to source FOREX from the official CBN FOREX window by independent marketers is continually hindering the effectiveness of the principles of DEMAND and SUPPLY market forces to correct the current inefficiencies in the pricing mechanisms adopted in the deregulation process.”

Mrs. Akpani also explained that inability of marketers to source FOREX creates a situation which can be described as “pseudo subsidy” in the market, suggesting that being forced to sell petroleum products at fixed prices means they cannot recover their importation cost, most of which is paid for in US dollars.

READ: FG gives reason oil marketers are not yet importing petrol, stops monthly price fixing

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This is further exacerbated by the fact that the federal government regulates pricing irrespective of the unique operating costs of these private oil companies. Also, being the sole importer of petroleum products means the NNPC will likely pass on inefficiencies in managing cost to petroleum marketers, eliminating any chances of efficient pricing that can be obtained from increased competition. The effects of these are low profit margins and ‘never-shifting’ revenue positions, except for exceptional cases.

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READ: Has petroleum product deregulation finally come to roost?

Last December, the Federal Government revealed it was ending its subsidy programme, increasing fuel to reflect its market cost. However, it balked after pressure from the labour unions, reducing prices without recourse to sector players.

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Despite these challenges, the sector will likely eke out some profits largely due to cost cutting initiatives and income from ancillary businesses. However, dividend payment might be a challenge as it will be advisable for these companies to set aside cash for what could be a pivotal year.

READ: Nigeria to import petroleum products from Niger Republic, sign MoU on transportation, storage

The Petroleum Industry Bill (PIB) will likely be signed into law this year and will produce new investment opportunities for the downstream sector if things go as planned. The government will likely relinquish its hold on the sector and fully deregulate the downstream before the end of the year.

When it does, those with a strong balance sheet will be winners.

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