VFD Group Profit Slumps 81.5% as Hedging Cost Spikes

VFD Group Profit Slumps 81.5% as Hedging Cost Spikes

VFD Group Plc, an investment firm in Nigeria, reported a steep decline in profitability in the first nine months of the financial year 2023, according to the company’s regulatory filing.

The company said its hedging costs spiked at the same time when the inflation rate continued to climb. The company share price has declined to N218.2, according to data from the Nigerian Exchange, down by about 19% since the company was listed at N269.30 early in October 2023.

At the end of the trading session on Friday, the company was valued at N41.463 billion spread over its 190.027 million shares outstanding.

In the first nine months, the company recorded about N934 million as pretax profit. This translates to about 82% year-to-date decline when compared with N5.058 billion reported in the financial year 2022.

A review of the group numbers showed that a steep decline in the bottom line was partly driven by a loss of revenue in the period, and rising operating costs on the other hand.

According to its unaudited financial statement, VFD Group’s net revenue for the period went down by more than 18% from the beginning of the year to N8.643 billion from N10.564 billion in 2022.

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Its operating experience grew significantly, accounting for a sizeable part of the company’s total revenue. Detail from its financial result showed that VFD group’s operating expenses spiked to N7.71 billion, a steep jump of 40% from N5.505 billion booked in 2022.

Its investment income line increased by 18.86% in the period, rising to N22.207 billion at the end of the third quarter of the year, from N18.731 billion in 2022. However, the company witnessed a spike in related expenses.

Rising by 46.5%, VFD group’s investment expenses accelerated faster than income growth. This resulted to a negative impact on the group’s net investment position of the company at the end of the third quarter of 2023.

VFD group’s net investment income plunged by about 42% to N3.462 billion from N5.936 billion at the beginning of the year.  The company result showed that shareholders’ funds nosedived moderately to N31.303 billion, down by 0.7% from N31.517 billion at the beginning of the year.

The total assets of the group rose by about 35% to N200.858 billion from N149.110 billion at the end of the financial year 2022. In a commentary note, Nonso Okpala, its chief executive officer said the company’s profitability was impacted due to the naira depreciation from N447 to N767.

Okpala noted that the devaluation of the naira raised the cost of hedging instruments the group used to address exchange volatility on its forward transactions and had a significant impact on interest expense.

He also said an unprecedented inflation and the rising cost of doing business in the country impacted the group’s operating costs as well.

“During the review period, we also made new investments, the benefits of which could not be recognized immediately, but which would manifest with significant upsides in the coming quarters, which is the crux of our unique business model.

“Due to the time lag between investments and recognition of investment income, our performance did not fully reflect the inherent strength of the balance sheet and the potential of the entire ecosystem.

“Despite a challenging economic environment marked by high interest rates, rising inflation, and Naira depreciation, VFD Group is dedicated to adapting and excelling. In order to add value to all of our shareholders, our team will continue to excel at what we do”, VFD chief said.

The investment firm plans to raise N32.5 billion from a blend of equity and debt, with 12.5 billion naira to be sourced through the sale of shares. #VFD Group Profit Slumps 81.5% as Hedging Cost Spikes Naira Devaluation Deepens Economic Crisis in Nigeria

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