vfd group plc investor presentation...vfd group plc investor presentation full year 2019 & q1...

VFD Group Plc Investor Presentation

FULL YEAR 2019 & Q1 2020 RESULTS PRESENTATION TO INVESTORS AND ANALYST

Foresight House,

163/165 Broad Street, Marina, Lagos Island,

Lagos, Nigeria

08189989898

[email protected]

www.vfdgroup.com

mailto:[email protected]

http://www.vfdgroup.com/

2©2019 VFD Group Plc. A proprietary investment company. All rights reserved.

Content

Page

About VFD Group Plc 3

Macroeconomic Environment 4

Financial Highlights 8

Financial Performance 12

2020 Guidance and Strategic Focus 16

Questions 20


About VFD Group Plc

The group was incorporated in July 2009 as a

financial services focused proprietary investment

company that creates value by working within

Nigeria’s informal financial sector to create

innovative products and solutions that are

accessible to the everyday citizen and

entrepreneur. Our subsidiaries include:


Regulatory Environment in 2019

Q1

2019

• The implementation of IFRS 9 to ensure

proper and consistent treatment of financial

instruments across all financial institutions.

• CBN revised the categories of Microfinance

Banks with the view to ensure continued

operations of MFBs in the rural, unbanked and

underbanked areas of the economy

• CBN approved automated operations for

Bureau De Change (BDC) operators in the

country

• CBN added textile to the list of items restricted

from FX

• CBN capped the remunerable daily placement by

banks at N2 billion

• The President signed the Federal Competition and

Consumer Protection Act into Law

• CBN mandated Microfinance Banks to acquire 64

new customers per months

• CBN released guidelines for foreign currency deposit

of at CBN by DMBs

• CBN introduced a special intervention fund for

microfinance banks

• CBN reviewed the Loan to Deposit Ratio (LDR) to

65% from 60% for all DMBS and it became effective

and mandatory from December 2019

• CBN restricted individual and local corporate from

access to OMO at both primary and secondary

market

• The NSE reviewed the rule on the pricing

methodology for all equity securities

• VAT charges on transactions reintroduced into the

Nigerian Capital Market

• Introduced the New finance bills

• CBN set new rules and minimum capital

requirements for Currency Processing Companies

(CPC) and Cash-In-Transit (CIT) companies.

• CBN released exemption to the implementation of

Cashless policy

• CBN slashed bank charges and strengthened the

Consumer Protection Regulation

• CBN released Regulation for the Operations of

Mortgage Guarantee Companies (MGCs) in Nigeria

Q2

2019

Q3

2019Q4

2019


Regulatory Environment in Q1 2020

Pre-Covid 19 Season

Before the discovery of the index Covid 19 case in Nigeria, below are some of the regulatory changes in Q1

2020:

• CBN released an exposure draft of the guidelines for the regulation and supervision of microfinance banks in

Nigeria.

• CBN prohibited the registration of Forms M for the importation of fertilizers and any other variant

• CBN allowed the importation of Milk and dairy products for 6 companies in order to enhance their production

capacity

• CBN revised standards on Nigerian Uniform Bank Account Number (NUBAN) for banks and other financial

institutions

• The President signed the New Finance Bill into law

Covid 19 Season

• Contingency funds of N984 million ($2.7 million) have been released to Nigeria’s Center for Disease Control,

and an additional N6.5 billion ($18 million) was distributed for purchasing more testing kits, opening isolation

centers and training medical personnel.

• The government reviewed its 2020 budget due to the expected large fall in oil revenues, announced plans to

cut/delay non-essential capital spending by N1.5 trillion (close to 1 percent of GDP).

• Regulated fuel prices have been reduced, and an automatic fuel price formula introduced to ensure fuel

subsidies are eliminated.

• CBN in response to the Covid-19 Pandemic introduced major policies, which include:

• Interest Rate reduction to 5% from 9%;

• Additional one year moratorium period;

• Introduced regulatory forbearance to consider temporary and time limited restructuring of loan terms and

tenors;

• Created a N50 billion fund to support households and Small and Medium Enterprises (SMEs) affected by

COVID-19;

• Introduced credit support for the healthcare sector


Macroeconomic EnvironmentEconomic Growth

Nigeria Gross Domestic Product (GDP) grew by 2.55% yoy in

real terms in the Q4 2019 compared to the Q4 2018 which

recorded a growth rate of 2.38%, this represents an increase of

0.17% and an increase of 0.27% when compared with the Q3

2019. The strong Q4 2019 growth rate also represented the

highest quarterly growth performance since the 2016 recession

Inflation

The inflation rate maintained its upward trajectory from August

2019 till date. The headline inflation grew from 11.02% in

August 2019 to 12.26% in March 2020. This can be attributed

to pressure on FX, border closure and short fall in domestic

food supply.

External Reserves

The External reserves fell by c9% YTD in Q1 2020. This is due

to continuous intervention by the CBN in the FX market and

strong fluctuation in oil prices this year.

1.81%

2.38%2.10% 2.12% 2.28%

2.55%

Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019

GDP Growth

11.37 11.4

11.02

12.26

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20

Exchange Rate

The naira was relatively stable in 2019, however following the

recent outbreak of the Corona Virus (COVID 19) pandemic,

there has been a sharp decline in crude oil price, turmoil in

global stock and financial markets with shocks to our exchange

rate on the dollar.

In response, the official exchange rate has been adjusted by

17% to N360/$ from N307/$.

CBN I&E FX Window


Investment EnvironmentEquities Market

The Nigerian Equity Market started the year on a positive note recording a YTD of c11% as at January 2020 due to low

interest rate environment in the fixed income market, buoyant system liquidity coupled with the low price of most stocks

and attractive dividend yields on some stocks.

Fixed Income

The secondary Bond market witnessed some sell off in Q1 2020

with the average yield up by 1.14% to 11.91% as at 31st March

2020 from 10.76% in 31st December 2019.

At the beginning of the quarter we saw sustained demand as

investors flocked the Bond markets to enjoy the high interest rate

environment in the bond market given the decline in the interest

rate in the money market instruments coupled with buoyant

system liquidity. However, with the drop in crude oil price and

speculation of devaluation of the country’s currency, the secondary

bond market witnessed sell off most especially from foreign

investors.

In the primary market, the Central Bank of Nigeria (“CBN”)

successfully rolled over all maturing T-bills in Q1 2020. The CBN

issued N922.29 billion in which there was an over subscription of

93% at an average spot rate of 4.20%. The stop rate across all

maturities declined from 3.50%, 4.90% and 5.20% to 2.30%,

3.40% and 4.60% for 91, 182 and 364 days respectively between

the first T-bill auction in Q1 and last T-bills auction during the

quarter.

However, this growth was short lived with the onset of the

response to the Corona virus epidemic. The Nigerian All Share

Index fell to the negative territory of 20.65% to close the

quarter with an index level of 21,300.47 and market

capitalization of N11.10 trillion.

Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20

Avg yield on T-bills

91 days 182 days 364 days


Financial Highlights – FYE 2019

In N'million FYE 2019 FYE 2018 % Change

Total Asset 44,237 19,048 132%

Funds Under Management 18,668 5,991 212%

Property and Equipment 1,433 1,054 36%

Cash and cash equivalents 1,461 1,133 29%

Restricted Cash Balance with CBN 10,000 0 0%

Other Assets 12,675 10,870 17%

Total Liabilities 38,255 13,280 188%

Total Equity 5,982 1,535 290%

Statement of Financial Position Summary : YoY Change

In N'million FYE 2019 FYE 2018 % Change

Gross Earnings 5,112 2,200 132%

Interest Income 1,941 1,003 94%

Interest Expenses (949) (584) 63%

Net Interest Income 991 419 137%

Non Interest Income 3,171 1,162 173%

Total Expenses (1,920) (754) 155%

PBT 1,478 687 115%

Income Tax (238) (140) 70%

Profit for the year 1,241 547 127%

Income Statement Summary : YoY Change


Financial Highlights – Q1 2020

In N'million Q1 2020 Q1 2019 % Change

Gross Earnings 1,268 1,732 -27%

Interest Income 529 594 -11%

Interest Expenses (293) (317) -7%

Net Interest Income 235 278 -15%

Non Interest Income 739 1,138 -35%

Total Expenses (609) (236) 158%

PBT 289 1,144 -75%

Income Tax

Profit for the year 289 1,144 -75%

Income Statement Summary : QoQ Change

In N'million Q1 2020 FY 2019 % Change

Total Asset 60,341 44,237 36%

Funds Under Management 14,745 18,668 -21%

Property and Equipment 1,464 1,433 2%

Cash and cash equivalents 4,569 1,461 213%

Restricted Cash Balance with CBN 25,000 10,000 150%

Other Assets 3,533 6,369 -45%

Total Liabilities 54,244 38,255 42%

Total Equity 6,096 5,982 2%

Statement of Financial Position Summary : YTD Change


Ratio Analysis

PAT Margin Earning Yield Net Interest Margin

Cost of Fund Return on Asset Return on Equity

-14.96%

24.89% 24.27%22.83%

FY 2017 FY 2018 FY 2019 Q1 2020

16.35%

6.74%7.34%

6.57%

FY 2017 FY 2018 FY 2019 Q1 2020

Earnings Yield

-2.12%

2.87% 2.80%

1.92%

FY 2017 FY 2018 FY 2019 Q1 2020

ROA

-6.43%

35.65%

20.74%18.99%

FY 2017 FY 2018 FY 2019 Q1 2020

10.37%

2.82%

3.75%2.92%

FY 2017 FY 2018 FY 2019 Q1 2020

6.78%

9.49%9.00%

7.10%

FY 2017 FY 2018 FY 2019 Q1 2020


Balance Sheet Management• The firm continually grew its asset base for both its Interest Earning

and Non-Interest Earning Asset. The composition of the Interest

Earning Asset and Non-Interest Earning Assets as FYE 2019 is put at

60% and 40% respectively while in Q1 2020 contribution of Interest

Earning Asset fell to 53%. Drop is due to deployment of assets to

potentially higher earning investments (equity investment, arbitrage

type transactions)

• The Total Asset grew significantly by 132% year on year between FYE

2018 and FYE 2019 while in March 2020, we saw a growth of 36%

YTD.

• The restricted Cash Balance with the CBN grew by 150% from N10

billion to N25 billion as the firm seeks to acquire a national

commercial banking license rather than the regional commercial

banking license previously communicated.

• In 2019, we witnessed an impressive growth in the Fund under

management as the Asset Management division increased product

offerings and drive to attract HNIs.

Component of Asset Base

Funding Mix

76% 78%

60%53%

24% 22% 40% 47%

FY 2017 FY 2018 FY 2019 Q1 2020

Interest Bearing Asset Non Interest Bearing Asset

6.10 5.98 1.54

17.09 16.02

6.15

10.08 15.74

4.896.49

7.13

Q1 2020 FYE 2019 FYE 2018

Total Equity Funds Under Management Borrowings Other Liabilities

14.7518.67

5.99

25.00

10.00

0.00

3.53

12.67

10.87

Q1 2020 FYE 2019 FYE 2018

Funds Under Management Property and Equipment Cash and cash equivalents

Restricted Cash Balance with CBN Other Assets*figures in billion naira


Profitability Trend• The Gross Earnings grew significantly in 2019 by 132% due to 94%

growth in the interest income and 173% growth in the Non-Interest

Income

• However in Q1 2020 we saw a decline in the Gross Earnings by 27%

due to the significant decrease in Non-Interest Income by 35%. This is

due to disposal of a material stake in NEM at a profit in Q1 2019. Also

the interest income declined by 11% due to declining yield environment.

Income from trading and placement dropped by significantly by c688%

and 199% yoy respectively.

• Also in Q1 2020, the interest expense fall by 7% as the Group benefitted

from repricing customers’ Deposit rate due to declining interest rate

environment in the country.

• The OPEX increased due to increased Staff cost (continuous human

capital capacity enhancement via strategic hires and promotions across

the Group) and also increase in marketing cost

• The growth in the PAT seen in FYE 2019 of 127% was driven by efficient

balance sheet Management, improved treasury management, increased

income generating activity and effective deployment of cost optimization

strategy across the Group.

• Although in Q1 2020, the PAT fell by 75% due to increase in OPEX and

decrease in Gross Earnings, however, as at end of Q1 2020 the Group

was on track to ensure achievement of the forecast for the 2020

financial year

Gross Earning Mix

529594

739

1,138

Q1 2020 Q1 2019

Non Interest Income Interest Income

1,941

1,003

3,171

1,162

FYE 2019 FYE 2018

Interest Income Non Interest Income

0.55

1.24

FY 2017 FY 2018 FY 2019

0.29

1.14

Q1 2020 Q1 2019

PAT Movement


2020 Guidance & Strategic

Focus


2020 Q2 Guidance

Q1 2020A Q2 2020F

Total Asset 60,341 61,111

Borrowings 10,076 10,282

Total liabilities 54,244 54,857

Total equity 6,096 6,254

Total equity and liabilities 60,341 61,111

Key Income Statement Indices

Q1 2020A Q2 2020F

Gross Earnings 1,268 1,917

Interest and similar income 529 1,004

Interest and similar expense (293) (596)

Net Interest Income 235 409

Total Non-Interest Income 739 1,515

Operating expenses (609) (1,212)

Profit Before Tax 289 553

Key Balance Sheet Indices


Strategic Achievement for Q1 2020

1. Official Launch of the Rebranded V Digital Banking App

Towards the end of the year 2019, we successfully concluded the first phase of our digital bank initiative – a soft launch

of the VFD digital bank app. We embarked on a soft B2B and word of mouth marketing of the app and within 2 months

we recorded over 10,000 downloads with positive reviews from users, media houses and industry experts. As at March

31, 2020 we had recorded over 100,000 downloads.

2. Successful Investment in Abbey Mortgage bank

Pursuant to the various approaches we outlined towards the acquisition of our commercial banking license, we took up

a 35% equity Abbey Mortgage Bank. Beyond the new client base and geographic reach this investment presents us, it is

strategic towards driving the value chain and upselling of our real estate business.

3. Successful Investment in Atiat Leasing Limited

In line with our strategic objective of establishing a foothold in all sectors of the financial services industry, we made a

significant equity investment in Atiat Leasing Limited. Atiat Leasing Limited specializes in various forms of vehicle and

equipment leasing. We intend to expand the company’s business to include vehicle sales and servicing. This we believe

will complement our existing auto lending business in addition.


Strategic Focus for Q2 2020

1. Expansion of the V Digital Banking Community

Following the official launch of the V digital banking application on the 4th of March 2020, the next step for us is to

acquire customers and ensure that our retention strategies are on track.

We have taken the customer-centric approach to ensure we adequately capture feedback from our users and channel

them towards the development of future iterations for the digital banking application and its ecosystem.

2. Establishment of a Global Investment Structure

Following the change in the Group’s focus from making investments solely in the financial services sector and its

ancillaries, to being a proprietary sector agnostic investment company, it has become imperative to revise our

investment structures. More so, this revision is in alignment with our vision of becoming a commercially viable

proprietary investment company with global influence focused on building positive and socially conscious ecosystems.

3. Operationalization of VFD Tech

One of our major focus for the next few months will be to fully implement the operations of our newly established tech

arm – VFD Tech. VFD Tech will focus on providing all technology related services to VFD Group and its subsidiary

companies.

4. Optimization of the Hospitality Businesses

We have plans to structure and optimise the hospitality businesses for increased profitability and efficiency.


Questions?


Thank You

Contact us

Investor Relations

[email protected]

+234 908 752 2477

mailto:[email protected]

vfd group plc investor presentation...vfd group plc investor presentation full year 2019 & q1...

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