presentation to investors & analysts - africa prudential

Presentation to Investors & Analysts

Q3 2020 Presentation


Disclaimer

Excellence

• From time to time, Africa Prudential Plc (“Afriprud”) or the (“Company”) make written and/or oral forward-looking statements in presentations(including this presentation) and other communication. In addition, representatives of the Company may make forward-looking statements orally toanalysts, investors, the media and others. All such statements are intended to be forward looking statements. Forward looking statements include, butare not limited to, statements regarding the Company’s objectives and priorities for 2020, and beyond and strategies to achieve them, and theCompany’s anticipated financial performance. Forward looking statements are typically identified by words such as “will”, “should”, “believe”,“expect”, “anticipate”, “intend”, “estimate”, “may”, “project” and “could”.

• By their very nature, these statements require the Company to make assumptions and are subject to inherent risks and uncertainties, general andspecific. In the light of uncertainties related to the financial, economic and regulatory environments, such risks and uncertainties – many of which arebeyond the Company’s control and the effects of which are difficult to predict – may cause actual results to differ materially from the expectationsexpressed in the forward-looking statements. Risk factors that could cause such differences include, exchange rate, market exchange, and interestrate, operational, reputational, insurance, strategic, regulatory, legal, environmental, and other risks. All such factors should be considered carefully,as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements, when making decisions with respectto the Company and we caution readers not to place undue reliance on the forward-looking statements.

• Any forward looking statements contained in this presentation represent the views of management only as at the date hereof and are presented forthe purpose of assisting the company’s investors and analysts in understanding its financial position, objectives and priorities and anticipated financialperformance as at and for the periods ended on the dates presented, and may not be appropriate for other purposes. Africa Prudential does notundertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on its behalf, except asrequired under applicable securities legislation.

• The information used in this presentation were obtained from several sources that the Company believes are reliable. Whilst Africa Prudential hastaken all reasonable care to ensure the accuracy of the information herein, neither Africa Prudential nor any of its subsidiaries/affiliates makesrepresentation or warranty, express or implied, as to the accuracy and correctness of the information. Thus, users are hereby advised to exercisecaution in attempting to place reliance on these information and carry out further research or seek the opinion of professional advisers beforereaching conclusions regarding their investment decisions.


Presentation Outline

• Company Overview Pages 04-07

• Operating Environment Pages 08-13

• Financial Review Pages 14-21

• Digital Technology Pages 22-24

• Outlook Pages 25-28

• Appendix Pages 29-31

OVERVIEW


Overview

Core Values

Excellence

Transforming the African continent through innovative solutions, superior investor relations and business support services.

Listed on the Nigerian

Stock Exchangewith over 250,000 shareholders.

600,000+Aggregate users on

EasyCoopAutomated Cooperative

Management Solution.

10million+ User-Capacity Platform.

Ranked

3rd

on the Nigerian Stock Exchange

in terms of dividend yield with 6

years average dividend yield of

14.07%.

First USSD-based solution in the

Nigerian Capital Market

(Personal Registrar *4018#).

Consistent dividend pay-out

since listing.

+3millionInvestor accounts for proprietary

enterprise.

Certified on the

NSE CGRSCorporate Governance Rating

System.

Leading Registrar with

5 DecadesCapital Market Experience.

Our Journey So Far

1970 2012

Company Birth

• Started as a department of

legacy United Bank for Africa

Plc (UBA).

• Registered UBA’s Initial Public

Offering.

Incorporation

• Incorporated as UBA Registrars

Limited.

• Grew total asset base to about

N14.1 billion and increased

client base to 50 companies.

Name Change

• We changed business name to

Africa Prudential Registrars Plc.

• We became the first Registrar

firm to be listed on NSE.

2013

Business Acquisition

• Opened an oversubscribed

Rights Issue for additional one

billion ordinary shares of 50

Kobo each.

• Acquired UAC 2Registrars

Limited.

2017Business

Transformation

Change of name and rebrand

to Africa Prudential Plc.

Announced business strategy

venturing into digital

technology.

2019

Product Innovation

• Launched its own in-house Innovation

Lab.

• Innovation hub, acceleration

program, development of various

software for the capital market,

automated registrar service, customer-

focused services.

• Total Asset stood at $60.7 Million

2020-2021

Business

Expansion

• Expand digital

technology, capital

market and e-

commerce offerings

across Africa,

leveraging cloud

technology and big

data.

2006

Our Competitive Advantage

Technology Support• Our activities are geared towards leveraging

technology to create superior value and

transform customer experience across our

businesses.

• To this end, our processes are technology-

driven for effective and efficient service

delivery.

Durable Exposure• With experience spanning three decades, we

have faced tough times and numerous

economic turbulence.

• These experiences have helped us anticipate

and predict our environment with precision.

Customer Experience• Our customer remain central to business and

we focus on creating exceptional experience

across our touch points.

Synergy with Industry

Stakeholders

• We are attuned to symbiotic relationship

founded on mutual respect with industry

stakeholders, regulators and other Capital

Market Operators.

Management Team

Experience

• Each management staff has an average of 15

years in our industry.

• As such we have an in-depth understanding of

our industry.

OPERATING ENVIRONMENT


Snapshot of Environment

Challenging Macroeconomic Environment

• Both the global economy and the domestic economy hasbeen significantly affected by the COVID-19 as mostdeveloping economies posed a negative GDP growthrate in Q2 2020.

• Our own business was also affected, we were faced withresultant challenges of the virus such as decline in Stategovernments’ taking of already agreed tech solutionsdue to fund constraints.

Digital Technology

• Siginficant traction has been gained through thedigital business as seen with over 264% year-on-yeargrowth in the Digital consultancy revenue.

• It is our goal to position Africa Prudential as a go-todigital solution provider on the African Market.

Regulations

•With the fast pace of digital disruptions in thebusiness landscape, the need for regulations toplay a leading role in supporting innovation iscrucial to growing the capital market.

Capital Market Activities gains momentum

•Corporate issuances of CPs and Bonds has takenthe centre stage in a bid to raise fresh capital toweather the storm of COVID-19.

•The duo factor of increased system liquidity andlow-yield environment is spurring interest in pursuingdebt financing in the capital market by corporatesand government.

COVID-19 Impacted Performance

Source: COVID Observer, WHO Situation Report, CNBC, Arrhenn Analysis, Trading Economies

< 10,000

Cases

> 1 Million

Cases

Data is given as at October 19th, 2020

Confirmed Positive Cases of COVID-19 Infection around the World

• Economies around the world were significantly affected by the

COVID-19 pandemic due to restrictions put on movements and

trade. The US economy contracted by -9% in Q2, UK economy

by -21.5% and the German economy by -11.3%.

• Statistics, however, are showing a gradual recovery of the

global economy from the crisis, China’s economy rebounded by

3.2% in Q2 2020 after a dip of -6.8%.

• With economies easing measures to contain the COVID-19

pandemic and the initial re-opening of businesses, financial

organizations have began to review their gloomy forecast of

growth in 2020 and 2021. The Organization for Economic

Cooperation and Development (OECD) revised its forecast to a

better forecast of -4.5% for 2020 and 5.0% in 2021 from an earlier

forecast of -6% and 4.8% respectively in June.

• Like most other economies, there have been policies such as

reduction of the MPR to 11.5%, ₦2.3 trillion stimulus package and

survival fund for Micro Small and Medium Enterprise (MSMEs).

40,355,746Confirmed

27,631,864Recovered

1,117,667Deaths

11,606,212Active

Key Macro Indicators

Source: CBN, NBS, OilPrice.com, Comercio Research, Nairametrics, Arrhenn Analysis

GDP growth rate vs Oil production

• GDP data released for Q2 2020 showed that the 3-year slow but positive growth in GDP

came to an end in Q2 2020. According to the NBS, Nigeria’s GDP growth slipped into the

negative zone, declining by 6.1% compared to Q1 2020.

• This result was due to a 6.63% year-on-year contraction in oil sector income and 7.70%

decline in the non-oil sector.

• Nigeria’s volume of oil production reduced during the quarter in line with the OPEC+

coalition’s decision to support the oil market by extending its 9.7mbpd production cut by

an additional month. Meanwhile, Nigeria is expected to accelerate her production cuts

to comply with the allocated target of about 1.4mbpd.

Inflation Rate

• Headline inflation continued its upward trajectory in September 2020, expanding for

the 13th consecutive month. This increase represents the highest rate in 30 months

due to cost push factors in the economy.

• Inflation grew to 13.71% YoY and is the highest inflation rate since February 2018. It

was fueled by increase in prices due to the border closure, the pandemic, and the

prevalence of low interest rates. Inflation rate is expected to increase further.

• The devaluation of the naira, the removal of tariffs on electricity, removal of subsidy

on petrol, as well as the sustained border closure is expected to contribute to an

increase in prices of goods across Nigeria.

-4%

1%

6%

11%

16%

21%

Inflation Rate

Food Inflation Core Inflation Headline Inflation

0

0.5

1

1.5

2

2.5

-7.00%

-6.00%

-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

Oil P

rod

uc

tion

GD

P g

row

th r

ate

GDP Growth vs Oil Output

Quarterly GDP Growth Rate Oil Production (mbpd)

Key Macro Indicators

Source: CBN, NBS, Trading Economics, OilPrice.com, Comercio Research, Arrhenn Analysis

Interest Rates

• The central bank of Nigeria further cut its monetary policy rate (MPR) to 11.5% in

September, the lowest rate since 2016. This was done to combat the increasing inflation

rate.

• The new MPR is expected to provide buffer for the Nigerian economy’s rebooting amidst

the wake of the pandemic.

• The average treasury bills rate has been under 4% since Q4 2019 because of CBN’s

prohibition of domestic participants from the OMO auction market.

Foreign Reserves and Crude Oil Prices

• Crude oil prices shed gains during the quarter, putting an end to the 6-month price

appreciation. Brent Crude closed at $42.3/barrel while WTI closed at $40.2/barrel/

• Although demand for crude oil increased as economies began to reopen for

activities during the quarter, new coronavirus infections dampened demand across

the US and Europe, contributing to the oil price decline.

• The CBN devalued the naira twice during the quarter – in July and August – which

resulted in greater speculative activities and demand for dollars for transactional

reasons in the forex market.

10.5%

11.0%

11.5%

12.0%

12.5%

13.0%

13.5%

14.0%

0%

2%

4%

6%

8%

10%

12%

MPR

T-B

ills

Interest Rates

T-Bills Rate Monetary Policy Rate

-

5

10

15

20

25

30

35

40

45

50

0

10

20

30

40

50

60

70

80

Fo

reig

n R

ese

rve

s

Cru

de

Oil P

ric

es

Foreign Reserves vs Crude oil

Brent Crude ($ pb) WTI Crude ($ pb) Foreign Reserve ($ bn)

Effects of the COVID-19 pandemicDecline in interest rate on our

portfolio investment business

Business-Related Challenges & Solutions

f

Continuous deployment of digital

solutions to deliver value to clients

across our business lines.

Consolidation on the gains from

the company’s diversification into

the digital technology, cooperative

and e-commerce space.

Creation of the right perception

of the Africa Prudential brand as a

digital technology business.

Ensure optimal portfolio mix to

achieve optimal performance.

Continuous assessment of the

macroeconomic landscape to

effectively position us for superior

returns.

Our ResponseOur Response

FINANCIAL REVIEW


Financial Review

Income StatementSep ‘20(₦’mn)

Sep ‘19(₦’mn)

Change (%)

Gross Earnings 2,630 2,896 -9.2

Revenue from Contracts 861 1,223 -29.6

Interest Income 1,769 1,673 +5.8

Operating Expenses (1,088) (1,066) +2

Profit Before Tax 1,569 1,759 -10.8

Profit After Tax 1,410 1,502 -6.1

Statement of Financial PositionSep ‘20(₦’mn)

Dec ‘19(₦’mn)

Change (%)

Total Assets 19,379 18,649 +3.9

Total Liabilities 11,110 10,365 +7.2

Total Equity 8,269 8,284 -0.2

Key Financial Ratios Sep ’20 Sep ’19 Change

PAT Margin 53.62% 51.88% +1.7 pp

EBIT Margin 59.72% 64.25% -4.5 pp

Return on Average Equity 17.05% 18.13% -1.1 pp

Return on Average Assets 7.28% 8.05% -0.8 pp

Asset Turnover Ratio 0.14 0.16 -7%

9-Month Income Statement Review

Income StatementSep 2020(₦’mn)

Sep 2019(₦’mn)

Change (%)

Gross Earnings 2,630 2,896 -9.2

Operating Expenses 1,088 1,066 +2.1

Profit Before Tax 1,569 1,759 -10.8

Profit After Tax 1,410 1,502 -6.1

Sep '19 Sep '20

2,896

2,630

Gross Earnings (₦'mn)

Sep '19 Sep '20

1,066 1,088

Operating Expenses (₦‘mn)

Sep '19 Sep '20

1,759 1,569

Profit Before Tax (₦'mn)

Sep '19 Sep '20

1,502 1,410

Profit After Tax (₦‘mn)

Operating expenses rose by

2% year-on-year, driven by an

increase in amortization costs

of 17.2% and 3.4% increase in

personnel expenses.

During the nine-month period

ended September 2020, gross

earnings reduced by 9.2%

because of a 29.6% fall in

revenue from contracts with

customers.

Profit before tax declined by

10.8% due to ripple effect

from the decline in revenue

from contracts.

While income tax expense

declined significantly, profit

after tax reduced marginally

by 6.1%.

3-Month Income Statement Review

Income StatementQ3 2020(₦’mn)

Q3 2019(₦’mn)

Change (%)

Gross Earnings 757 889 -14.8

Operating Expenses 340 342 -0.7

Profit Before Tax 421 555 -24.2

Profit After Tax 396 522 -24.2

Q3'19 Q3 '20

889

757

Gross Earnings (₦ 'mn)

Q3'19 Q3 '20

343 341

Operating Expenses (₦ 'mn)

Q3'19 Q3 '20

555

421

Profit Before Tax (₦ 'mn)

Q3'19 Q3 '20

522

396

Profit After Tax (₦ 'mn)

Operating expenses declined

by 0.7%, driven by a 7.5%

drop in personnel expenses

and a 9.3% decline in other

operating expenses.

During the third quarter of

2020, gross earnings dropped

by 14.8%. This was triggered

by the 24.3% YoY drop in

revenue from contracts and

a 9% drop in interest income.

A lower other income figure

coupled with the increase in

operating expenses pulled

profit before tax to a YoY

decline of 24.2%.

Profit after tax reflected the

24.2% decline in profit before

tax during the period due to

lower earnings compared to

Q3 2019.

9-Month Gross Earnings Breakdown

Sep ‘20(₦’mn)

Sep ‘19(₦’mn)

Change

(%)

Retainership fees - 715 -100

Fees from corporate actions 379 302 +25.79

Register maintenance 183 124 +47.49

Digital consultancy 299 82 +263.74

Revenue from contracts with

customers861 1,223 -29.61

Interest on loans and advances 1,522 1,270 +19.83

Interest on treasury bills 200 370 -45.94

Interest on short-term deposits 3 28 -87.85

Interest on bonds 44 5 +844.90

Interest Income 1,769 1,673 +5.76

Revenue from contracts with customers

Interest Income

58%25%

10%

7%

Sep 2019

Retainership fees Fees from corporate actions

Register maintenance Digital Consultancy

₦1,223mn

0%

44%

21%

35%

Sep 2020



₦861mn

86%

11%0%

2%Sep 2020

Interest on loans and advances Interest on treasury bills

Interest on short-term deposits Interest on bonds

₦1,769mn

76%

22%

2%

0%

Sep 2019



₦1,673mn

Q3 Gross Earnings Breakdown

Q3 ‘20(₦’mn)

Q3 ‘19(₦’mn)

Change (%)

Retainership fees - 252 -100.00

Fees from corporate actions 74 75 -1.58

Register maintenance 41 23 +75.08

Digital consultancy 155 6 2,483.16

Revenue from contracts with

customers270 356 -24.26

Interest on loans and advances 393 405 -2.91

Interest on treasury bills 61 116 -47.35

Interest on short-term deposits 1 12 -88.97

Interest on bonds 32 - +100.00

Interest Income 487 533 -8.54

Revenue from contracts with customers

Interest Income

0%

27%

15%

57%

Q3 2020



₦270mn

71%

21%

6%

2%Q3 2019



₦356mn

76%

22%

2%

0%Q3 2019



₦533mn

81%

13%

0%7%

Q3 2020



₦487mn

Statement of Financial Position

Income StatementSep 2020(₦ ‘bn)

FY 2019(₦ ‘bn)

Change (%)

Total Assets 19.38 18.65 +3.9

Total Liabilities 11.09 10.37 +7.2

Total Equity 8.27 8.28 -0.2

Dec '16 Dec '17 Dec '18 Dec '19 Sep '20

16.8

21.9 21.3 18.6 19.4

Total Assets (₦ 'bn)


4.6

6.9

8.6 8.3 8.3

Total Equity (₦ 'bn)


12.3 15.0

12.7

10.4 11.1

Total Liabilities (₦ 'bn)

During the period, the book value of total assets appreciated slightly

by 3.9% YTD on the back of 141.0% increase in trade and other

receivables,13.6% increase in intangible assets and 7.3% growth in

debt instruments measured at fair value through OCI

Total liabilities increased by

7.2% YTD owing to 5.3%

increase in customers’ deposits

and 2106.8% rise in creditors

and accruals

Total equity slightly declined

by 0.2% during the period as

a result of 121.9% increase in

negative fair value reserve.

Ratio Analysis

Key Financial Ratios Sep ’20 Sep ’19 Change

PAT Margin 54% 52% +2pp

EBIT Margin 60% 64% -4pp

Return on Average Equity 17% 18% -1pp

Return on Average Assets 7% 8% -1pp

Asset Turnover Ratio 0.14 0.15 5%

Sep-19 Sep-20

52% 54%

PAT Margin

Sep-19 Sep-20

64%60%

EBIT Margin

Sep-19 Sep-20

18%17%

Return on Average Equity

Sep-19 Sep-20

8%

7%

Return on Average Assets

Sep-19 Sep-20

0.16 0.14

Asset Turnover Ratio

In Q3, PAT margin rose by

2 percentage points from

52% to 54%

Return on average equity

fell by 1 point as a ripple

effect from the reduced

PAT

EBIT margin fell by 4 points

in September 2019 to 60%

in September 2020

Return on average assets

also took a 1-point drop

on the back of lower PAT.

The asset turnover

ratio declined

marginally, due

to the decline in

gross earnings

DIGITAL TECHNOLOGY


Key Metrics Achieved

Currently has over 500,000 subscribers on the platform.

Automated disbursement for cooperators on the platform

seamlessly.

Enhanced the platform with payroll, accounting and inventory

management features to the delight of cooperative organizations.

Developed an app version for one of our major client on this solution. Commenced development of

mobile app for PolCoop.

Commenced customization features for different Cooperative groups

Go-live of the Website

Over 5,000 products so far available on the platform. Working to have 700% growth by

December 2020.

Developed dynamic sales strategies leveraging relationship, data analytics and

market insight across B2B and B2C channels.

Developed strategic partnerships for valuable plug-ins aiding more lifestyle experience for

shoppers.

Established sustainable strategic partnerships and alliances with OEMs and 3PLs

Commenced services offering on the Website

Developed a winning logistics strategy for delivery and inventory.

Sep-19 Sep-20

82

299

₦'m

illio

n

Digital Technology

Sep 20

Performance Review

Our digital consultancy business line recorded a massive growth

YoY, as it expanded by 263.74% in the period to September 2020

compared to its value at September 2019

264%YoY growth

Contribution to Revenue from Contract with Customers

Our digital consultancy’s contribution to revenue from

contracts grew from only 7% in September 2019 to 35% in

September 2020.

Sep 19

7% 35%

OUTLOOK


Strategic Plans for Q4 2020

06 01

02

0304

05

Position her flagship product, ”EasyCoop

Solution” among top cooperative manager

solutions in Africa while enhancing it to an

enterprise cooperative platform.

Leverage technology to expand our service

offerings in the cooperative space

Expand value offerings in the e-commerce

space

Define strategy to position among top 3 in

the e-commerce space.

Create exceptional experience to clients

Continuously leverage key strategic

alliance with top–tier portfolio managers for

quicker access to market opportunities.

Aggressively drive optimal utilization of all

funds.

Ensure optimal portfolio mix

Drive the corporate brand perception of

Africa Prudential beyond the Registrar

Company to a full-fledged technology

company.

Defined plan to improve client satisfaction

and ensure retention.

Define strategy for attracting new customers

and new businesses while turning existing

customers to advocates

Deepen our capital market presence in

African along our SaaS business model via

our “Enterprise Capital Market Platform”.

Expand our registrar service offerings across

Africa.

Transform the internal and external

experience by deploying digital technology

solutions across all our interaction channels.

Achieve full automation of AGM processes

to transform stakeholder experience

Position Africa Prudential as a go-to digital

solution provider on the African Market.

Launch at least 2 digital ecosystem

platforms before year end.

Position as a strong body shop service

provider in the country by leveraging

strategic partnership

Leverage our Data warehouse facility to

drive intelligent business insights to create

improved value to our clients while

expanding revenues across our business

lines.

Repositioning the Africa Prudential brand as a technology company

DigitalTechnology

Registrar

Cooperative Business

PortfolioInvestment

ClientRelationship

EasyMall/E-Commerce

Projected Product Launch/Initiative Drive

EasyCoop Product Launch

Position DT Consulting as the

Go-To technology solution

builder and development

partner across her chosen

target market

Launch of Enterprise Capital

market Solution

Deployment of multi-listing

platform solution across

global multiple stock

exchanges

Customer Experience Center

CXC will be promoted as a

Go-To call center service

provider

5

41

2

3

Position Cooperative SBU as

the Go-To SaaS provider for

the deployment, support and

implementation of enhanced

cooperative and enumeration

platform across Africa

6

Earnings Guidance

Achieved Guidance

Interest Income ₦2.5bn

Operating Expenses ₦1.1bn

Profit Margin 45%

Return on Equity 20%

Gross Earnings ₦3.5bn

Revenue from Contracts ₦1bn

119%

54%

₦1.08

98%

₦1.77

71%

₦2.63

75%

Revenue from Contracts ₦1bn86%

₦0.86

85%

17%

APPENDIX


APPENDIX

Statement of Comprehensive Income (in thousands of Nigerian Naira) Sep-20 Sep-19

Revenue from contracts with customers 860,787 1,222,866

Interest Income 1,769,214 1,672,795

Gross earnings 2,630,001 2,895,661

Other income 29,192 30,863

Credit loss reversals/(expenses) (9,723) -

Personnel expenses (464,975) (449,810)

Other operating expenses (551,227) (561,631)

Depreciation of property and equipment (40,792) (39,840)

Depreciation of right of use assets (4,268) -

Amortisation of intangible assets (17,496) (14,923)

Profit before finance costs and tax 1,570,712 1,860,320

Finance costs (1,310) (101,030)

Profit before tax 1,569,402 1,759,290

Income tax expense (159,273) (257,164)

Profit for the period 1,410,129 1,502,126

APPENDIX

Statement of Financial Position (in thousands of Nigerian Naira) Sep-20 Dec-19

ASSETS

Cash and cash equivalents 535,014 1,520,859

Equity instruments at fair value through OCI 222,101 243,328

Debt instruments at fair value through OCI 17,259,417 16,084,109

Trade and other receivables 994,523 412,582

Property, plant and equipment 292,044 314,854

Right-of-use-assets 9,010 14,725

Intangible asset 66,870 58,876

TOTAL ASSETS 19,378,978 18,649,333

LIABILITIES

Customers’ deposits 10,155,371 9,644,466

Creditors and accruals 709,232 32,139

Lease liabilities 6,901 12,292

Current income tax payable 196,468 634,296

Deferred tax liabilities 41,856 41,856

TOTAL LIABILITIES 11,109,828 10,365,049

EQUITY

Share capital 1,000,000 1,000,000

Share premium 624,446 624,446

Revaluation reserves 70,596 70,596

Fair value reserve (45,991) (20,728)

Retained earnings 6,620,099 6,609,970

TOTAL EQUITY 8,269,150 8,284,284

TOTAL EQUITY AND LIABILITIES 19,378,978 18,649,333

Thank you !!!

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