FY 2023: VFD Group records first loss as a listed company

Investment firm VFD Group released its full-year 2023 results, showing gross profits increased 31.9% to $45.1 billion.

The company, however, recorded a loss after tax of N1 billion, a sharp reversal of the N8.5 billion profit recorded a year earlier. This is the company’s first after-tax loss since listing in October last year and its first full-year loss in at least five years.

The company operates its own investment company, with ownership interests in approximately 40 portfolio companies. Ccompanies in its portfolio cover sectors including financial services, asset management, real estate, leasing and fintech

The most important information

Gross earnings: N45.11 billion (up from N34.03 billion in 2022)

Net investment income: N1.53 billion (down from N8.16 billion in 2022)

Other income: N6.76 billion (down from N10.50 billion in 2022)

Total expenses: N13.21 billion (up from N10.11 billion in 2022)

Operating loss before tax: N1.40 billion (compared to a profit of N8.25 billion in 2022)

Loss before tax: N1.02 billion (compared to a profit of N8.58 billion in 2022)

Loss after tax: N750.44 million (compared to a profit of N6.84 billion in 2022)

Loans: N81.5 billion vs N56.7 billion (43.8%)

Fund shareholders: N32.5 billion vs N32.5 billion (-0.2%)

These are the company’s first full-year audited results since it went public in October 2023, highlighting the challenges it faces during the year.

Comment

A cursory analysis of the results reveals a number of challenges that could have resulted in losses incurred by the company.

Capital and related expenditure in 2023 was significantly higher than the previous year at N32.7 billion compared to N12.3 billion in 2022.
This significant increase in expenditure has drastically impacted net investment income, reducing it from N8.1 billion in 2022 to N1.5 billion in 2023.
The higher interest costs reflect higher borrowing costs in the country as the central bank has increased interest rates to combat inflation.
There was also a significant increase in other operating expenses, which increased from N6.4 billion in 2022 to N8.3 billion in 2023. This increase in operating expenses contributed to the overall increase in total expenses.
The impairment of financial assets had a negative impact on financial results. In 2023, the company recorded an impairment loss of N171 million, although this is an improvement over the previous year’s impairment loss of N3 billion.
Staff costs increased to N3.3 billion from N2.5 billion and depreciation costs increased to N1.4 billion from N1 billion. These increases further increased total costs, reducing net profit.
Financial results were also impacted by hyperinflationary conditions in Ghana, where the company said the application of IAS 29 resulted in a net cash loss of N241.6 million.

VFD Group also recorded mixed results in Nigeria and Ghana, its two main locations. In Nigeria, the group recorded a loss after tax of N2.49 billion and Ghana’s total profit was N1.7 billion despite revenues of N30.3 billion and N3.9 billion in the two countries respectively.

The group’s FinTech businesses also struggled during the year, with VFD Microfinance Bank posting a loss of N211.4 million and VFD Tech posting a loss of N244.8 million (N284.6 million in 2022). However, its capital is Cedi
Microfinance Bank’s operations have finally turned to profits.

The share price of VFD Group also dropped from a trading price of N269.3 per share to N202.9 per share, which is the average price for most of the period of the year.