The group managing director of VFD Group, Nonso Okpala has expressed confidence in the group’s ability to post a profit in 2024.
Speaking during the group’s annual general meeting, Mr. Okpala noted that the company’s financials were going to turn the corner in 2024. He also highlighted reasons for the group’s net losses posted at the end of 2023.
Okpala noted,
- “I will also try to explain a bit about the loss we incurred in 2023. It was a very challenging year, marked by significant volatility in the FX regime. Principally, that was one of the main reasons our performance was not as expected in 2023, in addition to a negative carry that we had in 2023.”
- “We were hoping that the capital raise would happen sooner, but that didn’t happen due to certain delays. Based on the success of the rights issue we carried out in late 2023 and early 2024, we believe the issue of the negative carry is now behind us.”
- He added, “We evaluated and think that things will be more stable, so we are quite positive about the return for 2024 and beyond. There has been significant growth, but I know shareholders would have appreciated returns in profit and dividends. We encourage you to stay steadfast with us, as we are very positive about 2024 turning around.”
He explained that a series of investments made by the group in the years leading up to 2023 had a significant impact on its balance sheet.
Okpala noted that these investments required the deployment of capital, and the capital raise carried out in 2023 was necessary to offset the negative carrying amount occasioned by the investments.
He noted, “To explain the negative carry: When you run an investment company like ours, we have seasons of making investments and seasons of maturing those investments to achieve high dividend yields and good returns from divestments.”
“That period requires the deployment of capital, especially for companies that are not listed. As a result, it affected the firepower needed to maintain operations and make subsequent investments.”
“In 2023, we had initially planned to complete our capital raise by mid-year to cure the negative carry, but there were delays. However, it is good to announce that our rights issue was successful, so that negative carry is cured.”
VFD Group’s 2023 financials
VFD Group Plc posted a net loss for the first time in 2023, to the tune of N750.4 million, representing a decline from the N6.68 billion net profit posted in 2022.
However, the group posted a gross earning of N45.1 billion, representing a 32.6% growth from the N34.0 billion gross earnings posted in 2022. During the fiscal year, the group posted an income of N34.3 billion from its investments, representing a 67.5% growth from the N20.5 billion investment income posted in FY 2022. VFD Group’s total assets grew by 45%, from N151.5 billion as of 2022 to N219.4 billion as of 2023.
In its 2023 annual report, the group attributed its loss after tax to the Naira’s depreciation from ₦447 to ₦899.4. This sharp decline significantly increased the cost of hedge instruments used to manage exchange rate volatility and substantially raised the overall interest expense.
A significant subsidiary of the group, VFD Microfinance Bank posted a net loss of N211.45 million during the year, a decline from the bank’s N4.99 million net profit posted in 2022.
Despite posting an operating income of N5.2 billion, VFD Microfinance Bank recorded an operating expense of N5.43 billion, leading to a pre-tax loss of N182.7 million.
Speaking about VFD Microfinance Bank, Nonso Okpala said,
“One thing they have going very well for them is the technology they’ve built. As you know, they pioneered the digital banking regime that we are currently enjoying in the economy today. They built it on a very robust technology.”
“Unfortunately for us, most of that cost was incurred in dollars, and because of the variations in the dollar exchange rate, we had to recognize certain losses, which we think are behind us because the technology will still be beneficial for quite some time.”
“We’ve booked that loss, and we rest assured that with the reconstitution of the board and the retooling of management, we will see fantastic returns from that company in the near future.”