NGX Group's pre-tax profit rose 170%. Trading fees did most of the work.
The company that owns Nigeria's stock exchange more than doubled its revenue while costs rose by half. But three-quarters of that revenue is now trading fees, the tax bill more than tripled, and more than a quarter of pre-tax profit is a share of other companies' earnings.
| Revenue | ₦17.60bn |
| Profit after tax | ₦10.36bn |
| Tax charge | ₦4.40bn |
Five things you need to know
- Revenue rose 118% to ₦17.60bn, while operating costs rose 53%.
- Transaction fees were ₦13.34bn: 76% of revenue and 88% of the revenue growth.
- Profit before tax rose 170% to ₦14.76bn, but the tax bill more than tripled, so profit after tax rose 146% to ₦10.36bn.
- More than a quarter of pre-tax profit, ₦4.14bn, is the group's share of other companies' profits, mainly the clearing house CSCS.
- The board declared a ₦1.30 interim dividend per share, about ₦2.87bn at today's share count, or ₦3.82bn if the pending bonus shares are issued first.
What grew, and what it cost, against the same half last year
Revenue went from ₦8.08bn to ₦17.60bn. Operating costs went from ₦5.70bn to ₦8.72bn. The gap between the two bars is why operating profit more than doubled, from ₦4.16bn to ₦10.62bn.
Statement of profit or loss and notes 4 to 7 of the filing.
So was this a good half year?
Yes, and the group calls it a record. Revenue reached ₦17.60bn against ₦8.08bn a year earlier. Add ₦1.74bn of other income and total income was ₦19.34bn, up 96%.
Costs grew far more slowly. Staff costs rose 51% to ₦4.03bn and other running costs rose 54% to ₦4.28bn, so total operating costs rose 53%. When income grows more than twice as fast as costs, that is . Operating profit rose 155% to ₦10.62bn, which was 60.3% of revenue, up from 51.5%.
Where did the growth actually come from?
Mostly one line. A transaction fee is what the exchange earns each time shares change hands. It brought in ₦13.34bn, up from ₦4.96bn. Of the ₦9.52bn rise in revenue, ₦8.37bn was transaction fees.
Transaction fees were 75.8% of revenue, up from 61.4% a year earlier.
The second quarter alone brought in ₦7.53bn of them, against about ₦5.80bn in the first quarter.
The group says the growth was driven principally by increased market activity. The other fee lines grew far less: listing fees rose 59% to ₦2.38bn, technology income rose 19%, market data income was flat at ₦1.08bn, and income from investing its own cash fell 17% to ₦1.23bn.
The business has become more dependent on how much Nigerians trade. When the market is busy, fees rise quickly while most costs stay fixed. When it is quiet, the same operating leverage works against it. The filing gives no trading volumes, so we cannot say how much of the rise is more shares traded and how much is higher prices.
Rainingmoney's reading. The group attributes the growth to market activity; the filing does not quantify it.
One timing detail: ₦0.55bn of the ₦0.57bn of "other fees", annual charges to brokers plus licence and membership fees, was booked in the second quarter. That flatters the quarter-on-quarter comparison.
Where did every ₦100 of revenue actually go?
Derived from the statement of profit or loss and notes 5 to 8. Each ₦100 of revenue had ₦133.40 to work with once other income and investee profits are added; the rows below it add back to that, with ₦0.01 lost to rounding. Bars are scaled to ₦60. The group had no interest cost this half.
What changed since last year?
The tax bill more than tripled
Tax went from ₦1.24bn to ₦4.40bn, up 254%, against profit before tax up 170%. That is why profit after tax rose 146% instead of 170%. Company income tax was ₦3.87bn, up from ₦1.10bn, and a new ₦534.1m development levy appears where the Police Trust Fund levy, tertiary education tax and IT levy sat last year. The effective rate on reported profit was 29.8%, up from 22.8%, and the filing gives no tax reconciliation.
The cost base got heavier
Staff costs rose from ₦2.66bn to ₦4.03bn. Property and facility costs went from ₦150.5m to ₦508.5m, and business development from ₦43.3m to ₦237.6m. A ₦437.5m "project expenses" line appears for the first time, and the filing does not say what the projects are. Technology costs fell 7% to ₦898.8m.
The borrowing is gone
Last year the group charged ₦502.0m of interest and paid ₦743.0m in cash. This half the interest cost is nil, and no borrowings appear on the balance sheet at 30 June or at December. Cash from operations was ₦4.72bn, against an outflow of ₦2.03bn a year earlier. The filing does not say when the borrowing was repaid.
What caught our attention
The group's share of profit from companies it part-owns was ₦4.14bn, up 130%. That is 28% of pre-tax profit.
The biggest contributor is CSCS, the depository and clearing house, of which the group owns 43.52%. Its share of CSCS profit rose 74% to ₦4.14bn. The rest of the 130% is NG Clearing, another part-owned company, swinging from a ₦572.0m loss to a ₦3.6m profit.
None of that profit arrived as cash. CSCS paid the group a ₦3.49bn dividend, and the other ₦0.65bn stayed inside the stake's carrying value. That stake, at ₦33.2bn, is 43.8% of everything the group owns. The exchange itself is a smaller part of the balance sheet than the plumbing behind it.
Two other things are worth knowing. First, NGX Group is far more widely held than the cement companies we have decoded. The is 69.58%, worth ₦175.6bn at 30 June, against 5.73% at Dangote Cement and 2.31% at BUA Cement. Only two holders are listed as substantial: United Capital Securities at 5.00% and Stanbic IBTC at 4.91%. Directors' holdings, direct and indirect, total 11.98%, and two staff share schemes hold a combined 7.17%.
Second, the dividend. A ₦1.30 interim dividend is about ₦2.87bn on 2.20bn shares, roughly 28% of the half's profit. But shareholders approved a of one new share for every three held on 29 April, and it is still awaiting regulatory approval. If it goes through first, the same ₦1.30 would cost about ₦3.82bn, or 37% of the half's profit. The qualification and payment dates have not been announced.
The filing is also untidy in places. The cash flow statement places the ₦4.41bn of dividends paid under investing activities, where accounting standards normally put it under financing or operating, and it shows no earnings per share. We calculate ₦4.70 a share on today's share count. The totals reconcile either way.
Two notes on receivables do not fully add up on their face. One describes ₦2.09bn paid to former council members between 2006 and 2008, which the filing says the SEC directed the company to recover. It says ₦620.5m has been refunded and ₦256.5m is outstanding and in litigation. Those two figures total ₦877.0m, and the note does not explain the other ₦1.21bn. Separately, the ₦256.5m is down ₦254.0m from December, and the provision held against receivables fell by the same ₦254.0m, labelled an "impairment write-back". If that is a write-off against the provision, profit is untouched; if it is a true write-back, profit gained ₦254.0m. The filing does not say which. Neither changes any figure we have used.
The Scorecard
Each label comes from a fixed rule applied the same way to every company we cover. Strong means the measure improved materially against the same period last year. Steady means it held. Watch means it moved against shareholders, or moved without explanation. We publish no single score out of 100, because these categories don't trade off against each other in any honest way.
Did you follow all that?
Revenue rose 118%. Where did most of the extra revenue come from?
Transaction fees, the fees earned each time shares trade. They rose by ₦8.37bn, which is 88% of the ₦9.52bn increase in revenue. That is why the group's results move so closely with how busy the market is.
Profit before tax rose 170% but profit after tax rose only 146%. Why?
Because the tax bill more than tripled, from ₦1.24bn to ₦4.40bn, up 254%. Tax grew faster than profit, so it took a bigger share: 29.8% of pre-tax profit, against 22.8% a year earlier.
The group reports ₦4.14bn of profit from companies it part-owns. Was that cash?
Not all of it. The group records its share of those companies' profits as its own. The cash it actually received from CSCS was a ₦3.49bn dividend. The other ₦0.65bn of its share stayed inside the value of the stake.
The Bottom Line
NGX Group had a record half. Revenue more than doubled, costs rose by half, the borrowing is gone, and the board declared a ₦1.30 dividend that looks affordable at about 28% of the half's profit.
But the profit is closely tied to how much Nigerians trade. Transaction fees are 76% of revenue, the tax bill more than tripled, and more than a quarter of pre-tax profit is a share of other companies' earnings rather than money received. The next filings will show whether this was a peak or a new level.
Take the simplified report
The analysis above stays free to read. Leave an email if you want the PDF, or download it directly.
No simplified PDF attached yet.