98 Companies Post N6.1trn Turnover Despite Covid-19
The companies’ H1’21 combined turnover was 17.57 per cent more than the N5.2 trillion recorded in the same period in H1’20.
Financial Vanguard findings from the financial reports they turned over to the NGX for the period under review showed that the companies posted 29.3 per cent increase in pre-tax profit to N1.275 trillion in H1’21 as against the N986.572 billion in H1’20.
The topline and bottomline performance indicate that the corporate world may have shaken off the adverse impact of the COVID-19.
It would be recalled that Nigeria, alongside other countries in the world, went into recession last year following the effects of the restrictions to movement and economic activities implemented across the country in early second quarter, Q2’20 of the year in response to the COVID-19 pandemic.
However, the government launched some stimulus interventions meant to curtail the impact of the pandemic on businesses and individuals. The impact of this stimulus, analysts stated, have started reflecting in the companies’ performance and hoped it would be sustained barring unforeseen circumstances.
Meanwhile, though the banking sector topped the performance chart contributing the highest volume of both topline and bottomline, the sector recorded mixed financial performance for the first half 2021, H1’21.
Banking sector analysis
Financial results of leading banks show that the combined turnover grew marginally by 2.8 per cent to N2.575 trillion from N2.505 trillion recorded in the corresponding period of H1’20.
This gives a significant under-performance against the 5.01per cent recorded as the Gross Domestic Product, GDP, growth.
However, the banks recorded positive performance in Profit Before Tax, PBT, which grew by 6.5 per cent to N573.7 billion in H1’21 from N545.7 billion in H1’20, but inflation at 17.75 per cent in HI’21 has put pressure of the profit growth rate.
Meanwhile, analysts have stated that the mixed H1’21 performance was attributable to a combination of factors such as Naira depreciation and rise in cost as they resume full on-site operations unlike last year when most of the staff worked from home.
They further noted that tier-2 banks were relatively better in terms of profit, especially Wema Bank, Unity Bank and Jaiz Bank, an indication that tier-2 banks are navigating the challenges of macroeconomic environment more efficiently.
Industrial Goods sector
The Industrial Goods sector recorded higher growth rates than the banking sector.
Specifically, the 11 companies in the sector grew their turnover by 38.1 per cent to N899.032 billion in H1’21 from N650.844 billion in H1’20 while their PBT grew by 64.64 per cent to N 312.150 billion from N189.596 billion in HI’20.
Consumer Goods sector
The 10 companies whose results were captured in the Consumer Goods sector occupied the third position in the sectoral analysis as they accounted for 13.8 per cent and 5.9 per cent of the 98 companies combined turnover and PBT respectively.
Specifically, the sector posted N843.631billion turnover in HI’21 as against N626.775 billion, representing 34.60 per cent growth while they grew PBT by 10.95 per cent to N74.936 billion from N 67.541 billion in H1’20.
Meanwhile, the Advertising/Media and Hospitality sectors remains in the struggle to recovery path as they accounted for paltry 0.2 per cent and 0.23 per cent of the companies’ combined turnover respectively while their PBT accounted for 0.01 per cent and a negative of -0.04 per cent respectively.
Analysts/operators’ reactions
Reacting analyst and Managing Director of APT Securities & Funds Limited, Mallam Garba Kurfi said: “The performance of half year results is mixed while some have very good results especially the Cement companies and Telecoms companies while Banking and Insurance have mixed results.
“Access and Fidelity Banks have done very well while Stanbic and Guaranty Trust Bank, GTCO have poor results and fell below expectations.
“The likely factors responsible for some of the companies’ low performance may be the combination of falling of naira value and rising of over head cost due to the fact that they operated in full operations with the attendance of full staff unlike previous year when most of the staff were at home.”
On banks, performance, he said: “Tier 1 Banks have mixed performance especially Access and UBA have done while Zenith and First Bank Nigeria Holdings, FBNH have marginal increase but GTCO have fallen below expectations.
“Meanwhile, Tier – 2 are relatively better in terms of profit especially by Fidelity Bank and Sterling Bank while Stanbic IBTC did not meet expectations but in total the PBT is cumulatively better than the previous year. It shows that Tier- 2 is catching up with the challenge and hope to meet expectations.”
In his own reaction, analyst and Managing Director, High Cap Securities Limited, David Adonri said: “Nigeria was virtually crippled in H1, 2020 due to Covid19 disruption. Reopening of the economy in H1 2021 ought to impact more on the financial performance of banks, when compared to last year H1. The difference is actually below expectation.
Apparently, Tier-1 banks reduced their risk exposures in H1 2021 hence, reduction in gross earnings. They were able to increase profits through stern cost reduction measures.
“Their negative growth returns, in comparison to the hyperinflation bedeviling the economy, are fallout of the general weakness of the nation’s socioeconomic fundamentals and the low interest rate environment that emerged since Q3’20.”
Commenting on tier-2 performance, Adonri said: “Tier 2 banks may have assumed more risks in deployment of their assets in H1 2021 thus, heightening the general cost of their administration. They grew during the period but at the expense of profitability.
