Our digital technology drive will create more income streams and boost value for shareholders – Idiong
In this interview with BusinessDay journalist Segun Adams, Obong Idiong, Managing Director/CEO, Africa Prudential shares insights on how the company is evolving from its Registrar business to becoming a first-class digital technology solutions provider.
A glance at the company’s financial performance report for 2019 revealed that professional fee income i.e revenue from contracts with customers grew by 6 percent to N1.502bn in 2019 compared to N1.416bn in 2018, what accounted for this?
In 2017, we took a deliberate position in line with our strategy to diversify from our dependence on investment income which makes up the chunk of our revenue at 56% in 2019. We saw the need to introduce and strengthen other income lines which would enable the business become more sustainable, especially given the current yield environment.
Looking at our financial reports for 2019, our digital technology business contributed 4% to our professional fee revenue which was almost nonexistent in 2018. This gives us the assurance that our digital transformation strategy is on the right path to create new values.
Despite the growth in professional fee income, the company reported a 13 percent decline in gross earnings and profitability also declined by 0.22 percent compared to 2018, can you explain why?
Last year we had a profit decline of 0.22% due to the yield environment and this affected our investment income revenue. In March, 2019, there was a reduction of the Monetary Policy Rate (MPR) by 50 basis points to 13.5% which affected that income line.
There was also a subsequent crash in the financial market rates in the aftermath of the Central Bank of Nigeria’s suspension of non-banking domestic corporates and individual investors from the OMO market. Despite this, we were able to mitigate the impact of this decrease in investment income by reducing our finance cost by 88% based on our decision to pay down on our loans.
Why was there a significant increase in the company’s operating expense for the year and what you are doing to reduce the cost?
In 2019, we recorded some milestone achievements in our business diversification drive with the go-live of our Digital Technology Innovation Lab. This necessitated the increased expense to finance the recruitment of competent personnel and other resources like technology to drive the new business to success.
We also upgraded our Help Desk to a well-equipped Customer Experience Center to provide application support, telemarketing and Business Process Outsourcing Services.
We see a lot of upsides from our investments and expect the generation of more revenue to boost our profitability and offer increased return to stakeholders.
In 2017, the then Africa Prudential Registrars Plc changed its name to Africa Prudential Plc. What has changed?
In today’s business climate, the need to constantly innovate and respond quickly to change is a core ingredient for growth.
One of the things we saw was the decline in fees in the capital market due to very few activities in that space coupled with the constant decline in investment yield.
These prompted us to look inwards and carve out measurable diversification strategies by leveraging on our competencies. Today, through our Innovation Lab, we develop business solutions and software for public and private institutions within and outside the capital market. We also cater to our numerous subscribers on our various technology platforms.
We have moved from being just a registrar business to a provider of technology solutions and applications which has further enhanced our registrar business.
With this change in our business model, we believe that our commitment to grow and protect our over 260,000 shareholders’ wealth is intact as we are ensuring that our business is viable and sustainable.
Despite the decline in profitability during the period, the company’s Board of Directors recommended a 40 percent increase in dividend payout to shareholders of 70 Kobo per share compared to 50 Kobo in 2018, resulting in a gross dividend payout of N1.4 billion. Why?
Since listing on the Nigerian Stock Exchange in 2013, Africa Prudential Plc has consistently rewarded its investors with impressive dividend payout with a six years average dividend yield of 14.07%.
Despite this impressive dividend payment history, we have also grown our retained earnings to N6.6bn representing 80% of the total shareholders’ fund. Therefore, business expansion and growth considerations re taken into cognizance whilst upholding our commitment to delighting our investors.
The macro-economic landscape has changed due to the outbreak of the Coronavirus and the low yield environment that dominated 2019 is expected to persist in 2020. What are you doing to sustain the impressive performance and dividend payout in 2020?
The COVID-19 pandemic has affected the world in unprecedented ways. Our immediate consideration is to ensure the safety of our staff and clients by providing measures to curtail the spread of the virus at our various locations. We had to postpone our earlier scheduled Annual General Meeting in putting the safety of our shareholders and staff first.
We have also out in place, a sound Business Continuity Plan to enable us render services to our clients, even in the event of a lock down. While the pandemic will affect growth projections for the year due to its widespread impact on investment spending globally, we will continue to offer services through our various cloud based digital platforms, sustain ongoing technological projects and adequately position for post-crisis continuity.
As earlier mentioned, the company stepped up its drive to diversify into the digital technology space in 2019, what are the prospects for the business in 2020?
We have built significant capacity in the digital technology space and have commenced some transformative both with our businesses and for third-party clients.
Our work in this space is about bringing impact, improving customer experiences and creating value to our creations; we see a lot of upsides. In terms of revenue, we are hope to see a substantial portion coming from digital technology in the near future. We also see our technology ability scaling and providing a lot of value for our core registrar business and the capital market in general.
Tell us about Africa Prudential’s transition into the technology space. What are the challenges encountered and how they were addressed?
The transformational journey has not been very smooth but by adopting an agile management approach, we have been able to learn fast, fail smart and scale along our business transformation process.
We have built an innovation friendly environment and launched our i-Academy (innovation-Academy) where we upskill and reskill ourselves to get everyone onboard the transformation process. One of the skills we have acquired is the appreciation of data so we can predict and personalize services for exceptional customer experience. Of course, issues around cyber security and data privacy are one of the things that keep me awake.
Our business model has largely changed as we have introduced new ways of creating, delivering and capturing value.
Putting all of this together, we have been able to progress tremendously from where we were; a year ago, six months ago, or even a month ago in terms of bringing in best practices, scaling and creating an enabling environment for innovation and change to thrive.
You also play in the cooperative space. Tell us about the value you are bringing to the cooperative sector?
Cooperative societies in Nigeria are creating a lot of value and enhancing the socio-economic development of their members. Unfortunately, there is paucity of data within the sector to accurately record their contributions to growth and development.
One of the ways we are trying impact the sector is by introducing change through the adoption of technology as an enabler.
Our EasyCoop Cooperative Management Solution is an enterprise resources planning tool developed by our Innovation Lab to automate the processes of cooperative societies. Some of the features include loan requests, withdrawals, inventory management, payroll, accounting, market place via the discounted EasyMall e-commerce platform, chat and other value-added features. We currently have over 500,000 subscribers on the platform.
We also do a lot of advocacy in the space through our partnerships with local and international cooperative bodies and assist in other interventions that will enhance development in the sector.
What should investors expect from Africa Prudential in 2020?
Over the last six years, we have delivered a very impressive dividend yields and this was based on just two revenue streams; Investment income and fees from our Registrar business. We are now adding more revenue streams.
Today, we have a very strong digital economy and Africa Prudential is now an integral part of that economy in terms of the services we are providing and our investment in technology.
We are investing in technology and building platforms, where a lot of value is being created and we cannot currently measure the full potential.
In just over a year, our foray into the digital technology space is yielding fruits as we are now in several client locations creating solutions, growing a large subscriber base on our products; all of which prove a product-market fit.
If you bring all of these together you can clearly see that there is a lot of value in Africa Prudential for investors.
The world celebrated The International Women’s Day a few weeks ago. I would like to know how Africa Prudential encourages gender equality at work?
Equality of any kind resonates within our core value at Africa Prudential. We have a balanced workforce with women in several leadership positions cross our organization including on our Board which is led by Chief (Mrs.) Eniola Fadayomi, an achiever within the public and private sector in Nigeria.
For us, performance and productivity drive our rewards system and we believe in equal opportunity for all.
Women are critical to the future, and we have very clear policies not to discriminate and to deliberately encourage female participation in the workplace.
Today, we employ more software engineers than any other profession into our workforce and as the sector is a male dominated one, we have undertaken positive action to encourage applications from women. We just recently employed a female tester and a front-end developer who come with very strong credentials.
As a Nigerian business driver, what steps do you recommend Nigeria takes to ensure a soft landing of the economy at this crucial time?
Nigeria is a very interesting place filled with a lot of opportunities and very smart people.
In spite of the some of the challenges we face, we have businesses that are thriving across country. The problems we are faced with today as a country is not unique to us as a lot of emerging economies are facing the same challenges
I think that what the government is trying to do in terms of investment in infrastructure is in the right way to go and creating an enabling environment will help more businesses thrive.