VFD Group Plc Q2/H1 Result – Solid Growth Trajectory Amidst Rising Finance Costs

VFD Group Plc delivered a strong financial performance for the half year ended June 30, 2025, showing significant top-line growth, improved profitability, and robust asset expansion. The Group's gross earnings rose by 44% YoY to ₦41.17 billion (H1 2024: ₦28.59 billion), driven by solid investment income and net gains on financial assets. Despite a sharp increase in finance costs, the Group's profit before tax still advanced by 80% to ₦6.04 billion (H1 2024: ₦3.35 billion), and comprehensive income surged nearly sixfold to ₦17.19 billion (H1 2024: ₦2.88 billion), backed by strong fair value movements and foreign exchange gains.

Strengths

1. Strong Earnings Growth:
   • Gross earnings grew 44% YoY, and net investment income rose 49%.
   • Profit after tax more than doubled to ₦5.01 billion, showcasing strong operational resilience.
2. Diversified Income Streams:
   • ₦2.92 billion gain from financial assets and ₦645 million other income show income beyond core investments.
3. Substantial Other Comprehensive Income:
   • ₦12.18 billion in OCI largely driven by equity fair value and FX translation gains – a key boost to overall returns.
4. Balance Sheet Expansion:
   • Total assets surged to ₦356.87 billion (+21% YTD), supported by investment in financial assets, funds under management, and receivables.
5. Capital Raise and Improved Capital Base:
   • Share capital grew significantly from ₦633 million to ₦3.8 billion, indicating successful capital injection.
6. Improved Liquidity:
   • Cash and cash equivalents increased by 36% to ₦18.16 billion.

Weaknesses

1. Rising Finance Cost:
   • Finance cost rose by 60% to ₦21.14 billion, eroding operating profit significantly and highlighting leverage pressure.
2. Shrinking Loan Book:
   • Loans and advances dropped by 40% YTD to ₦37.6 billion, suggesting reduced lending or cautious credit stance.
3. Elevated Operating Expenses:
   • Operating expenses remained high at ₦10.79 billion, diluting profit margins despite increased revenue.
4. Impairment Charges:
   • ₦1.29 billion in impairment losses suggests some asset quality concerns.

Valuation & Outlook

While no explicit valuation is provided in the report, VFD’s strong earnings growth, expanding asset base, and healthy equity capital raise indicate strong intrinsic value appreciation. However, the aggressive rise in finance cost poses a medium-term risk to earnings sustainability if not contained or supported by improved yield on assets.