Legend Internet Plc’s first-quarter financial results for the period ending April 30, 2025, reveal a mixed performance characterized by increased revenue and gross profit, but significantly hampered by escalating operating expenses, ultimately leading to a substantial decline in profitability. While the company managed to grow its top line, the uncontrolled surge in operational costs overshadowed this positive development, raising concerns about the company’s cost management strategies. The listing of the company on the Nigerian Exchange Limited’s Main Board in April 2024 adds another layer of complexity to the analysis, suggesting a period of transition and potential adjustments that may have contributed to the observed financial outcomes.
A deeper dive into the figures reveals a 54.3% year-on-year decline in profit after tax, settling at N32.9 million compared to N72.1 million in the same quarter of the previous year. This drastic reduction can be primarily attributed to the staggering 164% increase in operating expenses, which ballooned to N122.6 million from N46.4 million in the corresponding period of 2024. This dramatic rise in operating expenses warrants further investigation to determine its underlying causes. Potential factors could include expansion efforts, increased marketing and advertising spend, rising administrative costs, or investments in new technologies and infrastructure. Understanding the drivers behind this increase is crucial for assessing the sustainability of the company’s current operational model.
Despite the profit downturn, Legend Internet Plc did experience a modest revenue growth of 2.2%, reaching N319.9 million compared to N313.0 million in the first quarter of 2024. This marginal increase suggests a relatively stable market demand for the company’s services, primarily wholesale bandwidth and subscriptions, which contributed the lion’s share of N312.7 million to the total revenue. This reliance on two key revenue streams underscores the importance of maintaining and expanding these core offerings. Diversification into new service areas could mitigate risks associated with over-dependence on specific products.
The company’s efforts to control the cost of sales yielded positive results, with a 22% reduction to N105.7 million from N135.7 million in the previous year’s first quarter. This cost efficiency translated to a 20.8% increase in gross profit, rising to N214.2 million from N177.3 million. This improvement in gross profit margin demonstrates the company’s ability to manage direct costs associated with service delivery. However, the significant increase in operating expenses negated the positive impact of the improved gross profit, ultimately leading to a decline in overall profitability.
Further examination of the financial statement reveals a marginal 2.4% increase in depreciation and amortization expenses, reaching N38.5 million from N37.6 million in the prior year. Finance costs, on the other hand, saw a substantial decrease of 65.8%, dropping to N821,917.81 from N2.4 million, likely reflecting lower interest expenses or improved debt management. These fluctuations in depreciation, amortization, and finance costs, while relatively small compared to the surge in operating expenses, contribute to the overall financial picture and warrant monitoring in subsequent periods.
Profit before tax followed a similar downward trend as profit after tax, declining by 42.6% to N52.2 million from N90.9 million in the first quarter of 2024. This pre-tax profit decline, coupled with the substantial increase in operating expenses, paints a concerning picture of the company’s financial health. The company’s balance sheet, however, presents a more robust picture, with total assets standing at N3.28 trillion and total equity at N2.95 trillion as of April 30, 2025. These figures suggest a strong asset base and a healthy equity position, providing some cushion against the immediate impact of the declining profitability. The market capitalization of N16.5 billion and a share price of N8.25 per unit reflect investor sentiment and market valuation at the end of the reporting period. The listing on the Nigerian Exchange Limited’s Main Board in April 2024 introduces a new dimension to the company’s financial trajectory. The impact of this listing on investor confidence, market access, and regulatory requirements needs to be closely monitored in future analyses. Furthermore, the potential implications of the listing process itself on operating expenses and overall financial performance should be considered.
