eTranzact Suffers N182.5m Loss in Q1 2020, Far Cry from N90.7m Profit Recorded in Q1 2019

eTranzact International Plc, in its unaudited financial report, recorded N182.5 million loss in the first quarter ended 31^st March 2020. This is a huge decline from the N90.75 million profit recorded in the same period in 2019.

While its revenue rose by 5.81% from N5.59 billion in Q1 2019 to N5.91 billion in Q1 2020, eTranzact still incurred a huge loss owing to its huge administrative and operational costs.

Cash Flow

eTrazanct generated cash from sources ranging from customer receipts as part of its operating activities to interest received as part of its investment activities. While it received cash of N5.9 billion from customers in Q1 2020, it paid N5.56 billion to suppliers and employees. Thus cash generated from its operations is N339 million.

The company didn’t fare too well with its investments cash flow, spending more than N279 million on property, plant and other equipment, N1.9 million on intangible assets and N5 million in interest payment on loans. It, however, received more than 64 million in interests and similar payments as well as 600,000 as proceeds for the sale of property, plant and equipment.

This set the company back 221.3 million in cash flow for investment activities. However, the company maintained a positive cash flow of more than N118 million. With cash and its equivalent at over 3.2 billion at the start of the year, total cash and its equivalent at the end of Q1 2020 is nearly 3.4 billion.

Assets and Liabilities

eTranzact’s non-current assets amount to more than N2 billion. This includes property, plants, equipment, investment property, intangible assets and deposits for shares. This represents an 11.4% increase from over N1.8 billion recorded at the end of 2019.

Current assets stand at about N4.6 billion at the end of Q1 2020, representing a 5% reduction from over N4.93 billion recorded at the end of 2019. Total assets currently stand at N6.7 billion.

The company’s non-current liabilities stand at about N442 million, roughly the same as at the end of 2019. This includes deferred tax liabilities, accrued loan interest, deferred grant income and long term loans.

Current liability, however, stands at 6.1 billion, rising from 6 billion recorded at the end of the year. Total liability is N6.6 billion up from N6.4 billion

Gross Profit

Gross profit fell from N518.7 million in 2019 to N255.4 million in 2020, representing a downturn of 50.75%. This is because cost of sales for the period increased from N5.07 billion in 2019 to N5.65 billion in 2020, indicating an 11.6% hike.

Note that cost of sales represents the direct costs related to the manufacturing or purchasing of a good that is sold to a customer. Companies use this measurement to calculate their gross margin.

Operating Loss

Contrary to its operating profit of N78.46 million recorded in Q1 2019, the company incurred an operating loss of N241.8 million in the same period in 2020. This is as a result of the increase in its administrative expenses from N433.5 million in Q1 2019, to N491.2 million in Q1 2020. Although the company saw a reduction in it’s selling and marketing costs from N6.75 million in 2019 to N6 million in 2020, that expense still contributed to its declining fortunes.

Loss Before Tax

The financial factors enumerated above contributed to earning eTranzact a loss before tax of N182.5 million for Q1 2020. The company managed an investment income of N64.3 million from interests and dividends etc and has a finance cost and Investment income are N5 million and N64.3 million respectively.

The above financial statements poses a huge threat to the company as it might put it behind its various competitors like Paystack and Flutterwave.

N11 Billion Fraud Allegation

Since its launch in September 2003, eTranzact has witnessed steady growth. But the company found itself in hot waters following an N11 billion fraud scandal perpetrated on its platform. This followed a petition that the company developed a solution which helped Smartmicro Systems Limited defraud a major Nigerian bank.

The petition was filed by the MD of Smartmicro Systems Limited, Michael Osasogie Obasuyi himself.

eTrazanct would file its own counter-petition against both Obasuyi and Smartmicro Systems and that led to an EFCC investigation into the matter. In the aftermath of the allegations, several key officers of the company were fired including former CEO, Valentine Obi, COO, Kehinde Segun and CTO, Richard Omoniyi.

The company has denied any wrongdoing, insisting that its books aren’t the subject of audit by external auditors. But many wonder if it has indeed shaken itself clean of that experience.

eTranzact prides itself as Nigeria’s first award-winning multi-application multi-channel electronic transaction switching and payment processing platform. It provides payment solutions for B2B as well as B2C transactions.

It is currently in partnership with 70 universities in Nigeria, government parastatals and banks, and has evolved into a brand with global reach. The company offers payment solution platforms and easy payment channels to its numerous customers while providing security, convenience, and affordability.