United Capital Profit Slips 36.9%, Offers N0.35 Dividend

Pix: Mrs. Toyin Sanni, Group Managing Director, United Capital Plc

Shares of United Capital Plc fell 4.88% on Monday and a bigger 5.87% on Tuesday to close at N3.85 each, after the company’s directors presented what investors presented less-than expected financials for the full-year ended December 31, 2017, with flat earnings and 36.9% earnings slip. The board however offered shareholders 35 kobo per share as dividend per share, less than the 40 kobo offered by African Prudential Plc, its sister company.
United Capital’s earnings growth was flat at N8.9bn from N9bn in the corresponding period of 2017, with investment income remaining the biggest contributor at N4.965bn, up from N4.039bn in the corresponding period of 2016; boosted by fixed deposits of N4.732bn, up from N4.036bn; just as investment securities fetched N232.552m as against N2.919m in 2016. It was followed by fee and commission income, which dropped slightly from N1.979bn to N1.813bn, with financial advisory fees accounting for N778.482m, a decline of N1.219bn; while N1.034bn came from other fees and charges, compared with N760.182m in 2016. Net trading income soared from N15.31m to N88.397m; a feat that was not repeated in net interest margin, which plunged to N143.516m to N640.319m; as interest income on managed funds of N8.212bn, as against N8.874bn in prior year; even as interest expense on managed funds came to N8.073bn from N8.234bn; resulting in net operating income of N7.01bn, up from N6.674bn in the 2016 full year.
Other income dropped by N451.481m or 19.41% to N1.874bn from N2.325bn, principally from miscellaneous income of N1.61bn, representing a decline from N1.86bn; and dividend on equity investment fell from N464.395m to N264.094m; net gains from financial assets held for trading stood at N30.384m, an item that did not exist in prior year.
Personnel expenses for the period rose from N1.274bn to N1.568bn, comprising mainly staff cost of N1.554bn from N1.259bn; other operating expenses increased to N1.473bn from N1.239bn, driven mainly by a N405.903m professional fees, which dropped from N467.233m, followed by the rise in general admin expenses from N138.864m to N342.017m; depreciation and amortization jumped to N106.18m from N86.587m; just as impairment losses catapulted from N33.511m to N219.04m, representing a N185.529m, or 553.64% with N158.978m being impairment loss on trade receivables and other assets, as against N33.511m; while impairment loss on loans and receivables came to N60.061m.
Profit before tax was down by 12.9% from N6.37bn in the preceding year to N5.6bn; while tax expenses jumped by 518.17% to N1.185bn, up from the previous N363.209m, the bulk of which was the N720m excess dividend tax, as income tax dropped from N211.679m to N153.562m. This translated to an effective tax rate of 21.37%, up from the previous 5.7% further depressed net profit from N6.9bn in 2016 to N4.4bn, representing Earnings Per Share of 73 kobo, as against the previous 115 kobo.
The 35 kobo dividend will be paid to shareholders whose names appear on the register of members at the close of business on March 8, 2018, while closure of register is between March 31 and April 1; while payment would be subject to approval by shareholders when they meet on April 14, 2018.