Ernst & Young, the external auditors of UACN Property Development Company (UPDC), in their audit of the company’s 2017 financials submitted over the weekend ahead of the March 31 regulatory deadline drew attention to material uncertainty relating to its going concern.
Particularly, the auditors noted the fact that UPDC has continued to wallow in losses, both as a group and a company.
Specifically, UPDC reported a net loss of N2.95bn in the full-year ended December 31, 2017, up from N1.55bn in prior year, just as the group’s current liabilities exceeded current assets by N7.59n, which was however an improvement over the N10.56bn reported in the corresponding period of 2016.
Shying away from expressly urging the shareholders to consider recapitalization in the coming months, Ernst & Young noted that “these conditions indicate the existence of a material uncertainty which may cast significant doubt on the group and company’s ability to continue as a going concern and therefore, may be unable to realise its assets and settle its liabilities in the ordinary course of business.”
As if these were not enough troubles already, the auditors noted the huge intercompany receivables of N20.89bn, up from N20.79bn from its related parties majorly from joint ventures and subsidiary (UPDC Hotels Limited) which have been operating at a loss, besides their liquidity issues.
Also brought to the fore, were uncertainties around the ability of the subsidiary and joint venture to generate cash flows to fully repay its indebtedness, just as N13.86bn is from UPDC Hotels as receivables and classified as held for sale in the current year.
An impairment assessment performed on the receivables due from the JVs using the fair value of the unsold properties undertaken by an external expert to determine recoverability of the amount, the auditors continued, led to the recognition of a N453m impairment loss.
According to the result, group revenue for the period fell 20% from N4.994bn from N3.983bn; cost of sales dropped to N3.37bn from N3.943bn, leaving operating profit at N628.062m, representing 197% rise from N1.862bn.
Fair value loss on investment properties stood at N146.645m, from a N1.508bn gain in 2016; gain on disposal of investment properties rose to N1.95bn from N732.372m. Selling and distribution expenses rose to N21.068m from N15.326m; administrative expense fell from N1.256bn to N859.79m; just as other operating income rose to N477.197m from N302.56m. Other projects losses dropped to N150.463m from N1.695bn; all of which left operating profit at N1.862bn, more than double prior year’s N628.062m.
Finance income dropped to N525.761m from N624.993m; as finance cost soared to N5.03bn, representing a 129% increase over the N2.2bn of 2016; share of profit of associates fell by 29% to N829.38m from N1.16bn; just as share of loss of joint ventures declined by 309% to N290.283m from N70.913m.
Operating loss before impairment rose from N482.692m to N2.628bn; impairment of investment and receivable in JVs and UHL dropped from N747.907m to N428.309m; following which loss before tax soared by 148% to N3.057bn from N1.23bn; while the N403.306m tax credit, 73% higher than previous year’s N233.069m, resulting in N2.947bn loss after tax, up from N1.55bn, translating to loss per share of N1.44, as against the previous 88 kobo.