United Capital Plc recorded marginal growth in after-tax profit for the three months ended September 30, 2019, largely driven by weaker earnings in spite of the impairment allowance the company received in the period. The decline in earnings is attributable to lower yield environment in government securities.
Net income of the investment company rose 2 percent to N1.09 billion between July and September this year compared with N1.07 billion profit realised in the comparative period of 2018.
However, the marginal increase for the quarter could not raise the company’s aggregate profit for the first nine months of this year above what it earned as profit in the same period last year.
United Capital recorded a profit after tax of N2.76 billion between January and September 2019, representing a 10 percent decline when compared with N3.08 billion recorded in the same period of 2018. This is the company’s worst performance in three years.
Revenue fell 10.8 percent in the first three quarters of this year to N5.32 billion from N5.96 billion in the corresponding period of 2018, while net operating income declined by 11.5 percent to N4.29 billion from N4.84 billion.
A breakdown of United Capital’s earnings shows the company received N1.21 billion as investment income from securities in the nine- month period, implying it received N555 billion lower than N1.76 billion for the same period a year earlier.
“We are taking salient steps to mitigate this,” the company said in a note that accompanied the financial statement released on the Nigerian Stock Exchange (NSE) on Friday.
Although income from fixed deposit grew by more one- third to N1.2 billion from N893 million, it was not enough to offset the impact of the shortfall. This caused the aggregate investment income to fall by some 9 percent to N2.41 billion.
Fees and commission income was not left out as financial advisory fees and other charges which form the components of the income line came in lower at N1.38 billion in the review period compared with N1.48 billion recorded in the first nine months of last year.
“Revenue from other line items are showing signs of improvement save for revenue from investment income which is made up of income from fixed income and investment securities, given the persistent decline in interest rate this year,” United Capital said.
Furthermore, while United Capital spent less than it spent last year on contribution plans, it expended N1.11 billion to pay salaries and provide other welfare packages for its workforce. That is more than 13 percent higher than N980 million spent as personnel cost between January and September 2018.
Despite the increase in personnel cost, the company’s total expense reduced to N2.03 billion, representing a 12 percent decline from N2.29 billion total expenditure recorded a year earlier. United Capital assured it would continue to push its cost-efficiency strategy.
It further said the cost-efficiency strategy also helped the company record an increased in profit before tax margin which settled at 62 percent as against 61 percent recorded in the comparative period last year, even as earnings per basic share dropped to 46 kobo from 51 kobo.
The company it has continued to inject innovative financial products in the retail space to cater for the need of every Nigerian domestically and internationally, this according to the firm is evident in its newly unveiled “Nigeria Diaspora Trust”.
The company’s shares fell by 2.86 percent to N2.04 after the close of business on the floor of the Lagos bourse.
