United Capital Plc (NSE: UCAP, Bloomberg: UCAP) became the first listed company on the Nigerian Stock Exchange to release its unaudited financial results for the Half Year (H1) period ended 30th June, 2020. Despite the ongoing COVID-19 pandemic, and the lockdown enforced in the last quarter to contain the spread, the company was able to report an impressive financial performance.
The company made a Revenue of N4.45 billion in H1 2020, a Year on Year (YoY) increase of 37% from the N3.24 billion reported in H1 2019. In the highlights released along with the full report, the company attributed the impressive revenue growth to a strong YoY increase of 347.65% in net interest margin, 85.03% increase in net trading income and 77.15% increase in fee and commission income.
The net interest margin grew from N308.165 million in H1 2019 to N1.379 billion in H1 2020. The Net Interest Margin (NIM) for a financial institutions like UCAP is the difference between the interest income generated and the amount of interest paid out to their lenders. This is similar to the gross margin (or gross profit margin) of non-financial companies.
The net trading income grew by 85.03% YoY, from N51.974 million recording in H1 2019 to N96.170 million in H1 2020.
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The fees and commission which comprises of financial advisory fees (H1 2020: N416.099 million vs H1 2019: N258.211 million) and other fees and charges (H1 2020: 952.068 million vs N514.107 million) grew from N772.318 million in H1 2019 to N1.368 billion in H1 2020.
The Profit Before Tax (PBT) increased by 14%, from N1.987 billion in H1 2019, to N2.267 billion. The Profit After Tax (PAT) on the other hand increased by 15.98% during the period in review, up from N1.649 billion recorded in H1 2019, to N1.913 billion in 2020. The company reported an Earnings Per Share (EPS) of 32 kobo, up from 28 kobo reported in the same period in 2019.
The company’s Net Profit Margin for the period, decreased by 7.89%, from 50.92% in H1 2019 to 43.03% in H1 2020. The decline is because of the increase in operating expenses arising from significant increase in impairment charges during the period under review due to impact of COVID-19.
While commenting on the group’s performance the Group CEO, Mr. Peter Ashade, had this to say:
“The COVID-19 pandemic has lasted than envisaged and caused greater speculations of global recession and slower global recovery from the pandemic. The Nigerian economy has been greatly affected by the pandemic as seen in the increasing depreciation of the exchange rate, inflation rate and other economic indicators. As we stated at the release of our last quarter result, our business was not immune to these challenges; however, the Group was able to endure the challenges- Thanks to the well-articulated and diligent implementation of our plans set out last year.
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“With our well-articulated plans, business continuity plan in economic crisis and solid risk assessment framework we were able to deliver an increased revenue of over 37.26%, increased PBT of 14.10% and PAT increase of 15.98%. During this same period, we successfully issued our N10 billion Series 1 bond under the N30 billion Medium-Term Debt Program – The first to be issued by an investment banking firm in Nigeria – which was oversubscribed by about 24%.
“Going into the remaining half of the year, we remain assiduously committed to deliver greater returns to our shareholders, by constantly reviewing our strategy in the light of global and domestic happenings, ensuring that we provide value to all our stakeholders from time to time.”
UCAP ECL impairment was impacted significantly as the Group recorded an impairment charge of about N475m during H1 2020, it downgraded some counterparties who are holding some of the group’s financial assets in view of the impact of covid-19 on their businesses.
Following the release of the H1 2020 result, UCAP shall be hosting an Investors and Analysts conference call in due course to discuss its performance and overall outlook for the next quarter of 2020. The date and further details with respect to the conference call would be circulated in due course.
Analysts at Investogist have a BUY rating on United Capital Plc, with a fair value range between N2.75 – N2.95.