United Capital Braves the Odds

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Effective cost management strategy as well as improvement in information technology enabled United Capital to deliver strong performance in 2015 despite the bearish nature of the capital market where it operates, writes Goddy Egene

Operating in the Nigerian economy has been very challenging especially in the past one and half years. Many companies reported weaker earnings in the 2015 financial year. While the general economy was very tough for companies, the survival for operators in the capital was tougher. The market declined in 2014 and 2015, indicating how challenging it has been for operators. However, United Capital Plc, which operates in the market has defied the challenging environment and posted impressive performance for the full year of 2015 and first quarter (Q1) of 2016. The company ended 2015 with a growth of 39 per cent in profit and first quarter with a growth of 61 per cent in Q1 of 2016.

Corporate profile
United Capital Plc was incorporated in Nigeria on March 14, 2002 under the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria 2004. It became a public company and was listed on the Nigerian Stock Exchange (NSE) in January 2013 after a successful spin-off from United Bank for Africa Plc. United Capital is first investment bank in Nigeria to be listed on the NSE and it is a holding company with three subsidiaries: United Capital Trustees Limited, United Capital Asset Management Limited and United Capital Securities Limited.

The company is engaged in the business of investment banking and provides issuing house, corporate investment advisory services, project finance, debt restructuring, mergers and acquisitions, debt capital markets. Through its subsidiaries, it provides additional services such as trusteeship, asset management, securities, trading and insurance. United Capital’s vision is to be the leading financial and investment services group inAfrica, while its mission is to be the financial and investment role model across Africa, deploying innovation, technology, and specialist skills to exceed client expectations, whilst creating superior value for all stakeholders.

The company’s board of directors is led by Mr. Chika Mordi as chairman, while Mrs. Oluwatoyin Sanni is group chief executive officer. Other directors include:
Adim Jibunoh, J. K. Shinkaiye, oro Mohammed Diallo and Emmanuel Nnorom

Financial performance
Towering above the challenging environment, United Capital recorded an impressive performance for the year ended December 31, 2015. It posted gross earnings of N6.154 billion, showing an increase of 32 per cent compared with N4.677 billion in 2014. Net operating income rose by 38 per cent to N5.496 billion to N3.968 billion. Profit before tax grew by 41 per cent from N2.309 billion to N3.263 billion, while Profit after tax stood at N2.570 billion, from N1.846 billion. Despite the higher cost of doing business in that year, the company maintained a cost to income ratio of 53 per cent. Earnings per share grew from 41 kobo to 43 kobo, while return on average equity improved from 21 per cent to 26 per cent.

Based on the improved performance, the directors proposed that a dividend of 35 kobo per ordinary share of 50 kobo each, amounting to N2.1billion, be paid to shareholders upon approval at the annual general meeting.
While many companies where lamenting their dwindling fortunes in 2015 and Q1 of 2016, United Capital consolidated on its 2015 performance in Q1 of 2016.

The company recorded gross earnings of N1.857 billion in Q1 of 2016, compared with N1.307 billion in 2015. Net operating income stood at N1.761 billion, up by 49 per cent from N1.182 billion in 2015. Total expenses was reduced by 11 per cent from N512 million to N453 million. As a result, profit before tax improved by 59 per cent from N892 million to N1.422 billion, while PAT witnessed a fast growth of 61 per cent to be at N1.137 billion as against N707 million in 2015.

Company explains performance
Commenting on the full year results, Sanni had said the performance in a year characterised by adverse macro-economic factors, was driven by the group’s growing market share, efficient execution of key mandates and effective cost management driven by improvements in operations and IT capabilities, thereby ensuring that we optimised value and retained a significant proportion of earnings.
“We continue to pursue our clear and consistent strategy, which has delivered a strong performance for shareholders, and we remain positive about our future opportunities within the Nigerian and African market, not-withstanding the challenging macro-economic environment,” Sanni said.

She said by executing the company’s long-term strategy, and displaying resilience and resourcefulness, it was able to earn significant revenues predominantly from the execution and delivery of debt capital and trust services as well as through growth in asset under management (AUM) and the prudent investment of client and proprietary funds.

Key transactions
Specifically in 2015, the company successfully participated in and completed key transactions. It acted as lead Issuing House/ Underwriter and Sole Trustee on N30.00billion Transcorp Hotels Plc Medium Term Debt Issuance; Structuring Bank/Facility Agent on $250million Pre-Export Finance for Orion Oil – One of the largest debt deals by a Pan-African Investment Bank in 2015; Joint Trustee on Fidelity Bank Plc N30.00billion Fixed Rate Unsecured Subordinated Bond; Appointed Joint Fund Manager for the KfW-sponsored $30 million African Local Currency Bond fund; Joint Trustee on the Cross River State N8.5billion Fixed Rate Bond Issue; and Sole Trustee on the N5 billion Gombe State Bond issue.

Strategies for future growth
According to Sanni as ‘we commence 2016, we remain committed to achieving our goal of building Africa’s leading investment and financial services group and to work hard to accomplish our strategic objective set out in 2015 & 2016. Our priorities include: driving effectiveness and efficiency initiatives to improve productivity whilst optimising costs. Further improving our brand awareness, corporate image and brand value to achieve market-wide recognition and appreciation of our corporate identity.”

The CEO added that the company would renew focus on service excellence and execution to drive client growth and retention, expand its footprint, develop innovative product lines, driving growth in its market share along core areas of product coverage and expertise, increase focus on developing human capital and strengthening our staff.

“These initiatives should see us successfully enhance the group’s productivity, revenue growth and profitability. I have great confidence in the highly dedicated staff and the management team of United Capital Plc, whose superior pedigree and expertise, led by a strong and highly supportive board of directors, make us supremely equipped to build on our strong performance in 2015 to take on 2016, ensuring delivery of excellent value to our shareholders,” she said.

Sanni said she is confident in company’s ability to consistently deliver value to stakeholders in the current year, declaring “I have no doubt in my mind that the strategies we have put in place in light of our expectations of market scenarios in the coming year will prove effective in delivering much better results. I must thank all of you for your constant support in our task of building a leading financial services firm in Africa. I am confident that with the dedication of our resourceful staff and your unalloyed support, we will continue to delight you with superior return in every line of business we are involved.”