Despite the heavy economic headwinds, United Capital Plc recorded a growth of 65 per cent in profit for the half-year ended June 30, 2021, writes Goddy Egene
The first six months of 2021 were very challenging for companies due to the economic headwinds. Hence, investors and all stakeholders have been apprehensive over how companies would perform in their financial results. Operating in the financial sector and investment space in particular, was even more challenging as returns on investment was impacted negatively due to rising inflation and among other factors.
The stock market that recorded a growth of 50 per cent in 2020, was the target of many investors and investment banks, fell by 5.8 per cent in the first half (H1)of this year as the Nigerian Exchange (NGX) Limited declined from 40,270.72 to 37,907.28. Also, the market capitalisation of NGX went down by N1.303 trillion in H1 of 2021.
Profit-taking, shift to fixed income (FI) market by local investors due to uptick in yields and low participation by foreign portfolio investors (FPIs) had proved to a big challenge for players in the stock market.
Also, the steep rise in yields on sovereign instruments like Treasury Bills and FGN Bonds had undermined the risk appetite of investors for equities, as most high net worth investors (HNIs) and institutional investors took comfort on the low double digit rates in the fixed income environment in the H1 unlike in 2020 when yields on treasuries were near zero and bond yields waned to low single digit.
“More so, as concerns on probable Naira devaluation continues to fuel speculative demand for foreign currency (FCY), equities have seen notable outflow of funds, notwithstanding the attractive valuation of large- and mid-cap counters with strong fundamental,” she said.
Genuine concerns on reduced liquidity in the foreign exchange (FX) market, which has constrained some foreign investors from repatriating dividend and proceeds of divestment equally influenced the weak participation of foreign investors in Nigerian equity market. All these made the investment banking space a challenge to navigate and report positive results.
However, United Capital Plc, which is a leading investment bank and a foremost pan-African financial and investment services group, defied the headwinds and soared through the volatile markets to record significant growths in all performance indices in H1 of 2021.
A breakdown of the results released last week, showed a revenue of N6.85 billion in 2021, compared to N4.45 billion, which is a growth of 54 per cent. The revenue was driven by a strong growth in fee and commission income (+128 per cent) and investment income (+27 per cent) despite 60 per cent decline in net trading income
Operating income printed at N6.81 billion in 2021, indicating a rise of 57 per cent from N4.35 billion in 2020. Operating expenses rose by 43 per cent to N3.11 billion from N2.18 billion in 2020.
Profit Before Tax (PBT) rose by 65 per cent to N3.74 billion in 2021, compared to N2.27 billion in 2020, while profit after tax (PAT) grew by 64 per cent from N1.91 billion to N3.14 billion in 2021.
Total assets improved by 44 per cent to N320.23 billion, compared to N222.75 billion as at December 31, 2020.
One of the factors that was responsible for the impressive performance was efficient cost management that led to a decline in the cost to income ratio. The cost-to-income ratio for the period declined by 3.58 percentage points largely attributable to the faster growth in revenue relative to operating expenses, which indicated a continued improvement in operational efficiency.
Also, United Capital’s profitability margin improved with PBT margin gaining 3.58percentage points to 54.57 per cent for H1 2021 relative to 50.99 per cent for H1 2020 as PBT increased by 65 per cent during the period. Similarly, PAT margin improved, gaining 2.81 percentage points despite a higher tax charge of 16 per cent
Commenting on the group’s performance the Group Chief Executive Officer (GCEO) of United Capital Plc, Mr. Peter Ashade, said: “I am excited to inform our stakeholders that United Capital Plc recorded a very impressive half year 2021 result following a record year performance in 2020. We ended the first half of the year on a very high note as reflected in our earnings growth and strong financial performance.”
According to him, United Capital Plc is in a growth phase, saying that their strong financial performance was a testament of their unwavering commitment to increasing value creation for all their clients amid the harsh socio-economic environment and lingering effects of the devastating pandemic.
“In the remaining half of the year, we will be focused on our transformation agenda by deepening our value propositions to underserved market segments especially mass affluent and mass market clients, while driving phased automation of our business processes. Our bespoke affluent segment propositions including private trusts, and wealth management solutions are curated to increase, preserve, and transfer wealth for our fast-growing affluent customer base. Furthermore, our best-in-class digital platforms remain central to our purpose of transforming lives and promoting financial inclusion across Africa by providing easy access to collective investment schemes and micro loans while promoting socio-economic development. Our stakeholders can be assured of our commitment to delivering superior returns. More importantly, we will continue to work with our regulators and other capital market operators on structural reforms to deepen the capital market as the domestic economy continues the path to recovery,” he said.
He said United Capital Plc remains a leader in the financial and investment services space, with a mission to provide bespoke and innovative value-added services to its clients.
The group, he added, aimed to transform the African continent by providing innovative and creative investment banking solutions to governments, companies, and individuals.
Ashade had last year told shareholders that the company was optimistic about the year 2021, saying it presented greater opportunities for innovation, growth, and expansion beyond its current ecosystem.”
The GCEO had said that while the COVID-19 pandemic dealt a devastating blow to businesses and economies globally including our domestic operating environment, as a responsible organisation, the focus of United Capital Plc was the safety of their staff while helping their clients to navigate those challenging times towards meeting their respective goals.
He said one of the strategies the company adopted to sustain the performance during the challenging times, was the commencement of virtual operations without significant impact on their service delivery to clients.
“Our digital platforms (InvestNow – mobile and web) continued to serve our clients globally from the comfort of their homes. In addition, we increased client engagements across digital platforms such as streaming investment clinics and other advisory services. All internal and external workplace interactions have been seamless in a virtual environment due to our improved technology capabilities.
We developed new competencies including propositions to exploit emerging opportunities identified while also creating buffers such as income earnings on long term investments,” Ashade said.
