United Capital Posts Strong H1 2020 Earnings in Touch Terrain
By Dipo Olowookere
Despite the rough environment it found itself this year, especially as a result of the negative disruption caused by COVID-19, United Capital Plc was able to achieve double digits growth in its revenue for the first half of this year.
The firm on Thursday released its financial statements for the period ended June 30, 2020, and from the brief analysis by Business Post, it increased its revenue by 40.6 per cent N4.5 billion from N3.2 billion in the same period of last year.
It was observed that the significant growth in the earnings was influenced by the strong year-on-year rise in the net interest margin, net trading income and fee and commission income.
From the results filed with the Nigerian Stock Exchange (NSE), United Capital reported an operating income of N4.1 billion in HY 2020, compared with N2.8 billion achieved in the corresponding period of 2019.
Unfortunately, the firm announced a rise in its operating expenses, which skyrocketed to N2.2 billion in the first six months of this year from N1.3 billion in the first six months of last year.
An analysis by Business Post showed that the major factors responsible for the increase in OPEX were rise in personnel costs (N671.2 million in H1’20 versus N622.3 million in H1’19), rise in other operating expenses (N921.2 million versus N750.3 million), increase in depreciation and amortisation (N112.0 million versus N59.7 million) and rise in write-back/impairment allowance (N474.7 million versus N180.0).
In the period under review, the cost-to-income ratio of the company rose by 10.35 per cent as a result of the sharp rise of 363.79 per cent in impairment allowance. This increased cost is in compliance with IFRS 9 that requires some financial assets to be measured at amortized costs.
On the bottom line of the results, United Capital increased its profit before tax to N2.3 billion in the first half of the year from N2.0 billion in the first half of the previous year.
In addition, the profit after tax grew to 1.9 billion in HY 2020 from N1.7 billion in HY 2019, while the earnings per share (EPS) rose to 32 kobo from 28 kobo.
On its balance sheet, the total assets increased to N219.7 billion from N150.5 billion as at FY 2019 on account of over 242.09 per cent growth in cash and cash equivalent holdings and 9.29 per cent jump in trade and other receivables.
Also, the total liabilities increased to N201.6 billion in H1’20 from N130.9 billion in FY’19 owing to the growth in managed funds by 95.22 per cent, 22.56 per cent increase in current tax liabilities and 15.96 per cent rise in other liabilities.
Furthermore, in the period under consideration, the shareholders’ fund of United Capital plunged to N18.1 billion from N19.6 billion in FY 2019 as a result of the 6.47 per cent decline in retained earnings and 42.28 per cent increase in the negative other reserves.