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Half year 2022: United Capital maintains consistent earnings growth despite spiralling operating costs

Over the past five years, UCAP’s earnings have grown significantly at an average of 23% per year. In FY 2021, earnings grew by 44.14% to N11.259 billion from N7.811 billion in 2020FY. This represents a robust net profit margin of 62% achieved on the back of revenue growth of 40.32% buoyed by impressive growth in fees and commission, which jumped by 78%.


However, higher overhead costs and impairment for credit losses on the backdrop of market and economic dynamics slowed down the company’s operating profit before tax, profit before tax and profit after tax in H1 2022. The company’s H1 2022 report card released to the investment public shows that gross earnings grew by 33% and 50.43% sequentially to N9.112 billion from N4.437 billion in H1 2021. But due to higher year-on and successive growth in personnel, other operating expenses and impairment of credit losses, operating profit before tax, profit before taxes and net profit margin grew by 35%, 40% and 41% respectively.


For instance impairment on credit, losses grew year-on by 14% and sequentially by 222% to N1.009 billion from N881 million in H1 2021 and N454 million in December 2021. The company’s earnings for the H1 2022 stood at N4.437 billion from N3.142 billion in H1 2021, which is 39.41% of 2021FY earnings, a reflection that the company is behind earnings forecast based on 2021FY performance.


Despite that setback, United Capital Plc has been able to maintain consistent and impressive margins, giving rise to impressive earnings per share growth. UCAP’s current net profit margins at 68.7% are higher than last year’s 60.8%. Earnings per share grew by 40.95% to N1.48 in H1 2022 from N1.05 in H1 2021, which is 79% of 2021FY earnings per share, which grew by 45% to N1.88 from N1.30 in 2020.


UCAP has a solid track record with an adequate balance sheet with on-line balance sheet size of N531.791 billion as at June 30, 2022; retained earnings constituting just 4.5% and share premium just 0.1%. The company’s retained earnings dropped to N24.096 billion in H1 2022 from N28.661 in H1 2021 due to the N9 billion dividend payments for the 2021FY.

Culled from Nairametrics

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