United Capital Speeds Up Profit Growth To N4.4b At H1

United Capital Plc gained further speed on the earnings track in the second quarter, pushing after-tax profit to N4.4 billion at the end of half-year operations. Profit growth accelerated from 39 per cent in the first quarter to 43.4 per cent quarter-on-quarter in the second.

The financial and investment services group is sustaining its top record growth in earnings for the third year running since 2020. The company grew after-tax profit by 57 per cent to N7.8 billion in 2020 and 44 per cent to over N11 billion in 2021.

The improved room for profitability in the second quarter followed cost moderation that could not be achieved in the first quarter. Total expenses changed direction from growing ahead of revenue in the first quarter to growing below it in the second quarter.

Total expenses slowed down from 43.5 per cent in the first quarter to less than 23 per cent quarter-on-quarter in the second. On the other hand, gross earnings grew ahead of cost by 31 per cent quarter-on-quarter to N4.9 billion in the second quarter.

The cost saving raised the profit margin from 45.8 per cent in the same quarter last year to 48.7 per cent in the second quarter of the current year.

Adding cost moderation to the strength in revenue performance is the key development in the company’s earnings story in the second quarter.

The company’s half-year earnings report at the end of June 2022 shows gross earnings of over N9 billion, which is an increase of 33 per cent year on year.

Revenue growth is led by net gains on financial assets, which advanced from a negative N15 million to about N250 million over the review period. This is followed by other income, which grew from below N58 million to roughly N746 million year-on-year.

Fee and commission income rose by about 24 per cent year on year to N3.8 billion while investment income – the company’s biggest revenue line, grew by 9 per cent to N3.9 billion over the same period.

Net trading income reversed from a decline of 15 per cent in the first quarter to multiply seven times to N262 million.

The company’s investment portfolio continues slimming down after a remarkable expansion last year. Investment assets dropped by 26 per cent from the closing figure of N363.6 billion at the end of last year to about N268 billion at the half year, extending from a 14 per cent drop in the first quarter.The cost moderation recorded in the second quarter was led by other operating expenses, which slowed down from a 60.5 per cent rise in the first quarter to 10 per cent in the second. That lowered the year-on-year increase in total operating cost from 43.4 per cent in the first quarter to 30.4 per cent at half year to close at N4 billion at the end of June 2022.

The cost saving stepped up operating profit from a 30 per cent increase in the first quarter to 35 per cent in the half year, amounting to over N5 billion at the end of the period. This was boosted further by a share of accumulated associate profit of N194 million that was absent in the prior fiscal year.

The inflow also stepped up pre-tax profit from 36 per cent growth in the first quarter to over 40 per cent improvement at half a year to stand at N5.2 billion at the end of the period. After-tax profit equally accelerated from 39 per cent to 41 per cent to close at N4.4 billion for the six months of trading.

The company closed the half-year operations with earnings per share of 74 kobo, which is an increase from 52 kobos per share in the same period in 2021.

It is expected that the company’s second half would contribute more to the bottom line than the first. Last year, up to 72 per cent of the full year profit was generated in the second half.

 

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