N24bn Exchange Gain Saves United Capital From Credit Losses, Profit Drop In 2023
Foreign exchange gains of over N24 billion provided an escape route for United Capital Plc from a three-time jump in credit losses and a drop in net operating income – that could have crashed the bottom line in 2023.
Foreign exchange gains multiplied close to 13 times from less than N1.9 billion in the preceding year to build another income of N24.4 billion – that provided the strength to keep revenue from dropping in 2023.
The full-year audited financial report of the financial and investment services group at the end of December 2023 shows that foreign exchange gains accounted for roughly 53 per cent of gross earnings of about N46 billion for the year. It provided less than 1 per cent of the preceding year’s gross earnings of under N27 billion.
Rising costs and loss of revenue from core operations were the main challenges the company encountered in 2023.
Cost increases were led by credit losses that multiplied three times from N6.1 billion to N18.7 billion over the review period, including trade receivables.
Also, inflation-driven other operating expenses grew by 34.7 per cent to N6.6 billion while personnel costs rose by over 51 per cent to N3.5 billion.
Revenue losses were led by investment income, the company’s main revenue line, which dropped by over 38 per cent from N13.8 billion to N8.5 billion over the period.
Fee and commission income also went down slightly at N8 billion while net trading income – the only core revenue line that improved in the year, grew by 62.8 per cent to almost N4 billion.
Net operating income therefore went down from N24.4 billion in 2022 to N20.6 billion at the end of 2023 operations.
A bailout came from other income that was spurred by foreign exchange gains to advance from N2.5 billion in 2022 to N24.4 billion at the end of the 2023 financial year. This was supported by net gains on financial assets of about N851 million, turning around from a net loss of N22 million in the prior financial year.
The gains remedied the drop in net operating income and powered a major increase of 70.6 per cent in total revenue to almost N46 billion for the year.
However, total expenses for the year grew well ahead of revenue at 113.5 per cent to over N29 billion.
Impairment on financial assets and trade receivables accounted for close to 64 per cent of total expenses.
Total expenses claimed 63.8 per cent of total revenue in 2023, up from 51 per cent in 2022.
Operating profit improved by 26 per cent to less than N16.6 billion – which was supported by a leap of 115 per cent in the share of associate profit to N691 million to build a pre-tax profit of over N17 billion for the year.
After-tax profit improved by 18 per cent to N11.4 billion, as the net profit margin went down from 35.9 per cent in 2022 to 24.9 per cent in 2023.
United Capital earned N1.90 per share at the end of the 2023 operations, improving from N1.61 per share in 2022. The directors have announced a cash dividend of N1.80 per share for the 2023 operations.
