Q3 2022: UACN records N1.1bn pre-tax loss on debt finance pressure
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By Okey Onyenweaku

This is not the best of times for sundry profit-oriented businesses, with conglomerates not being an exception. The ravaging effect of the coronavirus pandemic, popularly known as Covid-19, and the crash in the price of crude oil has not favoured most business activities or endeavours.
A specific villain that has been identified in the mix is the rash of Covid-19 induced lockdowns which affected production lines, and cut supplies among other still being discovered negative effects which reduced productivity and resulted in declining revenues and plunging profits.
At the more overhanging macroeconomic level, the low price of crude oil which is the main source of Nigeria’s national revenue has further weakened the fabrics of the already feeble economy.
The outcome then is that this double barrel and immensely choking challenge has left the conglomerates sector essentially gasping for air.
Some of the conglomerates that have historically featured quite ebulliently on the price charts of the Nigerian Stock Exchange (NSE) include the United African Company (UAC), John Holt Plc, Transnational Corporation of Nigeria (Transcorp) and Dangote Cement Plc.
Of the four big conglomerates, the most troubled are UAC and John Holt Plc which have existed for many decades even before the emergence of the relatively younger Transcorp and Dangote Cement Plc.
Readers and consumers who were born in the decades of the 1960’s and 1970’s still remember with nostalgia when products of UAC Plc and John Holt Plc literally dominated about all of the nooks and crannies of Nigeria.
Some of them very much remember that their parents may have either worked in those companies or enjoyed the products of UAC and John Holt. These companies were once the pride of Nigeria and they provided jobs for many who could not be accommodated in the civil service.
These firms also dominated the corporate and conglomerates arena long before now. In fact, it was difficult not to see the products UAC in the shelves of most families while John Holt was the major distributor of motor bikes among others.
Investors scrambled to own a slice of the shares of UAC and John Holt stocks as major parts of their portfolios. This was when the duo made their mark in the country. However, circumstances have since continued to change.
Even companies with good track records have hardly had it so well since the economic contraction started in 2008. Apparently, most of them are beginning to betray signs of weakness. Their once robust profit margins are, also, shrinking by the day. The outcome is that investors are a little nervous, not knowing what the next three operational seasons may hold if the harsh operating environment continues.
UAC reported a huge loss of N9.2billion in the financial year ended 2019. The report showed that the conglomerate made a N9.2 billion loss.
While the average reader may be cursorily startled by the loss figure as posted, the underlying factor is that the firm has been in a long fight of sorts, and across a few years at that, to continue to hold its head above water. But evidently, it has to do more to ensure that victory ultimately comes.
BH analysis shows that the group’s revenue for the period stood at N79.2 billion as against N70.4 billion during the comparable period in 2018. This is indicative of a 12.4% increase, year on year. At the same time though, the company’s cost of sales, however, increased by 9.3% to N62.5 billion, up from N57.2 billion in 2018.
Commendably in the short term, UACN’s profit before tax stood at N7.4 billion, thereby marking a 22.7% increase compared to N6 billion in 2018.
Similarly, the group’s profit after tax from continuing operations increased by 26.1% to N5.3 billion, up from N4.2 billion during the preceding financial year.
However, and underscoring the depth of where it is clawing its way out from, UAC of Nigeria Plc reported a loss of N9.2 billion during the period under review. Note that the group had also operated at a loss of N9.5 billion in FY 2018.
Looking critically at its historic performance, UAC of Nigeria has, for over a century, remained a foremost private enterprise and a leader in the economic advancement of Nigeria. A leading food-focused Company, UAC operations, also, spans logistics, real estate and automobile sectors of the economy.
The company’s business portfolio includes UACN Property Development Company Plc (UPDC), the first company in the real estate sector to be on the Nigerian Stock Exchange; and until recently, Warm Spring Waters Nigeria Limited, manufacturer of ‘GOSSY’ Spring Water. The bottling plant is located in Ikogosi-Limited Ekiti, Ekiti State.
Even more actively today, the company has majority stakes in Grand Cereals Limited, Spring Waters Nigeria Limited (SWAN) and Opticom Leasing Company Limited. UAC’s interest, also, includes Chemical and Allied Products Plc (CAP), UAC Registrars Limited and GM Nigeria Limited, a joint venture with General Motors Corporation of Detroit, USA. Following the new pension reforms in the country, UAC obtained the licence of the National Pension Commission for UNICO CPFA limited, a subsidiary of the Company to operate as a closed Pension Fund Administrator.
As a food –focused conglomerate, the company has re-aligned its food business architecture to unlock the values in the business. This has led to the merger of UAC Franchising Division with UAC Restaurants to create a new UAC Restaurants Division. UAC Restaurants operates leading Quick Service Restaurant brands including MrBigg’s, Village Kitchen, Chicken Inn, Pizza Inn, Creamy Inn and Dial –a-Delivery. UAC, also, operates Nando’s, the renowned Casual Dining Restaurants in Nigeria.
Nonetheless, UAC has had strong antecedents in addition to good fundamentals. It has made many rich persons and many others are still interested in buying its shares in order to reap impressive returns which date back to the 70’s. But many advise that the company should be more proactive and watch the market so as to know the best way to go. But the company’s strength appears to be waning with recent performance. A company which had paid dividend of 130kobo in 2009 and 150kobo in 2011 paid a paltry 10kobo to shareholders in 2019.
It would be recalled that UAC lost its first credible investor in 1994 when Unilever Plc divested its 40% stake in the company. Many analysts believe that UAC’s popularity and vigour started waning when Unilever divested in 1994.
Despite the suspicion that the company may be over leveraged, many observers have pointed out stiff competition in the major sectors of the company’s supposed strength. For instance, UAC’s food chain ‘Mr. BIGGS’ is experiencing stiff competition from other food chains like Tantalizers, Sweet Sensation, KFC, Chicken Republic, Tasty Fried Chicken among others. Similarly, Gala its flagship snacks is competing with several others such as beefy, superbite, bigi for market share. Berger paints and others are also competing strongly with CAP Plc and Portland Paints. Observers are also aware that Swan table water which is a product of UAC is also facing stiff completion from Ragolis water, PureLife table water, Eva Water among numerous others including satchet water. Indeed, it is economies of scale considerations that led to its delisting from the Ikogosi Water project.
Out there on Broad Street, the consensus among analysts is unequivocal: John Holt Nigeria is in dire need of a responsible and efficient management to redirect its long-building drift away into deeper crisis waters and help steer it away from the path of uncertain death. Even the present management team which was put in place to revive the dying firm does not seem to have the skill, vision and depth to stir it to life again.
Unfortunately, analysts say the challenges before the company would involve many of the beyond the surface measures which the embattled firm has taken to rescue its sinking ship. In fact, keen observers of John Holt appear lost in the company’s depth of crisis which has eaten up a once proud organization. Many still remember with nostalgia the quality of service delivery, products, manpower and the respect John Holt commanded a few decades back. The company had even ranked above the UAC Plc, at some point in the 1970’s.Surprisingly, that glamour, opportunities among other good things which the company was known for, have slipped away. Industry experts are quick to blame bad management for the misfortune of the once pride of Nigeria.
John Holt Plc has released its financial statements for the period ended March 30, 2020. The Consolidated statement of profit or loss for the year ended March 30, 2020 shows group’s revenue of N 907million as against N1,219billion in 2019.
The main business activities of the group are the assembly, sale, leasing and servicing of power and cooling equipment; sale and servicing of fire fighting vehicles and equipment; boat building, sale and servicing of marine equipment; marine transport; warehousing and distribution services; property services and construction.
The group’s gross profit came lower at N215million against N339 million 2019, representing 36% decline from the previous periods performance. Loss from operating activities stood at N-506million, representing a loss of 1,299 % as against N42million in 2019.
Loss before taxation was -N541million representing 2,539% loss against N22million in 2019.
More so, people fear that the effect of inferior products coming in from the Asian axis would continue to pose challenges for the marketability of the company’s products.
Managing Director of Lambeth Trust & Investment Co. ltd, Mr. David Adonri, reckons that the company has not been doing well lately, adding that since there are competing investment options, people will prefer those ones that are likely to offer better and higher returns. Another market analyst, Mr. Teslim Shitta-Bey, believes that the company has lost not only vigour, but focus
John Holt Plc was incorporated on August 28, 1961, in Nigeria as a Limited Liability Company. The Company was listed on the Nigerian Stock Exchange in May 1974. John Holt Plc is a subsidiary of John Holt & Company (Liverpool) Limited, UK. 52.97 percent of the issued share capital of the Company is owned by John Holt & Company (Liverpool) Limited, UK, while 47.03 percent is owned by Nigerian individuals and corporate investors.
Clearly, these are indeed most troubling times.

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