UAC Nigeria Plc has declared a total revenue of N41.6 billion in its unaudited half year 2019 report, up 12.4 percent from N36.9 billion posted in the corresponding quarter of 2018.

The increase, according to the result posted on the Nigerian Stock Exchange, resulted primarily from the Animal Feeds & other Edibles segment (+22.8% YoY), following a recovery in market share which had been lost in the prior year, as well as better pricing.

Revenue growth in Quick Service Restaurants (+16.7%) and recovery from a low base in Real Estate (+26.0%) made marginal contributions to Group revenue. Logistics (-4.3%) and Paints (-0.5%) were down against the same period last year, whilst Packaged Foods was broadly flat YoY (-0.3%).

Gross profit was up 14.1% YoY to ₦8.6 billion in H1 2019, leading to a 31 basis points gross profit margin accretion to 20.8% in H1 2019. This was led by double digit revenue growth in the period, whilst input costs growth was partly offset primarily by efficiency gains in production.

EBIT increased by 9.3% to ₦3.0 billion in H1 2019, but EBIT Margin declined 20 basis points YoY to 7.1%.

2018 EBIT was positively impacted by a one-off gain of ₦476.3 million from UPDC. On an adjusted basis, 2018 EBIT margin was 7.3%. Group EBIT improved YoY on account of higher revenue from Animal Feeds & other Edibles (EBIT up 24.1% YoY) and QSR (+13.2%), and due to operational efficiency improvements in Packaged Foods (+47.2%). Management kept Group operating expenses under control (+4.0% YoY), as selling and distribution expenses increased by 11.6% whilst administrative expenses declined by 4.9% YoY. As a result, OPEX represented 14.2% of revenue in H1 2019, against 15.3% in H1 2018.

The revenue and operating margin impacts, coupled with an 84.8% decline in net finance costs, resulted in a Profit Before Tax increase of 61.3% YoY to ₦3.4 billion in H1 2019. Finance costs decreased by 24.6% YoY, driven by the repayment of short-term loans and lower average interest rates and finance income increased by 23.9% YoY due to a higher amount of cash available for investment at better yields.

In line with the increase in Profit before Tax YoY, the H1 2019 tax expense was up 62.7% YoY to N957.5 million, resulting in an effective tax rate of 28.2%, similar to H1 2018. Consequently, the Profit after Tax from continuing operations rose to ₦2.4 billion, up 60.8% YoY against ₦1.5 billion in H1 2018, whilst

Total Profit, including profit from discontinued operations2, was N2.6 billion in H1 2019 against N1.3 billion in H1 2018. Total earnings per share was 62 kobo in H1 2019, compared with 24 kobo in H1 20183.

Free cash flow was a positive ₦5.0 billion in H1 2019, against a negative ₦0.6 billion in H1 2018. The YoY improvement was driven by a N6.0 billion net cash inflow from operating activities, which was offset by a N0.4 billion increase in net CAPEX. The improvement in net cash from operating activities was largely driven YoY by a N1.3 billion increase in Profit before Tax to N3.4 billion. In addition, changes in working capital represented a N3.1 billion inflow in H1 2019, up by N4.2 billion YoY. This was driven primarily by longer payable days (+N2.7 billion positive impact) linked to better trade terms with suppliers, and by improved inventory management (+N1.8 billion).

Deleveraging initiatives initiated for the Real Estate improved the Group’s financial structure in H1 2019. As such, gearing reduced to 23.0% in June 2019, against 32.6% in December 2018, whilst financial leverage declined to 1.69x in June 2019, against 1.77x in December 2018.

Annualised Return on Equity increased from 3.0% at the end of June 2018 to 7.0% at the end of June 2019, whilst the Return on Invested Capital (annualised) increased by 16 basis points to 4.8% (4.6% in H1 2018).

Commenting on the performance, Group Managing Director/Chief Executive Officer, Mr Folasope Aiyesimoju, stated: “We recorded modest top line growth in what were tough economic conditions, driven largely by recovery in our animal feeds and edible oils businesses and, to a lesser extent, our real estate business.

“Efficiency gains in our packaged foods business contributed to profitability. We continue to focus on building management teams able to drive long-term growth; streamlining our structure and processes; enhancing governance frameworks; and investing for long-term growth.”