EUR 48.04 For Business Accounts Only

UAC OF NIGERIA PLC - Q1 delivers flat topline, PAT down 21%

• ​ UACN released Q1’16 results showing a relatively flat turnover amidst mixed performances across operating divisions. Whilst a 6% y/y revenue growth was recorded in the Food and Beverages division (73% revenue contribution), persistent steep decline in the Real Estate (-54%), Paints (-5%), and Logistics (-4%) divisions put Group revenue 1% lower y/y. We believe the flat revenue was due to broad based slower volume growths. Overall, Group revenue (N17.5 billion) fell 9% short of our N19.2 billion estimate, the lowest Q1 figure recorded in 3 years and this is despite the low base recorded in Q1’15 due to political and security uncertainties. 

• Gross margin for the period contracted to 22% (Q1’15: 24%, Q4’15: 25%) amidst marginally higher cost of sales. Furthermore, higher operating expenses in the quarter (+3% y/y), an increase in net interest expense (following a 27% y/y decline in finance income), and a lower contribution from UPDC REIT (down 10% y/y) dragged bottom line. Overall, Profit after tax declined 21% y/y to N1.3 billion, 34% below our N2.0 billion estimate. We expect the operating environment to remain challenging in FY’16 and cut our revenue estimate to N74 billion (Previous: N80 billion) and EPS to N1.75 (Previous: N2.39) to reflect thus. Consequent to the revision to our forecasts, our 12-month target price for UACN is revised downwards to N30.27 (Previous: N39.07).