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UTC or United Trading Company as they were once called was a house hold name back in the days Nigeria. After years of inactivity and shut down in operations the 80 odd year company received a lifeline a few years ago when it was acquired by new investors. There was so much hope that the glory days were back and the inglorious gone ….or is it?


The company saw its income drop 19% to N1.25b in the first half of this year when compared to the first half of last year. The company is no longer the retail giant it used to be and so relies mainly on sales from bakery and food items to survive. Without available explanation from the company one can attribute the dip to intense competition within the industry. Competition in the food industry is rife with price wars and heterogenous products ensuring that no one company can claim market leadership. Nevertheless, they were able to reduce direct cost and increase gross profit margin to 42.8% for the period. However, it fell 5.7% short of the prior years result.


The company is still bogged down by high operating cost relative to its revenue as selling and general expenses ate up almost 87% of gross profits for the period. This was largely in line with last years result a sign that the company is yet to reign in on cost or better revenues. Going by their past results staff cost take up about 50% of their SG&A. Their 500 or so staff have an average salary of about N60k, more than thrice the minimum wage.

Profit After Tax

Profit after tax towed the line of top line revenue in falling short of 2011 half year result. The company posted a paltry N32m in half year profits, 19% short of the N40m it made in the same period in 2011. Finance cost came at a manageable N38m even though it was almost 54% of operating profit.  The company also did not accrue taxes and indication that it may be a pioneer company. Return on Equity at just under 2% sums up the entire mood.

Bottom Line

UTC is one of those company’s I have strong childhood affinity for. Before the likes of Shoprite and Park and Shop, UTC and Leventis stores were the place to be. However, its dismal results is not enough for me to own it even as a sympathy stock. The company in my opinion faces a more dire solvency situation as its trade creditors of N331m and over drafts of N256m is enough to bankrupt the company. Recently, they were in the news for outstanding tax payments. A figure the FIRS put at about N277m. Whether this has been paid is a unknown to me but surely its a red flag.


                     Stock Chart is culled from – Expresson-line.com

Their share price are moderately traded and so may not even be available should you want to buy. For example, just 167k units were traded on the 30th of July. Their ultra low P.E ratio of 0.5xx ironically doesn’t provide much succor to me considering their negligible earnings per share. Their share price has been relatively flat with very little growth as the above chart depicts. UTC maybe back but surely nor in black.




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