UACN of Nigeria Plc’s FY 2018 Revenue declined 12% y/y to N78.7bn on the back of lower revenue from its Food (-24% y/y accounting for 54% of group revenue) and Real Estate (-43% y/y accounting for 3% of group revenue) segments of its businesses.
The reported revenue was, however, above our 2018 estimate of N73.9bn, mainly due the strong growth of 22% q/q recorded in the final quarter. The firm posted a Pre-tax loss of N5.5bn in FY 2018 compared to a Pre-tax Profit of N3.2bn in FY 2017 and CSLís estimate of N1.1bn. The Pre-tax loss was largely due to Impairments totalling N7.1bn.
Animal and Feeds Segment
Revenue from its Animal Feeds business was underwhelming, down 24% y/y to N42.8bn from N56.3bn. We attribute this to weaker sales as a result of intense competition, reduced bird population, higher input prices and loss of market share. Real Estate revenue also nosedived by 43% y/y to N2.2bn from N3.9bn in FY 2017, on the back of lower housing inventory sales and collections amid challenging market conditions. We estimate that average occupancy rate has fallen to 45-47% from 55-60% pre-2014 oil price slump.
However, on a q/q basis, Q4 2018 revenue grew 22% q/q to N22.9bn. We believe the growth was as a result of the firm benefitting from increased consumers patronage during the festive season. Despite the growth in Revenue in Q4 2018, the firm recorded a Pre-tax loss of N5.9bn compared to the loss of N1.6bn realised in Q3 2018. Again, the loss in the quarter was driven by Impairments recorded in its Real estate business.
EBITDA was also down 36% y/y and 20% q/q to N4.4bn and N629mn respectively. The y/y decline in EBITDA was brought about by the 12% y/y decline in Revenue, further exacerbated by a rise of 5% y/y in Selling and Distribution as well as a marginal increase of 2% y/y in Administrative expenses. Consequently, EBITDA margin declined to 6% in FY 2018 from 8% in FY 2017.
Although, Net Finance Cost moderated downwards significantly, down by 54% y/y to N2.0bn compared to N4.3bn in FY 2017, this positive was completely offset by the Operating Losses of N8.9bn recorded in FY 2018.
Consequently, bottom line drifted to the negative territory as the firm reported a Pre-tax loss of N5.5bn in FY 2018 compared to the Pre-tax Profit of N3.2bn in FY 2017. Post-tax loss came in at N9.5bn compared to the Profit after tax of N1.3bn in FY 2018.
Earnings per share (EPS) declined to a negative of N2.11 in FY 2018 compared to N0.50 in FY 2017.
We have a target price of N11.3/s for UACN with a Hold recommendation (current price; N7.70).
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