UAC of Nigeria Plc (UACN) released its FY2019 audited results over the weekend. We note that the comparative figures of FY 2018 were restated to align with FY 2019, following the reclassification of UPDC (the real estate business) as discontinued operations and divestment of control in MDS Logistics, consequent on the sale of 8% of its stake to Imperial Capital Limited (ICL).
Reported FY 2019 revenue of N79.2 billion came in below our estimate of N83.8bn while the reported Pre-tax Profit of N7.5 billion was broadly in line with our estimate of N7.4bn. We highlight that that a loss of N14.6 billion arising from discontinued operations (UPDC) led to a net loss of N9.3 billion in FY 2019. Excluding the loss from discontinued operations, the company made a Net Profit of N5.3 billion (up 26% y/y) in FY 2019.
Revenue grew 12% y/y to N83.9 billion, on the back of higher Revenue from its Animal Feeds (+14% y/y) and Packaged Foods segment Feeds (+11% y/y). We regard the double-digit Revenue growth in the Animal feeds segment as a positive development, which in our view, reflects the recovery of market share previously lost to competitive pressures.
Despite the increase in OPEX (up 34% y/y), EBITDA grew strongly, up 31% y/y to N8.1 billion. EBITDA margin however improved only moderately to 10.2% in FY 2019 from 8.8% in FY 2018. The modest improvement in EBITDA margin was due to the double-digit growth in OPEX, following the jump in Selling and Distribution ex-dep (up 41% y/y) and Administrative costs ex-dep (up 28% y/y).
We observed a marked decline in the debt of the group (down 73% y/y to N6.4 billion in FY 2019 from N24.2bn in FY 2018). This was driven by the exclusion of debts belonging to UPDC in the group following the reclassification of UPDC as discontinued operations in Q3 2019. Consequently, the leveraged position of the group measured by Debt/Equity ratio improved to 0.11x in FY 2019 from N0.33x in 2018. Net Cash also rose to N17.4 billion in FY 2019 from 6.1bn in FY 2018.
Although, Profit after tax from continuing operations grew 26% y/y to N5.3 billion, the loss of N14.6 billion from discontinued operations (UPDC), resulted in a net loss of N9.3 billion for FY 2019.
The company declared a final dividend of N0.10/s, implying a dividend yield of 1.3% based on the last closing price of N7.50/s.
We have a target price of N17.0/s on UACN with a BUY recommendation.
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