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Tag: UPDC

  • UPDC, C & I Leasing list N11.36b bond on NSE

    UACN Property Development Company (UPDC) Plc and C & I Leasing Plc have listed their newly issued corporate bonds valued at N11.36 billion on the Nigerian Stock Exchange (NSE).

    UPDC, a subsidiary of UAC of Nigeria (UACN) Plc, listed the N4.355 billion 16 per cent Series 1 Senior Guaranteed Fixed Rate Bond Due 2023 under its N20 billion Bond Issuance Programme.

    The listing by way of introduction provided bondholders opportunity to trade on their investments and allow new investors to participate in the issue.

    UPDC had offered 4.355 million units of the 16 per cent bond at N1,000 per unit. The issue was fully subscribed.

    C & I Leasing listed 7.0 million units of its 16.54 per cent Senior Secured Series 1 Bond. It had offered 7.0 million units at N1,000 per units.

    Companies have increasingly turned to corporate debt issue to bridge the gap between the apathy in the primary equities market and funding requirements for corporate growth.

    UPDC, for instance, has been leveraging on debts to fund its projects, after a slowdown in real estate market and stock market recession combined to shrink access to long-term capital.

  • UPDC gets new board

    The board of UACN Property Development Company (UPDC) Plc has appointed Mr Babatunde Kasali as Chairman and Mr Folasope Aiyesimoju as the Chief Executive Officer of the real estate company. Kasali takes over from Mr Larry Ettah who retired with effect from July 23.

    Also, Mrs Adeniun Taiwo has been appointed as the Chief Operating Officer and Mrs Awuneba Ajumogobia as Non-Executive Director.

    Kasali, an accomplished accountant, banker and a Fellow of the Institute of Chartered Accountants of Nigeria is a Non–Executive Director of UAC of Nigeria Plc and the Non-Executive Chairman of Wema Bank Plc.

    Aiyesimoju, a finance professional with experience spanning corporate finance, principal investing and private equity, is the founder of Themis Capital Management and a Non-Executive Director of UACN Plc.

    Ajumogobia, a Fellow of the Institute of Chartered Accountants of Nigeria, is a Non-Executive Director and Chairman of Risk Management Committee of the Board of UACN Plc

    Taiwo, until her current appointment, was the Chief Financial Officer of UACN Plc and acted as Managing Director of UPDC Plc from May 2.

     

  • UPDC to list N4.36b bond on NSE

    UACN Property Development Company (UPDC) Plc has received regulatory approval to list its N4.355 billion bond on the Nigerian Stock Exchange (NSE)

    UPDC, a subsidiary of UAC of Nigeria (UACN) Plc, will be listing the N4.355 billion Series 1 Senior Guaranteed Fixed Rate Bond Due 2023 under its N20 billion Bond Issuance Programme. The listing by way of introduction will provide bondholders opportunity to trade on their investments and allow new investors to participate in the issue.

    UPDC has been leveraging on debts to fund its projects, after a slowdown in real estate market and stock market recession combined to shrink access to long-term capital.

    Attempt by the company to raise equity funds last year was only partially successful as it was only able to secure half of the funds it sought under the capital raising.

    Shareholders appeared to have shunned the shares that were provisionally allotted to them under the rights issue. UPDC had launched a rights issue of 1.719 billion ordinary shares of 50 kobo each to existing shareholders at N3 per share in a bid to raise N5.16 billion. The shares were provisionally allotted on the basis of one new share for every one share held as at close of business on January 19, 2017. The rights issue, which had opened on April 18, 2017, closed on May 26, 2017. However, the company only recorded subscription for 879.65 million ordinary shares valued at N2.64 billion.

    UPDC paid a total of N2.83 billion as interest expense during the year ended December 31, 2016, which contributed significantly to the company’s net loss of N1.55 billion during the period. It had planned to use N3.0 billion from the N5.2 billion rights issue to repay debts.

  • UPDC optimistic of improved performance

    The board of directors of UACN Property Development Company (UPDC) Plc yesterday outlined ongoing initiatives aimed at repositioning the real estate company for improved performance.

    At the annual general meeting yesterday in Lagos, Chairman, UACN Property Development Company (UPDC) Plc, Mr. Larry Ettah said the board and management were working on repositioning the company to deliver better value to all stakeholders.

    He outlined that a key strategic imperative in 2017 is deleverage of the company, which is being achieved through deployment of an aggressive sales strategy, ongoing rights issue to raise new equity funds and divestment from low yielding investment properties.

    “The fundamentals of the company are strong; and the brand remains positioned to deliver value to all stakeholders,” Ettah said.

    He noted that the real estate sector remains an attractive investment destination for investors to hedge their risks against inflation and devaluation.

    According to him, regardless of the challenges facing the sector, some positive trends in recent time signpost impending growth in the real estate industry, including housing sector reforms, refinancing of mortgage loans and establishment of the Nigeria Mortgage Refinance Company (NMRC), rise in property, real estate sector transparency ratings, recapitalization of mortgage institutions and others.

    “We expect an improved economic environment in line with the projected recovery in 2017. The fundamentals of the real estate sector are still good given the size of the market and the estimated deficit in the housing sector,” Ettah said.

    He however urged the government to address challenges militating against property investors and developers including cumbersome and time-consuming processes for land acquisition, insecure land title, infrastructure deficiency, underdeveloped mortgage market and absence of reasonable interest rates among others.

    Key extracts of the audited report and accounts for the year ended December 31, 2016 showed that UPDC recorded turnover of N6.34 billion in 2016 as against N5.12 billion in 2015, representing an increase of 24 per cent. The company however posted a loss before tax of N1.78 billion in 2016 compared with pre-tax profit of N55.85 million in 2015. After taxes, net loss stood at N1.52 billion in 2016 as against net profit of N421.77 million in 2015.

    Ettah explained that increase in Monetary Policy Rate, recession, government policies and other un-abating economic vagaries in 2016 had negative impact on the performance of the company noting that the cost of debt for the hugely indebted company increased significantly.

    According to him, growth in the retail development segment of the real estate market slowed down with vacancy rate of between 33 per cent and 65 per cent in the big shopping malls due to uncomplimentary foreign exchange regime.

    He noted that UPDC recorded losses upon completion of certain projects due mainly to high interest costs, effect of the 41 banned items on the Central Bank of Nigeria (CBN) list as well as extended completion date.

  • UACN eyes N6b for Livestock Feeds, UPDC

    UACN eyes N6b for Livestock Feeds, UPDC

    UAC of Nigeria (UACN) has opened application lists for supplementary capital raisings for two of its subsidiaries-Livestock Feeds Plc and UACN Property Development Company (UPDC), as the conglomerate launched a major bid to recapitalise its businesses.

    Livestock Feeds is seeking to raise about N750 million new equity funds from existing shareholders. Livestock Feeds is offering a rights issue of 1.0 billion ordinary shares of 50 kobo each at a price of 75 kobo per share. The rights issue has been pre-allotted on the basis of one new ordinary share for two ordinary shares already held by the shareholder.

    The rights issue’s price of 75 kobo per share however, represents about 15.4 per cent increase on the company’s opening market value of 65 kobo today at the Nigerian Stock Exchange (NSE).

    UPDC is seeking to raise about N5.16 billion new equity funds from its existing shareholders to reduce its debt burden and provide supportive capital for long-term growth.

    UPDC is offering a rights issue of about 1.72 billion ordinary shares of 50 kobo each at a price of N3 per share. The shares were pre-allotted on the basis of one new ordinary share for every one ordinary share held as at the qualification date. However, the rights issue price of N3 per share represents a premium of 71.4 per cent on UPDC’s opening market price of N1.75 at the start of trading today at the Nigerian Stock Exchange (NSE).

    The application lists for the two offers will run concurrently and are expected to close on Friday May 26, 2017.

    UPDC was spun off from UACN and its shares were listed on the NSE in 1997. UACN still holds the largest 46 per cent equity while First Trustees Nigeria holds the second largest stake of 12 per cent. Other corporate bodies hold some 18 per cent while individuals and trustees hold the balance of 24 per cent.

    UACN had last month closed application list another N1 billion rights issue for another subsidiary, Portland Paints and Products Nigeria (PPPN). PPPN floated a N1.02 billion rights issue by offering 600 million ordinary shares of 50 kobo each at N1.70 per share.

    Group Managing Director, UAC of Nigeria Plc, Mr. Larry Ettah, has said the new equity funds will be used to restructure balance sheet and support business expansion programme.

    “We will apply the planned rights proceeds to minimise the debt exposure risks of our business as well as carry out targeted expansion in our operations. The business will focus on its growth brands as well as make the necessary investment in marketing to improve its brands’ awareness and visibility,” Ettah said.

    Nigeria’s oldest surviving business, UACN started business in Nigeria in 1879, well ahead of the 1914 amalgamation that created the nation. The UACN Group consists of several active companies spreading through manufacturing, services, logistics and real estate sectors of the economy.

  • UPDC alerts investors to possible losses

    The Board of UACN Property Development Company (UPDC) Plc has alerted the investing public that the real estate company would record materially lower earnings for the immediate past business year, euphemism for negative bottom-line that could deny investors dividends for the second consecutive business year.
    Audited report and accounts of UPDC for the year ended December 31, 2015 showed that group revenue dropped from N11.70 billion in 2014 to N5.12 billion in 2015. Profit before tax stood at N30.76 million as against N3.54 billion in 2014. With this, the company could not declare dividend for the 2015 business year.
    The board of UPDC, a member of the UAC of Nigeria (UACN) Group, in a regulatory filing signed by the company secretary, Godwin Samuel, stated that it has “carried out a preliminary review, subject to audit, of the management accounts of our company for the year ended 31st December, 2016 and expect to report materially lower earnings”.
    UPDC’s share price dropped by 3.77 per cent or 8.0 kobo to close at N2.04 per share at the Nigerian Stock Exchange (NSE) as investors yesterday reacted to the profit warning. UACN, the parent company, also dropped by 4.97 per cent or 75 kobo to close at N14.35 per share.
    According to the board, the decline in earnings was mainly as a result of the recognition of losses on certain projects and impairment of investments in one joint venture project occasioned by significant increase in finance costs.
    “The results were further worsened by foreign exchange losses and the negative performance of our hotel asset,” the board stated.
    The board however assured that despite the continued lull in the real estate sector occasioned by the headwinds of the macro-economic environment, the fundamentals of the business remain strong, adding that UPDC is being restructured and repositioned to better deal with the challenges of the times and explore emerging opportunities.
    The profit warning could negatively impact the capital raising being planned by the real estate company. The Nation had recently reported that UPDC plans to raise about N5.2 billion new equity funds from its existing shareholders to reduce its debt burden and provide supportive capital for long-term growth.
    A source in the know had indicated that UPDC plans to undertake a rights issue of about 1.72 billion ordinary shares of 50 kobo each at a price of N3 per share.
    According to the source, the qualification date for the rights issue was Thursday January 19, 2017 and the shares will be pre-allotted on the basis of one new ordinary share for every one ordinary share held as at the qualification date.
    The rights issue price of N3 per share represents a premium of 47 per cent on UPDC’s market price of N2.04 at the start of trading today. This makes the secondary market more attractive than the rights’ shares. Traditionally, rights issue is usually offered at lower-than-market price as a form of bonus and incentives to shareholders.
    An analyst stated that the UPDC’s rights price of N3 implies that the directors of the company and their professionally advisers believe that the company is undervalued at the secondary market.
    UPDC has already applied to the Quotation Committee of the NSE, which oversees new issues and listing, for the approval of the rights issue.
    Key extracts of the nine-month report of UPDC for the period ended September 30, 2016 showed that the real estate company recorded profit before tax of N132.95 million in the third quarter of 2016 as against pre-tax loss of N109.76 million in comparable period of 2015. Tax provision of N109.18 million in 2016 however depressed net profit after tax to N23.77 million, still a significant recovery from the net loss of N109.76 million recorded in third quarter 2015 when the company did not provide for tax due to the losses.

  • UPDC to raise N5.2b new equity from shareholders

    UACN Property Development Company (UPDC) Plc is seeking to raise about N5.2 billion new equity funds from its existing shareholders to reduce its debt burden and provide supportive capital for long-term growth.
    A source in the know indicated that UPDC, a subsidiary of UAC of Nigeria (UACN) Plc, Nigeria’s largest conglomerate; plans to undertake a rights issue of about 1.72 billion ordinary shares of 50 kobo each at a price of N3 per share.
    According to the source, the qualification date for the rights issue was Thursday January 19, 2017 and the shares would be pre-allotted on the basis of one new ordinary share for every one ordinary share held as at the qualification date.
    The rights issue price of N3 per share represents a premium of 9.1 per cent on UPDC’s market price of N2.75 at the start of trading on Friday. Traditionally, rights issue is usually offered at lower-than-market price as a form of bonus and incentives to shareholders. An analyst stated that the UPDC’s rights price of N3 implied that the directors of the company and their professionally advisers believe that the company is undervalued at the secondary market.
    The source confirmed that UPDC has applied to the Quotation Committee of the Nigerian Stock Exchange (NSE), which oversees new issues and listing, for the approval of the rights issue.
    UPDC was spuned off from UACN and its shares were listed on the NSE in 1997. UACN still holds the largest 46 per cent equity stake while First Trustees Nigeria holds the second largest stake of 12 per cent. Other corporate bodies hold some 18 per cent while individuals and trustees hold the balance of 24 per cent.
    UPDC had recorded pre-tax profit of N133 million in the third quarter of 2016, breaking away from a losing streak that had worsened due to its relatively high financial leverage and indebtedness. The company had recorded a net loss of about N128 million in the first quarter of 2016.
    Key extracts of the nine-month report of UPDC for the period ended September 30, 2016 showed that the real estate company recorded profit before tax of N132.95 million in the third quarter of 2016 as against pre-tax loss of N109.76 million in comparable period of 2015. Tax provision of N109.18 million in 2016, however, depressed net profit after tax to N23.77 million, still a significant recovery from the net loss of N109.76 million recorded in third quarter 2015 when the company did not provide for tax due to the losses.
    The report showed that the rebound was driven by reduction in cost of sales and gains from disposal of certain assets. While group turnover dropped from N4.10 billion to N3.21 billion, gross profit improved from N841.12 million to N904.46 million. With a gain of N747.37 million on disposal of assets, operating profit stood at N348.04 million in 2016 as against N445.1 million. Operating profit was depressed by 80 per cent increase in administrative expenses from N788.9 million to N1.42 billion.
    Chairman, UACN Property Development Company (UPDC) Plc, Mr Larry Ettah, had recently outlined that the company plans to raise new equity funds through a rights issue and additional capital by disposing some assets in a multi-prong strategy aimed at enlivening the slowing performance of the real estate company.
    According to him, the company plans to reduce its indebtedness and strengthen its balance sheet by raising new equity funds from existing shareholders, selling down the company’s surplus stake in the UPDC Real Estate Investment Trust (UPDC REIT) and disposing underperforming assets.
    “Our strategy for 2016 and beyond includes deleveraging the business through equity capital injection by way of rights issue, sell down of surplus stake in the REIT and disposal of low-performing assets, as well as leveraging on partnerships and alliances that are in sync with the company’s long term goals,” Ettah said.
    He said the company was recalibrating development towards the retail segment and has put in place strategies to enable it take advantage of emerging opportunities in the segment.

  • Impediments to housing finance, by UPDC, others

    The Managing Director, UACN Property Development Company (UPDC) Plc, Mr. Hakeem Ogunniran, has identified five drawbacks to housing finance in the country. These include cost, character, capacity, collateral and conditions.

    This is coming on the heels of a World Bank report. The  findings of Word Bank Group, contained in “Doing Business in Nigeria 2014” under the section “Understanding Regulations for Small and Medium-Sized Enterprises, revealed that an investor in the country’s real estate sector has to go through 11 procedures of over 78 days, and also pay 15.8 per cent of the value of the property before a transfer of property can be achieved.

    This situation has made the country to be rated as one of the most difficult and expensive places to register property in the world.

    Ogunniran said the problem with land registration and titling was much a systemic issue, explaining that the system is people-driven and not process-driven. He, therefore, suggests that there should be a “one-stop-shop” for perfecting title and should be made business-like.

    The report, which is based its submission on findings examined in the 36 states and Federal Capital Territory (FCT), held that the easiest place to register a property is in Zamfara State, where it takes nine procedures, 31 days, and eight per cent of the property value.

    In Abia State, it takes 13 procedures, 108 days, and 15.9 per cent of the property value. The report, which blamed the delays recorded while trying to register property on government bureaucracy, said “the time is largely dependent on a single requirement: the state governor’s consent, which accounts for 65 per cent of the total time required, on average. The delay varies from four days in Gombe to six months in Anambra or Keffi.”

    As a way forward, the Managing Director, Resort Savings and Loans Plc, Mr. Abimbola Olayinka, said the Land Use Act should be used to empower the people and not as an economic and political tool by state chief executives, adding that the Act should be taken away from the constitution so that it could be easily tinkered with.

    Olayinka said land administrators should adopt what he called “three-one-three strategy” for land registration. This means that land titles should be perfected in three days at one central place, and at the cost of three per cent of the value of the land.

    Similarly, the Chief Executive Officer, Imoleayo Properties, Mr. Kayode Oyedele, explained that eliminating the bottlenecks created by the land and property laws and regulations will go a long way in encouraging mortgages.

    He revealed that previously in Ghana, there is a dysfunctional land administration, long and expensive procedures that lasted up to five years and involving six different agencies supervising the process, leading to inefficiency of the system.

    But following the reforms by the Ghanaian government, property registration in the country, Oyedele said, was cut to 34 days and queues at the lands commission disappeared, making it possible for the mortgage sector to thrive.

    And following further improvement to the system, today in Ghana, it takes 10 days to register a property.

    “A similar experience happened in Egypt, where high fees and inefficient government agencies that hindered the process of real estate was eliminated by reducing property registration fees; simplifying the property registration process thus encouraging citizens and companies to obtain titles,” he submitted.

  • UPDC outlines new growth plan as shareholders get N859m dividend

    UACN Property Development Company (UPDC) Plc plans to source additional capital through a supplementary equity issue and disposal of certain surplus assets as part of a medium-term plan to deleverage the real estate company and boost its liquidity.

    Chairman, UACN Property Development Company (UPDC) Plc, Mr. Larry Ettah, outlined the strategic plan of the company at the annual general meeting held at Golden Tulip, Festac, Lagos. Shareholders approved distribution of N N859.4 million as cash dividends for the 2014 business year, representing a dividend per share of 50 kobo.

    Ettah said the company is focused on long-term value creation and has put in place strategies to enable it take advantage of emerging opportunities in the market place.

    He outlined that the company would be raising new equity funds through a supplementary capital issue while it would also dispose its surplus equity stake in the UPDC Real Estate Investment Trust (UPDC Reit) to reduce its debt overhang and free more earnings for shareholders.

    “Our strategy for 2015 and beyond include deleveraging the business through equity capital injection, disposal of the surplus stake currently held in UPDC REIT, about 21.5 per cent, to generate liquidity and re-creating our products portfolio to include more commercial and retail offerings which have proven to be more resilient revenue sources in periods of depression,” Ettah said.

    He noted that the Nigerian real estate market remained attractive as there were significant untapped potentials in the residential segment, and numerous opportunities in the hospitality, retail, commercial and industrial segments of the market in the near term.

    According to him, in recent years, foreign private equity firms have invested millions of dollars in the Nigerian real estate market due to existing and emerging huge demand which is driven by increasing urban population and changing shopping culture among the expanding middle class.

    “The real estate market is gradually rebounding and has experienced reasonable growth and performance in the last few years. This performance is largely driven by the re-emergence of the Nigerian middle-class and the increasing demand for decent residential and commercial accommodation by high net-worth individuals, corporate organizations and key players in the retail segment of the economy,” Ettah pointed out.

    He added that the upturn in economic activity which started in the last quarter of 2011 has led to an increase in demand and supply for commercial and high end residential developments, particularly in the key cities of Abuja, Lagos and Port Harcourt.

    He said UPDC has continued its ongoing developments in 2014 and commenced some new ones, assuring that the company is on a good footing to sustain good performance.

    Ettah however highlighted that challenges being faced by the industry in terms of title uncertainties, high cost of funding, inadequate mortgage financing and poor infrastructure are expected to persist in the medium term and might continue to prevent effective demand in the low to medium residential market segments.

    Audited report and accounts for the year ended December 31, 2014 showed group turnover of N11.70 billion in 2014 as against N11.29 billion in 2013. Profit before taxation stood N3.54 billion compared with N3.71 billion in 2013.

  • UPDC: Making better returns

    UPDC: Making better returns

    UACN Property Development Company (UPDC) Plc drew on improving values of its underlying assets and the steadiness in its real estate business to deliver better returns to shareholders. Audited report and accounts of UPDC for the year ended December 31, 2013 showed a generally positive bottom-line, although its top-line was constrained by declines in both sales and rental incomes. Pre and post tax profits rose by 51 per cent and 45 per cent respectively, which enabled the real estate company to deliver a two-in-one cash and scrip dividend to shareholders while substantially improving its returns and dividend outlook.

    UPDC’s two business segments-property and hospitality services, provided complementary synergies to even out the downsides on both sides. While the hospitality services business showed a stronger growth momentum with 66.9 per cent growth in turnover, it still posted a loss, although lower than previous year. The main property development, sales and management business witnessed decline in turnover but recorded significant growth of 38 per cent in pre-tax profit, which altogether coloured the overall group performance.

    The group performance altogether showed a steady growth outlook with improved margins and better financing structure. The proportion of equity funds to total assets improved from 44 per cent in 2012 to 50.2 per cent in 2013 while pre-tax profit margin rose from 20.4 per cent in 2012 to 32.8 per cent in 2013. While the company paid out cash dividend per share of 70 kobo, the same rate it paid in previous year, in addition to a bonus issue of one for four shares, improvement in dividend cover from 2.30 times in 2012 to 3.31 times in 2013 underlined the increased intrinsic value to shareholders. This was also evident in the modest increase in net assets value, which is considerable higher than current market value of the stock at the stock market. This may suggest possible undervaluation of the company’s shares.

    UPDC however still remains under considerable cost pressures, especially under the intensive cost of its capital-intensive business. Both liquidity and debt-to-equity ratios indicated these concerns, compounded by the decline in disposable incomes of its upper-to-middle class clients. The issues of inadequate capital, high interest rates and lower effective demand among others are general industry issues in the Nigerian real estate sector, and when viewed against the background of the industry performance, UPDC appeared stronger and less susceptible.

     

    Financing structure

     

    UPDC Group’ paid up share capital remained unchanged at N687.5 million, consisting of 1.375 billion ordinary shares of 50 kobo each. Shareholders’ funds rose steadily from N31.25 billion in 2012 to N33.43 billion in 2013. Total assets stood at N66.55 billion in 2013 as against N71.36 billion in 2012. Long-term assets had increased from N48.12 billion to N48.28 billion. Total liabilities dropped by 17 per cent from N40.11 billion to N33.13 billion. Long-term liabilities had dropped by 54 per cent from N14.05 billion to N6.46 billion while current liabilities increased by 2.3 per cent from N26.06 billion to N26.67 billion. The financing position was steady and balanced. The proportion of equity funds to total assets improved from 43.8 per cent to 50.2 per cent. However, debt-to-equity ratio dropped to 56.9 per cent in 2013 as against 50.8 per cent in 2012. Long-term liabilities/total assets ratio stood at 49.8 per cent compared with 56.2 per cent while current liabilities/total assets ratio closed 2013 at 40.1 per cent as against 36.5 per cent in 2012.

     

    Efficiency

     

    Average staff productivity improved in 2013, although the top-line cost pressure undermined initial margins. Average number of employees improved from 305 persons to 359 persons, with increase in both management and non-management staff. Total staff cost also increased from N509.35 million in 2012 to N687.47 million in 2013, representing average staff cost per employee of N1.92 million in 2013 as against N1.67 million in 2012. Average contribution of each employee to pre-tax profit meanwhile improved from N8.05 million to N10.33 million. With considerable increase in cost of sales, total cost of business, excluding financing charges, increased to 87.6 per cent of total turnover in 2013 compared with 72.7 per cent in 2012.

     

    Profitability

     

    Underlining profitability ratios showed a generally positive outlook in 2013 as the company mitigated top-line constraints with additional incomes from existing assets. While gross profit margin dropped from 41.5 per cent in 2012 to 28.3 per cent in 2013, pre-tax profit margin improved from 20.4 per cent to 32.8 per cent. Average return on total assets also improved from 3.4 per cent to 5.6 per cent while average return on equity rose from 7.0 per cent to 9.4 per cent. With 44 per cent increase in net earnings per share, the company distributed N962.5 million as cash dividends, representing a dividend per share of 70 kobo. It had paid the same rate in the previous year. It however added a bonus issue of one for four shares to the 2013 distribution. Dividend cover, which underlines the possibility of sustaining current cash payout in the future, was stronger at 3.31 times in 2013 as against 2.30 times in 2012.

    Group profit before tax had risen by 51 per cent from N2.46 billion in 2012 to N3.71 billion in 2013. After taxes, net profit rose by 44.7 per cent from N2.18 billion to N3.16 billion. Earnings per share thus stood at N2.32 in 2013 compared with N1.61 in 2012. Net assets per share rose from N22.73 in 2012 to N24.31 in 2013. The mid-line performance cushioned the negative top-line performance, which saw group turnover dropping by 6.2 per cent from N12.04 billion to N11.30 billion. Segmental analysis showed mixed performance. The main business segment of real estate development, sales and management recorded lower sales of N9.33 billion in 2013 as against N10.86 billion in 2012. The second business segment of hospitality services recorded turnover of N1.97 billion in 2013 as against N1.18 billion in 2012. Meanwhile, group cost of sales rose by 15 per cent from N7.04 billion to N8.10 billion, depressing gross profit from N5 billion to N3.2 billion. Total operating expenses also inched up by 5.3 per cent from N1.71 billion to N1.80 billion. Interest expenses grew by 32 per cent from N1.53 billion to N2.01 billion.

     

    Liquidity

     

    The liquidity position of the company declined during the period. Current ratio, which relates current assets to relevant liabilities, dropped from 0.89 times to 0.69 times. Working capital/total sales ratio remained negative at -74.3 per cent in 2013 as against -23.4 per cent in 2012. Debtors/creditors ratio stood at 30.3 per cent in 2013 compared with 45.4 per cent in 2012.

     

    Governance and

    structures

     

    UPDC was spun off from UAC of Nigeria (UACN) Plc and its shares were listed on the Nigerian Stock Exchange (NSE) in 1997. UACN still holds the largest 46 per cent equity stake while First Trustees Nigeria holds the second largest stake of 12 per cent. Other corporate bodies hold some 18 per cent while individuals and trustees hold the balance of 24 per cent.

    UPDC Group includes mainly the parent company and UPDC Hotels Limited, the owner of Golden Tulip Festac Hotel, Lagos. In 2013, UPDC spun off some assets and created a real estate investment trust (reit) with an initial public offering that closed at a value of N26.7 billion. The Reit is listed on the NSE. UPDC currently holds 62.2 per cent stake in UPDC Reit. It however plans to sell 22.2 per cent stake to reduce its shareholding to 40 per cent, in line with its corporate strategy.

    The board and management of the company remained stable. Mr. Larry Ettah, the group managing director of UACN, chairs the board of UPDC while Mr. Hakeem Ogunniran leads the executive management team as managing director. UPDC broadly complied with the code of corporate governance and best practices.

     

    Analyst’s opinion

     

    The Nigerian real estate industry faces twin problems of high costs and sluggish market. With liquidity squeeze and attendant high costs of funds, declining consumer purchasing and increasing top-line costs compounded the performance of the industry. While Nigeria’s huge housing deficit of between 16 and 17 million units, growing population and evolving middle class offer exciting business prospects for real estate companies, the absence of a liquid mortgage system and declining disposable income constitute threats to the real estate sector. For instance, as against average of one million housing units that are supposed to be added annually, only 30,000 housing units were added in 2013. However, the ongoing reforms including the recapitalisation of primary mortgage companies and the establishment of a mortgage refinancing company should provide some necessary financial linkage.

    UPDC’s leadership position in the industry, the cross-selling opportunities and economies of scale offered by its conglomerate parent company and prudent management could serve as cushions and increase the momentum in the years ahead. It however needs to further explore opportunity for amenable long-term capital, to fully realise its long-term projects without the cost pressures of interest expenses. In this, existing and new shareholders can play important roles. Altogether, the long-term prospects of the company is reassuring.