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UAC of Nigeria Plc (UACN) released its Q1’11 results for the period ended March 31, 2011.




Please find below details of the results (as released on the floor of the Nigerian Stock Exchange):
Analyst’s Note
  • Turnover increases YoY, decreases QoQ
YoY, topline grew 14.9% in the three months (January to March), from N10.9 billion in Q1’10. Whilst the growth is reflective of the weak base in 2010, we observe that turnover dipped on a QoQ basis, from N15.2 billion in Q4’10 (October to December) to N12.5 billion. The reported turnover was ahead of management’s N12.0 billion target but came in 10% below our N13.8 billion estimate.
  • Profits in line with Management Guidance, misses our estimate
Profit Before Tax (PBT) and Profit After Tax (PAT) also increased by 15.4% and 21.3% respectively in the quarter. PBT and PAT were in line with company’s guidance of N1.2 billion and N830 million forecast. However, profits missed our forecasts of N1.5 billion and N1.1 billion by about 28% as we had expected more bullish growth in topline to feed through.
  • Margins stay unchanged
Pre- and post-tax profit margins were unchanged at 9.4% and 6.6% respectively for the quarter, compared with Q1’10. However, PAT margin (after minority interest) dipped by 4.2% (3.7% in Q1’11 vs. 3.9% in Q1’10). While costs have remained largely controlled compared with 2010, margins remain significantly lower than historic average for Q1, of 14.4% (PBT margin) and 9.1% (PAT margin). This supports our assumption that the rising cost of energy continue to weigh down on expenses (the Restaurants in particular).
  • CAP, UPDC figures suggest relatively weak profit performances from other divisions
It is worth noting that Q1’11 results for CAP Plc and UPDC Plc, subsidiaries of the UACN Group, show that the paint manufacturer and real estate developer contributed strongly to Group performance (about 57% of profits from 2-year average of 48%), suggesting that performances from other divisions, especially the UAC Restaurants division, have been relatively weak. These subsidiaries saw strong growth across revenue and profit lines in the quarter, and their contributions to Group PBT increased by 10.9% (UPDC) and 16.8% (CAP).
  • Bland market reaction, rating under review
As with many other companies that announced results yesterday, there was no noticeable reaction to UACN’s shares. The stock gained a marginal 0.3% to close the day at N38.61, translating to a P/E of 11.2x vs. a conglomerates average multiple of 14.2. While we impact these announced results and the company’s FY’11 forecast on our valuation, our recommendation remains under review. 
Vetiva Capital Management Limited
Plot 266B, Kofo Abayomi Street
P. O. Box 73530 Victoria Island
Tel: +234-1-4617521-3, 2700657-8; Fax: +234-1-4617524.
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