UAC to raise N15.4bn in Rights Issue

As investors’ interest in Nigerian listed equities remains positive, UAC of Nigeria plc (UACN) now plans to latch on the development to raise up to N15.4 billion by way of Rights Issue. The go-ahead approval for the Rights was given by its shareholders at its annual general meeting held Wednesday in Lagos.
Recall that the Board of UAC of Nigeria had decided to discontinue earlier proposed 1 for 12 Rights Issue that was approved at the 2015 annual general meeting, due to then prevailing market conditions.
The Rights Issue, through the issuance of ordinary shares on such other terms and conditions as the directors may deem fit or determine will help bolster UAC’s capital position.
At the Nigerian Stock Exchange (NSE), the shares of UAC of Nigeria Plc closed high on Wednesday at N18 after adding 60 kobo or 3.45percent. UAC of Nigeria Plc is one of the largely capitalised companies on the Nigerian bourse with shares outstanding in excess of 1.920billion units.
UAC of Nigeria Plc is one of Nigeria’s largest and oldest diversified companies with operations that span the food, agro-allied, real estate, paint and logistics segments. The company runs a holding company (HoldCo) business model with majority (controlling) stake investments in ten subsidiaries at present.
“The Board has identified an urgent need to bolster the Company’s capital position,” said Dan Agbor, chairman, UAC of Nigeria Plc. He said at the Meeting that this would ensure that UAC of Nigeria Plc provides its subsidiaries with working capital support in a timely manner, “so that the subsidiaries can quickly respond to challenges and take advantage of emerging opportunities.”
“I am pleased to inform you that the Rights Issue of Portland Paints has been concluded while the Rights Issues of Livestock Feeds and UPDC are at various stages of execution, due to delayed regulatory approvals. Grand Cereals also plans to raise equity by way of a Rights Issue that your Company also intends to subscribe for,” he noted.
“Given the weak macroeconomic environment, it is unsurprising that UACN’s property business continues to struggle. Cost of funding remains a big concern for the firm,” according to Uwadiae Osadiaye, team of research analysts at Lagos-based FBNQuest.
In view of the Company’s performance in the financial year ended December 31, 2016, the Board got the approval of shareholders to pay dividend of 100kobo per ordinary share, which amounted to N1.92billion.
UACN recorded a Group Revenue of N84.606 billion in 2016, an increase of 15percent from the N73.771billion in the preceding financial year; while group Profit After Tax (PAT) of N5.66billion increased by 10percent against N5.162billion recorded in 2015.
Agbor noted that despite the daunting challenges posed by the operating environment, UACN was able to deliver a mixed to good result in 2016 “through cost optimisation initiatives, innovation in key categories and extensive retail market expansion, all of which helped to offset further deterioration of margins during the year.”
“In 2017, we will focus on consolidating the initiatives that we started in 2016, support growth and working capital through equity calls, unlock value through the realisation of under-performing assets and restructure the route to market architecture across the group,” Agbor said.
“We forecast a 10percent topline growth for financial year 2017, majorly hinged on continued support from the Feeds businesses. Also, given that UACN sources over 90percent of its inputs locally, we estimate a mild improvement in gross margin to 21percent (2016: 20.5percent, previous: 22.5percent)”, said Ifedayo Olowoporoku team of analysts at Vetiva Capital.
According to Vetiva analysts, “our financial year 2017 earnings per share (EPS) forecast is little changed at N2.17 (previous: N2.20). Our 12-month target price for UACN is marginally raised to N30.91 (previous: N30.33)”.
 

Iheanyi Nwachukwu