United Capital generates N34.6bn operating cash, profit rises by 78%

United Capital Plc generated N34.62 billion in net cash from operating activities in the first half of 2026, exceeding its N21.10 billion after-tax profit by 64 percent, a sign that the investment banking group’s earnings are increasingly backed by real cash generation rather than accounting gains.

The sharp turnaround in operating cash flow underscores improving earnings quality and strengthens the firm’s capacity to fund growth, sustain dividends, and reduce leverage.

One of the strongest indicators of earnings quality is how much cash a company generates from its core operations relative to the profits it reports. By that measure, United Capital delivered one of its strongest performances in recent years.

The group reported net cash generated from operating activities of N34.62 billion, compared with an operating cash outflow of N119.03 billion in the corresponding period of 2025. The swing came despite recording a more modest increase in accounting profit, highlighting a significant improvement in cash conversion.

For every N1 of profit after tax, United Capital generated approximately N1.64 in operating cash, well above the ideal one-to-one ratio that analysts typically regard as evidence of high-quality earnings.

The result suggests that the company’s profitability is being supported by actual cash receipts rather than non-cash accounting adjustments or aggressive revenue recognition.

Profit after tax rose 77.5 percent to N21.10 billion from N11.89 billion a year earlier, driven by stronger investment income, fee and commission earnings, trading gains, and fair-value income. Gross earnings climbed to N37.49 billion from N23.76 billion, while operating profit before tax increased to N23.32 billion from N12.64 billion.

The stronger cash generation reflects a substantial improvement in working capital management. Cash generated from operations before interest and tax payments reached N21.95 billion, reversing a N125.30 billion cash burn recorded in the first half of 2025. The turnaround was largely supported by a N42.09 billion increase in managed funds, alongside better collections and improved operating cash flows despite higher operating expenses.

Interest receipts remained a major source of liquidity. The group received N78.27 billion in interest income during the period while paying N64.46 billion in financing costs, leaving healthy net interest inflows that further strengthened operating cash generation. Income tax payments also declined to N1.14 billion from N3.28 billion in the previous year.

Strong operating cash flow also allowed the company to continue rewarding shareholders while reducing leverage. United Capital paid N14.4 billion in dividends during the half-year and simultaneously repaid N195.18 billion in borrowings, substantially reducing outstanding borrowed funds from N372.30 billion at the end of December 2025 to N185.88 billion by June 2026.

Although financing activities resulted in a cash outflow of N209.58 billion, this largely reflected deliberate debt reduction rather than operational weakness.

The company’s balance sheet consequently became less leveraged while liquidity remained strong. Cash and cash equivalents increased to N400.80 billion from N287.10 billion at the end of 2025, even after dividend payments and debt repayments.

Another positive indicator was the group’s investment activity. United Capital generated a net N272.98 billion from investing activities, largely from disposals of investment securities amounting to N291.37 billion, while continuing to invest in technology and operational infrastructure through property and equipment purchases of N7.13 billion.

Beyond cash generation, the income statement reflected broad-based earnings growth. Net investment income rose to N13.81 billion from N9.55 billion, and fee and commission income increased to N14.28 billion from N11.35 billion, while net trading income surged to N4.96 billion, compared with N419 million in the previous year. Total operating expenses increased to N14.17 billion as the company continued investing in talent, technology, and expansion, but revenue growth comfortably outpaced costs.

For investors, the significance of United Capital’s results extends beyond headline profit growth. Corporate earnings can sometimes be inflated by unrealised gains or accounting adjustments that do not translate into cash. Companies that consistently convert profits into operating cash are generally considered financially stronger because they possess greater flexibility to pay dividends, fund expansion internally, withstand market volatility, and reduce dependence on external borrowing.

United Capital’s first-half performance indicates that its earnings are increasingly translating into cash available for shareholders and business growth. The improvement also positions the investment banking group favourably as Nigeria’s capital markets continue benefiting from elevated interest rates, stronger investor participation, and increased activity in asset management, investment banking, and securities trading.

With retained earnings rising to N59.89 billion and shareholders’ funds increasing to N187.09 billion, the company’s ability to generate cash alongside profit provides an additional layer of comfort for investors assessing the sustainability of future earnings.

The company began the year with a share price of N18.76 per share, and as at the close of trading on Friday, the company’s share price fell to N18.5, losing 1.07 percent year-to-date. The company is currently valued at N333 billion.