UNITY CAPITAL'S INVERTED PYRAMID

Going through the 2015 audited accounts of United Capital PLC reminded Henates all through of an inverted pyramid, you know the type that has a  relatively small base.
From almost every angle, the figures reflected a group that was dependent a lot less on its core company.
For example, according to the figures released not too long ago, the group gross earnings as given in the accounts was N6153.7m, compared to N3087.1m for the company in 2015.
In 2014, the weight was distributed the same way with group gross earnings coming to N4676.6m as against N2236.7m for the company.
Much the same way, at every level of income stream, the group got less and less from the company with the lone exception of dividend income from subsidiaries which was zero for the group in 2015 and 2014 but chipped in N1950 and N1008m into the company coffers in both years respectively.
Yet, in terms of expenses, the push that resulted in key growths came from the company.
For example, personnel expenses grew by 0.76% for the group to N1197.8m from N1188.8m while the company's rose by 40.8% to N491.2m from N348.8m.
Other operating costs increased by 17.9% for the group from N1112m to N1310.6m compared to more than doubled one of the company, up 100.9% to N579.7m from N288.5m.
It was only in impairment charges that any semblance of equal growth occurred with group provision rising by 434.3% to N665.7m from N124.6m and that of the company growing by 408.8% to N497.1m from N97.7m.
The reason could be that the group had managed funds of N109105.1m by 2015 up 62.8% on previous N67035.4m while the company had none. Yet the company controlled bulk of borrowed funds in both years.
In 2015, total borrowed funds was N16145m out of that the company has N13704.5m under its control.
Finally, in the bottom line where it matters most, group profit before tax in 2015 was N3263.7m, more than twice the N1488.4m reported by the company.
To get there, group profit grew by 41.3% on 2014's N2309.9m while it was only a case of 1.67% increase for the company from N1464m.
SO:
* Sure, no inverted pyramid runs into trouble while the base is still able to carry the load but, well, any crack there always leads to crisis.
* Thus, it will be in the interest of all stakeholders if the pyramid can be reversed through more income and less cost growth for the company. Alternatively, the group can be restructured to give it a bigger base.

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