WHY UNITED CAPITAL PLC'S SMILE. IS FADING

From the nine months figures to September 2017 released this week, obviously United Capital PLC is still one of the few companies in today's trying times with thick enough profit margin to withstand much of what is thrown at it but let us watch, the smiles are beginning to fade.

According to the group unaudited results, the company's profit margin is still a hefty N62.5 gain on every N100 income earned but the truth is that it got a lot thinner than N69.7 on the same N100 income at the same time last year.

To put it another way, from 9.66% rise in gross earnings to N6238.5m, profit before tax dropped by 1.66% to N3897.1m. And that is not the way business empires are built unless drop in profit can be linked yet to realised potential in new investment or product.

From the figures, United Capital's cost profile within the period grew in fairly strong double digit and only growth in investment income at 59.7% to N1099.2m came any where near this. Two other minor income streams did record higher growth rates but because they are very small, not much impact was felt.

Personnel expenses grew by 30.3% to N653.1m: Other operating expense rose by 38.4% to N1609.4m and all considered, including depreciation, total expenses ended 35.6% up at N2341.4m.

On the other hand, strong growths were recorded in net trading income from N14.6m to N92.4m; and as net gains recovered from net losses of yore but top flight income stream grew by only 0.66% to N1438.2m and net interest margin decreased by 5.15% to N2846.3m leaving 59.7% rise in investment income to N1099.2m almost alone to carry the new cost heap ons.

Naturally, it was unable to even though it looked like deciding to loans and receivables, reduce financial instruments available for sale to beef up instruments held to maturity by 25.2% to N51,482.8m paid off well in the form strong growth investment income.

Decoded: Unless the mounting cost of running is linked to set up new subsidiaries with potentials still in the pipeline, United Capital had better do something about its rising cost profile,or raise income to match it. If not, soon the smiles will begin to fade faster.

UNITED CAPITAL PLC: 9 mths Nm

                                  2017.             2016

Gross earnings.    6238.5.          5689.4

Investment inc.     1099.2.           688.2

Fee & Comm.         1438.2.          1428.7

Net trading income   92.4.               14.6

Net interest margin 2846.3.        3000.7

Other income.             762.3.         659.1

Net gains.                      0.076.       (1.85)

Personnel cost.            653.1.     501.2

Other Op. Expenses. 1609.4.    1163.0

Total expenses.         2341.4.    1726.6

Profit before tax.       3897.1.     3962.8

Profit margin %.           62.5.          69.7