Following the slump in the real estate market last year, occasioned by the global financial meltdown and the intervention of the Central Bank of Nigeria (CBN) in the banking sector, UACN Property Development Company Plc (UPDC) recorded a 35 percent slide in profit after tax (PAT) for its operations in 2009 compared to the preceding financial year.
Specifically, the property development firm recorded a profit after tax of N2.39 billion for its operations in the 2009 financial year as against N3.68 billion in the previous year, representing a decline of 35 percent. Also, the profit before tax (PBT) dipped by 24 percent to N2.83 billion in 2009 as against N3.72 billion in the preceding year.
Speaking at the companyâ€™s annual general meeting (AGM) in Lagos, last week, the Ag. Chairman, Mr. Larry Ephraim Ettah, declared that the company posted a modest turnover performance of N13.33 billion for 2009, which was just at par with the figure of N13.32 billion recorded in 2008, reflecting the harsh operating environment in the real estate industry.
Despite the declining profit of the company however, the board recommended and shareholders approved dividend of 50 kobo per share and a bonus issue of one for every four shares held.
According to Ettah, â€œthere was a significant decline in the level of activity in the real sector in 2009 resulting from global real estate market melt-down, the crash of the Nigerian equities market, credit crunch and weak earnings profile of most corporates. This situation was exacerbated by the inability/unwillingness of banks to extend further credit to the real estate sector.
â€œThese developments led to decline in effective demand for property especially at the premium segment of the market, increased buyers/tenants default in meeting payment terms, delayed commencement and increased cost of executing projects. These factors combined impacted margins negatively during the year. It is pertinent to note that the challenges encountered by the Company during the year with regard to delays in planning approvals had consequential impact on commencement of new projects.â€
He further stated: â€œDespite the challenges of the times your Management and Board are poised to weather the storm and create sustainable value for you, our esteemed shareholders. We would take advantage of the emerging opportunities in this period of economic downturn to improve the Companyâ€™s profitability. We would continue to exploit the wide gap between demand and supply of accommodation to the benefit of the Company.
â€œThe bold step taken by the Company to source for more affordable, longer term funds via a bond issue in the near term (and the establishment of a Real Estate Investment Trust in the medium term) are expected to reduce cost and completion time of project developments and ultimately impact the companyâ€™s performance and return to shareholders positively.
â€œAs stated at the Extra Ordinary General Meeting held on February 23, 2010, the global economic crises, the reality of the Nigerian real estate market, the recent developments in the Nigerian banking sector and the attendant liquidity and credit squeeze have made it imperative for us to review the funding of the Companyâ€™s projects and operations in order to guarantee sustainable value creation for our shareholders.