Umeme Ltd and Bank of Baroda Uganda surprised investors after
they grabbed star status on the local bourse during the first reporting
season of 2019 on account of strong profits and dividends posted last
year.
Umeme, the country’s leading
power distributor, recorded higher revenues driven by increased power
sales and highest profits attributed to elimination of a one-off debt
provisioning expense worth Ush115.2 billion ($30.3 million) that was
incurred in 2017.
This one-off cost
was pegged to unpaid investment claims previously filed with the
Electricity Regulatory Authority, which was prompted by stiff debt
provisioning rules provided under International Accounting Standard 9
that took effect in 2017.
The company
also declared a final dividend of Ush28.2 ($0.007) per share for 2018
compared with Ush7.6 ($0.002) per share declared in 2017. A half-year
dividend of Ush12.7 ($0.003) per share was issued in the second half of
2018, bringing the total dividend in the previous year to Ush40.9
($0.01) per share.
Umeme’s net profit
before tax rose from Ush44.6 billion ($11.97 million) in 2017 to Ush195
billion ($52 million) in 2018 while total electricity sales grew by 13
per cent to Ush1.6 trillion ($429 million) by end of 2018.
Total
customer numbers increased by 14.8 per cent to 1.3 million in 2018, an
outcome largely due to the government’s electricity connection drive.
This policy was launched in November 2018 and
offers cheap electricity connections to rural consumers through
subsidised fees charged for electricity poles and external wiring. The
government has set an annual target of 300,000 new electricity
connections in targeted districts, according to official policy
documents.
Full-year results posted
by Bank of Baroda also revealed impressive performance by the bank in
2018. The bank’s total assets rose from Ush1.5 trillion ($395 million)
in 2017 to Ush1.7 trillion ($447.6 million) in 2018 while total loans
and advances increased from Ush616.5 billion ($162 million) to Ush757
billion ($199 million) during the same period.
Total
customer deposits grew from Ush1.17 trillion ($308 million) in 2017 to
Ush1.3 trillion ($342 million) in 2018. The bank’s total income
increased from Ush174 billion ($45.8 million) in 2017 to Ush195.9
billion ($51.5 million) in 2018, backed by increased lending and fairly
high interest rates earned from Treasury bills and bonds.
Bank
of Baroda’s profit after tax surged from Ush49.4 billion ($13 million)
in 2017 to a record high of Ush73.5 billion ($19.3 million) in 2018. Its
full- year dividend also rose from Ush6 ($0.001) per share in 2017 to
Ush10 ($0.003) per share in 2018.
In
contrast, DFCU Bank, a fully owned subsidiary of DFCU Ltd, saw its loans
and advances grow only slightly from Ush1.33 trillion ($355.5 million)
in 2017 to Ush1.39 trillion ($371.5 million) by end of 2018.
Its
total assets fell to Ush2.9 trillion ($775 million) in 2018 while the
value of bad loans written off jumped by Ush55.4 billion ($14.8 million)
to Ush82.6 billion ($22 million) during the same period. The bank’s
profit after tax dropped by Ush65.9 billion ($17.6 million) to Ush61.7
billion ($16.5 million).
Consequently,
DFCU Ltd’s full-year dividend dropped from Ush68.24 ($0.02) per share
in 2017 to Ush33.01 ($0.009) per share in 2018.
“Umeme
Ltd certainly recovered from a one-off impairment cost that was
incurred on unpaid investment claims filed with the government in the
past. The biggest growth factor driving its performance curve is
industrial demand for power. An increase in the number of new factories
will surely boost demand for power, energy sales and profits earned by
Umeme,” argued Mubbale Kabandamawa-Mugalya, investment manager at Sanlam
Investments Uganda Ltd.
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