UPDC plans recreating products portfolio to favour retail, commercial offering

As part of efforts to respond to the prevailing economic  slowdown, UAC Property Development Company (UPDC) Plc  is planning to re-create its products portfolio to include more commercial and retail offerings which, it notes, have proven to be more resilient revenue sources in periods of depression.

Also as part of strategies for 2015 and beyond, the company is considering  the disposal of the surplus stake it currently holds in the UPDC REIT (21.5 percent) in order to generate liquidity to increase its capital injection into its business.

UPDC, the property investment and development subsidiary of United African Company of Nigeria (UACN) Plc, is the leader in residential real estate development in Nigeria with strong presence in the high end market where it is building sustainable value in classic and premium housing products.

At its 17th Annual General Meeting for the year ended December 31, 2014  in Lagos recently, Larry Ettah, chairman of the company, disclosed that the company posted revenue of N10.08 billion (Group N11.70 billion) as against 2013 revenue of N9.33 billion (Group N11.29 billion), adding that profit before taxation (PBT) was N2.04 billion (Group N3.54 billion) down from N4.38 billion (Group N3.71 billion) in 2013.

For the company, however, outlook for 2015 is not something to cheer about because, according to Ettah, the macro-economic indicators are negative, pointing out that external reserves are down while  headline inflation has increased to 9 percent and the equities market has experienced a free fall with the NSE All Share Index declining by 3.4 percent compared with 2014.

“The naira exchange rate to the dollar has been volatile and worsened by more than 20 percent in the first half of 2015 and the CBN’s interventions have generally been ineffective. Interest rates have remained high with bank lending and mortgage rates as high as 28 percent for certain classes of borrowers”, he said.

The naira has continued to weaken and analysts are predicting a further depreciation in its value, increase in the debt position of the federal government, further decline in oil price and revenue and a spike in inflation rate to 12 percent by year end. The projected GDP growth rate of 5 percent for the year has been revised down to 3.8 percent which may be further hampered by the lingering challenges of insecurity, vandalism, oil theft and shortage of petroleum products.

On account of all of this, it has not been a tea party for this real estate construction giant such that, according to the chairman, the performance of the company has been less than satisfactory which is a reflection of the general macro-economic challenges confronting  the industry.

  “Turnover and profit performance for both the company and its Golden Tulip Hotel fell below last year. The Ebola crisis of 2014, socio-political uncertainties of 2015 and delayed execution of government road works and ancillary infrastructure upgrade in the Festac/Mile 2 vicinity have impacted the hotel business negatively, with annual room occupancy declining from an average of 44 percent in 2013 to 31 percent (January to June 2015), short of projected levels”, he noted.

Ettah’s  expectation, however,  is that the opening of Festival Mall and completion of The Residences (Block B), both sharing premises with the hotel,  will have a positive rub-off impact on the hotel’s performance in future.