Umeme and Bank of Baroda star at USE

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.