Transcentury proposes Rights Issue to boost its turnaround strategy

Transcentury proposes Rights Issue to boost its turnaround strategy

Listed investment firm, Transcentury Plc has proposed to undertake a Rights Issue to raise funds as part of its turnaround strategy.

This as the firm announced that it narrowed its losses in 2019 by 12.9 percent to report a pre-tax loss of Ksh. 3.185 billion down from Ksh. 3.658 billion the previous year.

The firm, which is focused on infrastructure-related businesses, has mainly attributed this to a 34 percent revenue growth to Ksh. 5.7 billion during the year ended December 31, 2019.

The revenue growth has been credited to two of its subsidiaries, Tanelec Limited and AEA Limited, which reported a 56.8 percent and 89.7 percent revenue growth respectively.

Tanelec, headquartered in Arusha, Tanzania, deals in the manufacturing and distribution of transformers in the region while AEA, headquartered in Nairobi, Kenya, provides solutions that enhance infrastructure efficiency and sustainability across the region.

 “The performance in both subsidiaries is underpinned by a robust order book, successful debt re-profiling freeing up operating cash flows and innovative working capital financing accelerating execution.”, said the firm in a statement.

According to the firm, since 2016, Transcentury has reduced 40 percent of commercial debt, increased debt tenure with most tenures falling between 5 to 10 years and reduced debt service cash flow.

At the same time, the company reduced its operating expenses by 19.5 percent in 2019 to Ksh. 1.80 billion.

Commenting on the results, Transcentury Group Chief Executive Officer, Mr. Ng’ang’a Njiinu said, “The aggressive top line growth despite scaling down in some of the businesses, confirms that TC capital re-allocation strategy and focus on key levers in the turnaround plan is bearing fruit.”

“In 2019, we strategically scaled down operations in some of our portfolio businesses whose operating environment was incongruent with TC strategy and not supportive of the turnaround.” He added.

Transcentury’s subsidiaries include East African Cables, Civicon Ltd, AEA Ltd., Tanelec Ltd. and Kewberg cables and braids (based in South Africa).

However, following the company’s decision to restructure non-performing entities, the company suffered a one-off impairment loss of Ksh. 2.8 billion related to goodwill carried in one of the scaled down businesses.

Despite the company’s efforts to restructure its balance sheet, Transcentury’s independent auditors, KPMG have said a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. This is in light of the fact that TransCentury’s current liabilities exceeded current assets by Ksh. 10.1 billion, and its total liabilities exceeded its total assets by Kshs 7.1 billion..

It is against this backdrop that the listed investment firm has announced its intention to raise additional capital through a Rights Issue. The proposed Rights Issue, which is to be discussed during the Group’s upcoming shareholder meeting scheduled for 10th June 2021 will see TransCentury issue five (5) new shares for every one (1) ordinary share held. The amount of money that Transcentury intends to raise through the transaction was not disclosed as the cash call is subject to shareholder and regulatory approval.

TransCentury’s Group CEO, Mr. Ng’ang’a Njiinu has expressed confidence that the company’s turnaround is on course despite the impact of the COVID-19 pandemic on its businesses.

Mr. Njiinu said the pandemic disrupted demand and supply chains globally, resulting in a 21 percent decline in revenue as compared to the same period in 2019.

While commenting on the effects of the pandemic, Njiinu added, “We saw a strong rebound in the second half of the year that will substantially reverse the impact of the pandemic on the first half of the year,”

“Our focus now is on the fundraising pillar as we are comfortable that we have sufficiently prepared the business to receive funding,” added Mr. Njiinu.

Transcentury is however yet to announce its 2020 results due to what it says are “…statutory and legal processes that needed to be accommodated in the audit process.”

Last month, East Africa Cables PLC, which is one of Transcentury’s subsidiaries, indicated that the publication of its results would be delayed due to delayed reporting from its Tanzania subsidiary as well the disruptions occasioned by the COVID-19 pandemic.

The E.A. Cables’ Board and Management pledged to publish the firm’s audited financial statement by June 30, 2021.

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