TransCentury in Sh1.3bn record profit after debt pardon

A worker at East African Cables manufacturing plant in Industrial Area. The Kenyan subsidiary recorded a double digit growth in revenue in the review period. PHOTO | DIANA NGILA 

By VICTOR JUMA, vjuma@ke.nationmedia.com

In Summary

• TransCentury made a net profit of Sh1.3 billion in the period, higher than its previous peak full year Sh1.1 billion profit in 2007.
• This reversed the net loss of Sh676.1 million in the same period last year, with the debt reduction offsetting lower sales.

A Sh4 billion debt forgiveness propelled TransCentury to a record net profit in the half year ended June, reversing the investment firm’s losses.

The company made a net profit of Sh1.3 billion in the period, higher than its previous peak full year Sh1.1 billion profit in 2007.

This reversed the net loss of Sh676.1 million in the same period last year, with the debt reduction offsetting lower sales.

“The group’s earnings were positively impacted by … the recognition of write back on convertible bond following the successful resolution in March,” TransCentury said in a statement.

The company’s bond holders reduced their claim from Sh8 billion to Sh4 billion, lightening its liabilities.

TransCentury said it further benefited from foreign exchange gains and lower interest expenses, with the savings making up for a 25 per cent drop in turnover to Sh4.1 billion.

The firm recently moved to reduce its finance costs by proposing a transfer of over Sh15 billion of its existing loans from various financiers to Cairo-based Africa Export-Import Bank (Afreximbank).

The company is projecting improved performance in the second half of the year, citing higher demand for its power and engineering subsidiaries.

Its subsidiary East African Cables narrowed its net losses to Sh31.4 million in the half year ended June compared to Sh70.9 million the year before amid a surge in costs.

The cables manufacturer’s performance was weighed down by its Tanzanian unit, with the Kenyan operation recording a double digit growth in revenue and net earnings.

The company said it benefited from increased spending by Kenya Power to connect more customers to the national grid.

TransCentury continues to implement a plan to pay off the convertible bond it took in 2011.

It is set to receive $20 million (Sh2 billion) capital injection from private equity (PE) firm Kuramo Capital to pay half of the outstanding debt.

The New York-based fund will in return get a 25 per cent stake in the Nairobi Securities Exchange-listed firm, diluting existing shareholders by a similar margin.

READ: Entry of PE Kuramo to dilute TransCentury owners' stake by 25pc

The remaining Sh2 billion, which is due next month, is to be paid from new sources of funding or packaged into a new medium term loan.

A section of the bondholders were also allotted 5.7 million shares in TransCentury, booking a 95 per cent loss in the convoluted settlement plan.

The proposed entry of Kuramo will see the PE fund acquire TransCentury’s shares at a large premium on the current market price of Sh5.5 on the Nairobi bourse, indicating its confidence about the firm’s future prospects.

The dilution will see the combined stake of TransCentury’s top ten founder shareholders drop to 35 per cent from the current 46.8 per cent as Kuramo becomes the single largest investor in the company.