News Column

For Julius Berger's Shareholders, It's Time for Dividend, Bonus Issue

May 19, 2014

Julius Berger Nigeria Plc last week held its yearly investors forum in Lagos where the management engaged the leadership of the various shareholders associations on developments within the company in the past one year, with the highlights being the proposal for dividend payment and bonus issue, reports Festus Akanbi.

For shareholders of the construction giant, Julius Berger Nigeria Plc, who are billed to converged on the Shehu Musa Yar'Adua Hall, Abuja venue of the company's 44th annual general meeting (AGM) on Thursday, June 19, it is a harvest time for their last year's investment in the company. This is because one of the highlights of the AGM is the proposal that a dividend of N2.70 (2012:N2.50) per ordinary share should be paid to the shareholders. For formality sake, the dividend issue will be tabled at the annual general meeting for approval along with the deduction of withholding tax at the appropriate rate. The directors of the company are also proposing the capitalisation of N60 million out of the balance standing to the credit of the retained earnings of the company, as at December 31, 2013, which sum shall be applied in paying for a bonus issue of one new ordinary share of 50K each for every 10 ordinary shares now held.

The dividend payment formed part of the issue discussed at an investors' forum in Lagos last week where the management of Julius Berger presented the company's performance figures to the shareholders.

Rise in Turnover The financial summary prepared by the company's managing director, Mr. Wolfgang Goetsch, but which was presented by the financial director, Mr. Wolfgang Kollermann showed that turnover in the year was N212.74 billion, signifying an increase of six per cent when compared with the turnover of N201.57 billion in the prior year. The management explained that the increase in the turnover during the year was as a result of the increased activities in the subsidiaries who are engaged in related and other business lines; thereby signifying the group's strength in diversification. It described the turnover achieved as a remarkable improvement which exceeded the budgeted turnover of N200 billion in the period.

Contracts The shareholders also wanted to know how the company's management is addressing the security challenges in the north on Julius Berger's activities. Kollermann reassured the company's stakeholders that apart from Kaduna, where the company worked on some projects recently, it was not contemplating going to the three troubled states, Yobe, Adamawa and Borno for now for the safety of its employees. He said: "There is no construction activity in Borno, Adamawa and Yobe and we are not looking in that direction for now."

Competition On the challenge posed by the presence of the various Chinese construction companies in Nigeria, the Julius Berger Finance director said there was no cause for alarm, explaining that his company was not in the same segment of construction with these Chinese firms. He said Julius Berger was in the premium segment of the construction industry in Nigeria. According to him, the Chinese are doing something different. He added that Nigeria is a huge market for construction companies.

And responding to the enquiry of a shareholder activist, Mr. Lona Awoh, on the level of payment of contract debts especially by federal and state governments, Kollerman said the company was making progress in its debt recovery.

Profitability The company showed its profitability as it recorded a 31 per cent increase in profit before tax from N12.34 billion to N16.22 billion in the current period as a result of the increase in profitability of the subsidiaries. This, according to Goetsch report, confirms the group's efficient management of investments and assets which the shareholders have entrusted in their custody to generate a reasonable level of profit. The profit margin increased from 6.1 per cent to 7.6 per cent.

According to the presentation, despite the substantial increase in profit before tax, profit after tax slightly increased by two per cent from N8.26 billion in the prior year to N8.43 billion in the current year. "This under proportional increase was as a result of significant increase in deferred taxation in the period due to the huge investment and an additional assessment arising from a tax audit conducted by Federal Inland Revenue Service," the company said, adding that retained earnings increased by 37 per cent to N18.86 billion in the period.

In the same vein, shareholders' fund rose by more than 39 per cent from N15.14 billion to N21.03 billion. It was however pointed out that the figure would be adjusted for the proposed dividend for the period once approved at the Annual General Meeting. The fund had been consistently increasing and indicates that the group's assets are sufficient to repay the liabilities.

Overdraft The company explained that the increase in interest expense from N2.7 billion to N3.0 billion in the year resulted from overdraft facilities which the group had to embark upon due to delay in receipt of payments from clients during the year. A term loan in euro with a low interest rate was obtained from HSBC Bank of London. The loan is to finance procurement of equipment with exporters up to a maximum aggregate amount of E62,720,000. Also, overdrafts increased from N8.21 billion to N15.88 billion due to delayed payment from clients. Repayment to HSBC is said to have commenced in the period under review.

Addressing the various shareholders associations at the forum, the company's financial director explained that the company recorded an increase in its taxation which resulted from the deferred tax charge of N2.21 billion (because of the significant investment in property, plant and equipment) and an additional tax assessment of N863 million arising from an audit conducted by the Federal Inland Revenue Service.

Subsidiaries Today, subsidiaries of Julius Berger Nigeria Plc include Abumet Nigeria Limited, which deals in the manufacturing and fabrication of aluminium and glass related product; Julius Berger Services Nigeria Limited - Stevedoring and port management services; PrimeTech Design and Engineering Limited - Engineering and design of civil works and products; Julius Berger Medical Services Limited - Providing health care and medical services; Julius Berger Investments Limited: Investment portfolio managers and Julius Berger International GmbH: Provision of logistical and technical support.

Kollerman disclosed that the "ownership structure of investments in the company's subsidiaries remains the same except for an additional interest of 20 per cent acquired in Abumet increasing the company stake to 90 per cent. More so, the capital base of Julius Berger Medical Services was increased to N500 million, PrimeTech Design & Engineering Limited to N200 million and Julius Berger Investment Limited to N130 million. A total sum of N820 million was used to increase investment in subsidiaries.

Another interesting issue to the shareholders is the provision for doubtful debts, which increased by only 23 per cent in the year. The financial director explained that margin signified the ageing of existing debts further considered as doubtful, adding that management is however proactive in the recovery of payments, especially debts that are overdue. "An age analysis of debtors is carried out by management on a periodic basis and efforts are geared towards recovery of all existing debts in addition to a prudent selection of clients or contracts to be executed based on the liquidity analysis of the existing and prospective customers.

Shareholders were told that the company advances, which represent advance receipts from clients for various contracts including contracts entered into in prior periods, amounted to N107.9 billion during the period. Kollerman explained that the major client from whom the company had advances as at December 31, 2013 are Federal Capital Development Authority, Bayelsa, Lagos and Akwa Ibom states.

Meanwhile, cash receipts from customers recorded a significant decrease of 26 per cent from the prior year figure to N167 billion. Consequently, cash paid to suppliers and employees decreased in a proportionate ratio by 22 per cent to N150 billion against N192 billion in the 2012 financial year. The development naturally pushed down the cost of sales margin by two per cent while the expenses to sale ratio slightly decreased by one per cent.

Investment in Equipment Also during the period, the group invested the sum of N22.9 billion in equipment in the period against the sum of N15.1 billion in 2012. There had been no deviation from the budgeted amount on fixed asset investment in the period. Julius Berger also received an inflow from the sale of the Federal Government bond issued in 2012, thereby generating N4.1 billion.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: AllAfrica