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Umeme Issues A Profit Warning On The Back Of Amortization Cost Inbox

BY Standard Investment Bank · January 17, 2024 05:01 pm

KEY POINTS

Safaricom followed closely at 44.1% of the day’s turnover. In line with our expectation, the counter turned green gaining 0.7% to KES 14.00 – following a three-session build of support levels at KES 13.90.

StanChart gained 2.5% to KES 161.25 while KCB Group shed 1.6% to KES 21.15. I&M remained unchanged at KES 17.50.

The market remained mixed for the fourth session with the NASI gaining 0.2% while the N10 and NSE 25 shed 0.2% each. The NSE 20, on the other hand, was down 0.6% on the day.

Equity turnover edged upward by 41.1% to USD 1.1m with foreign investors dominating market activity at participation levels of 64.2% up from 40.6% in the prior session.

Equity Group was the day’s top mover, accounting for 46.8% of the activity levels. The price remained unchanged at KES 36.00.

Safaricom followed closely at 44.1% of the day’s turnover. In line with our expectation, the counter turned green gaining 0.7% to KES 14.00 – following a three-session build of support levels at KES 13.90.

StanChart gained 2.5% to KES 161.25 while KCB Group shed 1.6% to KES 21.15. I&M remained unchanged at KES 17.50.

Read Also: How To Get A Stock Loan Of Up To Ksh 6 Million From NCBA

Kenya Power, was a surprise top mover, on a KES 1.1m turnover print. The stock shed 4.3% to KES 1.35 – closing as the worst-performing top mover.

NBV was the day’s top gainer on a 9.3% rally to KES 2.36 while Car and General shed 9.1% to KES 25.00 – closing as the leading laggard.

Foreign investors turned net buyers with net inflows of USD 84.4K. Safaricom led the buying charge while I&M led the selling charge.

In line with the Capital Markets (Securities) (Public Offers, Listing, and Disclosures) Regulations – which requires all listed firms to notify shareholders and the general public when anticipating a decline of 25% or more in their profit before tax – the board of directors of Umeme has issued a profit warning for the financial year ending 31st December 2023.

The projected reduction in earnings is attributable to the increased amortization charge for the year. The company has aligned the amortization of its non-current assets to the remaining duration of its electricity distribution concession in compliance with the IFRS standards. The natural term of the concession is coming to an end in March 2025 as the Ugandan government plans to set up its own power distribution company, Uganda National Electricity Co.

As of the six months ended 30th June 2023, the company reported profits of Ushs 13.2Bn down from Ushs 64.4Bn in a similar period in 2022. This was largely on the back of a Ushs 210Bn amortization charge. Topline however remained strong (+19.9%y/y) signaling a likely growth in electricity demand, new customer connections, a reduction in energy losses, and strong cash collection. Management notified that shy of amortization, operating profits are expected to print higher in 2023 compared to 2022 and that the dividend policy remains unchanged.

Read Also: Safaricom Top Traded Stock, Stanbic Top Gainer As Markets Exhibit Mixed Notes

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