Otedola’s Geregu Power reports 58% surge in net profit

Femi Otedola’s Geregu Power recorded roughly a three-fifth jump in bottom-line to N16.1 billion for last year after notable improvement in key revenue sources, the power generating company said Tuesday in its audited earnings report.

Shares in the company appreciated 4.6 per cent in Lagos after the news hit the market, making it the second-best-performing stock of the day.

The second publicly issued audited account of the company, which was listed on the Nigerian Exchange in October 2022, showed revenue at N82.9 billion, 74.1 per cent higher than the figure posted a year ago.

The driver of growth was increased income from energy sold even though the cash earned from capacity charge contributed to turnover almost at the same rate.

Cost of sales accelerated by 71 per cent to N38.1 billion, at the mercy of Nigeria’s elevated price levels, which touched their peak in nearly three decades in the last month of the year, driving up the company’s spending on logistics significantly.

The company is controlled by billionaire magnate Femi Otedola, who returned this month to the Forbes Africa Billionaire Index after falling off the list about seven years ago. His return owed its debt to the sharp rise in the valuation of Geregu Power, whose shares have returned 264 per cent in 52 weeks.

Geregu Power spent N6.4 billion to overhaul plants and machinery during the year. That component alone accounted for nearly half of administrative expenses.

Pre-tax profit stood at N24.4 billion, advancing by 60.8 per cent, while after-tax profit rose to N16.1 billion from N10.2 billion one year prior.

The company plans to pay shareholders N8 per share as a dividend, which will take its payout to N20 billion for the year.

That will earn Mr Otedola N15.9 billion in cash reward, considering the 78.6 per cent stake he holds in the company.

ALSO READ: Otedola’s Geregu Power reports 13% jump in nine-month profit amid soaring impairment loss

Yet, the dividend proposal continues the worrisome tradition of using more than the net profit of the company to pay dividends to shareholders, forcing the company to dip into its retained earnings to make up for the payment.

The move calls to question the prudence of the board which, in the penultimate year, declared N21 billion as a dividend when net profit was only N10.2 billion.

If the trend continues, it may strain the amount of cash reinvested into the company from the previous year, straining the capital inflow into the company’s operations.

Already, the balance sheet showed that total equity fell to N45.2 billion from N49.1 billion, with lower retained earnings being the driving factor.

Femi Otedola’s Geregu Power recorded roughly a three-fifth jump in bottom-line to N16.1 billion for last year after notable improvement in key revenue sources, the power generating company said Tuesday in its audited earnings report.

Shares in the company appreciated 4.6 per cent in Lagos after the news hit the market, making it the second-best-performing stock of the day.

The second publicly issued audited account of the company, which was listed on the Nigerian Exchange in October 2022, showed revenue at N82.9 billion, 74.1 per cent higher than the figure posted a year ago.

The driver of growth was increased income from energy sold even though the cash earned from capacity charge contributed to turnover almost at the same rate.

Cost of sales accelerated by 71 per cent to N38.1 billion, at the mercy of Nigeria’s elevated price levels, which touched their peak in nearly three decades in the last month of the year, driving up the company’s spending on logistics significantly.

The company is controlled by billionaire magnate Femi Otedola, who returned this month to the Forbes Africa Billionaire Index after falling off the list about seven years ago. His return owed its debt to the sharp rise in the valuation of Geregu Power, whose shares have returned 264 per cent in 52 weeks.

Geregu Power spent N6.4 billion to overhaul plants and machinery during the year. That component alone accounted for nearly half of administrative expenses.

Pre-tax profit stood at N24.4 billion, advancing by 60.8 per cent, while after-tax profit rose to N16.1 billion from N10.2 billion one year prior.

The company plans to pay shareholders N8 per share as a dividend, which will take its payout to N20 billion for the year.

That will earn Mr Otedola N15.9 billion in cash reward, considering the 78.6 per cent stake he holds in the company.

ALSO READ: Otedola’s Geregu Power reports 13% jump in nine-month profit amid soaring impairment loss

Yet, the dividend proposal continues the worrisome tradition of using more than the net profit of the company to pay dividends to shareholders, forcing the company to dip into its retained earnings to make up for the payment.

The move calls to question the prudence of the board which, in the penultimate year, declared N21 billion as a dividend when net profit was only N10.2 billion.

If the trend continues, it may strain the amount of cash reinvested into the company from the previous year, straining the capital inflow into the company’s operations.

Already, the balance sheet showed that total equity fell to N45.2 billion from N49.1 billion, with lower retained earnings being the driving factor.