Having consistently increased revenue for the 5-year period by 51 percent from N6.6 billion in 2015 to N10.0 billion in full year (FY) 2019, Red Star Express Group Plc, Nigeria’s leading logistics provider, was at the stock market to raise fresh capital to the tune of N1.35 billion by way of Rights Issue to existing shareholders.
The offer, which opened on Monday 11th November 2019, is aimed to issue 336,855,291 ordinary shares of 50 Kobo each at N4 on the basis of four new ordinary shares for every seven shares held as at August 21, 2019.
The purpose of this exercise is to raise additional capital to finance the expansion of the company’s current operations, the deployment of modern technology and improvement of its working capital.
Speaking during the facts behind the figures at the Nigeria Stock Exchange (NSE) on Thursday, Sola Obabori, group managing director, said the expected net issue proceeds of N1,309,936,278 will be applied to developing warehouse facilities along Lagos-Ibadan Expressway and at Murtala Muhammed International Airport Cargo Terminal, purchase of trucks, group ICT Improvement/Enterprise Resource Planning Solution, and working capital.
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He disclosed that the additional capital is to accentuate the growth potentials already put in place by the company’s management.
“This move underlines our ambition to maintain the expansion activities undertaken in the last few years. After opening international offices in Niger Republic, Burkina Faso and Benin Republic, we have established new business lines in the Agricultural and Technological sectors of the economy. This Right Issue represents the next logical step in this regard,” he stated.
“We have a promise to keep towards our shareholders; which is to continue providing superior returns on their investment in our business. With this additional capital, we will be able to ensure considerable growth of the company; making it more profitable and in a position to continue fulfilling that promise (of providing superior returns),” he said.
FBN Quest Merchant Bank Limited is the lead issuing house for the Rights Issue while Meristem Capital Limited is involved as the joint issuing house.
The subsidiaries contribution has been hovering between 42 percent – 48 percent during the periods under review.
As a percentage of revenue, the Group has consistently maintained a Profit Before Tax (PBT) margin between 7.3 percent and 9.2 percent with Profit After Tax (PAT) margin ranging from 4.1 percent and 6.3 percent in the last 5 years which is above industry average of 4 – 5 percent.
The PAT margin increased on a year-on-year (YOY) from 4.1 percent in FY 2018 to 4.6 percent in FY 2019, while PBT increased YOY from 7.3 percent in FY 2018 to 7.4 percent in FY 2019: which is as a result of several cost savings initiatives being implemented with the hope of more positive impact in the future years.
The Group has successfully maintained an upward trend in dividend payment over the last 5 years, with the highest record of 43kobo in FY2019. The Earnings Per Share recorded its highest of 79kobo in FY 2019 over the 5-year period, which is 34 percent above 59kobo recorded in FY2018