Manufacturing subsidiaries behind TransCentury’s improved revenues

East African Cables, AEA Ltd, and Tanzanian subsidiary Tanalec, are the key drivers of TransCentury Plc’s turnaround.

The regional infrastructure investment firm reported an improved financial position in its published H1 2021 results, which saw a 47 percent reduction in its net losses to Ksh764.3 million.

The reduction was a direct result of a Ksh536 million jump in revenue to Ksh2.54 billion, mainly driven by revenue from its trading arms, AEA Ltd and Tanalec Tanzania. This is a significant improvement from the previously reported performance and a clear indication that the company's turnaround strategy is delivering results.

East African Cables, one of TransCentury’s most known subsidiaries, also contributed to the company’s positive performance. The company reported a 55 percent growth in revenue in its half-year trading results, which is a validation of TransCentury’s turnaround strategy. East African Cables has been able to grow its distribution channels through accredited dealers throughout the region, leading to increased sales and revenue. The strategy has helped to increase the firm’s local and export sales, resulting in a turnover of over Ksh2.3 billion, representing a 29 percent growth compared to the same period last year.

According to TransCentury CEO Ngángá Njiinu, the company's engineering subsidiary is also registering positive results, indicating that the overall business is doing well. With the positive performance of the company, TransCentury is now able to sustain a fundable order book of more than one time its annual revenue.

TransCentury, which is currently raising additional funds in the market through a rights issue, has been implementing a turnaround strategy to return the company to profitability. Njiinu, says the company has decreased its debts by over 40 percent and has established strong relationships with key stakeholders and markets throughout Africa, for infrastructure development. “We have achieved this through a combination of cost-cutting measures and strategic partnerships with key players in the industry,” he explains.

The strategy identified four key areas of focus: Debt reprofiling, delivering robust commercial opportunities, creative fundraising, and execution of order book. This plan has led to the reduction of TransCentury’s debt by $55 million, and the restructuring of the $52 million debt.

The Group has also undergone an organisational redesign, including strengthening the corporate governance structures and streamlining the business systems and controls in line with its current strategic direction.

The rights issue, which began trading on December 29, 2022, is expected to close on January 23, 2023. It targets raising Ksh2.063 billion, which will be applied towards recapitalising the business, reducing debt, and unlocking working capital for the underlying businesses. This will help the company to continue to grow and expand its operations, leading to even more positive financial performances in the future.

The shares are trading at a discounted price of Ksh1.10 per unit, and they are being issued on the basis of five new ordinary shares for every existing share. This type of issue gives existing shareholders the right to purchase additional shares at a prescribed price on a stated future date. The additional shares are usually sold by the company at a discount to the market price.

It is important to note that legally, a rights issue must first be offered to existing shareholders before being issued to non-shareholders. This is because existing shareholders have the “right of first refusal”, also known as “preemptive rights”, on the new shares. By taking these preemptive rights up, existing shareholders can maintain their current percentage holding in the company.

Overall, TransCentury’s turnaround strategy has been a success, resulting in a significant reduction in net losses and an increase in revenue.