KUALA LUMPUR (April 28): Eco World International Bhd (EWI) is proposing to reduce its share capital by RM1.5 billion to eliminate the group's accumulated losses, which stood at RM144.45 million as of Oct 31, 2022 (FY2022), with the balance RM900 million to be credited to the group's retained earnings.
In a statement, EWI said the proposed exercise is based on the group's intention to distribute its estimated excess cash of up to RM900 million in 2023 to shareholders — after setting aside funds for working capital and funding necessary to meet its sales targets — and to provide additional headroom for further declaration of dividends by the group in the future from the sales of its remaining properties in the UK.
The group had in December last year communicated its intention to reward shareholders with a special RM900 million distribution by the end of 2023, following the release of its FY2022 results.
On completion of the proposed capital reduction, EWI will declare the first tranche of dividend that would amount to at least RM300 million of the targeted RM900 million.
“The proposed capital reduction is a concrete first step towards the realisation of EWI’s commitment to meet our targeted distribution of RM900 million to our shareholders, as earlier announced. With cash balances of RM910 million as at Jan 31, 2023, EWI has RM446 million of net cash after setting aside funds to repay the Medium Term Notes (MTNs) due in April and May 2023. As such, the board believes we are well placed to make a first tranche dividend distribution of at least RM300 million to shareholders following the completion of the proposed capital reduction,” said EWI president and chief executive officer Datuk Teow Leong Seng.
Teow said the capital reduction will only be implemented after full settlement of the MTNs on May 24. "Following this settlement, we will have no more borrowings or gearing. As such, our lenders and bondholders will not be affected by this exercise,” Teow added.
The corporate exercise, which is expected to be completed by the second half of this year, requires shareholders’ approval at an upcoming extraordinary general meeting, the date for which will be announced in due course, said EWI.
EWI posted a net loss of RM234.42 million for FY2022 compared with RM13.57 million net profit in the previous year, as revenue dropped to RM156.96 million from RM572.71 million in FY2021. Its total borrowings stood at RM482.82 million with gearing at 0.20 times.
Of its accumulated losses, they were mainly due to prolonged construction in Kew Bridge and Millbrook Park in the UK due to the Covid-19 pandemic lockdown, which resulted in higher costs and impacted EWI’s profit margin.
Also contributing to the losses was an impairment of its investment in Eco World Ballymore Holding Company Ltd and the latter's subsidiaries, following an increase in discount rates applied in determining the recoverable amount of EWI’s investments in them, and the higher yield for valuation of commercial properties.
On Friday (April 28), EWI’s share price rose 2.78% to close at 56 sen, giving the group a market capitalisation of RM1.33 billion. The stock has risen 38.75% year-to-date.