Page 95 - flipbook-ubp-IR

Unlike for FY2021, where the Covid-19 context forced us to defer a major part of our Capex budget, the significant investment in capital expenditure over the past five financial years, as compared to our yearly depreciation charge, confirms our Group’s commitment to increase its production capacity, agility and efficiency in view of meeting market demand, increasing our market share and improving our profitability.
Borrowings, Finance Costs and Gearing Level
Given our increased capital expenditure and investment needs, our total borrowings, including lease liabilities, increased significantly by Rs 805.6 million to Rs 1.8 billion during the year under review. The acquisition of shares in Pre-Mixed Concrete Limited and Drymix Ltd, for a total purchase consideration of Rs 381.8 million, was financed through a new term loan of Rs 325.0 million. In addition, we used up our existing overdraft facilities and increased our renewable short-term banking facilities, via the Money Market Line (MML), to finance our increasing Capex and working capital needs, attributable mainly to an increase in trade receivables and inventories. As a result of the above and given a significant decrease in cash flows generated from operations and an adverse fluctuation in foreign exchange rates, our finance costs increased from Rs 33.9 million for FY2021 to Rs 58.5 million for the year under review. Furthermore, with the drop in equity attributable to shareholders of the parent company, our debt-to-equity ratio increased from 0.29 in previous year to 0.53 at June 30, 2022.
Equity and Total Shareholders’ Return
As mentioned above, the equity attributable to shareholders decreased by 3.2% (Rs 114.3 million) from Rs 3.55 billion in previous year to Rs 3.44 billion this year, given the net loss incurred for the year and the payment of dividends, and this despite re-measurement gains of Rs 72.5 million, net of tax, realised on our defined benefit plans. Dividend per share was maintained at Rs 3.00 per share, while our share price moved from Rs 144.75 at June 30, 2021 to Rs 139.00 at June 30, 2022. Consequently, the total shareholders’ return for the year moved from +14.98% for FY2021 to -1.89% this year while the return on equity dropped from +5.52% to -1.96%.
Cash Flow Status
Cash flows generated from operations decreased from Rs 568.6 million for FY2021 to Rs 135.3 million for the year under review, after adjusting for a significant unfavourable movement in working capital needs, attributable mainly to an increase in inventories resulting from delays in our supply chains. Other significant cash flow movements comprised of the purchase of property, plant and equipment, the purchase of intangible assets, the acquisition of shares in Pre-Mixed Concrete Limited and Drymix Ltd, the repayment of loans and the payment of dividends, which remained stable at Rs 79.5 million for the year under review.
Going Forward
Our future level of activities and performance are dependent upon the recovery pace of our economy and the timely implementation of announced government initiatives aimed at boosting the construction industry going forward. Our future profitability also relies on the containment of our costs.
In reference to the communiqué, dated June 23, 2022, concerning the acquisition of a group of companies operating in a similar line of business of the Company in Réunion Island, a Share Purchase Agreement (SPA) was signed on July 07, 2022. The Transaction is however subject to the satisfactory completion of conditions precedent including all regulatory, corporate and other approvals required by the parties. It will enable the Group to expand its principal activities within the Indian Ocean. At time of writing, we are working on the circular intended for shareholders while devising the best financing plan for this investment.
CORPORATE FINANCIAL GOVERNANCE STATEMENTS
UBP INTEGRATED REPORT 2022 93
OUR PERFORMANCE