Seprod Limited shareholders have cleared the way for the company to raise fresh equity, reduce debt and pursue expansion opportunities across the Caribbean, while also approving a five-for-one stock split.
Shareholders approved all three resolutions at Monday’s extraordinary general meeting, increasing Seprod’s authorised share capital from one billion ordinary shares to 1.9 billion and giving directors broad authority to issue new shares. Thereafter the company will increase the authorised shares from five fold in a split to 9.5 billion units.
The shares may be issued through an additional public offer, rights issue, private placement or as consideration for acquisitions.
Chairman P.B. Scott said the expanded capital structure provides additional options as Seprod seeks to strengthen its balance sheet and position for growth.
“We are looking to deleverage the company,” Scott told shareholders. “We’re looking at opportunities that we may well have across the region and in order to do that we can issue shares or we can pay down debt,” he said.
The strategy comes as financing costs continue to absorb a significant portion of Seprod’s operating earnings.
For the six months to June, finance costs were $2.42 billion, compared with operating profit of $5.11 billion. Second-quarter finance costs were $1.26 billion against operating profit of $2.35 billion.
Seprod has nevertheless been reducing its leverage, reporting that strong cash flow allowed the group to repay more than $3 billion of debt during the first half.
Second-quarter revenue declined three per cent to $36.51 billion, reflecting softer demand from Jamaica’s tourism sector, but net profit rose 16 per cent to $688 million. For the half-year, revenue slipped three per cent to $72.93 billion while net profit climbed 62 per cent to $2.34 billion, partly reflecting the gain on the disposal of International Biscuits Limited.
The stock split will convert each issued share into five, taking Seprod’s approximately 910.95 million shares outstanding to about 4.55 billion. The board will determine the record date.
Investors have already bid up Seprod since the proposed changes were announced. The stock closed at $71.50 on September 22 before jumping 11.9 per cent to $80 the following session, when 622,078 shares traded. It remained at $79.99 on October 9, about 12 per cent above the September 22 close.
With shareholder approval secured, Seprod now has the flexibility to decide whether fresh equity should be deployed towards debt reduction, acquisitions or other regional growth opportunities.
neville.graham@gleanerjm.com
