Umeme, chaired by Patrick Bitature, sees shareholder equity drop by 14.4 percent

Oluwatosin Racheal Alabi -

Key Points

  • Umeme Limited chaired by Patrick Bitature reports a 14.4-percent drop in shareholder equity as its concession end date approaches.”
  • Umeme faces financial challenges, including a rise in amortization and a significant tax increase.”
  • Umeme prepares for a smooth transition of assets back to the Ugandan government before concession ends.

Uganda’s leading electricity distributor Umeme Limited chaired by Patrick Bitature reported a 14.4-percent decline in shareholder equity for the first half of 2024.

As of June 30, 2024, shareholder equity had dropped to USh803 billion ($216 million), down from USh937 billion ($252 million) at the end of 2023. This decline is primarily due to financial challenges as the company approaches the end of its 20-year concession, set to expire on March 30, 2025.

Factors behind the decline

The drop in equity is largely attributed to low profit after tax, which remained unchanged at USh13 billion ($3.5 million). Despite maintaining profitability, Umeme faced accelerated amortization of intangible assets. This increase in amortization, mandated by International Financial Reporting Standards (IFRS), saw the amortization charge rise from USh210 billion ($56 million) in 2023 to USh238 billion ($64 million) in the first half of 2024.

The increased amortization reduced Umeme’s total assets, which fell from USh2,347 billion ($656 million) in December 2023 to USh2,243 billion ($693 million) by June 2024. A decrease in capital investments further contributed to this asset decline.

Financial adjustments and tax challenges

Umeme managed to reduce its finance costs by 36.2 percent, dropping to USh16 billion ($4 billion) after repaying all term loans in December 2023.

However, these gains were offset by a rise in the income tax charge, which increased to USh11 billion ($3 million) from USh3.5 billion ($941,824) in the same period in 2023. The higher tax liability was driven by performance on profit before tax.

The company’s net operating cash flow also fell sharply, decreasing from USh221 billion ($59 million) in 2023 to USh112 billion ($30 million) in the first half of 2024. This decrease was due to reduced payables and delays in government payments.

Preparing for concession expiry

As Umeme’s concession nears its end, Chairman Patrick Bitature emphasized the need for a smooth transition of assets back to the Ugandan government. Bitature reassured stakeholders that Umeme is committed to ensuring a seamless re-transfer process while protecting the interests of customers, staff, and shareholders.

The coming months will be major for Umeme as it navigates the final stages of its concession.

The company’s ability to manage these challenges will be key to protecting shareholder value and ensuring a stable transition from the Ugandan electricity distribution sector.