Cross-listed Ugandan electricity distributor Umeme (NSE:UMME, USE:UMEM) has raised its dividend by 22.4 percent as the company enters the final year of a 20-year concession from the Uganda government.
The company on Monday announced a USh54.20 (Sh1.84) final dividend for the year ending December 2023, which together with the interim dividend of Ush24 (Sh0.82) paid last month raises its payout for the year to Sh2.66 per share.
It paid a total dividend of USh63.90 (Sh2.17) per share in 2022.
Umeme raised its dividend despite net profit dropping by 92 percent to Sh408.2 million on account of an amortisation charge of Sh15 billion (USh442 billion) to meet accounting standards on aligning the value of assets to their remaining useful life.
“As the natural term of the concession is coming to its end in March 2025, the International Financial Reporting Standards (IFRS) require alignment of the amortisation of underlying fixed assets to the shorter of the remaining contract duration or the underlying useful life of the assets that generate economic benefits to the company,” said Umeme.
“Consequently, the amortisation and impairment charge for the year increased significantly to USh442 billion compared to USh160 billion in 2022.”
Given that the amortisation does not represent actual cost or outflow, the company was able to raise the dividend to reflect the higher operating profit before the amortisation charge.
The firm’s operating profit before amortisation, impairment, interest and tax was up by 21 percent to Sh16.48 billion, while the total dividend payout stands at Sh4.32 billion.
The company’s revenue rose by 16.4 percent to Sh74.7 billion in 2023 while the cost of sales rose by 15.5 percent to Sh49.3 billion.
The assets and operations of Umeme will be handed back to the Ugandan government after the expiry of the concession in March 2025, with private shareholders, including International Finance Corporation, getting compensated at the value of net assets plus a premium of five percent.
Amortisation and corporate transfers have, however, been reducing the present value of the assets progressively as it winds down towards the handover to the State.
Umeme, which is cross-listed on the Nairobi Securities Exchange (NSE) since December 2012, has the highest returns in the market based on dividend yield.
