Turnall losses to widen

HARARE - Embattled construction firm Turnall Holdings (Turnall) is likely to report a full-year loss of $7 million after parent company FBC Holdings’ (FBCH) shareholders unanimously voted to divest from the firm.

Herbert Nkala, FBCH chairman last week said the company, which recently parted ways with its managing director John Jere, is expected to turn the corner by end of next year.

“Projections to year end indicate that Turnall will most likely double its half year loss as new management restructures the business,” he said.

“We anticipate, however that the business will be back in the black in the following year that is 2015,” Nkala told shareholders at an extra ordinary general meeting (EGM) on Friday.

This comes as Turnall posted a before tax loss of $3,5 million for the six months to June 2014.

FBCH shareholders resolved to part away with Turnall after a Reserve Bank of Zimbabwe (RBZ) directive to the financial services group to cease its investment in non-banking activities.

The plan to divest from Turnall will be done by way of a dividend in specie to FBCH shareholders.

FBC Bank, the flagship unit of the financial services group, in 2010 acquired a 58,32 percent equity investment in Turnall through realisation of pledged security on a non-performing loan.

After a series of restructuring of the group, the bank eventually held 10,42 percent shareholding of Turnall with the remainder being held by the parent company FBCH.

Nkala said the balance of Turnall’s shares would not be made available for distribution but would finance the $754 000 cost the transaction.

He said the divestment of FBCH from Turnall would reduce and also create additional income arising from a loan yet to be serviced by the building materials manufacturer.

“Turnall currently has an outstanding loan balance of $2 050 719 expiring in July 2016. The loan is considered an insider loan because the loan is due for a related entity. Accordingly, the loan is deducted from the regulatory capital of FBC Bank,” Nkala said.

“However, upon the successful execution of the dividend in specie, the loan will no longer be classified as an insider loan and this will have a positive effect on the bank’s capital adequacy and capacity to underwrite more business.”

Nkala noted that the transaction will not have a significant impact in terms of net asset value (NAV).

The NAV prior to transaction as at June 30, 2014 is 0,15 cents while it will slightly go down to 0,13 cents post the transaction. The current market price of FBCH which has averaged 11,5 cents over the last 12 months does not equate to the NAV with or without Turnall,” he said.

He added that the impact of the transaction on the group will be to reduce profitability for the year $6,8 million.

“The group will, however, remain profitable. It is important to mention that this once-off-transaction will result in the spinning-off of non-core activity and the consequent presentation of a clean financial services focused group,” Nkala said.

 

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