Ellah Lakes Plc, an agricultural company listed on the Nigerian Exchange, has reported zero revenue for the second consecutive year.
The struggling company disclosed a net loss of N893.9 million for the year ending July 2024, underscoring the financial challenges it faces despite ambitious plans for growth.
Meanwhile, one of its majority stakeholders, CBO Capital announced the sale of 81 million shares in the company.
CBO Capital offloads 81 million shares
In a recent disclosure seen by Nairametrics, CBO Capital, one of Ellah Lakes’ largest shareholders, announced the sale of approximately 81 million shares.
The shares were sold in two tranches: 79 million shares at N3.67 per share and another 1.4 million shares at N3.75 per share.
While the identity of the buyer remains unclear, this divestment aligns with CBO Capital’s earlier statement in July, where it signaled intentions to transfer some of its holdings to its shareholders and creditors to meet obligations.
“We are pleased to announce that CBO Capital Partners Limited (“CBO”), a major shareholder of Ellah Lakes Plc, is transferring a portion of its Ellah Lakes shares to its shareholders and creditors in a cross deal,” the July statement read. “This trade move is aimed at offsetting CBO’s outstanding obligations to CBO Shareholders while simultaneously fulfilling Nigerian Exchange Limited’s (NGX) requirements on the free-floating of Ellah Lakes shares.”
This strategic divestment is part of CBO’s efforts to improve liquidity in Ellah Lakes’ shares while satisfying regulatory standards. By reducing its stake, CBO appears to be both addressing financial obligations and enhancing the free float of Ellah Lakes’ shares on the NGX, a move that could attract new investors seeking liquidity.
Ellah Lakes’ recent filing further reveals a marked shift in its shareholding structure. Following CBO Capital’s sale, its stake in the company has dropped from 28.2% in 2023 to 8.1% in 2024, leaving CBO with approximately 225.3 million shares.
The company has a total outstanding share count of 2.75 billion, with nine substantial shareholders controlling nearly 69% of the company’s equity.
Revenue challenges and rising expenses
The company’s financial performance continues to reflect significant operational difficulties.
- For the year under review, Ellah Lakes declared zero revenue, mirroring its 2023 result. Despite the lack of income, the company reported a substantial personnel expense of N591.4 million and an administrative expense of N297.7 million.
- Interest expenses on bank loans added another N147 million to its cost profile.
- The company’s debt obligations are also a cause for concern. Ellah Lakes has a substantial outstanding loan balance of N658 million with the Central Bank of Nigeria (CBN) and First City Monument Bank (FCMB), part of a N940 million loan under the CBN’s Oil Palm Plantation Development Programme.
- This loan was initially offered at a concessionary rate of 5% for the first year, rising to 9% thereafter, which adds financial pressure amid the company’s revenue.
Plans for capital injection
As it battles financial woes, Ellah Lakes has been exploring options to bolster its capital base.
- In March 2024, the company’s Board of Directors approved the process of raising funds through private placement and subsequently notified the Securities and Exchange Commission (SEC) of an impending investment from a core investor.
- This capital injection is expected to shore up the company’s liquidity position, although the transaction is still subject to regulatory approvals.
- This anticipated investment is seen as a crucial lifeline for Ellah Lakes, which has struggled to generate revenue despite a high-cost structure and rising debt obligations.
- The company has yet to provide further details on the identity of the investor or the exact terms of the deal, but the announcement highlights a strategic pivot towards attracting capital that could stabilize its operations.
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