C&I Leasing Plc has issued a N10 billion Series 5 commercial paper (CP) under its N50 billion issuance programme, registered with the FMDQ in 2022.
This comes as part of the company’s continued efforts to optimize its working capital and refinance high-interest short-term borrowings.
The offer opened on March 10, 2025, and closed on March 14, 2025.
Key details of the issuance
- Issue price: N1,000
- Tenor: 269 days
- Funding date: March 17, 2025
- Maturity date: December 11, 2025
- Minimum subscription: N5 million and multiples of N1,000 thereafter
- Target investors: Qualified Institutional Investors (QIIs)
- Source of repayment: Operating cash flows
- Implied yield: 27%
- Discount rate: 22.519%
- Issuer rating: “A3” by GCR, “Bbb-” by Agusto & Co
Financial performance and debt position
C&I Leasing’s financials show strong revenue growth but shrinking profitability:
- Big revenue growth: The company made N37 billion in 2024, up 75% from the previous year. Most of this (85%) came from leasing income.
- But costs are rising fast:
- Lease expenses (the cost of leasing out assets) jumped 55%
- Finance costs (the cost of borrowing money) surged 64%
- Operating expenses (including salaries and equipment wear-and-tear) skyrocketed 112%
Why does this matter?
Even though C&I Leasing is making more money, it is also spending a lot more, which is squeezing profits. As a result:
- Pre-tax profit stood at N2.278 billion, a small profit compared to revenue.
- Pre-tax margin fell to just 6% meaning for every N100 earned, only N6 remains before tax.
- Return on assets (ROA) improved slightly to 2%, showing that assets are generating some profit, but not much.
- Return on equity (ROE) rose to 4.96%, which is still far below Nigeria’s 24.4% inflation rate, meaning investors’ real returns are deeply negative.
Balance sheet & FX translation impact
C&I Leasing’s total assets grew by 44%, but this was in part due to foreign currency translation gains. The depreciation of the naira inflated the value of its offshore subsidiaries, boosting the foreign currency translation reserve by 84% to N29 billion.
While this strengthened equity and reduced leverage, it did not translate to actual cash flow improvements.
C&I Leasing’s total assets surged by 44%, largely due to foreign currency translation effects from its offshore subsidiaries.
On the debt side:
- Commercial paper outstanding declined sharply from N19.7 billion to N7.169 billion as the company repaid N12.5 billion, a strong signal of its commitment to meeting short-term obligations.
- Total borrowings, however, surged by 21% to N44.976 billion, meaning the company remains leveraged despite lowering short-term debt.
- Operating cash flow dropped significantly from N14.5 billion to just N732 million, largely due to the heavy commercial paper repayment from core operations.
Takeaways for shareholders and stock investors
Although C&I Leasing’s N10 billion commercial paper (CP) issuance primarily targets institutional investors, it also has direct and indirect implications for shareholders and retail stock investors.
By raising funds through debt (CP) rather than issuing new shares, C&I Leasing avoids equity dilution, meaning existing shareholders maintain their ownership stake. This is positive for stock investors, as it prevents earnings per share (EPS) from being diluted.
Impact on dividend and bonus shares
In 2023, C&I Leasing paid a final cash dividend of 5 kobo per share and issued a bonus of 2 shares for every 3 shares held. This suggests that management prioritized rewarding shareholders despite financial pressures.
C&I Leasing has a strong repayment record on previous CPs. More so, the CP issuance provides much-needed cash flow to sustain operations and possibly refinance existing obligations.
However, the increasing debt load could pressure future earnings, potentially limiting dividend payments.
In the 2024 financial year, finance costs grew by 64% YoY to N10.427 billion, driven largely by finance lease interest.
Although commercial note interest declined by 39%, contributing 15% of the finance cost, the repayment affected the net cash flow from investing activities.
While net profit margin contracted to 1.96%, net cash flow from operating activities declined to N752 million from N14.505 billion in 2023.
This could potentially impact dividend payments for the 2024 financial year.
Stock price volatility and recovery prospects
CP issuance impact: Raising N10 billion without issuing new shares prevents dilution, which is positive for stockholders.
However, if profitability does not improve, it may limit the company’s ability to generate strong returns on equity (ROE), which is currently low at 1.59%.
The stock fell 33% YtD in 2024 after gaining 75% in 2023 but has rebounded by 5.84% YtD as investor confidence slowly returns.
