Happy Ltd has a complex capital structure. The following information relates to the company for the year
Question:
Happy Ltd has a complex capital structure. The following information relates to the company for the year ended 31st May 2021.
The net profit for the company for the year ended 31st May 2021 and which is attributable to preference and ordinary shareholders of the company was sh. 146million. Of this amount, the net profit attributable to the operations which have since been discontinued was sh. 33million.
The ordinary shares of sh10 par value in issue at 1st June 2020 totaled to sh. 60million. On 1st September 2020 ordinary shares of sh 10 par value were issued at market price for a sum of sh 12million.
The average market price per share of the company for the year ended 31st May 2021 was sh100 and the closing market price of the share was sh110.
On 1st January 2021, 300,000 orinary shares of sh 10 par value were issued at a price of sh 80 per share. Sh 40 of this price was payable on 1st January 2021 and sh 40 payable on 1st January 2022. Dividend participation of the issued shares is at 50% until they are fully paid.
Convertible debentures of sh200million at an interest rate of 5% per annum had been issued at par on 1st April 2020. Half a year’s interest payable on 30th September and 31st March each year. Each sh1,000 of the debenture is convertible at the holder’s option into 300 ordinary shares at any time. Sh 50Million of debentures was converted on 1st April 2021 when the market price of the share was sh 105 per share.
Sh. 10million of convertible preference shares of sh 10 each had been issued in the year ended 31st May 2018. Dividends on these shares are paid half yearly on 30th September and 31st May at the rate of 6% per annum. The preference shares are convertible into ordinary shares at the option of the preference shareholder on the basis of two preference shares for one ordinary share fully paid. On 1st December 2020, holders of sh 6million preference shares converted them into ordinary shares.
Warrants to buy 6 million ordinary shares at sh. 6.60 per share were issued on 1st January 2021. The warrants expire in five years’ time. All warrants were exercised on 30Th June 2021.
The financial statements of the company for the year ended 30th June 2021 were approved on 1st August 2021.
The rate of taxation applicable is 30%.
Required:
Basic earnings per share ( EPS) of the company for the year ended 31st May 2021.
The number and value of anti- dilutive potential ordinary shares.
Diluted earnings per share of the company for the year ended 31st May 2021.
