NAIROBI, Kenya Apr 2 – Centum Investments has issued a profit warning for its results for the year ended March 31, 2009 stating that it expects the profits to register a 70 to 80 percent decline from the previous year.
The company explained that the warning had been issued as a transparency and good governance measure aimed at proactively informing shareholders of the company\’s financial results outlook.
The statement explained that in preparing the unaudited financial results, the company had followed the International Financial Reporting Standards which require that a company recognises any material changes in the value of its investments. The warning is in line with best practice among listed companies.
With Rift Valley Railways Investment (RVRI) undergoing a recapitalisation program, the company had chosen to mark down the value of its equity investment in the transport company in line with the requirements of International Financial Reporting Standards.
At the same time due to the depressed nature of the capital markets the company reduced its selling activities in the stock market resulting in a significant decline in gains realised from disposal of investments. Together, the two areas are expected to reduce the total profits after tax.
"Over the last twelve months, and in line with developments in other markets, the NSE 20 Share Index has declined by 42 percent. Despite the bearish environment, the prevailing market prices of our investments remained higher than their average cost and we retained the option to take profits. We however did not exercise that option because in our view this is a buyers\’ market and we therefore limited our selling activities," the statement said.
The current market presents excellent opportunities for long term investments and Centum said that "we will employ our relatively un-leveraged balance sheet and strong cash flow position to make investments in private equity, listed equity and real estate."
The company however says that Centum remains a very stable company and retains a healthy portfolio of investments and a strong and liquid balance sheet.