NAIROBI, Kenya, Nov 23 – Last year\’s decision by Centum Investment to dispose of poor performing assets and subsequently re-investing the proceeds in other high yielding areas have paid off, with the group registering a 1,058 percent rise in its half year profit.
The investment group\’s profit after tax for the six months to September 2010 increased to Sh846 million from Sh73 million posted in the corresponding period last year.
\’The principal drive of return has been a very rigorous examination of the assets that we have and exiting those ones that have been underperforming and re-deploying cash to better performing assets," Chief Executive Officer and Managing Director James Mworia explained.
The company\’s exit from Rift Valley Railways Investment where they gave up their 10 percent shareholding for $4.5million was one of the exits amounting to Sh950 million that were undertaken last year.
The performance was against a backdrop of a small cash injection in the last 12 months and the CEO hinted at further exits to drive returns through the \’rebalancing\’ process.
Mr Mworia also attributed the good results to the improved profitability posted by their associate companies in the beverages and financial sector.
He cited improved economic conditions and increased local consumption as major factors that enabled the firms to double their earnings and their significant contribution to the bottom line.
The company also sees a lot of potential in the private equity, quoted private equity and real estate business lines which Mr Mworia said would go a long way in enabling them to continue delivering market beating returns.
The private equity portfolio which comprises unlisted companies and which is Centum\’s core business delivered a return of Sh900 million while quoted private equity contributed Sh500 million.
Investments into the real estate line in which they pumped in Sh1.5 billion over the last six months have not yet been realised but would be reflected in the company\’s books in the 2011/2012 financial year. The funds went into buying a 100 acre-piece of prime land in Nairobi\’s Runda estate at a cost of Sh1 billion and another 300 acres in Entebbe, Uganda.
Mr Mworia disclosed that they were currently working on the master plan for the development of the plots which the CEO said would be ready by April next year after which the construction would commence.
"What we are looking at is integrated development which will have residential, commercial, recreational facilities serving that community. We have chosen to play in the space of creating new neighbourhoods," he added.
The acquisition of land in Uganda and the cross listing of its shares on the Uganda Securities Exchange are part of a larger plan to entrench the company into the neighbouring country and the rest of the continent as it seeks to transform into a pan African firm.
There are various strategies in place that are geared towards increasing the proportion of investments outside Kenya which will see Centum significantly reduce its investment portfolio in Kenya from the current 97 percent to 50 percent in the next three years.
The implementation of all these measures Mr Mworia opined would enable them to remain on course to achieve their various targets which include increasing the assets under management from the current Sh11.8 billion to Sh30 billion by 2014.
A stock market analyst Bob Karina forecast that with such a performance and planned investment activities, the Centum share would be one to watch.
"Without having considered any income from the real estate, they have made huge profits. When this income starts coming in, they will make even more and that\’s why I\’m forecasting it to be a worthwhile share. For anyone who wants to come in, this is a very good company to invest in," Mr Karina who\’s also Faida Securities Managing Director said.