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Kenya

Centum Boosts Liquidity Position Despite a decline in Profitability

NAIROBI, Kenya, Nov 27 – Centum Investment PLC announced a decline in Group Profit After Tax and recorded a loss of Sh1.9 Billion for the six months to September 2020 down from a consolidated profit of Sh6.9 Billion in the prior period.

The decline in performance was largely on account of a significant drop in investment income with the prior period investment income having included Sh12 Billion gain on disposal of investments. Centum did not conclude any investment transaction in this period.

The Company Profit and Loss which is the measure of Centum’s performance as an investment company recorded a Profit After Tax of Sh95 Million an improvement from a prior period loss of Sh1.6 Billion.

In a statement, the company says the improvement in performance at the Company level was despite the lack of gains on disposal in the period and a significant decline in dividend income from portfolio companies as they conserved cash to enable them navigate the Covid 19 crisis.

“The Company’s performance was enhanced by a reduction in finance costs which reduced from Sh1.2 billion to Sh335 Million following the full repayment of long-term loans,” the Group said.

During the period under review, Net Asset Value Per Share declined from Sh71.29 to Sh68.14. The decline is explained by the payout of a Sh1.20 dividend per share and a Sh1.3 Billion revaluation loss. Total return in the period, which is a measure of total investment return as a proportion of the opening value of shareholder funds was negative 2 percent.

Centum continued to pursue its strategy of strengthening the balance sheet and enhancing liquidity. The Company made Sh4.1 Billion repayments of loans reducing net debt from Sh7.4 Billion to Sh3.5 Billion. The Company also maintained a high level of liquidity with cash and marketable securities closing at Sh8.2 Billion.

The underlying lines of business have continued with their cash generative focus. Centum Real Estate a subsidiary of Centum Investment Plc repaid Sh3.75 billion shareholder loan to the parent company.

The business has a healthy pipeline of bulk land sales that underpin the repayment of the shareholder loans. The business also recorded a strong performance in the residential development arm having increased pre-sales to Sh9.2 Billion which represent 73 percent of all units under construction and presales collections rose from Sh1.95 Billion to Sh2.65 Billion in the six month period.

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This line of business is expected to start contributing to profit in the second half of 2020/21 as the completed projects are handed over to buyers.

“The Companies within the private equity business line weathered the COVID 19 storm with 5 of 8 of the companies remaining profitable in the first half. To conserve liquidity this companies suspended dividend payment in the first half and we therefore did not book any dividends in the first half but expect to start booking dividends in the second half of the financial year,” the Investment company said.

The Marketable securities portfolio recorded an annualized return of 11.5 percent as the company pursued a strategy of capital preservation and liquidity enhancement and largely investment in fixed income securities.

“We are cautiously optimistic as we get to the second half of the year. We have seen improvement in business activity and should this be sustained it should translate into an improved performance in the second half of the financial year.”

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