Battered by market woes, Centum earnings drop

Published on 13/05/2009

By James Anyanzwa and James Ratemo

Centum Investment Company’s investment income dropped 33 per cent as the slump in share prices at the Nairobi Stock Exchange weighed heavily on its earnings.

The investment firm now plans to raise Sh2 billion through a corporate bond to be issued in the next three months, as a way to shore up its leaking balance sheet.

According to the company’s full year results for the period ending March 31, 2009 total investment revenues declined to Sh392 million down from the previous year’s Sh582 million.

Operating expenses climbed 12 per cent to Sh136 million from Sh121 million, leading to a 52 per cent decline in the company’s pre-tax profits, which nose-dived to Sh475 million from Sh985 million.

The group’s asset base plunged 20 per cent to Sh6.6 billion from Sh8.1 billion.

The Nairobi Stock Exchange (NSE), which fell by 40 per cent, also affected the performance of Centum’s associate companies, resulting in the shares of associate earnings falling to Sh491 million from Sh525 million. “This is in line with the market conditions. It is no longer a seller’s market, but a buyer’s market. Nobody knows when the situation will stabilise,” Mr James Mworia, the company’s chief executive told a media briefing in Nairobi, yesterday.

The company’s operating cash (working capital) fell short of the daily financial obligations (liabilities) by Sh144 million. Mworia, however, defended the worrisome financial position saying the company’s liquidity standing was well cushioned by an existing Sh2.3 billion worth of quoted investments, and an unused facility amounting to Sh340 million.

Grim outlook

The gloomy financial figures come barely two months after the investment company issued a grim outlook about its financial position, forecasting a drastic slump in its full year profits after tax (PAT) by between 70 and 80 per cent. The firm blamed the grim forecast on a Sh 294 million (84 per cent) write-down on its investment in a railway company and the decline at the Nairobi bourse. Centum said it limited selling at the stock exchange because it had opted for a long-term view of the market, in spite of the bearish environment that set in the second half of last year. The investment company, however, hoped to take advantage of its unleveraged balance sheet to borrow and invest in private equity, listed equity and real estate.

“We believe that the current market conditions have created excellent investment opportunities for long-term investors. We will, therefore, employ our relatively unleveraged balance sheet and strong cash flow position to make investments in private equity, listed equity and real estate. We will also tale advantage of the current market conditions to expand our footprint to the rest of Africa, “said Mworia.

Centum’s investments include large holdings in the bourse blue chips, plus a Sh350 million stake in Rift Valley Railways (RVR), which runs the Kenya-Uganda railway.

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