Centum Investments sinks deeper in the red with $10m half-year loss

Centum CEO James Mworia who says rising interest rates led to an increase in borrowing costs and slower economic activity that in turn resulted in a reduction in turnover of the group’s portfolio companies. PHOTO | FILE | NMG

By JAMES ANYANZWA

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Centum Investments is contending with losses after years of massive capital investments and mounting debt took a heavy toll on its finances, dimming earning prospects for

shareholders.

The group made a loss of Ksh1.29 billion ($10.57 million) in the six months to September 30, 2022 from Ksh662 million ($5.42 million) in the same period last year.

All of the group’s trading, investments and subsidiary operations, save financial services, made losses.

The regional company which is listed on the Nairobi Securities Exchange (NSE) attributed its poor performance to the volatility in the forex market.

According to the unaudited financial statements released Tuesday, the group’s consolidated net loss increased by 95 percent to Ksh1.29 billion ($10.57 million) from Ksh662 million ($5.42 million).

Weakening shilling

This was on account of the impact of the depreciation of the Kenyan shilling against the US Dollar in respect to the US Dollar denominated liabilities in the group.

“This unrealised value movement accounted for 96 percent of the decline in after tax performance,” said James Mworia, the group’s chief executive officer.

“The weakening shilling resulted in unrealised forex and currency translation losses being recognised by the group during the period to September 30 2022.”

According to Mr Mworia, the rising interest rates led to an increase in borrowing costs and slower economic activity that in turn resulted in a reduction in turnover of the group’s portfolio companies.

The group’s trading business and real estate operations generated losses of Ksh22.59 million ($184,426.22) and Ksh267.99 million ($2.19 million) respectively while the investment operations posted a loss of Ksh344.74 million ($2.82 million) during the period under review.

The Two Rivers Investment operations increased its losses to Ksh984.47 million ($8.06 million) from Ksh342.37 million ($2.8 million).

Share buyback

The company’s board has also approved a share buyback plan that will see the listed firm purchase up to 10 percent of its issued and paid up share capital subject to shareholder and regulatory approvals.

The Company is majority (30.94 percent) owned by the estate of the late businessman Chris Kirubi and the Kenya Development Corporation (22.97 percent)

In June 2019, Centum suspended further capital expenditure and put key investments on sale as part of a plan to pay off mounting debts amid a weakening cash flow position and deteriorating debt-coverage ratio.

Over a five-year period (2015-2019) the group’s debt had more than doubled to Ksh16.14 billion ($132.29 million) from Ksh7.56 billion ($61.96 million) driven by a number of mega projects that the firm was undertaking.

However, the debt has declined to as low as Ksh4.27 billion ($35 million) following a series of repayments helped by proceeds from disposal of shares in private equity investments.

In 2019 Centum completed the sale of beverages companies (Almasi Beverages, Nairobi Bottlers and King Beverage Limited) realising total sales proceeds of Ksh19.6 billion ($160.65 million).

In September this year, the company announced that it had sold 83.4 percent of the shares it held in Sidian Bank to a Nigerian lender — Access Bank Plc — in a transaction valued at Ksh4.3 billion ($35.24 million).

Part of the proceeds from these transactions are for reducing the group’s debt burden.

Centum adopted a five-year (2019-2023) plan dubbed ‘Centum’s 4.0 Strategy’ in which it seeks to scale down investments in real estate to between 45 percent and 55 percent from 64 per cent of the total assets and reduce investment in marketable securities to between 10 percent and 20 percent from 16 percent of the total assets.