PROFITABILITY

Centum profits triple as alternative investments boost gains

Both listed and non-listed companies have risen to profitability despite the country’s tough economic environment.

In Summary

•Centum said its investment and other income skyrocketed to Sh12.4 billion, a 206.17 per cent jump from Sh4.05 billion the same period last year

•Insurers have also increased alternative investments by 12.89 per cent to Sh410.36 billion, from Sh363.49 billion

REINVESTING: Centum chief executive James Mworia during a past investor briefing in Nairobi.
REINVESTING: Centum chief executive James Mworia during a past investor briefing in Nairobi.

Centum Investment Company has more than tripled its profit before tax for the first half of the year to Sh7.72 billion driven by high investment income.

The firm, which has a varied portfolio ranging from real estate to energy said its investment and other income skyrocketed to Sh12.4 billion, a 206.17 per cent jump from Sh4.05 billion the same period last year.

“Our Private Equity portfolio has sufficient liquidity to take advantage of the current macroeconomic conditions,” Centum CEO James Mworia said on Thursday.

Centum said it made fivefold of initial investments made through the sale of its shareholding in Almasi Beverages and Nairobi Bottlers Limited.

The firm which owns shares in listed and non-listed firms in the manufacturing, banking and publishing sectors entered an agreement to sell its stake in the two companies with a total valuation of Sh19.5 billion in earnings before interest, taxes, depreciation, and amortization.

This is after acquiring the shareholding at a combined historical cost of the two assets at Sh3.4 billion.

The firm, which is part of Amu Power, a consortium, comprising Kenya’s Gulf Energy and a group of Chinese companies, said it had made provisions provision on the shareholder loan it had provided to Lamu coal power project given it was stopped in June.

"Our profit was driven by the gains on disposal and impairment provision, primarily in Amu Power," Mworia stated.

Centum also said it plans to invest an extra Sh10-15 billion in sectors it was already familiar with via its private equity arm over the next five years.

In the first half of the year, Britam Holdings also reported Sh2.4 billion profit before tax in the first six months of 2019 compared to Sh1.4 billion in 2018 driven by an increase in returns from investments and improved underwriting performance.

 

The Group’s investment assets grew 11 per cent with fixed income contributing 46 per cent of total assets up from 35 per cent in 2018.

This was backed by a Cytonn report showing insurers have been leveraging on high-yield investment channels to mitigate losses as revenues from premiums cease to be profitable.

This mean, underwriters are shifting to real estate and asset management as a source of revenue from government securities and the equity market, with at least 80.4 per cent of insurers’ profits are held in income-generating investments.

Data by the Insurance Regulatory Authority shows investments increased 12.89 per cent to Sh410.36 billion, from Sh363.49 billion during the first half of the year.

 

Commercial banks also closed the third quarter of the year in profitability with tier 1 banks reporting improved net profits in their Q3 results.

KCB Group reported the highest post-tax profit of Sh19.2 billion during the nine months to September.

The lender beat competitors Equity Group, which registered a 10 per cent growth in profit after tax to Sh17.46 billion followed by Co-op Bank with profit recorded at Sh10.9 billion.

Majority of commercial lenders in the country have been leveraging on lending to government and disbursing digital loans to grow their non-funded income at the expense of loans to small businesses and individuals.