DENT

Centum issues profit warning as Covid-19 slows business

Some of the portfolio companies in which the firm has a controlling or significant stake reported a decline in net earnings

In Summary
  • According to the firm for the financial year ending March 31 2021, net earnings will be at least 25% lower than that reported in the year ended March 31 2020.
  • The firm’s real estate subsidiary however sustained strong sales and cash collection level despite the challenging environment.
Centum CEO James Mworia.
Centum CEO James Mworia.
Image: FILE

Investment firm Centum  has issued a profit warning citing lower disposal of investments and effects of Covid-19 on the private equity portfolio business.

The caution if for the for the financial year ending March 31, 2021.

A statement from the firm signed by company secretary, Mwangi Mbogo said the board wished to bring this to the attention of shareholders, potential investors and the general public.

A profit warning is a regulatory requirement by the Capital Markets  Authority for any listed firm whose full year net earnings are likely to drop by more than 25 percent compared to the previous year. 

According to the firm, results for the previous financial year included gains on disposal of investments amounting to Sh12.5billion and for the current financial year there were no disposal of investments consequently, no gains on  disposal have been recorded.

The firm recorded a Sh 7.4 billion profit in the 2019 financial year marking a 79 per cent growth from 2018.

In its half year results from April 1 2020 to September, Centum, as a stand-alone company, made a net profit of Sh95million from a loss of Sh1.6billion in the same period in the previous year.

However, on a consolidated basis, the group made a loss of Sh1.98billion from a net profit of Sh6.79billion due to poor performance of some of its portfolio companies such as Longhorn Publishers and NAS Servair.

“Our private equity business segment holds investments in various sectors, some of which were significantly affected by the Covid-19 pandemic especially in the first half of the financial year,” said Mbogo

Some of the portfolio companies in which the firm has a controlling or significant stake reported a decline in net earnings which will affect the Group's consolidated net earnings.

Other portfolio companies Centum has minority stakes, and which would contribute to the Group’s performance through dividend distributions have cut back on dividend payments during this financial year in order to preserve their liquidity as they navigate through Covid-19 uncertainties.

According to Centum, the repayment of it's long-term liabilities, has significantly reduced its finance costs in the current financial year, further mitigating the impact of declined portfolio performance.

It said the real estate subsidiary sustained strong sales and cash collection level despite the challenging environment.

Out of the 1,478 units under construction 72 per cent were sold with a revenue potential of Sh10billion.

Deposits collected in respect of these sales are Sh3.5billion (representing 35 per cent of total revenue).

Mbogo said the performance will not reflect in the consolidated income  statement for this financial year, as revenue from the sale of residential units is only recognised upon registration and transfer of ownership to the respective buyers.

Centum real estate also completed land sales in this financial year and booked approximately Sh2billion in revenue at a significant value uplift on the initial cost.