Centum Investments

Centum: Diversify Regionally as Profitability Rises

RELATED FINANCIALS
-2008 Nine Months Results (Q3-08) - Centum Investments
-2008 Quarter 3 Investor Briefing - Centum Investments

Centum Investment Company Limited, one of Kenya’s oldest investment company, has seen it profit rise in folds over the recent years. In their (revised year end) nine month financial report, pre-tax profit stood at Ksh.985 million compares to Ksh.1.186 billion report for the 12 moths ending June 2007. The investment company managed to fight off post election violence effect due to its diverse investment in a number of sectors. Early this year the company changed its name from ICDCI to Centum and revised their year end to March 31, to coincide with its associates.

Centum was listed on the Nairobi Stocks Exchange in October 2001, in an issue that raised Ksh.500 million. Of the Ksh.500 million raised, Ksh.160 million was put in treasury and corporate bonds, Ksh.150 million in equities of unquoted Coca-Cola bottling plants in Kenya, and Ksh.100 million in offshore markets together with stakes in Uganda and Tanzania.

In partnership with other investors, like the Tanzania Development Finance Ltd and Transcentury ltd., the company has provided investment capital to both industrial and commercial ventures. Centum’s current portfolio is valued at Ksh.8.1 Billion, after shrinking by about Ksh.300 million due to the post election violence, with most of its portfolio in equity. The investment company has a lot of interests in Manufacturing, Beverage, Financial and Services (energy, tourism and telecommunication) industries.

The investment company has holdings in Property which represents 5% of their total portfolio and consists of both equity investments and direct investment in property by the company. Direct property includes the controversial Uhuru Highway plot - located next to the Grand Regency Hotel and Consulate Chambers - situated on Race Course Road in downtown Nairobi.

Another controversial investment by Centum was the selling of its stake in the loss making Uchumi, just before the supermarket chain went under and got suspended from trading on the NSE. The company also divested from the loss making Eveready E.A when it got listed in December 2006. This begs a lot of questions on the asymmetry of information in the Kenyan securities market.

During the nine months period to March 31, 2008, Centum acquired a 35% stake in a publishing firm, Longhorn Kenya Limited, and sold its stake in Mather and Platt Limited and sold two building in Nairobi. Other investments held by Centum include Coco-Cola bottlers– Nairobi Bottlers (28%), Mount Kenya Bottlers (29%), Rift Valley Bottlers (46.3%), and Kisii Bottlers (17.6%), KWAL (25%), General Motors East Africa, Rift Valley Railways, Aon Minet Insurance Brokers, UAP Provincial Insurance, K-rep Bank and Nairobi Airport Services.

Diversifying Regionally

Following the violence witnessed in Kenya after last year’s disputed elections, Centum is seeking regional expansion as a way of reducing associated risk. Centum’s Investment Strategy has been to invest 5% to 49% in public and private equities, alongside credible partners to minimize risk. This has manly been concentrated in Kenya due its strong and stable economy compared to its neighboring countries. But the recent violence has made Centum’s management to rethink this investment strategy.

To avoid exposure to such risk the investment company plans to extend its investments into Uganda, Tanzania and other East African countries. The company has launched an aggressive search for companies in the region that meet their investment criteria of investing in companies with huge market potential (both in domestic or export), with attractive margins, a competitive advantage in their business, low business risk and with a credible and experienced management that has a strong corporate governance structures in place.

Once the investment company gets good firms to buy into, it will not only cushion it from such political uncertainty witnessed in Kenya, but also help in maintaining a strong and well-diversified portfolio to cushion its profits in cases of unfavorable performance in a particular industry or an economic downturn in one country.

Management Commentary on Year end Results

Centum Investment Company Limited reported robust performance for the nine-month period ended March 31, 2008. The Group’s profit before tax stood at Ksh.985 million compared to Ksh.1,186 million reported for the 12–month period of June 30th 2007. Profit after tax stood at Ksh.868 million compared to Ksh.1,115 million reported in FY2006/07

During the period, the company changed its financial year-end from June 30 to March 31 of every year in order to align its reporting cycle with those of its associate companies. Investments income and share of associate profits stood at Ksh.582 million and Ksh.525 million respectively while total expenses were contained at Ksh.121 million.

The Group’s assets base declined marginally by 3.3% from Ksh.8.4 billon in June 2007 to Ksh.8.2 billion in March 2008. This was mainly due to decline in values of investments as a result of subdued capital markets as at the balance sheet date.

The company is looking to the future with optimism and expects business performance to remain strong in the current financial year. The company remains committed to its vision to be the investment partner of East Africa .We will seek to grow our regional footprint by aggressively seeking both private equity and listed equity opportunities in the region.

Dividends

The directors are recommending for approval at the next Annual General Meeting a first and final dividend of Ksh.0.45 per share in respect of the financial year ended March 31, 2008. The dividend will be paid on or about Thursday, October 16, 2008 to the shareholders registered at the close of business on Thursday, August 7, 2008. Notice is hereby given that the register of members will be closed for ONE day only on Friday, August 8, 2008 for purposes of preparing dividends warrants.

David Owino
Company Secretary

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