Centum profit drop by 21 per cent driven by political worries and rate cap law

Centum Investment CEO Mr James Mworia

Centum Investment Limited has recorded a 21 per cent drop in half year net profit posting Sh1.6 billion in September 2017 compared to Sh2.1 billion in September 2016.

The Nairobi Securities Exchange (NSE) listed firm has blamed the decline on poor performance of its subsidiary, Sidian Bank, which recorded a massive drop of 37 per cent in its interest income.

Centum Chief Executive Officer James  Mworia in an investor briefing on Monday said that Sidian’s depressing  performance is attributable to the negative impact of the interest rate capping regulations on the entire banking sector.

“Sidian is a third tier bank. It is mostly engaged in micro-lending. The credit pricing as a result of the rate cap law has hit the bank hard. But we are in a process of restructuring its balance sheet to bring operating costs down in order to revise the trend,” Mr Mworia said. Centum holds a 74 per cent controlling stake in Sidian.

Apart from Sidian’s performance, Mworia also blamed the political uncertainties that have rocked the country for Centum’s drop in profits in its other investment portfolio.

The firm recorded a 55 per cent decline in dividend income in the period under review. At the same time, Mworia said Centum had planned to make some exits from some of its investments just after the August 8 election, but the political situation that befell the country afterwards made that difficult to happen.

“We mostly deal with international investors. We had planned to exit some of our investments by selling to these investors but the political uncertainty kept them at bay,”  Mworia said.

On a more positive note, the firm’s publishing subsidiary Longhorn Publishers saw its profits go up by 41 per cent from 381 million to 535 million in the period under review.

Mworia attributed this positive growth to good performance in Longhorn’s subsidiaries in Zambia and Malawi, where the publisher replicated the same business model as the mother company in Kenya.

Apart from Longhorn, Centum’s other subsidiary Almasi Beverages that is involved in the manufacture of soft drinks recorded a five per cent growth in sales.

Centum’s main investment portfolio, real estate, which soaked in a Sh1.6 billion investment during the first half of this financial year also gave sluggish returns again as a result of the general economic slowdown in the country as a result of the political uncertainties.

Centum’s real estate investment portfolio comprises the Two Rivers Mall in Kiambu, Vipingo at the coast, Pearl Marina investments, Uhuru Heights and the Athena properties.

“We intend to increase the development and sale of apartments at the Two Rivers Mall, as well as sell the bulk land that his held in our other properties in Vipingo and pearl Marina in order to reap returns from real estate,” Mworia said.