Investment firm Britam has issued a profit warning, joining several firms that announced their profits would decline by more than a quarter last year.
Britam said a tough operating environment and poor performance at the Nairobi Securities Exchange (NSE) would adversely affect its bottom line.
“…the earnings of the company are expected to drop by at least 25 per cent compared to the earnings reported in the same period in 2017,” said the firm in a letter to NSE Chief Executive Geoffrey Odundo. “The expected decline is mainly due to performance at the stock market, which has led to reduced returns from our equity investments.” The firm, which reported a Sh527 million profit in 2017, down from Sh2.4 billion in 2016, had to write off a Sh1.3 billion investment in mortgage lender Housing Finance (HF).
Similar action
HF itself also issued a profit warning last year, as did Sameer Africa, Kenya Power, Bamburi Cement, Mumias Sugar, and Sanlam. Deacons and Athi River Mining were placed in receivership, while Uchumi, which has not released its results, is facing similar action by creditors.
East African Portland Cement, which lost a suit by its former workers for a Sh1.4 billion payout, has sunk further into negative territory. It needs a Sh15 billion rescue plan. Blaming its problems on a tough year, Kenya Power also issued a profit warning and later posted a Sh1.9 billion net profit, a 74 per cent plunge from what the company reported in 2017.
The poor performance of firms in the local market is haunting companies into the new year, with the NSE opening the first day of trading with a Sh4 billion decline in paper value as market capitalisation dipped to 2.09 trillion.
All the indexes blinked red, with the benchmark Nairobi Securities Exchange (NSE) 20 Share Index losing 11.06 points to stand at 2822.78.
The NSE has continued the decline that characterised the second half of last year, spooked by new taxes and the exit of foreigners from the local market.
The market ended the year in the red, with the NASI and NSE 20 closing -18.0 per cent year-to-date and -23.7 per cent, compared to the positive returns of 28.4 per cent and 16.5 per cent in 2017.
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