The board of Centum Investment has approved a plan to buy back up to 10 per cent of the firm's issued and paid-up share capital.
The firm said that the move is intended to provide liquidity for the shares of the dual-listed firm as well as reward long-term shareholders.
Their proportionate holding will now increase as a result of the buyback of the company's shares at the current prices, which are deeply discounted relative to net asset value per share (NAVPS).
NAVPS is a yardstick for measuring the performance of companies, especially property and investment companies.
It is usually calculated by dividing net assets (total assets on the balance sheet less total liabilities) by the number of equity shares in the issue (excluding any shares held in treasury).
An increase in net assets per share, for example, using a share buyback, may lead to an increase in the market value of a company's shares. The share buyback is subject to approval by shareholders as well as capital market regulators in Kenya and Uganda, where Centum is cross-listed.
The company will buy shares on the market at a maximum price of Sh9.03 per share, which is the price that is 10 per cent above the 30 days before the board approval Value Weighted Average Price (VWAP) and is in line with Capital Markets Authority's (CMA's) share buyback regulations.
The share price closed at Sh7.98 on Friday, November 25 and the nominal share price of the company is Sh0.50 per share, hence the minimum offer price shall be Sh0.50 per share in line with the CMA guidelines.
"The share buyback is expected to provide liquidity to shareholders who may not have been able to trade due to the current depressed market conditions," said Centum Group Chief Executive James Mworia.
"It will reward long-term shareholders whose Net Asset Value per Share and Dividend Per Share will improve as a result of the reduction in shares."
Centum has appointed Faida Investment Bank as the advisor on the buyback.
This is as Centum recorded a net profit of Sh244 million for the six months ended September 30, 2022, representing a 20 times improvement from the Sh12 million reported in a similar period in 2021.
The performance was attributed to increased operational efficiencies, nil impairment provisions and a reduction in finance costs. Dividend income for the company increased by 45 per cent during the period.
Mr Mworia said the company did not take up additional debt during the period and maintained a positive cash position net of debt, cash and the marketable securities portfolio.
Total debt stood at Sh4.2 billion and the gearing ratio at 10 per cent as of September 30.
The consolidated profit after tax declined by Sh594 million largely driven by unrealised foreign exchange losses arising out of the depreciation of the shilling relative to the US dollar and Uganda shilling.
The consolidated performance aggregates the performance of subsidiaries, associates and joint venture investments across the five business segments in the period.