The bizarre business world of Kurwitu Ventures

Nairobi securities Exchange (NSE) trading floor.

Last year was a challenging year by all accounts. But this should not by any standards be an excuse for a listed company to spend Sh15 million only to generate Sh317.

This revenue earned by Kurwitu Ventures in the whole year is just Sh56 above what an adult Kenyan spends on food and non-food needs in a day on average, going by latest data from Kenya National Bureau of Statistics.

Despite having been listed on the Nairobi bourse in 2014, the company has been dormant, revising its strategy direction several times without hitting the target.

Last year, it paid Sh540,000 to auditors and auditors but their role was more on scrutinising costs than revenue.

According to the company’s financials, whose name was borrowed from an ancient but now extinct settlement area that existed in present-day Kilifi County, it booked a net loss of Sh10.8 million, assisted by a tax credit.

It suffered an operating loss of Sh15.4 million. The principal activity of the group is to provide Sharia-compliant investment products.

Islamic finance

Sharia-compliant investment products are those that meet the requirements of Sharia law and the principles articulated for Islamic finance.

According to Kurwitu’s financial results for the year ended December 31, 2017, the firm’s revenue plunged from a low of Sh20,885 to another low of just Sh317, being money earned as interest income.

Kurwitu, which is listed on Nairobi Securities Exchange under the investment segment, has the most expensive share (Sh1,500) but with negative earnings per share of 106.

The Group, whose managing director is Abdirahaman Abdullahi, consists of Kurwitu Ventures Ltd and Kurwitu Asset Management Ltd, which is a wholly-owned subsidiary of the company.

The subsidiary is supposed to provide asset management services, investment advisory services, and real-estate investment trust management but has not begun operations.

Other directors of the firm include Mohammed Abdirahman Hassan, Abdikadir Mohamed, Sumayya Hassan Athmani, Abdikadir Mohamed Haji and Isaak Jamal Ibrahim.

During the year, the firm spent Sh5.5 million to pay staff, meaning that every month, it was paying employees about Sh460,000 to generate a revenue of Sh26.

Further, administrative costs were Sh7.8 million, up by 63 per cent from Sh4.6 million incurred in 2016.

Directors had to advance Sh208,708 to the company to help meet some of the costs. A stream of losses has left the firm with a negative retained earnings of Sh43.9 million, drifting it far away from the bold dream of the founders.

According to its proforma statement of financial performance, the company was expecting that by end of last year, it would have posted a total revenue of Sh128 million and a net profit of Sh48.78 million.

Its plan also shows that by end of last year, it ought to have raised Sh200 million by private equity and get a return of at least 20 per cent.

The firm, whose primary asset is a parcel of land in Lamu has not struck any investment deal since listing on NSE in November 2014.

It had hoped to work on two corporate finance advisory mandates in 2015 and increase by one deal per annum for each succeeding year.

From this, it hoped to charge at least Sh4 million per deal.

By now, it should have completed nine deals. On February 6, 2014, the board made a decision to list the shares of Kurwitu Ventures in the Growth and Enterprise Market Segment at the NSE.

The firm spent Sh2.2 million to be able to list on Nairobi bourse.

It paid nominated advisors Sh1.5 million, Sh140 million to reporting accountants and half a million to legal advisors. Registrars earned Sh50,000 while NSE received Sh32,000 as listing fees.

With no deals in sight and the firm incurring huge costs to operate, its total borrowing has jumped from Sh50 million to Sh70 million.  

The firm had to incur Sh372,255 on marketing and advertisement since its mandatory for listed firms to make public their performance.

Its gearing ratio, a ratio that compares a proportion of owner’s equity or capital to funds borrowed by the company, is at 91.3 per cent.