Centum Investment Limited (CTUM.ke) 2022 Abridged Report
The company’s loss after tax for the year ended 31 March 2022 reduced by 97% to Kes 21 million from a loss after tax of Kes 607 million in FY 2021. Included in this performance is a non- cash impairment of assets without which the operating profit was Kes 592 million, an increase of 142% from prior year.
The improved performance was attributable to an increase in investment income as the company continued rebalancing its portfolio in line with its capital preservation and liquidity enhancement objectives, reduction in impairment provisions and increased operational efficiencies.
Operating and administration expenses reduced by 21% in line with the Centum 4.0 strategic focus of organisational effectiveness through optimisation of the operating model and focus on subsidiaries attaining full operational autonomy. Finance costs reduced by 10% in FY 2022 compared to FY 2021.
The company recorded net revaluation losses of Kes 227 million in FY 2022 compared to Kes 4.2 billion revaluation losses in FY 2021 on the back of improved market multiples and profitability of the portfolio companies.
During the year, the company did not take up additional debt, and maintained a positive cash position net of debt. Short term debt remained at Kes 4.1Bn, and gearing remained at 10%. There was no long-term debt in the year.
Net Asset Value Per Share
The Net Asset Value per share declined slightly from Kes 62.85 to Kes 62.1. This was attributable to the impact of the unrealised fair value loss movements of Kes 227 million in the year.
The Consolidated performance aggregates the performance of our subsidiaries, associates, and joint ventures in the year. These are disclosed in five distinct segments: (i) Trading Businesses (ii) Financial Services, (iii) Real Estate, (iv) Two rivers investment operations, and (v) Investment operations.
Consolidated total comprehensive income for the year stood at Kes 142 million a 120% growth from the loss of Kes 1.4 billion recorded for the FY2021. Excluding the loss from Two Rivers investment operations, the consolidated total comprehensive income would have been Kes 2.1 billion up from Kes 405 million in the prior year. This huge improvement in total comprehensive income demonstrates the health of our investment portfolio. In regard to Two Rivers, while Centum owns 58% of the Company, Centum consolidates 100% of the losses of the company thereby overstating the effect of the loss in the consolidated financial statements of Centum Group. Nonetheless, we are working with the management of Two Rivers to raise capital for the next phase of the development comprising residential housing. Once successful, the capital raise will see Two Rivers knock off a huge amount of finance costs from its income statement while recording a boost in its profits from the development and sale of the residential housing.
The key performance drivers for the various segments are highlighted below: –
Trading businesses: This segment comprises of investments in Longhorn Publishers, Green Blade Growers, Tier Data Ltd and Tribus Security Group Ltd. The trading businesses reported a profit before tax of Kes 73 million compared to a loss of Kes 529 million in FY 2021 attributable to a gradual improvement in the trading environment following the easement of Covid 19 containment measures.
Sales grew 2.3x from Kes 0.9 billion in FY 2021 to Kes 2.3 billion in FY 2022 mainly driven by Longhorn Publishers Plc which recorded top line growth through regional expansion and a recovery in the education sector following the re-opening of schools. Direct and operating costs grew by 57% in tandem with the higher sales. The trading businesses paid down their debt to Kes 1 billion as at 31 March 2022 from Kes 1.3 billion in March 2021 with a resultant reduction in finance costs by 23%.
Financial Services: This segment comprises of Sidian Bank Limited, Nabo Capital Limited, and Zohari Credit Limited. The financial services segment recorded a two-fold increase in performance from an operating profit of Kes 330 million in FY2021 to Kes 692 million in FY2022. The strong performance in this segment was buoyed by a growth in the loan book as well as non-funded income in Sidian Bank and improved performance by Nabo Capital and Zohari Credit Limited.
Real Estate, Centum RE: The Real Estate business recorded a profit of KES 127 million in FY2022.
Gross profit from sale of residential units increased by 304% from Kes 124 million to Kes 335 million on completion and handover of more projects. Net gain from sales of development rights was Kes 111 million compared to a prior year loss of Kes 238 million. Development rights sales have been achieved at valuations that are several multiples to both the land acquisition and development costs and carrying values, validating both our business model as a master developer and the valuations on our balance sheet. Lower fair value gains were recorded in FY2022 of Kes 0.5 billion compared to Kes 1.6 billion in FY2021.
Centum RE’s debt holding as at 31 March 2022 was Kes 5.3 billion from Kes 6 billion in FY 2021 with an asset cover of 7.8x. All the project finance debt, including the corporate bond, is fully covered by the escrowed cash and the projects’ inventories and receivables accumulated on the Centum RE balance sheet.
Centum RE continues to record a significant increase in pre-sales level in residential units and land sales conversions. The pre-sales of residential units in the year ended 3t March 2022 was Kes 4.7 billion compared to Kes 3.6 billion in FY 2021 reflective of market demand. The value of residential units under construction increased to Kes 7.6 billion from Kes 6.6 billion reflective of ongoing development of residential units in Vipingo, Pearl Marina and Two Rivers. The pre-sales of both land and residential units are shown in the balance sheet as deferred income and as the projects and sales are completed and handed over to the purchasers, the sales will be recognized in the income statement and will reflect on the consolidated performance in subsequent periods.
Two Rivers Development Limited: Two Rivers Development Limited posted an operating loss of Kes 2 billion in FY 2022 compared to Kes 1.9 billion in FY 2021 due to finance costs.
The Board of Two Rivers Development Limi