20 June 2012

Kenya: Centum's Profit Fall Affects Share Price

LISTED investment company Centum full year profits dropped by more than half as investment income dipped by Sh1 billion.

The company, which had not issued a profit warning earlier as required by the Capital Markets Act saw profits before tax falling by 64 per cent from Sh2.3 billion to Sh1.4 billion. Companies are required by market regulator Capital Markets Authority to publicly issue a profit warning if they expect their full year profit to fall by at least 25 per cent.

The firm's investment income dropped from Sh2.3 billion to stand at Sh1.3 billion. Profits after tax dropped to Sh1.2 billion, down from Sh2.3 billion the previous year. The announcement saw the company's shares at the Nairobi Securities Exchange dropping by close to 17 per cent to trade at Sh12.25 per share as investors panicked and sold off their shares.

"The company had not issued a profit warning so the results come as a surprise to the market," Standard Investment Bank said in a note to clients. "Whereas the profitability results are disappointing, we think there is significant value yet to be unlocked from the business, embedded in a potentially understated net asset value."

Chief Executive James Mworia blamed the nature of the business on the lack of a profit warning, saying the management believed they were on track to achieve a less than 25 percent profit fall, right up to the end of the financial year. Mworia played down the profit drop saying the company's future is bright because most of the projects the company has been undertaking for the last 24 months are about to mature. The firm is also planning to break ground for the 300 acre real estate development on Limuru Road early next year. Mworia said Centum has secured the necessary approvals and is now working on the designs.

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