Chief executive at Centum James Mworia. FILE PHOTO | NMG Centum Investment is preparing for reduced dividend payout from its portfolio companies such as Longhorn Publishers as they step up cash preservation measures in the prevailing Covid-19 environment.
Chief executive at Centum James Mworia says in the latest annual report that Covid-19 has hurt the performance of its private equity businesses and this will result in reduced dividend income.
“The short-term impact of Covid-19 on our private equity business is likely to be a substantial reduction in the 2020/2021 earnings of the underlying portfolio companies and consequently a reduction in dividend income to Centum as the portfolio companies are likely to cut their dividend pay-out to preserve liquidity,” says Mr Mworia.
Mr Mworia has however not explained whether this will also impact Centum’s dividend payment decision. The firm paid Sh799 million as dividends for the year ended March.
Centum has invested in firms such as Sidian Bank, Isuzu East Africa, NAS Servair, Longhorn Publishers and Sabis Runda School from which it earned Sh318 million in dividends in the year ended last March.
However, the payout looks set to be depressed by the prevailing Covid-19 environment that has hurt business momentum.
Longhorn last week posted a net loss of Sh225.9 million, the first loss in eight years, from a profit of Sh185.1 million as the closure of schools hurt sales.
Sabis School earnings have also been impacted with the extended closure of schools while Spire and Isuzu are also feeling the impact of slowed economic activities.
NAS, the main airline caterer in Kenya’s two largest international airports, also took a hit from suspension of flights between March and early July.
Centum is hopeful that the portfolio companies can go back to sustainable earnings levels after the infectious virus is contained.
However, its earnings from portfolio companies will also be impacted by the decision to sell Almasi Bottlers, Nairobi Bottlers and King Beverage Limited at a combined Sh19.6 billion.Dividends from Almasi and Nairobi Bottlers had totalled Sh400 million in the financial year ended March 2019.Centum has turned to mixed use real estate projects where it targets to put between 45 percent and 55 percent of its assets under its five-year strategy than runs to 2024.Private equity will be allocated between 30 percent and 40 percent while marketable securities will account for between 10 percent and 20 percent of total assets.
