Centum Investments can breathe easy after repaying the Ksh16.14 billion ($161.4 million) debt which had, in the past five years, affected its cash flow and eroded shareholder earnings, restricting its options for new debt for growth and investments.
Last week, the firm made a final debt payment of Ksh6.6 billion ($66 million) due to accrued interest and a variable return to holders of the Equity Linked Note component.
The debt, which had accumulated since 2015, had seen the company spend a massive Ksh1.8 billion ($18 million) every year on interest payments.
Chief executive James Mworia told The EastAfrican that the company took a radical approach and sold residential houses and parcels of land which generated Ksh10.7 billion ($107 million) for the business in barely six months. This improved its financial position. By March 31 this year, they had sold a parcel of land valued at Ksh2.9 billion ($29 million) across its entire portfolio and 999 housing units valued at Ksh7.8 billion ($78 million), that accounted for about 70 per cent of the 1,442 units under development.
However, Centum has certainly more reason to celebrate as net profit for the year ended March 31, 2020, increased by 12 per cent buoyed by the improved performance of its private equity investments.
The firm which is listed on the Nairobi Securities Exchange (NSE) and cross-listed on Uganda Securities Exchange (USE) saw its profit after tax rise to Ksh4.62 billion ($46.2 million) from Ksh4.12 billion ($41.2 million) the previous year, after a portion of the earnings were wiped off by a one-off provision for impairment of assets totalling Ksh2.75 billion ($27.5 million).
Its investment income grew 57 per cent to Ksh14.99 billion ($149.9 million) from Ksh9.54 billion ($95.4 million) while finance costs jumped 28 per cent to Ksh3.22 billion ($32.2 million) from Ksh2.51 billion ($25.1 million).
RECOVERY CYCLE
"We have completed repayment of our loan. We repaid the last tranche on June 8. The global economic crisis arising out of the Covid-19 pandemic has validated the appropriateness, and importance, of focusing on balance sheet resilience and having a strong liquidity position," said Mr Mworia.
"As we enter the economic recovery cycle, Centum’s strong liquidity and balance sheet position has put it in a strong position to take advantage of investment opportunities that will emerge given the significant corrections that have taken place on valuations of even very strong companies, and the growing need by companies to shore up their equity capital positions […]