The number of Kenyan companies issuing profit warnings continues to pile up as investment firm Centum joins the list. Centum has warned of a 25 percent drop in profit for the year ended March 2017 as it expects its net profits to drop from 2016’s 9.9 billion to sh8.3 billion in 2017.
“The fair value loss is consistent with the performance of Kenyan real estate market where the sector generally appreciated in value at a lower rate in 2017 on account of political environment and reduced access to credit by the private sector,” said Centum CEO James Mworia.
The drop is also attributed to Centum’s failure to conclude deals involving disposal of investments by March 31, which meant that the company could not declare those deals within the 2016/2016 financial year but will instead include them in the financial results for the year ended March 2019.
Centum has a wide portfolio of investments ranging from the energy sector (Lamu coal plant), to banking with Sidian bank where it is a majority shareholder and real estate: where it has invested heavily. The company is listed both in the Nairobi Securities Exchange (NSE) and the Uganda Securities Exchange (USE).
Constrained credit access, has been cited across sectors as one of the main causes of a slowdown in industry performance. The 2017 Cytonn Commercial Office Report, that analysed the commercial office real estate market in Nairobi predicted that if the banking law capping interest rates was not reversed, the real estate sector was likely to see a further reduction in developments and offtake of real estate due to reduced credit access.
Additionally, an extended electioneering period in 2017 has also been called culprit for infusing an attitude of ‘wait and see’ among investors; which translated to projects stalling as people waited for the election period to end. This is as per a 2017 statement by the Kenya Private Sector Alliance (KEPSA) where they reported a 700 billion loss its members suffered from election uncertainty in 2017.
The number of companies issuing profit warnings in Kenya has been high in the past year. In March 2018, cement manufacturer Athi River Mining (ARM) warned of an impending drop in its 2017 earnings by at least a quarter; citing constrained working capital, a prolonged election period and difficult market conditions as causes. Other firms that have also issued profit warnings include Britam, Stanchart, Unga Group, TranCentury, Bamburi Cement, Standard Bank, Standard Group etc.
