Investment firm Centum announced a 6.6 per cent drop in half year net profits due to the bearish run at the Nairobi bourse where it reduced it reduced its stake as it prepares to go big on the property market.
The firm Wednesday said its net profit dropped to Sh793 million in the six months to September compared to Sh836 in the same period last year on revenues of Sh1.02 billion up from Sh976 million.
Centum said reduced gains from lower share prices and increased costs attributed to the initial set-up costs of its property subsidiary hurt its profit as it reduced its quoted securities to Sh1.33 billion in September from Sh3.4 billion in March.
Now, the company is betting on region’s red-hot property market and buying more shares in companies listed outside Nairobi to grow its profit —which will reduce the influence of stock market cycles and dividend payouts on its earnings.
“The repositioning of our portfolio was behind the flat performance since the weakening of stocks affected capital gains,” said James Mworia, the CEO of Centum.
“We will focus on the property market and diversifying outside Kenya into alternative sub-Saharan markets,” added Mr Mworia.
Kenyan shares have suffered from a steep fall on high inflation currently 18.93 per cent, flight of foreign investors due to concerns over the global economy and the currency woes — weakening the bourse’s performance by 16 per cent in the six months to September.
This saw Centum reduced its exposure to the NSE to 9.1 per cent of its total portfolio of Sh14.4 billion from 23.6 per ent in March as it increased its cash position and grew its property investments by Sh1 billion.
The asset reallocation reflected in 5.6 per cent growth in Centum’s revenues, which is lower than the 50.2 per cent it posted in the year ended March due to the recovery in the equities market in 2010.
The performance did not dampen its share prices at the NSE Wednesday as it increased to Sh16.35 from Tuesday’s close of Sh15.90, but has shed 30 per cent over the past year.
The investment firm work does not pay dividends since it prefers to re-invest profit into the business — making its share movement at the Nairobi bourse a critical investor’s tool. It last paid a dividend of Sh0.40 in 2008.
Centum has more than Sh2 billion in cash with Sh1.76 billion generated in the half-year and intends to invest it in the regions lucrative real estate market to boost its returns.
It is targeting the Kenyan and Ugandan market where its new department — Real Estate and Infrastructure division — will scour for buyout opportunities in real estate and infrastructure across East Africa.
The investment fund recently acquired a 100-acre piece of land in Runda on which it intends to build upmarket homes, office blocks, shopping malls and industrial parks.
Location of the project, which are close to the United Nations offices in Nairobi and the leafy suburbs of Runda and Muthaiga, clearly signals that Centum is targeting the cream of Kenya’s buyers that includes international civil servants, top traders and civil servants whose numbers are expected to rise significantly in the next two decades.