Centum Investment Company Plc International House 5 th Floor Mama Ngina St. P.O BOX 10518-00100 Nairobi, Kenya Tel: +254 20 2286000 Mobile +254 709 902000 Email: info@centum.co.ke www.centum.co.ke 27 November 2017 Geoffrey Odundo Chief Executive Officer Nairobi Securities Exchange The Exchange 55 Westlands Road NAIROBI Dear Geoffrey, RE: FINANCIAL RESULTS FOR THE SIX MONTH PERIOD ENDED 30 SEPTEMBER 2017 The Board of Directors of Centum Investment Company Plc is pleased to announce the unaudited interim financial results of the Group and Company for the six month period ended 30 September 2017 as set out below: - Consolidated and Company Statements of Comprehensive Income for the six month period ended 30 September 2017 Group Company KES. 000 Sept 17 Sept 16 Sept 17 Sept 16 Trading business: Sales 4,772,045 4,121,865 - - Direct and other operating costs (4,223,126) (3,619,903) - - Trading Profit 548,919 501,962 - - Financial services: Income from financial services 1,585,604 2,422,458 - - Funding and other costs (1,697,086) (1,851,163) - - Operating (loss)/ profit from financial services (111,482) 571,295 - - Investment operations: Investment and other income 2,231,220 1,932,971 1,070,007 1,453,868 Realized gains on disposal of investments 11,461 12,995 - - Operating and administrative costs (524,583) (250,177) (292,055) (230,784) Finance costs (557,253) (354,536) (929,551) (739,530) Share of profits from associates and joint ventures 568,236 345,651 - - Profit/(Loss) before tax 2,166,518 2,760,161 (151,599) 483,554 Profit/ (Loss) after tax 1,631,416 2,057,886 (151,599) 483,554 Other comprehensive income, net of tax 296,660 (256,308) 2,550,699 1,537,396 Total comprehensive income 1,928,076 1,801,578 2,399,100 2,020,950 Earnings Per Share-Basic 2.07 2.57 Directors: Dr. D. Kaberuka (Chairman), J.M. Mworia (Managing Director), Industrial & Commercial Development Corporation (ICDC), Dr. C.J. Kirubi, Dr. L. Macharia, Hon. W. Byaruhanga, C. Igathe, M. Ngige 1
Consolidated and Company Statements of Financial Position as at 30 September 2017 Group Company KES million Sept 17 Mar 17 Sept 17 Mar 17 Portfolio investments 68,275 65,464 61,759 58,762 Cash and cash equivalents 4,921 5,639 274 2,447 Other assets 18,713 17,283 475 361 Total Assets 91,909 88,386 62,508 61,570 Customer deposits 11,125 9,799 - - Borrowings 22,441 20,986 12,884 14,656 Other Liabilities 7,739 8,127 3,216 2,106 Total Liabilities 41,305 38,912 16,100 16,762 Total Equity 50,604 49,474 46,408 44,808 Total Capital and Liabilities 91,909 88,386 62,508 61,570 NAV per share (KES.) 69.74 67.33 Consolidated Statement of Cash Flows For the six month period ended 30 September 2017 Consolidated Changes in Equity KES million Sept 17 Sept 16 Opening cash and cash equivalents 4,657 10,197 Net cash from operations 537 868 Net cash used in investing activities (2,584) (9,679) Cash generated from financing activities 2,311 3,528 Closing cash and cash equivalents 4,921 5,639 KES million Sept 17 Mar 17 Share capital 333 333 Share premium 590 590 Other reserves 3,101 2,804 Retained earnings 34,150 32,772 Proposed dividends - 798 Non-controlling interests 12,430 12,177 Total 50,604 49,474 The financial data presented above are selected extracts (without material adjustment) of the unaudited interim financial results. For an in-depth analysis of performance, please visit www.centum.co.ke. A. Financial Performance Despite a challenging operating environment, characterised by prolonged political uncertainty, depressed private sector credit growth and the after-effects of the drought experienced earlier this year, Centum continued to deliver on its mission to not only preserve but grow shareholder wealth. The Company recorded a 5% growth in the book value of shareholder funds which closed at KES 46 billion as at September 2017. The Company s total assets grew by 2% during the period, closing at KES 62.5bn while the Net Asset Value (NAV) per share increased to KES 69.7. The NAV per share has grown at a compounded annual growth rate of 17% over the last four years, underscoring the Group s commitment to sustained value creation for its shareholders.
Kes Billion 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 - Total Company Assets and Net Asset Value Per Share (FY 2011-HY 2018) 67.3 69.7 59.1 61.6 62.5 48.0 51.5 34.5 41.3 18.9 20.6 24.3 28.8 21.4 15.0 15.7 2011 2012 2013 2014 2015 2016 2017 HY 2018 Total assets (Kshs Billion) Net asset value per share (Kshs) I. Group performance The Group recorded a 21% decline in consolidated profit before tax from KES 2.7 billion as at 30 September 2016 to KES 2.2 Billion as at 30 September 2017. This decline was largely attributable to the negative impact of interest rate capping regulations on its banking subsidiary, Sidian Bank Limited, lower income from its asset management subsidiaries driven by depressed markets and a sluggish transaction environment as a result of the political uncertainty that characterized much of the year. Despite the decline in overall profitability, the Group s trading subsidiaries reported a 9% increase in trading profits, primarily driven by increased profitability of Almasi Beverages Limited on the back of both volume growth and increased operational efficiency. The Group also incurred higher finance costs on facilities that were closed in September 2016 and which therefore would not have accrued interest in the prior half year. II. Company performance The Company recorded a 26% decrease in investment income from KES 1.5 billion as at September 2016 to KES 1.1 billion as at 30 September 2017. The decline was primarily driven by reduced dividends from subsidiary companies. Owing to the prevailing economic environment, the Company elected to retain earnings and cash at its subsidiary companies to support their operations and growth. The prevailing political uncertainty also impacted on the Company s exit pipeline and no exit transactions had been closed by September 2017. While the Company s operating costs remain significantly below the efficiency cap of 1.5% of total assets, some one-off costs were incurred in the period as part of business development activities. III. Investment activity During the first half of this financial year, Centum deployed KES 1.8 billion as equity and debt investment in its portfolio. The segmental analysis of the investment activity is set out below:
KES Mn Real Estate 1,596 Development portfolio 231 1,827 The major investment in real estate relates to a KES 1.4 billion payment upon completion of the acquisition of Vipingo property. B. Redemption of KES 4.2 billion Corporate Bond Centum redeemed its KES 4.2 billion Corporate Bond that matured in September 2017. Investors in the equity linked component (ELN) of the bond received an additional KES 191 million, representing a total equity upside of 15 percent of the par value in line with the terms of the issue, which translated to an annual internal rate of return of 14.9 percent for ELN investors. The Company also retired a KES 3 billion facility from Rand Merchant Bank (RMB) which was set to mature in December 2017 and subsequently obtained a KES 5 billion facility from RMB which matures over a 4-year period. The net effect was a reduction in the Company s debt position by KES 2 billion. A summary of movement in Centum borrowings is set out below. Instrument 31 Mar 2017 Repayment New debt 30 Sep 2017 2012 Bond 4,331 (4,331) - - 2015 Bond 6,225 - - 6,225 First Rand Bank Term Loan 3,118 (3,118) 5,143 5,143 Bank overdraft 982-534 1,516 TOTAL 14,656 (7,449) 5,677 12,884 Debt/Asset ratio 24% 21% Debt/Equity ratio 33% 28% The Company s debt service capacity remains strong with Debt Service Coverage Ratio (DSCR) exceeding the minimum level required under its debt covenants, as summarised below: KES million FY 2017 HY 2018 Operating Inflows 5,259 4,139 Operating Outflows (922) (616) Internally Generated Funds 4,337 3,523 Finance Cost 1,754 930 Debt Service Coverage Ratio 2.5x 3.8x Required minimum 1.5x 1.5x During the period, Global Credit Rating affirmed Centum s credit rating of A (long term) and A1 (short term) with a positive outlook, primarily citing the Group s substantial value enhancement as evidenced by more than three times growth in Net Asset Value under the current strategy period.
C. Outlook The Group remains optimistic on its outlook for the balance of FY 2018, with significant development activity anticipated in both the Real Estate and Development portfolios, together with an increased focus in monetisation of Real Estate assets. The Group has developed a sizable pipeline of Real Estate portfolio transactions which are at various stages of negotiation or documentation. The group is also working on a number of exit opportunities across its portfolio, with several expected to close in 2018. Following the redemption of the KES 4.2 billion bond, reduction in finance costs is expected moving forward. By Order of the Board James Mworia, CFA, CGMA Group Chief Executive Officer and Managing Director cc Paul Bwiso Chief Executive Uganda Securities Exchange Kampala, Uganda Mr. Paul Muthaura Chief Executive Capital Markets Authority Nairobi, Kenya Mr. Keith Kalyegira, The Chief Executive, Capital Markets Authority, Kampala, Uganda