Centum keeps dividend freeze despite a sharp rise in profits

Wednesday June 5 2013

Centum Investment managing director, Mr James Mworia. Centum Investments shareholders will not be paid a dividend for the fifth straight year as the company focuses on growing its assets under management using internally generated funds. Photo/LIZ MUTHONI

Centum Investment managing director, Mr James Mworia. Centum Investments shareholders will not be paid a dividend for the fifth straight year as the company focuses on growing its assets under management using internally generated funds. Photo/LIZ MUTHONI 

By David Mugwe, The EastAfrican

Centum Investments shareholders will not be paid a dividend for the fifth straight year as the company focuses on growing its assets under management using internally generated funds.

The investment firm, which is spending heavily in real estate projects in Kenya and Uganda, on Wednesday said that it will continue implementing a board decision made during the 2009/2010 financial year, even in the event of profit growth.

During that period which ended in March 2010, Centum’s board of directors decided to freeze any dividend payments for a five year period and use the funds which could have paid to shareholders for investments.

The last time the investment company, which is listed on the Nairobi Securities Exchange (NSE) and cross listed on the Uganda Securities Exchange paid a dividend was during the period ended March 2008 when it paid a total of Ksh247.78 million ($3.9 million) or Ksh0.45 ($0.007) per share.

“In 2009/2010 the board made a decision not to recommend the payment of a dividend for the five year duration of the strategy period. In keeping with this the Board has not recommended the payment of a dividend this year,” said Centum in a statement.

The company however said that assuming that it had paid out dividends over the past four years, at an annual growth rate of 10 per cent, the total payout would have been Ksh1.224 billion ($14 million).

Despite the dividend freeze, Centum’s stock has been on an upward trend and as of the close of trading on Tuesday, the share price closed at Ksh23.50 ($0.28), a 90.28 per cent increase when compared to its closing price of Ksh12.35 ($0.14) at the end of last year.

“Centum has instead utilised these funds and grown shareholder wealth by Ksh10.25 billion ($119 million) and this growth has been achieved by the use of very limited debt. For every shilling of dividend retained over the last four years, the company has created Ksh8.37 ($0.098) of value to its shareholders,” said the investment company.

The company reported that its profit after tax more than doubled to Ksh2.5 billion ($29.3 million) for the period ended March 2013 from Ksh1.89 billion ($14.3 million) over a similar period the previous year.

Income had more than tripled to Ksh3.9 billion ($45.6 million) as at the end of March this year from Ksh1.27 billion ($15.3 million) as at the end of March 2012 while its assets rose by 60 per cent to Ksh18.96 billion ($221.4 million) from Ksh11.5 billion ($139.2 million) over the same period of time.

The company said that its real estate business line now has Ksh5.1 billion ($59.5 million) in assets and that the Pearl Marina project which involves the development of 300 acres of land between Entebbe International Airport and Kampala will be ready to break ground in the next three to six months.

The real estate business line which accounts for 26 per cent of Centum’s assets also includes its Two Rivers Project which involves the development of 100 acres of land in the Gigiri-Limuru Road area in Nairobi which has also secured all necessary approvals and will be ready to break ground for infrastructure in July and the retail mall in September.

Centum said that its quoted private equity business line has Ksh3.7 billion ($43.2 million) accounting for 19 per cent of its assets and an additional Ksh2 billion ($23.3 million) of third party funds under management and that its private equity line of business has Ksh10.4 billion ($121.4 million) accounting for 54 per cent of its assets.

Last year, the company raised Ksh4.16 billion ($47.64 million) through the sale of unsecured bonds of which Ksh3.16 ($36.21 million) was raised through private placement in September 2012 and Ksh1 billion ($11.43 million) which was raised through public offer in December the same year.

Investors, who were mainly institutional, opted for the fixed rate notes which accounted for Ksh2.91 billion ($33.34 million) or 70 per cent of the entire offer.

The balance of Ksh1.25 billion ($14.29 million) accounting for 30 per cent of the offer was taken up in equity linked notes which have a 15 per cent upside of the par value of the notes.

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