Centum Investments Ltd has shelved negotiations for a Ksh3 billion ($27 million) private equity (PE) investment over valuation concerns as the Covid-19 pandemic slows activity across emerging economies.
The firm, listed on the Nairobi Securities Exchange (NSE) and cross-listed on the Uganda Securities Exchange (USE), is seeking to invest close to Ksh6 billion ($54 million) in shares of private companies over five years.
The investment is part of the firm’s diversification plan to grow shareholder earnings and build its PE portfolio to about 35 per cent of the total group assets estimated at Ksh108 billion ($970 million) from 17 per cent, according to the firm’s unaudited financial statements for the six months ended September 30, 2020.
As part of the five-year (2019-2023) plan dubbed “Centum’s 4.0 Strategy”, the firm plans to scale down investments in real estate to between 45 per cent and 55 per cent, from 64 per cent of the total assets. It also aims to reduce investment in marketable securities to between 10 per cent and 20 per cent, from 16 per cent of the total assets.
Centum, which is majority (49.99 per cent) owned by businessman Chris Kirubi, had hoped to conclude two deals valued at Ksh3 billion ($27 million) in 2019 and 2020 after completing repayment of long-term debts valued at Ksh14.4 billion ($130 million) and creating room for Ksh1.8 billion ($16 million) in annual finance cost savings.
“We have looked at over 100 opportunities, but we have not closed on any. I t would not have been possible for them to complete a transaction between April and September, even doing due diligence was not possible because of Covid-19,” James Mworia, the firm’s chief executive told The EastAfrican in an interview last week. “Our target companies have temporarily put their growth plans on hold to see how the market is affected. There are a lot of people who had plans for growth and expansion, but they are now re-evaluating those plans.”
Centum is focused on making investments across six sectors in the East African market — financial services, fast moving consumer goods, energy, agribusiness, education and healthcare.
Last year, the firm sold Almasi Beverages, Nairobi Bottlers and King Beverage Ltd, realising total sales of Ksh19.6 billion ($176 million).
Among the firm’s existing PE portfolio companies are Sidian Bank, Isuzu East Africa, Longhorn Publishers, NAS Servair and ACE Holdings.
During the six months to September 30, Centum, as a stand-alone company, made a net profit of Ksh95 million ($860,000) from a loss of Ksh1.6 billion ($14 million) in the same period last year.
However, on a consolidated basis, the group made a loss of Ksh1.98 billion ($17.8 million) from a net profit of 6.79 billion ($61.1 million) due to poor performance of some of its portfolio companies such as Longhorn Publishers and NAS Servair.
The latest report by the African Venture Capital Association shows that logistical troubles brought about by travel restrictions has complicated the ability for firms to conduct the necessary due diligence thereby resulting in delayed time horizons for firms wishing to liquidate their investments.