What is Centum’s current debt?
It is $35.71 million against an asset base of $401.78 million. At its peak in 2018, we had a debt of $169.64 million, of which we have paid $133.92 million. The idea was to pay our debts, consolidate operations, pay dividends, and invest.
Why does Centum move in and out businesses? Did you venture into sectors you were not well versed with?
Coming into 2019 from 2017, there were indicators that the Kenyan economy was softening, meaning that the growth we were experiencing was staggering off, and it was time for us exit what had matured and hedge our bets. This was because the interest rate was poised to be greater than returns from our portfolio companies and the returns we had realised would be diluted. That informed of our decision to exit certain companies.
Is real estate a growth area for Centum?
In real estate we have two investments; Centum Real Estate and Two Rivers Development Ltd (TRDL). Our vision or business model since our 2009 inception was about creating investments and assets that could attract other investors to buy in at a higher valuation.
In Centum Real Estate, we have created a company from nothing, because we bought land, but moved on into an operating entity with cash flow. We create assets that we can sell off to others after having de-risked them.
Are valuations of your real estate portfolio realistic? For instance, the pricing of the Two Rivers Project?
Yes, they are.
Two Rivers is supposed to become a destination shopping centre for the region. How will this work going forward in the post-Covid era of online shopping and non-physical purchases?
Underneath Two Rivers is the mall that is a subsidiary of Two Rivers Development. We invested in TRDL worth $16.96 million for our 58 percent stake considering we were the developer, then brought in other investors. We are the major shareholder, but are also the trailblazer who invested the least amount and brought on board other investors.
Originally, TRDL was only supposed to sell rights to other investors to undertake residential development. Meaning that now the mall does not just rely on external customers but also, has enough commerce within its space.
But when we realised that the sale process was sluggish, and got involved in doing the developments. We hoped that by now we would have 1,000 residences within the Two Rivers ecosystem but that obviously delayed and we had to step in. And now all the residentials are done.
Is Centum a Private Equity company or a conglomerate?
Centum is a publicly listed investment firm with an investment portfolio in two main categories. First are marketable securities, being investments in publicly held bonds or equities and whose current value is $66.96 million. Second are our private investments in a range of sectors. We are not involved in the operations of our portfolio companies and we are not a conglomerate. Ours is to create value in our portfolio companies and exit at a profit and recycle that capital into the business. That is how we have grown Centum for the past 14 years.
How do you fund your business?
In the past 14 years we have not raised any dollar of capital. The growth was internally funded. We have distributed $36.6 million to our shareholders as dividends. We are one of the few companies in the market that have never come for an equity raise.
How have you transformed Centum since you took over?
I took over in December 2008 and found it with a balance sheet of $89,285.71 and an overdraft of $1.6 million. Total assets were $53.57 million. Today we have an asset base of $401.78 million depending on the latest valuation without raising one dollar from the shareholders.
Where do you foresee Centum’s growth going forward?
When I took over as CEO at Centum, we had what was called ‘Centum 2.0’ and our objective was to scale up our business. However, we were constrained as existing shareholders were not willing to pump in new capital and not willing to be diluted.
As a result, the growth model we adopted initially was to use borrowed capital. You know you can fund your operations from three main sources. You can either borrow, inject equity capital or you can use internally generated funds.
Equity was not an option because the shareholders were not willing to invest more money. Our only option was to borrow and use internally generated funds. That is why in the first five years of this strategy we had a zero-dividend policy so that whatever money we made could be recycled into the business.