Centum Investment Company says the reduced profitability in its real estate subsidiary will not have a material impact on the group’s consolidated earnings in the year ended March.
Centum Real Estate Limited on Thursday issued a profit warning for the review period, anticipating its net income to fall by at least 25 per cent.
The property firm had made a net profit of Sh650.4 million in the prior year, indicating that it will record at most Sh488 million in the period whose results will be published in the next few weeks.
It is one of the major subsidiaries of the Nairobi Securities Exchange-listed firm (NSE) which will not issue a profit warning of its own.
“It has not materially affected the consolidated financial results,” said James Mworia, Centum’s chief executive.
“Their issue was end-year revaluations which tend to come in from external valuers several weeks after year-end (March).”
The parent company made a net loss of Sh1.3 billion in the year ended March 2021.
Mr Mworia’s statement indicates that the investment firm’s other operations had a better performance, cushioning it from the weaker earnings in the real estate division.
The company has stakes in scores of private and public companies including Isuzu East Africa and Longhorn Publishers. It also owns Sidian Bank which it will soon sell to Nigeria’s Access Bank.
The companies’ earnings took a hit in the wake of the Covid-19 pandemic and the attendant restrictions but are among those benefitting from the subsequent economic recovery and the receding health crisis.
Centum has invested heavily in defensive assets led by government bonds to counterbalance the risks it is taking elsewhere.
The company owns 100 percent of the real estate subsidiary whose core business is the sale of investment property and residential units. It has projects in Nairobi, Vipingo, and Entebbe.
The subsidiary said the reduced profitability is due to a new assessment of the value of its assets which resulted in a reduction in unrealised gains.
Companies are required by law to issue profit warnings at least 24 hours before they publish full-year results, which show that their earnings have dropped by a quarter or more compared to the prior year.