Centum Investments Company Plc, a publicly listed investment firm based in Nairobi, has utilized internally generated cash to settle its debt of Sh2.3 billion. This move came after efforts to obtain funds from the sale of its 83.4 percent ownership of Sidian Bank to Access Bank of Nigeria collapsed. The company had planned to sell its entire stake in Sidian Bank for Sh4.3 billion and was hoping to use some of the proceeds to cover outstanding debts.
Despite the setback, Centum’s CEO, James Mworia, said that the firm managed to retire the debt using profits from land sales and debt repayments from its subsidiaries. He added that the company is yet to find a new buyer for its shares in Sidian Bank, which has been struggling with growth since the Covid-19 pandemic hit and the introduction of interest rate controls in September 2016.
Centum’s decision to shift from a debt-funded investment strategy has seen it reduce its borrowings significantly. As of March last year, the company’s borrowings stood at Sh4.1 billion, down from Sh16.2 billion in March 2019. Its subsidiaries, on the other hand, had debt amounting to Sh16.4 billion, which is secured by their respective assets and cash flows.
The company aims to become debt-free at the parent company level by March 2024 as part of its risk reduction strategy and to build investor confidence. It previously sourced financing for its various businesses but altered its approach to allow its subsidiaries to take loans they can repay without recourse to the parent company.
This shift in strategy appears to have paid off as Centum’s share price has rebounded from a record low of Sh8 in July 2022 to close at Sh9.06 on Monday, representing a 6.84 percent year-to-date return. However, its market value of Sh6.03 billion is still a fraction of the Sh41.3 billion book value reported in March 2022.
Despite the challenges posed by the pandemic and interest rate controls, Centum remains committed to its long-term goals of reducing risk, eliminating debt and building investor confidence. The company’s efforts to achieve these objectives will no doubt be closely followed by stakeholders in the coming months and years.
