Centum Real Estate has reported a notable turnaround, posting a net profit of Sh174 million for the fiscal year ending in March.
This marks a significant improvement from the restated net loss of Sh486.9 million recorded in the previous year.
The return to profitability is largely attributed to a substantial unrealized gain on the company’s investment properties.
As a subsidiary of Centum Investment Company, Centum Real Estate experienced a more than fourfold increase in gains from real estate assets, rising from Sh513 million to Sh2.1 billion.
Revenue from residential unit sales also witnessed an increase, reaching Sh1.9 billion, although the gross profit from these transactions declined to Sh285.6 million due to higher costs of sales.
The company acknowledged recording property valuation gains, attributing the increase to extensive infrastructural investments within its land banks and accelerated development activity by third-party entities.
Despite the positive financial performance, Centum Real Estate observed an increase in operating expenses, which surged to Sh748.4 million from Sh502.1 million.
Additionally, finance costs rose from Sh794.7 million to Sh889.7 million. The company explained the increase in finance costs as a result of the depreciation of the Kenyan shilling against the US Dollar by 16% in the financial year 2023, leading to unrealized foreign exchange losses on USD-denominated liabilities.
In terms of completed residential units, Centum Real Estate highlighted that 222 units met the revenue recognition criteria and were recognized during the fiscal year ended March 31, 2023.
It expects revenue and profit from the remaining units to be booked in the financial year ending March 31, 2024.
Centum Real Estate, a subsidiary through which its NSE-listed parent firm holds part of its real estate assets, is currently engaged in selling both land and the properties it is developing in Kenya and Uganda.
The company reported revenue from the sale of 222 units in the review period, down from 304 units a year earlier. Another 342 units valued at Sh2.6 billion have been completed and sold, with their revenue expected to be recognized soon.
Looking ahead, NSE-listed Centum has announced plans to sell shares in the real estate arm. The listing of the subsidiary is expected to facilitate the sale of part of its interest to other investors.
Centum Real Estate aims to raise Sh17 billion in equity investment from Luxembourg-based private equity firm GEM Global Yield, which will take a stake not exceeding 20 percent.
The agreement with GEM carries a 36-month window after listing for Centum Real Estate to draw down the funds.
Centum has been strategically working towards booking major capital gains and reducing the concentration of its assets in the real estate sector.
The objective is to redirect cash into marketable securities such as stocks and bonds, as well as private equity, as part of its broader financial strategy.
