Centum posted a 10.6 per cent growth in net earnings in the half-year ended September, with the investment firm set to review its zero-dividend policy.
The company’s net profit increased to Sh892 million in the period, compared to Sh806 million a year earlier.
This was helped by a 60 per cent growth in investment income including dividend from companies which raised it to Sh1.1 billion from Sh749 million.
This is the last financial year in which Centum will not be declaring a dividend as its cash retention strategy that started in 2009 ends.
Centum’s board will soon decide on whether or not to lift the dividend freeze from the next financial year or continue with the profit-retention strategy to fund its growth.
“We will soon meet and decide on whether or not to pay dividends from the next financial year,” a director, Chris Kirubi, told the Business Daily.
Investors have since 2009 relied on capital gains from share price appreciation at the Nairobi bourse following the dividends, with the stock having more than tripled in value to date, taking into account bonus share issues.
The firm’s shareholders received a bonus share issue at the ratio of one for every 10 held in both 2010 and 2011.
The stock is currently trading at Sh30, representing a 150 per cent gain over the past one year. The rally has been partly driven by the announcement in September that Mr Kirubi – Centum’s largest shareholder— is buying an additional 32.65 million shares.
This would push his ownership to 29.9 per cent from 24.99 per cent, a move that has raised demand for the shares among speculative and long-term investors encouraged by Mr Kirubi’s confidence in the company.
Centum said it expects a strong performance for the remainder of the year, with the firm’s profitability held back by higher costs in the first half ended September.
Its finance costs nearly tripled to Sh298 million from Sh103 million while direct costs, including salaries, jumped 74 per cent to Sh219 million from Sh126 million.
“The increase in finance costs was on account of bond service (interest payments),” Centum said in a statement.
The company raised a total of Sh4.1 billion late last year through two corporate bonds that pay investors an average interest rate of 13 per cent annually.
This translates into interest payouts of about Sh540 million per year, with the company paying just over half the amount in the six months to March. The cash is funding Centum’s aggressive investments locally and in the region.
The firm said it has raised Sh5.1 billion in loans and another Sh9.4 billion in equity from local and international companies to develop its Two Rivers property in Kiambu area.
It has broken ground on the project that will see the construction of hotels, a shopping mall, office blocks and residential units.
“Two Rivers Mall is over 30 per cent let and there is significant interest from some of the top retail brands in the world,” Centum said in a statement without giving details.