Centum has firm grip on its growing investment bag

Investment firm Centum recently reported a 160 per cent growth in net profit to Sh7.9 billion while holding a total portfolio worth Sh68.9 billion.

The company has multi-billion-shilling projects in the pipeline that it says will shore up its bottom-line once commissioned.

The Business Daily interviewed the firm’s chief executive, 37-year-old James Mworia, on the stellar performance and how things are likely to play out going forward. Here are the excerpts.

Some analysts may argue that your profits would not have been that strong in the absence of the 13 per cent UAP stake you sold. What is your take on this?

The sale did give us a value uplift of almost Sh2.4 billion. We had been carrying the UAP stake in our books worth Sh2.7 billion, sold it for Sh5.2 billion and paid a capital gains tax of about Sh200 million.

People invest to add value and ultimately we realised that value. UAP therefore represented a very successful exit for us.

All our investment lines grew with total returns increasing by Sh9 billion to Sh31.9 billion, a 39 per cent jump. Even without the UAP sale, we were still going to do well.

Centum’s shareholders have not received dividends for the past several years despite improved performance. What is the rationale behind this?

The dividend drought is in the best interest of shareholders. If the company has better investment opportunities than those available in the market, it makes sense to retain dividends and reinvest it in growth areas.

This decision has been vindicated if you look at the shareholder book value growth and the share price growth over the past five years.

Should the market expect Centum to exit more companies where it is a minority shareholder like AON, General Motors and NAS Servair?

Centum’s old strategy was heavy on portfolio investments. About 60 per cent of it was in shares besides the minority shares we held in certain companies.

Today, we are focused on active investments. We are reviewing our position in companies where we hold a minority stake with the intention of redirecting capital to sectors where we can control use.

The issue of exits is sensitive and I would not want to comment further until something crystalises.

You have, however, increased your shareholding in Almasi Beverages (Rift Valley, Mount Kenya and Kisii Bottlers) to 51 per cent. What new developments should we expect now that you are in the driver’s seat?

We have invested Sh1 billion in a returnable glass line at Mount Kenya Bottlers.

The line, which became operational recently, has the capacity to produce 40,000 bottles per hour. By September, we will have installed a new plastic bottling line in the same plant with a capacity of 36,000 bottles per hour.

The investment is also worth Sh1 billion. Almasi has been relying on the Nairobi plant for its plastic-bottled products, a model that is unsustainable since demand in the city is also growing.

You have a regional distributorship contract with Carlsberg. You recently mentioned plans to begin local production of the famous beer. How soon should we expect this?

Yes, we are in talks with Carlsberg to build a factory in Kenya, but I am not at liberty to disclose time lines for competitive reasons.

We plan to be brewing Carlsberg and other products within the brewer’s extensive portfolio that are relevant to our market.

We shall soon start importing Tuborg (a product of the Carlsberg Group).

Your flagship investment is the Sh25.2 billion Two Rivers project. Give us an update on this.

The first phase, which is the mall, is set to be completed in October. Tenants will need another two months to settle in -meaning we should have the grand opening by the end of the year. The mall covers an area of 1.2 million square feet and will have 220 shops.

Sixty per cent of the shops are booked by top brands, including the anchor tenant French retailer Carrefour and other international firms.

Centum is also working with another international partner to construct a five-star hotel. City Lodge, a three-star hotel of 80 beds will also be built.

Phase two of the project involves construction of 108 apartments beginning August, with a December 2016 completion date.

Centum is also said to be planning to construct a hospital and venture into the education sector. Is this true and if so, what are the considerations?

Yes, we are partnering with an international healthcare provider to construct a fully-fledged 200-bed hospital within Two Rivers.

We have identified the location and are now drawing up the plans.

The school will be a partnership with a group that operates schools in Europe, Middle East, the United States and in Asia.

It will not necessarily be at Two Rivers but definitely in Nairobi. I am bound by confidentiality and regulatory clauses, so I cannot make further disclosures until later in the year.

The 960 megawatt coal project you are set to construct in Lamu has been hit by litigation, with one bidder contesting your win. Have you made headway with this?

The project is a very attractive public private partnership and that is why it attracted so much interest.

The petitioner’s grounds were dismissed in January and they were ordered to pay our legal fees of Sh180 million. These fees have been the cause of the stalemate so far.

We held discussions with the litigant recently and agreed to end the matter with each party accepting to settle their costs.

We have filed the consent in court so the project can continue unimpeded. We plan to begin construction this year and have cheap power come on stream in 2019.

You have also acquired 10,500 acres from Rea Vipingo land. What do you plan to do with it?

We are exploring options of setting up an urban node in that land, which is currently under sisal plantation. The urban node will include an industrial park, education, residential and health centres as well as a hotel.

The highway connecting Mombasa and Kilifi counties cuts across the land. Part of the land is also flanked by the seafront, making it a prime site for development.

The project may be similar to Two Rivers in terms of ambition but it has to be suited to that market.

Centum’s critics may opine that you have your hands in too many jars and that you run the risk of losing grip on some of them. What is your response to this?

Former US President Theodore Roosevelt once said that it is not the critic who counts, nor the man who points out how the strong man stumbles, but credit belongs to the man who is actually in the arena. Centum is in the arena.