Centum’s heavy borrowing spree has begun taking a toll on the company’s performance, according to results for the half year ending September 30, 2017.
Financial statements forwarded to Nairobi Securities Exchange (NSE) today indicate that the investment firm’s net profit slumped 21 percent as cost of debt increased 61.2 percent over the same period.
Net profit fell to Sh1.6 billion from Sh2 billion a similar period last year while debt financing costs increased to Sh557.2 million from Sh345.7 million.
Also gnawing at the firm’s profitability is increasing operating and administrative costs which grew 10 times faster than its total operating income.
During the reported period, operating and administrative costs increased by 110 percent to Sh524 million from Sh250 million while investment income increased by a narrow 15 percent to Sh2.23 billion from Sh1.93 billion.
Centum Chief Executive Officer James Mworia downplayed the high financing costs impact on the firm’s profitability, but blamed the earnings slump on interest rate capping law.
“This decline was largely attributable to the interest rate capping on the banking subsidiary, Sidian Bank; lower income from the asset management subsidiaries driven by a depressed market and sluggish transaction environment as a result of political uncertainty that characterized the year,” said Mworia in a statement accompanying the financial statements.