Centum issues profit warning citing accounting rule
Centum Investments has issued a profit warning citing an accounting rule that stops the firm from including pre sold real estate property as income.
The company says it has collected Sh3.5 Billion from house bookings but can only recognize the money after the units are sold and ownership is transferred.
Centum has 1,478 units under construction valued at Sh10 Billion and claims the units have continued to attract interest despite the Coronavirus pandemic.
“This performance will not reflect in the group’s consolidated income statement for this financial year because revenue from sales of residential units is only recognized upon registration and transfer of ownership to the respective buyers,” the company said in a March 23 notice.
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In 2019, Centum recorded a profit of Sh7.38 billion attributed to the sale of 53.9 per cent stake in Almasi Beverages Limited and 27.6 per cent stake in Nairobi Bottlers Limited for Sh19 billion.
Centum now says the deal injected Sh12.5 billion to the company’s income, an aspect that has not been repeated this year.
The investment firm also says they experienced lower returns from their investment portfolio as companies cut dividends and share price dropped due to the coronavirus pandemic.
Centum also expects the companies it owns to record a drop in profitability as a result of Covid-19 economic fallout, further dampening the entity’s outlook.
“Other portfolio companies in which we have minority stakes and which would usually contribute to the Group’s performance through dividend distributions have cut back on dividend payments during this financial year in order to preserve their liquidity as they navigate through Covid-19 uncertainties” the investment firm said.
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Centum joins 14 other companies that had issued profit warnings by December 2020 indicating the toll of Covid-19 on businesses in the country.
Restrictions to contain the virus reduced company operation times, disrupted supply chains and increased costs of setting up safety measures.
Customer demand has also been suppressed as people cut spending due to uncertainties while about 1.7 million people lost jobs as the economy sank into a depression.
