Investor Update Presentation - Centum Investment
51
Investor Update Presentation October 2020
Transcript of Investor Update Presentation - Centum Investment
Investor Update Presentation
October 2020
Table of Contents
2
Company Overview 3
Our Portfolio 7
Our NAV and Share Price 41
Covid-19 Impact & Outlook | FY2020/21 47
Centum at a Glance
3
1. Share price as of 01 October 2020
2. As at 31 March 2020.
3. From June 2020, following bond redemption
4. Rating awarded by Global Credit Ratings (GCR) in Sep 2020
KES 13.5Bn Market Capitalisation(1)
KES 47.4Bn Net Asset Value(2)
11x NAV growth FY2009– FY2020
Private Equity 22%
Marketable Securities 10%
Development 2.8%
KES 57Bn
Total
Assets
Real Estate 65%
0% Long Term Gearing (3)
30% Centum 4.0 target annualized cost-to-income ratio
3 Business Segments of Focus: RE, PE & MSP
A+(KE), A1(KE) National scale Long and Short-term issuer
ratings accorded on account of strong financial
profile(4)
Portfolio make up – 31 March 2020
Centum Investment PlcEvolution of our business
Centum is the leading listed investment company in East Africa and has existed for 53 years. We are
listed on the Nairobi Securities Exchange and the Uganda Securities Exchange
Centum 3.0Deploy, develop & manage
• Driving value creation in
portfolio companies &
realizing gains through
partial or full exit
• Commenced investments in
infrastructure and early
stage greenfield companies
Centum 4.0Sustainable growth
Focus on building sustainable
and resilient businesses with
decentralized core
operations.
Business organised into:
• Private Equity
• Real Estate
• Marketable Securities
Portfolio manager acquiring
minority stakes in publicly
traded market leading
companies
Centum 1.0Passive portfolio investor
Centum 2.0Active portfolio investor
Re-organized business into:
• Private Equity (PE):
Acquiring minority stakes in
market leading companies
• Quoted PE: Investment in
listed securities
• Real Estate: Master planned
nodes.
2004 2009 2014 2019 2024
Total Assets Kes 72 BnKes 29 BnKes 4.6 Bn Kes 57 Bn
2020
Long Term Gearing 30% 16%18%0%
Jun 2020
0%
Incre
asi
ng m
atu
rity
11xNAV growth in
the past decade
Net Asset value Kes 53 Bn Kes 47 BnKes 23 BnKes 4.1 Bn
4
Centum’s investment philosophy
To give investors access
to otherwise
inaccessible investment
opportunities
To grow net asset value
and enhance cash
return to the
shareholders
Centum’s twin objectives are:
&
Real EstatePursue market led infill developments and sale
of development rights
Private
Equity
Invest in companies where we can achieve
significant growth in value and position for exit
Marketable
Securities
Optimise income, preserve capital and optimise
capital growth subject to market conditions
Development
Achieve significant value uplift by taking
projects through the development phase, de-
risking and taking them to financial close
Monetize value• Annuity income stream in form
of dividends and interest
• Repayment of shareholder loans
from third party capital raise
• Equity exit at a gain on initial
investment
Deploy capital• Identify compelling opportunities
from…
• Our proprietary networks and ..
• Rigorous evaluation process, then…
• Deploy capital through innovative
investment structures
Create value• Institutionalize robust governance
structures and enhance processes
• Leverage on our networks to grow
products and markets
• Resolve operational challenges
• Optimize capital structures
Redeploy retained proceeds into new opportunities
Our
invest
ment
cycle
5
Centum 4.0 StrategyFY20 – FY24 Priorities
6
Return & Dividend
Pay-out
Organizational
Effectiveness
Portfolio Focus
• Ensure optimisation of Centum’s operating model
to support effective and efficient execution of its
strategy including governance, structure, people,
processes, technology and culture
• Maintain focus on three business lines with target
asset allocation as:
▪ Real Estate: 45-55%
▪ Private Equity: 30-40%
▪ Marketable Securities: 10-20%
Operating Costs• Maintain an average operating cost-to-cash annuity
income ratio at a maximum 30%.
Capital Structure &
Liquidity
• Generate a minimum return on equity of 20%
• Optimise dividend pay-out to the higher of 30% of
the cash annuity income and the previous year’s
dividend pay-out
• Repayment of all long-term debt obligations.
• Double the book-value of shareholders’ funds to
KES 100 billion by FY24
✓ Completed realignment of our business into three
independently managed segments – PE, RE & MSP – each
with experienced management and technical teams.
✓ Undertaking inhouse due diligence across our portfolio to
optimize process and enhance efficiency.
✓ Currently focusing on unlocking the value in real estate
portfolio for redeployment into private equity and
marketable securities.
✓ We are well on course to achieving an average cost-to-
income ratio of 30% over the Centum 4.0 period.
✓ Group posted Ksh 4.6bn in FY2020 PAT, 12% y-o-y growth.
✓ Made exits worth Ksh 19.6bn realizing 30% blended IRR.
✓ Paid dividends of Ksh 799m, equivalent to Kshs 1.2 per
share
✓ Repaid all long-term debt obligations worth Ksh 14.4bn
including Ksh 6.6bn bond redemption made in June 2020.
✓ Closed FY2020 with Kshs 8.9 bn in cash and marketable
securities.
Strategic Pillar Progress and FY2021 focus
7
Our Portfolio
Our portfolio We have structured our operations under three distinct segments
Real Estate
Private Equity &
Development
Marketable
Securities
Shared Services
Hold
s and M
anages
Greenblade Growers
Hold
s and M
anages
Holds and manages the marketable securities portfolio as well as other client funds as a licensed asset
manager
Nabo Capital invests the Centum portfolio in securities markets across Africa and manages third party
funds for a fee
Provide business support functions across the portfolio and these include; Finance, Treasury, Human
Capital Management, Legal & Company secretarial, Tax, Internal audit, Risk, Information Technology,
Strategy & Transformation Office
Centum Development (K)
Ltd [CDKL]
8
Our PortfolioCentum 4.0 Strategy Overview
9
Under Centum 4.0, the Group’s focus is on cash returns with a 5-year target of generating Kes 21 billion in annuity
income and Kes 26 billion in exit proceeds and shareholder loan repayments
Dividends: KES 6 billion
Exit Proceeds: nil
Private Equity
CICP
Real Estate Marketable Securities
Annuity Income: KES 6 billion
Exit Proceeds: KES 19 billion
Dividends: KES 9 billion
Repayment of shareholder loans: KES 7
billion
Annuity Income: KES 21 billion
Exit Proceeds: KES 26 billion
10
Real Estate
Managed by
Real EstateOrganization structure
11
Two Rivers Development Limited
Project SPVS
Centum Real Estate Limited
100% 100%
Centum Development Company Limited (Mauritius)
Vipingo Development LimitedKenya
Uhuru Heights LimitedKenya Centum Development
Kenya Limited
Pearl Marina Estates Limited Uganda
Projects:• Mirabella Villas• Bellavista Apartments• Riviera Townhouses• La Perla Bungalows• Signature Villas
100%
Cascadia ApartmentsProjects:
• Awali• Palmridge
Loft Two Rivers
365 PavilionElmer
KasaraniMzizi
Riverbank Two Rivers
100% 100%
Centum Investment Plc
100% 58%
Two Rivers Mall50%
Real EstateValue creation progress under Centum 4.0 strategy
12
CICP
Real Estate
Dividends: KES 9 billion
Repayment of shareholder loans: KES 7 billion
FY
’2021
Pro
gre
ss
Locked in Real Estate cash return pipeline:
KES 11.4 Bn (71% of 5 year target)
of which
Kes 6.7Bn will have been paid up by end of FY2021
Target is to contribute KES 16 Bn to
Centum over the 5-year strategy period
ending FY2024
Cash Return Target Over Centum 4.0
KES 6 bn
KES 4.6 bn
KES 3 bn KES 2.8 bn
Residential Units Land sales
Locked in Potential Cash
Return from Ongoing
Projects / Transactions:
KES 11.4 bn
KES 0.54 bn
KES 2.2 bn
5 Years Target:
KES 16 bn
Expected FY2021 Total
Distribution:
KES 6.7 bn
KES 7 bn
Shareholder Loan
Repayment
KES 4 bn KES 4 bn
Real EstateStrategic Pillars
13
Revenue from completed projects and land sales to reflect in current financial year’s performance, as the legal process of transfers to
buyers are completed
Objective Achievement at 30 September 2020 Pillar
Under Centum 4.0, Centum Real Estate is pursuing a four-pronged real estate strategy
3rd Party
Projects
• JV agreements established for development
of 1,238-units in phases and various locations.
Elmer Kasarani and 365 Pavilion near USIU
under market validation with 26 units sold.
To partner with landowners for
development of affordable housing on a
joint venture basis.
4
Rentals
• 3% growth in Mall letting and 6% on office
letting. 6 screen cinema complete on mall
rooftop and expected to boost footfall.
To optimize current and future operating
assets such Two Rivers mall, offices, Theme
Park and rental developments.
3
Land Sales
• KES 2.8 billion: value of bulk land sales,
with over Kes 300m deposits collected
and balance to be collected in FY2021.
To monetize our land banks through bulk
land sales and sale of development
rights
2
Infill
Projects
▪ 1,450 units under construction, of which
1,112 units (77%) have been pre-sold with a
revenue potential of Kes 9.37 billion
To monetize our land banks through
infill projects1
Real EstateOur Development model | sales-led
14
Pre-ConstructionMarket
Validation & Fundraising
Concept
Business CaseFeasibility Business
Case
321 4
Objectives
– Product brief with unique
value proposition
– Desktop market study
– Preliminary budget/QS
estimates
– model
– Consolidated feasibility
business case
– Updated product brief
– 3rd Party detailed market
study
– Concept product designs
– Concept marketing strategy
– Final Financial Model
– Final Concept business case
and IM
– Final marketing launch and
collateral
– 30% presales of GLA, GBA or
acreage
– Secured financing (signed
equity and debt term sheets)
– fully funded project
– Project update/progress
reports (cost, time and quality)
– Site-visits
– Project completion/close-out
report
Overarching
Decision
Criteria
• Compelling value
proposition that has been
approved by internal
stakeholders and meets
the return requirement of
30%
• A third party that
validates the
commercialization
assumptions of the
concept business case
• Securing 30% presales
targets
• Securing executed debt
and equity term sheets
aligned with concept
business case
• Securing a fixed
sum contract
Construction
5
6 months2 months1 month 1 month 24 months
– Detailed design and BOQs
– Final negotiations and award
of fixed contracts
– Detailed construction program
and milestones
Timelines
• Time
• Quality
• Cost
Real EstateOur model is designed to mitigate risks across the development value chain
15
• Project
Delivery Risk
▪ The Company has a large in-house Project Management /
Technical team that oversights all developments.
▪ We have a standing Project Management engagement with MML
Turner Townsend to complement our capacity.
▪ Specific initiatives put in place jointly with contractors to
response to COVID-19 impact on works programs
▪ Robust treasury management to ensure projected payments are
fully funded
▪ Market offtake
risk
▪ Inability to sell developed units as a result of
over-supply in specific nodes or slow down in
demand as a result of COVID-19 economic
impact
▪ Development process is sales-led. Our policy is 30% pre-sales
before ground breaking. [Of 996 units to be delivered in 2020/21,
846 (85%) have been sold. 77% of all units u/c pre-sold.]
▪ Institutional off-take : ongoing strategic engagements with
overseas bulk off-taker
▪ Diversification: Uganda and Kenya (Nairobi, Kilifi)
▪ Bias towards affordable and mid-market units.
Nature Mitigation
• Funding risk
▪ Deployment of deposits to reduce capital intensity: KES 2.6Bn
collected to date and a receivable of KES 6.8Bn. Current
receivable exceeds projected costs to completion.
▪ Since the 1st case of Covid 19, we have collected KES 0.7bn.
▪ Currently, all projects are debt free. We are pursuing portfolio
level structured debt locally for existing pipeline and engaging
with overseas capital sources for future pipeline.
▪ Recycling of retained earnings as equity for projects being
completed in 2020/21
▪ Strong land sales pipeline: KES 2.8 Bn closed to date.
▪ Mismatch in deposit collections and project
outflows
▪ Reduced appetite by local banks for real
estate sector exposure
▪ Impact of COVID-19 related lockdowns in our
locations or directives on social distancing
that reduces labour resources on sites on
delivery timelines
▪ Generic risk that projects will not be
completed on the set project timelines
Real EstateOur model is designed to mitigate risks across the development value chain
16
▪ Cost escalation
risk
▪ Escalation of project cost through change in
scope or variations will impact projected
profitability / cash flows
▪ In-house Costs and Contracts management team
complemented by outsourcing to QS firms;
▪ We only enter into fixed sum contracts, tied to our business
case, to manage cost escalation risk. All rates are fixed
upfront.
▪ Frequent cost appraisals, jointly with contracted QS firms
▪ Strong financial controls at project level and at corporate
level, with monthly reviewing and validation.
Nature Mitigation
• Counter-
party risk for
Joint
Ventures
▪ Robust due diligence procedures on JV counterparties and
on third party land, with a Board approved DD checklist on
which independent Risk Assurance from a third-party firm
has been obtained;
▪ Outsourcing of specialist DD elements to third party firms
(for example legal)
▪ Market validation is a condition-precedent in al JV
arrangements. We also have a criteria for qualifying
locations / sites, driven by market demand assessment.
▪ Technical DD on specific land to evaluate site suitability by
our technical team and third-party firms
▪ Risk of JV with unsuitable parties or land-
related risks
▪ Risk of tied capital in an unsuccessful JV
and related litigation risk
17
Real EstateInfill Projects: Performance as at 30 September 2020
Pearl Marina, UG Vipingo, KETwo Rivers, KE
& 3rd Party JVs
Total: 428 Units
Under construction: 428Phase 1
Units
Units Pre-
Sold
Sales Value
of Pre-sold
Units
KShs. 3.06 billion KShs. 4.08 billion KShs. 2.23 billion
Total
Total: 2,083 Units
Under construction: 1,450
77%
KShs. 9.37 billion
1,321
UnitsTotal Approved
Schemes
1,862
Units
1,407
Units
4,590
Units
89%
of Units
under
Construction
47%
of Units
under
Construction
91%
of Units
under
Construction
of Units
under
Construction
Underlying
Debt @
Project LevelNil Nil Nil Nil
Projects fully funded
by internally
generated fundsTotal Deposits Collected as at 30 Sep 2020 was
KShs 2.63 billion
201
344
FY20FY19
381
Sep 20
Total: 1,141 Units
Under construction: 508Total: 514 Units
Under construction: 514
56
198
FY20FY19
265
Sep 20
325
457
FY20FY19
466
Sep 20
582
999
FY20FY19
1,112
Sep 20
18
Real EstateFund raise: Kes 4Bn bond issue is underway
Issuer Centum Real Estate Limited (subsidiary of Centum Investment Plc)
Purpose Bridge funding for the construction of residential development projects
Tenor 3 years
Amount KES 4,000,000,0000 (with a KES 2bn green shoe option)
Description Secured zero coupon notes
Currency KES
Interest rate/coupon Zero coupon
Discount rate 3 year Treasury bond plus the margin
Security • Floating charge over the receivables and any unsold units
• Fixed charge over the sinking fund
Embedded options • Conversion of the outstanding amount into housing units
• Equity linked component
Credit Rating Short term and long term issuer ratings of A2(KE) and BBB+(KE) by Global
Credit Ratings (GCR).
19
Real EstateCovid-19 Impact on Sales and Collections up to Sep 2020
Apr-Sep 2020
Performance
2019 2020
% Change
KShs
'millions'
KShs
'millions'
Cumulative Revenue
Potential of Sold Units
as at 30 Sep 5,867 9,373 +60%
Cumulative Deposits as
at 30 Sep 1,249 2,629 +110%
Deposits Collected
Between April - Sep 737 656 -11%
Our real estate business has remained
resilient in the covid-19 environment owing to
risk mitigation embedded in our strategy.
✓ Revenue potential of units sold grew by 60%
y-o-y underscoring the underlyingg demand.
✓ Cumulative cash collection for units sold
doubled y-o-y to hit Kes 2.6 billion.
✓ Collections made in the six months to Sep
2020 was 11% lower than prior year’s similar
period. This is a significant recovery from a
40% decline registered earlier in April/May
2020
Real Estate Projects completed and handed over to buyers in Oct 2020
Awali Estate in Vipingo, Kilifi – 74 Units
Mirabella Villas at Pearl Marina, Uganda – 22 Units
20
Real Estate Handover of Completed Units in Vipingo and Pearl Marina
21
Real EstateDevelopment progress to Sep 2020
22
Palm RidgeExpected Completion – Q1 2021
Riverbank ApartmentsExpected Completion – June 2021
Cascadia ApartmentsExpected Completion – 2022
Real EstateDevelopment progress to Sep 2020
23
Bella VistaExpected Completion
Q1 2021
Real EstateRentals: Two Rivers Lifestyle Centre update
24
72%
75% 76%78%
81%
HY18 FY18 HY19 FY19 FY20
Mall Occupancy on the Gross Lettable Area –31 March 2020
+3% on
59,032
sq.
metres
6%9%
11%14%
20%
HY18 FY18 HY19 FY19 FY20
Office Towers Occupancy on the Gross Lettable Area – 31 March 2020
+6% on
25,244
sq.
metres
Mall roof top
Cinema
complete
and
undergoing
fit out
25
Private Equity
Managed by
26
▪ 2.7x growth in profitability year on year, driven by turnaround of
Sidian Bank Limited
▪ Despite declined business due to the Covid-19 pandemic, current
portfolio has not made any cash calls from Centum and remain self-
sufficient from their reserves.
▪ Over 3.5% annualized cash yield achieved on the portfolio YTD.
Profitability
Annuity Cash return to
Centum
▪ We completed the sale of Almasi Beverages, Nairobi Bottlers and
King Beverage Limited and realized total sales proceeds of Kes 19.6
Billion.
▪ We continue to evaluate a pipeline of compelling opportunities for
possible future deployment.
Investment Activity
Private EquityValue Drivers FY20
1
2
3
Private Equity A solid track record of value creation and realization
We actively
manage our
portfolio to
implement
value
creation
initiatives
that
generate
maximum
returns.
Company Industry
% of
company
acquired
Cost of
investment
(Kes bn)
Holding
Period
(months)
Dividends
since
inception
(KES bn)
Exit
proceeds
(KES bn)
Total
realized
proceeds
Dividend
Yield on Exit
Proceeds
Exit Multiple
on Cost
(MOC)
Gross KES
IRR
(KES bn) % p.a
Consumer 26.40% 0.3 96 0.04 1.1 1.1 0.5% 3.7x 20.76%
Transport 10.00% 0.06 14 0 0.08 0.08 0.0% 1.3x 4.40%
Manufacturing 22.80% 0.4 23 0 1.2 1.2 0.0% 3.0x 66.90%
Financial
Services36.00% 0.8 63 0.4 2.7 3.2 2.8% 3.4x 38.90%
Insurance 24.20% 0.9 69 0.3 5.5 5.8 0.9% 6.1x 39.90%
Insurance 21.50% 0.2 85 0.5 1 1.5 7.1% 5.0x 52.40%
Asset
Management73.40% 1.1 53 0.4 2.4 2.1 3.8% 2.2x 24.40%
Consumer 53.94% 1.8 126 0.9 10.9 11.8 0.8% 6.1x 25.90%
Consumer 27.62% 0.7 126 1.4 8.6 10.0 1.5% 12.3x 34.29%
Total
realisations6.3 3.9 33.5 37.4 1.9% 5.4x 25.8%
27
KShs. Million
Bottler Proceeds (net of Capital Gains Tax) 18,602
Invested in Marketable Securities 6,477
Interest Savings on Debt Paid 990
Projected Interest Income from Marketable Securities 907
Total Savings & Interest Income 1,897
Peak Dividends 408
Incremental annuity cash flows to Centum 1,489
Private EquityExit of Almasi Beverages and Nairobi Bottlers Limited
28
325.3
153.8
302.2 304.1
407.6
298.6
1.9%
0.9%
1.8% 1.8%
2.4%
1.8%
0%
1%
2%
3%
4%
5%
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
FY15 FY16 FY17 FY18 FY19 Average
Dividends (KES Million) Dividend Yield (%)
KShs.
Million
Compared to the historic dividend and dividend
yield between FY15 to FY19…
…..repayment of the debt represented an
incremental recurrent income KShs. 1,489 million
It would have taken 45 years (Sales Proceeds/Peak
Dividends) for the company to payback its capital.
Private EquityBottlers exit proceeds reduced leverage & enhanced liquidity
29
Corporate Bond II
Term Loan
Total
KShs. 6,448 million
-
KShs. 6,448 million
KShs. 6,367 million
KShs. 7,636 million
KShs. 14,003 million
0.1%
54%
100%
31 March 2020 31 March 2019
Company Long Term Debt
▪ Long term debt balance at 31 March 2020 comprised the bond which was subsequently paid in June
2020.
▪ Finance costs was incurred for most of 2019/20 as debt repayment took place late in the year.
▪ Savings in finance costs estimated at Kshs 1.8 billion annually expected to be realized looking forward
Utilization KShs
Bottler Proceeds Received
(Net of Capital Gains Tax)18,602
Debt Repayment (principal + interest) (10,712)
Dividends - FY 2018/2019 (799)
Investments in Real Estate and Private Equity (614)
Total uses (12,125)
Amount Invested in Marketable Securities 6,477
Utilization of Bottlers Exit Proceeds
3,096
2,014 2,118 2,133
596
656
1,0451,449
2016 2017 2018 2019
Sidian’s Net Interest and Non-funded Income
Interest Income Non-Funded Income
30
Private EquitySidian Bank
KShs
million
Sidian Bank remains profitable with 30% growth in loan book and significant improvement in asset quality as
NPL ratio drops from 20% to 12%
12%NPL ratio
41%NFI contribution to total
revenues
+1%
46%Liquidity Ratio
+5%
September 2020 update
28
(422)
(378)
113
2016 2017 2018 2019
Sidian’s Profit (Loss) After Tax FY2016 to FY2020
KShs
million
-6%
31
Private EquityLonghorn Publishers
Longhorn has experienced significant growth in recent years with diversification in products and markets
9 marketsGeographical operations
24.5%Market Share in KE
105 120
196248
357 3608%
14% 14%
19%
24%23%
0%
5%
10%
15%
20%
25%
30%
50
150
250
350
450
2014 2015 2016 2017 2018 2019
Longhorn Publisher’s EBIT and EBIT Margins
FY 2014 - 2018
EBIT EBIT Margin
KShs. Million Total Assets
Interest
Bearing Debt
Longhorn 2,450 1,175
KShs
million
28%Pre-Covid CAGR on EBIT
We assess that Covid-19
impact is short term and the
business will recover strongly
in FY21 as learning
institutions reopen.
Diversification to digital
products
https://elearning.longhornpublishers.com/
❑ Provides in flight airline catering with 99%
market share.
❑ Currently focusing on diversification of
revenue streams into corporate catering and
SGR train catering
❑ Earned Centum a 14% average dividend yield
in FY2020
32
Private EquityNAS Servair & Zohari
Market leader in
airline catering8%
Y-o-Y asset
growth
+8%KShs. 469 millionTotal Assets
Long term growth opportunities
exist in healthcare, ICT and
hospitality sectors
+8%KShs. 16 millionEBIT
33
Private EquityIsuzu East Africa
Isuzu has continued its market dominance with approximately 39% share
28.1%
35.7%39.4%
2018 2019 2020
+3.7%Market share gained in
2020
Strategic partnerships with financiers to boost sales...
34
Private EquityCentum Value Fund II: positioning for economic recovery
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
MSCI World Index
Data Source: IMF, OECD Report, Thomson Reuters
• We anticipate that depressed entry multiples could present some great opportunities to re-enter the private equity market at attractive valuations
• We are well position to take advantage of arising opportunities, given our enhanced liquidity.
35
Development
Managed by
Private Equity: Development PortfolioPower Assets
36
Milestones to date
Power Purchase Agreement (PPA)
Government of Kenya Letter of Support
Land acquired
Commenced exploratory drilling
Geoscientific studies finalized in partnership with KENGEN.
The target is to embark on drilling in this financial year.
✓
✓
✓
✓
Milestones to date
Power Purchase Agreement (PPA)
Government of Kenya Letter of Support
Electricity Generation License
Environmental Impact Assessment License issued
The EIA License that had been issued to the Amu Power was
revoked on June 26, 2019 leading us to fully write down its
value in FY2020.
Discussions are progressing with key stakeholders to agree on
the way forward on the project.
✓
✓
✓
✓
37.5% Stake
KShs. 1.45 billion
Carrying Value
51% Stake
nil
Carrying Value
Private Equity: Development PortfolioSABIS School and Greenblade Growers
37
87% of prior year export volumes achieved despite covid-19.
Major improvement in efficiency leading to enhanced and
consistent gross profit margins in FY2021.
5474
156 171
0
50
100
150
200
2017 2018 2019 2020
Enrolment of Students
Near term priority: Expansion of the portfolio of schools
within Africa through investment in greenfield and
brownfield locations
210 students: EBITDA
Break-even
38
Marketable Securities
Managed by
Marketable Securities
Allocation and Performance Highlights
39
90% of total MSP was allocated to fixed income and cash
❑ Growth in holdings of marketable securities and
cash from KES 4.1 billion at 31 March 2019 to Kshs
8.9 billion at 31 March 2020
❑ Strategic allocation of 90% of portfolio to fixed
income and 10% to listed equities pre-COVID (2019:
60%/40% respectively) in line with our capital
preservation objective.
❑ KES 450 million cash returns in FY20 compared
with KES 400 million in FY19, representing 12.5%
growth.
❑ 12.2% gross annualized return to August 2020;
capital fully preserved from erosion in the Covid-19
environment.
5%
60%
30%
5%
Equities
Fixed Income
Cash
Mutual Funds
Kes 8.9 Bn
40
Our NAV and
Share Price
Centum’s ValuePortfolio value attribution | 31 March 2020
41
NAV/ Share
Master-planned to new urban nodes
Catalyst Infill developments
Real Estate01
Trading subsidiaries or investments
that are cash generating
Private Equity02
Broadly diversified portfolio of equities
and fixed income across various stock
exchanges in Africa
Marketable Securities
03
Investments, outside real estate, that
entail early stage projects initiated
under Centum 3.0 strategy
Development Portfolio
04
NAVTotal Assets
KES 36.9 billion
KES 9.4 billion
KES 8.9 billion
KES 1.6 billion
KES 42.0 | 59%
KES 13.4 | 19%
KES 13.5 | 19%
KES 2.4 | 3%
KES 27.9 billion
KES 8.9 billion
KES 8.9 billion
KES 1.6 billion
Due to the significant PE exits made in FY2020, the RE segment has had increased weighting. We continue to focus on rebalancing the portfolio
within our strategic target asset allocations:
Real Estate: 30-35% Marketable Securities: 20-30%Private Equity: 35-45%1 2 3
KES 56.8 billion KES 47.3 billion KES 71.3 billionTOTAL
42
Centum’s Market Cap and Intrinsic ValueShare Price, Market Performance & NAV
34.5
48.0
59.1
67.3
73.2
79.0
71.3 71.3
36.5
63.5
46.0
34.5
44.5
32.0
22.7 20.7
4,946 5,248
3,982
3,113
3,845
2,846
1,891 1,852
-
1,000
2,000
3,000
4,000
5,000
6,000
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
FY14 FY15 FY16 FY17 FY18 FY19 FY20 Sep 2020
Centum Share Price vs NSE 20 Index
NAV per Share Price per Share NSE 20
Ke
s p
er
Shar
e
Centum’s share price has
declined over the past 6
years in pace with the
overall bearish performance
of local equities market.
Thus, our market
capitalization does not
reflect the intrinsic value of
the underlying portfolio of
assets
43
Centum’s Market Cap and Intrinsic ValueSignificant opportunity for value investors
Simulated share price attribution to our portfolio
Portfolio Assets NAV/Share
Sidian Bank 3.88
Isuzu East Africa 3.67
Longhorn Publishers 1.30
NAS Servair 0.92
ACE Holdings 1.40
Other Private Equity Assets 2.19
Private Equity 13.36
Two Rivers Development 9.10
Vipingo Development 23.11
Pearl Marina 8.52
Other Real Estate Assets 1.30
Real Estate 42.03
Akiira 2.18
Amu Power -
Greenblade Growers 0.20
Other Development Assets 0.04
Development 2.41
Total for PE and RE Portfolios 57.8
Marketable Securities 13.5
Total NAV per Share 71.30
Asset contribution to NAV per Share | Mar 2020
Cash +
Marketable
Securities
KShs.
Per
Share
Share Price as at
30th Sep 2020
Implied Market
Valuation for rest
of portfolio
7.220.7
13.5
vs Kes
57.8
Centum’s Value GapClosing the NAVPS and share price gap
Commentary Implementation statusDriver
Alignment of
management rewards
to shareholder value
✓ Staff bonus structure aligns rewards to performance, whereby
a bonus is only awarded if the company achieves the hurdle
rate of return on shareholder funds.
3
Dividend policy
✓ Done
✓ Dividend policy has been defined for our current strategy period
as pay out of the higher of 30% of annuity cash return or prior
year dividends.
✓ Having retired long term debt, savings on finance cost may be
available to enhance dividend payment going forward.
1
Share repurchase✓ Whereas share buy backs were permitted by law, the
relevant guidelines are yet to be finalized by the market
regulators.
✓ Once the guidelines are released, Centum will assess the
suitability of this option.
2 ✓ TBC
✓ Done
Whereas the company’s market price movements is subject to many external factors, management
has considered some drivers that may be within our control
44
Centum’s ShareholdingStaff and Directors holdings
The holdings by Centum staff and directors has increased over the last 5 years
45
No.
of
share
s held
(m
illions)
348
353 353 352
360
2016 2017 2018 2019 2020
Centum Shareholding by Staff and Directors
Covid-19 Impact &
Outlook | FY2020/21
46
Overview of Covid-19 Impact on our portfolio
47
Proportion of assets impacted:
Portfolio segment
NAV per
share
31 Mar 2020
(Kes)
%
Contribution
to Centum
NAV
Positively Neutral Negatively
Expected
recovery of
portion with
negative impact
Growth portfolio 13.36 19% 0% 56% 44%
Short - Medium
term
Real Estate 42.03 59% 0% 78% 22% Short term
Development 2.42 3% 0% 100% 0% n/a
Marketable
Securities 13.5 19% 100% 0% 0% n/a
Total NAV per
share at Mar 2020 71.31 100% 19% 60% 21%
Covid-19 Impact and Future Outlook | FY 2020/21
48
Real Estate Private EquityMarketable
SecuritiesDevelopment
• Evaluating new
opportunities that meet
the investment criteria
• Leverage new
developments that are
market validated
• Continue to focus on
sales-led development
model
• Close pipeline of land
sales
• Strategic allocation to
preserve capital while
optimizing cash returns
• Drive value creation in the
underlying assets and
unlock value across the
portfolio.
- Akiira – finalize
exploratory drilling
- Greenblade Growers –
market and product
expansion
Covid
-19
Impact
Our
Resp
onse
✓ 89% of pre-COVID sale
and collections
achieved.
✓ No impact on delivery
rollout of new projects
✓ All products under
development are
market validated and
significantly pre-sold.
✓ Project financing
available to bridge slow
collection.
✓ Low dividend payout as
portfolio companies
conserve liquidity.
✓ Attractive valuation of
targets.
✓ Cost reduction measures and
revenue diversification to
ensure self cash sustenance
by each business.
✓ Liquidity build up and
completion of Fund II set up.
✓ No major impact as portfolio
is largely fixed income.
✓ Attractive opportunities
arising as equity markets
recover.
✓ Weighting towards fixed
income to preserve capital.
✓ Positioning to re-enter
equity markets at near floor
valuations.
Str
ate
gic
obje
cti
ves
✓ No major impact.
✓ Scheduled milestones are on
course.
✓ Continue with value
creation.
✓ Continue stakeholder
engagement to unlock value.
Q & A
49
Disclaimer
Certain statements in this presentation concerning our future growth prospects are forward-looking statements, which involve a number of risks and
uncertainties that could cause actual results to differ materially from those presented in this report. The risks and uncertainties relating to these statements
include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage and sustain growth, intense competition in the
various sectors the company has invested in, in regions of operation, including those factors which may affect our cost and proprietary advantage, wage
increases, our ability to attract and retain skilled professionals, time and cost overruns on planned capital expenditures, geographic concentration, industry
segment concentration, our ability to manage our regional operations, reduced demand for our subsidiaries services in our key geographical areas, disruptions in
operational platforms or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our licenses and
service contracts, the success of the companies in which the Company has made strategic investments, withdrawal of governmental fiscal incentives, political
instability and regional conflicts, legal restrictions on raising capital or acquiring companies in different countries where we plan to invest, and unauthorized use
of our intellectual property and general economic conditions affecting the company. Additional risks that could affect our future operating results are described
in our Annual Report for the fiscal year ended 31 March 2018. The Company may, from time to time, make additional written and oral forward-looking
statements, including statements contained in the company's filings with the NSE, USE or CMA and our reports to shareholders. The company does not undertake
to update any forward-looking statements that may be made from time to time by or on behalf of the Company.
50
Tel +254 20 2286000
Mobile +254 709 902 000
Email [email protected]
www.centum.co.ke
Centum Investment Company Plc
99h Floor, Southern Tower, Two Rivers
PO Box 10518-00100
Nairobi, Kenya
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