Centum Investment Company Plc · NSEKE:CTUM
Centum Investment — Investor Presentation (November 2012)
82 slides from Centum Investment's investor presentation, Nov 20, 2012
Slide 1: Performance and Business Review
Performance and Business Review For the period ended 30th September 2012 20th November 2012
Slide 2: Agenda
Agenda 1• Overview 2• Financial Performance 3• Business Line reviews 4• Q&A 2
Slide 3: Agenda: Overview
Agenda 1• Overview • Our Business • Our Strategy • Funding strategy • Risk management 2• Financial Performance 3• Business Line reviews 4• Q&A 3
Slide 4: Our Mission
Our Mission To create real tangible wealth by providing the channel through which investors access and build extraordinary enterprises in Africa
Slide 5: We are a channel providing investors with access to a portfolio
We are a channel providing investors with access to a portfolio of otherwise inaccessible, quality, diversified investments
Slide 6: Our Business
Our Business We invest across three principal business lines Centum Investment Company Kes. 19 Bn Private Equity Quoted Private Equity Real Estate & Infrastructure Kes. 9.0Bn (58%) Kes. 2.0 Bn (14%) Kes. 4.0 Bn (28%) Cash & other assets - Kes. 4Bn As at 30 September 2012
Slide 7: Agenda
Agenda 1• Overview • Our Business • Our Strategy • Funding Strategy • Risk management 2• Financial Performance 3• Business Line reviews 4• Q&A 7
Slide 8: Strategy
Strategy Our focus Progress to date 1 Consistent delivery market beating NAV has grown by 137% since 2009 PERFORMANCE returns Currently 16% of portfolio outside Kenya 2 Diversify by geography and asset class DIVERSIFICATION Growth of PE & REI to 87% from 62% in with 50% being outside Kenya 2009 3 GR
Slide 9: 1.1 Performance – shareholder wealth
1.1 Performance – shareholder wealth We have grown shareholder wealth by Kes. 8.1Bn in 42 months Refer to page 7 of our Interim financial statements 9
Slide 10: 1.2 Performance - NAV
1.2 Performance - NAV We recorded a 137% growth in NAV since 2009 10
Slide 11: 1.3 Performance against market
1.3 Performance against market Year Centum NAV Return NSE 20 Return Centum Outperformance 2010 56% 43% 13% 2011 37% -4% 41% 2012 9% -13% 22% Sep 2012 3% 18% (15)% Geometric 24% 12% 21% Average 11
Slide 12: 2. Diversification - geographical
2.Diversification - geographical We continue to position ourselves as a Pan African investment firm Our current focus is on Anglophone East and West Africa Direct Presence Indirect presence Current target areas 12
Slide 13: 2. Diversification – geographical
2. Diversification – geographical Our portfolio outside Kenya increased from less than 1% in 2009 to 16% in Sept 2012 13
Slide 14: 2. Diversification - asset class
2. Diversification- asset class We continue to provide access to an otherwise inaccessible portfolio 14
Slide 15: 3. Growth – total assets
3.Growth – total assets We have grown total assets to Kes.19 Bn from Kes.6Bn in 2009 20 18 16 14 12 Cash Kes. Bn Quoted Private Equity 10 Bonds 8 Real Estate Private Equity 6 4 2 - 2009 2010 2011 2012 Sep-12 Page 5 Interim financial statements for six month period ended 30 September 2012 15
Slide 16: 4. Brand – our people drive our ability to deliver
4. Brand – our people drive our ability to deliver to promise Our people are the foundation of our success and the key to our future 16
Slide 17: Agenda
Agenda •1 Overview • Our Business • Our Strategy • Funding strategy • Risk management •2 Financial Performance • 3 Business Line reviews • 4 Q&A 17
Slide 18: Funding strategy
Funding strategy Investment Operations financed by a mix of internally generated funds and Debt Internally generated funds • Centum has over the years primarily financed its investments through internally generated funds(dividend, interest & rental income and proceeds on disposal of investments net
Slide 19: Successful Bond Raising
Successful Bond Raising Raised Kes.3.2Bn in the largest privately placed bond in Kenya Terms Description Capital Structure as at 30th Series 1. Unsecured Fixed Rate 1.944 Bn September 2012 amounts Note 1.250 Bn 2. Equity Linked Fixed Rate Note Secured Pricing 1. Unsecured Fixed Rate 13.5% • Term Loa
Slide 20: Agenda
Agenda •1 Overview • Our Business • Our Strategy • Funding Strategy • Risk management • 2 Financial Performance • 3 Business Line reviews • 4 Q&A 20
Slide 21: Risk Management at Centum
Risk Management at Centum We have prioritized management of the following risks that may affect achievement of our organizations objectives: An accepted risk is part of our core business; We therefore aim to optimise it rather than mitigate it. 1 Investment Encompasses market (including FX & credit
Slide 22: Risk management..continued
Risk management..continued Management of our key risks Arises from the design & implementation of our business model and 2 out of the key decisions made in relation to investment & capital Strategic risks allocation. Managed through periodic strategy reviews, involvement of board committees in strat
Slide 23: Risk management..continued
Risk management..continued Management of our key risks Concentration of key business expertise, knowledge and decisions to 4 a few individuals. Also includes difficulties in obtaining adequately Resourcing / skilled personnel to fill key business positions. Key man Managed through existence of a lea
Slide 24: Agenda
Agenda 1• Overview 2• Financial Performance 3• Business Line reviews 4• Q&A 24
Slide 25: Performance highlights
Performance highlights Kes. m HY 20131A HY 2012 A PE QPE RE&I Activity Investments (1,207) (2,967) (453) (662) (91) Realization proceeds 1,275 2,750 6 1,269 - Net investments 68 (217) (447) 607 (91) Return Gross Return 608 140 (156) 615 149 Total Return 348 (67) (214) 563 (1) Return on equity 3% (1)
Slide 26: Group Statement of Comprehensive Income
Group Statement of Comprehensive Income Kes. m 2013H1 2012H1 Var Dividend income 105 119 -12% Interest income 73 18 306% Other income 75 27 178% Realized gains 303 563 -46% Unrealized gains 194 - 100% Income 749 728 3% Portfolio costs (125) (156) 20% Finance costs (103) (12) -142% Share of Ass Profi
Slide 27: Consolidated Statement of financial position
Consolidated Statement of financial position Total assets grew from Kes 15.7Bn to Kes 19.2 Bn Portfolio value movement Group Company Kes. m 2012 2011 2012 2011 Assets: Portfolio value 11,818 11,181 14,881 14,694 Cash &cash equivalents 3,408 (108) 3,408 (108) Other assets 214 494 886 1,135 15,440 11,
Slide 28: Consolidated Statement of cash flows
Consolidated Statement of cash flows Healthy cash flows to meet our financing & investing needs Kes. m HY 20131A HY 2012H1A Operating inflows 1,362 3,825 Operating outflows (242) (200) Internally generated funds 1,120 3,625 Cash flows from Investing activities (1,178) (2,969) Cash flows from financi
Slide 29: Debt covenants
Debt covenants We have abided to our debt covenants Kes. m Debt Covenants Status Description Ratio 1 Debt Service coverage Internally generated funds will 1.5 : 1 10.9 : 1 always be at least 1.5 times greater that the finance costs 2 Net debt to Equity ratio Net debt(total group debt less freely 1:2
Slide 30: Agenda
Agenda 1• Overview 2• Financial Performance 3• Business Line reviews 4• Q&A 30
Slide 31: 3.0 Business Line Reviews
3.0 Business Line Reviews 1• Real Estate & Infrastructure 2• Private Equity 3• Quoted Private Equity 31
Slide 32: 3.1 Real Estate & Infrastructure
3.1 Real Estate & Infrastructure 1• Strategic Theme & Portfolio Overview 2 • Two Rivers Project 3• Pearl Marina Project 32
Slide 33: Our Strategy in Real Estate Development
Our Strategy in Real Estate Development REAL ESTATE To convert bare land to high quality commercial urban environments STRATEGY through; LAND PREMIUM HIGH QUALITY INVESTMENT GRADE IDENTIFICATION COMMERCIAL COMMERCIAL ASSETS (i.e. REITS) AND ACQUISITION LAND DEVELOPMENT Commercial Returns Bare land A
Slide 34: 3.1 Real Estate & Infrastructure
3.1 Real Estate & Infrastructure 1• Strategic Theme & Portfolio Overview 2 • Two Rivers Project 3• Pearl Marina Project 34
Slide 35: Our Track Record
Our Track Record LAND PREMIUM HIGH QUALITY INVESTMENT GRADE IDENTIFICATION COMMERCIAL COMMERCIAL ASSETS (i.e. REITS) AND ACQUISITION LAND DEVELOPMENT •Master-planning •Comprehensive completed in Oct 2011 market study finalized in July •Masterplan approved 2012 to develop 8,300,000 •Acquisitions of s
Slide 36: Two Rivers Development Site Location
Two Rivers Development Site Location •The land is 100 Acres •Within diplomatic Blue Zone •Within Nairobi Metropolitan Region (NMR) •Key access roads •High demand of commercial developments in the neighborhood 36
Slide 37: Value Creation
Value Creation LAND PREMIUM HIGH QUALITY INVESTMENT GRADE IDENTIFICATION COMMERCIAL COMMERCIAL ASSETS (i.e. REITS) AND ACQUISITION LAND DEVELOPMENT Value Uplift KES 0.9 Billion KES 2.06 Billion KES1.16 Billion KES1.16 Billion Zoning, planning Sale of serviced land & Portfolio Bare land and approvals
Slide 38: Two Rivers Phase 1
Two Rivers Phase 1 Phase 1 is approximately 18 acres and 173,000 Gross Floor Area The development will be constructed in Phases to fully capitalize on the value created by each phase and also be responsive to market needs. 38
Slide 39: Two Rivers Phase 1 Components
Two Rivers Phase 1 Components Zones Size/Units Retail, Entertainment & Lifestyle 45,000 sq.m Premium Office Space above retail 12,200 sq.m Luxury Serviced Apartments 84 Units Office park 20,000 sq.m Long and short stay apartments 132 Units 5 Star Hotel 200+ Rooms 3 Star Hotel 160+ Rooms Public Squar
Slide 40: Two Rivers Phase 1 Concepts-Main Entrance
Two Rivers Phase 1 Concepts-Main Entrance Main Entrance View 40
Slide 41: Two Rivers Phase 1 Concepts-Main Entrance
Two Rivers Phase 1 Concepts-Main Entrance River Front View 41
Slide 42: Retail, Entertainment and Lifestyle Concept
Retail, Entertainment and Lifestyle Concept Northern By Pass 42
Slide 43: Retail, Entertainment Lifestyle Concept
Retail, Entertainment Lifestyle Concept Showroom View 3D artistic view 43
Slide 44: Retail, Entertainment Lifestyle Concept
Retail, Entertainment Lifestyle Concept Mall and events square 3D artistic view 44
Slide 45: Two Rivers Entertainment & Lifestyle Concept
Two Rivers Entertainment & Lifestyle Concept Multi Purpose Events Square Wet park 3D artistic view 45
Slide 46: Two Rivers Landscaping Concept
Two Rivers Landscaping Concept Kids Play Area Public Environment 3D artistic view 46
Slide 47: Retail, Entertainment and Lifestyle Market Research
Retail, Entertainment and Lifestyle Market Research Primary Catchment Demographics Copyright 2012: Fernridge Consulting Source: Africa Eye Demographics & 2009 Aerial Photography 12 • 45,000 sq.m of the mall was informed by market studies by Fernridge (S.A) and Knight Primary Catchment Area Frank (Ke
Slide 48: Two Rivers Office Park Concept
Two Rivers Office Park Concept Office park • 20,000 sq.m of grade A office space. Market Demand • International/rapidly expanding local companies looking for a premier office address. •Professional services e.g. Lawyers •UN support agencies & NGO’S 3D artistic view 48
Slide 49: Two Rivers Office Park Concept
Two Rivers Office Park Concept Office Park Concept 3D artistic view 49
Slide 50: Two Rivers Serviced Apartments Concept
Two Rivers Serviced Apartments Concept • 84 Units of unique address apartments Market drivers • Embassies and foreign missions located in the area •UN staff 3D artistic view 50
Slide 51: Two Rivers Unique Address Apartments Concept
Two Rivers Unique Address Apartments Concept 132 units of long and short stay apartments for sale Market drivers •Expatriates •Diplomats •Individual business travelers • •Returning residents •Diaspora residents on vacation 3D artistic view 51
Slide 52: Development Timelines and Outlook
Development Timelines and Outlook Investor Participation Site Phase 1 Phase 1 Phase 1 Design & Urban Acquisition & Tender Infrastructure Buildings Exit (Sell or Approvals Management Planning Development Development Lease) May 2010-Dec 2011 Q1 2012 – Q1 2013 Q2 2013 – Q2 2015 Q3 2015 - In Done Progre
Slide 53: 3.1 Real Estate & Infrastructure
3.1 Real Estate & Infrastructure 1• Strategic Theme & Portfolio Overview 2 • Two Rivers Project 3• Pearl Marina Project 53
Slide 54: Value Creation in Pearl Marina Development
Value Creation in Pearl Marina Development LAND PREMIUM HIGH QUALITY INVESTMENT GRADE IDENTIFICATION COMMERCIAL COMMERCIAL ASSETS (i.e. REITS) AND ACQUISITION LAND DEVELOPMENT Value uplift KES 750 million KES1.167 billion KES 920 million KES 920 million Zoning, planning Serviced land and bulk Portfo
Slide 55: Unique Site Location
Unique Site Location •Pearl Marina development will be on 300 acres of land •Over 2km of lake frontage-ideal for waterfront development •Within resort destination region •Connected to major roads and close to airport •Attractive site with variety of flora and fauna 55
Slide 56: Key Milestones in Pearl Marina Development
Key Milestones in Pearl Marina Development LAND PREMIUM HIGH QUALITY INVESTMENT GRADE IDENTIFICATION COMMERCIAL COMMERCIAL ASSETS (i.e. REITS) AND ACQUISITION LAND DEVELOPMENT •Development of •Master-planning concepts in progress •Easily tradable completed in Oct financial instruments 2011 •Obtainin
Slide 57: Pearl Marina Phase 1 Components
Pearl Marina Phase 1 Components Zones Size/Service Luxury Apartments 100 Units Hotel resort 20 Rooms Shopping Arcade Convenience shopping Golf Course 9 hole European Standard Public Marina Ferry and boat services 57
Slide 58: Pearl Marina Project-Water front Precinct
Pearl Marina Project-Water front Precinct 58
Slide 59: Development Timelines and Outlook
Development Timelines and Outlook Investor Participation Site Planning, Phase 1 Phase 1 Phase 1 Costing Urban Acquisition & Design & Infrastructure Buildings Exit (Sell or &Tender Management Market Survey Approvals Development Development Lease) Aug 2010-Dec 2011 Q1 2012 – Q1 2013 Q2 2013 – Q2 2015
Slide 60: 3.0 Business Line Reviews
3.0 Business Line Reviews 1• Real Estate & Infrastructure 2• Private Equity 3• Quoted Private Equity 60
Slide 61: 2009 - 2014 PE Strategic Objectives
2009 - 2014 PE Strategic Objectives 1 • Active portfolio management ACTIVE VALUE – Deal with underperforming assets CREATION – Develop and implement a value creation plan for each investee – Trigger liquidity events within existing portfolio 2 • Grow Assets Under Management from KES 3.6B to KES 15.0
Slide 62: 2009 – HY 2012/13 Growth
2009 – HY 2012/13 Growth Growth has closely tracked strategy targets. We expect significant growth in assets at the end of the year as we close deals in advanced stages. Portfolio Growth Within Current Strategy Period FY 08 / 09 – HY 12/13 KES B 62
Slide 63: Investee Earnings Growth
Investee Earnings Growth 65% earnings growth from HY 08/09 to HY 2012/13 KES B 700 600 2.65x 500 growth 400 300 200 100 0 1H2009/10 1H2010/11 1H2011/12 1H2012/13 63
Slide 64: Fair value movement
Fair value movement 9,000 (346) 407 8,619 8,558 8,500 Increase in assets was driven by purchases of bottler shares. 8,000 Decline in performance due to 7,500 decline in multiples KES Millions 7,000 6,500 6,000 5,500 5,000 Opening fair value Unrealized losses Purchases Closing fair value 64
Slide 65: Private Equity earnings attribution
Private Equity earnings attribution Portfolio companies continue to perform well due to improving fundamentals Beverage Financial services Others Others, 24.6% Beverage, 41.2% Financial services, 34.2% Total = KES 587 million 65
Slide 66: Coca Cola Bottlers lawsuit against KRA
Coca Cola Bottlers lawsuit against KRA • Our Coca Cola Bottlers recently lost a High Court case against KRA . • The case related to the levying of excise tax on returnable containers (bottles and crates). • Our Bottlers believe that returnable containers should not be excisable because they are not
Slide 67: Key portfolio activities
Key portfolio activities Bottler Consolidation 14 Dec 2011 Until August 2012 Current status a. The 3 bottlers agree in principal a. Boards of the 3 bottlers pass a. The Board of Almasi has been to consolidate ownership. resolution to merge the Bottlers constituted. b. A joint transaction committee s
Slide 68: Attractive Deal Pipeline
Attractive Deal Pipeline Pipeline of circa. USD 60M in investment opportunities Target Geographies Opportunity Characterisation UGANDA KENYA RWANDA BURUNDI RWANDA TANZANIA 68
Slide 69: Target Portfolio Characteristics
Target Portfolio Characteristics 1 • Diversify investment across the region Geographical Diversification – Maintain a maximum exposure of 40% to any target geography, which will also facilitate necessary currency diversification 2 • Diversify target return contribution amongst: Return Diversificatio
Slide 70: Centum PE Fund I
Centum PE Fund I • Centum is in the process of raising a PE Fund to finance these investment opportunities. • Centum will sponsor the Fund, by putting in up to 20% of the total investment. • Centum will tap into the local market for the balance of the funding, particularly the pension funds. • We ar
Slide 71: Business Outlook
Business Outlook 1 ACTIVE VALUE • Currently implementing a variety of value enhancement strategies across the CREATION portfolio 2 GROWTH • Deploy at least USD 60M in new capital across the region • Raise 3rd party funds 3 DIVERSIFI- • Continue to pursue aggressive regional expansion strategies with
Slide 72: 3.0 Business Line Reviews
3.0 Business Line Reviews 1• Real Estate & Infrastructure 2• Private Equity 3• Quoted Private Equity 72
Slide 73: Business Model
Business Model • In the Quoted Private Equity (QPE) business line, we leverage on our private equity expertise to identify, invest and create value in quoted companies that exhibit private-equity-like traits: • Illiquid • Under-researched • Significant growth potential (Value creation potential) • A
Slide 74: Strategic Objectives
Strategic Objectives 1 PERFORMANCE To consistently outperform the NSE-20 Share Index 2 DIVERSI - To diversify outside Kenya by at least 50% of total QPE portfolio by 2014 FICATION 3 GROWTH To increase AUM from Kes 2Bn in 2009 to Kes6.5Bn by 2014 4 LIQUIDITY To provide liquidity to the other business
Slide 75: Performance
Performance Consistently outperformed the market Alpha: month-by-month Alpha: since strategy period began 25% 21% 20% 18% 18% 15% 15% 15% 14% 12% 10% 10% 9% 8% 5% 5% 4% 0% 0% 9% -3% Ave. -5% -5% -6% -7% -6% -10% -10% -11% -13% -15% -16% -15% -15% -18% -17% -20% QPE RETURN NSE 20 RETURN 75
Slide 76: Growth
Growth Suffered temporal setback from providing liquidity to other business lines Confident to achieve 2013 strategy targets through organic growth and 3rd party funds Strategy Actual 7.0 6.5 6.0 4.9 5.0 3.9 4.0 4.0 3.8 Kes Bn 3.0 3.0 3.0 2.5 2.3 2.1 2.0 1.0 - FY2009/10 FY2010/11 FY2011/12 FY2012/13
Slide 77: Diversification
Diversification Accelerated our geographical diversification… ….by taking advantage of attractive valuations and improving macro fundamentals across SSA Actual FY2011/12 Actual FY2012/13 Kenya SSA (excluding Kenya) 32% 68% Total Portfolio Kes2.2Bn Total Portfolio Kes 1.9 Bn Excluding cash 77
Slide 78: Diversification
Diversification Virtually all target markets returned positive performance… …contributed by loosening monetary policies and reduction of political risk in SSA Returns computed in dollar terms 78
Slide 79: Outlook
Outlook 1 Performance • More upside potential especially from investments outside Kenya 2 Diversification • Optimistic to achieve 50% diversification outside Kenya ahead of strategy 3 Growth • Third party funds to boast our AUM size besides organic growth 4 Liquidity • Recent Kes3.2Bn debt capitaliz
Slide 80: Outlook
Outlook Lower inflation augurs well for equities… ….subject to a peaceful general election in March 2013 1 Equities • Domestic: Reduced inflationary pressures and access to cheaper credit expected to boast corporate earnings growth 2 • Further fall in domestic yields is expected albeit limited Fixed
Slide 81: Q&A
Q&A C CENTUM
Slide 82: Centum Investment Company Ltd. contact details
Centum Investment Company Ltd. Tel +254 20 316303 International House, Mobile +254 722 205339 5th Flr. Mama Ngina St. Fax +254 20 223223 PO Box 10518-00100 Email info@centum.co.ke Nairobi, Kenya www.centum.co.ke
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