Centum Investment Company Plc · NSEKE:CTUM
Centum Investment — H1 2018 Earnings Presentation
55 slides from Centum Investment's earnings presentation, Nov 27, 2017
Slide 1: Investor Briefing: Group Results for Half Year Ended 30th September 2017
Investor Briefing Group Results for Half Year Ended 30th September 2017 27th November 2017
Slide 2: Business Review
Business Review Group Chief Executive Officer: Dr. James Mworia
Slide 3: Challenging Operating Environment
Challenging Operating Environment Exchange Rate, Inflation & GDP Growth Private Sector Credit Growth 104.00 12% 20% Exchange Rate (KES/USD) 103.50 10% 103.00 8% 15% 102.50 102.00 6% 101.50 4% 10% 101.00 2% 100.50 5% 100.00 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 2016 2017 0% Exchange Rate INFLATION GDP Growth Jan 1
Slide 4: Portfolio Snapshot
Portfolio Snapshot Centum Investment Company Plc. Total Assets (30th Sep 2017) - KES 62.5Bn GROWTH DEVELOPMENT MARKETABLE SECURITIES & REAL ESTATE CASH Financial FMCG “Others” Agribusiness Power Healthcare Education Services Greenblade Healthcare Growers project CENTUM Limited development EXOTICS in
Slide 5: Performance Highlights: Sustained Growth in Assets
Performance Highlights Sustained Growth in Assets Total Assets, FY 2014 - HY 2018 NAV, FY 2014 - HY 2018 60 80 50 46 CAGR: 21% CAGR: 19% 45 62 63 60 39 52 40 32 KES Bn KES Bn 41 30 40 23 29 20 20 10 0 0 FY2014 FY2015 FY2016 FY2017 HY2018 FY2014 FY2015 FY2016 FY2017 HY2018 For the period FY2014 to HY
Slide 6: Performance Highlights: Significant Increase in NAV per Share
Performance Highlights Significant Increase in NAV per Share NAV per Share, FY 2014 - HY 2018 80 CAGR: 23.5% 69.7 67.3 59.1 60 48.0 40 34.5 KES 20 0 FY2014 FY2015 FY2016 FY2017 HY2018 NAV per share has grown to KES 69.7, representing 2X increase since the commencement of our Centum 3.0 strategy in F
Slide 7: Performance Against Strategic Objectives
Performance Highlights Performance Against Strategic Objectives Centum 3.0 Strategic Objectives Achievements as at HY2018 • Generate 35% annualised return between • 25% annualised return achieved between FY RETURN FY 14 and FY 19 14 and HY 18 as compared to NSE average • Consistently outperform the
Slide 8: Performance Highlights: Reduction in Gearing
Performance Highlights Reduction in Gearing Long Term Debt Movement in HY 2018 • In Sep 2017, we successfully redeemed our KES 4.3Bn bond 16 – Investors in the equity-linked note received 13.6 14 3.1 an additional KES 191Mn, representing a total KES 2.3Bn decrease 12 in long term debt equity upside
Slide 9: NAV by Portfolio Class
Portfolio Characteristics NAV by Portfolio Class Portfolio Classification by Core Lines of NAV by Portfolio Class (KES Bn) Business Real Estate • Large scale mixed use Portfolio development portfolio (Two Rivers, Vipingo, Pearl Marina) • Property development management subsidiary, Athena Properties
Slide 10: NAV Decomposition by Portfolio Class
Portfolio Characteristics NAV Decomposition by Portfolio Class Total Assets Total Liabilities Total NAV NAV Per Share Portfolio Class (KES Mn) (KES Mn) (KES Mn) (KES) Real Estate 28,362 8,762 19,600 29.5 Portfolio Growth Portfolio 25,028 3,179 21,848 32.8 Development 5,017 3,352 1,665 2.5 Portfolio
Slide 11: Portfolio Highlights
Portfolio Highlights 1 • Growth Portfolio • FMCG • Financial Services • Others 2 Real Estate Portfolio 3 Development Portfolio • Power • Agribusiness • Education • Healthcare 4 Marketable Securities Portfolio 11
Slide 12: Growth Portfolio: Return Performance over Centum 3.0
Growth Portfolio Return Performance over Centum 3.0 Growth Portfolio IRR, Centum 2.0 and FY 2015 – HY 2018 80% 70% 60% IRR (%) 40% 40% 33% 31% 29% 20% 0% Centum 2.0 FY2015 FY2016 FY2017 HY2018 Growth Portfolio remains a significant driver of returns for the Group reflecting the success of our active
Slide 13: Growth Portfolio: FMCG Sector Contribution
Growth Portfolio FMCG Sector Contribution FMCG Sector Contribution, HY 2018 Sector NAV Contribution (KES Mn) 11,134 Sector NAV Contribution (%) 16.7% Sector NAV Per Share Contribution (KES) 24 FMCG Portfolio Companies NAV Per Share NAV Per Share Entity Total Entity Debt Contribution Contribution Ass
Slide 14: Almasi Beverages Update
Growth Portfolio Almasi Beverages Update EBITDA, HY 2016 and HY 2017 • Almasi Beverages continues to show strong performance, market challenges 2,000 notwithstanding • Almasi sales volumes grew by 10% vs prior 1,691 year mainly driven by product innovation 1,500 initiatives and increased availabilit
Slide 15: Financial Services Sector Contribution
Growth Portfolio Financial Services Sector Contribution Financial Services Sector Contribution, FY 2017 Sector NAV Contribution (KES Mn) 6,230 Sector NAV Contribution (%) 13.4% Sector NAV Per Share Contribution (KES) 9.4 Financial Services Portfolio NAV Per Share NAV Per Share Carrying Value Attribu
Slide 16: Sidian Bank Update
Growth Portfolio Sidian Bank Update • Interest rate capping regulations and the recent lacklustre business environment present a challenging operating environment for the country’s banking sector • The Bank numerous efforts aimed at optimising the Bank’s performance in light of the current market co
Slide 17: "Others" Contribution
Growth Portfolio “Others” Contribution “Others” Contribution, HY 2018 NAV Contribution (KES Mn) 4,483 NAV Contribution (%) 9.7% NAV Per Share Contribution (KES) 6.7 NAV Per Share NAV Per Share “Other” Portfolio Companies Contribution (KES) Contribution (%) General Motors Limited 4.3 6.2% Longhorn 1.
Slide 18: Portfolio Highlights
Portfolio Highlights 1 • Growth Portfolio • FMCG • Financial Services • Others 2 Real Estate Portfolio 3 Development Portfolio • Power • Agribusiness • Education • Healthcare 4 Marketable Securities Portfolio 18
Slide 19: Real Estate Sector Contribution
Real Estate Portfolio Real Estate Sector Contribution Real Estate Sector Contribution, HY 2018 Sector NAV Contribution (KES Mn) 19,600 Sector NAV Contribution (%) 42% Sector NAV Per Share Contribution (KES) 29.5 Real Estate Portfolio NAV Per NAV Per Entity Total Companies Share Share Entity Debt % S
Slide 20: Real Estate Sector Strategy Overview
Real Estate Portfolio Real Estate Sector Strategy Overview Our real estate strategy seeks to master develop attractive sites across the region and provide commercial impetus for investors to establish city-shifting developments therein Overview of Centum’s Value Creation Process in Real Estate 1 2 3
Slide 21: High Level Real Estate Progress Overview
Real Estate Portfolio High Level Real Estate Progress Overview Two Rivers Pearl Marina Vipingo 101.31 acres, Nairobi 389 acres, Garuga 10,254 acres, Kilifi Acquire Land Master Plan and Obtain Approvals Attract Investors at Discussions Underway Discussions Underway Development Level Develop Trunk Pha
Slide 22: Focus Activities Across Portfolio (1 of 2)
Real Estate Portfolio Focus Activities Across Portfolio (1 of 2) Two Rivers Pearl Marina Vipingo Sale of Bulk Rights/ • Advanced negotiations • 43 acres of fully • Finalised master plan Serviced Land on the sale of 32,650 serviced land available on 1,150 acres for an sq.m of bulk expect to industria
Slide 23: Focus Activities Across Portfolio (2 of 2)
Real Estate Portfolio Focus Activities Across Portfolio (2 of 2) Two Rivers Pearl Marina Vipingo Strategic Infill Complete projects Complete projects: • Residential and Developments • Two Rivers Development – • Luxury Villas commercial “Lifestyle 42% equity stake exit to Ongoing projects Centre” cur
Slide 24: Two Rivers Lifestyle Centre Update
Real Estate Portfolio Two Rivers Lifestyle Centre Update • Largest retail and entertainment centre in East and Central Africa, with 220 stores in Two Rivers Mall • 72% of the Gross Lettable Area (GLA) of Two Rivers Mall is currently let, with 9% under negotiation − The target is to close December 20
Slide 25: Two Rivers Apartment Development
Real Estate Portfolio Two Rivers Apartment Development • Two Rivers apartment project in advanced stages of development − Designs completed − All required statutory approvals obtained • Project set to launch in Q4 FY 2018 • Will comprise 196 units, including − One bedroom units (18) − Two bedroom un
Slide 26: Pearl Marina Residential Developments
Real Estate Portfolio Pearl Marina Residential Developments Luxury Villas Apartments • 4 villas completed • Project in advanced stages of • 4 and 5 bedroom villas overlooking Lake development Victoria • Mix of 2 and 3 bedroom apartments • Features include private pool and overlooking Lake Victoria g
Slide 27: Vipingo Industrial Park Development
Real Estate Portfolio Vipingo Industrial Park Development • Integrated mixed use industrial park set on 1,151 acres in total − 814 acres available for sale • Mix of uses as per master plan includes: • Warehousing • Light manufacturing • Heavy manufacturing • Truck stop + petrol station • Office park
Slide 28: Portfolio Highlights
Portfolio Highlights 1 • Growth Portfolio • FMCG • Financial Services • Others 2 Real Estate Portfolio 3 Development Portfolio • Power • Agribusiness • Education • Healthcare 4 Marketable Securities Portfolio 28
Slide 29: Power Sector Update
Development Portfolio Power Sector Update Power Sector Contribution, HY 2018 Sector NAV Contribution (KES Mn) 1,371 Sector NAV Contribution (%) 3% Sector NAV Per Share Contribution (KES) 2.1 Power Portfolio Companies NAV Per Share Contribution (KES) NAV Per Share Contribution (%) Akiira Geothermal 1
Slide 30: Agribusiness Sector Update
Development Portfolio Agribusiness Sector Update Agribusiness Sector Contribution, HY 2018 Sector NAV Contribution (KES Mn) 159 Sector NAV Contribution (%) 0.3% Sector NAV Per Share Contribution (KES) 0.2 • Greenblade Growers continues to export fresh herbs the European markets from its 120 acre far
Slide 31: Education and Healthcare Sector Updates
Development Portfolio Education and Healthcare Sector Updates Education • Through our investment in ACE Holdings, we are seeking to establish a platform of high quality schools across the region • The first school, to be operated by our internationally renowned partners, SABIS, is currently under co
Slide 32: Portfolio Highlights
Portfolio Highlights 1 • Growth Portfolio • FMCG • Financial Services • Others 2 Real Estate Portfolio 3 Development Portfolio • Power • Agribusiness • Education • Healthcare 4 Marketable Securities Portfolio 32
Slide 33: Marketable Securities Portfolio Performance at HY2018
Marketable Securities Portfolio Performance at HY2018 Portfolio Allocation by Asset QPE vs NSE 20 Gross Return (%) 4% 80% 60% 62% 56% 45% 45% 40% 45% 31% 21% 20% 10% 17% 0% 42% 2% -4% 54% 0% 6% -5% 2% -13% -20% -24% -22% -40% 2010 2011 2012 2013 2014 2015 2016 2017 H1 2018 QPE Portfolio NSE 20 Share
Slide 34: Financial Review
Financial Review Group Finance Director: Samuel Kariuki
Slide 35: Key Performance Drivers
Key Performance Drivers 21% decline in consolidated profit primarily driven by depressed performance of banking subsidiary as a result of interest rate cap and sluggish transaction environment exacerbated by political uncertainty KES Bn Sept 2017 Sept 2016 Change Group Turnover 8.8 8.5 1% Banking Su
Slide 36: Group Turnover Analysis
Group Turnover Analysis KES Mn Sept 2017 Sept 2016 Change Beverage Sales 4,044 3,741 8% Publishing Sales 535 380 41% Interest Income 1,646 2,625 (37%) Unrealised Gains on Revaluation of Investment Property 2,033 1,520 34% Utility Sales 165 - 100% Dividend Income 86 191 (55%) Other Income 90 33 173%
Slide 37: Group Financial Performance
Group Financial Performance KES Mn Sept 2017 Sept 2016 Change Trading Subsidiaries Sales 4,772 4,122 16% Direct and Other Operating Costs (4,223) (3,620) 17% Trading Operations 549 502 9% Financial Services Subsidiaries Income from Financial Services 1,586 2,422 (35%) Funding and Other Costs (1,697)
Slide 38: Group Financial Performance: Trading Subsidiaries
Group Financial Performance Trading Subsidiaries KES Mn Sept Sept Change • Almasi Beverages sales up by 8% on the back of 2017 2016 strong volume growth Sales – Increased efficiencies and impact of new PET Beverage Business 4,044 3,741 8% line driving margin expansion Publishing Business 535 380 41%
Slide 39: Group Financial Performance: Financial Services
Group Financial Performance Financial Services KES Mn Sept Sept Change • Sidian Bank’s decrease in interest income 2017 2016 driven by interest rate cap and lower level of Sidian Bank Interest Income 924 1,643 (44%) lending Fees, Forex and Other Income 307 339 (9%) • Bank’s funding costs lower as a
Slide 40: Group Financial Performance: Investment Income
Group Financial Performance Investment Income KES Mn Sept 2017 Sept 2016 % Change Investment Operations Unrealized Gains on Investment Property 2,033 1,520 34% Dividends 86 191 (55%) Interest Income 61 203 (70%) Other Income 62 32 93% Share of Associate/JV Profits 568 346 64% Total Investment Income
Slide 41: Segmented Group Performance
Group Financial Performance Segmented Group Performance Kes Mn Performance Carrying Value Sept 2017 Sept 2016 Change Sept 2017 Sept 2016 Growth Portfolio 25,028 27,282 Revenues 6,133 6,480 (5%) Dividend Income 52 152 (65%) Share of Associates Profits 195 346 (44%) Direct and Other Operating Costs (5
Slide 42: Group Statement of Financial Position
Group Statement of Financial Position Assets Liabilities and Shareholder Funds KES Mn Sept 2017 Mar 2017 KES Mn Sept 2017 Mar 2017 Property, Plant and Equipment 10,146 10,072 Customer Deposits & Banking Liabilities 11,125 9,799 Goodwill 3,529 3,529 Borrowings 22,441 20,986 Biological Assets 13 9 Div
Slide 43: Company Total Return Statement
Company Total Return Statement KES Mn Sept 2017 Sept 2016 Change Dividend Income 302 736 -59% Interest Income 751 714 5% Other Income 18 4 304% Unrealised Gains 2,602 1,657 57% Portfolio Costs (292) (231) 27% Finance Costs (930) (740) 26% Deferred Tax (52) (120) -57% Total Return 2,399 2,021 19% Ope
Slide 44: Net Asset Value Growth Attribution
Company Total Return Net Asset Value Growth Attribution Net Asset Value Growth Attribution 49 2.55 0.29 0.93 48 0.8 47 46.4 46 0.75 0.02 KES Bn 0.3 45 44.8 44 43 42 Mar '17 NAV Dividend Income Interest Income Other Income Unrealised gains Portfolio Costs Finance Costs Dividend Paid Sep '17 NAV net o
Slide 45: Cost Efficiency
Company Total Return Cost Efficiency Cost Efficiency FY 2014 – HY 2018 2.50% Portfolio Costs/Total Assets (%) 2.00% 1.50% 1.00% 2.10% 1.70% 1.50% 1.30% 0.50% 0.47% 0.00% FY 14 FY 15 FY 16 FY 17 HY 18 • Efficient cost management remains a key strategic focus • Portfolio management costs to total asse
Slide 46: Company Statement of Financial Position
Company Statement of Financial Position Assets Liabilities and Shareholder Funds KES Mn Sept 2017 Mar 2017 KES Mn Sept 2017 Mar 2017 Investments Portfolio Borrowings 12,884 14,656 Investment in Subsidiaries 37,831 35,311 Trade and Payables 759 446 Related Party Balances 12,798 12,723 Due to Related
Slide 47: Centum Portfolio Valuation Methodology
Centum Portfolio Valuation Methodology • Market multiples of • Value inferred from recently comparable listed transacted portions of the asset companies used • This approach is preferred • Mostly applied on private where a reference price exists equity investments from a transaction closed in the re
Slide 48: Segmented Portfolio Valuation (1 of 2)
Segmented Portfolio Valuation (1 of 2) Carrying Value (KES Mn) Implied Portfolio Companies Centum's Stake Sector Valuation Method Discounted 31 Mar 2017 30 Sep 2017 Multiple Growth Portfolio Almasi Beverages Limited 53.9% FMCG 7,716 8,230 FV: Multiples 6.77x Nairobi Bottlers Ltd 27.6% FMCG 4,388 4,4
Slide 49: Segmented Portfolio Valuation (2 of 2)
Segmented Portfolio Valuation (2 of 2) Carrying Value (KES Mn) Portfolio Companies Valuation Method Centum's Stake Sector 31 Mar 2017 30 Sep 2017 Real Estate Portfolio Vipingo Development Limited 100.0% Real Estate 5,713 7,794 NAV Two Rivers Development Limited 58.3% Real Estate 11,053 8,795 NAV Two
Slide 50: Company Statement of Cash Flows
Company Statement of Cash Flows KES Mn Sept 2017 Sept 2016 • Key driver of Company’s liquidity in the Cash Flow From Operations 2,443 (93) period was redemption of KES 4.4 Bn bond (inclusive of equity-linked uplift) Investing Activities: Real Estate (1,596) (906) • Bond was financed from cash reserv
Slide 51: Company Liquidity
Company Liquidity Cash and marketable securities representing 6.5% of Listed Securities KES Held through 100% owned 3.3 Bn subsidiary Listed Securities total company assets Kes 4 Bn KES Held on Centum balance 394 Mn sheet Cash and Kes Equivalents 274 Mn Held by Centum 51
Slide 52: Strong cash generating capacity for debt service
Strong cash generating capacity for debt service DSCR consistently above the 1.5x bond covenant KES Mn FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 HY 2018 Operating Inflows 1,722 2,349 6,619 2,547 4,146 8,114 7,904 5,259 4,139 Operating Outflows (199) (305) (309) 380) (463) (519)
Slide 53: Company Gearing & Debt Capacity
Company Gearing & Debt Capacity We redeemed the Kes 4.2 Bn 5-year corporate bond in Sep 2017, effectively deleveraging our balance sheet Time to Instrument Mar 2017 Repaid Addition Sep 2017 Maturity Bond covenant: 50% ceiling on net debt 2012 Bond 4,331 (4,331) - - N/A 23% to equity 2015 Bond 6,225
Slide 54: Outlook
Outlook Group Chief Executive Officer: Dr. James Mworia
Slide 55: Outlook
Outlook • Focus on delivery of strategic in-fill developments at Two Rivers (apartments), Vipingo (Lifestyle Centre and Industrial Park) and Pearl Marina (apartments) Real Estate • Aggressive sales of construction ready sites as well as bulk land sales − Several large transactions in the pipeline ac
Centum Investment Company — H1 2018 Earnings Presentation on 6ix