Centum RE posts Sh174m profit on valuation gain

Centum Real Estate has posted a net profit of Sh174 million in the year ended March, reversing a restated net loss of Sh486.9 million recorded the year before.

The return to profitability was largely helped by a large unrealised gain on its investment properties.

The property developer, a subsidiary of listed Centum Investment Company, saw the gain in its real estate assets more than quadruple to Sh2.1 billion from Sh513 million.

“The group recorded property valuation gains … on the back of extensive infrastructural investments within our land banks and accelerated development activity by third party development,” Centum RE said in a statement.

The company’s revenue from the sale of residential units increased to Sh1.9 billion from Sh1.8 billion.

Gross profit from these transactions, however, fell to Sh285.6 million from Sh334.7 million attributed to higher cost of sales.

“Of the 895 residential units that have been completed, an additional 222 met the revenue recognition criteria and were recognised during the year ended 31 March 2023,” the company said.

“We expect revenue and profit from the balance of these units to be booked in the financial year ending 31 March 2024.”

The real estate company saw its operating expenses surge to Sh748.4 million from Sh502.1 million.

Finance costs also rose from Sh794.7 million to Sh889.7 million.

“The increase in finance cost in the year is explained by the depreciation of Kenya shilling against the US Dollar 16 percent in the financial year 2023 resulting in unrealised foreign exchange losses on the USD denominated liabilities,” the company said.

Centum RE, the subsidiary through which its NSE-listed parent firm holds part of its real estate assets, is currently selling both land and the properties it is developing in Kenya and Uganda.

The company reported revenue from the sale of 222 units in the review period, down from 304 units a year earlier.

Another 342 units valued at Sh2.6 billion have been completed and sold, with their revenue expected to be recognised soon.

NSE-listed Centum has announced plans to sell shares in the real estate arm for some time, with the listing of the subsidiary expected to make it easier for the investment firm to sell part of its interest to other investors.

Centum RE is to raise Sh17 billion in equity investment from Luxembourg-based private equity firm GEM Global Yield which will take a stake not exceeding 20 percent.

The agreement with GEM carried a 36-month window after listing for Centum RE to draw down the funds.

Centum has been looking to book major capital gains and reduce the concentration of its assets in the real estate sector, to redirect its cash into marketable securities (stocks and bonds) and private equity.