Centum Investment Company plans to increase its dividend payouts after repaying its medium and long-term debt.
The Nairobi Securities Exchange-listed firm Monday redeemed its Sh6.6 billion outstanding corporate bond, enabling it to cut finance costs and raise cash returns to shareholders.
The latest debt settlement follows the retirement of Sh7.8 billion dollar-denominated loans in September last year.
“The rationale of the strategic pillar of balance sheet strengthening and liquidity enhancement was to release more than Sh1.8 billion that the company was spending annually on debt interest costs, to re-investment and future dividend enhancement,” chief executive James Mworia said in a statement.
Centum paid a dividend of Sh1.20 per share or a total of Sh798.5 million for the year ended March 2019, similar to what was paid in the prior year.
Paying more dividends and buying back shares are part of the company’s strategy to reverse its undervaluation at the stock market.
Centum’s current share price of Sh24 is about a third of its net asset value per share of Sh75.5 as of the half year ended September 2019.
The low stock price has seen the company’s major shareholder Chris Kirubi move to buy an additional 133 million shares.
Mr Mworia said the company has ample liquidity to support growth and generate revenues.
“We have in the same period significantly enhanced liquidity, which is the second aspect of this strategic pillar by Sh6.7 billion,” he said.
He added that the strengthened balance sheet can now be deployed to take advantage of opportunities in private equity and marketable securities.
He cited the depressed share prices of blue-chip companies caused by panic-selling in the wake of the Covid-19 pandemic.
Centum’s private equity arm could find more opportunities from the “growing need by companies to shore up their equity capital positions and the general capital flight from frontier and emerging markets to developed markets.”
