South African Global Credit Ratings (GCR) has accorded a stable outlook to Centum PLC #ticker:ICDC on account of reduced debt and proven record of capital gains from the sale of investments.
The agency has further upgraded Centum’s rating to A+ from A-, noting that the sale of Almasi Beverages and Nairobi Bottlers has helped reduce gross debt from Sh16.1 billion at the end of March 2019 financial year to Sh9.9 billion in six months to September 2019.
GCR says Centum has since paid off all its bank debt leading to improvement in gearing metrics and strong liquidity position. “Centum has sufficient cash and committed bank facilities to meet, not only its debt redemption but also its initial capital commitment as part of the planned private equity fund,” notes GCR.
“GCR has also premised the positive gearing assessment on the company’s intention to maintain an ungeared balance sheet over the medium term.”
Centum Chief Executive James Mworia said last year the firm would use part of the money received from the sale of residential apartments and land to pay off Sh6.3 billion corporate bond set for maturity in June next year.
Finance costs rose by 66 percent to Sh2.03 billion in half-year ended September even as Centum paid off about Sh10 billion to cut debt to Sh22 billion.
The firm is now eyeing the next round of fundraising from investors for fresh investments, having exited 10 of its 15 investments.
GCR says the company has demonstrated good access to capital through both domestic and international banks, as well as the capital market.
“Even if a larger than projected investment opportunity arises, GCR expects Centum to be able to meet its capital commitments,” says GCR.
The agency also positively views Centum’s strategy of maintaining a portfolio of marketable securities that generate sufficient income to meet operating costs.
GCR, however, says the rating is constrained by the geographic concentration of Centum’s investments and the high exposure in property developments, which the agency considers to carry higher risks.