42nd Centum AGM

Centum this afternoon held the Co’s 42nd AGM at Safari Park Hotel, off Thika Rd. Nbi. Unlike last year’s outdoor event, the 42nd AGM was an indoor affair which allowed a better ambiance for the proceedings IMHO. Screens were visible, the high-table was not imposing, and the facility’s capacity was well utilized – with an adjacent room to cater for any overspill of s/holders. On the downside, air-con may have been an issue depending on one’s location.

The Co. chairman provided an overview of the Co’s strategy. Highlights:
• Increase Assets Under Management (AUM) five-fold in 5-10yrs
• Proactive brand development
• Strengthen internal processes & capacity
• Expand to the rest of Africa

I found the brand development issue interesting. Coke was cited as an example of a Co. whose brand value is many multiples over the real assets; that of course is last decade news. I wondered if the same can be extended to a financial Co. whose underlying assets are exchange-traded? Why? Theoretically, if the brand value of such a Co. exceeds the value of the underlying assets, investors would simply reconstitute the underlying portfolio forcing the Co. to be fairly valued, thus no/little brand value. I concluded that that may be so if all the AUM were listed, in this case, the portfolio is almost evenly split between listed and non-listed securities so investors would be willing to actually pay a premium for the non-listed portion; hence, a strong brand would help in the quest to increase S/holder value.

The Chairperson clarified that a favorable brand would help the Co. acquire deals more easily and attract investment partners, blah, blah, blah….

The CEO gave a good walk through of the Co and its portfolio underscoring the Co. core business; Its an Investment Channel.

Portfolio Split:
• Banking & Insurance: 44%
• Publishing: 4%
• Automotive: 16%
• Beverages: 24%
• Services: 4%
• Others: 4%
*Excluding Carbacid stake (now 5% of portfolio)

Going forward, the Co intends to raise debt capital and plough back internally generated funds. I understand that the company has no immediate plans to obtain a debt rating. Why? The market doesn’t really need it. Besides, skeptics will argue that sub-prime debt easily made AAA so is it any good?

The CEO also recapped the more recent Carbacid acquisition. Essentially, the synergies that result from it being in the Centum stable are huge! About 50% of the company’s carbon dioxide production is taken up by bottlers Centum has a stake in. Though the cost was not explicitly stated, a ballpark figure of Ksh. 400-500 million was murmured. The impact on the company revenues going forward remains everyone’s guess.

Q&A
Kirubi questions & allegations never miss. Needless to say that the guy was again absent for the AGM. RVR was again an issue; apparently the Co. recognized the impairment of the investment. In my books, it was actually a tranche payment due to a party that incurred operation issues so it was possible to reassess these financial commitments. The 2007/8 annual report disclosed the projected liquidity risk contributions in relation to RVR (USD): 2008 (620,567), 2009 (943,262), 2010 (211,089). One shouldn’t be too surprised to see another less significant RVR related expense in this year’s financials; it all depends on how the arrangement was restructured. The scanty info on this is a red-flag.

Many were irked by the absence of a dividend payout. I actually think that dividend reinvestment is long overdue. Why should my withholding tax to a gov’t whose cabinet members say that they do not see the reason to pay tax to a central gov’t???

Auditor musical chairs; Deloitte the current auditors are to be changed in FY 2010/11. I expect the current Internal Auditors KPMG to take over.

Voting: Centum carries out all its voting by ballot. Shouldn’t all other companies follow suit?

Goodies: Umbrella, Centum branded Biro pen (of course Bics!). Lunch was served @ the Nyama-choma ranch. That was enough of a dividend for me!