Britam issues profit warning as NSE bear run continues

Britam Holdings is the latest Nairobi Securities Exchange (NSE)-listed firm to issue a profit warning indicating a tough year for investors.

In a notice placed in sections of the Kenyan press on Thursday, the investment company said its earnings are expected to drop by at least 25% compared to the earnings reported in the same period in 2017.

“The expected decline is mainly due to performance at the stock market, which has led to reduced returns from our equity investments,” it said in the notice, which was also dispatched to NSE Chief Executive Geoffrey Odundo.

In addition, the company wrote off a Ksh 1.3 billion investment in HF Group. Britam holds a 48.82 % stake in the mortgage firm through British American Insurance Company (Kenya), a fully-owned subsidiary, which acquired 57,270,000 shares from Equity Group Holdings in 2014. HF itself also issued a profit warning last year.

Other listed firms that have issued profit warnings include UAP Old Mutual Holdings, which cited lower asset valuations and one-off retrenchment costs.

As a result, the firm is expected to report at least 25.0 % (Ksh 300 million) drop in earnings in the current financial year, on the back of a bearish performance in equities listed at the NSE and retrenchment costs.

This comes a few weeks after the firm completed a restructuring process to unlock efficiencies in the business, analysts at Cytonn Investments noted in their weekly update. The company reported a 61.6 % drop in after-tax profit for the half year to Ksh 190.7 million from Ksh 496.8 million in 2017.

At least seven otherfirms listed on the NSE have issued profit warnings in 2018 citing difficult market conditions. They include Bamburi Cement , Housing Finance Group , Kenya Power and Lightning Company, Sanlam, Deacons East Africa PLC and Sameer Africa.

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The bear run is expected to continue in 2019 with the NSE opening the first day of trading with a Ksh 4 billion decline in paper value as market capitalisation dipped to 2.09 trillion.