Centum Investment Company was recently in the
news for reportedly cutting its losses $6 million in the six months to September 2021 which the
group’s Chief Executive Officer (CEO) James Mworia lauded as a positive indicator
of the efforts being made by the towards full
recovery and profitability.
The wary optimism of Centum making a recovery is red herring according some of the company insiders who believe that the Nairobi Securities Exchange (NSE) listed company is seeing its better days.
Recent media reports have aindicated that all is not rosy with the company’s financial books and that if drastic measures are not put in place, the
questioned by a section of the the loans have been procured, the investment group might go insolvent putting money of its shareholders at risk of losing their investments.
Centum stock market prices have plummeted from Sh70 in 2015 ti around Sh15 today.
According to an insider at the investment company, a clique of top executives have been using creative accounting to woo investors that all is well while in reality, the company is increasingly finding it hard to meet its obligations.
The company’s operational model is increasingly being questioned by the top management that feels that the debt that Centum is accumulating from some of the major commercial banks and some retail investors is soon becoming unsustainable.
As of now, the company owes commercial banks amounting to Sh34 billion which is expected to mature in the financial year 2024/2025.
The debt collateral structure of the loans has come into focus because of the high vulnerabilities it exposes the company to.
An insider added that some of the collateral against which some of the loans have been procured cannot measure up due to deliberate overvaluation of some of the company’s assets including some of its real estate holdings.
It’s also believed that a self-serving clique of Centum’s top management defrauded investors of the exit proceeds amounting Sh40 billion of private equity businesses covering periods between 2014 and 2020.
Too management’s ‘largesse’ arising from the exit proceeds saw the close knit faction awarding itself hefty bonuses to the disadvantage of company’s shareholders.
A disgruntled executive at the company indicated that aggressive revaluations of some of the real estate holdings by Centum have also led the company to exposure of Sh3 billion.
Revaluations in the case of Centum have only worked to worsen the financial situation for the company because the revaluations reverses against which sale is made as good as an assured loss because no consumer would go for a property whose pricing is way above the prevailing market price when there could be cheaper alternatives.
It is high time investors at Centum take a keen note of some of the emerging allegations about creative accounting and mismanagement at the company which is creating the illusion of solvency when the real sense the company could be struggling to stay afloat.
In addition, the company’s leadership mar need to come clean on some of the emerging issues about its financial health and play by the rules of the thumb in its accounting to communicate the true financial situation at the company to its investors.
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