Centum Real Estate post 72% drop in net profit due to COVID-19

Centum Real Estate Ltd, a leading real estate company, has weathered the storm of the COVID-19 pandemic, posting a 72% drop in net profit for the year ended March 31, 2021. The company's Managing Director, Samuel Kariuki, in an exclusive interview with CNBC Africa, discussed the challenges and successes the company has faced in a market heavily impacted by the global crisis. Kariuki highlighted the diverse trends observed in different market segments, with the hospitality sector being one of the most affected. He noted that the company, with a significant presence in this sector, faced a decline in traffic and revenue as a result of the pandemic. However, he shared that by the third and fourth quarters of the year, the company had recovered and was even collecting more cash than before the onset of COVID-19. The real estate market in Nairobi, particularly in the commercial office space, was already oversupplied pre-COVID, further exacerbating the challenges faced by the industry. Despite these obstacles, residential sales have seen a significant rebound, indicating a degree of resilience in this segment. The company's success can be attributed to its diversified business model, operating in three major urban areas in East Africa and offering a wide range of products catering to different market segments. Kariuki emphasized the importance of the company's strong brand and credibility, backed by its parent company, Centum Investment, which has been in operation since 1967. Centum Real Estate's foray into the Ugandan market proved to be a strategic move, with the market offering opportunities for growth and serving as a cushion against the slowdown in residential sales in Nairobi. The company's long-term plans include expanding further in East Africa, with potential interests in markets like Rwanda and the Democratic Republic of Congo. One of the key decisions made by Centum Real Estate during the pandemic was the issuance of a bond at a 12.5% yield, a move that was considered opportunistic and risky at the time. However, the successful subscription of the bond demonstrated the resilience of the company's business model and its ability to adapt to challenging circumstances. Kariuki also discussed the company's pre-sale policy, where at least 30% of a project needs to be pre-sold before commencement. This approach helps mitigate market risks and ensures that there is demand for the product being offered, supporting the company's capital-efficient business model. In light of the recent passing of the company's biggest shareholder, Chris Kirubi, there have been concerns about the impact on the company's governance and future investment decisions. However, Kariuki reassured stakeholders that Centum Real Estate operates with an independent board and strong governance structures, ensuring continuity and stability in the company's operations. Despite the challenges faced by the real estate industry in the wake of the pandemic, Centum Real Estate's resilience, diversified business model, and strategic decision-making have positioned the company for continued growth and success in the East African market.