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Kenya Corporate Analysis | Public Credit Rating
Centum Investment Company Plc
Kenya Corporate Analysis July 2018
Summary rating rationale
• Centum is a leading Kenyan investment company, with clear operating
structures and well-defined investment strategy. The ratings take cognisance
of Centum’s sectoral diversification across its investments, which have
supported consistently robust growth over the review period. NAV
registered at KES48.7bn at FY18, having increased at a CAGR of 20.8%
from FY14 to FY18.
• Much of the value creation has largely been driven by the growth and real
estate portfolios, with two more large property ventures expected to
contribute strongly to realised and fair value profits over the next few years.
Nevertheless, the projects’ prospects are closely related to the performance
in the property market, which is under some pressure. The investments in
power are set to substantially change the composition of the portfolio in the
medium term, while projects in the education and healthcare will further add
to the diversity of earnings.
• Centum has reported much stronger annuity income since FY16, supported
by dividend inflows from the FMCG businesses. Thus, while the interest
cost has increased over the review period, annuity income coverage of
interest and operating expenses has been maintained around 1.4x, which is
considered adequate given the earnings achieved through assets sales and
the availability of substantial funding facilities.
• Development risk is inherent to the business model. However, the
company’s demonstrated ability to generate substantial returns and cash
flows from disposals (which form a critical component of Centum’s
earnings), combined with the ability to maintain a firm development pipeline
over the review period supports the current ratings.
• At the holding company level, Centum’s gross debt was flat at KES14.8bn
at FY18 (FY17: KES14.7bn). Accordingly, gearing metrics remained
conservative and well within bond covenant levels. Net debt to equity
registered at 28.3% (FY16: 27.2%), whilst net debt to investment assets was
22.3% (FY17: 20.8%). The long debt maturity profile is positively noted,
with only 13% of total debt due in FY19.
• Centum’s strong access to capital markets, evidenced by oversubscribed
recent bond issuances, as well as long-standing relationships with
commercial banks and other financial institutions are also considered in
support of the ratings.
• The company is well positioned to benefit from the current strong growth in
Kenya and the broader East Africa region, as its investments are largely
targeted at servicing the growing middle class. Nevertheless, it does face a
more challenging outlook in most of its operating environments.
• Global Credit Ratings has withdrawn the rating accorded to Centum
Investment Company Plc’s Commercial Paper, as there is currently no
Commercial Paper in issue.
Factors that could trigger a rating action may include
Positive change: Continued strong profitability, both from annuity type
income and asset sales. Gaining critical mass in other targeted sectors would
be positively viewed, as it would lessen dependence on new property
developments.
Negative change: Protracted weak performance due to a deterioration in the
business and socio-economic environment would have a negative ratings
impact. Adverse developments in any of the subsidiaries/associates could be
managed, but Centum’s ability to service its debt could be strained by
simultaneous problems.
Rating class Rating scale Rating* Rating outlook Expiry date
Long term National AKE) Positive July 2019
Short term National A1(KE)
Financial data:*
(USD’m Comparative)
31/03/17 31/03/18
KES/USD (avg.) 102.2 103.3
KES/USD (close) 103.1 100.9
Total assets 597.2 654.7
Total investment 446.5 478.1
Total debt 142.2 147.0
Total capital 434.6 482,3
Cash & equiv. 23.7 10.7
Total income 42.1 34.2
EBITDA 31.7 34.1
NPAT 15.4 10.1
Market cap. ** KES24.0bn/USD239m
Market share n.a * Company financial statements.
** As at 12/07/2018 @ KES100.3/USD.
Rating history:
Initial rating (July 2012)
Long term: A-(KE)
Short term: A1-(KE)
Rating outlook: Stable
Commercial Paper: n.a
Last rating (July 2017)
Long term: A(KE)
Short term: A1(KE)
Rating outlook: Stable
Commercial Paper: A1(KE)
Related methodologies/research:
Global Master Criteria for Rating Corporate
Entities, updated February 2018
Centum Investment Company Limited
(“Centum” or “the company”) Issuer rating
reports, 2012-17
GCR contacts:
Primary Analyst:
Eyal Shevel
Sector Head: Corporate Ratings
Committee Chairperson:
Sheri Morgan
Senior Analyst: Corporate Ratings
Analyst location: Johannesburg, ZA
Tel: +27 11 784 – 1771
Website: http://globalratings.net
*As the bonds issued by Centum represents a senior
unsecured obligation, these bear the same ratings as
those of the Group. GCR’s ratings exclude the
equity-linked component of the bond, which is subject to market forces.
Kenya Corporate Analysis | Public Credit Rating Page 2
Business profile
Centum is an investment holding company domiciled in
Kenya and listed on both the Nairobi Securities Exchange
(NSE) and the Ugandan Securities Exchange (USE). The
company was incorporated in 1967 as an investment
vehicle for the Kenyan government’s Industrial and
Commercial Development Corporation (“ICDC”) and
listed on the NSE as ICDC Investment Company Limited
(“ICDCI”). Although ICDC’s shareholding has since
been significantly whittled down, it remains the second
largest shareholder, with a 23% stake at FY18.
#
* Centum’s stake in in Sidian Bank Ltd is held through Bakki Holdco. Similarly,
its stake in Two Rivers Lifestyle Centre is held through Two Rivers Development
Ltd. ** Centum has concluded the exit from GenAfrica, with the transaction to reflect in
FY19 financial statements
*** Consists of five 100% subsidiaries with small or negative fair values (Centum
BVI Ltd, eTransact Ltd, Mvuke Ltd, and King Beverage Ltd).
Centum’s strategy is based on actively developing
projects and businesses of a scale that themselves could
create value and be disposed to outside investors. Once a
business matures or achieves a certain scale and level of
performance, new investors can be introduced through a
partial or complete sale. Centum’s target is to conclude
at least one large sale transaction each year, and the
proceeds from these sales form a core component of its
earnings. The capital released from such disposals can
then be recycled to new investments. Thus, the ability to
maintain a firm pipeline of investments from development
stage to maturity is important for ensuring a steady
earnings trajectory. In recent years, some major
transactions include:
• The sale of a 13% stake in UAP Kenya to Old Mutual
Plc for around KES5bn in FY15;
• The sale of a 39% stake in Two Rivers Development
Ltd to AVIC JWHC (MU) Ltd for USD70m in FY15;
• The disposal of a 50% stake in Two Rivers Lifestyle
Centre for USD63m in FY16;
• The disposal of a 21.5% stake in AON Minet Ins.
Brokers for around KES1bn in FY16;
• The sale of a 26% stake in KWA Holdings East Africa
for KES1.1bn in FY17;
• The sale of the remaining 27.6% stake in the micro
finance business PlatCorp for KES1.9bn in FY18;
• The disposal of GenAfrica Investments Management
for KES2.3bn was largely concluded in FY18.
However, the proceeds therefrom will be realised in
1H FY19. Thus, the related assets were classified as
held for sale at FY18.
Shareholding and Corporate governance
Centum’s shareholders were largely unchanged at 31
March 2018, with Dr Christopher Kirubi holding a 30%
share and the ICDC a stake of just over 23%. Aside from
this, other shareholders are well diversified with no single
shareholding above 3%. Centum subscribes to several
codes of corporate governance, including the Capital
Markets Authority Guidelines on Corporate Governance
Practices by Public Listed Companies in Kenya, the King
Code on Corporate Governance, and the Principles for
Corporate Governance in Kenya issued by the Centre of
Corporate Governance. Its board and various board sub-
committees consists of a majority of non-executives.
Moreover, the group has an extensive risk and internal
audit function, as well as a code of conduct against which
all employees are measured. The group has been audited
by PWC and received unqualified audit reports for the
five years to FY18.
Table 1: Corporate governance checklist
Description Findings
Directors - Executive 1
- Non-executive 10 (of which 6 are independent)
Frequency of meetings 7 in FY18
Separation of the chairman Yes
Board committees 6 - Investment; Audit; Risk; Nominations &
Governance; Branding; and ICT.
Internal control/compliance Yes- reports to audit & risk committee.
External auditors PWC; which issued unqualified and clean audit
reports between FY14 and FY18.
Investment strategy and earnings diversification
During FY18, the group adopted a new operating
structure that merged some of the eight strategic sectors
into four reportable segments being; the growth portfolio,
real estate, development portfolio, and marketable
securities. Centum’s active investment management
strategy has been successful, with NAV increasing from
KES5.9bn at FY09 when the strategy was adopted, to
KES48.7bn at FY18 (FY17: KES44.8bn).
Subsidiaries (50%< held)*
• Athena Properties Ltd
• Rasimu Ltd
• Two Rivers Development Ltd (58.3%)
• Two Rivers Lifestyle Centre
Kenya (50%)
• Uhuru Heights Ltd
• Centum Exotics (Mauritius) Ltd
• Centum Dev. (Mauritius) Ltd
• Pearl Marina Uganda (100%)
• Vipingo Development Limited (100%)
• Vipingo Estates Limited (100%)
• Nabo Capital Limited
• Kilele Holdings Ltd (100%)
• GenAfrica Inv. Mng. Ltd (73.3%)**
• Centum Business Solutions Ltd
(100%)
• Almasi Beverages Ltd (53.85%)
• Bakki Holdco Company Ltd (100%)
• Sidian Bank (74%)
• Longhorn Publishers Ltd (60.2%)
• Green Blade Growers (100%)
• Zohari Leasing (100%)
• Other***
Associates /JVs (20-49%
stake)
• Nairobi Bottlers Ltd (27.62%)
• UAP Fin. Services Uganda Ltd
(29%)
• Akiira Geothermal Ltd (37.5%)
• Broll Kenya Ltd (30%)
• Amu Power Ltd (51%)
• General Motors EA (17%)
Centum Investment Company Limited
Unquoted investments
(<20- stake)
• Isuzu EA Ltd (17.8%)
• NAS Servair Ltd (15%)
Kenya Corporate Analysis | Public Credit Rating Page 3
Growth Portfolio
The Growth portfolio consists of all the more mature
businesses in the FMCG and financial services sectors.
FMCG investments are focussed on Almasi Beverages
and Nairobi Bottlers, as well as the much smaller King
Beverages. Almasi Beverages is the fastest growing
bottling company in Kenya, with 55,000 active outlets
and capacity to grow to 90,000. During FY18 sales
volumes grew 10% following the commissioning of two
new production lines and additional warehousing space.
Medium term volume growth should be supported by the
new bottling plant and distribution centre for Coca-Cola
products in Eldoret. Nairobi Bottlers also continues to
invest in additional capacity, and in May 2018 launched a
new juice bottling line with capacity to produce 28,000
bottles per hour. This should also support volume and
earnings growth in the medium term.
In the financial services sector, Sidian Bank has
evidenced signs of recovery, despite the net loss widening
to KES439m in FY18 (FY17: KES222m). Trade finance
lending increased to KES9.7bn at FY18 (FY17:
KES1.1bn), as the bank positions itself as a leader in trade
finance solutions. To finance growth, the bank raised
KES1.5bn through a rights issue during FY18. Despite
the NPL ratio declining to 20% (FY17: 25%), non-
performing loans and advances remain a concern. The
bulk of the NPLs are adequately covered by collateral.
Sidian has also started realising operational efficiencies
from its recent investments in new ICT systems and
expanding alternative channels income. Despite subdued
equity and debt market performance, Nabo Capital (the
asset management subsidiary) registered sound growth
with fund management income increasing to KES124m in
FY18 (FY17: KES90m). The portfolio is well diversified
geographically and by asset class, thus reducing volatility
of returns. During FY18, Centum sold its remaining
27.6% stake in PlatCorp for KES1.9bn, recording a
realised fair value gain of over KES1bn.
Other holdings in the growth portfolio, such as Longhorn
Publishers, Isuzu East Africa and NAS Servair are
expected to also provide substantial value and earnings
uplift in the medium term, given their general correlation
with the broader Kenyan economy.
Real Estate
The Two Rivers Development remains Centum’s largest
asset with a NAV of KES12.3bn at FY18. Nevertheless,
letting at the Two Rivers Mall was adversely affected by
extended periods of electioneering, with occupancy of
75%, behind the initial target of 85%. Two Rivers Office
Towers was opened during FY18 and while only 9% of
space was let at year end, management expects occupancy
to rise to over 60% by FY19. The Two Rivers Power and
Two Rivers Water and Sewerage Companies, continued
to gain traction and revenue is expected to rise to over
KES400m by FY20 (FY18: KES261m). The short-term
target for Two Rivers is to realise value through the sale
of plots worth KES2bn during FY19. In addition, the
Riverbank Apartments project, which entails 196
residential apartments within the Two Rivers precinct, is
set to break ground in FY19. KES2bn in third party
funding has already been secured for this development.
Bulking up the residential component will further support
demand for electricity and water.
In July 2018, Centum broke ground on the Vipingo
project, set on 10,254 acres of land near Mombasa. The
project is a mixed-use development consisting of an
industrial zone, a commercial centre and residential. A
detailed master plan for the area has already been
completed, and potential investors and developers have
been engaged. Of the 180 acres of serviced land to be sold
to developers, 25 acres were pre-sold in FY18 at between
KES18m to KES20m per acre, while expressions were
received for an additional 1,000 acres of unserviced land.
Phase one of the development will include a 1,200-acre
industrial zone, as well as a 50-acre commercial centre.
Following the official ground-breaking, sales of serviced
land are expected to pick up during 2H FY19.
In Uganda, progress at the Pearl Marina in Entebbe
remains slow, although the project is now nearing cash
generation stage. Construction of a 10km access road
linking the development to the Kampala-Entebbe Road
was approved by Uganda National Roads Authority
during FY18 and is currently underway. The final plan for
the residential apartments was also approved during
FY18, with construction set to commence in 2H FY18.
Development Portfolio
The development portfolio consists those businesses that
are generally young and still require substantial capital
investment and management time until they reach
maturity over the medium term.
In Agribusiness, Green Blade Growers has continued to
expand since its establishment in FY16, with strong
demand from its main export markets. The business
produces vegetables and related horticultural products
mainly for export. Six new off-takers were secured in
FY18, which saw revenue increase to KES58m (FY17:
KES16m) and additional investments in infrastructure
were made during the year. An outgrower scheme was
initiated in partnership with the local farming community
to diversify the product mix and meet growing demand.
The management team has been strengthened by adding
horticulture and marketing experts. However, the planned
establishment of an agribusiness unit in Uganda was
suspended after Centum faced challenges in concluding
the acquisition of land initially meant for cereal
production.
Centum’s Power projects have been beset by delays,
although they are both nearing financial close. The Amu
Power project had faced resistance from environmental
lobby groups who felt that the coal fired power plant
would pollute the environment. Nevertheless, the project
received a letter of support from government in FY18.
Post year-end, Centum announced the Amu Power
consortium had secured USD2bn funding for the project,
and contracted General Electric to design and build the
Kenya Corporate Analysis | Public Credit Rating Page 4
plant. Construction is expected to commence during the
FY19. At the Akiira power plant, two out of the five
exploratory wells have been drilled, confirming the
presence of a viable resource. Land rights have been
secured and a power purchase agreement signed, while
agreements with financiers and construction contractors,
as well as Government of Kenya letter of support were
secured in FY18. Thus, management expects to achieve
financial close by FY19.
In the Education Sector, Centum has partnered with
SABIS (a global education network with 70,000 students
enrolled on five continents) and private equity firm,
Investbridge Capital, to develop a network of schools
across East Africa. The first SABIS® International
School (Nairobi) is scheduled to open in September 2018
with an initial enrolment of 250 students and will
eventually have the capacity for up to 2,000 students.
An experienced and reputable operator has already been
engaged to develop a Healthcare platform aimed at the
Kenyan middle class. A site within the Two Rivers
precinct has been identified for the hospital and the
project will likely break ground during FY19. Potential
local and foreign equity and debt financiers are being
sought to partner with Centum on the healthcare project.
Earnings diversification
Table 2:
Segmental
diversification
Growth Real
Estate Development
Marketable
Securities Total
Dividends 2,033 0 0 7 2,040
Interest income 11 886 10 439 1,347
Other Income 140 (2) 0 (5)
Realised gains 0 0 0 9 9
Unrealised
gains 66 3,725 (188) 32 3,635
Gross return 2,251 4,609 (178) 482 7,165
Finance cost (803) (793) (36) (14) (1,646)
Expenses (412) (413) (10) (6) (841)
Total return 1,036 3,403 (224) 462 4,677
Total assets 25,090 30,302 5,301 5,393 66,087
Debt (2,225) (9,186) (3,431) 0 (14,843)
Other liabilities (961) (1,311) (43) (243) (2,559)
Net asset
value 21,903 19,805 1,827 5,150 48,686
Real estate remains the primary generator of returns,
albeit driven by unrealised gains on property valuations.
The fair value gains recorded in FY18 were driven by a
KES1.2bn gain at Vipingo and a KES2.7bn gain at Pearl
Marina. Such gains are a reflection of the major
development activity during the year at these properties.
Positively, 82% of the businesses in the growth segment
were profitable after tax in FY18, and 71% declared
dividends. Nevertheless, dividend income was driven
largely by Almasi and Nairobi Bottlers, as the financial
services operations were impacted by the regulatory
changes and market confidence issues. The businesses
within the development portfolio are still in the negative
cash flow phase with Greenblade Growers and King
Beverage Limited expected to break-even in FY19.
Economic and operating environment
Table 3: Economic
overview 2014 2015 2016 2017 2018f
Real GDP growth (%) 5.3 5.6 5.8 5.3 5.5
GDP per capita (USD)* 1,430 1,439 1,516 1,607 1,608
Inflation (annual avg. % ∆) 6.9 6.6 6.3 8 5.2 Govt. debt: GDP (%) 43.9 52.4 54.4 56.7 55
Current account: GDP (%) (9.8) (6.8) (5.5) (5.6) (5.0)
KES: USD (avg.) 87.9 98.2 101.5 103 n.a *Current prices. f – forecast
Source: IMF, Oanda
Following robust growth in 2016, the Kenyan economy
expanded at a marginally lower rate of 5% in 2017,
impacted by the severe drought, lower levels of credit
supply to the private sector as a result of the capping of
interest rates, as well political instability. In particular,
uncertainty in the wake of the protracted general election
saw many infrastructure projects being delayed and
retailers reducing stock levels.
Annual inflation averaged 8% in 2017, higher than the
6.3% in 2016. This rise in inflation was largely
attributable to the impact of the drought on food prices.
Positively, the Kenyan Shilling remained largely stable in
2017 amidst the economic headwinds, depreciating by
just 1.7% against the USD. The capping of interest rates,
introduced in September 2016, was meant to stimulate
economic growth by offering cheaper access to credit.
However, the actual result has been a tightening of credit
supply to the private sector, particularly SMEs, as lenders
shunned riskier credit profiles, given their inability to
price rates accordingly. The Kenya government has now
signalled that this could be scrapped, although the timing
of such regulatory amendments remains unknown.
Removing the cap is expected to increase credit supply to
SMEs, which have been the drivers of employment
creation and economic growth in recent years.
Favourable weather conditions are expected to support
increased grain production and tea exports in 2018, whilst
manufacturing sector growth should rebound to 4.5% in
2018 (2017: 2.7% growth) on the back of increased agro-
processing output. However, the rapid growth in the
construction industry is expected to moderate to 6.9% in
2018 (2017: 8.5%), with the value of approved building
plans on Nairobi declining by 18%. Against this
background, the World Bank projects GDP growth to
accelerate to 5.5% in 2018. However, the high level of
government debt, which currently stands at 57% of GDP,
remains a risk to sustainable long-term growth, as fiscal
consolidation may slow down government-driven
economic activity.
Financial performance
As GCR’s credit rating relates to debt assumed directly by
Centum Limited (usually to fund its portion of
investments), the analysis focuses on the extent to which
earnings and cash flows are available to the holding
company to service its debt obligations. Accordingly,
GCR considers company financial statements to be of
greater value as they more accurately reflect the true cash
Kenya Corporate Analysis | Public Credit Rating Page 5
flows attributable to Centum1. This notwithstanding, the
likelihood that dividend receipts will continue to expand,
is best reflected in the group accounts, which contain the
true performance of the underlying entities.
Accordingly, a five-year synopsis of key financial data for
both company and consolidated financial is appended to
this report. The commentary that follows focusses
primarily on company financial performance and
reference made to Centum relates to the holding company.
Consolidated group financial accounts are included and
analysed where necessary.
Centum’s annuity income consists largely of interest from
investing and financing activities, as well as dividends
from investee companies. Interest income remained flat at
KES1.3bn in FY18, while dividend income increased to
KES2bn (FY17: KES1.8bn) on the back of sound
profitability by most of the subsidiaries in the growth
portfolio. Thus, annuity income increased to KES3.5bn in
FY18 (FY17: KES3.2bn). With the businesses in the
growth portfolio projected to continue operating
profitably, rising dividend income should support
stronger annuity income growth in the short term.
Nevertheless, the potential disposal of some mature
businesses may curtail this growth. Loans to subsidiaries,
which are provided on commercial terms, increased
marginally during the year, suggesting a modest increase
in interest income for FY19.
While dividend and interest income tend to be low and
largely used to cover costs, the company generates
substantial earnings and cashflow through assets sales.
During FY18 the realised gains declined to just KES9m
as no significant investments were disposed, compared to
the KES1.1bn recorded in FY17 from the sale of KWAL
Holdings. Thus, total income declined to KES3.5bn in
FY18 (FY17: KES4.3bn). The proceeds from the disposal
of GenAfrica Asset management will be realised in FY19.
This, coupled with the disposal pipeline already identified
for FY19, is expected to support a rebound in realised fair
value gains and total income.
1 In contrast, Centum’s group audited accounts reflect the consolidation of Sidian Bank,
GenAfrica Asset Managers (held for sale at FY18), Almasi Beverages, Two Rivers and
Longhorn Publishers. In group numbers, line by line consolidation is applied to the income,
expenses, assets and liabilities of the subsidiaries. Nevertheless, the profitability is not
directly available to Centum as it must be retained within the individual businesses for,
inter alia; solvency purposes or for expansion; and Centum only benefits to the extent that
Despite staff costs declining to KES314m in FY18
(FY17: KES436m), an increase in consultancy fees
resulted in operating expenses rising to KES853m (FY17:
KES797m). The finance charge increased marginally to
KES1.8bn (FY17: KES1.7bn) on the back of slightly
higher average debt during the year, albeit that the debt
was reduced towards year end. Nevertheless, annuity
income coverage of interest rose to 2x in FY18 (FY17:
1.9x), which reflects adequate debt service capacity. In
addition to finance costs, annuity income has also been
sufficient to cover all operational expenses with a
coverage of 1.4x in FY18 (FY17: 1.3x). Management has
indicated that no significant additional debt is expected in
the short term, and operating expenses are to be kept
within current levels. Thus, the annuity income coverage
of interest and operating expense ratios are projected to
remain sound. Overall, the company posted attributable
earnings of KES1.0bn (FY17: KES1.6bn), as the decline
in NPBT was partly offset by a deferred tax credit.
Consolidated earnings
Consolidated income declined to KES12.9bn at FY18
(FY17: KES13.4bn), impacted by the lower interest
income generated by Sidian Bank. Realised fair value
gains declined to KES786m (FY17: KES1.1bn),
consisting largely of the disposal of Centum’s remaining
stake in PlatCorp, as well as some quoted equities. Fair
value gains on investment properties declined to
KES4.2bn in FY18 (FY17: KES6.5bn). Accordingly,
total income was lower at KES17.9bn (FY17: 20.9bn).
Operating expenses rose to KES13.7bn (FY17:
KES12.2bn), driven by higher selling and distribution
expenses and impairment charges. The consolidated
interest charge increased to KES2.3bn (FY17: KES1.8bn)
on the back of higher debt while favourable currency
movements resulted in a foreign exchange gain of
KES188m, compared to a loss of KES103m in the prior
year. Equity accounted earnings were also significantly
lower at KES695m (FY17: KES1.4bn), resulting in the
NPBT declining to KES3.3bn (FY17: KES8.9bn).
Funding and liquidity
Centum’s role is to identify favourable investment
opportunities and to ensure that sufficient funding is
available to pursue them. Where internal cash is not
sufficient, or where optimal capital management
strategies dictate a mix of funding, Centum may raise debt
or equity capital. Thereafter, any funding needed to
support operations is raised at the subsidiary level with no
recourse to Centum, through issuing debt or the sale of
shareholding to outside parties. Centum also supports the
financing requirements of its subsidiaries/associates
through loan funding generally in the start-up phase
where the subsidiary’s risk is deemed excessive by
commercial banks, although the funding is provided on
dividends are declared (which is determined by the individual Boards). More saliently, the
businesses all raise their own debt funding (and retain cash and investments) which has no
recourse to Centum itself. Accordingly, Centum’s exposure to each underlying business is
limited to the carrying value of its investment and any dividends it may receive.
0
1
2
3
4
5
FY13 FY14 FY15 FY16 FY17 FY18
Coverage ratios (x)
Annuity income : operating and finance costs
Annuity income : Interest
Kenya Corporate Analysis | Public Credit Rating Page 6
commercial terms. Such loans to subsidiaries increased to
KES13.4bn at FY18 (FY17: KES12.7bn), driven by
additional amounts drawn by Vipingo Limited to finance
the servicing of the land.
Interest-bearing debt was flat at KES14.8bn at FY18,
consisting of KES8.4bn spread across 3 banks and a
KES6bn 5-year note issued in FY15. During FY18,
Centum redeemed the KES4.2bn DMTN note that
matured and replaced it with bank funding. The USD30m
facility from RMB, which matured in March 2018, was
refinanced by a USD50m facility over four years. Further,
an overdraft facility of USD5m and a revolving credit
facility of USD15m were secured from Stanbic Bank
Kenya (secured by its equity investments in some
subsidiaries and unlisted shares). The overdraft and
guarantee line facility at Cooperative Bank of Kenya
(which is used to finance working capital requirements)
was maintained at KES1.5bn and is renewable every 12
months. The facility is secured by Centum’s corporate
bond investments and quoted equities portfolio.
Positively, while debt remained stable, the maturity
profile was significantly extended. Only KES1.9bn (13%
of total debt) is due in FY19. However, there is a very
high concentration in FY21, when the KES6bn bonds
mature. To ensure adequate liquidity metrics, GCR would
require that refinancing be negotiated one year ahead of
maturity, and will monitor developments in that regard.
From a gearing perspective, Centum remains
conservatively geared. Net debt to equity registered at
28.3% (FY17: 27.2%), while net debt to investments was
22.3% (FY17: 20.8%). This was well within the bond
covenant requirement for a net debt to equity ratio of 50%.
Despite a number of ongoing investments in the
development portfolio, Centum has indicated an intention
to deleverage the group over the next three years. In this
regard, all debt will be paid off as it matures, with a view
to operate debt-free from FY22. Portfolio companies will
secure any needed debt at subsidiary level, with no
recourse to Centum. A pipeline of exits has already been
identified, which management considers sufficient to
achieve this. Thus, gearing is expected to trend
downwards until FY22, when the company will be
ungeared.
Conclusion and rating rationale
Due to the diversity of the industries in which Centum is
invested, and its focus on industries servicing the middle
class, the company is well positioned to benefit from the
growth trends in Kenya and the broader East Africa
region. Nevertheless, it does face a more challenging
outlook in most its operating environments. Positively,
Centum exhibits a strong portfolio of projects at various
stages of development, the sale of which should support
robust revenue growth in the short term. In the longer
term, large investments in energy are set to fundamentally
change the income distribution, albeit that they require
significant upfront capital investments.
From a credit risk perspective, Centum remains
conservatively geared. Although the company has a
number of projects in the development pipeline, proceeds
from the disposal of mature assets should meet the bulk
of the funding requirements, thus limiting recourse to
debt. Centum’s demonstrated ability to maintain a firm
development pipeline over the review period supports the
current rating. Nevertheless, the relative lack of
substantial annuity income and the requirements to
generate cash flows from assets sales, presents a higher
level of development risk that may constrain the ratings.
This is, however, somewhat mitigated by the substantial
access to funding from a variety of sources the company
enjoys, while current credit protection metrics suggest
sufficient additional capacity to raise further debt.
-
2,000
4,000
6,000
8,000
10,000
FY19 FY20 FY21 FY22
Debt Maturity ProfileKES' Bn
0
10
20
30
40
50
FY13 FY14 FY15 FY16 FY17 FY18
Gearing ratios (%)
Net debt : investments Net debt : equity
Net debt : invest. (consol.)
Kenya Corporate Analysis | Public Credit Rating Page 7
Centum Investment Company Plc (Group) (KES in millions except as Noted)
Income Statement Year ended : 31 March 2014 2015 2016 2017 2018 Interest income^ 218.4 758.3 2,749.7 2,131.0 1,215.8 Dividend income 460.2 724.5 266.3 306.4 271.1 Fees , rent & other 278.8 1,154.5 9,365.6 10,922.9 11,460.6 Total annuity type income 957.4 2,637.3 12,381.6 13,360.2 12,947.5 Realised Fair value gains/(losses) 993.2 6,367.4 5,606.5 1,046.7 786.0 Unrealised Fair value gains/(losses) 2,932.6 2,562.2 5,082.6 6,454.8 4,182.7 Total income 4,883.2 11,566.8 23,070.8 20,861.7 17,916.2 Expenses (795.8) (2,458.4) (11,290.2) (12,217.1) (13,703.2) Finance charges^ (691.0) (1,059.9) (1,936.7) (1,831.6) (2,341.3) Capitalised interest 228.2 560.0 398.7 885.7 392.1 Foreign exchange gains/(losses) (6.6) (190.4) (444.0) (102.5) 187.9 Exceptional items 0.0 (48.8) 0.0 0.0 135.6 Equity accounted earnings (after taxation) 393.4 447.7 1,074.1 1,346.9 694.8 NPBT 4,011.5 8,817.2 10,872.7 8,943.2 3,282.2 Taxation charge (956.1) (874.7) (925.1) (613.3) (490.4) NPAT 3,055.4 7,942.4 9,947.6 8,329.9 2,791.8 Minority interest (35.2) (989.2) (2,131.6) (1,199.7) (158.0) Retained earnings 3,020.2 6,953.3
7,816.0
7,130.2 2,633.8
Cash Flow Statement Cash generated by operations 212.1 561.6 3,343.8 3,255.9 1,596.8
Working Capital (increase)/decrease 741.6 290.2 287.8 (1,116.9) (2,010.6) Net movement from banking activities - 319.9 (2,253.0) (2,241.1) 3,894.9 Net interest paid (660.1) (1,251.2) (3,031.0) (2,566.7) (2,584.5) Dividends received from associates 204.8 342.7 373.4 277.3 150.5 Taxation paid (50.8) (552.2) (1,142.3) (919.6) (780.6) Net cash flow from operations 447.6 (289.0) (2,421.4) (3,311.1) 266.6 Dividends paid - Ordinary shares (45.3) (47.2) 0.0 (605.4) (710.7) Net cash retained 402.3 (336.2) (2,421.4) (3,916.5) (444.1) Net investment (cost)/proceeds (2,351.20) (192.06) (8,491.9) (4,352.84) (1,643.10) Capital expenditure (26.9) (132.6) (3,712.8) (3,838.4) (1,752.1) Investments acquired (5,003.1) (8,761.1) (10,155.3) (5,170.1) (4,129.0) Proceeds on sale of assets/investments 2,678.8 8,701.7 5,376.1 4,655.7 4,238.0
Shareholder loans 0.0 6,834.7 6,426.0 0.0 0.0 Net cash available/(consumed) (1,948.9) 6,306.4 (4,486.2) (8,268.3) (2,086.2) Borrowings raised/(repaid) 1,291.1 3,151.5 6,494.2 2,728.5 1,504.1 Net increase/(decrease) in cash and cash equivalents# (657.8) 9,457.9 2,007.9 (5,539.8) (582.2)
Balance Sheet
Ordinary share capital and premium 922.5 922.5 922.5 922.5 922.5 Investment revaluation reserve 6,170.2 7,022.0 4,675.0 2,803.8 2,389.9 Retained earnings 11,945.0 15,388.6 25,744.0 30,061.2 32,596.0 Minority interest 268.0 5,129.1 8,749.5 12,177.6 12,427.3 Shareholder loans 0.0 6,925.0 0.0 0.0 0.0 Total shareholders' interest 19,305.6 35,387.1 40,090.9 45,965.1 48,335.6 Short term debt 1,291.1 0.0 0.0 0.0 5,959.9 Long term debt 4,201.0 9,982.6 16,356.2 20,986.4 18,503.6 Total interest-bearing debt 5,492.1 9,982.6 16,356.2 20,986.4 24,463.6 Customer deposits 0.0 12,400.6 12,039.9 9,798.7 12,832.4 Accounts payable 1,840.6 8,005.7 3,337.5 5,436.7 4,999.6 Other liabilities 1,991.7 3,288.0 3,061.7 2,670.0 3,095.3 Total liabilities & equity 28,630.0 69,064.0 74,886.1 84,856.9 93,726.6 Fixed assets 60.0 4,273.3 7,003.9 10,072.0 9,665.5 Intangible assets 21.5 171.6 444.0 472.1 685.3 Investments in associates and joint ventures 3,900.9 3,744.5 13,047.8 13,520.1 12,543.8 Investment property 10,845.4 17,774.8 16,514.2 27,311.1 32,718.7 Quoted investments 3,036.3 2,979.2 1,369.0 1,223.2 1,738.8 Unquoted investments 7,569.3 19,609.5 18,930.9 16,859.6 16,135.1 Corporate bonds 1,071.0 3,426.6 3,990.8 3,021.5 4,056.4 Cash and cash equivalent 843.6 9,006.3 10,197.5 5,638.8 5,819.8 Other assets 1,282.0 8,078.1 3,388.1 6,738.6 10,363.2 Total assets 28,630.0 69,064.0 74,886.1 84,856.9 93,726.6
74,886.1 74,886.1 74,886.1 Ratios Efficiency:
Expenses : recurring income (%) 58.9 79.7 83.9 83.1 100.4 Expenses : average total investments (%) 3.5 5.9 18.7 18.6 19.5 Cash flow: Operating cash flow : Interest bearing debt (%) 8.1 (2.9) neg neg 0.1 Profitability: Annuity income growth (%) 44.4 155.8 338.2 1.2 (3.10 Total income growth (%) 15.4 120.0 86.2 (15.2) (14.1) Effective tax rate (%) 26.4 10.5 9.4 8.1 19.0 Coverage: Interest coverage (Total income + earnings from associates) 7.6 11.3 12.5 12.1 7.9 Interest coverage (Total income) 7.1 10.9 11.9 11.4 7.7 Interest coverage (Annuity income) 1.4 2.5 6.4 7.3 5.5 Liquidity: Cash : short term debt (x) 0.7 n.a n.a n.a 1.0 Marketable securities : short term debt (x) 3.8 n.a n.a n.a 1.9 Capitalisation: Equity : total assets (%) 67.4 51.2 53.5 54.2 51.6 Total debt : total investments (%) 20.8 21.0 30.4 33.9 36.4 Net debt : total investments (%) 17.6 2.1 11.4 24.8 27.7 Total debt : equity (%) 28.4 28.2 40.8 45.7 50.6 Net debt : equity (%) 24.1 2.8 15.4 33.4 38.6 # Excluding exchanges gains/(losses) on cash and equivalents
^ Since 2015, interest paid on deposits and borrowed funds by Sidian Bank has been set-off against interest income.
Kenya Corporate Analysis | Public Credit Rating Page 8
Centum Investment Company Plc (Company) (KES in Millions except as Noted)
Income Statement Year end: 31 March 2014 2015 2016 2017 2018
Interest income 39.8 76.6 675.6 1,326.4 1,347.0 Dividend income 1,788.6 1,318.3 2,670.6 1,765.1 2,040.1 Fees , rent & other 11.3 8.6 7.8 146.1 133.0 Total annuity type income 1,839.8 1,403.4 3,354.0 3,237.6 3,520.2 Realised Fair value gains/(losses) 148.3 5,326.9 989.5 1,062.8 8.7 Unrealised Fair value gains/(losses) 0.2 0.0 0.0 0.0 0.0 Total income 1,988.2 6,730.3 4,343.5 4,300.3 3,528.9 Expenses (430.7) (867.4) (877.5) (797.6) (852.7) Finance charges (459.7) (751.6) (1,490.3) (1,694.0) (1,767.5) Foreign exchange gains/(losses) (2.3) 82.2 (20.3) (59.5) 121.1 Exceptional items 0.0 (48.8) 0.0 0.0 0.0 NPBT 1,095.6 5,144.6 1,955.4 1,749.2 1,029.7 Taxation charge (48.3) (277.7) (87.0) (177.9) 11.5 Attributable earnings 1,047.3 4,866.9 1,868.4 1,571.3 1,041.3 Dividends paid - Ordinary shares 0.0 0.0 0.0 0.0 0.0 Retained earnings 1,047.3 4,866.9 1,868.4 1,571.3 1,041.3 Cash Flow Statement Cash generated by operations - 487.479 2,477.157 2,302.587 2,718.514 Working Capital (increase)/decrease - 164.173 (235.706) (118.720) 2,075.610 Net interest paid - (1,251.2) (1,490.3) (1,486.8) (1,601.4) Dividends received - 0.0 0.0 0.0 0.0 Taxation paid - (27.3) (406.8) (78.7) (57.0) Net cash flow from operations - (626.8) 344.4 618.4 3,135.8 Dividends paid - Ordinary shares - (0.5) (70.5) (605.4) (727.1) Net cash retained - (627.3) 273.9 13.0 2,408.6
Net investment (cost)/proceeds - 1,409.7 (2,850.9) (4,426.4) (3,876.6) Capital expenditure - (2.0) (0.4) (27.5) (116.1) Investments acquired - (4,703.4) (4,013.4) (5,478.9) (3,780.1) Proceeds on sale of assets/investments - 6,115.0 1,162.9 1,080.0 19.6
Capital contribution from minorities - 0.0 0.0 0.0 0.0 Shares issued/(redeemed) - 0.0 0.0 0.0 0.0 Net cash available/(consumed) - 782.4 (2,577.0) (4,413.4) (1,468.0) Borrowings raised/(repaid) - 2,715.6 2,820.4 1,962.1 (866.8) Net increase/(decrease) in cash and cash equivalents# 3,497.9 243.3 (2,451.3) (2,334.8) Balance Sheet
Ordinary share capital and premium 922.5 922.5 922.5 922.5 922.5 Investment revaluation reserve 15,962.4 20,098.0 25,604.3 30,192.6 33,828.3 Retained earnings 6,051.4 10,918.3 12,786.7 13,692.5 13,935.3 Total shareholders' interest 22,936.2 31,938.8 39,313.5 44,807.6 48,686.1 Short term debt 1,291.1 0.0 0.0 8,572.1 1,947.6 Long term debt 4,201.0 7,569.3 10,475.0 6,084.0 12,895.1 Total interest-bearing debt 5,492.1 7,569.3 10,475.0 14,656.1 14,842.6 Accounts payable 204.5 587.2 571.2 446.5 530.7 Other liabilities 56.8 1,232.5 1,183.0 1,659.8 2,027.9 Total liabilities & equity 28,689.6 41,327.8 51,542.8 61,570.0 66,087.3
Fixed assets 0.0 0.0 0.0 22.8 133.1 Intangible assets 0.0 1.6 1.3 0.6 0.2 Investments in associates and joint ventures 6,594.3 8,825.7 7,799.6 6,831.1 7,181.1 Investments in subsidiaries 8,159.2 14,331.0 25,411.2 35,310.9 37,089.7 Investment property 0.0 0.0 0.0 0.0 0.0 Quoted investments 686.3 406.3 156.1 100.0 98.1 Unquoted investments 5,495.3 6,027.9 5,545.0 3,796.8 3,886.8 Corporate bonds 0.0 0.0 0.0 0.0 0.0 Net amounts owed by subsidiaries 7,546.7 8,062.4 8,334.2 12,722.8 13,385.8 Cash and cash equivalent 174.9 3,672.9 3,916.2 2,447.1 1,077.7 Other assets 32.8 0.0 379.2 337.9 3,234.7 Total assets 28,689.6 41,327.8 51,542.8 61,570.0 66,087.3
Ratios Efficiency: Expenses : recurring income (%) 23.4 61.8 26.2 24.6 24.6 Expenses : average total investments (%) 2.4 3.2 2.3 2.0 1.9 Profitability: Annuity income growth (%) 290.5 (23.7) 139.0 (3.5) 5.0 Total income growth (%) 3.9 238.5 (35.5) (1.0) (17.9) Effective tax rate (%) 4.4 5.4 4.4 10.2 n.a Coverage: Ordinary dividend cover n.a n.a n.a n.a n.a Interest coverage (Total income) 4.3 9.0 2.9 2.5 2.0 Interest coverage (Annuity income) 4.0 1.9 2.3 1.9 2.0 Annuity income : opertaing and finance costs 2.1 0.9 1.4 1.3 1.4 Liquidity: Cash : short term debt (x) 0.1 n.a n.a 0.3 0.6 Marketable securities : short term debt (x) 0.7 n.a n.a 0.3 0.6 Capitalisation: Equity : Total assets (%) 79.9 77.3 76.3 72.8 73.7 Total debt : Total investments (%) 19.3 20.1 22.2 24.9 24.1 Net debt : Total investments (%) 18.7 10.3 13.9 20.8 22.3 Total debt : equity (%) 23.9 23.7 26.6 32.7 30.5 Net debt : equity (%) 23.2 12.2 16.7 27.2 28.3
Kenya Corporate Analysis | Public Credit Rating Page 9
GLOSSARY OF TERMS/ACRONYMS USED IN THIS DOCUMENT AS PER GCR'S CORPORATE GLOSSARY
Balance Sheet Also known as Statement of Financial Position. A statement of a company's assets and liabilities provided for the benefit of
shareholders and regulators. It gives a snapshot at a specific point in time of the assets the company holds and how they have been
financed. Bond A long term debt instrument issued by either a company, institution or the government to raise funds. Capital The sum of money that is invested to generate proceeds. Cash Flow The inflow and outflow of cash and cash equivalents. Such flows arise from operating, investing and financing activities. Consortium A group of companies that combine some or all of their resources to undertake a joint project.
Corporate Governance Corporate governance broadly refers to the mechanisms, processes and relations by which corporations are controlled and directed,
and is used to ensure the effectiveness, accountability and transparency of an entity to its stakeholders.
Credit Rating An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.
Debt An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a
commitment to repay the principal in full on a specified date or over a specified period.
Diversification Spreading risk by constructing a portfolio that contains different investments, whose returns are relatively uncorrelated. The term also
refers to companies which move into markets or products that bear little relation to ones they already operate in. Dividend The portion of a company's after-tax earnings that is distributed to shareholders.
Economic Indicators Statistical data about country's economy, such as unemployment figures, the Consumer Price Index (CPI), Gross Domestic Product
(GDP), money supply and housing statistics. This data gives information about the future direction of output and demand in an economy.
Equity Equity is the holding or stake that shareholders have in a company. Equity capital is raised by the issue of new shares or by retaining
profit. Exchange Rate The value of one country's currency expressed in terms of another.
Exposure Exposure is the amount of risk the holder of an asset or security is faced with as a consequence of holding the security or asset. For a
company, its exposure may relate to a particular product class or customer grouping. Exposure may also arise from an overreliance on
one source of funding. Fair Value The fair value of a security, an asset or a company is the rational view of its worth. It may be different from cost or market value.
Gearing With regard to corporate analysis, gearing (or leverage) refers to the extent to which a company is funded by debt and can be
calculated by dividing its debt by shareholders' funds or by EBITDA.
Interest Scheduled payments made to a creditor in return for the use of borrowed money. The size of the payments will be determined by
the interest rate, the amount borrowed or principal and the duration of the loan.
Interest Cover Interest cover is a measure of a company's interest payments relative to its profits. It is calculated by dividing a company's operating
profit by its interest payments for a given period.
Interest Rate The charge or the return on an asset or debt expressed as a percentage of the price or size of the asset or debt. It is usually expressed on an annual basis.
Joint Venture A project or other business activity in which two persons or companies partner together to conduct the project. Liabilities All financial claims, debts or potential losses incurred by an individual or an organisation.
Liquidity The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or
sold quickly and in large volumes without substantially affecting the market price.
Long-Term Rating A long term rating reflects an issuer’s ability to meet its financial obligations over the following three to five year period, including
interest payments and debt redemptions. This encompasses an evaluation of the organisation’s current financial position, as well as how the position may change in the future with regard to meeting longer term financial obligations.
Mandate Authorisation or instruction to proceed with an undertaking or to take a course of action. A borrower, for example, might instruct
the lead manager of a bond issue to proceed on the terms agreed.
Net Asset Value The value of an entity's assets less its liabilities. It is a reflection of the company’s underlying value and is usually quoted on a per
share basis.
Portfolio A collection of investments held by an individual investor or financial institution. They may include stocks,
bonds, futures contracts, options, real estate investments or any item that the holder believes will retain its value. Revaluation Formal upward or downward adjustment to assets such as property or plant and equipment.
Rights Issue One of the ways that a company can raise additional funds is to issue new shares. These must be first offered to
current shareholders and a rights issue allows a shareholder to buy shares in proportion to the number already held.
Risk The possibility that an investment or venture will make a loss or not make the returns expected. There are many different types of risk
including basis risk, country risk, credit risk, currency risk, economic risk, inflation risk, liquidity risk, market or systemic
risk, political risk, settlement risk and translation risk.
Risk Management Process of identifying and monitoring business risks in a manner that offers a risk/return relationship that is acceptable to an entity's
operating philosophy. Shareholder An individual, entity or financial institution that holds shares or stock in an organisation or company.
Short-Term Rating A short term rating is an opinion of an issuer’s ability to meet all financial obligations over the upcoming 12 month period, including
interest payments and debt redemptions.
Tranche Used to mean an allocation or instalment of a larger loan facility. Tranches of the same debt programme may differ from each other
because they pay different interest rates, mature on different dates, carry different levels of risk, or differ in some other way. Unrealised Gain The profit or loss that would be made if a position were to be liquidated.
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SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
Centum Investment Company Plc participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The credit ratings have been disclosed to Centum Investment Company Plc with no contestation of the rating. The information received from Centum Investment Company Plc and other reliable third parties to accord the credit ratings included;
• 2018 audited annual financial statements and four years prior comparative financial statements;
• Details of funding facilities; and
• FY18 Investor briefings The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision
of the ratings.
ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GLOBALRATINGS.NET/RATINGS-INFO. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE UNDERSTANDING RATINGS SECTION OF THIS SITE. CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE. Copyright © 2013 Global Credit Rating Co (Pty) Ltd. INFORMATION PUBLISHED BY GCR MAY NOT BE COPIED OR OTHERWISE REPRODUCED OR DISCLOSED, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT GCR’S PRIOR WRITTEN CONSENT. Credit ratings are solicited by, or on behalf of, the issuer of the instrument in respect of which the rating is issued, and GCR is compensated for the provision of these ratings. Information sources used to prepare the ratings are set out in each credit rating report and/or rating notification and include the following: parties involved in the ratings and public information. All information used to prepare the ratings is obtained by GCR from sources reasonably believed by it to be accurate and reliable. Although GCR will at all times use its best efforts and practices to ensure that the information it relies on is accurate at the time, GCR does not provide any warranty in respect of, nor is it otherwise responsible for, the accurateness of such information. GCR adopts all reasonable measures to ensure that the information it uses in assigning a credit rating is of sufficient quality and that such information is obtained from sources that GCR, acting reasonably, considers to be reliable, including, when appropriate, independent third-party sources. However, GCR cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall GCR have any liability to any person or entity for (a) any loss or damage suffered by such person or entity caused by, resulting from, or relating to, any error made by GCR, whether negligently (including gross negligence) or otherwise, or other circumstance or contingency outside the control of GCR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits) suffered by such person or entity, as a result of the use of or inability to use any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained in each credit rating report and/or rating notification are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained in each credit rating report and/or rating notification must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY GCR IN ANY FORM OR MANNER WHATSOEVER.