NAIROBI, KENYA, JAN 5—Insurance group Britam Holdings (Plc) has issued a profit warning for the year ended December 31, 2017, becoming the latest Nairobi Securities Exchange listed company to forecast a drop in its earnings.
The company has written to the Capital Markets Authority and the NSE saying its earnings for the current financial year are expected to decrease by at least 25 per cent, compared to the earnings reported for the same period in 2016.
The company expects a drop in earnings from the Ksh4.2 billion pre-tax profit and Ksh2.4 billion net profit reported in the previous year.
“The Board of Directors of Britam Holdings Plc wishes to inform the shareholders of the company , potential investors and the general public, that based on the preliminary assessment of the forecasted financial results of the company for the period December 31, 2017, the earnings for the current financial year are expected to decrease by at least 25 per cent,” the company’s board said in a letter dated January 4, signed on its behalf by company secretary Nancy Kiruki.
According to the company, the expected decline in earnings is mainly due to a change , in 2016, of the valuation method of the long term liabilities to Gross Premium Valuation (GPV) methology , from the previously applied Net Premium Valuation (NPV) in accordance with requirements of the Insurance Act as amended by the Finance Act 2015.
This one-off change positively impacted the earnings in 2016 by Ksh5.2 billion, the company noted.
“Without the impact of the one-off change, the company’s performance has improved in 2017.The company is on track in executing its 2016-2020 strategy on the backdrop of which, the board and the management are optimistic that the business will continue to perform well in 2018,” the board said.
At least nine public traded companies in Kenya have issued profit warnings so far.
Among them is Family bank which has forecast its earnings to be lower than 25 per cent of the earnings for the same period in 2016.
The lender has pegged the lower earnings to a drop in deposits, the impact of interest rate capping and the slowdown in economic activity due to last year’s prolonged electioneering period, as well as the prolonged drought earlier in the year which affected the economy, impacting on its revenue levels.
Fashion retailer Deacons has also indicated that its earnings for the full-year through December will drop by at 25 per cent.
The retailer with foot prints in Kenya, Uganda, Rwanda and Mauritius has also blamed its financial woes on the interest rate cap which has led to a credit crunch in the country.
The 2017 electioneering period and the downfall of giant retailer Nakumatt also add to Deacons woes.
This week, HF Group also issues a profit warning for the year ended December 31, 2017, expected to be 25 percent lower than that reported in 2016.
The management has blamed the interest rate capping and “unfavorable macroeconomic environment.”
“The warning is based on the un-audited results for the period to 30th September 2017, factoring in forecasts to the end of the year, and the preliminary evaluation made by the board, with reference to figures and information currently available,” group managing director Frank Ireri said.