NSE profit warnings narrow in economic turnaround

Only four of the 65 public listed companies in Kenya issued profit warnings last year.

This is in contrast to 15 profit warnings by the Nairobi Security Exchange (NSE) listed firms in 2020 and 10 in 2019.

The lesser profit warnings mirror the improved business environment in recent months which has been anchored by the lifting of COVID-19 related restrictions.

The four to issue profit warnings include Centum Investment Company Plc, Umeme Limited, Williamson Tea Kenya Plc and WPP ScanGroup.

Centum cited a freeze in investment disposals for the year ended March 31, 2021, in its profit warning notice while Uganda’s Umeme Limited pointed to depressed electricity demand across the stay of the pandemic.

On its part, Williamson Tea quoted fair value losses in its investment properties while WPP ScanGroup highlighted the impact of discontinued operations from the sale of its businesses represented by Millward Brown- East and West Africa, Millward Brown Nigeria and Research & Marketing Group Limited.

Publicly listed firms are required by law to issue profit warnings if they project a more than 25 per cent dip in profits over subsequent years.

The lesser profit warnings have anchored better company/stock valuations by investors, firming up the rise of the NSE from its 2020 bear status.

Across the last year, the Kenyan equities market remained on a positive trajectory with the NASI, NSE 20 and NSE 25 posting gains of 9.5, 1.6 & 9.8 per cent respectively.

The rise in market performance is attributable to gains in large cap stocks/ blue chip valuations with Equity for instance leading the performance with a 45.5 per cent share price gain ahead of Absa Bank, BAT, KCB and Safaricom whose share price rallies came in at 24.5, 22.3, 18.4 and 10.8 per cent respectively.

Nevertheless, foreign investors remained net sellers in the year in what was seen as profit-taking activity following the posting of significant price gains in major stocks.

Going into 2022, the NSE still represents pockets of opportunities for entry by investors as the market’s price to earnings ratio remains well below the historical average by double digits.

Across the region, the Kenyan equities markets outperformed Uganda and Tanzania in 2021 with the peers recording lower gains at 3.4 and 0.2 per cent respectively.

Zambia had the top-performing Equities market in the period having nearly doubled returns at 96.2 per cent on the back of a rebound in copper prices.

Ghana and South Africa trounced NSE returns in the year but local yields topped those of Nigeria and Rwanda whose markets remained in bear territory.