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UAP Holdings issues profit warning




UAP Old Mutual group chief executive officer Peter Mwangi. PHOTO | SALATON NJAU | NMG  

UAP Holdings has issued a profit warning for the full financial year ended December 2018 citing lower asset valuations and one-off retrenchment costs.

The firm now expects to post net earnings for the year ending December 2018 at least 25 per cent lower than what it reported last year.

Higher investment returns increased UAP Holdings’ 2017 net earnings 46.49 per cent to Sh1.2 billion, helping to offset a marginal drop in gross written premiums. The financial services group recorded a Sh826 million after-tax profit in 2016.

“Investment income has been negatively impacted by the poor performance of the equities market in the second half of the year and the impact of adverse valuations on our properties in Kenya and South Sudan due to lower than expected rental yields and occupancy respectively,” said the firm in a cautionary statement.

“During the year, management proactively carried out a staff reorganisation in order to unlock efficiencies in the business. The lower profit after tax in 2018 is partly driven by the related one off redundancy cost.”

The company let go of 89 additional staff in the first six months of the year in a reorganisation exercise that cost Sh335.12 million.

UAP said on Monday that “the full benefit” of the cost savings from the retrenchment exercise “will be achieved next year”.

“The board is confident that the initiatives by management to grow the business while containing costs will support improved performance by the company in 2019,” it added.

The company reported a 61.58 per cent drop in after-tax profit for the half year to Sh190.86 million from Sh496.79 million in 2017 attributed to a one-off retrenchment cost and a deferred tax obligation.

At least seven firms listed on the Nairobi Securities Exchange (NSE) have issued profit warnings in 2018 citing difficult market conditions.

They include Bamburi Cement #ticker:BAMB, HF Group #ticker:HFCK, Kenya Power #ticker:KPLC, Sanlam #ticker:PAFR, Deacons #ticker:DCON and Sameer Africa #ticker:FIRE. Fashion retailer Deacons East Africa sunk into administration last month, forcing capital markets regulator to suspend its shares from trading on Nairobi bourse.