Controversial company Cytonn Investments announced their full year financial results for the period ended 31st December, 2017. Sales from real estate projects grew by 92% to KES 612M. This was accompanied by a faster growth in cost of sales which rose by 104% to KES 690.3M.
The company continues to rely on financing activities to drive its operations. This led to finance costs growing more than 290% to KES 285 million.
Negative Cash Flows
Moreover, company generated negative cash flows from operating activities and investing affirming their reliance on cash flow from financing activities. Debt to Equity ratio stood at 45%. Staff and operating costs grew by 69% to KES 1098.9 as the company continued to grow its operations.
Sh 569 Million Operating Loss
Removing fair value gains, the company made an operating loss of KES 569 million, worsening from an operating loss of KES 425 million a year earlier. The company incurred one of impairment loss of KES 178.2million with Kshs 95.6 mn being for Imperial Bank Limited and Kshs 82.6 mn being for Nakumatt Holdings Limited. It remains a concern why the company is attracted to high risk investment asset classes such as commercial papers from distressed companies and above market rate fixed deposit rates.
Net Asset value per share slid by 13% to KES 54 from KES 61.9 a year earlier after the number of ordinary shares increased from 84M to 98M. The 3 partners who founded the company own 79% of the issued shared.
For the second year in a row previous financial year statements were restarted.
There was a change in the representation of financials whereby “Operating fair value gains” was used to refer to increase in fair value gains in the shares of listed companies invested at the NSE and this was included in the operating income unlike in the previous year. The term “Operating fair value gains” is non-existing in accounting world.
Superior Homes Stake
According to the company’s annual report, they acquired 12.5% stake in Superior homes against the 25% they had previously stated in their initial press release. Superior Homes is the developer of Green Park Estate in Athi River which was recently flooded after Stoni Athi River bursts its banks.
We note aggressive accounting and uber-bullish representation of the company revenues and financial position. Companies do this for reasons such as to access to open credit terms and (larger) credit lines with suppliers, obtain financing and / or meet covenants, get favourable rating from agencies amongst other reasons.
A Few Tweets from the concerned
These figures for Cytonn are bs..250% increment in profits due to fair value gains on real estate…what was the math here?.. bs who was valuing them.. which auditor accepted these figures
— Miss.Meria🎀 (@Gaciku_Meria) May 22, 2018
So is cash flow generation via new capital injections? Since operations and investing doesn't seem to throw off positive cash flow.
— Sura Mbaya (@surambaya) May 19, 2018
Alykhan Satchu in 2017
"With Cytonn, I think there's an OPACITY about the balance sheet which I find it a little bit tricky to make a clear call on" Alykhan Satchu pic.twitter.com/YgiuCEYXsl
— Kenyanwallstreet (@kenyanwalstreet) September 22, 2017