Britam half-year net profit drops 77 per cent

British American Investments Company (Britam) has reported a 77 per cent dip in net profits in the first half of the year, joining a growing list of companies taking a beating from difficult beginning of the year.

The financial services firm said its profits after tax fell to Sh625 million, down from the Sh2.7 billion it registered in the six months to June last year. The firm attributed the drop to a beating from the stock market, holding significant shares in Equity Bank and mortgage firm Housing Finance.

"The decrease in our profits is a result of the downturn performance of the securities market, which impacted negatively on the fair value gains from the financial assets. This down turn also affected other blue chip companies listed in the Nairobi Securities Exchange," the firm's Managing Director Benson Wairegi told an investor briefing yesterday.

It posted an unrealised loss of Sh843 million on the stock market in the period. This is compared to the Sh2.8 billion it earned in a similar period in 2014. Its income grew 8 per cent to Sh11 billion mainly helped by a rise in premium income and its asset management business. The Insurance and asset management business revenues jumped 77 per cent to Sh10.6 bilion. However these revenues were wiped out by rising costs and net claims that the insurance firm paid.

Its net claims rose 42 per cent to Sh5.1 billion in the first half of the year. The firm's diversification and entry into six other countries across Africa has started paying off after it cushioned its earnings. It said the regional business contributed Sh2.1 billion in revenues, a 708 per cent jump from the Sh262 million it received in a similar period last year.

The firm is counting on its new investments in the real estate sector to boost its diversification strategy and shield it from future turbulence on the stock market. Mr Wairegi says the firm will break ground on a Sh2.3 billion serviced apartment project on a piece of land it owns in Kilimani by the first quarter of next year. "Our strategy in the real estate sector suffered a major set back following our fall out with Acorn Group. But we are back. We have enough land to start with on Mombasa Road and Ngong," Wairegi said.

In the plan that went sour, Britam had entered into a deal to provide financing for ten real estate projects worth Sh40 billion while Acorn was to focus on the actual development of the properties which include shopping malls, office complexes and mixed-use projects. But the plan aborted after a disagreement that saw some asset managers quit. But Britam has assembled a new team, which it paraded to investors yesterday to drive its real estate dream.

It expects the investments to earn in at least a 25 per cent return. The dip in profits of the financial services firm further bring to the fore how a difficult operating environment in the first half of the year is hurting companies. More than half of the 32 listed firms that have booked their earnings have reported slowdown in profits or even losses, including the record Sh29 billion loss announced by Kenya Airways.