UAP records Ksh.3.4 billion loss from lower property valuations

UAP Holdings PLC has announced an extended Ksh.3.4 billion loss for the year ending December 31 from a Ksh.518 million loss in 2018.

The loss is largely attributable to an extended distress in its property investment portfolio which saw write-downs soar by 530 percent to Ksh.3.2 billion from Ksh.604 million.

The continued softening of real estate valuations across Kenya, Uganda and South Sudan saw the firm’s value of property investments decline sharply to Ksh.16 billion from Ksh.19.8 billion an year earlier.

As a result, investment income during the year fell by 78.3 percent to Ksh.634 million to push UAP into the higher recorded loss.

Previously the firm had issued a profit warning cautioning investors of lesser than ideal returns from the property inflicted fair value losses.

“There are indicators that the weakening performance of the property market in Kenya and the uncertain political environment in South Sudan will likely lead to further impairments in the carrying value of certain investment properties,” UAP board said.

UAP Holdings new Chief Executive Officer Arthur Oginga however expressed optimism in the recovery of the portfolio supported largely by improving market conditions.

“We believe we have hit the bottom end of the market and are optimistic the market in South Sudan will turn supported by easing tensions. Further, we expect stronger rental yields to support growth with half of our building already consisting of fairly new units with longer leases,” he said.

The occupancy levels in UAP invested properties however defied the fair value losses to see rental income hit Ksh.753 million from Ksh.683 million in 2018.

Nairobi’s UAP Old Mutual Tower for instance reached an occupancy rate of 95 percent from a previous 73 percent while the Kampala based Nakawa Business Park hit an occupancy rate of 70 percent from 38 percent.

UAP Holdings further marked growth in its core insurance business from greater underwriting as net earned premiums hit Ksh.16.1 billion in value from Ksh.15.5 billion.

Net claims payable however soared by 11.5 percent to Ksh.11.6 billion from higher medical claims and accompanying costs.

Meanwhile, operation costs were up 9.1 percent from a revaluation loss in owner-occupied property portions.

In spite of the huge write-downs, UAP improved its free cash-flows position to Ksh.7.9 billion from its operating activities.

The board however held back against declaring a dividend for the second year running as the company’s earnings per share dipped further to a negative Ksh.14.23 from negative Ksh.1.66.

UAP expects to face greater headwinds in its core business this year as a result of the Covid-19 pandemic including higher death claims, lower business in segments such as travel insurance and premium withdrawals from customers.

“While we remain cautiously optimistic about the economic prospects of the region in the medium term, the impact of the COVID-19 pandemic in the short term will significantly slow down growth,” UAP noted in a statement.