UPDATE 2-Kenyan Centum FY pretax more than halved, plans bond
* Pretax hit by weak markets, railway writedown
* Investment income dropped by a third
* Plans 2 billion shillings bond issue in three months
(Adds bond plan)
NAIROBI, May 12 (Reuters) - Kenya's Centum Investment (ICDC.NR) said on Tuesday its full-year pretax profit more than halved to 475 million shillings ($6.1 million), hit by weak markets and a writedown on an investment in Rift Valley Railways.
Most of Centum's investments are in blue chip stocks on the Nairobi Stock Exchange where the main 20-share index .NSE20 has dropped by a fifth this year alone.
Centum said its investment income dropped by a third to 392 million shillings in the year to end-March.
"This performance was reflective of the depressed market environment that limited activity on the stock market assets," the firm said in a statement.
Centum issued a profit warning last month saying its post-tax profit was likely to fall at least 70 percent because of the declining stock market and a non-performing investment in a railway company.
The group wrote down some of its investment in Rift Valley Railways (RVR), a firm that won a 25-year deal to run Kenya's and Uganda's railways jointly in 2006, but which has failed to turn around the networks.
"We made an 84 percent provision for our investment in RVR leading to a charge of 271 million (shillings)," Centum said. "This also contributed to the overall decline in the company's profitability."
Managing Director James Mworia said the company impaired its investment in RVR to reflect what incoming investors will put into the company.
RVR plans to recapitalise with $50 million equity this year by roping in new shareholders and raising additional funds from existing shareholders. Centum will not participate in the recapitalisation, Mworia said.
Centum said current market conditions offer a good opportunity for long-term investment in both private and listed equity and real estate.
Mworia told investors Centum hopes to raise 2 billion shillings in a five-year bond in the next three months.
The interest rate could be 1-3 percent above government borrowing rates. The return on the government's most recent five-year bond is 10.849 percent.
"We see a window of opportunity we would like to take advantage of and one of the ways we want to raise money is long-term debt capital, our balance sheet today is largely unleveraged," he said.
Mworia said the company would retain earnings of 241 million shillings this year. ($1=77.55 Kenyan Shilling) (Editing by Jon Loades-Carter)
