After Kahawa Tungu published an investigative piece on how Cytonn was peddling lies on its financial standing, the company through its CEO Edwin Harold Dayan Dande wrote an ‘expansive’ response to counter the article.
Despite providing preliminary response to the media statement, Kahawa Tungu’s investigative desk took time to respond to the issues raised by Cytonn, one by one, including digging in to the projects that they claimed were finished.
Below is how we debunked the lies by Cytonn, which were fabricated by sweet and ‘convincing’ words:-
- Cytonn Investment Group Plc, in their consolidated audited financials for the year 2017 made a profit of Kshs398.0 million. Cytonn Group has over 30 entities and the appropriate presentation is the consolidated group financial statements, which are available in our Annual Report. Analysts about our structured finance business model. It shall be held on Thursday, 19th July, 2018. To attend our Investment Analysts Open Day, email our Investor Relations Team at [email protected].
Once again, I don’t dispute the figures they put out, I dispute the creative/aggressive accounting meant to deceive the investing public that all is well whereas it’s not, as reported by one of the objective minds in the industry, Kenya WallStreet.
Removing fair value gains, the company made an operating loss of Ksh569 million, worsening from an operating loss of Ksh425 million a year earlier. The company incurred one of impairment loss of Ksh178.2 million with Ksh95.6 million being for Imperial Bank Limited and Ksh82.6 million 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.
It is also interesting to note that the term “Operating fair value gains” is non-existing in accounting world.
- Our Cytonn Group revenues grew by 128.2%, which is much faster than expenses, which grew by 69.0% (After adjusting for one off costs, such as provisions for bad debts, core expenses only rose by 60.5%).
To support the view that this is a Ponzi scheme, the company generated negative cash flows from operating activities and investing affirming their reliance on cash flow from financing activities and actually had to bribe some members of the board with a paid trip for a day costing up to Ksh20 million (of clients’ money) for them to sign on the cooked annual report.
- Before we respond to the assertion on real estate, we need to make an important clarification. The author attempts to portray Cytonn Investments just as a real estate shop, yet real estate made up only 40.7% of our revenues in 2017. Our investments in KCB Group, our stake in NIC Bank, where we rank as the #5 largest shareholder, and other investments delivered 32.8% of our revenues
Again, this is an attempt to run away from the poorly performing real estate business where they allocate upwards of 70% of funds collected from the investors, meaning if you take your money and invest for less than one year it will be used to pay contractors and suppliers and salaries, with the real estate lull that’s happening, it is 100% unrealistic to return 20% p.a. How can the public confidently invest in a company that has not completed a single development? Their other investments in Housing Finance and NIC Bank are staring at huge losses.
Next, this desk will inform you of how most of the hyped projects have been stalled, with investors being lied to and paying Ksh25,000 booking fees to projects that will never be.
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