Flame Tree gains Sh202 million in land value

Consumer goods manufacturer Flame Tree Group #ticker:FTGH booked a gain of Sh202 million after revaluation of its land and buildings last year, with the company saying it will seek to properly assess all its assets to unlock their value.

The gain, which triggered a deferred tax of Sh60.8 million, was reflected in the Nairobi Securities Exchange-listed firm’s comprehensive income in the year ended December.

The paper profit, which also contributed to the value of property, plant and equipment in its balance sheet rising to Sh529 million in the review period from Sh334.3 million the previous year, can be realised upon sale of the land and buildings.

“We have also began an independent asset valuation that has already brought an additional Sh202.7 million to the value of our land and building increasing the value of our assets,” the company’s chairman George Theobald says in its latest annual report.

“This valuation exercise will continue through 2019, and new value not currently recognised in our balance sheet will be added as the valuation exercise continues.”

Flame Tree joins a list of other NSE-listed firms that have revalued their land holdings upwards. Agricultural firm Sasini, for instance, carried its land holdings at cost and later sold part of the parcels at market value, generating a windfall.

Flame Tree’s normal net earnings, excluding the impact of the land revaluation, dropped 15 percent in the year ended December on the back of sluggish sales and rising costs.

Its net profit stood at Sh33.7 million in the review period compared to Sh39.7 million the year before.

Flame Tree did not declare a dividend, making it the fourth consecutive year that shareholders will not receive a cash payout from the manufacturer and distributor of a wide range of consumer goods including cosmetics and water tanks.

The dividend drought is expected to continue as the company suffers from sluggish sales and rising costs that have more than halved its profit margins.

Flame Tree’s sales rose 2.6 per cent to Sh2.48 billion in the review period when its production costs rose 6.1 per cent to Sh100.5 million.