NAIROBI, Kenya, SEPT 20 – Pan African housing development financier, Shelter Afrique signaled completion of its turnaround plan as it reported the second-quarter earnings Friday.
The company’s net profit grew modestly to Sh7.8 million (US$ 78, 000) from a loss of Sh500 million (US$ 5.1m) it recorded in the second quarter of 2018, against budgeted loss of Sh72 million (US$ 0.72m) in the period ending 30 June 2019.
The renaissance was backed by growth in fees and commissions from new projects, performing loan book, and from loan recoveries.
Appraising the Press in Nairobi, Shelter Afrique Chairman Nghidinua Daniel said, “The positive indicators beginning to merge is a sign that the recovery process and efforts to return the Company to financial sustainability is bearing fruit.”
“Enhanced corporate governance practices, robust enterprise risk management, a new management team, a new strategic plan, a new business model, and debt restructuring plans played key roles in fast-tracking the turnaround process,” Nghidinua said.
Following 2016 disruptive event, Shelter Afrique restructured its business and developed a 5-year strategic plan with a primary focus on turning around the company’s financial performance from loss making to financial viability by 2020 and overall financial sustainability by 2023.
“The return to profitability ahead of time is an indication that the turnaround strategy has come full circle and is now ready for business,” Nghidinua said.
During the period under review, fee and other incomes, however, grew by 11 percent to Sh80 million (US$0.8m) from recurring fees on performing loan book. Liquidity position remained stable with average liquidity ratio above 15 percent minimum threshold.
However, interest income recorded a 19 percent decline during the period under review to Sh779 million (US$7.79m) due to declining loan portfolio on the back of no new lending for past two-and-half years.
Consequently, interest expense declined by 35 percent due to lower debt load. Operating expenses also declined by 9 percent to US$3.8m as a result of stringent cost containment measures.
Total assets declined by 26 percent year-on-year to Sh20.8 billion (US$208m) due to decreased loan book. Cash balances, however, rose by 4 percent to Sh400 million (US$4m). Shareholders’ Funds declined by 16 percent year-on-year to Sh11 billion (US$110m) due to impact of operating losses in last three years and IFRS 9 Transition Adjustment made in December 2018.
“The picture continues to improve with sustained equity capital subscription receipts of Sh870 million (US$8.7m) to date,” said Shelter Afrique Managing Director Andrew Chimphondah.
Back in business
The Company temporarily halted undertaking of new projects in 2016 to pave way for restructuring of its operations and for the development of a new strategic direction. It resumed full operations early 2019.
“We have adopted an aggressive approach to business following our resumption of operations this year, which involves getting into meaningful partnerships and doubling our loan recovery efforts. For instances, we have launched a number of projects across member States and signed a number of memoranda of understanding with governments and institutions. On loan recovery, we set a target to recover Sh1.5 billion (USD 15m) by end of 2019, but we had already recovered Sh1.3 billion (USD13m) as of today. We hope to reduce our non-performing loans significantly by end of year,” Chimphondah said.
Some of the projects the Company has launched this year include Richland Pointe, Everest Apartments, and Karibu Homes in Kenya, and Rugarama housing project in Rwanda. The Company has also invested in the Kenya Mortgage Refinance Companies (KMRC), and signed memoranda of understanding (MOU) with the governments of Liberia, Ivory Coast, Central Africa Republic, and Cameroon, for the provision of affordable housing. It has also signed MOUs with Habitat for Humanity International and iBUILD, to enhance its capital-raising efforts.
“Research from our Centre of Excellence (CoE) shows that the overall shortage of housing in Africa is estimated to be 56 million housing units. This shows that the need for Shelter Afrique and like-mined organisations is even more pressing,” Chimphondah said, adding that the Company was on course to deliver on its mandate pegged on implementation of its 5-year strategic plan, which broadly focuses on financial stability, enhanced shareholders value and organizational sustainability.