Nairobi, Kenya – Friday, September 20, 2019: Pan African housing development financier, Shelter Afrique signalled the completion of its turnaround plan as it reported the second-quarter earnings Friday.
The company’s net profit grew modestly to Ksh7.8 million (US$ 78, 000) from a loss of Ksh 500 million (US$ 5.1m) it recorded in the second quarter of 2018, against budgeted loss of Ksh72 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.
- Net profit grew modestly to Ksh7.8 million (US$ 78, 000) representing a 111% growth against budgeted loss of Ksh72 million (US$ 0.72m) in second-quarter 2019.
- Liquidity position remained stable with average liquidity ratio closing at 21%
- Following the resumption of operations, the Company projects budgeted disbursements of Ksh 3.5 billion (US$35m) in 2019 with a progressive increase over a five-year period.
Appraising the Press in Nairobi, Shelter Afrique Chairman Mr Daniel Nghidinua 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,” Mr 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,” Mr Nghidinua said.
During the period under review, fee and other incomes, however, grew by 11% to Ksh 80 million (US$0.8m) from recurring fees on performing loan book. Liquidity position remained stable, with the average liquidity ratio above 15% minimum threshold.
However, interest income recorded a 19% decline during the period under review to Ksh 779 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 decreased by 35% due to lower debt load. Operating expenses also decreased by 9% to US$3.8m as a result of stringent cost-containment measures.
Total assets declined by 26% year-on-year to Ksh 20.8 billion (US$208m) due to decreased loan book. Cash balances, however, rose by 4% to Ksh 400 million (US$4m). Shareholders’ Funds declined by 16% year-on-year to Ksh 11 billion (US$110m) due to the 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 Ksh870 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 the way for the restructuring of its operations and 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 some projects across member States and signed several memoranda of understanding with governments and institutions. On loan recovery, we set a target to recover Ksh1.5 billion (USD 15m) by the end of 2019, but we had already recovered Ksh1.3 billion (USD13m) as of today. We hope to reduce our non-performing loans significantly by the end of the year,” Mr 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 mortgage refinance companies in Kenya, 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-minded organisations are even more pressing,” Mr 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 organisational sustainability
