Pan African housing development financier, Shelter Afrique signalled a full recovery as it reported its 2019 earnings Tuesday.
The Company reduced its operating loss to KSh 59 million (USD 0.59M) in 2019, down from the KSh 923 million (US$9.23M) loss recorded in 2018, representing a 94 per cent drop year-o-year.
Addressing the Press in Nairobi, Shelter Afrique Chairman Dr. Steve Mainda said despite the minimal loss, the Company had put the distressful past behind it and had successfully turned around to become financially viable.
“Enhanced corporate governance practices backed by a strong, diverse ,competent and ethical Board, robust enterprise risk management, a new business model, and debt restructuring plans have played key roles in fast-tracking the recovery process,” Dr. Mainda said.
Shelter Afrique Managing Director Andrew Chimphondah said the Company had projected a return to financial viability by 2020 and overall financial sustainability by 2023.
“The return to financial stability as indicated by a significant reduction in our operating loss in 2019 is an indication that the turnaround strategy has been both successful and effective. With the commencement of loan commitments leading to disbursements on the robust loan pipeline of KSh50 billion (US$501.30M) from 2020 and beyond, the Company was poised to return to profitability and provide returns to the 46 shareholders,” Mr. Chimphondah said.
During the period under review, the Company maintained a strong liquidity position with a cash balance of KSh5.6 billion (US$56.97M) closing the year with a liquid ratio of 29 per cent, 14 percentage points above the 15 per cent minimum policy limit. The strong liquidity was achieved on the back of enlarged share capital receipts from shareholders and successful collections from the non-performing loan book. A total of KSh979 million (US$ 9.79M) was received during the year, which increased total paid-up capital by 8 per cent, from KSh13 billion (US$ 130.65M) in 2018 to KSh14 billion (US$140.64M) in 2019. Similarly, Shareholder Funds increased by 8 per cent from KSh10.6 billion (US$ 106.79M) in 2018 to KSh11.5 billion (US$ 115.42M) in 2019 due to the new capital subscriptions.
The Company also recorded a significant reduction in interest expense by 33 per cent from KSh998 million (US$9.98M) in 2018 to KSh670 million (US$6.70 M) in 2019 on the back of a 39 per cent decrease on borrowings from KSh11.67 billion (US$116.77 M) in 2018 to KSh7.16 billion (US$71.66 M) in 2019.
Interest income and fees fell to KSh1.53 billion (US$15.34M) KSh130 million (US$1.30 Million) in 2019 respectively, as a result of slow underwriting of new business. Total assets under management reduced by 16 per cent, from KSh22.9 billion (US$ 229.43M) in 2018 to KSh19.3 billion (US$ 193.13M) in 2019 as a result of a 31 per cent decrease in net loan assets from KSh16.5billion (US$165.19M) in 2018 to KSh11.46 billion (US$114.63M) in 2019 due to effective loans collection policies on the back of reduced lending.
The Chief Executive said with the improved financial performance in 2019 and the significant milestone conclusion of the Debt Restructuring Agreement (DRA) with the 8 global lenders, the Company was optimistic of returning to full financial viability from 2020.
“Severe impacts from the COVID-19 Pandemic notwithstanding, we believe this is still achievable. We shall focus on our immediate strategic ambition of achieving KSh100 billion (US$1Billion) plus in housing finance delivered directly and through funds mobilized and leveraged from third parties. The 6 key focus areas post COVID-19 pandemic are going to be capital raising, business continuity, cost realignment, strategic repositioning, refinement of the business model and digital transformation,” Mr. Chimphondah said.