Pan African housing development financier, Shelter Afrique signalled a full recovery as it reported its 2019 earnings.
The company reduced its operating loss to Kshs. 59 million (USD 0.59M) in 2019, down from the Kshs. 923 million (US$9.23M) loss recorded in 2018, representing a 94% drop year-on-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 Kshs. 50 billion (US$501.30M) from 2020 and beyond, the company was poised to return to profitability and provide returns to the forty six shareholders,” Mr. Chimphondah said.
During the period under review, Shelter Afrique maintained a strong liquidity position with a cash balance of Kshs. 5.6 billion (US$56.97M) closing the year with a liquid ratio of 29%, 14 percentage points above the 15% minimum policy limit. The strong liquidity was achieved on the back of enlarged share capital receipts from shareholders and successful collections from the non-performing loan book. A total of Kshs. 979 million (US$ 9.79M) was received during the year, which increased total paid-up capital by 8%, from Kshs. 13 billion (US$ 130.65M) in 2018 to Kshs. 14 billion (US$140.64M) in 2019. Similarly, shareholder funds increased by 8% from Kshs. 10.6 billion (US$ 106.79M) in 2018 to Kshs. 11.5 billion (US$ 115.42M) in 2019 due to the new capital subscriptions.
The company also recorded a significant reduction in interest expense by 33% from Kshs. 998 million (US$9.98M) in 2018 to Kshs. 670 million (US$6.70 M) in 2019 on the back of a 39% decrease on borrowings from Kshs. 11.67 billion (US$116.77 M) in 2018 to Kshs. 7.16 billion (US$71.66 M) in 2019.
Interest income and fees fell to Kshs. 1.53 billion (US$15.34M) KSh130 million (US$1.30 Million) in 2019 respectively, as a result of slow underwriting of new business. Total assets under management reduced by 16%, from Kshs. 22.9 billion (US$ 229.43M) in 2018 to Kshs. 19.3 billion (US$ 193.13M) in 2019 as a result of a 31% decrease in net loan assets from Kshs. 16.5 billion (US$165.19M) in 2018 to Kshs. 11.46 billion (US$114.63M) in 2019 due to effective loans collection policies on the back of reduced lending.
Mr. Chimphondah further said that with the improved financial performance in 2019 and the significant milestone conclusion of the debt restructuring agreement (DRA) with the eight global lenders, the company was optimistic of returning to full financial viability from 2020.
“Severe impact from the Covid-19 pandemic notwithstanding, we believe this is still achievable. We shall focus on our immediate strategic ambition of achieving Kshs. 100 billion (US$1Billion) plus in housing finance delivered directly through funds mobilized and leveraged from third parties. The six 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 emphasized.
During the year, the company registered major milestones including the launch of its centre of excellence, which offers intellectual capital solutions to member countries. It is a one stop shop for research and development, capacity building training and advocacy on influencing housing policy within the continent.
The company also attained an ISO 9001:2015 quality management system accreditation, retained BBB+ Bloomfield long term credit rating, named among top one hundred global financiers by World Finance Publication, attained the chairmanship of the African Union for Housing Finance and received both the Town Planners Council of Kenya (TCPAK) Award and AIHS Award for commitment to the Affordable Housing Agenda in Africa.