RECOVERY

Shelter Afrique cuts loss, tightens corporate governance

In Summary
  • The strong liquidity was achieved on the back of enlarged share capital receipts from shareholders 
  • Shareholder funds increased by eight per cent from Sh10.6 billion in 2018 to Sh11.5 billion due to the new capital subscriptions.
Chief executive officer Shelter Afrique Andrew Chimphondah during a press conference of the release of it’s full financial year at Shelter Afrique headquarters on July 13,2020
Image: MERCY MUMO

Pan African housing development financier, Shelter Afrique is on a recovery path,  cutting its losses to Sh59 million for the year ended December 31, 2019, from Sh923 million the previous year.

The Nairobi-headquartered lender, which was hit by alleged financial malpractices that saw the firm suffer a $40.6 million dent, said it has overcome the set back and had successfully turned around to become financially viable.

Speaking after releasing the results yesterday, Shelter Afrique chairman Steve Mainda attributed the improved results to enhanced corporate governance and innovative business proposition.

 
 

“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,” Mainda said.

During the period under review, the company maintained a strong liquidity position with a cash balance of Sh5.6 billion closing the year with a liquid ratio of 29 per cent, way 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.

The firm received a total of Sh979 million during the year, which increased total paid-up capital by Sh1 billion, rising to Sh14 billion compared to Sh13 billion in 2018.

Similarly, shareholder funds increased by eight per cent from Sh10.6 billion in 2018 to Sh11.5 billion due to the new capital subscriptions.

The lender also recorded a significant reduction in interest expense by 33 per cent to Sh670 million compared to Sh998 million in the previous year. This is attributed to a 39 per cent decrease in borrowings from Sh11.67 billion to Sh7.16 billion.

Interest income and fees fell to Sh1.53 billion and Sh130 million in 2019 respectively, as a result of slow underwriting of new business. 

 
 

Total assets under management reduced by 16 per cent to Sh19.3 billion as a result of a 31 per cent decrease in net loan assets due to effective loan collection policies.

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,’’ Chimphondah said.

He added that with the commencement of loan commitments leading to disbursements on the robust loan pipeline of Sh50 billion from 2020 and beyond, the company was poised to return to profitability and provide returns to the 46 shareholders.

Chimphondah said 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 about 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 Sh100 billion-plus in housing finance delivered directly and through funds mobilised and leveraged from third parties,’’ he said.