Capital Markets

Profit drops 72pc as Home Afrika adopts new rules

NJOROGE

Home Afrika chief executive Ng’ang’a Njoroge. PHOTO | FILE

Home Afrika half-year net profit fell 72 per cent as it adopted new accounting rules for treating property sales.

The listed real-estate firm’s net profits for the first six months of the year stood at Sh42.9 million down from Sh115.49 million over the same period in 2013 even as sales rose.

Revenue increased to Sh550.4 million from Sh486.7 million or 13 per cent.

Part of the new rules demand firms record sales once buyers pay fully for their properties—until then the deposits and other part payments are not recognised as income.

Costs associated with the development of these properties are however fully recognised which reduces the bottom line. The cost of sales nearly doubled to Sh326.3 million from Sh167.35 million over the period.

Home Afrika chief executive Ng’ang’a Njoroge said the company will start recognising the income as payments are completed and development at the flagship Migaa project in Kiambu County makes headway.

“The deferred income will move to the profit and loss account once we complete the infrastructure projects,” said he said. Deferred income more than doubled to Sh662.3 million from Sh313.3 million over the period.

READ: Home Afrika bags Sh1bn deal to build houses in Nigeria

Mr Njoroge however said costs for its next projects should go down due to the company’s use of bonds for financing. Home Afrika is planning to begin the first construction phases of Lakeview Heights in Kisumu and Llango in Kwale County in September.