Bond failure and project delays hit Home Afrika’s profit

Property developer Home Afrika has announced a 90 per cent drop in profit last year, attributing it to project delays after the firm’s Sh900 million bond issue failed.

The Growth and Enterprise Market Segment-listed firm says its 2014 net profit dropped to Sh9 million from the previous year’s Sh80 million even as revenue grew six per cent to Sh687 million.

The bond flop saw the company turn to bankers taking a loan of Sh500 million, leading to delay in funding projects that would have propped up its earnings in the period.

“The company had embarked on raising finance through debt issue since early 2014, the proceeds of which were only realised in late December 2014 and early 2015,” the company said in a statement to investors.

“As a consequence, the investment of such funds in the infrastructure development at the underlying projects of the group has been delayed which is the primary reason for the net profit achieved in 2014.”

The Migaa housing project in Kiambu was to be the main beneficiary of the bond cash while other funds were to go to the Llango Development in Kwale and Lakeview housing project in Kisumu.

The company’s assets grew 19.3 per cent to Sh3.7 billion from the previous year’s Sh3.1 billion, mainly on account of improved valuation of properties.

READ: Home Africa raises Sh500m from bank after bond issue fails

Home Afrika’s earnings were dragged down further by administrative expenses which stood at Sh213.1 million as well as costs of sales which grew by 71 per cent to Sh447 million.

Directors of the company did not recommend a dividend payout.

“The group anticipates continued utilisation of the proceeds from the Sh500 million debt issue in project development over the first half of 2015 with resultant benefits in the form of revenue and profits to be generated in the second half of 2015,” the company said.