Home Afrika eyes profit with full stake in projects

Home Afrika plans to take full ownership of future projects to reverse the current arrangement that has seen its minority partners take a relatively larger share of earnings from joint ventures.

The company, through its subsidiaries, has teamed up with equity investors to develop various real estate projects, including Migaa in Kiambu.

This has left it with non-controlling interests who have taken a larger share of profits despite their smaller stake of about 40 per cent, according to the company’s reports.

In the six years ended 2014, the non-controlling investors took a cumulative net profit of Sh93.3 million as shareholders of Home Afrika booked a net loss of Sh126.4 million in the same period.

In the year ended December, the Nairobi Securities Exchange (NSE)-listed firm recorded a net loss of Sh17.8 million while the minority partners took a net profit of Sh26.8 million.

READ: Bond failure and project delays hit Home Afrika’s profit

“The current model is a 60-40 split between ourselves and the equity partners in the subsidiaries,” said Home Afrika CEO Njoroge Ng’ang’a. “Going forward, we will seek to own projects 100 per cent.”

Mr Ng’ang’a said Home Afrika has taken a smaller share of the consolidated earnings because it has shouldered the costs of implementing the projects including administrative and marketing expenses. “We have been carrying all the costs,” he said.

Mr Ng’ang’a said that Home Afrika would realise significant profits as the real estate developments are completed in the coming years.

Most publicly traded firms have allotted a smaller share of their net profits to minority interests, making Home Afrika’s larger payouts to the non-controlling investors a rare phenomenon.

Shareholders of TPS Eastern Africa, for instance, took Sh245.9 million out of the total Sh274.4 million net profit the hotel chains operator made in the year ended December.

This left Sh28.5 million to the non-controlling interests.

“Our equity structure is unique compared to other NSE firms,” he said, noting that this would be remedied by full ownership of future projects.

The strategy shift means the company is expected to raise funds to undertake real estate developments on its own. Its current partners in the various projects have contributed capital or land.

Taking full ownership of future projects will, however, see the firm’s shareholders, including those who bought its share at the NSE when it listed in 2013, book the entire profits.

The loss attributed to Home Afrika’s owners last year saw them miss out on a dividend payout.

This came as the company’s total net earnings — including the profit attributed to the minority owners — dropped 90 per cent to Sh8.9 million on project delays caused by the failed issuance of a Sh900 million bond.

The bond termination saw the company turn to bankers for Sh500 million loan, leading to delay in funding projects that would have lifted its earnings.