HF half-year profit up 2.2pc as sales slow and bad debts surge

Slower property sales and higher bad debts saw mortgage lender Housing Finance net profit increase by a marginal 2.2 per cent in the half-year ended June.

The firm’s net profit rose to Sh485.1 million in the period, about Sh10.7 million more than the earnings reported in the first six months of last year.

HF maintained its dividend payout ratio at 45 per cent, declaring an interim payment of Sh0.65 per share.

The payout is about 10 cents per share less than the interim dividend of Sh0.75 per share paid last year when the lender’s outstanding ordinary shares were less by 116.6 million units.

HF recently created the additional shares in a rights issue that netted Sh3.5 billion. The small profit growth in the period came as property sales, captured in “other income”, dropped to 306.9 million from Sh506.2 million.

The company also raised its loan loss provisions by 61.4 per cent to Sh283.3 million, weighing down on overall earnings. The increase in loan loss provisions reflected the increase in the gross bad debts to 4.1 billion from Sh3.8 billion, a 7.3 per cent jump.

HF’s loan book expanded 28.8 per cent to Sh49.9 billion, helping to raise total interest income 27 per cent to Sh3.7 billion. Its costs however increased in tandem, also contributing to the small profit growth.

Interest expenses, for instance, jumped 26.4 per cent to Sh1.9 billion while operating expenses including salaries increased 16.4 per cent to Sh1.3 billion.

HF chief executive Frank Ireri said the company will launch several real estate projects over the medium term to stabilise and grow earnings.

Through its subsidiary, the Kenya Building Society (KBS), HF plans to embark on Komarock Phase 5C that will see it develop 1,272 apartments.

It also plans to build 144 apartments in the second phase of Precious Gardens and develop 240 apartments along Kamiti Road and another 1,100 apartments along Thika Road.

KBS also plans to develop site and service for l,024 plots along Ruiru-Kiganjo Road. The subsidiary is currently developing a mall in Komarock and is finalising the development of Kahawa Downs consisting of 220 two and three-bedroom apartments.

Mr Ireri said the KBS projects will be staggered in phases in order to contribute regular income to the group, including capital gains on property sales.

“The group’s strategy is to phase all developments so that income is consistent each financial year. In the next two quarters, we expect good contribution from Kenya Building Society ongoing projects,” said Mr Ireri.

He said that Komarock Phase 5B and Kmall are expected to be completed and sold this year, contributing to profitability in the fourth quarter.