This archive report was first published on 31 July 2019.
Home Afrika Limited's financial performance took a hit in 2018, with a 58.5% decline in project percentage-of-completion based revenue from Sh. 263 million in 2017 to Sh. 109 million in 2018.
Actual sales plummeted from Sh. 921 million in 2017 to Sh. 582 million in 2018, largely due to the slowed growth in the real estate sector, constrained credit access, and a general slowdown in spending power among plot and house buyers.
According to the company's financial reports, the group operating expenses increased, mainly driven by fundraising roadshows, the application of International Financial Reporting Standards (IFRS 9), and other professional fees, resulting in a loss of Sh. 346 million in 2018.
Home Afrika Managing Director, Dan Awendo, explained that the company's revenue recognition model, guided by IFRS 9, only allows them to recognize deposits from sales as revenue once a plot owner has completed payment, title has been processed, and the project is complete.
“International Financial Reporting Standards IFRS only allows us to recognize deposits from sales as revenue once a plot owner has completed payment, title has been processed and the project is complete. This means the billions we have received as sales and sales deposits are reflected as deferred income liabilities in our books thus presenting a more depressed outlook on our financial position,” said Dan Awendo.
The company's deferred income and deposits from sales of plots stood at Sh. 2.6 billion in 2018, compared to Sh. 2.3 billion in 2017. Mr. Awendo observed that with the road and golf course works at Migaa Golf Estate in high gear, the completion of the project will effectively see all of the deferred revenue and deposits from sales of plots translate to revenue in the profitability statement shortly.
Home Afrika is currently engaging three financial institutions that are owed various debt facilities, with negotiations on restructuring and reorganization of the facilities at an advanced stage. The company is also seeking to raise cash from a strategic investor to accelerate the completion of its projects and effectively see a majority of its deferred revenue and deposits from sale of plot translate into revenue.
