Home Afrika Ltd (NSE: HAFR) announced their audited financial results for the Full Year (FY) ended 31st December 2014 on 29th April 2015.
Recommendation ; HOLD, Fair Value KES 3.02
5.64% Growth in Revenue amid 70.82% Rise in Cost of Sales
Revenues earned for the year grew 5.64% to KES 687.30 Mn attributed to cash flows from its 2 new projects; Lakeview Heights Kisumu and Llango in Kwale. Cost of sales expanded 70.82% to KES 447.03 Mn on account of a sales mix in which most sales for the year were in residential properties that attracted a higher margin. The property developer however earned significant growth in other operating income from KES 10.56Mn ( FY2013) to KES 114.88Mn.
PBT Dips 74.14% to KES 47.48Mn despite a 2.74% Trim in Operating Expenses; gloomy ROE at 2.57%
Following a lower than 25% profit warning made earlier in the year, PBT diminished 74.14% to KES 47.48Mn in spite of a 2.74% slide in operating expenses, management explained that the decline in profits resulted from increased cost of sales as well as project delays that hampered better growth of revenues. PAT stood at KES 8.96Mn, an 88.89% dive from FY2013 profit of KES 80.63Mn with a modest margin of 1.30%. Return on shareholders’ equity (ROE) rescinded by 21.18% to 2.57% while a loss per share of KES 0.04 was reported, as a result of the sharp decline in net income earned, reflecting subdued returns to shareholders.
Outlook: Management attributed the year’s dismal performance to delayed projects and investments arising from late receipt of the proceeds of the KES 500Mn debt issue that was floated early last year. Revenues are anticipated to surge as the proceeds are utilized in project development over the first half of 2015 with benefits been realized in the second half of 2015.In addition,completion of its new projects; Lakeview heights Kisumu by June 2017 and Llango in Kwale by December 2016 should contribute to better revenues. The Migaa project is also expected to be completed by 2017, as the firm recently entered a KES 22Mn partnership to develop and manage the club house, sports and golf facilities at Migaa. The firm has potential to provide better earnings prospects, however this relies heavily on the completion of the above projects.