Ilam Fahari I-Reit Records 15.5% Decline in Full-Year Profit to KSh 148 mn

Net profit declined by 15.5% to Kshs 148.0 mn in the period under review from Kshs 175.2 mn in FY’2019, driven by an 8.4% decline in total operating income to Kshs 347.5 mn, from Kshs 379.2 mn in FY’2019, coupled with a 1.8% growth in operating expenses to Kshs 229.6 mn, from Kshs 225.6 mn in FY’2019.

Property fund Ilam Fahari I-Reit reported a 15.5% decline in profit to Kshs 148.0 million in FY’2020 from Kshs 175.2 mn in FY’2019

The fund, which is managed by ICEA Lion Asset Management attributed the decline to a reduction in fair value gain on revaluation of investment property compared to prior year against the backdrop of Covid-19 pandemic whose “impact is a material valuation uncertainty in the short to medium term,” it said.

Rental income declined by 0.9% to Kshs 341.2 mn, from Kshs 344.3 mn in FY’2019 mainly attributable to the COVID-19 impact on the retail and commercial office sectors which has led to rent rebates for struggling tenants thus, suppressing rental income growth. 

Distributable earnings declined by 6.7% to Kshs 134.4 mn, from Kshs 144.0 mn in FY’2019. The fund manager attributed the decline to the higher property expenses arising from a significant provision for bad debts as a result of the non-performance of the anchor tenant at Greenspan Mall

This was partially offset by a reduction in fund operating expenses after the REIT Manager temporarily reduced their fees by 10.0% to cushion the investors during a, particularly difficult year. 

The REIT recommended a Kshs 108.6 mn dividend distribution to its unitholders at Kshs 0.60 per unit. At the current price of Kshs 7.0, this translated to a dividend yield of 10.7%.

On the Nairobi Securities Exchange, the Fahari I-REIT is currently trading at an average of Kshs 6.4 per share on a YTD basis, representing a 28.1% decrease compared to the same period under review in 2020 trading at an average Kshs 8.9. 

“Since inception, the instrument has recorded a decline of 64.5% from Kshs 20.0 in November 2015 to Kshs 7.0 as of 19th March 2020,” Cytonn Investments says.