Incorporation of Harmony Holdings: Matters arising

It has become expedient, once again, based largely on insinuations arising from hatred and hallucinations as a result of electoral failure, to expatiate on matters arising from the incorporation of the

For the records, the states owns more than 20 companies and corporations established by successive administrations to offer services to the people and generate profit thereby adding to the revenue base of the State Government. Regrettably, most these companies have become burdens on the migre resources of the state due to such factors as mismanagement, lack of corporate governance structure and other general ills. Instead of being sources of additional revenue for the government, they had turned into drain pipes badgering government for complementing their expenditure.

The continued reliance of these companies on the State’s financial grants for their sustenance was a challenge to the administration of Governor Abdulfatah Ahmed. The concern of the administration then was to urgently arrest the rot in those entities, turn them around and make them profitable so as to shore up revenue base of the State Government and thereby free up more funds for the provision of more infrastructures for Kwarans.

In view of the need to reposition the companies and make them more result oriented for the challenge and exigencies of fulfilling Governor Ahmed's obligations of massive infrastructural development, provision of 21st century health facilities, youths jobs and empowerment and sustainable economic growth and development, the government engaged the services of Consultants, Atelier Services Ltd in 2011 to streamline their operations. The due diligence review by the Consultant revealed unprecedented level of rot across most of the companies. For instance at Kwara Insurance Brokers Ltd, cost to income ratio was 104% of reported turnover, and 133% of adjusted turnover. Profit before tax had consistently been negative for 5 years; Shareholders’ Fund was in negative of N2.9 million despite a N1million increase in Issued and Paid-up Capital in 2011. The Company had not been able to meet dividend obligations since inception, as Return on Equity was negative.

Additionally, the Company had not had any Board of Directors since inception, among other major anomalies.

This concern directly led to the incorporation of Harmony Holdings Limited. The company was expected to coordinate and oversee the day-to-day activities of the entities under reference and turn them into profitable ventures through effective and efficient management. The company was not only to provide the highly needed leadership and strategic direction to these entities, but also provide the necessary integration of the entities in order to bring out synergistic results in terms of better performance and cost reductions.

The objectives of the holding company include the achievement of better financial performances by all the entities by giving them desired strategic focus and direction, reorganizing and restructuring all the moribund entities for optimal performance, hence providing employment opportunities for Kwarans, while also collaborating with local and foreign investors to increase investment activities in the State especially to unlock the potentials presently locked in such areas as mining, property and tourism within the State, among others.

In order to achieve desired results especially in respect of generating returns to the State coffers, the Company is to ensure that the “business as usual” approach as obtained across the entities is totally eradicated. This, the Company was to do by institutionalizing a performance-based matrix for all the entities in line with their respective core competencies and harmonizing the operational services within the Group through shared services arrangements as a way of achieving efficient cost structure across board.

The Company was also to make new investments in identified profitable green field areas, while also consolidating government’s equity holdings in the existing businesses across all the sectors of the nation’s economy.

The incorporation of Harmony Holdings Ltd was superintended by the then Attorney General and Commissioner for Justice, Barr Kamaldeen Ajibade and Mr. Yomi Ogunsola, Senior Special Assistant to the Executive Governor on Investments & Strategy. They undertook this task in their official capacities and therefore, signed as Harmony Holdings Ltd statutory directors for the purpose of registration only in trust for the state government. The shares of Harmony Holdings belong to, and have always belong to Ilorin Cargo Terminal Company Ltd, Patigi Regatta Motel Ltd, Kwara State Cashew Nut Processing Company Ltd, and Kwara State Tourism Kitchen Company Ltd, all wholly owned by Kwara State Government.

Harmony Holdings Limited was incorporated in May 2012 as a limited liability company wholly owned (100%) by Kwara State Government. By incorporating this Company, Kwara State Government was only following the footsteps of other States in the Federation which had earlier did same. There are the Ibile Holdings Ltd in Lagos State, the Gateway Holdings Ltd in Ogun State, the New Nigeria Development Company Ltd for the Northern States, etc. Indeed, since the incorporation of Harmony Holdings Ltd, some other States in Nigeria have followed suit, e.g. Fountain Holdings in Ekiti State, Osun Investment Company Ltd, etc.

At the commencement of operation by Harmony Holdings Ltd, distinguished and exemplary Kwarans, who had distinguished themselves in various sectors of endeavors, were appointed by the Government as directors of the company to replace the statutory directors earlier mentioned. The Chairman of the Board of Directors of Harmony Holdings Ltd is HRH (Prof.) Halidu Abubakar, Emir of Ilesha-Baruba, Emeritus Professor of Public Finance has been Member, Presidential Committee of Experts on Wage Fixing and Pay Relativity in the Nigerian Public Service (January to September, 2010), Chairman, New Nigerian Development Company (NNDC) for two terms (2006 & 2010), Member, Planning Committee on the Establishment of Kwara State University (2008); Member KWASU Implementation Committee (2009) and Member KWASU Governing Council, (2009 to date) just to mention a few. Another Director. Prof Kenneth Adeyemi has been director in several companies including Executive Director, Information Technology and Operations, Commercial Banking & Retail Banking, Union Bank of Nigeria Plc. He has also chaired and served on different committees including Chairman, Covenant University Strategic Planning Committee, Chairman, Centre for Life Long Learning Programme, member, National Economic Management Team (NEMT), the Vision 20:2020 Implementation Committee, Technical Committee on Nigeria’s Trade Policy, among others. Alhaji Hamzat Balogun, another distinguished Kwaran who also sits on the Board of Harmony Holdings Ltd is Director of Finance & Accounts, Joint Admission and Matriculations Board (JAMB).

It is in view of this and other factors that the Company has posted positive results since it took off fully in January 2013. For instance, the shared services structure has ensured that global best practices including institutionalization of sound corporate governance principles as it exists at the holding company is replicated at the subsidiaries already fully taken over by the Holding company. The outlook and orientation of staff at the subsidiaries has also been positively turned around. The fact that performance based matrix has been fixed against which the output of each individual staff will be adjudged has ensured improvement in staff productivity and performance.

In strict financial terms, the plugging of leakages through strict internal control mechanism and competitive bidding process has radically reduced costs at the subsidiaries thereby ensuring return to profitability within the first year of operation of the Holding Company.

The result announced by the Holding Company for the first year of operation (Financial Year ended December 31st 2013) attest to the fact that the Company has caught the vision and delivered substantially on the stated objectives. The announcement of N373 Million Profit Before Tax by the Group (for the year 2013) is a clear indicator that the Company has positively driven entities whose fortunes had hitherto waned over the years. With an Earnings Per Share (EPS) of 2.96, the Group has been able to almost triple the resources committed to businesses in the course of the year under review.

In specific terms, the companies fully taken over by the Holding Company recorded impressive results for the Year ended 2013 viz: Kwara Investment & Property Development Company Ltd (KIPDC)- N217Million PBT (compared to N46Million Loss in corresponding period in 2012), Harmony Securities Ltd (HSL)- N210.7Million PBT (as against N28Million PBT in corresponding period in 2012), and Kwara Insurance Brokers Ltd (KIB) – N3.6Million PBT (compared to N90,000 Loss in corresponding period in 2012).

Apart from the above, the Holding Company also rendered supervisory services to the Kwara State Transport Corporation. When Harmony Holdings Ltd began to supervise Kwara State Transport Corporation (KSTC), the entity was in comatose characterized by myriad of malaise. Expenditure consistently outstripped revenue since 2008, accounting for a whopping 114% of total revenue in 2010 for example. Net operating profit (earnings before interest and tax-EBIT) had consistently been negative over 5 years. The Corporation’s accumulated funds (retained earnings) had also been consistently negative (-N288million in 2008,-N329.8million in 2009 and –N211.6million in 2010), an indication of the weak financial state of the Corporation.

Morale among staff was at the lowest ebb due to accumulated arrears of salaries, leave bonus and cooperative contributions owed to staff since 2008. Performance monitoring and management processes were practically non-existent. Creditors were on the verge of repossessing leased buses to the Corporation due to inability to pay or service outstanding obligations in the sum of N86Million. Partners who operated their buses with the Corporation were owed backlog arrears stretching to several months. Above all, total outstanding obligation stood at N176Million.

Once Harmony Holdings came on board, the Company immediately stepped in to restructure the debt portfolio with the Infrastructures Bank. Payment has since been seamless with the debt profile reduced to less than N30Million. The total liability of KSTC has also been reduced to less than N50Million from N176Million. Other worthy achievements of the Holding Company vis-à-vis the Corporation include offsetting all backlog of arrears of staff emoluments, implementation of Minimum Wage Policy since July 2013, regularization of contract staff employment, institutionalization of performance based matrix and worthwhile internal control system, automation of ticket sales from Ilorin loading bay (which has drastically minimized incidence of fraud, and improved accountability), etc.

Above all, after many years of recording losses (even in 2011 which was supposed to be a profitable year in view of 40 new buses acquired from Infrastructures Bank), KSTC has now returned to the path of profit making. In the result posted which could not be consolidated due to its status as a Corporation (rather than limited liability company), KSTC posted a Profit Before Tax (PBT) of N16Million for the year ended December 31st 2013.

In the first year of operation of the Holding Company which is under review, there were several challenges which were to be a cog in the wheel of progress, but which the Company, with the proven experience of the Board and Management, was able to bypass.

Finally, it is noted that the Company is focused and fully committed to the tenets of the vision of His Excellency, Executive Governor of Kwara State, Alhaji (Dr.) Abdulfatah Ahmed behind the setting up of the Holding Company. In the coming years, the Company will continue to make progress in the areas of human capital development and institutionalization of value driven system across the Group, thereby laying a solid foundation for sustainable economic development of Kwara State. Kwarans should no longer be deceived by backseat drivers who have no alternate ideas on good governance other than armchair criticism. Kwarans are wiser.

Oba can be reached through abdulwahaboba@gmail.com

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