Chairman’s Statement
The Economy
The economic fundamentals were weak for the greater period during the year, characterised by cash shortages, foreign currency shortages and a multi-tier pricing system, as well as low capacity utilisation. The productive sectors of the economy, mainly agriculture, through the success of the command agriculture initiative and mining, gave an impetus to economic growth, through savings on food imports.
The changes in the political landscape ushered in an array of new economic policies that are inclined towards re-engagement with the international community, hence bolstering business confidence. The new horizon is well endowed with opportunities for property development in support of envisaged growth across all sectors of the economy.
The Property Market
In 2017, the Zimbabwean property market was lopsided, with the greater portion victim to declining overall occupancy levels and increasing tenant arrears. Although an increase in demand for retail and office park space was recorded, investment in property refurbishments and new developments remained modest. In spite of all this, the sector remained attractive to both individual and institutional investors seeking value preservation.
The positive political outlook fostered by the new political landscape has put the economy under the global spotlight and early signs are indicative of increased demand for space, especially in the office park sectors.
Financial Performance
During the period under review, rental income declined by 4.73% to US$7.36 million (FY2016: US$7.73 million) driven by tenants’ requests for rent reductions and decline in occupancy levels. Some rent reductions were consented to, with a view to preserving occupancy levels. Despite this, overall occupancy levels dropped by 1.16% to 70.94% (2016: 71.77%).
Trade receivables grew to US$3.431 million from US$3.001 million at 31 December 2016 as tenants continue to struggle to meet their lease obligations. Despite the tough operating environment, the Company recorded positive results for the year driven by the resilience of our diversified property portfolio posting a 48.75% increase in profit after tax of US$1.69 million (FY2016: US$1.14 million).
An independent property valuation conducted by Knight Frank Zimbabwe as at 31 December 2017 valued the property portfolio at US$137.46 million, being a 0.11% gain on the prior year, on a market value basis. The marginal gain is driven by property acquisitions in Nyanga and Chivhu, however on a like-for-like basis, the portfolio market value declined by 0.03%.
Property Acquisitions
Post year end, in line with the Group’s strategy to grow the portfolio, the business acquired two properties at a total price of US$2 million. One of the properties located in Belgravia Harare, is earmarked for commercial use and the other property located in Chivhu will remain tenanted to a major retailer in the country.
Dividend
At a meeting held on 1 March 2018, your Board resolved that a final dividend of US$730,000 being 0.059 US cents per share be declared from the profits for the year ended 31 December 2017. The dividend will be payable on or about 29 April 2018 to all shareholders of the Company registered at close of business on 13 April 2018. The shares of the Company will be traded cum-dividend on the Zimbabwe Stock Exchange up to 10 April 2018 and ex-dividend as from 11 April 2018.
Rebranding
During the year, your Company rebranded to First Mutual Properties Limited from Pearl Properties (2006) Limited effective 13 September 2017, following approval by the Company’s shareholders at the Annual General Meeting held on 2 June 2017. The company name change is intended to align to the First Mutual monolithic brand architecture.
Outlook
Proposed macro-economic policy changes and international re-engagement efforts are expected to stimulate growth within the productive sectors of the economy. This in turn will stimulate demand for space through stimulating spending. Economic turnaround, supported by an estimated population growth rate of 2.2% per annum, and an estimated 2.5% per annum rate of urbanisation, will unleash increased demand for space across the country. In addition, significant investment in infrastructure will spur economic recovery, drive employment levels and spending power, necessitating growth in the property sector.
Real estate markets are positively correlated to the performance of the economy at large, and the implementation of pro-production policies across the economy will benefit the property market. In the interim, our strategy is to pursue diversification by sector and location, achieving growth through pre-let acquisitions and developments in diverse locations and repositioning poor performing assets.
Appreciation
On behalf of the Board, I wish to thank our clients, staff, management and all other stakeholders for their invaluable support.
E K Moyo
Chairman
1 March 2018
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