CHAIRMAN’S STATEMENT
Overview of Operating Environment
The property sector’s rental performance remained closely tied to the general macro-economic performance dynamics. The dollarisation of the economy was more entrenched during the period, particularly in the informal sector, as the share of USD rentals grew in sympathy with the increased share of USD expenditure by economic agents. The introduction of the ZWG (Zimbabwe Gold) currency in Q2 2024 managed to stabilise the devaluation being experienced by the local currency. However, it remained too early to tell the medium to long term impact of this policy change on the property sectors’ performance. The local currency’s exchange rate performance was within a 1% corridor and ZWG inflation saw YTD inflation retreating by 2.4% in Q2 2024 whilst USD inflation was between 3.2% to 3.8% in H1 2024. In the outlook we believe that exchange rate distortions have the potential to disrupt the property related income mix between USD and ZWG as patrons can potentially take advantage of any exchange rate premiums and shocks.
According to the Government of Zimbabwe, the impact of the El Nino induced drought is likely to see Zimbabwe’s GDP growth slowing to 2% from an initially forecasted growth of 3.5%. The drought has had significant downside implications for the economy as the import bill is expected to rise and thereby narrow the country’s current account balance. Growth is however expected to be sustained by the Tourism, Mining and Construction sectors for the balance of the year. Additionally, firmer gold prices and strong diaspora remittances have already been instrumental in shoring up foreign currency liquidity and this trend should counter the downside growth implications arising from the Agricultural sector.
Within the property sector space, management will continue to seek opportunities arising from the significant investments being made in infrastructure which has underpinned several property developments in the country.
Property Market Overview
The supply of space in the Central Business District (CBD) office and urban retail sectors was relatively high as this was driven by increased voids and the migration towards office parks and suburban retail and residential sites.
Most tenants continued to pay rentals in United States Dollars, however in line with the country’s laws, most tenants paid operating costs using the local currency which depressed the real value of utility fees and other operating income for the property sector in general.
The market has seen an increase in the development of residential stands, cluster houses and high-rise flats. Furthermore, investors were focused on owner-occupied office park-style buildings and the conversion of residential properties into offices in the suburbs surrounding CBDs and on major arterial routes. Despite the gap for supporting infrastructure, the growth in the development of industrial and warehousing properties in the country remained firm.
Business performance overview
The Group’s Net Property Income stood at US$2,378,662 while the revenue was amounted to US$4,342,779. Rental income remains the main source of revenue. The occupancy level averaged 89% for the period under review.
Management continued to engage the tenants for timeous rental payments. For the half year, the collection rate achieved was 56%. The Company is committed to providing its tenants with a quality and safe product (property). To this end, US$412,169 was spent on maintenance in the first half of the year.
Property valuations
An independent property valuation conducted by Knight Frank Zimbabwe as at 30 June 2024 valued the property portfolio at US$124,829,000 (FY 2023: US$121,579,000). The growth in rentals was in line with market developments which was responsible for the growth in the property portfolio’s value by 2.7%.
Developments
The Group has strategically positioned itself to generate shareholder value by pursuing various projects at varying execution stages.
The Group’s flagship project is the Arundel Office Park extension, whose scope involves building a double-storey office block with a basement, providing a lettable area of 2,616.5 square metres, which is underway. Significant progress has been made on the project and it is nearing completion.
The Group is a co-investor and Project Manager in constructing a 388-bed student accommodation building near the Chinhoyi University of Technology. The project is at an advanced stage of fitting furniture and biometric security features, with completion expected in August 2024.
In Zvishavane, the Group is also a co-investor and Project Manager in the development of mixed-use duplex clusters, three to four-storey apartments, and student hostels, with the proposed designs having been approved by Zvishavane Town Council.
The project is in three phases. Phase A, comprising 6 duplex flats and 20 blocks of double and triple-storey flats, is already underway and completion is targeted for the 30th of September 2024.
Sustainability
The Group will continue to conduct its operations in a sustainable manner, aligning with the principles of environmental, social, and governance (ESG) requirements. Sustainability principles are embodied in the Group’s strategy wherein green operations are a top priority. Therefore, solar power will be prioritised for all new developments and upgrades. The new office block development at Arundel Office Park will incorporate a solar plant to reduce carbon footprint of the property portfolio Further, management is promoting energy efficiency, inclusive facilities and implementing waste management initiatives. The Governance structures around ESGs are also being enhanced to increase equality in the workplace through equal opportunities and representation as well as increased transparency. During the period, the business identified an orphanage in the community to which a donation of key basic products was made. The business will continue offering support going forward.
Dividend
At a meeting held on 27 August 2024, the Board of Directors resolved that no dividend should be paid for the first half of the year 2024, and the available cash be channeled towards the completion of the Arundel Office Park block.
Business Outlook
Despite the ongoing uncertainty, the business plans to navigate the situation by implementing strategic growth strategies that aim to increase shareholder value. This includes investing in lucrative properties that can serve as a safeguard against inflation. Additionally, the business will prioritise maintaining high occupancy levels by effectively managing client relationships and offering quality and secure products through continuous property refurbishment, maintenance, and upgrades.
Acknowledgements
On behalf of the board, I would like to thank my fellow board members, management and staff for their significant contributions to the Company’s performance under difficult conditions. I thank our key stakeholders, including strategic investment partners, tenants and service providers, for their invaluable support.
Elisha K. Moyo
Chairman of the board
27 August 2024
Related Download
FMP – Unaudited Abridged Financial Results For the Half Year ended 30 June 2024
