eBusiness Weekly
Enacy Mapakame
Listed property firm, Mashonaland Holdings Limited’s operating profit for the half year to March 31, 2020 increased by 8,6 percent to $18,9 million compared to $17,4 million recorded in the same period in the prior year.
However, after fair value of investment properties, the group recorded a loss of $1,7 billion from a profit position of $20 million in the same period last year as their properties lost value in US$ terms.
The property market has remained under pressure due to the obtaining economic challenges among them inflationary pressures and declining capacity utilisation.
Chairman Ron Mutandagayi, indicated that although the sector implemented regular rent reviews, this was not enough to match the inflation rate that closed the period at 676 percent.
The Covid-19 pandemic has also increased strain on an already fragile economy as occupancy levels remain under pressure.
“While the property market responded with regular rent reviews, the general reduction in economic activity meant that constrained rental growth could not match prevailing inflationary pressures.
“Construction and maintenance cost continue to surge as service providers index their prices against the US$. Most projects across the market have been frozen.
“Rising construction costs and the decline in rentals in real terms have rendered some projects unviable. Developers have largely adopted a wait and see attitude,” said Mutandagayi.
During the period under review, revenue rose 44 percent to $30,1 million, an increase that reflects the positive impact of rental reviews. The group implemented regular rent reviews in order to hedge against erosion of rental value due to inflation.
Net property income came in at $25,1 million representing a 45 percent growth on prior year comparable period.
At $4,98 million, property expenses were 36 percent above prior year comparable period reflective of increase in voids related costs, insurance costs and expenditure on repairs and maintenance work compared to 2019.
Administrative expenses rose 19 percent to $7,72 million on the back of an increase in staff related costs as the group cushioned its staff from rising cost of living coupled with an increase in advertising and consultants’ fees.
Despite the challenging environment, the group managed to maintain occupancy level levels at 77 percent.
The periodic maintenance of buildings saw some of its strategic tenants increasing space uptake within the portfolio, while some tenants left the portfolio mainly due to business closure.
“Management continue to build a strong leasing pipeline to ensure portfolio optimization going forward,” said Mutandagayi.
Rental collection closed the period at 90 percent from 84 percent in the comparable period as the optimisation of the business operational process continues to pay off.
Management says they will continue to ensure a rigorous tenant on boarding process to achieve quality growth going forward.
In line with its strategic focus area on income streams diversification, the group grew its third party business portfolio during the period.
While the economic outlook remains uncertain, the group’s focus will remain on preservation of shareholder value and ensure future for through regular building maintenance and talent retention.
