eBusiness Weekly
Enacy Mapakame
Property firm, First Mutual Properties’ after tax profit for the six months to June 30, 2019, surged 4 691 percent to $242,9 million from $5 million in the same period last year.
FMP indicated fair value adjustment of the property investment contributed a significant share to the overall profitability achieved during the period under review. The fair value gain was driven mainly by the group’s strategic land bank.
Its property portfolio was valued at $419,212 million, representing a 186,8 percent gain on the prior year on a market value basis.
Basic earnings and headline earnings per share rose 4 690 percent to 19 cents from 0,41 cents in the comparable prior year period.
During the period under review, the property market remained subdued largely due to the effects of the depressed economic conditions that led to the streamlining of productive and other expansionary activities, erosion of purchasing power, job losses and deteriorating social service delivery.
Demand for commercial space in the central business district (CBD) went down resulting in lower occupancy levels. On the other hand, the residential market experienced relatively high activity as buyers sought to hedge against currency and inflation risk in property assets before the gazetting of Statutory Instrument 142 of 2019, although some sellers withdrew their properties from the market following the introduction of a mono-currency system.
“Rental values growth were driven by a combination of exchange rate depreciation and rising inflation. In addition, rising inflation posed challenges for property portfolio valuation as the fair value gains were significantly higher than increases in revenue, resulting in unsustainably low yields,” said chairman Elisha Moyo in a statement accompanying financial results.
During the period under review, rental income grew by 69,9 percent to $6,710 million due to rent reviews, improved occupancy levels, improved turnover rentals on retail space and exchange gains on foreign currency denominated business.
Industry-wide, rentals increased by between 30 percent and 150 percent.
Occupancy levels improved by 8,4 percent to 82,8 percent. Property expenses were up 62,11 percent for the period, on the back of high maintenance and operating costs.
Operating expenditure rose across the board as suppliers pegged their prices to prevailing exchange rates. Net property income rose by 68,49 percent to $5,365 million on the uplift in rental incomes.
Total assets grew 185 percent to $426 million from $149 million achieved in the same period last year.
While development activity in the commercial property sector is expected to remain subdued unless there is increased economic activity that will help trigger demand, FMP says it will continue to employ strategies that help preserve shareholder value as well as achieve sustainable returns.
“The company remains alive to the developments in the economy and will continue to adapt its strategies in order to preserve shareholder value and achieve sustainable returns,” said Moyo.
FMP did not declare an interim dividend allow the business to reinvest into the portfolio and maximise shareholder value in the future.
