Mashonaland Holdings rentals continue to be under pressure from the subdued economic activity. Giving a trading update for the four months to January 2016, during the company’s 49th Annual General Meeting (AGM), Chief Executive officer Manfred Mahari said falling occupancy levels and downward rent reviews resulted in a 7% drop in revenue to $1.9 mln.
“We have put strategies in place to ensure that we attract new quality tenants on the market and also retain good quality tenants already in the portfolio”, he said
“In addition, new revenue streams are being actively pursued. High quality service delivery and responsiveness to customer needs will also be a priority”
Since 30 September 2015, voids remained largely stable at 26 732 square metres, representing 25% of the lettable portfolio.
Mahari said as a result voids related costs (40%) as well as provision for credit losses (23%) and property management costs (23%) were the key drivers of the company’s expenses.
The property expenses at $493 669, were up by 1% from the previous year and 11% above the current budget of $445 992.
“The resultant property expense to income ratio was 26 percent compared to 23 percent in the same period last year.”
Administrative expenses, at $0.7 mln, were 3% above those in the same period last year and 17% above budget. The admin expenses to income ratio improved to37% from 40% in the comparative period.
Mahari noted that cost containment measures remain a priority.
Operating profit for the period under review at $0.8 mln was 19% below both the comparable period and budget. The margin eased to 39% compared to 45% achieved in the same period last year.
“We have put revenue growth and cost containment strategies to improve operating profit”, he said.
Rental debtors grew by 20% to $2.3 mln from the year end position of $1.9 mln and this was largely attributed to Government ministries and departments in the company’s portfolio.
“We remain confident that government will honour their debt. Management is aware of the tight liquidity space but we will continue to actively seek ways of reducing these arrears,” said Mahari.
The resulting arrears ratio was 34% compared to 28% in September 2015.
In terms of property maintenance, Mahari mentioned that their properties are in a good state of maintenance in terms of building fabric, plant and equipment. Installation of the new lift for ZB Center Bulawayo, procured at a cost of $157 000 was in progress.
“This completes the first round of the replacement plan for all lifts in the office buildings portfolio, bringing the cumulative investment on new lifts to $1.2 mln.
Turning to property developments, OK Houghton Park project is expected to be completed by July 2016 and the entry yield for the project is 6%. Completion of the project is expected to free up the space being let to OK for further strategic re-letting.
Given the persistent liquidity challenges and lack of affordable mortgage, alternative options are being considered for realizing value on the Hazeldene landbank in the short term.
The AGM also voted for the extension of the company’s share buyback scheme for another year. FinX
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