Zimre rental income contribution reduce significantly

Published: 10 September 2013

Zimre Property Investment (ZPI) released a lukewarm set of numbers showing a 25% growth in revenue to $3.5m from $2.8m. Rental income contribution reduced significantly from a high of 70% in December 2012 to 53% in June 2013 due to higher contribution from projects income.

Rental income was adversely affected by the constrained liquidity situation with total rental-income recording a 4% growth to $1.9m from $1.8m.

Collection of rent declined to average 97% compared to 100% in the prior period, consequently vacancy ratio increased from 9.1% to 11.8%.

Administration and other operating costs increased by 31% to $2.0m eroding the 25% growth in revenue in the process. Operating profit grew at a much slower rate of 8.0% to $1.6m from $1.5m. The company reported an attributable profit of $1.1m almost unchanged from the prior year and a dividend was not declared.

The balance sheet reflects a 2.0% growth in total assets from $55.6m to $56.9m. Investment property was unchanged at $48.2m while receivables increased by 25% to $1.8m from $1.4m.

The company made $0.6m provision for trade debtors showing that some tenants are past due with rental obligation to ZPI. Short term loans increased from $0.2m to $0.6m and other payables were unchanged during the period.

Cash flow from operation declined by 50% to $0.5m. Increases in trade receivables and interest paid during the six months resulted in a weak cash cycle for the company. Investing cash flow increased from $0.1m to $0.4m due to investments in equipment and vehicles.

Imara Edwards analysts says the property industry continues to suffer from severe liquidity challenges as well as increased vacancies in the CBD office space. Rental yields have suffered significant compression as companies are failing to review rentals upwards. Rental yields for most CBD offices have shrunk from an average of 8.6% to 6.8% for the industry and the situation remains fragile on this front.

In a report to shareholders, Tonderai Maneswa of Imara Edwards wrote: "With uncertainties regarding the currency the country will be using in the future investment in properties remains imperative given the inflation hedge provided by such investments. Compared to other properties ZPI has a relatively diversified income stream giving the company a diversification appeal that other properties like Dawn Properties do not have."
- businessdaily