In compliance with the requirements of the Securities Act No. 41 of 2016 and the listing rules of the Lusaka Securities Exchange, Real Estate Investments Zambia PLC announces the financial results of the Company and its subsidiaries (collectively referred to as the Group) for the six months ended 30 June 2019. These interim financial results are derived from the Group’s Management Accounts, which have been approved by the Directors, but have not been audited.
Group revenue for the six months to 30 June 2019 increased by 21% from ZMW 28 million in 2018 to ZMW 33.9 million mainly as a result of Arcades shopping mall having returned to normal operations in the first quarter of 2019. Profit from operations before change in fair value of investment property grew by 19% indicating stronger operational performance. Notwithstanding the recorded increase in rental income, the Group recorded a loss after tax of ZMW 10.8 million compared to a profit after tax of ZMW 12.6 million for the same period in 2018. The loss was a result of:
– ZMW 15.4 million unrealized exchange losses on revaluation of foreign currency denominated liabilities due to depreciation of the ZMW against the USD, compared to an exchange gain of ZMW1.9 million in 2018.
– higher finance costs following full drawdown of loan facilities to fund the Arcades shopping mall and cinema redevelopment and,
– a reduction in fair value of the investment property portfolio of ZMW 1.7 million driven by falling market rental rates during the period compared to a revaluation gain of ZMW 1.9 million for the same period in 2018.
Company reported a loss of ZMW 19.9 million driven by:
– ZMW 17.0 million net unrealized exchange losses on revaluation of foreign currency denominated assets and liabilities due to depreciation of the ZMW against the USD during the period, compared to an exchange gain of ZMW 1.0 million in 2018,
– higher finance costs amounting to ZMW 11.5 million following full drawdown of loan facilities proceed of which were invested in the Arcades shopping mall and cinema redevelopment compared to ZMW 5.8 million incurred in 2018,
– lower gain in fair value of the investment property portfolio of ZMW 1.4 million compared to a revaluation gain of ZMW 7.6 million for the same period in 2018.
FAIR VALUE OF INVESTMENT PROPERTY PORTFOLIO
The fair value of our investment property portfolio increased to ZMW 954 million mainly due to the acquisition of Southview Park in second half of 2018. The overall investment property value was negatively impacted by the reported fair value loss of ZMW 1.7 million during the period under review. The fair value of the Group’s investment property portfolio was determined as at 30 June 2019 by external independent and professional property valuation experts, Knight Frank Zambia Limited, who possess appropriate internationally recognised professional qualifications and have requisite experience in the location and category of the properties that were valued. Revaluation is done twice a year as at 30th June and at 31st December in order for the Group’s financial statements to provide reliable, relevant and up-to-date information about its financial position and performance.
The Group recorded an increase in cash generated from operating activities to ZMW 12.7 million for the six months to 30 June 2019 from the ZMW 4.8 million that was recorded for the same period in prior year. This represents an increase of 164% which was driven by higher revenue and higher collections on receivables resulting in a net increase in cash and cash equivalents during the period.
The Directors resolved not to pay an interim dividend for the year ending 31 December 2019.
The Directors will review the results for the full year and consider recommendation of a final dividend for approval by Shareholders at the Annual General Meeting (AGM) that will be held before 31 March 2020.
The property industry is expected to remain challenging for the remainder of the year with the adverse market forces that characterized the first half of 2019 continuing to prevail in the second half particularly regarding occupancy and market rental rates. This notwithstanding, the Group is expected to perform better in 2019 compared to 2018 on the strength of Arcades shopping mall having returned to normal operations and rigorous leasing efforts that are in place particularly for big box spaces at Counting House Square and Central Park which faced the biggest challenges in the past six months.
BY ORDER OF THE BOARD
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