· 33.5% increase in profit for the period.
· Revenues increased by 17.7%.
· Occupancy levels declined from 87.3% to 89.4%.
· Net property income decline of ZWL146,878,216.
ZSE-listed company First Mutual Properties posted aminimalistic update for the quarter. Many descriptive statistics and financial line items such as cash generated from operations, and financial performance subheading have been left out as is their usual practice when performance is strong.
The report boasts a 33.5% increase in profit for the period but fails to adequately explain the operations by which this return was achieved.
Revenues for the company increased by 17.7% and werereportedly driven by increases in rent. The success of upward rent reviews was made possible because occupancy levels remained relatively stable, only declining by 2.1 percentage points from 87.3% to 89.4%. Furthermore, the company managed to keep the rate of collections at 81%, which is a single percentage point above the level realized in the prior period.
This allowed the increase in rentals to be translated into an increase in revenue. With a more acute decline in occupancy, rent reviews would likely have resulted in a decline in revenue.
Growth by means of rental upsurges is not sustainable in the current macroeconomic environment. The sustainability of the strategy is therefore not probable given that demand in the Zimbabwean property market remains weak and is outstrippedby supply.
Furthermore, the depreciating local currency coupled with increases in year-on-year inflation also tightens purchasing power of tenants thereby threatening the sustainability of occupancy rates at increased prices.
Despite this shortcoming in strategy, rental income is the company's main source of revenue. Of which the company realized a decline in net property income of ZWL146,878,216.
No clear opportunities were stated in the trading update outlook section and property market demand/supply dynamics are expected to continue to plague the company's future. This leaves investors who seek a return to ask “what are our other options”.