• Revenue Decline Driven by Handover Delays: Revenue fell 9.86% to USD 12.8 million from USD 14.2 million, primarily due to timing differences in unit handovers
• PAT Plummets Amid Rising Costs: Dropped 39.5% to USD 2.65 million , pressured by a 20.54% increase in operating expenses and a 129% surge in finance costs
• REIT Launch Bolsters Long-Term Outlook: The Radisson Apart Hotel under the Seatrite Five Trust REIT enhances non-core income by 46% to USD 857,441

Harare- One of the leading property development companies in Zimbabwe, West Properties (West Prop), has seen both topline and profit after tax (PAT) nosediving during the half year to 30 June 2025 due to timing differences in unit handovers, a strategic shift toward higher-margin developments, and increased operating and finance costs.

The Group recorded a revenue decline to USD 12.8 million from USD 14.2 million in the prior period, a 9.86% drop, while PAT fell to USD 2.65 million from USD 4.38 million, a 39.5% contraction.

Despite these challenges, West Prop “maintained a robust gross margin of 53% and strengthened its balance sheet, bolstered by the successful launch of the Radisson Apart Hotel under the Seatrite Five Trust REIT, a landmark initiative in its capital markets strategy,” said the group chairperson Michael Louis in a statement accompanying the half-year financials.

The revenue decline stems from delays in unit handovers, a common issue in the property sector where supply chain constraints, regulatory approvals, or construction delays can defer revenue recognition.

West Prop’s strategic pivot toward higher-margin developments, while aimed at enhancing long-term profitability, has contributed to this short-term revenue dip as the Group prioritises premium projects with longer gestation periods.

Key revenue contributors included Pokugara Properties (USD 5.43 million), Pomona City (USD 4.11 million), and Millennium Heights (USD 3.28 million). The strong performance of Pomona City’s flats, launched in late 2024, reflects robust demand for mid-to-high-end residential units in Zimbabwe’s urban centres.

This aligns with sector trends, where urbanisation and rising disposable incomes drive housing demand despite macroeconomic challenges like inflation and currency volatility.

The launch of the Radisson Apart Hotel under the Seatrite Five Trust REIT marks a significant milestone, diversifying West Prop’s portfolio into income-generating assets and reinforcing its market positioning, though its immediate revenue impact may be limited due to the project’s early stage.

Gross profit fell to USD 6.8 million from USD 8.21 million, tracking the revenue decline. However, the Group’s gross margin of 53%, down slightly from 58%, demonstrates resilience amid lower sales volumes. This stability is driven by the internalisation of construction processes through subsidiaries TrustProp, BrickFusion, and WDC, which enhance cost control and reduce reliance on external contractors.

In Zimbabwe’s property sector, where input costs are volatile due to inflation and import reliance, this vertical integration provides a competitive edge. The stable cost of sales (USD 5.99 million versus USD 6.03 million) reflects West Prop’s disciplined cost management, enabling it to maintain strong margins despite sectoral pressures.

The REIT’s focus on income-generating assets like the Radisson Apart Hotel is likely to further stabilize margins in the future by providing recurring revenue, though its full financial impact will materialise post the 24-month lock-in period.

A key highlight is the 46% increase in other income to USD 857,441 from USD 587,838, driven by higher interest earnings, property levy recoveries, and sundry income. This growth shows West Prop’s ability to diversify revenue streams beyond core property sales, a critical buffer in a sector prone to cyclical fluctuations. The launch of the Radisson Apart Hotel under the Seatrite Five Trust REIT, structured under the Collective Investment Schemes Act and approved by the Securities and Exchange Commission of Zimbabwe, represents a strategic leap in diversifying income.

The REIT enables West Prop to unlock value from income-generating assets without incurring high-interest debt, offering investors a USD-denominated vehicle shielded from local currency volatility. With a 24-month lock-in period, the REIT is poised to enhance non-core income in the medium term, aligning with sector trends where firms with rental or investment income streams are better positioned to weather market volatility.

Operating expenses rose 20.54% to USD 3.11 million from USD 2.58 million, driven by intensified marketing initiatives and customer acquisition efforts to promote new developments like Pomona City flats and the Radisson Apart Hotel. These investments, while pressuring short-term profitability, are critical for market expansion and brand visibility.

The combination of lower revenue, higher operating expenses, and increased finance costs drove a decline in profit before tax to USD 4.20 million from USD 5.88 million, and PAT dropped to USD 2.65 million from USD 4.38 million. This 39.5% reduction in net profit reflects transitional challenges as West Prop recalibrates its portfolio and absorbs higher costs. Basic earnings per share (EPS) fell to 8.85 cents from 14.59 cents, signalling a temporary dip in shareholder returns. However, the Group’s balance sheet remains robust, with total assets rising to USD 218.87 million from USD 213.51 million and retained earnings increasing to USD 153.02 million from USD 151.18 million.

The REIT’s structure, designed to generate stable returns without additional debt, supports long-term financial stability, though its benefits will accrue gradually due to the lock-in period and VFEX listing timeline.

Therefore, West Properties’ performance for the half year to 30 June 2025 reflects a strategic transition toward higher-margin developments and innovative capital markets engagement, exemplified by the Radisson Apart Hotel under the Seatrite Five Trust REIT. While topline and PAT declines stem from handover delays, increased operating expenses, and higher finance costs, the Group’s robust gross margin, diversified income streams, and strong balance sheet highlight its resilience.

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