adminTinashe Makichi Business Reporter
Pearl Properties reported a 14 percent increase in profit for the six months to June 30, 2015 mainly driven by savings realised from staff rationalization carried out by the company during the period. Despite an increase in profit, the company’s revenue for the period went down 3,90 percent to $4,25 million from $4,43 million recorded in the previous period. Revenue during the period includes rental income and property services income.
Property expenses during the period increased 24,23 percent to $0,60 million compared to $0,48 million recorded in the half year 2014 driven by an increase in expenses relating to vacant space. Net property income before administration expenses went down 1,08 percent to $3,255 million from $3,29 million while administration expenses went down 7,18 percent to $1,317 million due to savings in staff related costs, depreciation and group shared services fees.
Operating profit before tax and fair value adjustment increased 12,77 percent to $1,94 million from $1,72 million following savings on staff rationalization and external borrowing costs. “The macroeconomic environment continues to be characterized by illiquidity and deflationary conditions and the challenges faced in policy implementation, fiscal collections, debt distress and global commodity price decline further hampered any meaningful development in the local economy.
“Strong economic growth is important for the success of the real estate market. It helps in the maintenance of strong property fundamentals, attracts investors and inspires demand and growth,” said the company in a statement. Poor aggregate demand and the depressed operating environment during the period under review negatively affected property sector fundamentals with increasing pressure on the ability of tenants to remain profitable and the ability of property owners to stimulate positive outcomes on rentals, yields and development activity.
The property market remained subdued in the first half of 2015 with increasing defaults, declining occupancy levels, increasing evictions and voluntary space surrenders. These fundamentals adversely affected the prospects for upward rent reviews as landlords sought to retain existing paying tenants. Demand for space during the period under review remained weak with the Central Business District office sector being the most affected.
Pearl Properties said demand for retail space remains relatively strong in both the CBD and suburban areas despite the subdued economic fundamentals. “The overall subdued demand for space and punitive pricing of mortgage facilities available from financial institutions restricted meaningful property development.
“The uncompetitively priced mortgage facilities resulted in property sales transactions being completed at suppressed prices with the affordability of mortgages being restricted to a small segment of the formally employed,” said the company. Pearl Properties managing director Mr Francis Nyambiri yesterday told the company’s analyst briefing that implementation of sustainable macro-economic policies to resuscitate key productive sectors remains the stimulus to growth, with investment in public infrastructure being a key driver in supporting productive sector growth.
He said to this end, growth in the property sector is positively correlated to the economic fundamentals that will stimulate growth, stability and security for investors, with the added access to competitive funding for property development and infrastructure being essential to growth in the real estate market.
“In the short term, the Group will continue to implement cost reduction initiatives to ensure sustainable earnings as growth in revenue are likely to remain depressed. The Group will also seek opportunities to enter into tailored property development structures to enhance the value and long term sustainability of the property portfolio,” said Mr Nyambiri.
Online Reporter