Zimre Property Investments Limited (ZPI) recorded a 13% drop in operating profit for the year ended December 31 due to tight liquidity and a larger provision for doubtful debts.
Operating profit declined to $1,67 million from $1,91 million while revenue increased by 26% to $3,95 million from $3,13 million in the previous year.
Rental income contributed 77% while sales of serviced stands in Masvingo and Bulawayo contributed 23% to total revenue.
ZPI managing director Edson Muvingi told an analysts briefing on Monday business was operating in a “grindstone” environment.
“Grindstone simply means companies are doing more to get less in terms of profitability,” he said.
Muvingi said the liquidity crunch was affecting rental and business performance.
Finance director Nyasha Zhou said income for the group stood at $4 million, indicating a 12% increase from $3,6 million last year.
Administration costs went up by 23% to $1,7 million.
Profit after tax for the group rose to $7,5 million compared to $4,5 million in 2010.
ZPI property manager Stephen Kapfunde said rentals were reviewed upwards averaging $7, $15 and $2 per square metre for office, rental and industrial space respectively during the year under review.
“That is good for us because more than 80% of the portfolio is office,” he said.
Prices were higher than those of 2010. Kapfunde said rental collections went up to 90% from 77% last year.
“While this was a marked improvement, the problem of debtors persists, hence an increase in the provision for doubtful debts at $344 000 from $583 664.
Portfolio voids rose from 9% in 2010 to end the year 2011 at 10, 7% largely due to the removal of non-performing tenants and strategic emptying of some properties which will soon undergo renovation works,” the group said.
Portfolio values increased to $42,8 million in the period under review from $35,4 million.
The company, however, said local authority service delivery remained poor while service charges continued to increase.
ZPI invested $4,2 million in land development in 2011 through internal resources and short-term debt.
The company plans to invest $5 million towards the development of 80 cluster houses in the Westgate area.
The area covers 4,07 hectares of land.Muvingi said the project was expected to earn $6,5 million and construction is scheduled to commence in May 2012 subject to council approval.
“There are institutions that want to pick up all units. The funding is a combination of debt and internal funds,” he said.
He said negotiations to acquire significant land banks in Harare were at an advanced stage.
Muvingi said the group was looking forward to reduce the contribution of rental income to revenue to around 50%.
“We want to get into projects that have a short-cash cycle,” he said.
The company had an excess of 100 hectares of land under its portfolio.
Kapfunde said 60% of stands in Parklands Bulawayo had been sold while 40% were yet to be sold.
The company has so far realised $1 million from sales and expects to raise another $1,7 million.
The Rhodene Masvingo project’s phase one and two had been sold realising $1,22 million.