Constrained market weighs down Masholds

PHILLIMON MHLANGA


Listed property investment and development firm, Mashonaland Holdings
(Masholds), fell into the red after slumping to a shock ZWL$1.7bn net loss in the six months to March 31, 2020 due to a constrained market.


In the corresponding period in prior year, Masholds recorded a ZWL$20.4m profit.


Zimbabwe’s economy has experienced the brunt of sustained assault from
hyperinflation, which has severe repercussions across markets.

Annual inflation rate hit 786% in May while foreign exchange rates continue to skyrocket.


Property expenses increased 36% to ZWL$5m from ZWL$3.6m due to increase in voids-related costs, insurance costs, expenditure on repairs
and maintenance work compared to the same period in 2019.


Administrative expenses also grew 19% to ZWL$7.7m during the reviewed period from ZWL$6.5m in the same period in prior year.


“The operating environment worsened during the period under review as economic activity continued to shrink in the face of very strong headwinds,” chairman, Ron Mutandagayi said.


He added: “The property market continues to be at the receiving end of an economic environment characterised by declining capacity utilisation
and monetary policy inconsistencies. The reported growth in money supply in Q4 2019 fuelled inflation.


Whilst the property market responded with regular rent reviews, the general reduction in economic activity meant that constrained rental growth could not match prevailing inflationary pressures.


As the sector navigates the COVID-19 pandemic shock, occupancy levels across the market remain under pressure.
(Although) rental collections remained relatively high during the period across the market, the property sales subsector was, however, subdued
given the currency fragilities, with some activity noticeable in the residential sector.
“Construction and maintenance costs continue to surge as service providers index their prices against the United States dollar. Most projects across the market have been frozen. Rising construction costs and the decline in rentals in real terms have rendered some projects unviable.
“Whilst the retail, warehousing and logistics sectors are expected to show
some resilience, they too have been put under strain following the disruption of global supply chains.”


“The increase in administrative expenses from the prior year was attributable to an increase in staff-related costs as the group cushioned
its staff from the rising cost of living coupled with an increase in advertising and consultants fees relating to various projects,” Mutandagayi said.


Revenue grew 44% to ZWL$30.1m compared to ZWLO$20.9m, reflecting
the positive impact of rent reviews in order to hedge against erosion of rental value to inflation, according to Mutandagayi.


Despite the difficult operating environment, Mutandagayi said the
response measures put in place by Masholds maintained occupancy levels at 77% at the end of the reporting period.


Rental collections closed the period at 90%, up from 84% in the same period in prior year as the optimisation of the business operational processes continues to pay off, Mutandagayi said.


Going forward, Mutandagayi said, the economic outlook remains highly uncertain as it is riddled with multiple macroeconomic, fiscal and monetary challenges.


The COVID-19 pandemic further worsens the prospects for economic recovery in the short to medium term.”

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