Zimbabwe Stock Exchange (ZSE) listed property firm First Mutual Properties (FMP) last week reported a 140 percent jump in after tax profit to US$4m for the full year ended December 2018 as operating efficiencies, coupled with revenue growing mechanisms paid off.
Revenues grew 9 percent to US$8m while occupancy levels for the year also went up by 5 percentage points to 76 percent although they remained below target due to market constraints that persisted into 2018.
Business Times senior reporter Taurai Mangudhla (TM) interviewed FMP managing director Chris Manyowa (CM) around the company’s performance in the first quarter of 2019 and strategies to weather the prevailing economic challenges.
Below are excerpts:
TM: You reported a decent profit and revenue growth in 2018 with occupants levels growing as well, what has been the picture in the first three months of 2019?
CM: I think it is only fair to say that the operating environment is very difficult, but at the same time we just have to be bold as businesses. We have got a strategy that we put in place at the end of 2018 and I would like to say, without really giving a lot of detail to it, that we are on track in terms of delivering that strategy both in terms of revenue collections and profitability.
We are actually collecting revenue and we are also still profitable despite the difficult operating environment.
TM: What about other indicators like cash flow and costs?
CM: We are positive in terms of our operating cash flows which is quite a very good thing.
TM: How about the cost side?
CM: Operating costs are still a concern; they need to be looked at very carefully which is something we spoke about in the market briefing.
TM: Can you elaborate on the strategy to deal with costs?
CM: What one needs to do now if they are running a business is to try and push revenues up while containing costs. We are simply responding to the reality because in 2018 rentals were, based on our contractual leases, denominated in US dollars but in reality coming through as RTGS so the reality of the matter now is that we are looking after a portfolio and we should ensure its value is preserved. That is the only reasonable thing for us.
TM: What initiatives are in place to ensure you preserve value?
CM: We have started a process now of renegotiating our rentals, to ensure that there is value preservation. When we conclude negotiations, it must not be for a very long time because there are a lot of uncertainties.
TM: What seems to be a feasible tenure of leases in this current environment?
CM: The question remains for how long is the current rent profitable, it’s not even really about being profitable but more of a question of sustainability. On one hand, you want to look at the ability of the rent you agree on being sustainable and on the other your review period has to be fairly short, maybe say six months at least until we have clarity in terms of where things are going.
TM: Businesses are easily tempted to hike prices as they chase the exchange rate and rising costs, but it gets to a point where you can price yourself out of business.
How are you striking a balance between staying afloat and remaining sustainable with clients coming in and actually affording your rates?
CM: The key word is always sustainability and part of the presentation in the analyst briefing actually said there is no one- size-fits-all.
We said we are using a sectoral approach; we have to say office park tenants can never be looked in the same manner as CBD offices, industrial and retail.
There has to be differentiation but I wouldn’t want to divulge too much information along those lines, suffice to say it’s a properly thought out process where we try to make sure that rental proposals are reasonable and affordable.
