Dawn Properties Limited 2018 Annual Report

We have extracted below the Chairman’s Statement from the 2018 annual report of Dawn Properties Limited (DAWN.zw), listed on the Zimbabwe Stock Exchange:


It is with pleasure that I present the audited financial statements for Dawn Properties Limited (‘the Company” or the “Group”) for the year ended 31 December 2018.

2018 was a year of good strategic progress on the Company’s three core areas of hospitality, property development and property consulting. We implemented a number of key initiatives designed to strengthen and enhance our income generation in the next 5 years.


The economy grew by 3.5% in 2018, driven mostly by continued growth in agriculture and mining. However, turbulence characterised much of the economic environment in 2018. The currency value distortions resulted in severe hard currency shortages in the formal market. As a result, while the year had started on a positive note, inflationary conditions set in as the gap between the formal currency exchange rate and the parallel market rate widened significantly.

Our business was not spared as prices for raw materials, particularly in construction industry, increased significantly.

Despite the difficult trading conditions, on the fiscal side, the Government committed to continue with austerity measures designed to reign in fiscal deficit funding through issuance of Treasury Bills.

As a board, we are still confident that, despite the current challenges, the economy will stabilise post the Monetary Policy pronouncements announced by the Governor in February 2019, to address the disparity in the currency valuation. Further, we believe agriculture, mining and tourism will continue to provide some tailwinds for the economy to generate foreign currency and stabilise the exchange rate on the interbank trading platform. Continued efforts should therefore be made towards reforming the investment climate both more broadly and in the above-mentioned key sectors.


The separating of foreign currency accounts (“FCA”s) into two categories, namely Nostro FCAs and RTGS FCAs, when the Monetary Policy Statement was announced on 01 October 2018, led to a new risk as businesses were not able to do interbank transfers using the Nostro FCAs which hampered ease of settlement of transactions as well as resulting in some entities accumulating cash deposits with no reasonable interest rates being offered by banks. Various measures meant to turn around the economy came with the fiscal policy including the introduction of the intermediated tax of 2%.

In addition, other key updates affecting the business were also pronounced on the 20th of February 2019, when the Monetary Policy Statement was announced by the Central Bank Governor, including;

  • Establishment of an Inter-bank Foreign Exchange Market, to formalise the trading of RTGS balances and bond notes with US dollar and other currencies on a willing-buyer willing-seller basis through banks and bureaux de change.
  • Denominating the existing RTGS balances, bond notes and coins in circulation as RTGS dollars in order to establish an exchange rate between the current monetary balances and foreign currency.
  • The RTGS dollars shall be used by all entities (including government) and individuals in Zimbabwe for the purposes of pricing of goods and services, record debts, accounting and settlement of domestic transactions, and thus becomes the functional currency with effect from 20 February 2019. Prior period bank balances and comparative financial records to be converted to the new functional currency of RTGS dollar at a rate of US$1: RTGS$1.
  • Foreign currency from the inter-bank market shall be utilised for current bona fide foreign payment invoices.
  • All foreign liabilities or legacy debts due to suppliers and service providers such as the International Air Transport Association (“IATA”), declared dividends, etc. shall be treated separately after registering such transactions with Exchange Control for the purposes of providing the Bank with sufficient information that will allow it to determine the roadmap for orderly expunging the legacy debt.

To support the above-mentioned changes, statutory instrument 33 of 2019 was issued on 20 February with the following main updates:

  • That the Reserve Bank has, with effect from the effective date, issued an electronic currency called the RTGS dollar. RTGS dollar means any funds held as bank deposits under the Real Time Gross Settlement system established in terms of the National Payment Systems Act [Chapter 24:23]. This effectively becomes a legal tender and forms part of the multi-currencies acceptable for transactional settlements from 20 February 2019.
  • That Real Time Gross Settlement system balances expressed in the United States dollar (other than those referred to in section 44C (2) of the principal Act), immediately before the effective date,shall from the effective date be deemed to be opening balances in RTGS dollars at par with the United States of America dollar; and
  • From the effective date the bond notes and coins referred to in the Reserve Bank of Zimbabwe Amendment Act, 2017 (No. 1 of 2017) shall continue to be legal tender within Zimbabwe, exchangeable with the RTGS dollar at parity with each bond note unit, that is to say, at a one-to-one rate.
  • For accounting and other purposes, all assets and liabilities that were, immediately before the effective date, valued and expressed in United States America dollars (other than assets and liabilities referred to in section 44C (2) of the principal Act) shall on and after the effective date be deemed to be valued in RTGS dollars at a rate of one-to-one to the United States of America dollar; and
  • After the effective date any variance from the opening parity rate shall be determined from time to time by the rate at which authorised dealers under the Exchange Control Act exchange the RTGS dollar for the United States of America dollar. The functional currency of the Group therefore changes from the current reporting currency of US$ to RTGS$ in 2019.


Statement of comprehensive income

The Group achieved revenue amounting to US$11.2m compared with US$5.1m for the same period in 2017, representing an increase of 117%. The increase was mainly attributable to recognition of the property development income coming from our first development in Marlborough and a stronger performance from the property investment portfolio.

Operating expenses amounted to US$4.2m compared with US$2.9m for the same period last year, representing a 44% increase in costs. The significant increase came on the back of general increase in costs in line with inflationary pressures experienced in 2018 and renovation work in some of the property investments, with specific mention of Blue Swallow Lodges in Nyanga.

Statement of comprehensive income.

The Group recorded a net profit after tax amounting to US$3.5m compared with US$3.0m recorded in 2017, representing an increase of 16%. Statement of financial position The carrying value of the investment property increased to US$90.8m compared to US$88.2m as at 31 December 2017. The increase is primarily attributable to a purchase of additional land in Victoria Falls and fair value adjustments on the property portfolio.

Statement of financial position

The carrying value of the investment property increased to US$90.8m compared to US$88.2m as at 31 December 2017. The increase is primarily attributable to a purchase of additional land in Victoria Falls and fair value adjustments on the property portfolio.


Property investments
Hotel properties

Rental revenue earned for the 2018 financial period was at US$4.0m compared with US$3.0m for the prior year. While overall all the properties performed better than last year, the total increase of 36% was mainly attributable to increased rentals from Elephant Hills Resort and Conference up by 46%, Troutbeck Resort up by 40% and Holiday Inn Mutare up by 36%.

Our rental yield improved from 4.2% recorded in 2017 to 5.4% in 2018. The management team, in conjunction with African Sun Limited (ASL), continue to work a number of measures to ensure that this key performance indicator improves significantly. Our target remains a yield of 7.5% by 2020.

It is the board’s strategy to ensure that our properties benefit from the resurgence in tourism and also increased business traffic coming to the major cities. We remain confident that the major driver of growth will be in Victoria Falls and Hwange, as such, particular attention is being paid to those key areas.

Timeshare lodges – Blue Swallow Lodges and Kingfisher Cabanas 2018 represents the second full year under which Dawn has managed the timeshare resorts of Blue Swallow Lodges in Nyanga and Kingfisher Cabanas in Kariba. These assets represent an exciting new growth area for the Company. Revenue from timeshare rentals grew by 39% from US$195,519 in 2017 to US$270,820 in 2018. In addition, 25 contracts were sold for the total value of US$110,271 in 2018 compared to 57 contracts for a total value of US$219,318 in 2017. The board is convinced that the market for the timeshare contracts, which remains our key focus area, is yet to be fully exploited. Our focus remains renovating our lodges to world class standards and invariably increase the uptake of our timeshare contracts.

Property Consultancy

The business unit recorded an impressive growth for the year ended 31 December 2018. Revenues were up 27% to close at US$2.5m driven mainly by agency department, up by 118% and property management up by 19%. Profit after tax decreased by 20% from US$534,733 to US$428,125 as a result of an increase in operating expenses. The board took a decision to make some once off payments to staff to cushion them from the increase in the costs of living post October 2018. We believe going forward, the business will be able to re-align its pricing model to the costs structures prevailing in the market. Property management remains the main driver of revenue, with a contribution of US$1.4m. Valuation advisory services continued on a steady growth, with revenues of US$579,000, while the balance of US$423,000 came from agency commission and project management.

Property Development

The business unit completed its first major project in June 2018. While we had hoped to have completed the project much earlier, the delivery of the residential cluster units was significant for the business and our plans going forward. As at 31 December 2018, 36 Units had been sold for a total of US$4.4 million. A balance of 22 Units is still on the market and it is the intention of the Company to sell them all in 2019. The board has noted a number of lessons from the project and is confident that the next pipeline project will continue to add value to the Company. The goal remains to make property development a sustainable business for the Group going forward.


Ms V Muyambo stepped down as Finance Director on 31 October 2018. Mr F Myambuki was appointed Finance Director and Company Secretary by the Board with effect from 1 December 2018. We are grateful for the contribution Ms Muyambo rendered to the Company and wish her the very best in her future. Mr G Johnson was appointed a Non-Executive Director on the 28th of August 2018 and brings along a wealth of experience in hospitality, construction and project management. On behalf of the Board, I would like to welcome Mr Myambuki and Mr Johnson to the Board and wish them the very best.


As at 31 December 2018, the Company had total debt of US$3.0m. The bulk of the proceeds were deployed towards the construction of the 58 residential cluster units in Marlborough as well as for the purchase of 2.2ha of land within the Harare Gardens from City of Harare. The Group’s gearing ratio stood at 1% as at the reporting date with an average interest cost of 9.04%.


The Group’s new strategic initiatives from 2019 going forward is as follows:

  1. Investment Property Portfolio – focus remains on increasing our exposure to Victoria Falls and Hwange. To that end, the Company has purchased additional land in Victoria Falls (3.7 hectares). Exciting new projects are being planned for the two areas and will be announced as and when construction commences.
  2. Timeshare Assets – continued focus on driving contract sales and rentals.
  3. Property Development – continue to enhance internal capacity and execute a number of pipeline projects. Our land bank gives the Company the ability to create a sustainable business Unit going forward.
  4. Property Consultancy – enhance technology as a key enabler for delivering value to our clients. We remain convinced, despite a turbulent 2018, that the Company is in a healthy state and is well positioned to execute its strategy in 2019.


The year under review has been an exciting and challenging one. We have continued to build on the restructuring done in 2015 and believe we now have a sustainable business model to take us forward. Management and staff fully share the Board’s vision for the Company and I thank all of them for the enthusiasm and drive with which they have confronted and overcome the many challenges that have been faced by the business thus far; I believe that this tenacity will serve us well towards the realisation of the Company’s ambitions.

Phibion P. Gwatidzo
Board Chairman