We have extracted the Chairman’s Statement from the 2019 half year report for Dawn Properties Limited (Dawn.zw), listed on the Zimbabwe Stock Exchange:
On behalf of the Board of Directors, it gives me pleasure to present the abridged reviewed interim consolidated financial statements for Dawn Properties Limited and its subsidiaries (the “Group”) for the six months ended 30 June 2019.
Statement of comprehensive income
Revenue for the period closed at ZWL$6.4 million which was a 109% increase compared to the equivalent period last year. Revenues from hotel property leases came in at ZWL$4.7 million compared to US$1.6 million for the same period in 2018. While there was a drop in international arrivals compared to last year, the growth of 208% was attributed to the continued devaluation of the local currency, which saw our foreign currency earnings being translated from 1:1 in January moving to 1:6 by end of June. The consultancy business recorded total revenue of ZWL$1.40 million compared to US$1 million in 2018. The business unit continues to be resilient despite a tough operating environment in the property management business, driven by increased vacancies and downward pressure on rentals.
Group operating expenses stood at ZWL$3.1 million, a 91% increase compared to the same period last year. The major cost driver was increases in Staff Costs of 89% as the Group tried to cushion employees against a steep increase in costs of living. As at the close of the reporting period, the Group realised an operating profit of ZWL$3.5 million. Profit After Tax closed at ZWL$501 million, as the business adjusted for fair value gains in property as we moved from accounting in US$ to the new local currency. We expect that this line will continue to be adjusted in line with movements in the currency.
Statement of financial position
The carrying amount for investment property closed at ZWL$597 million, taking an adjustment as a result of a change in functional currency from US$ in December 2018 to ZWL in June 2019. The adjusted change in value was carried through in the Profit and Loss Statement. Group Total Assets closed at ZWL$610 million and Shareholders’ Equity at ZWL$594 million.
Trading conditions were subdued compared to the same period last year. Local demand was on the decline as the economy continues to decline. Salary increases across the board have not caught up with increases in prices forcing most consumers to reduce expenditure on luxuries like travel. Internationally, our major source markets in the West face uncertainity in the face of a chaotic Brexit and a trade war between the USA and China. As a result, overall Occupancy was down 10% compared to the same period last year.
Hotel Improvement Plan
The tenant continues to make significant strides in improving the overall hospitality experience and positioning our properties as “the go-to destination for hospitality”
Holiday Inn Mutare – A new modern restaurant was commissioned in the first half of the year. Work has already commenced to convert one of the storerooms into a gym, in line with the global standards for IHG Branded Hotels.
Carribea Bay Hotel – Mock up rooms have been completed in the first half of the year for the three types of rooms available at the hotel. The tenant intends to roll-out the works on all the rooms by the end of 2019. Further, a new Camp Site has been constructed and will be rolled out in Q3 2019.
Great Zimbabwe Hotel – The board took a decision at the end of 2018 to suspend the use of the Great Zimbabwe Indaba Hall after it developed structural defects. After further assessment, a decision was made to construct a new hall. Work on this has been completed. The tenant will commence soft furnishing of the property with a view to officially open the building by October 2019. While the onus of performance of repairs and insuring of our hotel assets lies with the lessee, i.e. African Sun Limited, we play a key supporting role to ensure that performance is high as this directly impacts our revenue line on rentals.
Dawn Property Consultancy enjoyed a relatively positive first half of the year. All business units within the consultancy business posted growth in revenue and volume of business compared to the same period last year.
The Valuation Advisory Unit handled a total of 322 mandates compared to 299 mandates last year. While volume was up 8%, our revenue was up 73% as we tried to adjust to the inflationary pressures while also maintaining our market share in a very competitive field. Fee income from property management was up 46%. The unit lags behind economic data output as rental adjustments are done at specific periods during the life of the contract. The business unit will continue to place more emphasis on high grade corporate clients and drive growth through long term client management.
Elizabeth Windsor Gardens
As at 30 June 2019, we had sold 36 units out of the 58 built. All revenue was recognised in the 2018 financial year. During the period 1 January to 30 June 2019, the market has been subdued with most banks suspending their mortgage offerings. Prior to promulgation of Statutory Instrument 142 of 2019, our prices had remained pegged in US$ which was beyond the thresholds of most local buyers. As we transition into the new currency, we will monitor the local market and ensure we price our product competitively.
Marlborough Sunset Views
The Group will launch its second housing project in the second half of the year. Marlborough Sunset Views is located in the West part of Marlborough and will consist of 354 residential stands measuring 2,000 square metres. Phase 1 of the development is expected to be completed by December 2019 and sales will commence in Q1 2020. With a large land bank in Marlborough, we look forward to rolling out additional residential housing projects.
The Group’s profitability for the remainder of the year is expected to be driven by property development as we start to roll out more projects, good performance from the timeshare rentals and an increase in rentals from African Sun across all our properties.
My appreciation goes to management and staff for their commitment even in these challenging times. I also extend my appreciation to my fellow Board members for the support and dedication as we continuously strive to create shareholder value.
Phibion P. Gwatidzo