First Mutual Properties Reviewed Abridged Financial Results For the half year ended 30 June 2022

By Published On: September 20th, 2022Categories: Corporate announcement, Earnings


Overview of Operating Environment
Zimbabwe has been experiencing rising inflationary pressures and exchange rate volatility since the beginning of the year. This has also been worsened by geopolitical conflicts, particularly the Russia-Ukraine conflict and the Covid-19 induced supply chain disruptions. These developments during the period under review had significant knock-on effects with global inflation reaching its highest since 2008 while economic growth remained mixed. Global issues coupled with climate change (unpredictable rainfall and weather patterns) had important implications for Zimbabwe’s operating environment, cost of doing business and hence strategy implementation as well as business viability.

Annual inflation rose to 191.6% in June 2022 from 60.7% in December 2021. Both the official and unofficial exchange rates were under pressure during the period under review. The official rate depreciated by 70.7% from ZWL108.67 on 31 December 2021 to ZWL370.96 on 30 June 2022. Management, however, continued to implement effective strategies to minimise the potentially huge negative effects of the changing operating environment on business.

Property Market Overview
Space absorption remained low during the period under review due to relatively weak demand that resulted in excess supply of space in the Central Business District (CBD) offices and Suburban Shopping centres. In contrast, the retail, warehousing and prime office space segments enjoyed relatively strong demand resulting in high occupancy levels.

Achieving sustainable rentals has remained a major challenge for the industry given the inflationary and exchange rate depreciation pressures experienced during the review period. Further, pressure to preserve value of the local currency denominated rentals remained a top priority for property companies including the First Mutual Properties. Against this, quarterly reviews of local currency denominated rentals were being made in tandem with the prevailing business conditions.

The country has seen some developments in the industrial and retail warehousing sectors. Further, there has been an increase in the development of owner-occupied office park style buildings, cluster houses and residential house conversions and new commercial developments especially in suburbs just outside the CBD and on major roads. First Mutual Properties has positioned itself to take advantage of the emerging growth opportunities for the benefit of the shareholders.

Business performance overview
The Group’s inflation adjusted Net Property Income after administration expenses decreased by 46% to ZWL67.4 million (HY 2021: ZWL125.8 million) despite growth in inflation adjusted revenue of 25% to ZWL746.3 million (HY 2021: ZWL595.5 million). Rental income remains the main source of revenue. In historical terms, revenue grew by 154% from ZWL191 million in June 2021 to ZWL486 million mainly due to timeous rental reviews and stable occupancy level averaged 89.23% for the 6 months ending 30 June 2022 (FY 2021: 89.53%).

Management continued to engage the tenants for timeous rental payments. This initiative resulted in the drop on the number of tenants who in the past deliberately delayed to meet their lease obligations leading to improved collection rate at 87% (FY 2021: 82%). The Company is committed to providing a quality and safe product (property) to its tenants. In light of this, ZWL85.4 million and ZWL3.4 million were committed towards maintenance and improvements respectively during the period under review.

Property valuations
An independent property valuation conducted by Knight Frank Zimbabwe as at 30 June 2022 valued the property portfolio at ZWL78.018 billion (FY 2021: ZWL22.039 billion). The growth in property values of 254% is driven by the growth in rentals in line with the inflationary environment.

The Group has positioned itself to create value for its shareholders by embarking on various projects that are at different stages of execution. We are happy to report on the Arundel Office Park extension and Mbare retail warehouse for Gains Cash and Carry.

With regards to the Arundel Office Park extension, all the construction designs, tenders and approvals were obtained. Construction is scheduled to commence in September 2022.

The Mbare retail warehouse was completed and handed over to the tenant (Gain Cash and Carry) in June 2022. Tenant operations began in July 2022.

The Group will continue to run its operations sustainably in line with the environmental, social and governance (ESG) requirements. The adoption of “green” operations including investing in a solar power plant, energy efficient operations and waste management initiatives remain key to the Group’s strategy. We will continue to enhance the Group’s ESG framework in line with the global trends.

On 30 August 2022 the Board resolved that an interim dividend of ZWL87 million and USD100,000 be declared from the profits of the Company for the quarter ended 30 June 2022. Further details on the payment of the dividend will be communicated in a separate dividend announcement.

Business Outlook
The business outlook remains highly uncertain. Despite this, the Company will continue to explore pragmatic strategies to grow the shareholder value including investing in high-yielding properties which will hedge the Company against inflation and exchange rate risks. Maintaining high occupancy levels on the back of effective client relationship management, provision of quality and safe product through on-going property refurbishment, maintenance and upgrades will remain a key focus area in the outlook.

E K Moyo

30 August 2022

FMP 2022 Interim financial results.pdf
FMP 2022 Interim financial results – Short-form.pdf

Directors: E K Moyo (Chairman), A M Chidakwa, D Hoto, S Jogi, C K Manyowa*, W M Marere, E Mkondo, T Ruvingo, S Wekwete (* Executive Director)
First Mutual Properties, First Mutual Park, First Floor, 100 Borrowdale Road, Borrowdale, Harare, Zimbabwe | P O Box MP 373, Mt Pleasant, Harare | Tel: +263 (242) 886 121 – 4 | Email: [email protected] | Website: | +263 778 917 309

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