ZIMRE Property Investments Limited (ZPI) says the restructuring of its portfolio led to a loss of US$1,42 million for the year ended December 31, 2018 from a profit after tax of US$2,48 million in the previous year.

In a statement accompanying the firm’s 2018 results yesterday, ZPI chairperson Jean Maguranyanga said the disposal of Zimre Centre in Harare to finance the construction of its planned Sawanga Shopping Mall in Victoria Falls and conversion of the Nicoz House building to student accommodation in Bulawayo impacted revenues.

“This was part of a broader portfolio restructuring and diversification strategy to enhance the portfolio’s future income earning capacity. The two buildings contributed more than a third of the rental income in prior years. The reduction in revenue was, therefore, anticipated in the short-term,” she said.

“In order to manage risk precipitated by market uncertainty, the board took a deliberate decision to slow-down project sales during the year under review. As a result, stand sales were $1,72 million compared to $2,4 million achieved in 2017…As a result of the restructuring of the portfolio and reduction in stand sales, revenue performance was subdued.”

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Maguranyanga said the projects were expected to start earning revenue in this current quarter.

Revenue dropped 24% to US$4,2 million from a 2017 comparative of US$5,27 million.

Rental income declined 21% to US$2,2 million in the 2018 period from a 2017 comparative of US$2,78 million. This added to a reduced net property income of US$1,8 million for the 2018 period from a comparative of US$3,73 million earned in 2017.

“There was a rapid erosion of rental revenues due to inflation and the contractual nature of leases which made it difficult to immediately adjust rentals. Turnover-based leases performed comparatively better than the other sectors, managing to track the inflationary trends,” Maguranyanga said.

“Some tenants scaled down operations, while others closed due to the difficult economic environment.”

However, the group managed to reduce its total administration costs by 4% to US$2,19 million in the period under review due to a reduction in employee expenses by 20%. This was from total administration costs of US$2,29 million in 2017.

Further, in terms of liquidity, ZPI recorded a current ratio of 3,58, showing the firm was insulated enough to cover its liabilities should they come due.

Total assets for the period under review declined to US$54,48 million, buoyed by a serious reduction in cash and cash equivalents to just US$285 826 from a 2017 comparative of US$10,22 million.

The drop in total assets was from a 2017 comparative of US$56,62 million.

In an outlook, Maguranyanga said: “The company continues to focus on restructuring its portfolio to maximise performance and returns, and capitalise on opportunities created through the various reforms undertaken by government”.