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New African Properties distributes more dividends despite profits decline

Publishing Date : 05 November, 2019

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New African Properties (NAP), a Botswana Stock Exchange (BSE) listed property group that owns amongst others one of Gaborone’s first urban shopping spaces River Walk mall, this week released their audited abridged financial results for the year ended 31st July 2019.


The company has distributed more to its unit holders despite an over 8 % decrease registered in profits for the year. The total distributions for the year amount to 25.80 thebe per linked unit adding to P155.9 million, mirroring a 5.2% increase when compared to 24.53 thebe, per linked unit from P148.3 million dispatched in the prior year.


Last year New  African Properties reported that the impact of the prior period income included in the first half of the 2018 financial year increased the comparable distributable income by P1.5 million, adjusting for this the annual increase in distributions would have been 6.3%.
The final distribution of 13.24 thebe per linked unit, based on the forecast distributable income of P156.0 million, was declared on 25th July and paid on 30th August and amounted to a 7.8% increase on the prior year's 12.28 thebe.


On the rental fronts, the company’s Net rental income has increased by 5.2% for the year, which would have been 6.2% without the P1.5 million prior period incomes included in the comparative. Property costs excluding tenant installations and letting commissions, which are expensed as incurred, increased by 4.6%.Other contributors to distributable income include portfolio costs which remained flat and net investment income and tax which both increased marginally.


Zooming into profits for the year BSE listed property closed the financial year ended 31st July 2019 at P198.7 million, lower than the P217.3 million recorded at 2018 year end. This year’s profits  exceeds the distributable income by P42.7 million lower that the P69.4 million recorded in 2018 as a result of after-tax revaluation and other accounting adjustments that are non-cash flow items and do not impact distributions but add to the underlying net asset value of NAP.


T.LJ Mynhardt Managing Director of New African Properties Limited says the actual value of investment property has increased by 3.0% this year but the relative increase in valuations in the current year is lower than last year which has resulted in a decrease in profit. The company ‘s property portfolio has not changed the year which comprises predominantly Botswana based retail properties, weighted towards Gaborone but with a wide geographical footprint, as well as some exposure to Namibian retail properties.


The Managing Director says the quality and diversity of the tenant base is a key consideration and contributor to the company’s performance. At year end 96.6% against 96.2%, 2018 figure of the gross lettable area was let in terms of 478 leases compared to 474 in 2018 with 58% of rentals flowing from listed and multinational companies.


Mynhardt added that two vacancies arose in the upper level at Riverwalk in  the second half of the year resulting  in  adverse impact for the second half explaining that this will spill over to impact the new financial year. “This space has not yet been re-let but Management is in discussions with prospective tenants” he said.


In Selibe Phikwe where the company owns a number of commercial spaces, which accounts for 2.4% of total property value and 2.7% of rental income, the portfolio has marginally exceeded expectations with vacancies decreasing from 2 094 m2 to 1 785 m2 during the year, albeit at reduced rentals, accounting for 41% of total vacancies in the portfolio at year end.


The lease expiry profile of existing leases in this area is 26%, 49%, 23% respectively in each of the next 3 years and 2% in the 2024 financial year with the tenant composition being 52% listed and multi-nationals, 3% nationals, 13% government and the remaining 32% smaller tenants. “Substantially all of the leases expiring during the year were either renegotiated or re-let.” Added the company MD.


Mynhardt further explained that renegotiations in Selebi Phikwe, an industrial property in Francistown and for certain smaller tenants in Kagiso reduced the average increases achieved across the remainder of the portfolio which achieved escalations in line with the portfolio rental growth for the year. New African Properties reports that net unprovided tenant arrears amount to P0.8 million  compared to P0.3 million) in 2018, with an impairment charge of P0.2 million against 2018’s figure of  P0.4 million after applying the new requirements in terms of IFRS 9. The change from IAS 39 to IFRS 9 did not result in any restatement to opening retained income.

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