- Group revenue up 7% to P227.0 million (FY23: P212.8 million) ·
- Fair value gains declined to P11.2m as compared to P44.3m in 2023 ·
- Profit before taxation consequently reduced by 40% to P62.3 million
- Ongoing sustainability and yield-enhancing improvements of existing properties
BSE-listed diversified property group PrimeTime today reports its financial results for the year ended 31 August 2024. Despite a challenging macro-economic environment – particularly in Zambia – impacting on tenant performance, the Group achieved significant progress in key strategic areas, including debt reduction, tenant retention and sustainable development.
Mr Sandy Kelly, Director, commented:
“Despite the challenging macroeconomic environment, PrimeTime has demonstrated resilience and continued to make significant progress in executing our strategic priorities.
“While we acknowledge the external challenges faced, particularly in Zambia and South Africa, our unwavering focus on operational excellence, financial prudence, and strengthening of the balance sheet positions us well to deliver stakeholder value in the years ahead.
“We managed to deliver a solid set of results by focusing on the key deliverables under our control, such as improving revenue, tenant retention and the filling of vacancies, as well as amortising debt to reduce our LTV.”
Financial performance overview
PrimeTime reported a 7% increase in revenue to P227.0 million, alongside an impressive overall portfolio occupancy rate of 99.3%, up from 97.5% in the prior financial year. This reflects the Group’s commitment to maintaining a high-quality asset portfolio and a well-diversified tenant mix.
Operating expenses, however, rose by 19% to P97.4 million, largely driven by increased property and maintenance costs, inflationary pressures, higher portfolio management fees and non-recurring expenditures, such as legal and consultancy fees related to corporate actions.
The Group also faced rising costs from load shedding in Zambia, leading to a significant increase in unrecoverable service charges, resulting in P1.9 million in unrecovered expenses for the year.
Notwithstanding improvements across most key metrics, profit from operations and consequently earnings per linked unit were adversely impacted by lower fair value adjustments in the Zambian and South African portfolios, mainly resulting from exchange rate fluctuations and subdued market conditions.
Foreign exchange adjustments for non-cash items further impacted the income statement, attributable to an expected credit loss (“ECL”) provision on an inter-company loan of P35.8 million (P469.9 million) from the holding company (PrimeTIme Property Holdings Limited) to its Zambian subsidiary (PrimeTime Zambia) via its Mauritius structure (PrimeTime Mauritius). This loan is denominated in US dollars, which resulted in significant increases to the loan amount because of the weakening of the Pula against the dollar.
The forex impact on operating income remained minimal at P447 000 for the year. However, the translation of all foreign balances into the Group’s reporting currency, Pula, due to the strengthening of the USD, resulted in a negative impact of P5.3 million from related party balances and P7.6 million on other balances. This led to a cumulative negative impact of P12.9 million on equity reserves, directly affecting Net Asset Value (NAV).
Profit before taxation decreased by 40% to P62.3 million (from P104.4 million in the prior financial year) and earnings per linked unit on a basic and diluted basis contracted to 17.28 thebe, largely as a result of lower fair value gains on property and higher operating expenses.
“In Zambia, operational improvements are ongoing; however, funding and business costs – compounded by an electricity crisis and a doubling of interest rates over the past three years – have tempered short-term performance.
“Tighter financial conditions necessitated increased provisioning to mitigate credit risk, whilst fair value gains in the Botswana portfolio were partially offset by valuation declines in Zambia and marginally in South Africa.
“Despite this, the Group remains focused on long-term growth by strengthening the balance sheet and maintaining consistent cash flows,” said Mr Kelly.
Debt reduction and financial prudence
During the year under review, PrimeTime reduced its overall borrowings comprising long-term debt and bank overdraft facilities from P931.7 million in the prior year to P905.4 million.
This was achieved through a P70.0 million debt amortisation from Funds from Operations and a successful P20.1 million capital raise allowing for an immediate reduction in the Botswana overdraft balance. The weighted average cost of debt improved from 8.14% to 7.8% at the year end, driven by debt restructuring and easing interest rates.
The Group’s loan-to-value (LTV), which measures the ratio of loans to the value of assets, consequently reduced by a further 3% from 51% in FY23 to 48%, delivering on the Group’s stated strategic objectives.
Strategic highlights
Tenant retention and occupancy rates
PrimeTime successfully retained all major tenants, resulting in an occupancy rate of 99.3%, up from 97.5%. This strong performance reflects the quality of the Group’s assets and the strategic importance of tenant diversification and maintaining good landlord/tenant relationships.
Sustainable development
The Motswere Building at Prime Plaza II, which achieved a 5-Green Star As Built rating, became operational in late 2023 and immediately achieved full occupancy. The Group’s focus on sustainability was further strengthened with the roll-out of solar energy solutions across some of its Zambian assets.
Mr Kelly added that “The Motswere Building exemplifies our vision of creating properties that deliver both exceptional value and a positive environmental impact. This project reflects our dedication to sustainable development as a core pillar of our growth strategy, in line with global best practice.”
Building on this success, PrimeTime is advancing plans for the remaining phases of Prime Plaza II, with a focus on delivering high-quality, sustainable developments.
The Group’s prime landbank in Botswana remains a critical asset, offering significant potential for future developments in its core market and forming a key strategic focus for the medium term.
Valuations
PrimeTime’s Botswana portfolio, accounting for 65% of its investment property holdings, experienced an 8% increase in value. This growth was largely attributed to the addition of the Motswere building at Prime Plaza II in Gaborone’s CBD. Rental income rose by 7%, driven by contractual escalations and the commencement of income from Motswere. Additionally, the portfolio’s occupancy rate saw a significant improvement, increasing from 97.5% to 99.3%.
The South Africa portfolio, comprising 5% of the Group’s holdings, declined 2% in Rand terms but rose 3% in Pula, driven by market dynamics and currency movements. Rental income fell by 9%, reflecting lease adjustments aimed at securing long-term agreements and ensuring the sustainability of the Group’s investments in the market. Year-end occupancy stood at 98.8%, attributed to a slightly larger footprint following the expansion of Riverside Junction to meet an existing tenant’s growth needs, strategically positioning the portfolio for future rental opportunities.
Zambia, accounting for 30% of the Group’s market value, saw a 4% decline in valuation, driven by market challenges and the depreciation of the Kwacha against the US Dollar. Proactive letting efforts increased the occupancy rate significantly, from 98.0% to 99.7%, while rental income grew by 1%, though rising costs and non-recoverable tenant service charges due to the ongoing electricity supply shortages offset this growth.
Mr Kelly added that PrimeTIme is actively addressing these challenges through measures to enhance operational efficiencies, possible introduction of solar and reduce costs while remaining optimistic about Zambia’s long-term growth prospects. Key drivers include political stability, favourable demographic trends, and robust global demand for natural resources.
Disposal strategy
To support sustainable growth and ensure long-term value creation, the Group is prioritising prudent debt-to-value management. This includes the selective disposal of properties and reinvestment into high-yielding assets aligned with its strategic goals.
In line with this strategy, the Group has identified certain assets for potential disposal over the next three years, which we it is confident will realise good value in line with recent market transactions. Moreover, the Group has identified selected developments offering better long-term growth prospects to reinvest the capital raised into.
Corporate actions
Corporate actions during the year under review include a withdrawn bid to acquire a property portfolio and a potential unsolicited takeover bid, requiring professional services, enhanced governance and compliance and the costs associated with these actions.
Dividend and Net Asset Value
No final dividend was declared (7.22 thebe interim dividend declared and paid) as the allocation of Funds from Operations towards debt reduction, in line with PrimeTime’s strategy, supports an increase in the Group’s Net Asset Value to the benefit of unitholders.
As at 31 August 2024, the Group’s Net Asset Value (“NAV”) (a measure of the value of the assets held) was 340 thebe per linked unit, marginally down following the dilutionary effect of the capital raise in early 2024, against a trading price of 160 thebe, representing a deep discount of 53%.
This is largely due to a once-off normalisation of non-distributable fair value gains of P40.0 million in the 2023 financial year, following valuation declines in the 2020 and 2021 financial years due to the impact of the Covid pandemic.
Outlook
PrimeTime is focused on achieving sustainable growth through continued debt reduction, tenant retention, and strategic investments in sustainable developments. The Group remains optimistic about creating long-term value for shareholders despite short-term challenges.
As the Group’s revised strategic plan gains traction (the start of the financial year being inhibited by the potential corporate action), the Board and Management are confident that the Group will deliver increasing distribution yields and continue to maintain and grow the intrinsic value of its assets.
The current financial year will see an ongoing emphasis on operational efficiency, sustainable practices, and selective investments, which will over the medium term position PrimeTime as a leading player in the property market across Botswana and beyond.
