ABOUT THE COMPANY
Real Estate Investments Zambia (“REIZ” – formerly Known as “Farmer’s House Plc”) is a property management and development company which mainly focuses on commercial property development in Zambia. The group’s portfolio owns prime commercial property in around Zambia such as Arcades Shopping Mall, Parkway Industrial Park and the Solwezi Business Park which house several blue chip tenants.
INDUSTRY CHALLENGES
The predominant theme for the 2020 – 2021 period has been how the real estate industry fared in the wake of the Covid-19 pandemic and the economic downturn. In an industry that is already reeling from heightened competition, falling rental rates and high vacancies, the year 2021 saw further challenges arising from the Covid-19 pandemic when Government introduced restrictions to safeguard public health and safety (Annual Report 2021). Several businesses such as bars, casinos, cinemas and restaurants were statutorily closed for a few months as a Covid-19 precautionary measure. The measures that were necessary taken by the government lead to the abrupt reduction in economic activity adversely impacting on the Groups financial and operation performance for the year 2021. The latter quarter of 2021 saw some normalcy returning with most businesses within the industry resuming operations gradually to increasing capacity.
FINANCIAL PERFORMANCE
The Group reported a loss after tax of ZMW 324.5 million for 2021 compared with a loss of ZMW 29.9 million in 2020. The Group and Company losses occurred predominantly due to the decreases in the fair values of the investment properties (Abridged Financial Statements, 2021). The investment property value for REIZ reduced by 37% as reported in Zambian Kwacha (ZMW) terms due to the currency appreciating by 21% against the US Dollar during the 2021 financial year. One of the group’s commercial properties “Arcades Shopping mall” once more felt the complete adverse effects of the 2nd and 3rd wave of the Covid -19 pandemic which lead to an increase in the Group vacancy rates from 26.8% (December 2020) to 33% as at 31st December 2021. The 6.2% difference in the vacancy rate of the Group contributed to the fair value reduction on investment properties.
Regardless of the Covid -19 pandemic and the challenging economic environment the Group revenue increased by 5%. Moreover, the Group and Company increased its capping rate from ZMW14 to a United States Dollar to ZMW18 in the first half of the year which was still 25 % below the average market rate of ZMW22 to the United States Dollar (Abridged Financial Statements, 2021). In the two quarters of 2021 the Groups tenants were provided with rental discounts amounting to ZMW 4,706,000 in order to help the tenants cope with the depreciation of the Zambian Kwacha and the effects of the Covid -19 pandemic.
The Group recorded a decrease in net cash generated from operating activities from ZMW47.3 million in the prior year to ZMW 11.4 million in 2021. This represents a
76% decrease and is mainly attributable to higher payment of interest arrears in 2021 as compared to 2020 (Abridged Financial Statements, 2021). Generally, the REIZ Group experienced a significant decrease in cash and cash equivalent during the reported period from ZMW 6,070 (2020) to ZMW1,120 (2021). The decrease as resulted in the directors resolving not to pay its shareholders a dividend for the year ended 31st December 2021.
FUTURE BUSINESS OUTLOOK
Improving the Group’s performance in 2022 remains a top priority for management and the Board. The year ahead remains equally as challenging as 2021 given the expected economic headwinds highlighted. However, the Group is expected to perform better in 2022 financial year as seen by the positive movements in the market indicates. For instance, the Groups vacancy rates post year-end have reduced significantly from 33% to 21.1% as at end of February 2022. Moreover, the property investment sector has positively improved in 2022 due to the reduction of the Covid-19 cases which has resulted in more economic activity. Moving forward, the Group shall continue to monitor the real estate industry, its clients and consumer patterns closely to remain equal to the task of facing the prevailing industry headwinds and take advantage of the opportunities that may arise.
NOTICE
The fortieth Annual General Meeting (“AGM”) of the fully paid-up shareholders of Real Estate Investments Zambia Plc in respect of the period ended 31 December 2021, will now be held on Wednesday, 27th April 2022 at 10:00hours. The AGM proceedings will be conducted through Mkutano eAGM, an electronic platform.
All shareholders are encouraged to make arrangements to participate in the AGM through the e AGM link provided below:
https://eagm.creg.co.zw/eagm/login.aspx