ZPI reports a 38% increase in profits

ZPI reported a 31% increase in operating profit to $1.55 million in the five months to May and a bottom-line of $1.38 million largely boosted by the Tynwald project sales.

CE Edson Muvingi told the AGM this afternoon that the performance in the operating line was 47% above budget while after tax profit was 38% higher than the year ago period.

There had been an increase of 82% in project sales in the period to $1.43 million, an amount, which Muvingi noted was 181% above budget. Muvingi said the group had not deliberately under budgeted but the high increase was mainly because the group had sold the Tynwald project much earlier than anticipated.   

Building and Project costs had risen 56% to $941 714 but Muvingi said these should be read together with the increase in project sales. '

Rental income increased by 7% in the period to $1.61 million but was 5% below the budgeted $1.7 million. Muvingi said the operating environment was characterised by rising voids mainly due to forced lease terminations while there was generally depressed demand for property, which had resulted in low property values.

He also said that uncertainty around the politics was affecting investment and funding decisions adding to the lack of long term debt finance to fund property developments.

The other major drags on the business were around the high cost of utility and service charges and the relative oversupply of office space due to increased vacancies and new supply mainly due to the reduced demand for city centre office space.

"But in spite of all this, the group has continued building a high performing company."

Muvingi said the group had successfully reduced the contribution of rental income to 53% and would continue to do work on it until it gets to about 50% although the long term target was 35%. Rental income contributed 65% in the year ago period and 78% at the end of December 2011.

"We need to reduce the contribution of rent to avoid all sorts of problems when the economy is not performing."

Portfolio rent collection was close to 140%, which Muvingi said they were happy about.

Muvingi said strict cost management had paid off as total admin costs were down 19% while personnel costs were almost flat from last year.

"At least the objective of targeting what we can control (i.e costs) has paid off"

In terms of the ratios, the staff costs/income was at 13% from 18% last year while admin costs were at 21% against a budgeted 35%. Admin costs excluding staff costs were at 8% from 9% last year while the operating margin was unchanged at 49%.

On the projects, 140 stands (or 37%) worth $2.81 million had been sold to date at Zimre Park Masvingo out of 338. The current value of the development was at $6.93 million against total cost of $4.96 million which would bring in a profit of $1.97 million. The expected return is 40% while the group had managed to recover 48% of the development cost to date.

"The performance is satisfactory though delayed."

 At Tynwald only 14 stands were remaining from the 288. The group expects a profit of $1.08 million which was a return of 41%. Muvingi said the group had deliberately set aside half the project for the post election period.

He said going forward, cash collection and cost management will continue to be the key focus areas but the group will also grow its portfolio and look for partnerships with regards land.  "We do not anticipate a change in the ratios come year end.

At the AGM, directors fees for the past year were approved at $59 500 while auditors fees were set at $38 095. The group said it was going to tender for audit services as BDO Kudenga had served for more than five years.

Shareholders also approved a share-buy back scheme.