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 was not spared from COVID-19 wrath. Year end profits stood at P149.3 million, a 24.9% decline from P198.7 million recorded in 2019.
Distributable income amounted to P154.5million, 1.0% lower than the comparative P156.0 million. Actual distributions closed the year at P154.2 million were declared for the year, slightly less than P155.9 million declared for 2019.
Impairment of debtors was the primary factor impacting distributions, with a total cost of P11.6 million for the from 0.2 million in 2019. Excluding this, distributable income would have increased by 6.4%. Rental income growth, before straight-lining, increased by 5.3%.
New African Properties Directors explained that this is lower than expected as a result of certain tenant failures, primarily in the take away food and restaurant sector in view of the effect of COVID- 19, the delay in issue of trading licenses and therefore lease commencement for reconfigured space at Mafenyatlala, the liquidation of Payless where the liquidator opted to cancel one of the leases, and the challenges of letting vacancies in the second half of the financial year due to COVID-19 disruptions.
Property expenses only increased by 1.1% excluding debtor impairments. Even though utility costs increased by 11.4%, this was offset by reduced management fees and realizing savings on contractual services during lockdown periods.
Net rental income showed a 1.0% dilution, primarily due to the increase in impairment provisions. Excluding these provisions net rental income grew by 5.8%. The weakening of the Namibia Dollar resulted in those properties contributing less to the Group than would otherwise have been the case.
Portfolio expenses remained at almost the same level year on year, while net interest income decreased by P0.2 million (4%) and taxes impacting distributable income decreased by P0.4 million.
Profit for the year includes various fair value and other accounting adjustments, which do not represent cash flows and are excluded from distributable income. These elements were more significantly impacted by COVID-19 in view of year end valuations calculated during this period of uncertainty.
NAP property portfolio remains unchanged with 57 Botswana properties and 7 Namibian properties, amounting to 97% and 3% of the total value respectively. The portfolio composition is almost exclusively retail at 99% of total value.
The top 10 properties account for approximately 81% of the total portfolio valuation and are weighted towards Gaborone, with exposure to Molepolole, Kasane and Maun.
The remaining properties are well located smaller properties across the footprint of Botswana and in the central and north of Namibia.
NAP has historically benefited from a strong diverse tenant base. At year end 95% (2019: 97%) of the gross lettable area was let to tenants in terms of 480 separate leases (2019: 478).
The relative strength of the tenant profile can be demonstrated based on the categories of tenants, with 58% (2019: 58%) of rentals being received from listed and multinational companies and 12% (2019: 13%) from national companies at year end.
The categories of tenants most impacted by COVID-19 are those in the entertainment sector and those dependent on the tourism sector in Kasane, but these tenants comprise a relatively small portion of the portfolio, 6% and 1% of July 2020 rentals respectively.
Total unimpaired tenant arrears, net of VAT, at the year end amounts to P5.4 million (2019: P0.2 million), which equates to 31% of the average monthly turnover for the year.