Subdued business hits property sector

Property management firm Icon Properties plc says stifled business confidence continues to hit the retail property sector as tenants struggle to stay afloat and fulfil rental obligations.

The Malawi Stock Exchange-listed firm said in the sector, small and medium enterprises (SMEs) retailers have been hit the hardest due to rising operational costs and foreign exchange shortages amid a subdued business environment.

However, the firm says residential rental markets, particularly in the middle-income sector, remain buoyant, spurred by steady demand from young upwardly mobile professionals amid a cost of living crisis heightened by runaway inflation currently at 27.3 percent.

Speaking on the sidelines of the firm’s 2022 Annual General Meeting in Blantyre on Friday, Icon Properties plc director Graham Chipande said the outlook for the year is mixed with the economy going through a number of pressures.

He said: “We are faced with rising costs of construction materials, which is a big part of our business and that causes costs to inflate. We are also looking at mixed economic views, so interest rates are going up and the economic environment starts to experience stress.

“However, this is a long-term company and we are looking at building a long-term value as we take a multi-year view of the future.”

During the year under review, the firm reported a 92 percent jump in profit after-tax to K16.7 billion from K8.7 billion reported during the same period the previous year.

The group generated total income of K22.8 billion, a rise from the previous year’s K12.9 billion, with its property portfolio value growing by 24 percent to K84 billion.

Addressing the AGM, Icon Properties plc board chairperson Eric Chapola said the group is working to consolidate, diversify and align the portfolio to create an asset base that can withstand the various shocks in the market.

He said during the year, the group made an initial investment of K6.8 billion into Oasis Hospitality Limited, a subsidiary of Blantyre Hotels plc which is in the process of constructing a four-star hotel in Lilongwe.

“At the moment, it [the group] is in the final stages of various negotiations and designs to close on projects in the commercial, hospitality and industrial real estate sectors,” said Chapola.

But one of the shareholders, Lovemore Pinto, while commending the firm for the positive performance during the year amid  a tough macro-economic environment, expressed dissatisfaction with a dividend increase of one tambala per share, which he said does not give value, considering the pressures on the kwacha and rising inflation.

Meanwhile, the directors have recommended a final dividend of K868.4 million or 13 tambala per share from the K801.6 million or 12 tambala per share the previous year.