PrimeTime releases 2017 financial results and a pipeline full of projects
PrimeTime has recently announced its 2017 financial results which show its exponential growth over the past 10 years since the company listed on the Botswana Stock Exchange in December 2007. Over the past decade, PrimeTime has grown from an initial portfolio of 13 properties valued at P175 million to 25 properties valued at P1.12 billion with total assets of over P1.3 billion. PrimeTime Managing Director Sandy Kelly reflects on these achievements and outlines plans for the future.
“Successful implementation of our geographical diversification strategy and strategic acquisitions led to total group assets increasing by 30% to P1.3 billion at the year end. The share price has grown from P1.25 to P3.16 over the 10 years of our existence. Shareholders have received a sound investment with a rate of between 5-10% annual distribution since we listed on the BSE. Consistent with these good results and the addition of a further 64 760 484 linked units, we are pleased to report that a total distribution of 15.92 thebe per linked unit was achieved for the year, maintaining last year’s level while having laid the foundations for growth into the future. This proves the value of investing in quality stock like PrimeTime,” says PrimeTime Managing Director Sandy Kelly.
PrimeTime has achieved year-on-year increases in both revenues and operating profits before fair value adjustments. Lease revenue grew by 27% to P110 million, completed investment property by 34% to stand at P1.12 billion, and the price per linked unit ended the year at P3.16. “PrimeTime is well positioned to pursue suitable investments. We are not stopping here –whilst good investments are few, due to our positioning, there are projects and properties out there.
The reason for our consistent performance is because of the quality and diversification of our properties. No single property accounts for more than 15% of our portfolio. While our intention is growth, we will not compromise quality for the sake of growth. This ensures we are able to create long-term wealth for our shareholders while growing and diversifying our asset base. We will continue to unearth new opportunities wherever they may be,” says Kelly.
PrimeTime has identified Zambia as an additional investment opportunity because it has a robust, diversified economy with a strong democracy and democratic principles that work, according to Kelly. PrimeTime’s acquisition of its largest asset by value, Centro Kabulonga in Lusaka, represents its entry in to the Zambian retail market. Kabulonga has secured Pick n Pay, Woolworths and Mr Price as anchor tenants and there is already a waiting list for space from major regional and national brands.
This acquisition has resulted in the Zambian operations contributing over 20% of the group’s annual rental income. This brings PrimeTime’s portfolio in Zambia to $30 million, representing 27% of the group’s portfolio at the year end. Two other retail centres, Munali Mall and Chirundu Mall, are under construction and will add a further $20 million in value to the portfolio in Zambia, taking the total country investment to over $50 million.
In Botswana, PrimeTime has started construction on The Design Quarter in Setlhoa which is a retail concept for the home décor and design sector. Two smaller extensions to existing centres are also underway with an extension at Sebele Centre and a fast food drive-through at Pilane Crossing where KFC will be opening in early 2018.
“After tenanting difficulties due to trading licence setbacks, Pilane Crossing is now on track to become the successful retail centre we originally envisaged. The new Design Quarter is a first for Botswana which will benefit both shoppers and retailers in terms of having one centralised home décor and lifestyle shopping destination. In terms of major refurbishments, our plans for some additional space and improvements at the Ramotswa Mall are still on the table, as are some other extensions.
“We have made good progress against our strategic objectives and see a number of future growth opportunities. Our diversified business model and risk diversification strategy place us in a strong financial position and our willingness to invest in the business means we are well placed to take advantage of these opportunities, despite the challenges faced by the industry,” says Kelly.
Trading highlights for the year ended 31 August 2017:
Total group assets increased by 30% to P1.3 billion at the year end. Close to P300 million in new additions specifically Centro Kabulonga and Pilane Crossing P201 million in equity capital raised from rights issue Opening of the Pilane Crossing retail centre in September 2016 Acquisition of the group’s largest asset by value Centro Kabulonga in Lusaka for US$17.3m in January 2017 27% increase in contractual lease revenue and 17% increase in operating profits before fair value adjustments. 4% increase in per linked unit (PLU) standing at P3.16 plu up from P3.05 in 2016.
The recent study on youth entrepreneurship in Botswana has identified difficult access to funding, land, machinery, lack of entrepreneurial mindset and proper training as serious challenges that continue to hamper youth entrepreneurship development in this country.
The study conducted by Alliance for African Partnership (AAP) in collaboration with University of Botswana has confirmed that despite the government and private sector multi-billion pula entrepreneurship development initiatives, many young people in Botswana continue to fail to grow their businesses into sustainable and successful companies that can help reduce unemployment.
University of Botswana researchers Gaofetege Ganamotse and Rudolph Boy who compiled findings in the 2022 study report for Botswana stated that as part of the study interviews were conducted with successful youth entrepreneurs to understand their critical success factors.
According to the researchers other participants were community leaders, business mentors, Ministry of Trade and Industry, Ministry of Youth, Gender, Sport and Culture, financial institutions, higher education institutions, non-governmental institutions, policymakers, private organizations, and support structures such as legal and technical experts and accountants who were interviewed to understand how they facilitate successful youth entrepreneurship.
The researchers said they found that although Botswana government is perceived as the most supportive to businesses when compared to other governments in sub-Saharan Africa, youth entrepreneurs still face challenges when accessing government funding. “Several finance-related challenges were identified by youth entrepreneurs. Some respondents lamented the lack of access to start-up finance, whereas others mentioned lack of access to infrastructure.”
The researchers stated that in Botswana entrepreneurship is not yet perceived as a field or career of choice by many youth “Participants in the study emphasized that the many youth are more of necessity entrepreneurs, seeing business venturing as a “fall back. Other facilitators mentioned that some youth do not display creativity, mind-blowing innovative solutions, and business management skills. Some youth entrepreneurs like to take shortcuts like selling sweets or muffins.”
According to the researchers, some of the youth do not display perseverance when they are faced with adversity in business. “Young people lack of an entrepreneurial mindset is a common challenge among youth in business. Some have a mindset focused on free services, handouts, and rapid gains. They want overnight success. As such, they give up easily when faced with challenges. On the other hand, some participants argue that they may opt for quick wins because they do not have access to any land, machinery, offices, and vehicles.”
The researchers stated that most youth involved in business ventures do not have the necessary training or skills to maintain a business. “Poor financial management has also been cited as one of the challenges for youth entrepreneurs, such as using profit for personal reasons rather than investing in the business. Also some are not being able to separate their livelihood from their businesses.
Lastly, youth entrepreneurs reported a lack of experience as one of the challenges. For example, the experience of running a business with projections, sticking to the projections, having an accounting system, maintaining a clean and clear billing system, and sound administration system.”
According to the researchers, the participants in the study emphasized that there is fragmentation within the entrepreneurial ecosystem, whereby there is replication of business activities without any differentiation. “There is no integration of the ecosystem players. As such, they end up with duplicate programs targeting the same objectives. The financial sector recommended that there is a need for an intermediary body that will bring all the ecosystem actors together and serve as a “one-stop shop” for entrepreneurs and build mentorship programs that accommodate the business lifecycle from inception to growth.”
Botswana Housing Corporation (BHC) is said to have recorded an operating surplus of P61 Million, an improvement compared to the previous year. The housing, office and other building needs giant met with stakeholders recently to share how the business has been.
The P61 million is a significant increase against the P6 million operating loss realized in the prior year. Profit before income tax also increased significantly from P2 million in the prior year to P72 million which resulted in an overall increase in surplus after tax from P1 million prior year to P64 million for the year under review.
Chief of Finance Officer, Diratsagae Kgamanyane disclosed; “This growth in surplus was driven mainly by rental revenue that increased by 15% from P209 million to P240 million and reduction in expenditure from P272 million to P214 million on the back of cost containment.” He further stated that sales of high margin investment properties also contributed significantly to the growth in surplus as well as impairment reversals on receivables amounting to P25 million.
It is said that the Corporation recorded a total revenue of P702 million, an 8% decrease when compared to the P760 million recorded in the prior year. “Sales revenue which is one of the major revenue streams returned impressive margins, contributing to the overall growth in the gross margin,” added Kgamanyane.
He further stated professional fees revenue line declined significantly by 64% to P5 million from P14 million in the prior year which attributed to suspension of planned projects by their clients due to Covid-19 pandemic. “Facilities Management revenue decreased by P 24 million from P69 million recorded in prior year to P45 million due to reduction in projects,” Kgamanyane said.
The Corporation’s strength is on its investment properties portfolio that stood at P1.4 billion at the end of the reporting period. “The Corporation continues its strategy to diversify revenue streams despite both facilities management income and professional fees being challenged by the prevailing economic conditions that have seen its major clients curtailing spending,” added the CEO.
On the one hand, the Corporation’s Strategic Performance which intended to build 12 300 houses by 2023 has so far managed to build 4 830 houses under their SHHA funding scheme, 1 240 houses for commercial or external use which includes use by government and 1 970 houses to rent to individuals.
BHC Acting CEO Pascaline Sefawe noted that; BHC’s planned projects are said to include building 336 flat units in Gaborone Block 7 at approximately P224 million, 100 units in Maun at approximately P78 million, 13 units in Phakalane at approximately P26 million, 212 units in Kazungula at approximately P160 million, 96 units at approximately P42 million in Francistown and 84 units at approximately P61 million in Letlhakane. Emphasing; “People tend to accuse us of only building houses in Gaborone, so here we are, including other areas in our planned projects.”
Researchers from some government owned regulatory institutions in the financial sector have projected that the banking sector’s profitability could increase, following Bank of Botswana Monetary Policy Committee recent decision to increase monetary policy rate.
In its bid to manage inflation, Bank of Botswana Monetary Policy Committee last month increased monetary policy rate by 0.50 percent from 1.65 percent to 2.15 percent, a development which resulted with commercial banking sector increasing interest rate in lending to household and companies. As a result of BoB adjustment of Monetary Policy Rate, from 1.65 percent to 2.15 percent commercial banks increased prime lending rate from 5.76 percent to 6.26 percent.
Researchers from Bank of Botswana, the Non-Bank Financial Institutions Regulatory Authority, the Financial Intelligence Agency and the Botswana Stock Exchange indicated that due to prospects of high inflation during the second half of 2022, there is a possibility that the Monetary Policy Committee could further increase monetary policy rate in the next meeting in August 25 2022.
Inflation rose from 9.6 percent in April 2022 to 11.9 percent in May 2022, remaining above the Bank of Botswana medium-term objective range of 3 – 6 percent. According to the researchers inflation could increase further and remain high due to factors that include: the potential increase in international commodity prices beyond current forecasts, logistical constraints due to lags in production, the economic and price effects of the ongoing Russia- Ukraine conflict, uncertain COVID-19 profile, domestic risk factors relating to possible regular annual administered price adjustments, short-term unintended consequences of import restrictions resulting with shortages in supplies leading to price increases, as well as second-round effects of the recent increases in administered prices “Furthermore, the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices could add upward pressure to inflation,” said the researchers.
The researchers indicated that Bank of Botswana could be forced to further increase monetary policy rate from the current 2.15 percent if inflation rises persistently. “Should inflation rise persistently this could necessitate an upward adjustment in the policy rate. It is against this background that the interest rate scenario assumes a 1.5 percentage points (moderate scenario) and 2.25 percentage points (severe scenario) upward adjustment in the policy rate,” said the researchers.
The researchers indicated that while any upward adjustment on BoB monetary policy rate and commercial banks prime lending rate result with increase in the cost of borrowing for household and compnies, it increase profitability for the banking sector. “Increases in the policy rate are associated with an overall increase in bank profitability, with resultant increases in the capital adequacy ratio of 0.1 percentage points and 0.2 percentage points for the moderate and severe scenarios, respectively,” said the researchers who added that upward adjustment in monetary policy rate would raise extra capital for the banking sector.
“The increase in profit generally reflects the banking industry’s positive interest rate gap, where interest earning assets exceed interest earning liabilities maturing in the next twelve months. Therefore, an increase of 1.5 percentage points in the policy rate would result in industry gains of P71.7 million (4.1 percent increase), while a 2.25 percentage points increase would lead to a gain of P173.9 million (6.1 percent increase), dominated by large banks,” said the researchers.