RDC Property Group has delivered a strong set of interim financial results for the six months ended 30 June 2024, reflecting the resilience of its diversified portfolio across sectors and locations, despite a challenging macroeconomic environment.
The Group reported a 6% increase in revenue compared to the same period last year, bringing total revenue to P288.4 million for the 6-month period. Profit before tax surged by 36% to P41 million. This significant jump was bolstered by a P6 million gain from the sale of subsidiary in the period. While high interest rates contributed to higher finance costs, RDC’s overall financial position remains solid. The Group’s loan-to-value (LTV) ratio improved to 43.2% from 44.9%, aided by a strategic move to leverage Croatian assets to reduce higher-interest debt in South Africa, improving cash flow and future interest expenses. Interest rates have started reducing in the Eurozone, Botswana and South Africa which will be positive for the group going forward.
Operationally, RDC continues to achieve positive results and grows from strength to strength.
The overall vacancy rate, expressed as a percentage of Gross Lettable Area (GLA), has decreased from 10.7% at the end of December 2023 to 8.4%. When measured by rental income, the improvement is more significant, from 7.9% to 4.8%.
In Botswana, RDC’s assets continue to benefit from increased leisure and business travel activity, with 8,000 square meters of new and renewed leases concluded. In South Africa, the Gauteng portfolio, which had faced a sustained downturn, is showing signs of recovery, with 14,200 square meters of new and renewed leases concluded. The KZN portfolio, which contributes 5% of the Group’s total rental income, concluded 3,100 square meters of new leases. Meanwhile, the RDC Western Cape portfolio continues to outperform its peers, with a vacancy rate of 2.2%, bolstered by the opening of the redeveloped Westlake Shopping Centre, anchored by key tenants, Checkers and Clicks. Lease renewals at the Edge Building with major tenants like PSG and Heineken further contributed to the region’s strong performance.
In Croatia, a significant leasing deal at the Dubrovnik Shopping Centre is expected to add €2 million to the property’s value in the next valuation cycle, enhancing RDC’s exposure in this region.
On the sustainability front, RDC has signed 13 Power Purchase Agreements with a solar solutions provider in South Africa. This initiative is projected to yield R4 million in energy cost savings in the first year, with long-term benefits as energy prices rise. Phase two of the project, assessing both the remaining South African and Botswana portfolios, is currently underway.
The Group also announced key management changes, with Phillip Mothoteng appointed as Group Finance Director, based in Gaborone, and Saleem Khan as Group Financial Manager, based in Cape Town. Both appointments are part of RDC’s strategy to strengthen its leadership as it continues to expand across Southern Africa and Europe.
RDC declared an interim distribution of 0.126 thebe per ordinary share and 2.712 thebe per debenture, amounting to a total of P21.5 million. This distribution will be paid on or around 29th October 2024, to linked unit holders registered at the close of business on 17th October 2024. The ex-dividend date is 15th October 2024.
As a leader in the Real estate industry in Botswana, RDC is pleased to provide its further guidance on market trends and prospects.
Market Trends
The property metrics of the markets within which RDC operates are strengthening amidst the continued uncertainties arising from global geo-political and economic tensions. Global inflation has abated, and central bank interest rates are easing with capital markets show signs of strengthening, along with reduced volatility in emerging markets currencies.
All sectors in the real estate industry are seeing a consolidation of the recovery post-COVID-19, led by hospitality and closely followed by retail, industrial, commercial, and residential sectors.
While navigating these market dynamics, the RDC Group remains focused on property improvement and the restructure of its property portfolio by concluding strategic sales of non-core assets and redeploying capital towards key developments and debt reduction.
Additionally, the Group will execute on planned hospitality property improvement programs and pursue diversification into renewable energy and the silver economy (senior living offering), thereby enhancing resilience in a fluctuating market environment.
Prospects for the RDC Group for 2024 and Beyond
The RDC Group is well-positioned to capitalize on the positive market trends and continue to benefit from its proactive strategies aimed at portfolio restructuring and diversification. The critical mass of the portfolio has enabled the gradual disposal of underperforming assets without impacting the Net Asset Value of the company.
Key initiatives include property improvement plans for hospitality assets together with targeted acquisitions and developments within the leisure market, strategic redevelopment of retail offerings, and the development of a new asset class in the renewable energy sector and silver economy. These initiatives will not only strengthen the Group’s financial performance but also position it favorably in an increasingly competitive market. In addition, the Company’s proactive ‘hands-on’ management approach will continue to pay dividends as occupancies increase and costs are effectively managed.
Looking forward, the Group aims to integrate its business operations and achieve synergies leading to greater efficiency as operations and achieve synergies leading to greater efficiency as part of its broader goal to expand its footprint across the Southern African region and the European Union and increasing exposure to hard currency operations.
Key property metrics within the Group’s portfolio reflect the improved market trends across the various jurisdictions within which the business operates. RDC has taken advantage of the positive macroeconomic environment and the stabilization of emerging market currencies through a refinancing strategy which will enhance earnings and cash flow. This, in turn, will continue to improve financial metrics, positioning the Group to unlock and attract capital for further growth.
By pursuing its strategy of strategic sales, reinvestment into accretive projects, debt reduction and diversifying into new sectors like renewable energy, the Group is expected to strengthen its financial position in 2024 and beyond.
RDC’s strong interim results reflect the Group’s ability to navigate a challenging environment while continuing to deliver value to shareholders. Full financial results are available for inspection at the Group’s registered office in Gaborone.