(2 – If needed) The various lockdowns imposed by the government to control the spread of Covid-19 resulted in low activity at the BHC’s construction projects.
Botswana Housing Corporation (BHC) has seen its profits take a huge knock for the six-month period ended September 30.
The Corporation recorded a profit after tax of P5.3 million for the period under review, a decline of P12.1 million from the P17.4 million registered during the same time phase last year.
According to BHC Chief Executive Officer (CEO), Reginald Motswaiso, the drop in profits was registered on the back of low margins from sales in areas away from the organisation’s major markets of Gaborone and Francistown.
Motswaiso also noted the various lockdowns imposed by the government to control the spread of Covid-19 resulted in low activity at the BHC’s construction projects.
“This affected the rate of capitalization of interest expenses year-on-year by 152 percent to P11 million. Operating costs and staff costs reduced year-on-year on the back of reduced business activity. However, these were eclipsed by interest expenses,” he outlined.
During the period under review, the Corporation also recorded a decline in revenue, which went down by 14 percent – from P391 million in 2019 to P335 million this time around.
Motswaiso attributed this drop to the reduction in revenue from construction and management contracts, which decreased by P69 million, representing a year-on-year decline of 41 percent.
“Sales revenue, which is the Corporation’s major revenue stream, performed well during the first half of the financial year, increasing year-on-year increase by 15 percent to P90 million,” stated Motswaiso, adding this was driven by high sales volumes.
However, he pointed out that the margins on the sales were low due to the sales mix between the old and new stock.
During the half-year period, new stock, which is said to have relatively lower profit margins, dominated the sales mix.
“This was further exacerbated by the fact that some of the sales were in areas away from main markets of Gaborone and Francistown,” explained Motswaiso.
Meanwhile, rental income, which is BHC’s second-biggest revenue earner, increased by P7 million to P103 million.
The increase is attributed to the additional housing units that were added to the investment property portfolio during the first half of the year.
Despite the growth in rental income, rentals arrears actually increased from P10 million to P14 million – something the CEO says needs ‘close monitoring’ as it puts additional pressure on BHC’s profitability due to impairment adjustments.
Meanwhile, the vacancy rate stood at 1.05 percent at the end of the review period, well below BHC’s benchmark of 1.5 percent.