Redefine HY23 revenue up 36.4%

Redefine Properties, a leading property company in South Africa, has reported a 36.4% increase in revenue for the first half of 2023. The CEO, Andrew König, recently sat down for an interview with CNBC Africa to discuss the company's financial performance and the challenges it faces in the current economic environment. One of the key issues that König highlighted was the significant impact of power outages on the company's operations. He revealed that the cost of load shedding to Redefine is approximately 35,400 rand per hour, resulting in a total cost of around 20 million rand for the first half of the year. König explained that while some of these costs can be recovered from tenants, a substantial portion remains a net cost to the company. To address the challenges posed by power outages, Redefine has implemented a comprehensive approach, including the use of solar PV installations and diesel generators. The company currently generates around 7% of its electricity consumption from solar power and has backup diesel generators across its properties. König also mentioned that they are exploring the possibility of incorporating batteries into their energy strategy in the future. In addition to discussing the impact of power outages, König shared insights into Redefine's portfolio strategy and revenue diversification. He noted that while Poland contributes around a third of the company's revenue, it is not solely responsible for propping up the business, as Poland itself faces its own challenges such as high inflation and interest rates. Despite this, König expressed confidence in the potential growth of the Polish market once conditions stabilize. When asked about the company's target allocation to Poland, König mentioned that it could potentially increase to 40-45% of the portfolio over time, but emphasized the importance of avoiding geographic concentration risk. In terms of Redefine's commercial and office properties in South Africa, König highlighted the resilience of the company's Grade A office portfolio, with improving trends in rental reversion rates and vacancy levels. He stressed the importance of quality in maintaining the company's competitive edge and expressed optimism about the future trajectory of the office sector. Looking ahead, König discussed the industry's position in the property cycle, expressing confidence that the sector is currently at a trough and poised for an upward cycle once interest rates stabilize and economic activity picks up. While consolidation in the sector is a possibility, König stated that Redefine is focused on its existing operations and not actively seeking acquisition targets. When addressing concerns raised by investors about the company's performance, König highlighted Redefine's efforts to deleverage, maintain healthy liquidity levels, and position its assets for future growth. He acknowledged that the company's loan-to-value ratio may be a concern for equity investors given the current interest rate environment, but remained optimistic about the company's long-term prospects. In conclusion, König emphasized the importance of focusing on controllable variables amidst economic uncertainties and reiterated his confidence in Redefine's ability to navigate challenges and capitalize on opportunities in the property market.