Octodec H1 HEPS down 14.5%

Octodec Investments, a company operating in a challenging economic environment, reported their first half results with revenue up just 3.1%. The Managing Director, Jeffrey Wapnick, highlighted the tough conditions that led to an increase in property expenses by 8.1%. This rise was attributed to assessment rates, bad debts, and repairs and maintenance costs, despite a reduction in generator costs. The company faced high interest rates, low economic growth, and issues with municipal service delivery. Approximately a third of Octodec's portfolio is in the residential sector, where challenges like security of water and electricity supply have led to discontent among tenants. To mitigate these issues, the company has invested in generating their own power through solar and generators, increasing costs. The company's balance sheet, with a gearing level of around 38%, has been impacted by high interest rates, affecting tenants' disposable income, especially in residential properties. While the environment remains challenging, Octodec did report a 6% improvement in March, possibly due to a period of uninterrupted power supply. Despite these challenges, the company saw growth in residential and retail sectors, with stability in office spaces, even after losing a major government tenant. Wapnick remains hopeful that the tough economic conditions will eventually pass, as property cycles are something the industry is accustomed to. The company's positive performance in Pretoria reflects the potential for better relationships with municipalities, leading to improved service delivery in the future.