LIVINGSTONE MARUFU/ MUNASHE MATAMBO
A reduction in non-recurring revenue lines saw Zimre Holdings profitability dip 70 percent to $0,8 million in the half year ended June 30 from $2,7 million in the same period last year.
Total income also declined by 14 percent to $14,9 million in the period under review from $17,3 million.
The group’s decline in revenue and profit comes at a time when the country is grappling with foreign exchange challenges causing low activity in the market due to hand to mouth conditions in the economy.
In a statement accompanying the financial results, ZHL chairman Ben Kumalo said the group recorded mixed performance with the domestic insurance and reinsurance operations continuing to show resilience and sustainable recovery following rebranding and rating upgrades.
“The fact that the group has over the years built solid bases from which the regional business units are operating from, their performance in the period under review was subdued due to a combination of factors including but not limited to the existence of soft insurance markets due to relatively low economic activity compared to previous trading periods,” said Kumalo.
The weakening of regional currencies against the US$ in some cases and relatively low capital bases which curtailed them from absorbing the existing insurance capacity,” he said.
The profit outturn was also adversely affected by the reduction in non-recurring revenue lines and low investment income mainly due to low money market rates and volatility of the stock market when compared to the same period last year.
High claims experience for the Mozambican operation arising from floods in that region had also resulted in subdued performance.
Gross Premium Written (GPW) at $15,8 million was in line with what was achieved in the same period last year.
Emeritus Reinsurance Zimbabwe continued on a recovery path with GPW increasing by 23 percent to $8 million in the period under review from $6,5 million in 2017.
Credit Insurance Zimbabwe Limited recorded a 58 percent growth in GPW reflecting the positive impact of the restructuring of the business that started in 2017 when ZHL acquired a controlling stake in the Company.
Kumalo said a deliberate and strategic decision was taken at ZimRe Property Investments Limited (ZPI) to restructure and realign its investment portfolio which was skewed in favour of office space situated in the central business districts (CBD) of major cities, in order to diversify into property classes with higher rental yields.
This entailed the disposal of a CBD property and conversion of another, necessitating construction and refurbishment respectively.
The period under review coincided with the construction and refurbishment of the said property, which triggered a significant but temporary reduction of rental income from the investment property portfolio.
This position is expected to be corrected in the first quarter of 2019 when the additional space is released for renting, Kumalo said.
The Sawanga Mall, which is currently under construction in Victoria falls, would avail approximately 5 000 square meters in retail space on completion and is expected to correct the group’s investment property portfolio mix and contribute annual net rentals that will be over 10 percent above those obtained from ZimRe Centre in Harare that was disposed in 2017.
The mall, when complete will also contribute $20 million to group investment properties compared to just over $10 million for ZimRe Centre, he said.
ZPI also slowed down on stand sales mainly due to currency uncertainties and increasing risk of losses on disposals, while a suitable pricing model is being implemented.
The group expects the situation to improve in the first quarter of 2019 when space is released for renting and higher rental yields and occupancies are expected.
Kumalo said the growth in the regional and domestic markets was expected to strengthen in the outlook, buttressed by relative political stability, recovery of commodity prices on the international market and growth in agriculture.
This anticipated economic growth, coupled with low insurance penetration rates, rapid urbanisation and growing middle-class, is expected to spur the growth of the insurance markets thereby presenting immense growth opportunities for the group.
The group’s financial position remained strong with total assets increasing to $108 million in June 2018 from $106 million in December 2017 mainly due to the fair value gains on listed and unlisted equities, trading activities and increase in share of associates.
Shareholders’ equity increased to $51,1 million in June 2018 from $49,7 million in December 2017 in line with the profit outturn and trend.
Cash and cash equivalents decreased to $15,6 million in June 2018 from $24,4 million in December 2017 mainly due to the deployment of cash resources to investment properties and quoted equities.
