LIVINGSTONE MARUFU
Zimre Holdings Limited’s (ZHL) profit after tax more than doubled to ZWL$1.2bn in the six months to June 30, from the same period last year driven by the profitable performance of most business units and the investment property fair valuations following change of functional currency.
In the same period last year, profit after tax was ZWL$533m.
Zimre chairman Ben Kumalo said in a statement accompanying the group’s half year financial results that the business growth momentum achieved at the beginning of the year continued into the second quarter though at a slower pace with most operations trading profitably during the period under review.
“There was significant positive recovery and turnaround at Emeritus Re Zambia, while all the other regional and domestic entities continued a positive business growth trajectory,” Kumalo said.
The group’s inflation adjusted total comprehensive income increased to ZWL$ 1.4bn during the reviewed period from ZWL$718m recorded in the prior comparative period.
On a historical cost basis, total comprehensive income was ZWL$ 2.3bn from ZWL $185m in the same period in 2019.
The growth is attributed to exchange differences on translation of foreign operations, fair value gains on financial assets as well as gains on property and equipment revaluations.
Total claims and expenses grew by 24% when compared to the ZWL$387m registered in the same period in 2019. Increases in commissions and business acquisition costs were in line with the growth in insurance business, Kumalo said.
Debtor impairments also contributed to the marked increase in costs. Total assets for the group grew 64% in inflation adjusted terms to ZWL$4.7bn as at June 30 2020 from the restated level of ZWL$2.9bn in the same period in 2019.
On a historical cost basis, the group’s financial position remained sound with total assets at ZWL$4.4bn compared to ZWL$1.05bn as at December 31 2019.
Kumalo said the growth was mainly attributed to the revaluation of the investment properties and other non-monetary assets. Positive cash flows were generated from operations.
Kumalo said the coronavirus pandemic outbreak disrupted economic activity and this was further exacerbated by rising inflation during the reviewed period, which resulted in local currency depreciating rapidly.
Zimre said despite the gradual easing of restrictions, recovery is expected to be extremely slow in some economic sectors.
There was significant positive recovery and turnaround at Emeritus Re Zambia, while all the other regional and domestic entities continued a positive business growth trajectory.
ZHL is currently working on value adding transactions that will result in the company holding controlling shares in Fidelity Life Assurance of Zimbabwe Limited (“FLA”) and the acquisition of the entire issued share capital of ZPI, a move which will result in ZPI delisting from the Zimbabwe Stock Exchange.
Kumalo said the group has seen opportunities for business growth and profitability through consolidation of its heartland investments and mergers and acquisitions in the current volatile and uncertain business environment, characterised by, among others, the slow economic recovery in the post Covid-19 pandemic era and the decimation of capital in real terms largely due to a depreciating local currency and hyperinflation.
He said the transaction has been motivated by strategic considerations, including growing the balance sheet size thereby strengthening the underwriting capacity of the insurance arms of the group and enhancing business retention and competitiveness of the businesses in both the regional and domestic market and thus enhancing overall profitability.
In the outlook, the board is confident that the group will survive and grow buttressed by its strong balance sheet with a sizeable property portfolio, the hedging effect provided by the regional operations, restoration and strengthening of ZHL heartland investments, Kumalo said.
He said the group would focus on value preservation, expenditure control and management, business innovation and increased digitalisation for operational efficiency.
