Zimre profit margin doubles
ZIMRE Holdings Limited (ZHL) recorded a 107% increase in profit-after-tax to $983,15 million last year owing to topline growth in some of its units and increases in investment portfolio fair valuations.
The profit was from a comparative $475,95 million in 2019.
“The group achieved modest growth and profitability in business underpinned by strong performance in the Botswana and Mozambique operations,” ZHL chairman Ben Kumalo said in a statement accompanying the group’s 2020 financial results.
“The regional diversification strategy became handy as the impact of the outbreak of the COVID-19 pandemic on group performance was less severe as different fiscal and monetary interventions in each country where the group operates were implemented to mitigate the effects of the pandemic.
“The group sustained growth in profitability in inflation-adjusted terms, registering an increase of 107% in profit for the year from the $0,5 billion registered in 2019 to $0,9 billion in 2020 ... on account of the strong topline business growth in some business units and the investment portfolio fair valuations following the change of the functional currency in Zimbabwe.”
The group, which operates insurance, private equity and property portfolios in Zimbabwe and some regional countries, registered total income of $2,77 billion last year, from $2,5 billion in the comparative period.
The increase was mainly driven by the strong top-line growth in premium income in Mozambique and Botswana as the units consolidated their respective market positions. Apart from those two countries, and locally, ZHL also operates in Malawi and Zambia.
Further, the growth in rental income from an upward review of rentals as well as property revaluation gains following the change of functional currency boosted total incomes.
Rental income rose nearly 15% to $89,63 million in 2020, from 2019’s comparative $78,1 million, while fair value adjustments on investment property reached $813,13 million in the period under review from a 2019 prior of $774,5 million.
Total claims and expenses declined by 27% to $1,4 billion registered in 2020, from $1,9 billion in 2019 comparatively, driven by an overall decline in operating expenses, acquisition costs and claims.
“Demand for insurance and rental space remained buoyant notwithstanding trends in the rationalisation of space by tenants as most business was conducted from home during the lockdowns. There was a slowdown in property sales and increased pressure on occupancies on leased premises,” Kumalo said.
“The onset of hyperinflation in Zimbabwe resulted in the need to constantly review sums insured by policyholders and a spike in the cost of insurance claims and operating costs. The tight liquidity situation in Zimbabwe slowed down premium and rental collection thereby impacting investment portfolio growth.”
Total expenses were down nearly 27% to $1,39 billion in the period under review, from a 2019 comparative of $1,91 billion, as ZHL implemented business continuity plans amid COVID-19 restrictions.
Kumalo said shareholders’ equity grew by 98% to $5,1 billion last year, from $2,6 billion in 2019, while total assets grew by 154% to $12,5 billion from $4,9 billion in 2019.
“Positive cash flows were generated from most operations mainly due to the strong business growth momentum achieved, leasing of space to quality tenants, implementation of premium warranty policies in certain markets and strengthening of the effects of moderate improvements in credit control functions in most business units,” Kumalo said.
“Overall, the group generated cash of $4,8 billion from operations which was 336% up from the comparative period in 2019.”
This left the firm in a good liquidity position heading into 2021.
For 2021, Kumalo said key business growth strategies would be underpinned by strong cash generation in the business units, customer focus and effective change management.
“The restoration of heartland investments in property and long-term insurance sectors, extracting value from synergies and ensuring sustainable re-rating of ZHL and creating value for shareholders, are on course to be achieved,” he said.
“Diversifying revenue streams and pursuing opportunities for mergers and acquisition in order to grow the business portfolio leveraging on the enhanced balance sheet are being implemented.”