Introduction
This reporting season has seen a mixed bag of results from both listed and unlisted counters in Zimbabwe. The truth is that many companies are trying to get the basics right. These includes capitalisation, strategy implementation, working on the road to IFRS compliance and managing the risks associated with working in a multicurrency environment.
There is evidence that some financial sector players still have capitalisation challenges and have posted losses at the back of a subded trading environment.
Capital raising and working capital will remain a major challenge with local investors and institutions hoping to hold on to their shareholding as much as possible and as long as possible. However most will have to relinquish their comfort zones and move fast albeit in an environment of limited liquidity and financial engineering to remain relevant on the shareholding matrices of the various organisations.
ROA in the banking sector is low but the insurance sector seems to be performing well in terms of sweating shareholder capital. The returns in the banking sector seem to reflect the conservative lending attitude calibrated to the country risk profile and subdued level of economic activity in the economy.
This reporting season has seen a mixed bag of results from both listed and unlisted counters in Zimbabwe. The truth is that many companies are trying to get the basics right. These includes capitalisation, strategy implementation, working on the road to IFRS compliance and managing the risks associated with working in a multicurrency environment.
There is evidence that some financial sector players still have capitalisation challenges and have posted losses at the back of a subded trading environment.
Capital raising and working capital will remain a major challenge with local investors and institutions hoping to hold on to their shareholding as much as possible and as long as possible. However most will have to relinquish their comfort zones and move fast albeit in an environment of limited liquidity and financial engineering to remain relevant on the shareholding matrices of the various organisations.
ROA in the banking sector is low but the insurance sector seems to be performing well in terms of sweating shareholder capital. The returns in the banking sector seem to reflect the conservative lending attitude calibrated to the country risk profile and subdued level of economic activity in the economy.
TN Holdings
The Holding company posted a loss of USD1,1m. This is at the back of expenses incurred in bankrolling a banking project and retaining staff.
The group seems to have taken the FBC Holding Group strategy of taking over noncore business onto its balance sheet through the takeover of Tedco Company. We will wait to see how the synergy effects of this reverse takeover will takeoff.
The financials still reflect the IFRS challenges bedevling the companies of Zimbabwe. These are the redenomination of share capital, determination of deferred tax, impairment losses and devaluation of property, plant and equipment and investment property.
The Nominee Balance sheet of the TN Asset Management with a balance sheet value of USD27,9m is quite significant though there is need to increase the share capital of the Company to match the signicant risks associated with a growing nominee balance sheet.
Lafarge Cement Zimbabwe Limited
The Cement company has held its own in the recovery process of the country even though activity in the construction sector is still subdued. With profit at USD5,2million the company did well.
The cash resources however at USD620k are not so healthy reflecting the working capital challenges of many local companies. This is further reflected by the Borrowings of USD1,6m.
The exchage loss of USD0.4 million reflects the significant exchange rate risks affecting both liabilities and assets of companies.
Risk management will remain a priority for many boardrooms going forward.
TA Holdings Limited
The financial results of the group have shown the positive impact of a diversified group and surely Shingi Mutasa and his investment group are doing well. With a strong balance sheet of USD162m there is evidence that the group has grown over the years and value is being created especially in the markets outside Zimbabwe i.e. Botswana, South Africa and Nigeria.
Its interesting that the group has made an investment in PG Group and this shows its interest in the construction sector.
Unlike exchange translation losses incurred by ABC Group, TA Holdings had positive translation exchange gains of USD3.2million which augured well for the total comprehensive income for the group. This goes to show the impact of prudent exchange rate risk management.
Total Comprehensive Income after tax stood at USD710 532. The profitability of the group was impacted negatively by the loss of USD2m arising from Zimbabwean operations and associated companes namely Sable Chemicals and Cresta Zimbabwe. Cresta was affected by all time low occupancy rates standing at 40% and revenue per room (REVPAR) of USD37.3 which is quite low given that the breakeven hotel rates should be around USD50-USD70.
Cresta’s performance does not compare favourably to a sister associate company, Cresta Marakanelo with REVPAR of USD59 and occupancy rate of 67%. In the hotelling business it is all about volumes and one hopes Cresta in 2010 will do more to boost its Zim operations especially with the World Cup on the shores of SA already!
The cash resources of the group are quite healthy with the company sitting on USD11.8 million of cash resources of which USD11.7million (more than 90%) are outside Zimbabwe. This shows that the company is still cautious of the sovereign risk of the parent country Zimbabwe and would want to manage this risk going forward.
Stanbic Bank
Nothing beats a sound bank with a sound balance sheet! This is the case of Stanbic Bank, modelled around the basics of banking – mobilise deposits and deploy in the interbank market and loans to various sectors. There is little financial engineering and fancy financial instruments on the bank’s books and yet the company posts what seems to be the best profit so far of USD6.7m from the banking sector results.
Most depositors such as NGOs and embassies bank with Stanbic and this seems to be reflected in the strength of the balance sheet standing at USD201m. This translates to ROA of 3%.
The bank is adequately capitalised with Tier 1 Capital standing at USD18.5m way above the minimum prescribed capital of USD12.5m. The shareholders do not have to do much and of course the the bank benefits from centralised technical support from Standard Bank in areas such as credit and risk.
The synergies with the parent group are also reflected in loans amounting to USD2.5m which were forgiven by Standard Bank group, further boosting the group’s profits and lowering its gearing ratio.
This shows that the parent company sees value in maintaining its value in Zimbabwe. Unlike MBCA which did not post good results, Stanbic Bank has prooved that one does not need to do much to sell an established brand such as Stanbic.
Local banks should know that depositors are now looking at the soundness of the balance sheet, good service and risk management systems before depositing funds in any institution. The funds under custody of USD167m further reflect the confidence clients have in the soundness and reliability of the financial institution.
Renaissance Financial Holdings Limited
If one thinks, TA Holdings is a monster of a group, then pause for a moment and look at Renaissance Financial Holdings Limited. With a balance sheet of USD173m, slightly more than USD162m of TA Holdings, the group has done far much better in terms of profitability with USD9.2m total comprehensive income attributable to non-controlling interests and USD1.2m to equity holdings of the parent.
A closer analysis of the segment performance reveals that much of the profit was generated by the insurance arm of the group, Afre Corporation which posted USD31.6m total comprehensive income for the year.
Renaissance Capital in Uganda continues to post losses and one hopes this business segment was a worthwhile investment given that Uganda still has its civil unrests affecting parts of the country. The other business segments, RFHL, Stock broking and renaissance merchant bank posted losses at the bank of a challenging environment for a financial services sector not involved in mobisiling cheap deposits.
The merchant banking model is facing challenges in Zimbabwe given a financial market without much depth and lackingz financial engineering. This has seen merchant banks such as Interfin looking at penetrating the retail banking sector through the planned takeover of CFX bank.
Nicoz Diamond
The insurance company posted a humble USD1.8m for the year ended 31 December 2009. The balance sheet stood at USD17.7m reflecting the USD4m rights issue concluded in December 2009.
Given the small balance sheet, the ROA is obviously quite high standing at 10.2% which shows management is doing well to sweat its capital in the face of limited resources.
Turnal Holdings
The total comprehensive income of USD8.1m was largely driven by revaluation gains in property plan and equipment. This non- cash gains were reflected in the cash and cash equivalents balances of only USD996k.
The performance of this company will be closely linked to the performance of the construction and housing sectors. As the economic recovery continues, the group is likely to post better results. However the profitability of the company is commendable with ROA standing at 24.7%.
Fidelity Life Assurance of Zimbabwe
Fidelity Life stood its own in this reporting season posting total comprehensive income of USD2.3m with a balance sheet size of USD15.9m translating to ROA of USD14.5%.
The group’s performance was largely sparred by good performance of Fidelity Life Assurance of Zimbabwe contributing USD2.1m (91.3%) akin to the Afre Corporation performance although on a much smaller scale.
Zimbabwe Actuary Consultants only contributed USD5k to the group profits and in my view is a reflection of the skills gaps in qualified actuaries in the local market.
The Holding company posted a loss of USD1,1m. This is at the back of expenses incurred in bankrolling a banking project and retaining staff.
The group seems to have taken the FBC Holding Group strategy of taking over noncore business onto its balance sheet through the takeover of Tedco Company. We will wait to see how the synergy effects of this reverse takeover will takeoff.
The financials still reflect the IFRS challenges bedevling the companies of Zimbabwe. These are the redenomination of share capital, determination of deferred tax, impairment losses and devaluation of property, plant and equipment and investment property.
The Nominee Balance sheet of the TN Asset Management with a balance sheet value of USD27,9m is quite significant though there is need to increase the share capital of the Company to match the signicant risks associated with a growing nominee balance sheet.
Lafarge Cement Zimbabwe Limited
The Cement company has held its own in the recovery process of the country even though activity in the construction sector is still subdued. With profit at USD5,2million the company did well.
The cash resources however at USD620k are not so healthy reflecting the working capital challenges of many local companies. This is further reflected by the Borrowings of USD1,6m.
The exchage loss of USD0.4 million reflects the significant exchange rate risks affecting both liabilities and assets of companies.
Risk management will remain a priority for many boardrooms going forward.
TA Holdings Limited
The financial results of the group have shown the positive impact of a diversified group and surely Shingi Mutasa and his investment group are doing well. With a strong balance sheet of USD162m there is evidence that the group has grown over the years and value is being created especially in the markets outside Zimbabwe i.e. Botswana, South Africa and Nigeria.
Its interesting that the group has made an investment in PG Group and this shows its interest in the construction sector.
Unlike exchange translation losses incurred by ABC Group, TA Holdings had positive translation exchange gains of USD3.2million which augured well for the total comprehensive income for the group. This goes to show the impact of prudent exchange rate risk management.
Total Comprehensive Income after tax stood at USD710 532. The profitability of the group was impacted negatively by the loss of USD2m arising from Zimbabwean operations and associated companes namely Sable Chemicals and Cresta Zimbabwe. Cresta was affected by all time low occupancy rates standing at 40% and revenue per room (REVPAR) of USD37.3 which is quite low given that the breakeven hotel rates should be around USD50-USD70.
Cresta’s performance does not compare favourably to a sister associate company, Cresta Marakanelo with REVPAR of USD59 and occupancy rate of 67%. In the hotelling business it is all about volumes and one hopes Cresta in 2010 will do more to boost its Zim operations especially with the World Cup on the shores of SA already!
The cash resources of the group are quite healthy with the company sitting on USD11.8 million of cash resources of which USD11.7million (more than 90%) are outside Zimbabwe. This shows that the company is still cautious of the sovereign risk of the parent country Zimbabwe and would want to manage this risk going forward.
Stanbic Bank
Nothing beats a sound bank with a sound balance sheet! This is the case of Stanbic Bank, modelled around the basics of banking – mobilise deposits and deploy in the interbank market and loans to various sectors. There is little financial engineering and fancy financial instruments on the bank’s books and yet the company posts what seems to be the best profit so far of USD6.7m from the banking sector results.
Most depositors such as NGOs and embassies bank with Stanbic and this seems to be reflected in the strength of the balance sheet standing at USD201m. This translates to ROA of 3%.
The bank is adequately capitalised with Tier 1 Capital standing at USD18.5m way above the minimum prescribed capital of USD12.5m. The shareholders do not have to do much and of course the the bank benefits from centralised technical support from Standard Bank in areas such as credit and risk.
The synergies with the parent group are also reflected in loans amounting to USD2.5m which were forgiven by Standard Bank group, further boosting the group’s profits and lowering its gearing ratio.
This shows that the parent company sees value in maintaining its value in Zimbabwe. Unlike MBCA which did not post good results, Stanbic Bank has prooved that one does not need to do much to sell an established brand such as Stanbic.
Local banks should know that depositors are now looking at the soundness of the balance sheet, good service and risk management systems before depositing funds in any institution. The funds under custody of USD167m further reflect the confidence clients have in the soundness and reliability of the financial institution.
Renaissance Financial Holdings Limited
If one thinks, TA Holdings is a monster of a group, then pause for a moment and look at Renaissance Financial Holdings Limited. With a balance sheet of USD173m, slightly more than USD162m of TA Holdings, the group has done far much better in terms of profitability with USD9.2m total comprehensive income attributable to non-controlling interests and USD1.2m to equity holdings of the parent.
A closer analysis of the segment performance reveals that much of the profit was generated by the insurance arm of the group, Afre Corporation which posted USD31.6m total comprehensive income for the year.
Renaissance Capital in Uganda continues to post losses and one hopes this business segment was a worthwhile investment given that Uganda still has its civil unrests affecting parts of the country. The other business segments, RFHL, Stock broking and renaissance merchant bank posted losses at the bank of a challenging environment for a financial services sector not involved in mobisiling cheap deposits.
The merchant banking model is facing challenges in Zimbabwe given a financial market without much depth and lackingz financial engineering. This has seen merchant banks such as Interfin looking at penetrating the retail banking sector through the planned takeover of CFX bank.
Nicoz Diamond
The insurance company posted a humble USD1.8m for the year ended 31 December 2009. The balance sheet stood at USD17.7m reflecting the USD4m rights issue concluded in December 2009.
Given the small balance sheet, the ROA is obviously quite high standing at 10.2% which shows management is doing well to sweat its capital in the face of limited resources.
Turnal Holdings
The total comprehensive income of USD8.1m was largely driven by revaluation gains in property plan and equipment. This non- cash gains were reflected in the cash and cash equivalents balances of only USD996k.
The performance of this company will be closely linked to the performance of the construction and housing sectors. As the economic recovery continues, the group is likely to post better results. However the profitability of the company is commendable with ROA standing at 24.7%.
Fidelity Life Assurance of Zimbabwe
Fidelity Life stood its own in this reporting season posting total comprehensive income of USD2.3m with a balance sheet size of USD15.9m translating to ROA of USD14.5%.
The group’s performance was largely sparred by good performance of Fidelity Life Assurance of Zimbabwe contributing USD2.1m (91.3%) akin to the Afre Corporation performance although on a much smaller scale.
Zimbabwe Actuary Consultants only contributed USD5k to the group profits and in my view is a reflection of the skills gaps in qualified actuaries in the local market.
Dony Mazingaizo has an interest in Financial Management & Financial Reporting
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