eBusiness Weekly
Tawanda Musarurwa
Listed firm, Zimre Holdings, says income from its linchpin subsidiary — Zimre Property Holdings — were in line with initially set targets, but voids and debtors have increased as the coronavirus pandemic worsened in the later part of the quarter.
Zimbabwe has been in lockdown since March 30, 2020 as a measure to contain the spread of the Covid-19 virus, but this has affected economic activity and therefore most people’s incomes, which is beginning to be felt by companies.
Despite the emergence of the pandemic in Zimbabwe in February, Zimre’s property subsidiary managed to maintain a steady income during the first three months of the year.
“Rental income performance for Zimre Property Investments Limited (ZPI) was on budget on account of the quarterly rental reviews being implemented and reconfiguration of existing rental space for other uses in line with market demand and move towards turnover based leases,” said company secretary Lovemore Madzinga in a trading update.
“The Company obtained a waiver to charge for some of its services in hard currencies. However, the reduced capacity of tenants to service lease contracts due to the mounting economic challenges, which became more pronounced in March 2020 with the outbreak of the Covid-19 pandemic, resulted in increases in void space and debtors.
Zimre Holdings said it remained profitable with sufficient cashflows on account of the continued and calculated disposal of its stock of residential stands, and the tight management of property operating and administrative costs.
But as a result of the hyperinflationary conditions and the depreciating local currency, rental income declined in real terms translating into weakened property values in real terms.
The group said its reinsurance operations’ capital positions met or exceeded the minimum statutory levels in the first quarter.
“Some regional operations are within the transitional periods set by regulators for compliance with new minimum capitalisation levels,” said Madzinga.
The group said its on course to provide competitive capital to regional operations mostly from its internal resources in order to increase capacity and take advantage of business growth opportunities in those markets.
“Key among those markets is Mozambique with its growth prospects from the multi-billion US dollar natural gas projects, which were at the verge of being commissioned. Credsure was set to meet the $37,5 million minimum capitalisation level for short-term insurers through organic growth.
Zimre’s reinsurance operations started the year on a positive not with increased treaty participation especially from top tier cedants in the domestic market on account of a relatively strong balance sheet, excellent service delivery and the increasing Emeritus brand equity.
The Group expected both its domestic and regional entities to contribute the bulk of its total income in 2020, but due to the tight liquidity situation and other challenges, premium collections were subdued thus slowing down investment portfolio growth across the Group.
In respect of its general insurance operations, Credit Insurance Zimbabwe Limited (Credsure) recorded above budget performance in most key result areas as well as significant growth compared to the same period last year.
“The improvement is credited to its focus on offering specialised products to the market especially to the tobacco sector and infrastructure development projects through underwriting management agents,” said Madzinga.
“In historical cost terms profit for the period was 439 percent above budget on account of the significant growth in topline performance, favourable claims experience (15 percent claims ratio) and controlled operating expenses.
“Due to the depreciating local currency against the United States Dollars (USD), the company is experiencing an increase in the demand for cover in harder urrencies. The industry is working with IPEC to reintroduce USD denominated policies following their suspension in 2019 (IPEC Circular 13 of 2019).”
Notwithstanding the positive performance in the first quarter, the group expects uncertainty to writ large going forward.
“In the first quarter of 2020, the group was on course to achieve its performance targets for the year. However, the unexpected outbreak of theCovid-19 global pandemic in the last part of the quarter with its negative impact on business performance created a material uncertainty that would require extensive business re-strategising for survival,” said Zimre.
