We have extracted a Chairman’s Statement from the 2019 half year interim report for ZimRe Holdings Limited (ZIMR.zw), listed on the Zimbabwe Stock Exchange:
my pleasure to present the financial statements for ZimRe Holdings Limited (“ZHL” or “the Company”) and its subsidiaries (together “the Group”) for the period 1 January to 30 June 2019. The financial statements were prepared in accordance with the new reporting and functional currency, the Zimbabwean Dollar (“ZWL”) which came into effect on 24 June 2019 following the issuance of Statutory Instrument 142 of 2019, and other Statutory Instruments, directives and guidelines on the ongoing currency reforms in Zimbabwe.
The Zimbabwean economy continued to regress on account of a poor agricultural season, power and foreign currency shortages, subdued performance of the mining sector, rapid devaluation of the ZWL leading to increased costs of key imports, sharp rise in inflation which peaked at 175.66% in June 2019, limited external support, inadequate infrastructure and depressed market confidence. These headwinds continue to hamper productivity and depress economic growth which is forecasted between -2% and -5.1% in 2019.
Notwithstanding the negative impact of cyclones Idai and Kenneth at the beginning of the year, the Mozambican economy is expected to grow by 4% in 2019, propelled mainly by improved investor confidence, increased output in coal mining and investments into the natural gas projects.
The mining sector in Botswana is expected to experience a slowdown resulting in a 3.9% muted growth in 2019.
The Malawi economy is forecast to grow by 4% in 2019 on account of improvements in agricultural output, improving industrial base and return of donor support. Recent political disturbances following the May 2019 disputed elections are headwinds that might impact on the projected economic growth.
Zambia The Zambian economy is expected to register muted growth of 3.1% in 2019 on account of reduced agricultural output, lower copper prices, rising inflation and a precarious debt position.
Group Performance Summary
The change in the currency regime from multi-currency to ZWL, has impacted on the reporting of the Group’s financial position and performance for the half year ended 30 June 2019. Given the disparities between the requirements of local legislation as enshrined in Statutory Instrument 33 of 2019 and International Accounting Standards (“IAS”) 21, ‘The effects of changes in foreign exchange rates’, the Board resolved that relative comparison to 2018 performance be undertaken with caution to users of these financial statements.
The Group recorded overall profitability in the six months anchored by profitability at ZimRe Property Investments (Private) Limited (“ZPI”) following fair value gains on revaluation of investment property (driven by change in reporting currency), rental reviews and US$ denominated revenue from sale of inventory property. Significant business growth in reinsurance also contributed positively, particularly in the Mozambican operation. Limiting factors were however noted in the domestic environment where businesses were adversely affected by the rising operational costs in line with surging inflation and erosion of consumer disposable incomes.
Statement of comprehensive income
Total income was ZWL167.1 million (2018: ZWL14.9 million) on account of the continued business growth in the reinsurance operations especially in the regional subsidiaries which contributed 68% of the premium written, and letting of high value rental space by ZPI.
Claims and expenses amounted to ZWL40.6 million in 2019 (2018: ZWL14.2 million). Increase in total expenditure was largely driven by inflationary factors an