FMHL whines over operating environment after almos...

FMHL whines over operating environment after almost doubling after tax profits

Zim Now Writer

First Mutual Holdings Limited which released its consolidated trading update for the quarter ended March 31, 2024, which saw the property giant enjoy an 82% jump in after tax profit chose to concentrate on challenges in a volatile operating environment

The Zimbabwean economy continued to struggle with a depreciating currency and high inflation, which peaked at 2,976% in March 2024. The company noted that the introduction of a new currency, the Zimbabwe Gold, on April 5, 2024, has done little to alleviate the situation.

“The operating environment remained volatile due to a depreciating currency and high inflation,” the company lamented.

The severe drought induced by El-Nino has also had a devastating impact on the domestic economy, with the 2023/24 summer crop being greatly affected.

Despite these challenges, FMHL reported an 8% increase in consolidated Insurance Contract Revenue to US$35.5 million, driven by an increased uptake of USD insurance products. However, the insurance service result only grew by 3% to US$4.6 million, due to higher claims in the period.

Rental income increased by 25% to US$2 million, with occupancy levels standing at 88.78%, below the target of 89.63%.

The company's profit after tax for the quarter ended March 31, 2024, amounted to USD$3.7 million, representing an increase of 82% from the previous year.

Total assets increased by 3% to US$229.1 million, driven by increases in ZSE-listed equities, insurance and reinsurance contract assets, and debt securities.

However, the company noted that “the sharp depreciation of the ZWL in the quarter accelerated the migration by our clients to USD business to provide adequate cover on the occurrence of the insured risk”.

The retention ratio continued to gradually rise as the business units increased their net USD assets.

“The pass-through effects of the big global funding squeeze which has seen global interest rates remaining elevated amid lingering inflationary pressures” continues to cast a shadow over the company’s prospects.

FMHL’s Q1 2024 results paint a mixed picture, with some positive growth in revenue and profit, but also significant challenges posed by the volatile operating environment.

As the company’s Group Company Secretary, S F Lorimer, noted: “The basis of preparation of this trading update was designed to faithfully represent the substance of the Group’s financial performance and position.”