BUSINESS EDITOR NOTE

As companies begin to report their interim financials, there is a noticeable trend where cost-cutting measures and structural realignments implemented in the review period are beginning to reflect on balance sheets. Operational costs have been managed downwards and losses are beginning to narrow. And as profits trek northwards, companies are becoming bullish despite facing significant headwinds.

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Turnall becomes profitable

LISTED building materials supplier Turnall Holdings’ half-year financials indicate the telling effect of structural realignment programmes the group has been implementing for the past 12 months.

There has been a deliberate move to contain costs through changing its asbestos fibre supplier to a cheaper one, and also changing from a credit-based model to a predominantly cash business.

Its order book has been growing due to the aggressive push to secure more domestic customers while growing exports.

Sales volumes in the half-year ended June 30, 2015 rose by 8 percent to 29 435 tonnes from the same period a year earlier as a result.

Revenues jumped nine percent to US$14 million, while net profit spiked 115 percent to US$400 000 from a loss of US$2,6 million a year ago.

Turnall believes that its performance will naturally be stronger in the second half of the year as its 3-Year Strategic Plan begins to take effect.

“The effects of the reduction in the cost of the main raw material mentioned above will only be felt in the second half of the year due to logistical considerations.

‘‘The group has managed to build a firm exports order book which should be realised in the second half. The group also has pipes orders from private sector companies, which once funding is availed, will boost the pipe plant capacity utilisation,” noted Turnall chairman Ms Rita Likukuma in a statement accompanying the half-year financials.

This represents a significant turnaround for the group that in September replaced MD Mr John Jere, who had served the company for more than 14 years in various capacities, with Mr Caleb Musonza.

Zimpapers bullish of prospects

It is also the same script with the country’s biggest integrated media group Zimbabwe Newspapers, which in May 2015 announced a new CEO in Mr Pikirayi Deketete, who took over from Mr Justin Mutasa.

Though the operating environment remains challenging, Zimpapers reported that its loss for the half-year ended June 30, 2015 had narrowed to US$20 000 from a loss of US$1,4 million in the same period last year.

The company’s flagship newspaper division recorded a gross profit of US$1,4 million, excluding financials costs, which crucially fell to US$688 314 from US$851 721 a year earlier.

The costs are still considered relatively high.

Most importantly, the commercial printing division and the broadcasting division continue to improve.

Buoyed by a successful recapitalisation programme, Zimpapers is upbeat about the prospects of the group going forward.

Smiling all the way to the bank

While finance costs continue to plague industry, banks continue to profit from them, underlying the RBZ’s assertion that the financial services sector is generally healthy.

FBC Bank, ZB Financial Holdings, Cabs – a unit of insurance giant Old Mutual – and NMB recorded a solid set of results.

On August 27, 2015 listed financial services group FBC Holdings reported that net profit for the six months to June 30, 2015 rose by 21 percent to US$8,2 million on the prior year driven by higher net interest income.

Total income remained flat at US$39,9 million.

Though net interest income contributed 37 percent to income at US$14,9 million, it was however 11 percent lower than the same period in 2014.

There wasn’t any significant movement in fee and commission income as the group continues to migrate to e-transactions that are generally low in value.

Loans disbursed in the review period also jumped to US$262,8 million from $250,3 million last year.

As a result, the group’s shareholders will be rewarded with an interim dividend of USc0,149 per share.

Just like Zimpapers and Turnall, Cabs also saw a change of guard as MD Mr Kevin Terry, who had a 15-year stint at the helm of the bank, was replaced by Mr Simon Hammond.

During the first six months of the year, its net interest income improved 58 percent to US$28,5 million from US$18,1 million a year ago, while fees and commission grew to US$19,6 million from US$16 million.

Unsurprisingly, its profit rose to US$10,6 million from US$7,2 million in 2014.

The banking group, whose share of deposits was US$717 million during the period, up from US$529 million a year ago, believes that “the economy has continued to experience a general price correction as a result of the negative movement in the rand against the dollar and weaker demand as well as the beneficial effect of the bond coins introduced in 2014”.

Another bank, ZB Financial Holdings, which recorded an annual loss of US$1,34 million last year, has witnessed a significant turnaround in fortunes as its net profit for the year ended June 30, 2015 climbed to US$4,95 million.

The group reduced expenses by 19 percent to US$23 million following a restructuring programme in 2014.

ZBFH is presently reorganising its business model from focusing on growing non-interest income, which now accounts for 80 percent of the total income.

With the new strategy, ZBFH took 10 percent less deposits in 2014 than it did a year earlier, but ramped up Treasury bills investments by nearly 300 percent.

Similarly, merchant bank NMBZ Holdings’ net profit vaulted 128 percent to US$3,2 million during the half-year to June after the bank decided to expand its customer base.

Its deposits rose 34 percent to US$287 million.

“The banking sector is proving to be a shining light … Our view is that the half-year 2015 banking sector performance is commendable given the obtaining economic environment.

‘‘A lot of companies in Zimbabwe are under financial stress which is being mounted by the decline in consumer buying power,” said MMC Capital.

Overall, financial industry profitability rose 25 percent in the first half of this year.

Afdis lifts spirits

Underlying the significant growth of the beverages sub-sector, spirits and wine maker African Distillers (Afdis) is continuing on the growth path.

The company’s interim financials show that revenues grew by five percent, or US$1,1 million, to US$25 million.

Its volumes also gained 18 percent.

As a result an interim dividend of USc0,36 per share was declared.

Results highlights

Management changes

Zimpapers: Mr Pikirayi Deketeke replaced Mr Justin Mutasa as group chief executive

Cabs: Mr Simon Hammond took over from Mr Kevin Terry

Turnall: Mr Caled Musonza is now MD, taking over from Mr John Jere

Operational Overview

Falling finance costs as interest rates drop, but still relatively high

Rising volumes

Heightened cost containment initiatives