Exclusion is due to hyperinflation and barriers to accessing capital through dividends
The value of Zimbabwe is reduced to zero in Group’s equity value
Old Mutual Limited, parent to Old Mutual Zimbabwe says it continues to exclude the results of the Zimbabwe business from the adjusted headline earnings owing to the hyperinflation and barriers to access capital by way of dividends being experienced in the country.
Zimbabwe has been experiencing a rise in inflation for years now with experts pointing out that the country is living in hyperinflation which has made its operating environment volatile to business operations as most are struggling to make real profits within the country.
According to the latest statistics by the Zimbabwe Statistics Agency, Zimbabwe's annual inflation climbed further in August of 2022 to 285%, from 256.9% in the prior month, the highest reading since February 2021.
“Due to the continued impact of hyperinflation on the Zimbabwean economy, and in particular the unrealised nature of the listed investment return supporting the IFRS net asset value for this business, the value of Zimbabwe is reduced to zero in Group equity value,” Old Mutual Limited said in a statement accompanying its financial results for the half year ended 30 June 2022.
The Group further highlighted that the profits in Zimbabwe continue to be driven by investment returns earned on the Group’s shareholder portfolio.
“The increase in investment returns relates to fair value gains earned on equities traded on the Zimbabwe Stock Exchange (ZSE) as market participants seek to invest in equities which preserve value in an inflationary environment, Old Mutual Limited said.
The Group added, “The ZSE generated returns of 83% during the period against inflation of 119% for the same period. We caution users of our financial results that the investment returns earned on the Group’s shareholder portfolio may reverse in the future.”
Meanwhile, Old Mutual Limited’s basic earnings per share for the six months grew by 74% to 118.1 cents from 67.8 cents, while headline earnings per share increased by 62% to 116.3 cents from 71.7 cents.
The Group’s gross flows decreased by 14% to ZAR83.39 billion from ZAR96.99 billion, while the value of new business declined by 4% to ZAR708 million from ZAR740 million.
Net earned premiums were almost flat at ZAR35.87 billion from ZAR35.61 billion in the same period last year.
Funds under management were marginally up by 1.1% to ZAR1.18 trillion from ZAR1.17 trillion.
During the period under review, the Group maintained its interim dividend at 25 cents, per ordinary share which amounts to 44% of adjusted headline earnings.
“We were able to maintain a dividend in line with our prior interim dividend due to our robust operational performance and our strong capital and liquidity position,” Old Mutual Limited said.
Going forward, the Group remains committed to working toward meeting its medium-term targets although this has become more challenging given the current economic backdrop.
“With a balance sheet that remains well capitalised and our solvency ratios within or slightly above the target range, we are well set up to weather the challenging operating environment across all of our operating regions,” Old Mutual Limited said.
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