Higher costs weigh down Imara financials

Brian Benza
Staff Writer | Tuesday December 21, 2010 00:00

During the comparative period in 2009, the group made a profit of P6.3m.

In a statement accompanying the results, management says the loss includes certain non-recurring expense items, namely, re-branding and a share of prior year losses from a Malawi associate totalling P1.62mn.

The Botswana-domiciled diversified financial house has interests in stock broking, asset management and investment banking, including corporate finance. Under the umbrella of Imara Holdings group, the company has offices in Malawi, South Africa, the UK, Kenya and Zimbabwe as well as working relationships with Stockbrokers Zambia, Namibia Equity Brokers and Mac Capital in Dubai. 'This confirms our cautious outlook at year-end and the subsequent trading statement advising that performance in the first half of the year could be below expectations,' says the statement.

'It must, however, be noted that the loss includes certain non-recurring expense items, namely, re-branding and a share of prior year losses in our Malawi associate totalling P1.62 million.

'In addition, adverse exchange rate movements resulted in an accounting loss of P2.06 million and further delays in the opening of the stock exchange in Angola has meant no revenue and ongoing costs.'

Adverse exchange rate movements resulted in an accounting loss of P2.06million.

Meanwhile, management says it will continue to focus on loss-making businesses and make a critical review of operating costs, future acquisitions and capital expenditure.

In addition, a comprehensive review of the group structure aimed at simplifying the structure, reducing administrative costs and improving tax efficiencies is underway.

Although cash and cash equivalents reflect a decline of P46.46 million to P76.94 million, a substantial portion of this is attributable to normal working capital movements in the South African stock broking business, while the exchange losses are a non-cash item.

The increased equity stake in the Mauritius Trust business was funded in cash at a cost of P1.23 million in September 2010. Shareholders' equity registered a marginal increase from the previous year.

A comprehensive review of the Group structure is underway aimed at simplifying the structure, reducing administrative costs and improving tax efficiencies. 'It is pleasing to note that the Asset Management Division continues to perform well and is ahead of budget and the prior year,' the statement continues.

'We have witnessed stagnant performance in the Stock Broking Division, although in recent months, there has been increased activity from both institutional and foreign investors across most markets.

'In South Africa, the Futures Desk continues to perform well. Corporate Finance remains disappointing in spite of an active deal [in the] pipeline.' Going forward, the company reckons that the trend of stronger second half earnings should continue in line with previous years.

Notwithstanding the poor interim earnings performance, the company says it does not believe that a comprehensive change in Group strategy is warranted at this time. 

Meanwhile, volumes were thin in last week's trading on the local bourse in anticipation of the Christmas holiday.

Only 2, 472, 461 shares worth P7, 242, 710 were traded during the week under review, a significant decline from 26, 330, 840 shares worth P51, 679, 032 that were traded the previous week.  The DCI continued on a losing streak, closing the week 3.28 percent softer at 6, 419.54 points. The FCI was virtually unchanged at 1, 647.94 points despite gains in African Copper, A-Cap Resources and Discovery Metals.

Says Gray Juma of Motswedi Securities: 'We expect the sluggish performance on the local bourse to persist up to the end of the year due to increasing selling, especially from retail investors without a corresponding increase in demand from institutional investors who have deferred taking investment action until next year for new strategic portfolio reviews.

'As the curtain comes down on 2010, the local bourse has yielded mixed fortunes for investors, with some maximising their gains in the course of the year while others saw their investment shrink.'

For the week, commodity-based stocks were the biggest movers with African Copper leading the gainers up 2 percent to close at 66thebe following the awarding of the second mining licence at Thakadu. 

A-Cap Resources firmed by 14.8 percent to close at a new 52-week high of 326thebe. Property developer RDCP added 6.8 percent to close at another new 52-week high of 630thebe as investors eye the completion of the much-anticipated Masa Centre early next year.

Tourism operator Chobe pushed 4.3 percent to 245thebe while brewer Sechaba added 2.4 percent to 1, 085thebe despite a 10-percent increase in the alcohol levy earlier in the month. Other gains were in Cresta, Engen and Discovery Metals.

FNBB, the largest counter on the domestic main board in terms of market capitalisation, dropped the most for the second week in a row, down by 7.2 percent to close at 206thebe on selling pressure from retail investors. Next on the line was Stanchart, erasing 5.5 percent to close at its new 52-week low of 846thebe.