ZIMRE Holdings Limited (ZHL) says it will implement short-term survival strategies including balance sheet preservation and cost control in the second half of the year on the back of setbacks caused by the coronavirus (COVID-19) pandemic.

By Tatira Zwinoira

In the new trading update of its first quarter performance for the period ended March 31, 2020, ZHL said the COVID-19 global pandemic would require extensive business restrategising for survival.

“In the first quarter of 2020, the
group was on course to achieve its
performance targets for the year. However, the unexpected outbreak
of the COVID-19 global pandemic in the last part of the quarter with its negative impact on business per-
formance created a material uncertainty that would require extensive
business re-strategising for survival,”
said ZHL group company secretary,
Lovemore Madzinga in the trading update.

“The resilience of the group and the Southern African Region shall be tested in the second half of 2020. ZHL shall lean heavily on its financial strength buttressed by its sizeable property portfolio to weather the storm and preserve shareholder value.”

He added: “The strategic focus shall
be responding to the effects of the
COVID-19 pandemic and implementing short-term survival strategies including balance sheet preservation and cost control”.

During the first quarter, ZHL’s reinsurance business started the year
well with increased treaty participation in the domestic market on account of a relatively strong balance sheet, excellent service delivery and the increasing Emeritus brand equity.

“However, due to the tight liquidity situation and other challenges,
premium collections were subdued
thus slowing down investment portfolio growth across the group,” Madzinga said.

Under ZHL’s general insurance operations, its Credit Insurance Zim-
babwe Limited subsidiary recorded
an above budget performance and
significant growth compared to the
same period last year.

The performance was credited to
offering specialised products to the
market, especially to the tobacco sec-
tor and infrastructure development
projects through underwriting man-
agement agents.

“In historical cost terms profit for
the period was 439% above budget
on account of the significant growth
in topline performance, favourable
claims experience (15% claims ratio)
and controlled operating expenses,”
Madzinga said.

He, however, added that due to the
depreciating local currency against
the United States Dollars, ZHL is see-
ing increased pressure in the demand
for cover.

Under ZHL’s property portfolio,
rental income performance for subsidiary, Zimre Property Investments,
was on budget.

This was because of the quarterly rental reviews being implemented, reconfiguration of existing rental space for other uses in line with market demand and a move towards turnover-based leases.

Madzinga said ZHL obtained a waiver to charge for some of its services in hard currencies which contributed to income.

“However, the reduced capacity of
tenants to service lease contracts due
to the mounting economic challenges which became more pronounced
in March 2020 with the outbreak of
the COVID-19 pandemic, resulted in
increases in void space and debtors,”
he said.

“The company remained profitable with sufficient cashflows on account of the continued and calculated disposal of its stock of residential stands, and the tight management of property operating and administrative costs.”

He added: “Due to the hyperinflationary conditions and the depreciating local currency, rental income declined in real terms translating into weakened property values in real terms”.

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