Masawara profits down 63pc

HARARE - London-listed investment firm, Masawara Plc, has registered a 63 percent decline in profits to $2,6 million in the half year to June compared to a $6,1 million profit recorded in the same period last year.

The Shingai Mutasa-led group said principal risks and uncertainties affecting the business relate to the political and economic environment of Zimbabwe, where its investments are predominantly held.

“There is a further risk that investments made by the group will not result in the envisaged cash generation or capital appreciation. This risk is managed by the careful evaluation of all proposed investments, with detailed due diligence work being undertaken, before any investments are made and ongoing monitoring of existing investments,” Masawara said.

This comes amid indications that the illiquidity of the Zimbabwean equity and bond markets may affect the valuation of the group’s investment in investment properties in the short to medium term.

Masawara noted that the prevailing liquidity challenges in Zimbabwe may also affect its ability to remit dividends from local operations to the off-shore holding companies and the Masawara Plc shareholders.

“The operating entities may also experience significant delays in remitting payments to offshore suppliers, which may have an adverse impact on the businesses,” the diversified group said.

In the six months to June, the group’s Zimbabwean hotels incurred a loss after tax in the current year, albeit a 24 percent improvement on the prior year.

The Jersey-headquartered firm said there was significant rate cutting in the Zimbabwe hotel market, resulting in a decline in revenue per available room in order to protect market share.

“Cresta Marakanelo registered growth in profit after tax, driven by improved profitability of the resort hotel Cresta Mowana, which was at break even during the prior year. The hotel segment is expected to register limited growth for the full year ending December 2016, as a result of the competitive environment in Zimbabwe,” Masawara added.

The company’s iconic building — Joina City — continued to be affected by the liquidity challenges in the market, which in turn had an impact on debtors’ collections for the period.

Masawara noted that major refurbishments were commenced at Joina City during the first six months of the year hence the non-payment to shareholders in the current period.

“The remainder of the year will see the completion of the refurbishments with improved occupancies anticipated in 2017. Emphasis will be placed on improving debtors’ collections,” the company added.

The group’s fertiliser manufacturing unit, Sable Chemical Industries (Sable), which was under care and maintenance during the period under review, sold a significant portion of the inventory carried forward from the prior year.

“Sable has raised some working capital finance and production is expected to recommence during October of 2016.  Efforts to raise additional financing are ongoing,” Masawara said.

In the half year period, the group’s total assets increased from $288,2 million by end of last year to $297,8 million.

Masawara had cash and cash equivalents of $29,1 million as at June 30 while total liabilities increased to $193,8 million from $188,6 million recorded at December 2015.

 

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