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… also makes financials unpredictable —— analysts

THE first batch of financials will be on the market next week but the thrill normally associated with the period is good as dead, analysts say.


However a few companies could still release subtle exciting numbers to an otherwise boring and underperforming market.

 

Apart from that, analysts cannot make heads or tails of what to expect this reporting season from first half financials because there is no discernible trend in terms of financial performance post dollarisation.

And the last financials on the market did not help at all, according to analysts, because the performance was not an actual reflection of companies’ performances post the dollarisation but mere numbers derived from an implied exchange rate in a hyperinflation environment.

Analysts believe that only after a full year in the current operating environment will a discernable trend be established saying for now it was difficult to anticipate anything from companies.

Said an analyst: “It is difficult to say what to expect this year. Basically companies are coming from a position where they were trading in a different operating environment in the era of Zimbabwe dollars charecterised by a lot of controls in the form of price controls and exchange controls among other impediments. The dollarisation of the economy, although a good thing, has not benefited businesses a lot.

Companies need capital and cannot access it to lift capacity.”

 “But a year from now, maybe, I will be able to say really where a company is coming from and where it is going,” added the analyst.

Retailers, who bore the brunt of government’s price controls in the past years, could have finally cashed in on the dollarisation but continued absence of disposable incomes has not helped the sector.

Mobile operator Econet Wireless and beer and soft drinks Delta Corporation could however excite the market judging by their trade updates recently.

Econet says its revenue base continued to grow beyond February while Delta told the market in April that beer sales would continue to rise.

Banks – traditional market favourates – are struggling to raise capital in line with monetary authorities’ demands and analysts are not upbeat about the sector players.

Banks now have the onerous task of attracting deposits from a population with little disposable incomes, a development not playing much in favour of the institutions. If the institutions seek out joint ventures, analysts feel investor appetite for banking counters could be restored. Analysts expect margins in the sector to be even tighter.

The insurance sector – a usually market turn off – is not expected to pimp its market image anytime soon and need to go back to its core business —— underwriting —— after years of relying on investments and passing on revalued earnings from properties as real money to the income statement.

Analysts are neither expecting little to nothing from insurers when they come to the market with their half year financials. Instead they expect a spike in claim payments and dip investment income. At the moment, insurers have to convert Zimbabwe dollar policies to the green back to at least 65% by the end of this year, analysts said.

But the major challenge will be to raise otherwise scarce liquidity for total conversion owing to a tight cash flow position against the need to raise working capital.

Generally this year’s reporting season could turn out to be a big yawn for financial analysts until companies make takeover bids,  consider IPOs, mergers or such business moves to tickle a bored market.

Chris Muronzi

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