Madison Finance Company earnings have weakened to K6.557 million for the year ending 31 December 2019 compared to K 21.537 million recorded as at 31 December 2018, according to audited financials published by the group.
The group which comprises of an insurance (Life and General) company, an asset management company, and a general insurance outfit in Tanzania, recorded a profit before income tax of K 11 million against K 26 million in 2018. “The decline is mainly attributed to suspension in lending to one sector due to delayed remittances of loan repayments”, according to the SENS announcement published on 30th April 2020.
At half-year 2019, Madison Financial Services reported a myriad of challenges that affected its performance. These included low market liquidity, arrears of premium income from civil service schemes, and a debacle at its asset management business Madison Asset Management Company Limited. According to the SENS announcement of 26th September 2019,” the asset management business Madison Asset Management Company Limited (MAMCo) took in what are expected to be the last losses from a restructuring which has seen ongoing disposal of its poorly performing property portfolio against a fixed-income fund deposit portfolio”.
With its losses amounting to K18.825 million for the period, the outfit required to enter into negotiations via a Scheme of Arrangement with Creditors of a Fixed Income Fund. However, fast forward to the Press Release issued by the Securities and Exchange Commission (“SEC” or “the Commission”) on 2 March 2020 regarding the possession of Madison Asset Management Company (“MAMCo”), the regulator lost patience with the outfit and step into to exercise its rights on behalf of stakeholders.
The main income earner, interest, was higher than the previous year. “Interest income of K 137 million is higher than last year by 9.9% while the Interest expense of K 76 million is lower than last year by 10.6%”. However, the loan book experiences subtle growth during the period. “The loans and advances to customers grew by 2% from last year”. The group attributed the marginal growth of the loan book due to changes in the business model to focus more on non-payroll and MSME related lending due to delayed payments by counterparties (civil service).
Operating expenses grew by 9% almost at parity with 2019 average inflation signaling extensive cost control despite escalating prices of support goods and services.
Despite customers’ deposits marginally growing by 1% with an improvement in the portfolio mix between corporate and personal deposits, total assets, and liabilities reduced by 4.5% during the period under review. “The reduction in assets is mainly arising from reduced growth in the loan book and reduction in cash and cash equivalents”. The reduction in liabilities is driven by the reduction in borrowed funds and a slowed growth in deposits to reflect the change in the business model.
Lower earnings have resulted in the earnings per share reducing to 0.033 from 0.108. Investors will be watching closely at the probable contagion of MAMCo. The Company anticipates that its 2020 “performance is expected to be a marginal growth in assets and liabilities with a constant profit position”.
