The Botswana Insurance Holding Limited (BIHL), one of the icons of the Botswana Stock Exchange, issued a profit warning Friday on its half year results to be released tomorrow ( Monday) saying that it will miss the expectations of investors due to suppressed performance of global equities.
In an advert, which was carried by The Botswana Guardian under the headline “Trading update”, the company rose to international standards by warning shareholders before hand.
“The board has reviewed the group results for the 6 months to June 30, 2008. Operating surplus and core earnings from the main actives of the group, life insurance and asset management, remain sound and are in line with the board’s expectations. However, due to the global downturn on equity markets, the group has experienced unreleased investment losses,” the company said in a statement on Friday.
The global downturn on equities started last year with the United States of America’s mortgage crisis, which has since spread across the world. The USA, which holds up to 50 percent of the global money seeking investment opportunities, was affected by the softening of the dollarÔÇöprompting some of the international prominent people clamouring for a new international currency of exchange that would replace the dollar as it was pushing companies into the red.
Further, the international crude oil prices, which have risen from US $ 70 per barrel from mid last year to around $120 to date have had a negative impact on international companies.
The BIHL’s investment arm, Bifm’s performance is expected to come out in a bad shape as it is responsible for placing money through a multiple of multi-managers across the world. And some of the losses could be attributed to the failed acquisitions, which were initiated by companies like Microsoft, where Bifm has invested some money.
“The picture there is totally different,” Leutwetse Tumelo, head of Capital Asset Management, said, referring to the international global equities.
“The stocks are reflecting what is happening in their primary markets, which I believe will remain under pressure for the rest of the year,” Tumelo said in his monthly research note.
However, on the local front, the company is fast re-rating after its share price plummeted after the story on its directors’ undisclosed share option that came out during the first half of the year.
For the month of July, the company’s performance was up 4.8 percent to P 11.00 on the local bourse to help the board move up 3.1 percent at 7411.9 points, a move to which Tumelo commented: “These signs are good, domestic prices are moving up, more stocks are trading regularly.”
Last year, the company said assets under its management had rise to P 17 billion, making it the largest asset management company in the country.
“As a result of these unrealized losses, the board expects the surplus after tax for the period up to June 30, 2008 to be less than that of a comparable period to June 30, 2007,” the company said.
Further, the company was this week trying to use its local muscle by taking local journalists on a tour of its two projects done under the Public, Private Partnership, which were built at a cost of P 210 million.
The magnificent and modern architecture buildings are expected to house the Ombudsman and the Southern African Development Community (SADC) headquarters. The SADC headquarters, which has a concession of 15 years between parties involved that include Bifm, Absa, Stocks & Stocks and Outsourcing Botswana, is one of the biggest and second project to come out the PPP.
“This is one of the projects which reflect the true spirit of cost sharing between the public and the private sector,” head of Bifm, Victor Senye said, referring to the Ombudsman building in the Gaborone Main Mall.