ECOCASH Holdings Zimbabwe Limited (EHZL) has posted a $4,76 billion loss for its financial year ended February 28, 2023 owing to monetary exchange losses worth $30,1 billion linked to its failure to redeem debentures.
EHZL, a mobile money services provider, together with sister company Econet Wireless Zimbabwe (EWZ), in April announced their failure to raise enough forex to redeem their remaining debentures from a 2017 rights offer worth US$130 million.
This 2017 capital raise was done to service a foreign debt worth over US$100 million for work done to help it and EWZ, before their unbundling into separate entities, upgrade and maintain its network infrastructure.
However, as sourcing foreign currency from the forex auction has proven difficult since then, EHZL is considering a renounceable rights offer where it will invite existing shareholders to buy additional new shares in a capital raising initiative worth US$30,3 million.
With these funds, EHZL will facilitate the redemption of its remaining debentures that matured in April.
“EcoCash Holdings recorded revenue of ZW$101,3 billion for the period, compared to $96,8 billion in FY22, a 5% increase from prior year,” EHZL board chairperson Sherree Shereni said in a statement attached to the company’s financial results for the year ended February 28, 2023 released yesterday.
“While the regulatory restrictive limits on the mobile money business, as well as the general cash economy on the US dollar transactions put pressure on the revenue numbers, significant growth has been noted in transaction volumes and values following the reduction in IMTT [intermediated money transfer tax] from 4% to 2% in January 2023.
“Seventy-eight percent of our revenue was driven by the Fintech business followed by Insurtech at 17% and lastly, digital platforms at 5%, in line with the prior year’s performance. The group achieved an EBITDA [earnings before interest, taxation, depreciation and amortisation] margin of 7% against 18% in the prior year mainly due to the pressure on costs due to the prevailing operating environment.”
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She continued: “The exchange losses related to the debentures amounted to $30,1 billion for the year under review.”
When the debentures became due in April, it meant that the principal investment amount had to be repaid to the investor basically subscribers to the bond, with interest payments ceasing.
The exchange loss is tied to the Zimbabwe dollar’s depreciation, as during the period, the currency sunk nearly 617%, against the greenback, to US$1:$889,13 as of February 28, 2023 from a 2022 comparative of US$1:$124,01.
However, EHZL reported that it made foreign exchange gains arising from items other than debenture related liabilities of $8,11 billion during the period under review.
“While the business environment remains challenging, the group is committed to delivering value to all its stakeholders. In line with our growth ambitions, we are actively looking at scaling our various businesses, enhancing the product offering and diversification of our products,” Shereni said.
“The group continues to scout the local and regional markets for strategic opportunities which complement our vision of a digitally connected future that leaves no Zimbabwean behind.”
Total assets grew to $198,1 billion during the period under review, from a 2022 comparative of $154,34 billion, this was largely owing to a revaluation of property and equipment and investment properties.
The growth was also attributed to gains on investment properties.