Vunani reports R3.1 million loss in challenging economic climate

Vunani, the independent black-owned diversified financial services group, for the year ended February 28, 2025 posted a loss of R3.1 million, compared to a profit of R24.2m in 2024 amid a difficult and volatile operating environment owing to sluggish economic growth.

Loss per share decreased to 7.1c from earnings per share of 9c the prior year. Headline loss per share decreased to 2.8 cents from headline earnings per share of 7.4c.

Despite this the group  declared a final dividend of 35 cents up from 9c the prior year.

Chairman Lionel Jacobs and CEO Ethan Dube said notwithstanding these challenges, in the latter half of the year, Vunani saw a slight uptick in equity markets, which positively impacted growth in the company's funds undermanagement.

"We were encouraged by the lowering of interest rates, although it was at a much slower rate than we had anticipated. The stall in a rate decrease was largely due to macroeconomic factors such as the presidential elections in the United States in November 2024. Interest rate cuts only resumed recently as market conditions eased," they said.

Revenue and insurance revenue for the group increased to R692.9 million up 4% from the prior year. Other income, which relates to non-core income generated from the group’s various businesses, decreased to R6.9m from R19.4m. The interest received from investments increased significantly to R36.4m from R0.7m due to improved returns from the insurance-related investments. The operating profit was 80.0m, an increase from R55.2m the prior year.

Total investments income for the year amounted to R9.8m compared to R0.7m in the prior year. Vunani said the increase is due to the improved performance of underlying investments. Negative fair value adjustments of R34m from  positive R5.5m relate to an increase in insurance liabilities.

Jacobs and Dube noted that the asset management division experienced notable stability, reversing the continuous decline in assets under management seen in prior years. Vunani transitioned from a period of asset losses in previous years to a more stable operating environment.

"Having stabilised, our focus will be on pursuing growth, although we are cognisant of the challenging environment given a lacklustre economy and high levels of unemployment. We therefore believe that business growth will require a certain degree of consolidation," they said.

Jacobs and Dube while the financial results had fallen short of expectations, looking forward they expect them to improve as the operating environment continues to recover.

"We are exploring ways to fast track the facilitation of consolidation in the market," they said.

During the year, Vunani progressed its strategy to expand into countries within the SADC region. It has established an asset management branch in Lesotho and have set up an office in Namibia, while its established operations in Eswatini and Botswana continue to progress well.

"We can confidently state that we have made solid progress in the regions initially targeted for expansion," they said.

In the short to medium term, Vunani will be looking to expand its operations in Zimbabwe and Zambia.

Jacobs and Dube said Vunani had previously taken a cautious approach to its expansion in Zimbabwe due to currency-related challenges. However, having seen increased signs of stability, it now believes it is the right time to scale the business and adopt a more aggressive approach to the market.

Looking ahead, Vunani's outlook remains positive. There were signs of improvement in the business.

"From a macroeconomic perspective, we view the South African Rand gaining strength and the lowering of interest rates by the South African Reserve Bank as positive developments and believe this will provide much-needed support for economic growth. In our view, the South African Reserve Bank has taken the correct approach in revising its inflation target," Jacobs and Dube said. 

Vunani  would like to grow its business through strategic partnerships by forming alliances such as the one it has formed with the Old Mutual Group and  believe these will help it unlock value.

"We are therefore cautiously optimistic and believe we are well-positioned to benefit from any growth that may arise from the economy going forward," they said.

BUSINESS REPORT