Atlas plans job cuts after first-half profit drop

  • Business
  • Thursday, 25 Aug 2016

JOHANNESBURG: Atlas Mara Ltd, co-founded by former Barclays Plc chief executive officer Bob Diamond, said it will cut jobs and costs as weaker African currencies and slowing growth caused a 71% drop in first-half profit.

“We have executed a group-wide cost-reduction programme to align our cost base with the current revenue environment,” the company, incorporated in the British Virgin Islands and traded in London, said in a statement.

Headcount in its shared services unit would be reduced by as much as 35%, which may cut operating expenses by US$8mil from next year, Atlas Mara said.

Atlas Mara is seeking to trim a cost-to-income ratio that climbed to 102% in the six months through June from 95% a year earlier as operating expenses accelerated at a faster pace than revenue.

With businesses in seven African countries – including Nigeria, Zambia, Zimbabwe and Rwanda – the company is struggling to convince investors of its strategy of building a bank spanning the continent as growth across the region slows to a 15-year low.

The stock slid 3.5% to US$3 as of 9:48am in London yesterday, a record low, and extending declines since its initial public offering in December 2013 to 72%. That values the company at US$209mil, compared with the more than US$600mil it spent buying African assets.

The landscape across Africa has shifted under Diamond’s feet since the company went on an acquisition spree to gather operations as a drop in commodities from copper to oil hit the economies in which his businesses operate.

Its biggest investment is in Nigeria, where a currency devaluation has hit earnings when translated back into dollars, and the country is teetering on the brink of a recession.

Net income fell to US$1.2mil in the first half from US$4.1mil a year earlier, while impairments rose to US$9.1mil from US$6.1mil, Atlas Mara said yesterday.

The company’s reported equity declined 7.8% to US$577mil largely due to US$83mil of foreign-exchange translation losses driven by the depreciation of Nigeria’s naira.

“Our current market valuation does not reflect the economic value we expect to deliver to shareholders from our businesses over time,” chief executive officer John Vitalo said in the statement.

“We also recognise that the market capitalisation of the company is below what we paid for our investment and subsequent capital injection into our principal operating entity BancABC or what we paid for our associate interest in Union Bank of Nigeria Plc.”

Atlas Mara is focused on growing its existing operations, it said.

“We expect a better operational performance from our businesses during the second half of the year as the cost and revenue initiatives that we have implemented begin to deliver results,” Atlas Mara said.

“Our medium-term financial targets and strategic goals remain unchanged and we remain optimistic about our ability to achieve them, but recognise that further acquisitions and a supportive economic environment are central to achieving this.” — Bloomberg

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