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Johannesburg - Atlas Mara, the African banking group co-founded by former Barclays chief executive officer Bob Diamond, said it will cut jobs and costs after first-half expenses outpaced revenue growth and profit declined 71%.
"We have executed a group-wide cost-reduction program to align our cost base with the current revenue environment," Atlas Mara, which buys banking assets in Africa to try benefit from the region’s growth levels, said in a statement on Wednesday.
Headcount in its shared services unit will be reduced by as much as 35%, which may cut operating expenses by $8m from next year, according to the company.
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 expenses accelerated at a faster pace than revenue. With banks 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.
"Atlas Mara can survive, but it needs to start owning some real assets," Kato Mukuru, head of equity research at Exotix Partners, said by phone before the results were released.
"Buying tiny little assets in Zambia, Rwanda, Zimbabwe just doesn’t cut the mustard. And it needs more of its management on this continent managing those assets."
The stock slid 3.5% to a record low $3 as of 12:07 p.m. in London, extending declines since its initial public offering in December 2013 to 72%. That values the company at $209m, compared with the more than $600m it has spent buying African assets.
Market valuation
"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 recognize that the market capitalization 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."
The landscape across Africa has shifted under Diamond’s feet since the company went on an acquisition spree to gather banking operations, after a drop in commodities from copper to oil hit the economies in which the company owns assets.
The company’s 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 $1.2m in the first half from $4.1m a year earlier, while impairments rose to $9.1m from $6.1m, Atlas Mara said.
The company’s reported equity declined 7.8% to $577m, mostly because of $83m of foreign-exchange translation losses driven by the depreciation of Nigeria’s naira.
Still, Atlas Mara is focused on growing its existing operations.
"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 recognize that further acquisitions and a supportive economic environment are central to achieving this."
The company said it will "strive" to match last year’s earnings of $11.3m though restructuring costs, weaker currencies and integration expenses "provide challenging headwinds in this regard."
