Reversals in tax cuts have harmed Old Mutual earnings

Old Mutual Holdings has issued a profit warning for the fiscal year ending December 2022, citing the write-off of deferred tax assets as the reason.

The company expects its earnings to fall by at least a quarter, implying a net loss worse than the Sh1.1 billion reported the previous year.

The company is anticipated to disclose a net loss of at least Sh1.3 billion for the review period on Friday.

“The board brings to the attention of the public that the earnings for the current financial year are expected to be lower by at least 25 per cent than the earnings reported for the same period in 2021,” the company said in a statement.

“Whilst profits from operations improved by more than 40 percent compared to 2021 and a profit before tax recorded as compared to loss after tax in 2021, we have written off a significant portion of deferred tax assets from the balance sheet resulting in a significant increase in the corporate tax expense.”

Deferred tax assets are utilized to reduce future taxes when a firm generates a profit. Tax assets typically accumulate in years when a corporation incurs losses.

In the six months to June 2022, Old Mutual posted a net loss of Sh813 million.

According to the statement, the board was confidence in the turnaround processes that the company had chosen and implemented.

Subsidiaries in Kenya, Uganda, Tanzania, South Sudan, Mauritius, and Rwanda carry out these activities.