AEL Zambia Plc at Half Year 2018
AEL Mining Services (Z) Plc, Mining

On 28th September 2018, two announcements came out of SENS LuSe. The first was the notice to shareholders from the board of the Mufulira based AEL Zambia Plc in compliance with requirements of the Securities Act No. 41 of 2016 and the Listing Rules of the Lusaka Securities Exchange. The announcement was given that a Special Interim Dividend would be payable to shareholders registered in the Company’s books as at close of business on Friday, 9 November 2018 (Note to self, buy shares before this date and stand a chance of getting a dividend). The payment date will be on or about Monday, 12 November 2018.

The second announcement on the day was the interim results of the company at half year. The condensed statement of comprehensive income showed a revenue increase of 37% and a profit for the year increase of 20%. With the half year EPS at 2.02, forward EPS should be in the region of 4.04. Our analysts project a profit increase ranging from 19% to 22% at end of year 2018.

Economic fundamentals show that with the volatility of the Kwacha against the Dollar, gains may be realised that can support the projected profit increase. Q2 and Q3 have seen an increase in cost of dollars on the foreign exchange (FX) market that will have AEL Zambia’s Financial Director, Esther Johnson, reeling with excitement over the prospect of her income statement reflecting the sort of gains in FX that may cushion the sales slowdown due to low productivity in the mining sector (AEL’s primary market).

Working capital performance seems to be where Esther’s strength can be seen. An acid test of current assets against liabilities show her company is more liquid that ever before, increasing cover from 4.2 to 7.2.

In terms of outlook, Esther believes that conditions in the local economy remain challenging. Lower productivity in the mining industry and continuous fluctuations of the ZMW/USD exchange rate will have a significant influence on year-end results. This is why many investment advisors always insist on the disclaimer “shares may rise or fall”.

For investors in the company, their eyes will be on the dividend. So far, year on year (YoY), AEL has paid a flat dividend. With our forward EPS estimate, we believe that the dividend will hold at the 2017 level.

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