Investment group ZCCM IH has announced that it expects its earnings per share to be lower for the financial year ended March 2019 due to reduction in performance at KCM and impairment of receivables.
“In accordance with Section 3.4(b) Lusaka Securities Exchange (“LuSE”) Listings Requirements, the Board of Directors of ZCCM-Investments Holdings Plc (the “Company” or “ZCCM-IH”) hereby advises the Shareholders of the Company that the Earnings Per Share (“EPS”) for the Group and Company financial year ended 31 March 2019 is expected to be approximately 47% and 125% respectively, lower than the financial year ended 31 March 2018”, read the statement issued by long service Company Secretary, Chabby Chabala issued in Lusaka on SENS on Friday 13th December 2019 by order of the Board.
ZCCM-IH which owns 20.6% of KCM and has its nominees on the company’s board, reports that the “movement in EPS for both Group and Company is primarily attributed to the reduction in other income of ZMW360 million due to a once-off income reported last year relating to the Konkola Copper Mines Plc price participation receivable”. This is a dip in performance compared to the $1.2 million revenue that was reported in the 2018 annual report.
“Konkola Copper Mines (KCM) reported total revenue of K12,251.43 million (US$1,283.0 million) for the financial year ended 31st March 2018 [(2017: K8,621.47 million (US$874.3 million)]”, read a statement in the 2018 ZCCM IH annual report. Fluctuating metal prices on the positive side led to the surge in revenue back then. “The increase in revenue was attributed to higher metal prices and increased sales volumes. The net loss for the year was at K1,102 million (US$115.4 million) [(2017: K1,367.72 (US$138.7 million loss)]”.
Although not mentioned in the SENS announcement, there are known assets that were reported in the 2018 annual report that may provide a signal to where the second issue relating to impairments were coming from. “In addition, the Group and Company recorded an impairment of receivables amounting to ZMW 205 million and ZMW 373 million respectively, following the implementation of International Financial Reporting Standard 9 (IFRS 9): Financial Instrument and a further fair value loss of ZMW 336 million was recognized on two of the investee companies”. The annual report for 2019 which will be made available before the forthcoming AGM will provide an indication which companies caused the impairments.
As always, ZCCM IH’s board understands the significance of this development as they have advised shareholders to trade with caution. “Shareholders are advised that the information contained in this trading statement has not been reviewed or reported on by the external auditors of the Company”. The ZCCM IH security was trading at K28.48 per share when the latest SENS announcement was made. “The Company expects its Provisional Abridged Financial Results for year ended 31 March 2019 to be released on the Securities Exchange News Services (“SENS”) and published in the local press on or about 16th December 2019”.