Review of the Business Environment
The Directors of Izwe Loans Zambia Plc “Izwe” are pleased to present the abridged audited financial results for the year ended 31 December 2022. The information disclosed in the SENS was derived from the information contained in the Audited Financial Statements and does not contain full or complete disclosure details.
The business environment remained positive throughout 2022, continuing into the first quarter of 2023. While recent increases in interest rates present a moderate risk in the short term, it is expected that once the government completes the imminent debt restructure, long term stability should be restored.
Demand for Izwe’s products and services remain high, with notable year on year growth in the earning assets of the business and primary collections. Izwe’s position as one of the sector leaders remains unchanged, even with heightened competition in the market.
Financial Highlights
Izwe continues to show strong profitability, ending the year with a performance of 19% growth in profit after tax. This growth has been attributed to a 40% increase in net operating income from ZMW262.9 million in the prior year, to ZMW368.3 million in 2022. This increase was driven by higher net interest income which grew from ZMW214.4 million to ZMW309.2 million representing a growth of 44%. Fees and commission income also grew by 22% from ZMW48.5 million to ZMW59 million.
Operating expenses for the period increased by 27% from ZMW100.2 million to ZMW127.4 million. This was driven by an increase in sales related activities; expenditure aimed at supporting our transformation strategy coupled with inflationary increases. Izwe continues to implement cost containment measures in order to maintain a superior cost to income ratio both in the market and when compared with its internal appetite ratio. A cost to income ratio of 37% was reported at the end of the year 2022.
The performance for the year was anchored by a sturdy year on year balance sheet growth of 20% in total assets from ZMW937.2 million to ZMW1.120 billion. Notably, the net loan book grew by 43% from ZMW712.0 million to ZMW1.020 billion as loan disbursements to both payroll and SME customers increased. There was also an increase in other assets of 47% as we invested in support infrastructure to drive revenue growth. Cash and cash equivalents reduced by 76% from ZMW195.0 million to K46.8 million to finance operating activities, in line with our focus to deploy cash efficiently in the business, while still maintaining sufficient levels of liquidity. Total liabilities recorded an increase of 11% from ZMW665.3 million to ZMW737.3 million, driven by a 13% increase in borrowings (ZWM571.4 million up from ZMW506.9 million) and 5% increase in other liabilities (ZMW165.9 million up from ZMW158.5 million).
Basic and diluted earnings per share for the year increased from ZMW1.07 per share in 2021 to ZMW1.29 per share on the back of a strong trading performance in the year.
Capital
Capital continues to grow, ensuring full compliance with prudential requirements. The capital adequacy ratio for the year was 35% and was significantly higher than the regulatory limit of 15%.
Dividend
The Directors elected not to distribute dividends in the year, instead opting to retain capital for asset growth in line with the strategic direction.
Future Outlook
The Company Directors are optimistic about the business outlook as it embarks on a three-year transformation agenda. It is expected that Izwe will launch new products aimed at responding to customer needs in the payments space in 2023. Other new products and services will be driven through strategic partnerships both on the local market and internationally to ensure the business becomes a more robust and diversified financial services provider.
Izwe is also committed to continually meeting internal and external stakeholder expectations through sound management practice and a strong drive for execution on its ambitions. The positive economic outlook for Zambia, coupled with a strong leadership team is expected to provide the bedrock of the anticipated strategic transformation success.