Review of the Business Environment
In the period under review, the financial sector experienced an improved operating environment owing to the continued reduction in inflation and a relatively stable exchange rate. However, competition in the sector remains high due to more favourable lending rates and a general improvement in levels of liquidity. The approved IMF credit facility will further provide improvements in the economic environment, especially stability in the exchange rate that will bolster confidence and allow for better planning.
Izwe Loans Zambia Plc (“Izwe”) anticipates to benefit from the projected economic growth, especially coming from the payroll product after the recruitment of more that 40,000 public service employees.
Financial Performance for the period ended 30 June 2022
The Directors of Izwe are pleased to present the abridged unaudited financial results for the period ended 30 June 2022. The information disclosed in the SENS was derived from the information contained in the unaudited financial statements and does not contain full or complete disclosure details.
The financial performance of Izwe has continued to improve year on year with net interest income growing by 43%. This growth can largely be attributed to overall lowering in the market cost of funding and the increase in loans and advances to customers. In the six-month period to June 2022, Izwe recorded a profit after tax of ZMW 64.78 million compared to ZMW 50.80 million for the same period in 2021. Gross revenue grew from ZMW 169.84 million recorded in prior year to ZMW 218.61 million recorded in the reporting period. Interest expense reduced from ZMW 37.80 million in 2021 to ZMW 29.50 million in the period under review.
The total operating expenses incurred amounted to ZMW 60.40 million during the period under review compared to ZMW 50.29 million of the same period in 2021. The increase was driven by strategic cost elements that form part of our 2025 strategy and includes expenditure in marketing and branding, additional human capital recruitment and an increase in sales variable costs. Despite this increase in operating expenses, Izwe still operated on a 35% cost to income ratio as was initially budgeted.
The overall performance for the half-year resulted in a year-on-year increase in Earnings Per Share (EPS) from ZMW0.49 recorded in 2021 to ZMW 0.62 in 2022. Izwe recorded a slight growth in total assets from ZMW 979.07 million in June 2021 to ZMW 989.77 million in the reporting period. However, there was significant change in the earning asset with the net loans and advances growing by 39% to ZMW 896.24 million from ZMW 642.96 million in June 2021. Borrowings and corporate notes reduced from ZMW 553. 20 million to ZMW 532.86 million after payment of matured facilities.
Izwe applied most of its cash flows in new loan disbursements and on the implementation of the new strategic plan, closing with a cash balance of ZMW 61.66 million in the period under review compared to ZMW 173.23 million of the same period in 2021.
Capital
Izwe has continued to maintain a very strong capital position with equity of ZMW 332.08 million as of June 2022 (2021: ZMW311.47), ensuring compliance with the regulatory requirements on capital adequacy.
Dividends
The Directors have elected not to declare a dividend to shareholders.
Outlook
Izwe is on course to attain performance targets going into the second half of the year. Revenue performance is expected to increase due to improved sales performance of both the SME products and Payroll business through uptake of newly recruited civil service employees. The Company expects to consolidate on the gains made towards product diversification in the second half of 2022.