The Board of Directors of Cavmont Capital Holdings Zambia issued a profit warning to the market stating that that the Earnings per Share for the six-month period to 31 December 2018 is expected to be about 5,655% lower as compared to that for the six-month period to 31 December 2017.
In a profit warning note availed to the Zambian Business Times – ZBT signed by company secretary, Rita Mapara-Ndhlovu, Cavmont stated that the decrease in profitability is attributed to increased impairment charges and operating expenses.
Impairment charges for the period are higher mainly on account of the implementation of IFRS 9 on 1 July 2018, which increased impairment provisions across the entire industry.
Mapara-Ndhlovu further stated that operating expenses increased by K19.5m (about US$1.6 million) year-on-year on the back of increased investment in infrastructure and in hiring of staff in order to upskill the group’s workforce which included the on-boarding of key new human capital resources as a performance enhancement strategy and to remain relevant within the industry.
Analysts have pointed to Loan impairments in 2017 to 2018 have weighed down heavily on most commercial banks, a factor that has led to limited to no growth in private sector lending space, a key driver for the financial services industry. Government arrears is another area were the industry had faced challenges as liquidity for loan repayments had been locked into goods and services to the government.