FMB | Release of 2016 annual report

DEAR SHAREHOLDERS
The year here reviewed was in almost all respects a remarkably positive one for the Group, a year of solid, often exceptional, achievements, all of which augured well for FMB’s future. In 2016 our operating context remained challenging in the extreme with Malawi, Mozambique and Zambia continuing to feel the adverse effects of the economic setbacks suffered in the previous year. In all of our markets growth was well shy of that of recent years, economic activity and investment being negatively affected by drought and depressed commodity prices. In Mozambique investor sentiment was rocked by revelations concerning previously undisclosed national debt and electricity shortages hampered growth prospects in Malawi and Zambia. Only in Botswana did we begin to see a resumption of growth and a material strengthening of the national currency.

In Malawi, Mozambique and Zambia inflation remained stubbornly high and above 20% for most of the year. Interest rates persisted at concomitantly elevated levels, thus increasing the cost of borrowing. In both Malawi and Mozambique our interest expense rose by over 100% though in the case of Malawi, this derived largely from our decision to replace dollar-denominated debt with kwacha-denominated borrowings, albeit at effectively higher rates.

PERFORMANCE IN THE FACE OF ADVERSITY

As the Group Managing Director explains in his message, the robust performances recorded by each of our operations were all the more commendable given the strong economic headwinds facing the various countries of the region.

These performances speak, I believe, to the strength of our board and of management, both at group level and at all of our various operations, the dedication of our staff and the evolving strength of both our systems and our strategy. Even the most cursory reading of FMB’s 2016 financial reports will disclose the fact of our having restated 2015 information in our balance sheet and income statement. As the Key Audit Matter in this annual report makes clear, this restatement derives from our decision (with which the external auditors concurred following an extensive evaluation) to consolidate the financial statements of what were previously our associates, Capital Bank Botswana and First Capital Bank of Zambia. This is not the place to elaborate on this decision beyond stating that it reflects the reality of our control over these key FMB Group operations and, almost coincidentally, that this decision accorded precisely with the Reserve Bank of Malawi’s draft consolidated-reporting requirements for purposes of capital assessment. Our 2016 performance against almost all key indicators was outstanding, notwithstanding this restatement.

CREATING VALUE FOR ALL

In saying that we will benefit customers and employees in Zimbabwe, we can state without fear of contradiction that FMB has an extremely proud record of adding value to the lives of the people associated with it and to the communities in which it operates. For 21 years we have consistently rewarded our investors while, equally, rewarding our employees. In 2016 we spent MK80.8 million on developing our people’s skills, at the same time helping deserving causes in our communities…

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• FMB 2016 annual report.pdf