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Letshego Holdings Limited - Unlisted Debt Instrument - Interim Results for the six months ended 31 July 2012

Release Date: 18/10/2012 15:00
Code(s): BILETS     PDF:  
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Unlisted Debt Instrument - Interim Results for the six months ended 31 July 2012

LETSHEGO HOLDINGS LIMITED
Incorporated in the Republic of Botswana Co. 98/442

UNAUDITED INTERIM REPORT
The Directors have pleasure in announcing the reviewed summarised financial results of 
Letshego Holdings Limited (the "Company") and its subsidiaries (the "Group") for the 
half year ended 31 July 2012

FINANCIAL HIGHLIGHTS

* Profit after tax increased 10%   
* Advances increased 21%   
* Profit before tax increased 24%   
* Dividend per share 4.2 t

CONSOLIDATED STATEMENT OF FINANCIAL POSITION                                                                                             
                                                                           6 months ended   6 months ended            12 months ended   
                                                                                  31 July          31 July                 31 January   
                                                                                     2012             2011                       2012   
                                                                               (Reviewed)       (Reviewed)   Change         (Audited)   
                                                                                    P'000            P'000        %             P'000   
ASSETS                                                                                                                                   
Cash and cash equivalents                                                         277 241          220 139                     73 612   
Advances to customers                                                           3 139 596        2 601 117       21         3 034 639   
Other receivables                                                                  29 867           37 411                     18 730   
Short-term investments                                                             11 439           22 684                     24 187   
Long-term receivables                                                              11 563           13 460                     11 120   
Plant and equipment                                                                14 520            7 812                      9 513   
Intangible assets                                                                   7 179              583                      3 291   
Goodwill                                                                           49 948           27 824                     27 824   
Deferred taxation                                                                  10 645            8 984                      9 809   
Total assets                                                                    3 551 998        2 940 014       21         3 212 725   
LIABILITIES AND EQUITY                                                                                                                   
Liabilities                                                                                                                              
Customer cash collateral                                                           30 371                -                          -   
Trade and other payables                                                           70 178           65 172                     70 732   
Taxation payable                                                                   12 455           13 764                     14 275   
Borrowings                                                                        801 952          832 761      (4)           802 864   
Total liabilities                                                                 914 956          911 697                    887 871   
Shareholders' equity                                                                                                                     
Stated capital                                                                    689 243          669 876                    669 876   
Foreign currency translation reserve                                             (21 324)         (45 056)                   (32 521)   
Share-based payment reserve                                                         9 782            5 203                     15 654   
Retained earnings                                                               1 887 458        1 353 642                  1 617 969   
Total equity attributable to equity holders of the parent                                                                                
company                                                                         2 565 159        1 983 665       29         2 270 978   
Non-controlling interests                                                          71 883           44 652                     53 876   
Total shareholders' equity                                                      2 637 042        2 028 317                  2 324 854   
Total liabilities and equity                                                    3 551 998        2 940 014       21         3 212 725   
                                                                                                                                     
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                                                                                          
                                                                           6 months ended   6 months ended            12 months ended   
                                                                                  31 July          31 July                 31 January   
                                                                                     2012             2011                       2012   
                                                                               (Reviewed)       (Reviewed)   Change         (Audited)   
                                                                                    P'000            P'000        %             P'000
   
Interest income                                                                   571 412          423 664       35           900 514   
Interest expense                                                                 (42 686)         (29 948)       43          (65 395)   
Net interest income                                                               528 726          393 716       34           835 119   
Premium income                                                                     44 975           29 066                     64 243   
Insurance fees                                                                    (3 803)          (3 167)                    (5 708)   
Net interest and insurance income                                                 569 898          419 615                    893 654   
Fee and commission income                                                          40 301           30 987       30            87 198   
Other operating income                                                              6 094            6 001                     10 107   
Operating income                                                                  616 293          456 603       35           990 959   
Employee benefits                                                                (63 326)         (51 603)       23         (100 297)   
Other operating expenses                                                         (75 654)         (51 674)       46         (113 367)   
Claim mitigation reserve movement                                                    (25)            (306)                      (686)   
Insurance claim mitigation reserve                                                (9 471)          (6 536)                   (21 268)   
Net income before impairment and taxation                                         467 817          346 484       35           755 341   
Impairment of advances                                                           (40 680)          (3 038)    1 239          (44 109)   
Profit before taxation                                                            427 137          343 446       24           711 232   
Taxation                                                                         (93 532)         (41 434)                  (133 433)   
Profit for the period                                                             333 605          302 012       10           577 799   
Attributable to:                                                                                                                        
Equity holders of the parent company                                              319 043          291 617                    555 944   
Non-controlling interests                                                          14 562           10 395                     21 855   
Profit for the period                                                             333 605          302 012                    577 799   
Other comprehensive income, net of tax                                                                                                  
Foreign currency translation differences arising from foreign operations           12 175         (40 114)                   (27 160)   
Total comprehensive income for the period                                         345 780          261 898       32           550 639   
Attributable to:                                                                                                                       
Equity holders of the parent company                                              330 241          256 335                    533 197   
Non-controlling interests                                                          15 539            5 563                     17 442   
Total comprehensive income for the period                                         345 780          261 898       32           550 639   
Weighted average number of shares in issue during the period (millions)             1 958            1 920                      1 953   
Dilution effect - number of shares (millions)                                         195              188                        189   
Number of shares in issue at the end of the period (millions)                       1 999            1 985                      1 985   
Basic earnings per share (thebe)                                                     17.0             15.7        8              29.6   
Fully diluted earnings per share (thebe)                                             15.5             14.3                       27.0   

NOTE: The diluted EPS has been calculated based on shares that may vest in terms
of the Group's long term staff incentive scheme and a convertible loan in issue.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS                                                                        
                                                                           6 months ended   6 months ended   12 months ended   
                                                                                  31 July          31 July        31 January   
                                                                                     2012             2011              2012   
                                                                               (Reviewed)       (Reviewed)         (Audited)   
                                                                                    P'000            P'000             P'000   
Operating activities                                                                                                  
Profit before taxation                                                            427 137          343 446           711 232   
Add : Amortisation and depreciation                                                12 499            1 960             3 772   
    : Impairment of advances                                                        8 640         (18 262)           (8 771)   
    : Loss on disposal of non-current assets including subsidiaries                   (3)               23                 2   
Movement in working capital and other changes                                    (88 172)        (350 554)         (782 565)   
Cash generated from / (utilised in) operations                                    350 101         (23 387)          (76 330)   
Taxation paid                                                                    (92 625)         (86 462)         (178 775)   
Net cash generated from / (utilised in) operating activities                      257 476        (109 849)         (255 105)   
Investing activities                                                                                                  
Net cash used in investing activities                                            (22 748)         (49 447)          (20 821)   
Financing activities                                                                                                  
Dividends paid (net of withholding taxation)                                     (49 554)                -                 -   
Net receipts on borrowings / equity raising                                        18 455          327 587           297 690   
Net cash (utilised in) / generated from financing activities                     (31 099)          327 587           297 690   
Net movement in cash and cash equivalents                                         203 629          168 291            21 764   
Cash and cash equivalents at the beginning of the period                           73 612           51 848            51 848   
Cash and cash equivalents at the end of the period                                277 241          220 139            73 612   

RATIOS                                                                                            
                                                                           6 months ended   6 months ended   12 months ended   
                                                                                  31 July          31 July        31 January   
                                                                                     2012             2011              2012   
                                                                               (Reviewed)       (Reviewed)         (Audited)   
                                                                                    P'000            P'000             P'000 
  
Annualised return on average assets (%)                                              20.6             22.1              20.5   
Annualised return on average equity (%)                                              28.6             31.7              28.7   
Cost to income ratio (%)                                                             24.1             24.1              23.8   
Debt to equity ratio (%)                                                             30.4             41.1              35.4   

                                                                                                Share-                                                   
                                                                                                 based                                Non-               
                                                                                              payments      Foreign exchange   controlling               
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY    Stated capital   Retained earnings    reserve   translation reserve      interest       Total   
                                                                  P'000               P'000      P'000                 P'000         P'000       P'000
   
Balance at 1 February 2011                                      412 814           1 334 016     12 545               (9 774)        38 155   1 787 756   
Total comprehensive income for the period                                                                                                                
Profit for the period                                                 -             291 617          -                     -        10 395     302 012   
Other comprehensive income, net of income tax                                                                                                            
Foreign currency translation reserve                                  -                   -          -              (35 282)       (4 832)    (40 114)   
Transactions with owners, recorded directly in equity                                                                                                    
New shares issued from long-term incentive scheme                19 744                   -   (19 744)                     -             -           -   
Allocation to share-based payment reserve                             -                   -     12 402                     -             -      12 402   
Dividends to equity holders                                     237 318           (273 647)          -                     -             -    (36 329)   
Disposal of non-controlling interest                                  -               1 656          -                     -           934       2 590   
Balance at 31 July 2011                                         669 876           1 353 642      5 203              (45 056)        44 652   2 028 317   
Total comprehensive income for the period                                                                                                                
Profit for the period                                                 -             264 327          -                     -        11 460     275 787   
Other comprehensive income, net of income tax                                                                                                            
Foreign currency translation reserve                                  -                   -          -                12 535           419      12 954   
Transactions with owners, recorded directly in equity                                                                                                    
Allocation to share-based payment reserve                             -                   -     10 451                     -             -      10 451   
Disposal of non-controlling interest                                  -                   -          -                     -           685         685   
Dividends paid by subsidiary                                          -                   -          -                     -       (3 340)     (3 340)      
Balance at 31 January 2012                                      669 876           1 617 969     15 654              (32 521)        53 876   2 324 854   
Total comprehensive income for the period                                                                                                                
Profit for the period                                                 -             319 043          -                     -        14 562     333 605   
Other comprehensive income, net of income tax                                                                                                            
Foreign currency translation reserve                                  -                   -          -                11 197           978      12 175   
Transactions with owners, recorded directly in equity                                                                                                   
Allocation of MAL's net assets to NCI at acquisition                  -                   -          -                     -         2 467       2 467   
Allocation to share-based payment reserve                             -                   -     13 495                     -             -      13 495   
New shares issued from long-term incentive scheme                19 367                   -   (19 367)                     -             -           -   
Dividends to equity holders                                           -            (49 554)          -                     -             -    (49 554)   
Disposal of minority interest - Micro Provident Uganda                -                              -                     -             -           -   
Balance at 31 July 2012                                         689 243           1 887 458      9 782              (21 324)        71 883   2 637 042   

SEGMENTAL REPORTING
Regional geographical segments
                                                       Southern Africa*       East Africa**              Elimination                Group

                                                     31 July     31 July   31 July   31 July       31 July       31 July     31 July     31 July   
                                                        2012        2011      2012      2011          2012          2011        2012        2011   
                                                       P'000       P'000     P'000     P'000         P'000         P'000       P'000       P'000 
  
Total income from lending                            561 416     457 834   126 942    61 005      (76 645)      (64 188)     611 713     454 651   
Segment profit before tax (before management and                                                                                                   
guarantee fees)                                      364 320     317 170    62 818    28 716             -       (2 440)     427 137     343 446   
Taxation - consolidated                                                                                                     (93 532)    (41 434)   
Profit for the period - consolidated                                                                                         333 605     302 012   
Gross advances to customers                        2 576 743   2 367 872   586 920   239 180             -             -   3 163 662   2 607 052   
Impairment provisions                               (15 561)     (4 674)   (8 505)   (1 260)             -             -    (24 066)     (5 934)   
Net advances                                       2 561 182   2 363 198   578 415   237 920             -             -   3 139 596   2 601 118   
Total segment assets                               4 638 296   4 379 065   647 489   259 883   (1 735 103)   (1 698 932)   3 550 682   2 940 016   
Borrowings                                         1 741 843   2 193 610   362 210   120 193   (1 303 418)   (1 481 042)     800 635     832 761   
Total segment liabilities                          1 802 107   2 280 646   426 088   125 934   (1 313 313)   (1 494 882)     914 882     911 698   

Ratio analysis on regional geographic segments

                                                     Southern Africa    East Africa       Group

                                                         2012   2011    2012   2011    2012   2011 
Impairment charge to average advances (annualised)       2.7%   0.1%    3.7%   1.7%    2.8%   0.3%   
Advances to total assets                                  89%    89%     91%    92%     89%    89%   
% of book on deduction code model                         99%    99%     54%   100%     91%    99%   
Customers employed by government (%)                      95%    96%     83%   100%     93%    96%   
Customers employed by parastatal or private sector (%)     5%     4%     17%     0%      7%     4%   
Debt to equity (%) (Includes intercompany borrowings)     21%    36%   96.2%    52%   30.4%    41%   
Cost to income ratio (%)                                  21%    12%     38%    41%     24%    24%   

* Southern Africa includes: Botswana, Lesotho, Mozambique, Namibia, Swaziland and Zambia.
** East Africa includes : Kenya, Rwanda, South Sudan, Tanzania and Uganda.

COMMENTARY

Highlights
The Board of Directors of Letshego Holdings Limited are pleased to present an
extract from the consolidated reviewed financial results for the six
month period ended 31 July 2012. The highlights for the financial reporting period
include:

    -   Advances to customers increased by 21% to P3.14 billion (2011: P2.60
        billion)
    -   Profits before tax increased by 24% to P427.14 million (2011: P343.45
        million)
    -   Cost to income ratio remains at a creditable 24% (2011: 24%)
    -   Impairment expense of 2.78% of the average advances book (2011: 0.3%)
    -   39% of profits before tax generated outside of Botswana (2011: 35%)
    -   Micro Africa Limited transaction completed and contributed P1.87 million to
        profit before tax for the two months consolidated
    -   Gross dividend declared of 25% of profit after tax amounting to P84 million

Financial performance
The Group's total interest-earning assets remain the largest component of total assets
at 97% of P3.55 billion (2011: 97% of P2.94 billion), and comprise P3.14 billion in net
customer loans, and P288.68 million in cash, cash equivalents and short-term
investments.

Despite incremental systems implementation costs, new regulatory compliance costs
and expansion in Mozambique and in Tanzania, the Group contained costs
satisfactorily within the existing business model to 24% (excluding credit costs) of net
total income.

Period on period, the growth in net loans of 21% incorporates, for the first time, the
Micro Africa Limited Group advances of P127.72 million (2011: nil) and includes a 9%
reduction in the Botswana loan book. This reduction is in line with the conservative
approach to lending in Botswana as notified to Shareholders during April 2012.

Impairment costs are generally in line with historical trends although Botswana is an
area of concern which is being monitored. The prior period cost is not comparable
due to certain once off items recorded in that period.

The increase in profit after tax is lower than the increase in profit before tax due to
the tax credit impact of the once off scrip dividend recorded in the prior period.

Regulatory environment
Central Registries continue to operate effectively in Botswana, Namibia, Swaziland
and Uganda. The Group strongly supports any efforts by regulators and industry
players to regularise practices, protect consumers and ensure a sustainable
industry. We continue to promote the establishment of independent Central
Registries in all countries where we have a presence.

In Botswana, the Non-Bank Financial Institutions Regulatory Authority (NBFIRA)
regulations came into effect from February 2012 and Letshego Financial Services
Botswana is subject to these regulations. We welcome the introduction of these
new regulations and governance in our industry.

Funding
The Group continues to explore the most effective methods of funding for the Group.

Further to this, Letshego and Sanlam Emerging Markets (SEM) have entered into
discussions regarding initiatives, which, if successful, could result in SEM
supporting some Letshego funding opportunities.

Post period end developments
Operations in Lesotho commenced from 17 September 2012 pursuant to the grant
of a deduction code to Letshego Financial Services Lesotho (LFSL). LFSL is
regulated by the Central Bank of Lesotho.

Prospects
    -   The Group continues to actively explore new regions in Africa, new
        business streams, both through acquisitive and green fields methods

    -   Prospects in existing operations remain positive and we continue to take a
        cautious approach to the market in Botswana as previously communicated to
        Shareholders
    -   Applications for banking and/or deposit-taking licences are underway in
        certain territories within the Group

Directors are optimistic about the future outlook of the Group results for the remainder
of the financial year.

Auditors' review
The financial information set out in this announcement has been reviewed but not
audited by KPMG, the Letshego Group's external auditors. Their unqualified review
report is available for inspection at the Company's registered office.

Dividend
Notice is hereby given that the Board has declared an interim dividend of 4.20 thebe
per share for the six month period ended 31 July 2012.

In terms of the Botswana Income Tax Act (CAP 50:01) as amended, withholding tax
at the rate of 7.5% or any other currently enacted tax rate will be deducted from the
interim gross dividend for the period ended 31 July 2012.

Important dates pertaining to this dividend are:

Declaration date:                  16 October 2012
Last date to register:             2 November 2012
Dividend payment date:             9 November 2012.

For and on behalf of the Board of Directors

C M Lekaukau                                     J A Claassen
Chairman                                         Managing Director

GABORONE, 16 October 2012

NON-EXECUTIVE DIRECTORS : C M Lekaukau (Chairman) (Botswana), J A Burbidge (UK), M M Dawes (RSA), G Hassam (Malawi), L E Serema 
(Botswana), I Mohammed (USA), R N Alam (alternate to I Mohammed)                           (USA)
                                                                                                        
EXECUTIVE DIRECTORS: J A Claassen (Managing Director) (RSA), D Ndebele (Director: Risk and Compliance) (Botswana)
                                        
TRANSFER SECRETARIES: PricewaterhouseCoopers (Pty) Limited, Plot 50371, Fairground Office Park, Gaborone, Botswana
                                                            
REGISTERED OFFICE: Plot 50371, Fairground Office Park, Gaborone, Botswana
                                                                                       
www.letshego.com

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