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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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