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Letshego Holdings Limited - CANCELLATION OF S337585 Unaudited Interim Report for the half year ended 31 July 2013

Release Date: 18/10/2013 14:59
Code(s): LHL01 LHL02 LHL03     PDF:  
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CANCELLATION OF S337585 Unaudited Interim Report for the half year ended 31 July 2013

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 2013

FINANCIAL HIGHLIGHTS

* Advances   22%   
* Profit before tax   8%   
* Profit after tax   9%   
* Interim dividend per share 4.2 t

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION             
                                                                
                                                                   31 July          31 July                 31 January   
                                                                      2013             2012                       2013   
                                                                (Reviewed)       (Reviewed)   Change         (Audited)   
                                                                     P'000            P'000        %             P'000   
ASSETS                                                                                                                   
Cash and cash equivalents                                          412 760          277 241                    807 254   
Advances to customers                                            3 818 207        3 139 596       22         3 336 204   
Other receivables                                                   46 942           29 867                     26 206   
Short term investments                                              20 397           11 439                     12 143   
Long term receivables                                                    -           11 563                     11 468   
Investment in associate                                                344                -                          -   
Plant and equipment                                                 17 401           14 520                     14 559   
Intangible assets                                                   32 567            7 180                     12 457   
Goodwill                                                            55 250           49 948                     49 948   
Deferred taxation                                                    9 115           10 645                      8 939   
Total assets                                                     4 412 983        3 551 999       24         4 279 178   
LIABILITIES AND EQUITY                                                                                                   
Liabilities                                                                                                              
Customer cash collateral                                            39 446           30 371                     34 185   
Trade and other payables                                            70 794           70 178                     78 828   
Income tax                                                          29 168           12 455                     28 327   
Borrowings                                                         855 198          801 952        7         1 277 395   
Derivatives                                                          3 632                -                          -   
Total liabilities                                                  998 238          914 956                  1 418 735   
Shareholders' equity                                                                                                     
Stated capital                                                     959 554          689 243                    689 243   
Foreign currency translation reserve                               (7 264)         (21 323)                   (45 982)   
Legal reserve                                                        2 696                -                          -   
Share based payment reserve                                         11 887            9 782                     19 173   
Retained earnings                                                2 359 142        1 887 460                  2 112 485   
Total equity attributable to equity holders of the parent                                                                
company                                                          3 326 015        2 565 160       30         2 774 919   
Non-controlling interests                                           88 730           71 883                     85 524   
Total shareholders' equity                                       3 414 745        2 637 043                  2 860 443   
Total liabilities and equity                                     4 412 983        3 551 999       24         4 279 178   


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                                               
                                                   
                                                                                   6 months ended   6 months ended            12 months ended   
                                                                                          31 July          31 July                 31 January   
                                                                                             2013             2012                       2013   
                                                                                       (Reviewed)       (Reviewed)   Change         (Audited)   
                                                                                            P'000            P'000        %             P'000   
Interest income                                                                           584 212          571 412        2         1 074 822   
Interest expense and foreign exchange gains                                              (28 541)         (42 686)       33         (108 807)   
Net interest income                                                                       555 671          528 726        5           966 015   
Premium income                                                                             59 764           44 975                     86 992   
Insurance fees                                                                            (4 128)          (3 803)                    (8 008)   
Net interest and insurance income                                                         611 307          569 898                  1 044 999   
Fee and commission income                                                                  64 338           40 301       60           132 907   
Other operating income                                                                     11 274            6 094                      6 218   
Operating income                                                                          686 919          616 293       11         1 184 124   
Employee benefits                                                                        (81 535)         (63 326)      (29)        (123 086)   
Other operating expenses                                                                 (99 405)         (75 654)      (31)        (157 395)   
Claim mitigation reserve movement                                                               9             (25)                    (1 306)   
Insurance claim expense                                                                   (8 458)          (9 471)                   (25 853)   
Net income before impairment and taxation                                                 497 530          467 817        6           876 484   
Impairment of advances                                                                   (37 964)         (40 680)        7          (35 097)   
Profit before taxation                                                                    459 566          427 137        8           841 387   
Share of net of tax profit of equity accounted associate                                      344                -                          -   
Taxation                                                                                 (96 051)         (93 532)                  (181 750)   
Profit for the period                                                                     363 859          333 605        9           659 637   
Attributable to :                                                                                                                               
Equity holders of the parent company                                                      342 356          319 043                    628 084   
Non-controlling interests                                                                  21 503           14 562                     31 553   
Profit for the period                                                                     363 859          333 605                    659 637   
Other comprehensive income, net of tax                                                                                                          
Foreign currency translation differences arising from foreign operations                   44 180           12 175                   (15 833)   
Total comprehensive income for the period                                                 408 039          345 780       18           643 804   
Attributable to :                                                                                                                               
Equity holders of the parent company                                                      381 074          330 241                    614 623   
Non-controlling interests                                                                  26 965           15 539                     29 181   
Total comprehensive income for the period                                                 408 039          345 780       18           643 804   
Weighted average number of shares in issue during the period (millions)                     2 088            1 958                      1 995   
Dilution effect - number of shares (millions)                                                  42              195                        195   
Number of shares in issue at the end of the period (millions)                               2 168            1 999                      1 999   
Basic earnings per share (thebe)                                                             16.4             17.0       (4)             33.1   
Fully diluted earnings per share (thebe)                                                     16.1             15.5                       30.1   

NOTE: The diluted EPS has been calculated based on shares that may vest in terms of the Group's long term staff incentive scheme. 
In July 2012 and January 2013 this also included shares that may be linked under a convertable loan then in issue, now converted.                                                                                             


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS                                 
                                            
                                                                   6 months ended       6 months ended   12 months ended   
                                                                          31 July              31 July        31 January   
                                                                             2013                 2012              2013   
                                                                       (Reviewed)           (Reviewed)         (Audited)   
Operating activities                                                        P'000                P'000             P'000   
Profit before taxation                                                    459 566              427 137           841 387   
Add : Amortisation and depreciation                                         4 067                2 499             5 417   
    : Impairment of advances                                               10 683                8 640             1 670   
    : Loss on disposal of non current assets                                    -                  (3)                 -   
Movement in working capital and other changes                           (490 825)             (88 172)         (255 336)   
Cash (utilised in) / generated from operations                           (16 509)              350 101           593 138   
Taxation paid                                                            (94 296)             (92 625)         (166 828)   
Net cash (utilised in) / generated from operating activities            (110 805)              257 476           426 310   
Investing activities                                                                                                       
Net cash (utilised in) in investing activities                           (48 735)             (22 748)          (33 631)   
Financing activities                                                                                                       
Dividends paid                                                           (86 702)             (49 554)         (133 568)   
Net cash (utilised in) / receipts on borrowings / equity raising        (148 252)               18 455           474 531   
Net cash (utilised in) / generated from financing activities            (234 954)             (31 099)           340 963   
Net movement in cash and cash equivalents                               (394 494)              203 629           733 642   
Cash and cash equivalents at the beginning of the period                  807 254               73 612            73 612   
Cash and cash equivalents at the end of the period                        412 760              277 241           807 254   

RATIOS                                                                                                                     
                                                                   6 months ended       6 months ended   12 months ended   
                                                                          31 July              31 July        31 January   
                                                                             2013                 2012              2013   
                                                                       (Reviewed)           (Reviewed)         (Audited)   
Annualised return on average assets (%)                                      18.3                 20.6              17.6   
Annualised return on average equity (%)                                      24.3                 28.6              25.4   
Cost to income ratio (%)                                                     27.6                 24.1              26.0   
Debt to equity ratio (%)                                                     25.0                 30.4              46.0   


                                                                                                Shared                                                             
                                                                                                 based                                          Non-               
                                                                                              payments      Foreign exchange     Legal   controlling               
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY    Stated capital   Retained earnings    reserve   translation reserve   Reserve      interest       Total   
                                                                  P'000               P'000      P'000                 P'000     P'000         P'000       P'000   
Balance at 1 February 2012                                      669 876           1 617 969     15 654              (32 520)         -        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   
New shares issued from long term incentive scheme                19 367                   -   (19 367)                     -         -             -           -   
Allocation to share based payment reserve                             -                   -     13 495                     -         -             -      13 495   
Dividends to equity holders                                           -            (49 554)          -                     -         -             -    (49 554)   
Balance at 31 July 2012                                         689 243           1 887 458      9 782              (21 323)         -        71 883   2 637 043   
Total comprehensive income for the period                                                                                                                          
Profit for the period                                                 -             309 041          -                     -         -        16 991     326 032   
Other comprehensive income, net of income tax                                                                                                                      
Foreign currency translation reserve                                  -                   -          -              (24 659)         -       (3 350)    (28 009)   
Transactions with owners, recorded directly in equity                                                                                                              
New shares issued from long term incentive scheme                     -                   -          -                     -         -             -           -   
Allocation to share based payment reserve                             -                   -      9 391                     -         -             -       9 391   
Dividends to equity holders                                           -            (84 014)          -                     -         -             -    (84 014)   
Balance at 31 January 2013                                      689 243           2 112 485     19 173              (45 982)         -        85 524   2 860 443   
Total comprehensive income for the period                                                                                                                          
Profit for the period                                                 -             342 356          -                     -         -        21 503     363 859   
Other comprehensive income, net of income tax                                                                                                                      
Foreign currency translation reserve                                  -                   -          -                38 718         -         5 462      44 180   
Transactions with owners, recorded directly  in equity                                                                                                             
Non - Controlling Interest in MAL acquired                            -             (6 301)          -                     -         -       (4 445)    (10 746)   
Allocation of additional shares to ADP I Holding                252 969                   -          -                     -         -             -     252 969   
Allocation to share based payment reserve                             -                   -     10 056                     -         -             -      10 056   
Legal Reserve                                                         -             (2 696)          -                     -     2 696             -           -   
New shares issued from long term incentive scheme                17 342                   -   (17 342)                     -         -             -           -   
Dividend paid by subsidiary to minority interests                     -                   -          -                     -         -      (19 314)    (19 314)   
Dividends to equity holders                                           -            (86 702)          -                     -         -             -    (86 702)   
Balance at 31 July 2013                                         959 554           2 359 142     11 887               (7 264)     2 696        88 730   3 414 745   

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   
                                                               2013        2012            2013      2012              2013          2012        2013        2012   
                                                              P'000       P'000           P'000     P'000             P'000         P'000       P'000       P'000   
Total income from lending                                   522 357     561 416         199 085   126 942          (73 692)      (76 645)     647 750     611 713   
Segment profit before tax (before management and                                                                                                                    
guarantee fees)                                             350 890     364 320         108 676    62 817                 -             -     459 566     427 137   
Share of results of associate                                                                                                                     344           -   
Taxation - consolidated                                                                                                                      (96 051)    (93 532)   
Profit for the period - consolidated                                                                                                          363 859     333 605   
Gross advances to customers                               3 180 986   2 576 743         661 212   586 920                 -             -   3 842 198   3 163 662   
Impairment provisions                                      (10 222)    (15 561)        (13 769)   (8 505)                 -             -    (23 991)    (24 066)   
Net advances                                              3 170 764   2 561 182         647 443   578 415                 -             -   3 818 207   3 139 596   
Total segment assets                                      5 638 054   4 638 296         724 552   647 489       (1 949 623)   (1 733 786)   4 412 983   3 551 999   
Borrowings                                                2 075 061   1 741 843         271 735   362 210       (1 491 598)   (1 302 101)     855 198     801 952   
Total segment liabilities                                 2 168 104   1 802 107         336 072   426 088       (1 505 937)   (1 313 239)     998 238     914 956   


Ratio analysis on regional geographic segments                                                                        
                                                         Southern Africa          East Africa          Group          
                                                                    2013   2012          2013   2012    2013   2012   
Impairment charge to average advances (annualised)                  1.3%   2.7%          5.0%   3.7%    2.0%   2.8%   
Advances to total assets                                             88%    89%           89%    91%     87%    89%   
% of book on deduction code model                                   100%    99%           54%    54%     91%    91%   
Customers employed by government (%)                                 95%    95%           84%    83%     93%    93%   
Customers employed by parastatal or private sector (%)                5%     5%           16%    17%      7%     7%   

* 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 but unaudited financial results for the six
month period ended 31 July 2013. The highlights for the financial reporting
period include:

    -   Advances to customers increased by 22% to P3.8 billion (2012: P3.1
        billion)
    -   Profits before tax increased by 8% to P459.6 million (2012: P427.1
        million)
    -   Impairment charges of 2.0% on the average advances book (2012: 2.8%)
    -   55% of profits before tax generated outside of Botswana (2012: 39%)
    -   Interim dividend declared of 4.2 thebe per share (2012:4.2 thebe)

Financial performance
Advances to customers increased by 22% from the prior period with the most
significant contributions from Botswana, Namibia and Mozambique. Overall all
markets remain competitive and the group has been able to maintain or grow
market share.

The quality of the advances book was within target levels with an impairment
charge of 2.0% for the period as compared to 2.8% in the prior period.

The Group remains well capitalised and has cash resources of over P400 million
which are available for future growth. However, strong growth in the markets
noted above, during and after the review period, has necessitated that new lines
of credit be introduced ahead of the planned date of January 2014. These are
expected to be completed by November 2013.

Profitability increased by 8% from the prior period driven by the increase in
assets, but partially offset by a reduction in margins in certain countries, to
ensure our pricing remains market related.

The cost of borrowing reduced mainly due to forex gains on open group
exposures which was offset against the interest expense. Initiatives are at an
advanced stage to close out the more significant of these open positions.
Overall, excluding the impact of net forex gains, the cost of borrowings remained
consistent with prior periods notwithstanding the overall increased level of
borrowings.

The credit rating from Moody's Investor Services was reissued during August
2013 at Ba3 and there was no change to the rating from the prior year.

Operating and staff costs increased by 30% to P181 million (July 2012: P138
million). Costs increases were a result of the new Lesotho operation, systems
upgrades, increased branch networks and the inclusion of Letshego Kenya
(formerly Micro Africa) costs for 6 months (2012 :1 month).

Overall, this has resulted in a cost to income ratio of 27.6% (2012: 24%). The
investment in the group transformation process is a long term project which will
benefit all stakeholders going forward.

In April 2013, the convertible loan in issue was successfully converted to
ordinary shares further strengthening the capital base of the group. The full
details regarding this were included in the 2013 annual report.

Diversification
Initiatives are on-going to execute the phased diversification strategy of the group
to become a more diversified financial services provider. As part of this strategy
the group will commence deposit taking activities in Mozambique during
November 2013. Further updates will be given to Shareholders in due course.

Funding
As noted earlier, due to the increased level of new business written in Botswana,
Namibia and Mozambique the anticipated new debt raising has been brought
forward to November 2013 (from the planned date of January 2014).

Group Structure
During the period the group acquired the remaining shares in Micro Africa
Limited. This was completed during February 2013 and all related details were
communicated to shareholders in the 2013 annual report.

In June 2013 the group acquired the remaining 2.5% minority shareholding in
Micro Rwanda Limited (now Letshego Rwanda Limited) to bring the shareholding
to 100% for a consideration of USD 45,000.

Post period end developments
The group has entered into an agreement to dispose of its entire shareholding in
Letshego Zambia. This disposal, once concluded, will not have any significant
impact on the group results given the current level of contribution by Letshego
Zambia. The transaction is subject to all relevant regulatory approvals and is
expected to be concluded by end November 2013.

Board appointment
The board appointed Mr Hannington Karuhanga as an independent non-
executive director on 4 October 2013. Mr Karuhanga has extensive experience
in the East Africa region and we welcome him to the board.

Managing Director
As previously communicated to shareholders, the board had commenced a
process to identify a successor to the Group Managing Director, Mr Jan
Claassen. This process is now complete and the board is pleased to advise
shareholders that Mr Christopher Low has been appointed as the new Managing
Director. Mr Low will take up this position once all relevant approvals have been
put into place. Mr Low has extensive experience in the financial services sector
and in Africa and the board welcomes him to the Letshego family at this exciting
time.

The board thanks Mr Claassen for his 10 years with Letshego in which the
company has grown to become a significant group under his leadership and
guidance. We are pleased to note that Mr Claassen will remain on the board of
Letshego Holdings and will also assist the new Managing Director with hand over
and other projects for the immediate future.

Prospects
If prevailing economic conditions continue, the Directors anticipate further growth
in the advances book during the financial year to 31 January 2014 and continued
profitability.

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 4.2
thebe per share for the six month period ended 31 July 2013.

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 2013.

Important dates pertaining to this dividend are:
Declaration date:                 17 October 2013
Last date to register:            1 November 2013
Dividend payment date:            29 November 2013

For and on behalf of the Board of Directors.

J A Burbidge                                           J A Claassen
Chairman                                               Managing Director

GABORONE, 17 October 2013

NON EXECUTIVE DIRECTORS: J A Burbidge (Chairman) (GB), M Dawes (RSA), G Hassam (Malawi), J de Kock (RSA), H Karuhanga (Uganda),
                         I M Mohammed (USA), S Price (GB), L E Serema (Botswana), R Thornton (USA)
                         R N Alam (alternate to I M Mohammed) (USA), Gerrit van Heerde (alternate to M Dawes) (RSA)

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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