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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) 17.4 17.0 2 33.1
Fully diluted earnings per share (thebe) 17.0 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, 18 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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