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Abridgeed Report for the 12 month period ended 31 December 2014
LETSHEGO HOLDINGS LIMITED
Incorporated in the Republic of Botswana Co. 98/442
PRELIMINARY REPORT
The Board of Directors of Letshego Holdings Limited is pleased to present an extract from the consolidated audited
financial results for the eleven month period ended 31 December 2014
FINANCIAL HIGHLIGHTS
Advances Up 28%
*Profit before tax Up 24%*
*Profit after tax Up 22%*
Total dividend per share 16.5t
RATIOS
31 December 31 January
2014 2014
Annualised return on average assets (%) 14% 14%
Annualised return on average equity (%) 21% 20%
Cost to income ratio (%) 29% 33%
Debt to equity ratio (%) 47% 36%
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 31 December 31 January
2014 2014 Change
P'000 P'000 %
ASSETS
Cash and cash equivalents 1 320 544 310 525
Advances to customers 2 5 686 796 4 427 757 28
Other receivables 3 151 103 101 911
Plant and equipment 4 51 762 53 988
Intangible assets 5 45 592 6 117
Goodwill 6 55 250 55 250
Deferred taxation 25 866 14 617
Total assets 6 336 913 4 970 165 27
LIABILITIES AND EQUITY
Liabilities
Customer deposits 7 3 995 -
Cash collateral 8 41 692 42 293
Trade and other payables 9 209 521 127 217
Income tax 49 228 46 517
Borrowings 10 1 937 844 1 249 871 55
Total liabilities 2 242 280 1 465 898
Shareholders' equity
Stated capital 11 975 510 959 554
Foreign currency translation reserve (2 189) (94 826)
Legal reserve 5 108 2 696
Share based payment reserve 21 246 17 470
Retained earnings 2 940 521 2 522 666
Total equity attributable to equity holders of the parent
company 3 940 196 3 407 560
Non-controlling interests 154 437 96 707
Total shareholders' equity 4 094 633 3 504 267
Total liabilities and equity 6 336 913 4 970 165 27
NOTE: % changes in the statement of profit or loss have been annualised.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Note 31 December 31 January *Annualised
2014 2014 Change
P'000 P'000 %
Interest income 12 1 345 194 1 176 176 25
Interest expense 13 (167 582) (62 488) 193
Net interest income 1 177 612 1 113 688 15
Fee and commission income 128 436 134 236
Other operating income 188 098 122 202
Operating income 1 494 146 1 370 126 19
Employee costs 14 (207 034) (199 658)
Other operating expenses 15 (225 500) (255 772)
Net income before impairment and taxation 1 061 612 914 696 27
Impairment of advances (91 480) (64 495) 55
Profit before taxation 970 132 850 201 24
Loss on sale of subsidiary (net of taxes) - (1 060)
Taxation (248 280) (205 511)
Profit for the period 721 852 643 630 22
Attributable to :
Equity holders of the parent company 674 915 601 151
Non-controlling interests 46 937 42 479
Profit for the period 721 852 643 630 22
Other comprehensive income, net of tax
Foreign currency translation differences arising from foreign
operations 106 304 (55 303)
Total comprehensive income for the period 828 156 588 327
Attributable to :
Equity holders of the parent company 767 552 552 636
Non-controlling interests 60 604 35 691
Total comprehensive income for the period 828 156 588 327
Weighted average number of shares in issue during the period
(millions) 2 174 2 129
Dilution effect - number of shares (millions) 32 28
Number of shares in issue at the end of the period (millions) 2 176 2 167
Basic earnings per share (thebe) 33.2 30.2 20
Fully diluted earnings per share (thebe) 32.8 29.8
NOTE: The diluted EPS has been calculated based on shares that may vest in terms of the Group's long term staff incentive scheme.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Note 31 December 31 January
2014 2014
P'000 P'000
Operating activities
Profit before taxation 970 132 850 201
Add : Amortisation and depreciation 13 392 8 721
: Impairment of advances 47 215 11 051
Movement in working capital and other changes (1 148 907) (1 149 398)
Cash utilised in operations (118 168) (279 425)
Taxation paid (256 817) (192 999)
Net cash utilised in operating activities (374 985) (472 424)
Investing activities
Net cash used in investing activities (45 447) (46 083)
Financing activities
Dividends paid to equity holders and subsidiary non-controlling interests (257 522) (197 800)
Net receipts on borrowings / equity raising (687 973) 219 578
Net cash generated from financing activities 430 451 21 778
Net movement in cash and cash equivalents 10 019 (496 729)
Cash and cash equivalents at the beginning of the period 310 525 807 254
Cash and cash equivalents at the end of the period 1 320 544 310 525
Notes to the statement of financial position and statement of profit or loss and other comprehensive income
31 December 31 January
2014 2014
P'000 P'000
1 Cash and cash equivalents
Cash at bank and in hand 311 665 296 341
Short term deposits 8 879 14 184
320 544 310 525
2 Advances to customers
Gross advances to customers 5 762 158 4 455 904
Less : Specific impairment allowance (36 285) (1 055)
: Portfolio impairment allowance (39 077) (27 092)
5 686 796 4 427 757
3 Other receivables
Prepayments and deposits 15 927 13 383
Dividend receivable from insurance arrangements 81 361 75 949
Withholding tax and value added tax refundable 40 869 9 411
Other receivables 12 946 3 168
151 103 101 911
4 Plant and equipment
Carrying Additions Transfers Disposal Depreciation Carrying
amount at 01 charge amount at 31
February 2014 December
2014
Motor vehicles 992 977 - - (735) 1 234
Computer equipment 4 365 14 299 - - (4 310) 14 354
Office furniture and equipment 9 786 8 001 - - (4 259) 13 528
Work in progress 38 845 27 364 (43 563) - - 22 646
53 988 50 641 (43 563) - (9 304) 51 762
5 Intangible assets
Carrying Additions Transfers Disposal Depreciation Carrying
amount at 01 charge amount at 31
February 2014 December
2014
Computer software 6 117 - 43 563 - (4 088) 45 592
31 December 31 January
2014 2014
P'000 P'000
6 Goodwill
Goodwill arose on the acquisition of:
Letshego Financial Services Namibia
(Proprietary) Limited 25 760 25 760
Letshego Tanzania Limited 2 064 2 064
Letshego Kenya Limited 27 426 27 426
55 250 55 250
The Group assessed the recoverable amount of goodwill, and determined that it was not impaired in respect of all cash generating
units noted above.
7 Customer deposits
Fixed deposit accounts 3 995 -
8 Cash collateral
Cash collateral on loans and advances 41 692 42 293
Cash collateral represents payments made by customers as security for loans taken. The amounts are refundable upon the
successful repayment of loans by customers or are utilised to cover loans in the event of default. This relates only to Letshego
Kenya,Rwanda,Uganda and South Sudan.
31 December 31 Jaunuary
2014 2014
P'000 P'000
9 Trade and other payables
Audit fees 2 813 2 633
Insurance premium payable 23 631 15 917
Payroll related accruals 57 246 34 267
Other accruals 23 104 35 020
Trade and other payables 92 644 31 200
Value added tax / withholding tax payable 10 083 8 180
209 521 127 217
10 Borrowings
Commercial banks 836 034 198 361
Note programmes 934 449 934 050
Development finance institutions 110 597 61 388
Pension funds 56 764 56 072
Total borrowings 1 937 844 1 249 871
11 Stated capital
Issued: 2,176,475,705 ordinary shares of no par value (2014: 2,167,540,301)
975 510 959 554
12 Interest income
Advances to customers 1 338 983 1 172 553
Deposits with banks 6 211 3 623
1 345 194 1 176 176
13 Interest expense
Overdraft facilities and term loans 165 755 112 533
Foreign exchange loss / (gains) 1 827 (50 045)
167 582 62 488
14 Employee costs
Salaries and wages 135 773 118 764
Staff incentive 40 304 21 515
Staff pension fund contribution 7 075 6 924
Directors' remuneration – for management services (executive) 4 150 36 816
Long term incentive plan 19 732 15 639
207 034 199 658
15 Other operating expenses
Accounting and secretarial fees 364 332
Advertising 14 516 16 021
Audit fees 3 133 2 431
Bank charges 3 735 3 632
Computer expenses 7 669 6 856
Consultancy and professional fees 9 448 11 522
Depreciation and amortisation 13 392 8 721
Directors' fees – non executive 3 407 2 662
Direct costs 65 822 99 398
Operating lease rentals - property 21 247 18 076
Other operating expenses 39 824 54 058
Office expenses 7 224 6 063
Insurance 4 640 2 155
Payroll administration costs 865 1 428
Telephone and postage 10 644 8 801
Travel 19 570 13 616
225 500 255 772
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN Shared based Foreign exchange Legal Non-controlling
EQUITY Stated capital Retained earnings payments reserve translation reserve reserve interest Total
P'000 P'000 P'000 P'000 P'000 P'000 P'000
Balance at 1 February 2013 689 243 2 112 485 19 173 (45 982) - 85 524 2 860 443
Total comprehensive income for the year
Profit for the year - 601 151 - - - 42 479 643 630
Other comprehensive income, net of income tax
Foreign currency translation reserve - - - (48 515) - (6 788) (55 303)
Transactions with owners, recorded directly in equity
Non - Controlling Interest in MAL acquired - (6 301) - - - (4 446) (10 747)
Allocation of additional shares to ADP I Holding 252 969 - - - - - 252 969
Allocation to share based payment reserve - - 15 639 - - - 15 639
Disposal of Letshego Finanial Services Zambia (Pty) Ltd - (4 235) - (329) - - (4 564)
Allocated to legal reserve - (2 696) - - 2 696 - -
New shares issued from long term incentive scheme 17 342 - (17 342) - - - -
Dividend paid by subsidiary to non-controlling interests - - - - - (20 062) (20 062)
Dividends paid to equity holders - (177 738) - - - - (177 738)
Balance at 31 January 2014 959 554 2 522 666 17 470 (94 826) 2 696 96 707 3 504 267
Total comprehensive income for the period
Profit for the period - 674 915 - - - 46 937 721 852
Other comprehensive income, net of income tax
Foreign currency translation reserve - - - 92 637 - 13 667 106 304
Transactions with owners, recorded directly in equity
Allocation to share based payment reserve - - 19 732 - - - 19 732
Allocated to legal reserve - (2 412) - - 2 412 - -
New shares issued from long term incentive scheme 15 956 - (15 956) - - - -
Dividend paid by subsidiary to non-controlling interests - - - - - (2 874) (2 874)
Dividends paid to equity holders - (254 648) - - - - (254 648)
Balance at 31 December 2014 975 510 2 940 521 21 246 (2 189) 5 108 154 437 4 094 633
SEGMENTAL REPORTING
Regional geographical segments
Southern Africa* East Africa** Group
31 December 31 January 31 December 31 January 31 December 31 January
2014 2014 2014 2014 2014 2014
P'000 P'000 P'000 P'000 P'000 P'000
Operating income 1 126 170 1 020 282 367 976 349 844 1 494 146 1 370 126
Segment profit before tax (before management and
guarantee fees) 794 555 660 126 175 577 189 015 970 132 849 141
Taxation - consolidated (248 280) (205 511)
Profit for the period - consolidated 721 852 643 630
Gross advances to customers 4 874 919 3 753 459 887 239 702 445 5 762 158 4 455 904
Impairment provisions (48 919) (10 225) (26 443) (17 922) (75 362) (28 147)
Net advances 4 826 000 3 743 234 860 796 684 524 5 686 796 4 427 757
Borrowings 1 568 508 1 005 507 369 336 244 364 1 937 844 1 249 871
* Southern Africa includes: Botswana, Lesotho, Mozambique, Namibia and Swaziland.
** East Africa includes : Kenya, Rwanda, South Sudan, Tanzania and Uganda.
COMMENTARY
The Board of Directors is pleased to present an extract of the audited consolidated results of the Letshego Holdings Limited Group (“the Group”) for the eleven month period
ended 31 December 2014.
Delivering on strategic initiatives
Letshego’s strategic intent is to build a leading African financial services group. Delivering the strategy is centred on four key areas of execution:
- Growing the franchise: deposit-taking commenced in Mozambique (February) and Rwanda (August), whilst in Namibia a provisional licence was granted in July 2014.
Subject to Central Bank approval we expect the licence to be confirmed in the current financial year. Progress has also been made on various financial inclusion
initiatives albeit in early stages.
- Building capabilities: continued investments in systems infrastructure have created a unified platform in six of our countries from which early benefits are beginning to
be realised. Group functions have been strengthened in the areas of regional sales, human resources, project and transformational management and
investor relations. At a country level, a new organisational structure has been agreed with added focus on sales, service andrisk management. Development of local talent
is a key focus.
- New operating model: a new corporate governance framework, in line with King III, is being rolled out to all subsidiaries. The senior and middle leadership teams
across our footprint have tailored the strategy to their respective areas and “strategy champions” have rolled this out to all employees. Customer experience standards
were developed and branch improvements started.
- Leveraging the balance sheet: diversification of funding sources has continued and the debt to equity ratio has improved to 47% (2014 January: 36%). The cost of borrowing
has remained at prior year levels and the group’s credit rating of Ba3 was maintained in an environment of financial services’ ratings being downgraded.
Headline performance - Highlights:
- Profit before tax increased by 24%* to P970 million
- Margins were consistent with the prior period despite the prevailing competitive environment
- 60% of profits before tax were generated outside of Botswana
- Cost to income ratio was reduced to 29%
- Impairment charges were 2.0% on average net advances
- Capital adequacy ratio remains above 60%
Our profit performance was strong with 91% (P884 million) of profit before tax coming from our four largest markets, Botswana, Mozambique, Namibia and Tanzania.
Non-interest income increased by 35%* and it remains an area of focus to grow these revenue streams as interest rates are under pressure.
Progress in closing out net foreign currency positions (mainly on the South African Rand and Mozambican Metical), resulted in a small foreign exchange loss of P1.8m, as
compared to a P50m gain in the previous period.
Operating costs were generally flat with a 4% increase; however investments in human capital, as noted above, resulted in a 13%* increase in staff costs.
The quality of the advances book was within target levels with an impairment charge on the net portfolio at 2.0%.
Growth indicators - Highlights:
- Advances to customers (net) increased by 28% to P5.7 billion
- The payroll portfolio increased by 26% to P5.3 billion (2014 January: P4.2 billion), and the microfinance portfolio increased 117% to P370 million (2014 January: P170
million)
- The customer base has grown by 11% to 265,265 (2014 January: 237,930)
- Customer access points have extended to 252 (2014 January: 211)
- Total headcount has risen by 8% to 1,425 (2014 January: 1,296)
The largest contributors in absolute terms to advances growth were Namibia, Mozambique and Botswana, contributing to P944 million (75%) of net increase, as well as driving
the payroll portfolio growth.
The microfinance operations in Kenya, Rwanda and Uganda, combined, achieved growth of 117%, closing at P370 million. Underlying this strong result was significant growth
in the low income housing and Micro and Small Enterprise (MSE) loan solutions.
Customer access points across Letshego’s footprint increased by 19% to 252, and distribution reach was enhanced with the addition of over 100 commission-based sales agents,
bringing this complement to 560. Overall the customer base rose to over 265,000 – an increase of 11%.
The Group remains well capitalised with a capital adequacy ratio of 62% (2014 January: 68%) and has cash resources of over P321 million (2014 January: P311 million).
Returns - Highlights:
- Return on Assets was 14% (2014 January: 14%)
- Return on Equity was 21%* (2014 January: 20%)
- Earnings Per Shares increased by 20%* to 33.2t (2014 January: 30.2t)
- Dividend declared during the period equates to 50% of profit after tax
Return on assets and on equity both stabilised at prior period levels, with a slight improvement in return on equity. This will remain an area of focus. Basic earnings
per share for the period were 33.2 thebe, which (on an annualised earnings basis) translated to an increase of 20% on the prior year.
The dividend policy remains at a 50% pay-out ratio and therefore the final dividend of 8 thebe a share brings total dividends declared during the current financial period
to 16.50 thebe a share (P359 million). This represents a dividend yield of 6.5% (2014 January: 3.4%).
Board of Directors
Mr. Legodile Serema retired from the board at the Annual General Meeting in July 2014 and the Board thanks him for his service to the Group.
Change of year end
The 2014 year is the first period in which Letshego’s year-end changes to 31 December. Therefore, these audited results are for the 11 months ended 31 December 2014. Kenya,
Mozambique, Rwanda and South Sudan subsidiaries already had a December year-end cycle.
Prospects
The Board and management continue to seek and review potential inorganic expansion opportunities, based on synergy with the Letshego strategy. The Board of Directors has a
positive outlook and expects sustained performance, growth and returns.
Dividend notice
Notice is hereby given that the board has declared a final dividend of 8 thebe per share for the period ending 31 December 2014.
In terms of the Botswana Income Tax Act (Cap50:01) as amended, withholding tax at the rate of 7.5% or any other currently enacted tax rate will be deducted from the final
gross dividend for the period ended 31 December 2014.
Important dates pertaining to this dividend are:
Declaration date Wednesday, 25 February 2015
Last date to register Friday, 13 March, 2015
Dividend payment date on or about Friday, 27 March 2015
For and on behalf of the Board of Directors.
J A Burbidge A C M Low
Group Chairman Group Managing Director
Gaborone, Thursday, 26 February 2015
* Note: where applicable, measures have been annualised in this commentary.
The report of the auditor is available for inspection at the company's registered office.
NON EXECUTIVE DIRECTORS: J A Burbidge (Chairman) (UK), G Hassam (Malawi), J de Kock (RSA), H Karuhanga (Uganda), I M Mohammed (USA), S Price (UK),
R Thornton (USA), Gerrit van Heerde (RSA), R N Alam (alternate to I M Mohammed) (USA)
EXECUTIVE DIRECTOR: A C M Low (Managing Director) (UK)
CERTIFIED AUDITORS:
KPMG, Plot 67977,
Fairground Office Park,
Gabarone,
Botswana
TRANSFER SECRETARIES: PricewaterhouseCoopers (Pty) Limited, Plot 50371, Fairground Office Park, Gaborone, Botswana
REGISTERED OFFICE: Plot 50371, Fairground Office Park, Gaborone, Botswana
Debt sponsor in South Africa
The Standard Bank of South Africa Limited, acting through its Corporate and Investment Banking division
Sponsoring broker in Botswana
Stockbrokers Botswana Limited
www.letshego.com
Date: 26/02/2015 03:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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