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Consolidated results for the year ended 31 December 2015
Letshego Holdings Limited
Incorporated in the Republic of Botswana
Registration number 98/442
Instrument Code: LHL03 ISIN: ZAG000101924
Instrument Code: LHL13 ISIN: ZAG000129719
Instrument code: LHL17 ISIN: ZAG000132234
Instrument code: LHL18 ISIN: ZAG000132242
Instrument code: LHL19 ISIN: ZAG000132259
(“Letshego Holdings” or “the Company”)
LETSHEGO HOLDINGS LIMITED GROUP REVIEWED CONSOLIDATED RESULTS FOR THE YEAR
ENDED 31 DECEMBER 2015
The Board of Directors of Letshego Holdings Limited (“the Group”) is pleased
to present an extract of the reviewed consolidated results for the year ended
31 December 2015.
CONTINUED PROGRESS ON DELIVERY OF THE STRATEGIC AGENDA
2015 has been another year of growth for Letshego and profit before tax
exceeded P1 billion for the first time. The Group continues to deliver on its
strategic agenda towards creating a leading African financial services group,
with a focus on financial inclusion.
GOOD GROWTH, PERFORMANCE AND RETURNS
Total revenues exceeded P2 billion
Profit before tax exceeded P1 billion with underlying profitability up
5%*(excluding foreign exchange differences)
Interest income rose 10%* to P1.7 billion
Fee, commission and other income increased by 14%* to P257 million
Cost to income ratio was contained at 29%
Conservative risk management limited impairments to 2.3% of the gross
book
Debt to equity ratio of 66% achieved up from 47% in the preceding
period
Return on equity was 19%
Return on assets was 10%
Earnings per share of 35.2 thebe per share
*percentages have been annualised where applicable since the prior accounting
period was for the eleven months to 31st December 2014.
The results were driven by continued growth in operational performance across
the business:
Total borrowing customers grew by 13% to 300,000
Customers were serviced through 268 customer access points, an increase
of 8% on 2014
Gross advances grew by 14% to P6.5 billion (or 18% in underlying
currency terms)
P2.37 billion was disbursed in new loans
The Group employed 1,592 full time staff as of 31 December 2015,
supplemented by an additional 775 commission-based sales agents
Customer deposits of P154 million representing over 100,000 customers
KEY HIGHLIGHTS OF DELIVERY OF THE STRATEGIC AGENDA
Diversification: Letshego continues to diversify in terms of geographic,
customer and product mix as well as through introducing new capabilities. In
the period we expanded our business through acquisitions in Tanzania
(November 2015) and Nigeria (December 2015). In our existing markets growth
was continued; in our home market of Botswana, despite strong competition we
increased loans and advances to customers by 7% to P2.2 billion, while
Kenya’s smaller and more diversified portfolio increased by 110% to P400
million. A number of new products were launched including agriculture supply
chain financing, asset financing and micro insurance, as well as enhancements
to existing products. Diversification will continue into 2016.
Embracing financial inclusion: this is the cornerstone of Letshego’s
strategic agenda. In December 2015, Letshego was confirmed as an Alliance for
Financial Inclusion (AFI) private partner, making Letshego AFI’s first
Africa-focused private partner. AFI is a global network of financial
policymakers from over 100 developing and emerging countries, covering the
majority of Letshego’s footprint – the AFI partnership status is important
for the Group’s sustainability objectives, and will enable accelerated
dialogue with regulators sharing a common focus on creating policies
conducive to financial inclusion. Also, we continue to seek deposit-taking
licences to facilitate our financial inclusion agenda - this includes
providing money transfer, bill payment and remittance services, as well as
facilitating borrowings for micro and small enterprises for their productive
needs. Access will be provided via third party agents and mobile telephony –
this approach for enhanced customer experience has already commenced in
Kenya, Tanzania, Rwanda and most recently Nigeria.
Delivering simple, appropriate and affordable solutions: continued investment
in people and systems has strengthened our operating platform, with Letshego
Mozambique now live (in 2016) with USSD mobile banking. Additional customer
solutions in partnership with a local mobile operator in Mozambique are
planned for 2016, with similar initiatives being progressed in other deposit-
taking countries. The enhancement of existing products to ensure continued
market relevance continues while for micro and small enterprises,
agriculture, health and education solutions have been piloted in East Africa.
Providing Access, Anytime Anywhere: enhancements to customer access points
continue across the Letshego footprint. The use of mobile money is well
established in Kenya and, following this, similar initiatives will be
explored in other geographies with suitable environments. New developments
include the securing of a dedicated Letshego short code number in Mozambique,
Namibia, and Rwanda plus registration of Faidika’s customer access points
(105) in Tanzania as agencies for the newly acquired Advans Bank Tanzania.
Analysis of the results for the period
This year’s results show good fundamental growth in an environment of
depreciating exchange rates against the Pula for most of the markets Letshego
operates in. Excluding a foreign exchange loss for the year of P75.6
million, profit before tax was P1.1 billion, a 5% increase on the prior
period.
Letshego saw a 14% rise in loans and advances (11% excluding Nigerian and
Tanzanian acquisitions). In local currency terms this was 18%. Overall
portfolio yields were maintained in competitive market conditions.
The Group continues to invest in human capital and infrastructure in support
of its strategic growth agenda. Total expenses increased by 8%, comprising a
12% increase in staff costs and 18% additional operating costs associated
with building sustainable competitive capabilities. Full time employee
numbers grew by 81% (1,592 in 2015 vs. 879 in 2014) and customer access point
numbers grew by 8% (268 in 2015 vs. 248 in 2014). Growth in full time
employee numbers excluding the new acquisitions was 22% for full time
employees while customer access points remained unchanged.
At the same time, the Group maintained a competitive cost to income ratio of
29%.
A key part of the Group’s strategy is to continue to diversify funding
sources - in December 2015 Letshego refinanced R475 million of maturing bonds
and raised an additional R180 million. Total ZAR bond issuance including
commercial paper now stands at ZAR980 million. In addition, the Group
concluded various other refinancing and introduced new, predominantly Pula,
funding lines, which, on a blended basis, reduced the annual cost of
borrowing to 10.5% from 11.3%* in 2014. As a result debt to equity levels
increased to 66%; this is in line with the strategic objective to optimise
the Group’s balance sheet. The Group’s Ba3 Moody’s credit rating remained
unchanged during the year.
The foreign exchange losses incurred during the year principally relate to
the weakening of the South African Rand, Namibian Dollar and the Mozambique
Metical against the Botswana Pula. While these currencies have recovered
slightly in early 2016, we expect to close the Metical position in Q1 of 2016
and the Rand position in Q2 of 2016. This is expected to be achieved via a
combination of the introduction of new local currency funding, rebalancing of
existing inter group lending portfolios and the introduction of hedging
arrangements.
Return on equity (19%) and return on assets (10%) remain at short term
targeted levels.
Operational progress
There are now four businesses within the Group with deposit taking licences:
two from acquisitions in Nigeria and Tanzania as well as those established in
Mozambique and Rwanda. Conversion of the provisional licence in Namibia is
subject to satisfactory finalisation of certain conditions set by Bank of
Namibia and is expected by mid-2016; the evaluation of opportunities for
licencing in other countries continues. While it is expected that deposit
taking will, over time, lower the Group’s overall cost of funding, in the
short to medium term, the benefits will lie in being able to access our
customer’s transactional accounts and thereby offer them a broader based set
of financial service solutions.
In May 2015 the Group received shareholder approval for a share buyback. As a
result of the acquisitions in Nigeria and Tanzania the company was restricted
from implementing the buyback due to being in closed periods whilst the
acquisitions were taking place. The Group will continue to assess the
viability of this aspect of its balance sheet management process and is
subject, in the main, to sufficient funding being available.
Impairments increased 39% in absolute terms. However, on a total cost of risk
percentage basis, the 2015 measure of 2.3% is aligned with the Group’s
appetite of between 1% and 3%. This underlines the Group’s continued focus on
maintaining high levels of credit quality.
Geographic expansion
Two acquisitions were completed during the period: Advans Bank in Tanzania
and FBN Microfinance Bank in Nigeria.
Acquisition - Tanzania
As disclosed on 10 November 2015, Letshego has become a 75% shareholder of
deposit taking commercial bank, Advans Bank Tanzania, specialising in micro
finance. The acquisition was effected through a subscription for new shares.
The acquisition of Advans Tanzania adds further savings, payments, and MSE
borrowing, capability to its footprint, in line with its strategy to embrace
financial inclusion and to diversify its customer and revenue mix.
Letshego already serves over 44,000 Tanzanians and covers over 95% of
Government districts, through its credit institution, Faidika. The
combination of Advans Bank Tanzania with Letshego’s existing business Faidika
will position Letshego to be one of the leading financial services
organisations in Tanzania over time.
Acquisition – Nigeria
In December 2015 Letshego announced its acquisition of FBN Microfinance Bank,
a deposit taking micro finance bank specialising in financing of MSEs in
Nigeria. The transaction was closed on 31 December 2015 and provides Letshego
with a national micro finance license that includes deposit taking. With over
80,000 depositors and approximately 10,000 MSE borrowing customers, the
bank’s operations are directly aligned to Letshego’s financial inclusion
agenda and provide a strong platform from which to grow our business in
Nigeria – despite current market stresses from low oil prices and a weakened
Naira, growth prospects in the low-to-middle income customer and MSE segments
have significant upside potential.
Exit - South Sudan
As previously communicated to Shareholders, the Board decided to exit its
investment in South Sudan. This was concluded during March 2015 through sale
to a European based developmental financial institution as a going concern.
Board of Directors
Dr Gloria Somolekae was appointed to the Board during January 2016 as a new
independent Non-Executive Director (NED). This brings the total number of
Directors to ten, of which six are independent NEDs.
Change of year-end and comparative figures
Letshego changed its year-end from 31 January to 31 December during 2014.
Therefore the full year period is for the 12 months ended 31 December 2015
and the comparatives are for the 11 month period ended 31 December 2014.
Annualised percentages and changes are provided where appropriate and, also,
certain comparative figures have been restated to align with new
classifications.
Auditors’ review
The condensed annual financial statements from which the financial
information set out in this announcement has been extracted, has been
reviewed but not audited by PricewaterhouseCoopers, the Letshego Group’s
external auditors. Their unqualified review report is available for
inspection at the Group’s registered office.
Prospects
Letshego continues to drive its financial inclusion strategy and strengthen
its operations through investment in technology and people as well as through
strategic partnerships. The Board of Directors is confident that the Group is
well positioned to benefit from the growing markets in which it is active and
views inorganic expansion via acquisitions as important to the acceleration
of Letshego’s strategy. As such it will continue to seek and review options
for the Group to pursue.
Dividend notice
Notice is hereby given that the Board has declared a final dividend of 8
thebe per share for the year ending 31 December 2015. 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 year ended 31 December 2015.
Important dates pertaining to this dividend are:
Declaration date, 24 February 2016
Last date to register, 25 March 2016
Dividend payment date on or about, 8 April 2016
For and on behalf of the Board of Directors:
J A Burbidge A C M Low
Group Chairman Group Managing Director
GABORONE, Thursday, 25 February 2016
An extract of the unaudited reviewed financial statements of the group can be
downloaded from http://www.letshego.com/financial_results.php
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
Date: 25/02/2016 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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