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Interim results for the six months ended 30 June 2017
Letshego Holdings Limited
Incorporated in the Republic of Botswana
Registration number 98/442
Instrument code: LHL17 ISIN: ZAG000132234
Instrument code: LHL18 ISIN: ZAG000132242
Instrument code: LHL19 ISIN: ZAG000132259
Instrument code: LHL22 ISIN: ZAG000139353
Instrument code: LHL26 ISIN: ZAG000141268
(“Letshego Holdings” or “the Company”)
This announcement is being released on the Johannesburg Stock Exchange for
information purposes only in respect of Letshego Holdings Limited’s Note
Programme.
LETSHEGO HOLDINGS LIMITED GROUP HALF YEAR 2017 FINANCIAL RESULTS
The Board of Directors of Letshego Holdings Limited (“the Group”) is pleased to
present an extract of the reviewed consolidated results for the six months period
ended 30 June 2017.
CONTINUED PROGRESS ON DELIVERY OF THE STRATEGIC AGENDA
Growth, Performance and Returns
- Net loans and advances to customers increased by 19%
- Total revenues exceeded P1.2 billion - a 15% increase
- Interest income increased by 17%
- Cost of borrowings remained stable at 10.9%: however, borrowings increased
by 45% resulting in a 20% increase in interest expense
- Staff and operational expenses increased by 21%
- This resulted in the cost to income ratio increasing to 40%
- Cost of credit risk was 3.3% and higher than target levels of 3%
- Profit before tax was P498m - a 2% increase
- Return on Assets was 9%
- Return of Equity was 18%
- A dividend of 8.5 thebe per share will be paid, retaining a 50% dividend
pay-out ratio
Non-Financial highlights:
- Total borrowing customers increased to 345,000 (2016: 300,000)
- Total savings customers increased to 120,000 (2016: 92,000)
- Customers were serviced through 307 customer access points (2016: 278)
- P1.4 billion (2016: P1.1 billion) was disbursed in new or top up loans
- The Group employed 1,891 (2016: 1,640) full time employees supplemented by
an additional 1,403 (2016: 1,164) commission-based sales agents
TARGETED INVESTMENT SUPPORTS LETSHEGO’S STRATEGIC AGENDA
Letshego is committed to its strategic intent of creating Africa’s leading
inclusive finance group. The Group is focused on consumer lending, micro finance
banking and savings solutions for our customers. These results include Ghana for
the first time following the 100% acquisition of AFB Ghana during March 2017.
Since this latest acquisition, Letshego’s regional footprint now comprises eleven
markets, six of which have deposit licences.
Strategic agenda highlights: January to June 2017
Embracing financial inclusion: The Group is progressing its inclusive finance
agenda by piloting educational, affordable housing as well as environmental
lending solutions within our existing footprint. Initial market response has
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been positive, in line with our market assessment and internal forecast on the
potential for sustainable commercial returns in the longer term.
Piloted educational solutions in both Tanzania and Nigeria include payment,
borrowing and savings options, with the aim of benefiting the complete
educational ‘eco-system’, which includes school bodies, educators, learners and
other associated partners. Further to this, Letshego’s agency delivery channel in
Mozambique and Tanzania is expanding our reach by using a number of different
business models, while providing our customers with enhanced access to managing
their money. Home improvement and affordable housing loans now make up 5% of the
Group’s total loan portfolio. The consumer lending segment is now 88% of the
overall loan portfolio with MSE at 12%.
Growing the franchise: In addition to the expansion of our network through
acquisitions, including Afb Ghana in March 2017, Letshego also understands the
value of strategic partnerships in increasing access and impact in all our
markets. Rwanda and Ghana are the latest markets to forge partnerships with
local mobile operators. These pilots introduced Letshego to over 30,000 new
customers in our emerging informal segment. If successful, it is intended to
expand this digital solution into other Letshego countries, and to introduce a
mobile savings, financial wellness and relationship based models to compliment
the micro loans offering.
Enhancing customer experience: Our award-winning ‘Blue Box’ agency concept
encapsulates simplicity and accessibility for customers to access Letshego loans
and savings in Mozambique, wherever they may be located. The interoperability of
the agency access channel is seamless, linking directly into local bank and
mobile network infrastructure to ensure end-to-end processing and security.
Using Blue Box’s built-in solar powered energy source and smart device, Letshego
agents can manage and maintain their own software connectivity, even in the most
rural locations. This initiative received grants in excess of US$1 million from
the MasterCard Foundation, GIZ and FSD Mozambique.
We embedded our brand-enhancing "Improving Life" customer engagement campaign
across eight of our countries, rewarding customers for productive and responsible
financial behavior. USSD-driven customer onboarding, borrowing and savings
solutions have been embedded in pilots in Ghana, Mozambique, Namibia and Rwanda,
enhancing our customers' ability to access simple and appropriate financial
services.
Embedding future capability: Letshego’s core banking platform is now supporting
operations across nine countries, ensuring consistency in processing, tracking
and reporting. Also our Enterprise Risk Management Framework has been
implemented in all eleven markets, enhancing identification, mitigation, tracking
and management of business risks as well as offering comprehensive customer
solutions across our footprint.
Analysis of the results for the period
This period’s results show good growth in a challenging environment.
Loan growth was 19% in BWP terms (14% excluding Ghana) and 16% in local currency.
The quality of the loan book remains at targeted levels with the exception of
Rwanda where we have taken additional provisions on a specific segment of the
loan portfolio. The loan loss ratio was 3.3% - this is higher than targeted
levels; however, if the referenced Rwanda portfolio is removed the loan loss rate
was 2.4%. Our coverage ratios remained stable and we are well positioned for the
introduction of IFRS 9 in 2018.
Customer deposits grew marginally and the impact of our customer savings
solutions is expected to come through in subsequent reporting periods. New
funding lines were introduced resulting in a 45% increase in borrowings; the
Group has a strong funding pipeline in place to support the business growth going
forward.
Profit before tax of BWP498 million was marginally higher period on period.
Operating income increased by 14% (13% excluding Ghana) - this reflected the
underlying growth in advances to customers and was supported by stable interest
margins and cost of funding. Costs increased by 21% (18% excluding Ghana) and
are normalising after a period of investment in the business; this trend is
expected to continue going forward. A higher effective tax rate of 27% resulted
in a 6% reduction in profit after tax for the period.
Letshego Namibia
We have obtained approval from the Namibian Stock Exchange (NSX) to list Letshego
Holdings Namibia Limited (Letshego Namibia) on the NSX. 20% of the shares in the
Company are being offered for sale as part of the licencing requirements of the
Bank of Namibia to increase the level of Namibian ownership of Letshego Namibia.
Should the listing be successful, this would raise approximately N$370 million
(BWP285 million) for the portion of the shares that Letshego Holdings Limited is
selling (17%). The public offer opened on 25 August 2017 and will close on 22
September 2017 with an intended listing date of 28 September 2017.
Letshego Namibia is a registered bank and micro finance group and its business
activities are similar to the overall Letshego Group. The net asset value of
Letshego Namibia was N$1.6bn at 30 June 2017 and the targeted market
capitalisation on listing is N$2,350bn. At 30 June 2017, the total assets of
Letshego Namibia represented 24% of the Group’s total assets and Letshego Namibia
contributed 40% of the Group pre-tax profit and 44% of the profit after tax.
The impact of the listing to the Group results will be to increase the profit
attributable to non-controlling interests. Upon successful listing of Letshego
Namibia, the Board will consider whether the listing proceeds will be distributed
to Shareholders or whether the cash should be deployed in the business. Further
guidance will be given at the time of publication of the full year results.
Share Buy Back
During the period to 30 June 2017 the Group did not exercise the mandate from
Shareholders to repurchase any of its shares. However, subject to the necessary
funding being available, the Company will re-enter the market to buy back shares
and is targeting to repurchase up to 5% of the shares in issue. This will be
dependent on the liquidity in the market as well as funding lines being available
as already mentioned.
This share buy-back programme is intended to generate returns for shareholder
over and above the existing dividend policy. Since Letshego listed on the
Botswana Stock Exchange in 2002 it has raised BWP646 million from Shareholders.
In the same period, it has returned BWP1.9 billion to Shareholders by way of
dividends and share buy-backs. Of this, BWP1.2 billion has been returned since
2014.
Group Structure
The Group has introduced an intermediate holding company structure in Mauritius
and over time, the Group subsidiary companies are expected to be moved to that
ownership structure. This will not result in any change in the ultimate
ownership of the subsidiaries but will allow for a more tax efficient movement of
dividends within the Group.
Board of Directors
The Board comprises of twelve Directors - seven independent non-executive
Directors, three non-executive Directors and two executive Directors. Of the
three non-executive Directors, two represent Botswana Insurance Holdings Limited
(BIHL) and one represents African Development Partners I (ADP I). Both BIHL and
ADP I have material shareholdings in Letshego Holdings Limited. Due to internal
changes in these organisations, Catherine Lesetedi will replace Gaffar Hassam as
one of the BIHL representatives and Runa Alam will replace Idris Mohammed as the
ADP I representative. The Board thanks Gaffar and Idris for their contribution
to the Group during their period on the Board and welcomes Catherine and Runa and
looks forward to their contribution. The changes will become effective once all
regulatory approvals have been obtained.
Auditors’ review
The financial information set out in this announcement has been reviewed but not
audited by PwC, 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 inclusive financial services strategy and to
strengthen its operations through investment in people, technology and 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 strategic acquisitions as important to the acceleration
of Letshego’s strategy. As such, it will continue to seek and review relevant
opportunities for the Group to pursue.
Dividend notice
Notice is hereby given that the Board has declared an interim dividend of 8.5
thebe per share for the period ended 30 June 2017. 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 interim gross dividend
for the period ended 30 June 2017.
Important dates pertaining to this dividend are:
- Declaration date, 31 August 2017
- Last date to register, 15 September 2017
- Dividend payment date on or about, 22 September 2017
For and on behalf of the Board of Directors:
For and on behalf of the Board of Directors:
E Banda A C M Low
Group Chairman Group Managing Director
GABORONE, Friday, 1 September 2017
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
African Alliance Securities
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