| Wed 12 Oct 2011, 16:01 | | BILETS - Letshego Holdings Limited - Unaudited Interim Report |
|
JSE
BILETS
BILETS - Letshego Holdings Limited - Unaudited Interim Report
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
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 2011
FINANCIAL HIGHLIGHTS
- Profit after tax up 36%
- Advances up 40%
- Profit before tax up 16%
- Earnings per share up 30%
- Impairment of advances charge down 80%
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 July 31 July 31 January
2011 2010 2011
(Reviewed) (Reviewed) Change (Audited)
P`000 P`000 % P`000
ASSETS
Cash and cash equivalents 220 139 112 643 51 848
Advances to customers 2 601 117 1 862 879 40 2 298 880
Other receivables 37 411 42 408 9 152
Short term investments 22 684 - 12 593
Long term receivables 13 460 9 379 10 007
Property, plant and equipment 7 812 5 773 7 045
Intangible assets 583 411 306
Goodwill 27 824 27 824 27 824
Deferred taxation 8 984 7 996 12 575
Total assets 2 940 014 2 069 313 42 2 430 230
LIABILITIES AND EQUITY
Liabilities
Trade and other payables 65 172 153 874 109 200
Income tax 13 764 28 799 28 100
Borrowings 832 761 348 760 139 505 174
Total liabilities 911 697 531 433 642 474
Shareholders` equity
Stated capital 669 876 412 814 412 814
Foreign currency
translation reserve (45 056) (2 431) (9 774)
Share based payment reserve 5 203 7 701 12 545
Retained earnings 1 353 642 1 092 392 1 334 016
Total equity attributable
to equity holders of the
parent company 1 983 665 1 510 476 31 1 749 601
Minority interest 44 652 27 404 38 155
Total shareholders` equity 2 028 317 1 537 880 1 787 756
Total liabilities and
equity 2 940 014 2 069 313 42 2 430 230
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
31 July 31 July 31 January
2011 2010 2011
(Reviewed) (Reviewed) Change (Audited)
P`000 P`000 % P`000
Interest income 423 664 343 419 23 721 900
Interest expense (29 948) (18 026) 66 (42 959)
Net interest income 393 716 325 393 21 678 941
Premium income 29 066 - 30 696
Insurance fees (3 167) - (2 358)
Net interest and insurance
income 419 615 325 393 707 279
Fee and commission income 30 987 58 390 109 643
Other operating income 6 001 5 668 6 234
Operating income 456 603 389 451 17 823 156
Employee benefits (51 603) (38 290) 35 (73 051)
Other operating expenses (51 674) (39 120) 32 (73 538)
Insurance claims expense (6 536) - (8 069)
Claim mitigation
reserve movement (306) - (2 825)
Net income before
impairment and taxation 346 484 312 041 11 665 673
Impairment of advances (3 038) (15 328) (80) (38 957)
Profit before taxation 343 446 296 713 16 626 716
Income taxation (41 434) (75 357) (153 379)
Profit for the period 302 012 221 356 36 473 337
Attributable to:
Equity holders of the
parent company 291 617 215 270 456 893
Minority interest 10 395 6 086 16 444
Profit for the period 302 012 221 356 473 337
Other comprehensive
income, net of tax
Foreign currency translation
differences arising from
foreign operations (40 114) (3 758) (10 708)
Total comprehensive income
for the period 261 898 217 598 462 629
Attributable to:
Equity holders of the
parent company 256 335 212 012 446 291
Minority interest 5 563 5 586 16 338
Total comprehensive income
for the period 261 898 217 598 20 462 629
Weighted average number of
shares in issue during the
period (millions) 1 920 1 833 * 1 837
Dilution effect - number
of shares (millions) 188 46 * 192
Number of shares in issue at
the end of the period (millions)1 985 1 841 * 1 842
Basic earnings per share (thebe) 15.7 12.1 * 30 25.8
Diluted earnings per share
(thebe) 14.3 11.8 * 23.3
* Adjusted for 10 to 1 share split approved by shareholders on 12 April 2010.
NOTE: The diluted EPS has been calculated based on shares that may vest in terms
of the Group`s long term staff incentive scheme and a convertible loan in issue.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
31 July 31 July 31 January
2011 2010 2011
(Reviewed) (Reviewed) (Audited)
P`000 P`000 P`000
Operating activities
Profit before taxation 343 446 296 713 626 716
Add: Amortisation and depreciation 1 960 1 564 3 210
: Impairment of advances (18 262) (4 398) (6 449)
: Loss on disposal of non-current
assets including subsidiaries 23 264 235
Movement in working capital and
other changes (350 554) (118 964) (566 829)
Cash (utilised in) / generated
from operations (23 387) 175 179 56 883
Taxation paid (86 462) (86 037) (169 501)
Net cash (used in) / generated
from operating activities (109 849) 89 142 (112 618)
Investing activities
Net cash (used in) / generated
from investing activities (49 447) (2 933) (18 402)
Financing activities
Dividends paid (net of
withholding taxation) - (49 130) (49 130)
Net receipts/ (net repayments)
on borrowings 327 587 (28 898) 127 536
Net cash from financing activities 327 587 (78 028) 78 406
Net movement in cash and
cash equivalents 168 291 8 181 (52 614)
Cash and cash equivalents at
the beginning of the period 51 848 104 462 104 462
Cash and cash equivalent at the
end of the period 220 139 112 643 51 848
RATIOS
31 July 31 July 31 January
2011 2010 2011
(Reviewed) (Reviewed) (Audited)
P`000 P`000 P`000
Annualised Return on average assets (%) 22.1 23.4 21.8
Annualised Return on average equity (%) 31.7 33.1 29.5
Cost to income ratio (%) 24.1 19.9 19.1
Debt to equity (%) 41.0 23.1 28.9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Stated Retained Share based
capital earnings payment reserve
P`000 P`000 P`000
Balance at 1 February 2010 396 019 932 365 18 287
Total comprehensive income for
the period
Profit for the period - 215 270 -
Other comprehensive income, net
of income tax
Foreign currency translation reserve - - -
Transactions with owners, recorded
directly in equity
New shares issued from long term
incentive scheme 16 795 - (16 795)
Allocation to share based
payment reserve - - 6 209
Dividends to equity holders - (55 243) -
Balance at 31 July 2010 412 814 1 092 392 7 701
Total comprehensive income for
the period
Profit for the period - 241 624 -
Other comprehensive income, net of
income tax
Foreign currency translation reserve - - -
Transactions with owners, recorded
directly in equity
New shares issued from long term
incentive scheme - - -
Allocation to share based payment reserve - 4 844
Dividends to equity holders - - -
Balance at 31 January 2011 412 814 1 334 016 12 545
Total comprehensive income for the period
Profit for the period - 291 617 -
Other comprehensive income, net of
income tax
Foreign currency translation reserve - - -
Transactions with owners, recorded
directly in equity
Allocation to share based payment reserve - - 12 402
New shares issued from long term
incentive scheme 19 744 - (19 744)
Dividends to equity holders 237 318 (273 647) -
Disposal of minority interest - Micro
Provident Uganda - 1 656 -
Balance at 31 July 2011 669 876 1 353 642 5 203
Foreign
exchange
translation Minority
reserve interest Total
P`000 P`000 P`000
Balance at 1 February 2010 827 21 818 1 369 316
Total comprehensive income for the period
Profit for the period - 6 086 221 356
Other comprehensive income, net of
income tax
Foreign currency translation reserve (3 258) (500) (3 758)
Transactions with owners, recorded
directly in equity
New shares issued from long term
incentive scheme - - -
Allocation to share based payment reserve - - 6 209
Dividends to equity holders - - (55 243)
Balance at 31 July 2010 (2 431) 27 404 1 537 880
Total comprehensive income for the period
Profit for the period - 10 358 251 982
Other comprehensive income, net of
income tax
Foreign currency translation reserve (7 343) 393 (6 950)
Transactions with owners, recorded
directly in equity
New shares issued from long term
incentive scheme - -
Allocation to share based payment reserve - - 4 844
Dividends to equity holders - - -
Balance at 31 January 2011 (9 774) 38 155 1 787 756
Total comprehensive income for the period
Profit for the period - 10 395 302 012
Other comprehensive income, net of
income tax
Foreign currency translation reserve (35 282) (4 832) (40 114)
Transactions with owners, recorded
directly in equity
Allocation to share based payment reserve - - 12 402
New shares issued from long term
incentive scheme - - -
Dividends to equity holders - - (36 329)
Disposal of minority interest - Micro
Provident Uganda - 934 2 590
Balance at 31 July 2011 (45 056) 44 652 2 028 317
SEGMENTAL REPORTING
Geographical segments
Botswana - Holding Company Botswana- Operations
2011 2010 2011 2010
P`000 P`000 P`000 P`000
Total income from lending 64 853 60 183 286 084 246 810
Segment profit before tax
(before management and
guarantee fees) 25 395 28 855 208 325 185 527
Taxation - consolidated
Profit for the period -
consolidated
Gross advances to customers - - 1 728 530 1 267 063
Impairment provisions - - (3 610) (16 707)
Net advances - - 1 724 920 1 250 357
Total segment assets 1 949 659 1 306 945 1 729 764 1 258 108
Borrowings 496 335 186 182 1 332 247 858 223
Total segment liabilities 508 240 225 610 1 369 216 918 509
Mozambique Namibia
2011 2010 2011 2010
P`000 P`000 P`000 P`000
Total income from lending 571 - 75 875 54 539
Segment profit before tax (before
management and guarantee fees) (3 108) (646) 61 467 29 047
Taxation - consolidated
Profit for the period - consolidated
Gross advances to customers 53 918 - 409 277 262 714
Impairment provisions (124) - (63) (4 764)
Net advances 53 794 - 409 214 257 951
Total segment assets 60 132 - 427 342 308 050
Borrowings 49 161 4 747 221 584 138 600
Total segment liabilities 50 285 4 802 254 100 253 298
Swaziland Tanzania
2011 2010 2011 2010
P`000 P`000 P`000 P`000
Total income from lending 27 912 31 920 36 813 38 408
Segment profit before tax (before
management and guarantee fees) 22 605 22 355 18 851 22 142
Taxation - consolidated
Profit for the period -
consolidated
Gross advances to customers 168 431 129 526 146 272 132 453
Impairment provisions (447) (1 133) (727) (2 084)
Net advances 167 984 128 393 145 545 130 369
Total segment assets 179 620 145 806 159 325 132 974
Borrowings 85 755 80 459 60 098 30 467
Total segment liabilities 89 722 83 007 62 176 35 382
Uganda Zambia
2011 2010 2011 2010
P`000 P`000 P`000 P`000
Total income from lending 24 192 17 873 2 539 8 576
Segment profit before tax (before
management and guarantee fees) 9 864 7 562 2 488 1 871
Taxation - consolidated
Profit for the period - consolidated
Gross advances to customers 92 908 77 392 7 716 19 979
Impairment provisions (534) (644) (430) (916)
Net advances 92 374 76 748 7 286 19 062
Total segment assets 100 557 77 694 32 548 28 216
Borrowings 60 095 42 632 8 528 7 033
Total segment liabilities 63 758 45 065 9 082 7 321
Eliminations Consolidated
2011 2010 2011 2010
P`000 P`000 P`000 P`000
Total income from lending (64 188) (56 500) 454 651 401 809
Segment profit before
tax (before management
and guarantee fees) (2 440) - 343 446 296 713
Taxation - consolidated (41 434) (75 357)
Profit for the period
- consolidated 302 012 221 356
Gross advances to customers - - 2 607 052 1 889 127
Impairment provisions - - (5 935) (26 248)
Net advances - - 2 601 117 1 862 879
Total segment assets (1 698 932) (1 188 480) 2 940 014 2 069 313
Borrowings (1 481 042) (999 585) 832 761 348 760
Total segment
liabilities (1 494 882) (1 041 561) 911 697 531 433
RATIO ANALYSIS ON GEOGRAPHIC SEGMENTS
Botswana - Holding Company Botswana - Operations
2011 2010 2011 2010
Impairment charge to average advances
(annualised) - - 0.5% 0.2%
Advances to total assets - - 99.7% 99.4%
Collection rates - - 95.5% 98.0%
% of book on deduction code - - 99.0% 99.0%
Customers employed by government (%) - - 95.0% 95.0%
Customers employed by parastatal or
private sector (%) - - 5.0% 5.0%
Debt to equity (%) (Includes
intercompany borrowings) 34.4% 17.2% 369.5% 252.7%
Cost to income ratio (%) 55.6% 48.8% 8.6% 6.6%
Mozambique Namibia
2011 2010 2011 2010
Impairment charge to average advances
(annualised) 0.7% 0.0% 0.3% 2.9%
Advances to total assets 89.5% 0.0% 95.8% 83.7%
Collection rates 46.0% 0.0% 98.7% 100.0%
% of book on deduction code model 100.0% 0.0% 100.0% 100.0%
Customers employed by government (%) 100.0% 0.0% 97.0% 97.0%
Customers employed by parastatal or
private sector (%) 0.0% 0.0% 3.0% 3.0%
Debt to equity (%) (includes
intercompany borrowings) 499.3% 432.2% 127.9% 140.1%
Cost to income ratio (%) 236.7% >100% 25.2% 34.1%
Swaziland Tanzania
2011 2010 2011 2010
Impairment charge to average advances
(annualised) (2.2%) 2.2% 1.0% 6.5%
Advances to total assets 93.5% 89.6% 91.4% 98.0%
Collection rates 99.0% 99.2% 100.0% 99.8%
% of book on deduction code 100.0% 100.0% 100.0% 100.0%
Customers employed by government (%) 100.0% 100.0% 100.0% 100.0%
Customers employed by parastatal or
private sector (%) 0.0% 0.0% 0.0% 0.0%
Debt to equity (%) (includes
intercompany borrowings) 95.4% 128.1% 61.9% 31.2%
Cost to income ratio (%) 13.1% 11.0% 41.9% 25.1%
Uganda Zambia
2011 2010 2011 2010
Impairment charge to average advances
(annualised) 2.9% 4.4% (26.4%) 26.3%
Advances to total assets 91.9% 98.8% 22.4% 67.6%
Collection rates 99.1% 77.3% 140.0% 102.4%
% of book on deduction code 100.0% 100.0% 100.0% 100.0%
Customers employed by government (%) 100.0% 100.0% 0.0% 100.0%
Customers employed by parastatal or
private sector (%) 0.0% 0.0% 0.0% 0.0%
Debt to equity (%) (includes
intercompany borrowings) 163.3% 130.7% 36.3% 33.7%
Cost to income ratio (%) 39.5% 38.3% 71.2% 28.1%
Consolidated
2011 2010
Impairment charge to average advances (annualised) 0.3% 1.8%
Advances to total assets 88.5% 90.0%
Collection rates 96.0% 99.0%
% of book on deduction code 99.0% 99.0%
Customers employed by government (%) 96.0% 96.0%
Customers employed by parastatal or private sector (%) 4.0% 4.0%
Debt to equity (%) (includes intercompany borrowings) 41.0% 23.1%
Cost to income ratio (%) 24.1% 19.9%
COMMENTARY
Highlights
The Letshego Holdings Limited Board of Directors is pleased to present the
consolidated reviewed financial results of the Group for the six months ended 31
July 2011. Key highlights for this financial reporting period are noted below:
- Net advances to customers have grown by 40% to P2.6 billion (2010: P1.86
billion)
- Profit before tax has increased by 16% from P296.7 million to P343.4 million
- Profit after tax has increased from P221.4 million at July 2010 to P302
million, period on period (an increase of 36%)
- Increase in basic earnings per share of 30% to 15.7 thebe
- Impairment expense (annualised) on average loans and advances to customers of
0.3% (2010: 1.8%) on the back of very strong collections and recoveries and the
introduction of credit insurance in certain countries
- Gearing remains low, relative to the industry, with a debt to equity ratio of
41% (2010: 23%)
- 35% of profit before tax (2010: 29%) was generated outside of Botswana
Developments during the period
The half year to July 2011 has seen a number of developments across the Letshego
Group. We share these with you below in chronological order:
- The inclusion of comprehensive credit default risk insurance on our advances
book in Swaziland
- Commencement of lending in Mozambique from February 2011 with the Letshego
brand and products well received by the market
- Approval by Shareholders of Directors` mandate to seek and obtain appropriate
funding of up to two times the total equity and reserves during April 2011
- Shareholders` approval in April 2011 of a non-elective, non-cash scrip
dividend, resulting in the issue of 7 new shares for every 100 issued ordinary
shares (increasing the total shares in issue to 1.985 billion)
- The introduction of a 15% minority shareholder in our Ugandan subsidiary,
Micro Provident Uganda (also announced in our annual results publication issued
in April 2011) which is in line with the Group practice of having local
participation in regional operating subsidiaries
- In June 2011 a credit rating of Ba3 (long term global scale rating with a
`stable` outlook) was obtained by Letshego Holdings Limited from independent
ratings agency, Moody`s Investor Services
- The listing of a Medium Term Notes ("MTN") programme on the Johannesburg Stock
Exchange during July 2011
- The introduction of a number of new funding lines during the period across the
Group
- The selection of a new integrated core debtors` and banking system was
finalised during July 2011
Financial performance
Given the prevailing economic conditions and business events during the period,
and the many initiatives underway within the Group, the Directors are satisfied
with the financial performance of the Group for the period under review.
The Group`s interest-earning assets remain the largest component of total assets
at 97% of P2.94 billion (2010: 95% of P2.069 billion), and comprise P2.601
billion in net customer loans, and P242.8 million in cash and cash equivalents
and short-term investments.
Period on period, the 40% growth in net loans is largely driven by continued
strong performance in three countries in particular. These are Botswana (net
book P1.72 billion, up 34% from P1.29 billion), Namibia (net book up 58% to P409
million from P259 million), and above-budget payout levels for a start-up in
Mozambique (net book P53.8 million up from nil last period).
Tanzania (net book of P145.5 million) and Uganda (net book of P92.4 million)
also posted consistent and healthy book growth in local currency terms, but was
slightly dampened by the continued weakening of the currencies against the
Botswana Pula by about 10% and 20% respectively.
While the Swaziland loan book has increased period on period by 30% it has
decreased by 10% since 31 January 2011 due to our decision to moderate lending
levels.
Against the above asset performance, the Group recorded an increase in operating
income of 17% on July 2010, an increase in total operating expenses of 42% and a
reduction in impairment expenses of 80% for the same period. Strong collection
and recovery focus in all countries has yielded positive results for this
period.
The significantly higher operating expenses in the current period are, in the
majority, attributable to Mozambican branch start-up costs, which are
anticipated to persist into the next financial year as expansion in that region
continues. Upgrading of branches in Tanzania, once-off legal and related costs
associated with the establishment of the Group`s JSE-listed medium term notes
programme also contributed to this incremental expenditure in the period.
However, strict control of normal operational expenditure in the more
established business units has, and will continue, to be enforced.
The reduction of the impairment expense by 80% is due in the main to the
introduction of credit insurance in Namibia and Swaziland, improved collections
in Uganda, Tanzania and Zambia, recoveries of prior written off amounts and
overall concentration and efforts by the respective credit teams in all
countries.
These elements have all translated in to the overall increase of 16% in the
Group profit before tax.
Also noteworthy in this half year period was the issue of a paper dividend to
the value of P273 million to shareholders on a basis of 7 new shares being
issued for every 100 shares owned. This issue was motivated in order to ensure
optimum use of additional company tax reserves, which was achieved. The
resultant credit to the Letshego Holdings tax charge contributed to a 36%
increase in the profit after tax reported (2010: P221.4 million) and an increase
in the basic earnings per share from 12.1 thebe to 15.7 thebe.
New markets and diversification
As part of our pan-African expansion strategy and diversification phase, the
expected acquisition of a controlling stake in Micro Africa Limited, a micro
lending group based in East Africa, is anticipated to be closed by 31 October
2011. This will assist in the aim of both regional expansion as well as
capturing increased market share creating further opportunities that may be
explored in future.
Examples of the advantages of this acquisition include a diverse product base,
use of mobile telephony as a disbursement channel, presence in regions that
Letshego has no footprint in, being Kenya, Rwanda and South Sudan, and an
experienced management team to complement local industry developments. Other
details relating to the acquisition were published on 21 September 2011.
Regulatory environment
Central Registries have been in place in Botswana, Namibia, Swaziland and Uganda
(all since before July 2010).The Group believes that this is the emerging model
of best practice in the industry and the Group will continue to promote the
establishment of independent Central Registries.
Funding
As mentioned earlier in this report, total borrowings increased by 139% to
P832.8 million (2010: P348.8 million) representing a debt to equity ratio of 41%
(2010: 23%).
Related party transaction
The Group divested a 15% shareholding in Micro Provident Uganda Limited to a
Ugandan citizen. The consideration for the transaction was BWP 2.59 million.
Post period end developments
Lending in Zambia to Central Government employees resumed in September 2011.
The Mozambican and Namibian business levels continue to grow at a satisfactory
rate.
There has been continued improvement in new business being written in Tanzania
subsequent to the period end date.
As noted earlier in the commentary, it is intended that the controlling share
purchase of Micro Africa Limited will be finalised by October 2011 end.
Progress with the design and implementation of a new core debtors` system, with
a banking platform, has started.
The outlook of the Moody`s credit rating was changed from stable to negative
during September 2011.
Collection methodology - Botswana
As noted to Shareholders on 1 September 2011 by way of a cautionary announcement
which was renewed on 21 September 2011, Letshego became aware on 31 August 2011
of the intention of the Government of the Republic of Botswana to cancel the
existing agreements with the two Central Registries in Botswana. We continue to
engage with relevant authorities to obtain more clarity and resolution in the
matter.
Future outlook
Generally, the Directors anticipate that, current economic conditions
prevailing, the second half results will be in line with the first half results.
Any outcome of the issues referred to in the cautionary announcement is unlikely
to have any material impact on the financial results for the current financial
year.
While the Group does not have any hard currency denominated liabilities (such as
the USD, Sterling and Euro) volatility in the currency markets may also have an
impact and will be monitored.
Auditors` review
The financial information set out in this announcement has been reviewed but not
audited by KPMG. Their unqualified review report is available for inspection at
the holding company`s registered office.
Dividend
The Directors do not propose an interim dividend in order to retain funds for
future growth. This is consistent with the last three interim periods.
For and on behalf of the Board of Directors
C M Lekaukau J A Claassen
Chairman Managing Director
GABORONE, 12 October 2011
BOTSWANA, MOZAMBIQUE, NAMIBIA, SWAZILAND, TANZANIA, UGANDA, ZAMBIA
NON-EXECUTIVE DIRECTORS: C M Lekaukau (Chairman) (Botswana), J A Burbidge (UK),
M M Dawes (RSA), G Hassam (Malawi), L E Serema (Botswana),
I Mohammed (USA), R N Alam (USA) (Alternate to I Mohammed) (USA)
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
Date: 12/10/2011 16:01:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
