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BILETS
BILETS - Letshego Holdings Limited - Audited Results for year ended 31 January
2012
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
("Letshego Holdings" or "the Company")
PRELIMINARY REPORT
The Directors of Letshego Holdings Limited are pleased to present an extract
from the consolidated audited financial results for the year ended 31 January
2012. The highlights for the financial period include:
FINANCIAL HIGHLIGHTS
* Advances to customers increased 32% during the year to P3.0 billion
* Profits before tax increased 13% to P711.2 million
* Earnings per share increased 15% from 25.8 thebe per share to 29.6
thebe per share
* Impairment expense of 1.6% of the average advances book
* Return on average equity of 28.7% compared to prior year of 29.5%
37% of profits before tax generated outside of Botswana compared to
prior year of 34%
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 January 31 January
2012 2011
(Audited) (Audited) Change
P`000 P`000 %
ASSETS
Cash and cash equivalents 73,612 51,848
Advances to customers 3,034,639 2,298,880 32
Other receivables 18,730 9,152
Short-term investments 24,187 12,593
Long-term receivables 11,120 10,007
Property, plant and equipment 9,513 7,045
Intangible assets 3,291 306
Goodwill 27,824 27,824
Deferred taxation 9,809 12,575
Total assets 3,212,725 2,430,230 32
LIABILITIES AND EQUITY
Liabilities
Trade and other payables 70,732 109,200
Income tax 14,275 28,100
Borrowings 802,864 505,174 59
Total liabilities 887,871 642,474
Shareholders` equity
Stated capital 669,876 412,814
Foreign currency translation reserve (32,521) (9,774)
Share-based payment reserve 15,654 12,545
Retained earnings 1,617,969 1,334,016
Total equity attributable to equity 2,270,978 1,749,601 30
holders of the parent company
Minority interest 53,876 38,155
Total shareholders` equity 2,324,854 1,787,756
Total liabilities and equity 3,212,725 2,430,230 32
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
31 January 31 January
2012 2011
(Audited) (Audited) Change
P`000 P`000 %
Interest income 900,514 721,900 25
Interest expense (65,395) (42,959) 52
Net interest income 835,119 678,941 23
Premium income 64,243 30,696
Insurance fees (5,708) (2,358)
Net interest and insurance income 893,654 707,279
Fee and commission income 87,198 109,643
Other operating income 10,107 6,234
Operating income 990,959 823,156 20
Employee benefits (100,297) (73,051) 37
Other operating expenses (113,367) (73,538) 54
Insurance claim expense (21,268) (8,069)
Claim mitigation reserve movement (686) (2,825)
Net income before impairment and 755,341 665,673 13
taxation
Impairment of advances (44,109) (38,957) (13)
Profit before taxation 711,232 626,716 13
Income taxation (133,433) (153,379)
Profit for the year 577,799 473,337 22
Attributable to:
Equity holders of the parent company 555,944 456,893
Minority interest 21,855 16,444
Profit for the year 577,799 473,337
Other comprehensive income, net of
tax
Foreign currency translation (21,160) (10,708)
differences arising from foreign
operations
Total comprehensive income for the 550,639 462,629
year
Attributable to:
Equity holders of the parent company 531,578 446,291
Minority interest 19,061 16,338
Total comprehensive income for the 550,639 462,629 19
year
Weighted average number of shares in 1,953 1,837
issue during the year (millions)
Dilution effect - number of shares 189 192
(millions)
Number of shares in issue at the end 1,985 1,841
of the year (millions)
Basic earnings per share (thebe) 29.6 25.8 15
Diluted earnings per share (thebe) 27.0 23.3
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 January 31 January
2012 2011
(Audited) (Audited)
P`000 P`000
Operating activities
Profit before taxation 711,232 626,716
Add: Amortisation and depreciation 3,772 3,210
Add: Impairment of advances (8,771) (6,449)
Add: Loss on disposal of non-current assets 2 235
Movement in working capital and other changes (778,037) (566,829)
Cash (utilised in)/ from operations (71,802) 56,883
Taxation paid (183,301) (169,501)
Net cash (used in)/ from operating activities (255,103) (112,618)
Investing activities
Net cash (used in)/generated from investing (20,823) (18,402)
activities
Financing activities
Dividends paid (net of withholding taxation) - (49,130)
Net receipts on borrowings 297,690 127,536
Net cash from financing activities 297,690 78,406
Net movement in cash and cash equivalents 21,764 (52,614)
Cash and cash equivalents at the beginning of 51,848 104,462
the year
Cash and cash equivalents at the end of the 73,612 51,848
year
RATIOS
31 January 31 January
2012 2011
(Audited) (Audited)
Annualised Return on average assets (%) 20.5 21.8
Annualised Return on average equity (%) 28.7 29.5
Cost to income ratio (%) 23.8 19.1
Debt to equity (%) 35.4 28.9
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share-
based
Stated Retained payment
capital earnings reserve
P`000 P`000 P`000
Balance at 1 February 2010 396,019 932,365 18,287
Total comprehensive income for
the year
Profit for the year - 456,893 -
Other comprehensive income, net
of income tax
Foreign currency translation - - -
reserve
Transactions with owners,
recorded directly in equity
New shares issued from long-term - - 11,053
incentive scheme
Allocation to share-based payment 16,795 - (16,795)
reserve
Dividends to equity holders - (55,242) -
Balance at 31 January 2011 412,814 1,334,016 12,545
Total comprehensive income for
the year
Profit for the year - 555,944 -
Other comprehensive income, net
of income tax
Foreign currency translation - - -
reserve
Transactions with owners,
recorded directly in equity
Sale of minority interest in - 1,656 -
subsidiaries
New shares issued from long-term 19,744 - (19,744)
incentive scheme
Allocation to share-based payment - - 22,853
reserve
Dividend paid by subsidiary - - -
Dividends to equity holders 237,318 (273,647) -
Balance at 31 January 2012 669,876 1,617,169 15,654
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 year
Profit for the year - 16,444 473,337
Other comprehensive income, net
of income tax
Foreign currency translation (10,601) (107) (10,708)
reserve
Transactions with owners,
recorded directly in equity
New shares issued from long-term - - 11,053
incentive scheme
Allocation to share-based payment - - -
reserve
Dividends to equity holders - - (55,242)
Balance at 31 January 2011 (9,774) 38,155 1,787,756
Total comprehensive income for
the year
Profit for the year - 21,855 577,799
Other comprehensive income, net
of income tax
Foreign currency translation (22,747) (4,413) (27,160)
reserve
Transactions with owners,
recorded directly in equity
Sale of minority interest in - 1,619 3,275
subsidiaries
New shares issued from long-term - - -
incentive scheme
Allocation to share-based payment - - 22,853
reserve - (3,340) (3,340)
Dividends paid by subsidiary
Dividends to equity holders - - (36,329)
Balance at 31 January 2012 (32,521) 53,876 2,324,854
SEGMENTAL REPORTING
Geographical segments
Botswana - Botswana -
Holding Company Operations
2012 2011 2012 2011
P`000 P`000 P`000 P`000
Total segment revenue 107,649 106,448 503,430 423,715
Segment profit before 28,433 56,975 429,895 374,240
tax (before
management and
guarantee fees)
Taxation -
consolidated
Profit for the year
- consolidated
Gross advances to - - 1,826,372 1,551,298
customers
Impairment provisions - - (9,994) (16,746)
Net advances - - 1,816,378 1,534,552
Total segment assets 1,938,141 1,431,700 1,822,298 1,537,406
Borrowings 434,509 283,006 1,245,722 978,323
Total segment 453,632 303,322 1,317,980 1,094,796
liabilities
Mozambique Namibia
2012 2011 2012 2011
P`000 P`000 P`000 P`000
Total segment 22,502 797 171,792 130,849
revenue
Segment profit 10,199 (1,598) 118,405 97,093
before tax (before
management and
guarantee fees)
Taxation -
consolidated
Profit for the year
- consolidated
Gross advances to 159,486 79 537,037 339,231
customers
Impairment (369) - (48) (1,314)
provisions
Net advances 159,117 79 536,989 337,917
Total segment assets 164,261 5,930 566,152 365,903
Borrowings 137,358 7,548 154,608 191,100
Total segment 156,079 12,200 413,109 258,922
liabilities
Swaziland Tanzania
2012 2011 2012 2011
P`000 P`000 P`000 P`000
Total segment 45,185 53,094 92,960 64,904
revenue
Segment profit 41,154 43,015 56,321 37,997
before tax (before
management and
guarantee fees)
Taxation -
consolidated
Profit for the year
- consolidated
Gross advances to 148,091 172,269 239,265 149,691
customers
Impairment (262) (1,449) (2,324) (1,617)
provisions
Net advances 147,829 170,820 236,941 148,074
Total segment assets 158,828 176,087 252,568 154,487
Borrowings 53,555 96,478 118,858 51,321
Total segment 58,274 102,402 189,989 122,801
liabilities
Uganda Zambia
2012 2011 2012 2011
P`000 P`000 P`000 P`000
Total segment 42,649 31,434 4,788 11,915
revenue
Segment profit 23,432 15,606 3,393 3,388
before tax (before
management and
guarantee fees)
Taxation -
consolidated
Profit for the year
- consolidated
Gross advances to 130,459 98,922 9,355 11,587
customers
Impairment (2,039) (1,313) (390) (1,758)
provisions
Net advances 128,420 97,609 8,965 9,829
Total segment assets 130,847 103,979 32,789 32,200
Borrowings 88,946 60,090 7,043 9,662
Total segment 125,440 96,950 26,525 28,543
liabilities
Eliminations Consolidated
2012 2011 2012 2011
P`000 P`000 P`000 P`000
Total segment - - 990,959 823,155
revenue
Segment profit - - 711,232 626,715
before tax (before
management and
guarantee fees)
Taxation - (133,433) (153,379)
consolidated
Profit for the year- 577,799 473,336
consolidated
Gross advances to - - 3,050,065 2,323,077
customers
Impairment - - (15,426) (24,197)
provisions
Net advances - - 3,034,639 2,298,880
Total segment assets (1,853,159) (1,377,462) 3,212,725 2,430,230
Borrowings (1,437,735) (1,172,355) 802,864 505,174
Total segment (1,853,159) (1,377,462) 887,871 642,474
liabilities
RATIO ANALYSIS ON GEOGRAPHIC SEGMENTS
Botswana - Botswana -
Holding Company Operations
2012 2011 2012 2011
Impairment charge to - - 1.8% 1.7%
average advances
(annualised)
Advances to total assets - - 99.7% 99.8%
Collection rates - - 96.2% 98.0%
% of book on deduction - - 99.0% 99.0%
code model
Customers employed by - - 95.0% 95.0%
government (%)
Customers employed by - - 5.0% 5.0%
parastatal or private
sector (%)
Debt to equity (%) 29.5% 25.1% 233.1% 207.0%
(Includes intercompany
borrowings)
Cost to income ratio (%) 73.6% 46.5% 8.6% 6.2%
Mozambique Namibia
2012 2011 2012 2011
Impairment charge to 0.1% 0.0% 1.3% 0.8%
average advances
(annualised)
Advances to total assets 96.9% 1.3% 94.8% 92.4%
Collection rates 118.3% 0.0% 98.1% 100.0%
% of book on deduction 100.0% 0.0% 100.0% 100.0%
code model
Customers employed by 100.0% 0.0% 97.0% 97.0%
government (%)
Customers employed by 0.0% 0.0% 3.0% 3.0%
parastatal or private
sector (%)
Debt to equity (%) 574.7% N/a 38.0% 127.7.0%
(Includes intercompany
borrowings)
Cost to income ratio (%) 53.8% 300.5% 27.7% 27.3%
Swaziland Tanzania
2012 2011 2012 2011
Impairment charge to (1.4%) 2.1% 3.6% 4.5%
average advances
(annualised)
Advances to total assets 93.1% 97.0% 93.8% 95.8%
Collection rates 98.7% 99.0% 119.3% 100.0%
% of book on deduction 100.0% 100.0% 100.0% 100.0%
code model
Customers employed by 100.0% 100.0% 100.0% 100.0%
government (%)
Customers employed by 0.0% 0.0% 0.0% 0.0%
parastatal or private
sector (%)
Debt to equity (%) 53.3% 130.9% 90.3% 51.0%
(Includes intercompany
borrowings)
Cost to income ratio (%) 13.8% 12.6% 32.0% 31.2%
Uganda Zambia
2012 2011 2012 2011
Impairment charge to 4.4% 4.1% (19.5%) 1.3%
average advances
(annualised)
Advances to total assets 98.1% 93.8% 27.3% 94.8%
Collection rates 94.8% 98.0% 96.2% 98.1%
% of book on deduction 100.0% 100.0% 100.0% 97.0%
code model
Customers employed by 100.0% 100.0% 100.0% 97.0%
government (%)
Customers employed by 0.0% 0.0% 0.0% 3.0%
parastatal or private
sector (%)
Debt to equity (%) 165.0% 12.7% 27.9% 38.0%
(Includes intercompany
borrowings)
Cost to income ratio (%) 33.4% 39.7% 71.8% 27.7%
Consolidated
2012 2011
Impairment charge to 1.6% 1.9%
average advances
(annualised)
Advances to total assets 94.5% 94.6%
Collection rates 103.1% 98.0%
% of book on deduction 99.0% 99.0%
code model
Customers employed by 96.0% 96.0%
government (%)
Customers employed by 4.0% 4.0%
parastatal or private
sector (%)
Debt to equity (%) 35.4% 28.9%
(Includes intercompany
borrowings)
Cost to income ratio (%) 23.8% 19.1%
Main events during the year include
* Formal launch of operations in Mozambique during February 2011
followed by the opening of four regional branches in the country
towards the end of the year
* Shareholders approved, during April 2011, a revised borrowing mandate
for the Board to borrow up to two times the shareholders` equity
* Approval by Shareholders of a non-elective, non-cash scrip dividend
during April 2011 resulting in 7 new ordinary shares being issued for
every 100 ordinary shares held
* Introduction of a 15% minority shareholder in Letshego Uganda during
April 2011, which was rebranded from "Micro Provident Uganda" to
"Letshego Uganda" in January 2012
* The selection of a new integrated core debtors` and banking system was
finalised during July 2011
* Resumption of lending to Central Government employees in Zambia during
September 2011
* In September 2011 announcement of the intended acquisition of 62.52%
of Micro Africa Limited
* Application for a banking license submitted to the Central Bank of
Namibia during December 2011
During the period an industrial action was undertaken by employees of the
Government of the Republic of Botswana. This action started in mid April 2011
and ended on 6 June 2011. While the duration of the action was longer than
anticipated, it did not have any significant impact on Letshego Botswana
operations.
Another significant event that occurred during the year was the uncertainty
caused by the announcement of the Government of Botswana regarding possible
actions on the deduction at source facilitation as well as its relationship with
the Central Registries in Botswana. As communicated to Shareholders on 29
February 2012 no changes to the collection methodology in Botswana have occurred
since August 2011. The operations of the Central Registries in Botswana
continue as normal and collections remain at historical levels via the deduction
at source basis.
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 98% of P3.21 billion (2011: 97% of P2.43 billion), and comprise P3.03 billion
in net advances to customers, P73.6 million in cash and P24.2 million in short
term investments (2011: P2.3 billion, P51.8 million and P12.6 million
respectively).
Year on year, the 32% growth in net advances to customers is largely driven by
continued strong performance in three countries in particular. These are
Botswana (net book P1.82 billion, up 18% from P1.53 billion), Namibia (net book
up 59% to P537 million from P338 million), and above-budget payout levels, for a
start-up, in Mozambique (net book P159 million up from nil last period).
Tanzania (net book of P237 million) and Uganda (net book of P128 million) also
posted consistent and healthy book growth for the year of 60% and 32%
respectively.
The decrease in the Swaziland loan book of 13% is due to our decision to
moderate lending levels in this territory.
Against the above asset performance, the Group recorded an increase in operating
income of 20% for the year, an increase in total operating expenses of 46% and
an increase in impairment expenses of 13%. The cost of borrowing did not change
significantly during the period.
The significantly higher operating expenses in the current period are, in the
main, attributable to Mozambican branch start-up costs, which are anticipated to
persist into the 31 January 2013 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 MTN 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. Notwithstanding the increase in costs, the Group`s
cost to income ratio for the year was 23.8% (2011:19.1%) which remains within
our target range.
The reduction in the impairment expense as a percentage of the average advances
book from 1.9% in 2011 to 1.6% this year is largely attributable to the
introduction of credit insurance in Namibia, Swaziland and Mozambique, improved
collections in Uganda, Tanzania and Zambia, recoveries of prior year written off
amounts and overall concentration and efforts by the respective credit teams in
all countries.
These elements have all translated to the overall increase of 13% in Group
profit before tax.
Also noteworthy was the issue of a paper dividend to the value of P273.6 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 has contributed to a 22% increase in the profit after tax
reported, and is a once-off occurrence.
Regulatory environment
Central Registries have been and continue to be in place in Botswana, Namibia,
Swaziland and Uganda. 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 in all regions where we operate.
In Botswana, the Non-Bank Financial Institutions Regulatory Authority (NBFIRA)
published the regulations for the industry and these are effective from 9th
March 2012. Letshego Botswana will be in a position to comply with these new
regulations and we do not anticipate any significant implications or changes to
the business arising from these.
Funding
Total borrowings increased by 59% to P802.9 million (2011: P505.2 million)
representing a debt to equity ratio of 35% (2011: 29%), which is well below the
industry norm. We have maintained all lines of credit and continue to work on
introducing new lines to support the growth of the business.
Areas of focus
For the year ahead, these include:
* Continue to grow quality loan books in the territories where we
currently operate
* Explore new countries to extend the group`s footprint
* Utilise the existing staff complement, branch network and ICT platform
to drive efficiencies and new opportunities
* Introduce comprehensive credit insurance in other countries
* Pursue banking licenses in selected countries
* Continue to promote regulatory developments and industry best practice
Post year end developments
The sale agreement for the acquisition of Micro Africa Limited was signed during
February 2012 and regulatory clearance from the Kenya Competition Authority is
awaited. This is the final condition precedent to concluding the transaction.
As noted earlier in this report NBFIRA published the regulations for the
industry in March 2012.
The Group was issued a deduction code in Lesotho during March 2012.
Future outlook
The Group`s pan-African expansion and business diversification mandate is
progressively being satisfied, with the following developments which will impact
on Group performance going forward:
* The addition of Micro Africa Limited which has operations in Uganda
and Tanzania will add Kenya, Rwanda and South Sudan to the Letshego
group footprint.
* Operations are also expected to commence in Lesotho during the 31
January 2013 financial year.
* The Group will continue to explore new markets, including applications
for banking licences in targeted countries.
Given prevailing economic conditions, the Directors expect continued growth in
the loan book during the financial year to 31 January 2013 and continued
profitability. However, this will be coupled with a more conservative lending
approach in Botswana, following on from the Botswana fiscal budget speech
(delivered in February 2012) indicating the possible reduction in the number of
Government employees over time.
Dividend
Notice is hereby given that the board has declared a first and final dividend of
2.5 (two and a half) thebe per share for the year to 31 January 2012.
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 final gross dividend for the year ended 31 January 2012.
Important dates pertaining to this dividend are:
Declaration date 24 April 2012
Last date to register 18 May 2012
Dividend payment date 25 May 2012
For and on behalf of the Board of Directors.
C M Lekaukau J A Claassen
Chairman Managing Director
GABORONE, 27 April 2012
Date: 30/04/2012 16:00:06 Produced by the JSE SENS Department.
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