Letshego Holdings Limited (LETSHE.bw) 2020 Presentation

Income Statement Commentary

• Net interest income better than expected against backdrop of COVID-19 impact, demonstrating business resilience.
• NFI reduction due to lower transactional volumes, and Namibia regulatory adjustment. NFI showed recovery in line with other business streams which was reflected by a 50% growth in the second half of the year.
• Operating Expenditure largely flat, increasing by only 1%. Other operating expenditure down 4% year on year. Staff costs up 9% due to once off exit costs and finalisation of the recruitment of senior executives.
• Credit impairment charge reduced by 85% , supported by improvement in mobile loan impairments which reduced by P105m YoY and an 8% increase in collection and recoveries.
• ETR up to 39% from 36% at 31 December 2019, due to lower profit before tax and prior year adjustments. Without prior year adjustments, ETR would have been 37%. Actual tax charge is down 3%.

Balance Sheet commentary

• Cash and cash equivalents up 1% year on year and 5% of this relates to statutory cash reserve for six of the deposit licensed subsidiaries.
• Net advances to customers up 12% year on year. Solid payouts growth from June 2020 and acceleration of digital capabilities.
• Customer deposits increased by 56% and this was driven by mass micro saving (MMS) customer in Tanzania and Mozambique.
• Borrowing up 14% following focus for subsidiaries to leverage local currency funding with longer tenor.
• Shareholders’ funds strong at P4.372bn – up 3% year on year.

Expected Credit Losses Key Highlights

• Overall impairment coverage remained healthy at 5.4% in 2020 compared to 7.7% in 2019 on the back of improved asset quality.
• Gross advances increased from P9.69billion in 2019 to P10.74 billion in FY 2020.
• Stage 1 – Growth in DAS portfolio underpinned by change in affordability rules and accelerated digitisation.
• Stage 2 – Increase in accounts having Significant Increase in Credit Risk on the back of sectoral risk in MSE portfolio.
• Stage 3 – Reduction driven by mobile loans and recovery of P36mn provisions in Eswatini on the back of normalization of specific portfolio that was in default in H1’2020.

Strategy

• Achieving over P1 billion in PBT.
• YoY DAS Net Payouts grew by 32% to an all-time high of P2.5 billion.
• Deposits from customers increased by 56% to P664 m.
• MSE PBT increased by 99% and Green solutions pilot in Ghana.
• Mass mobile PBT increased by 453%.
• Digital Adoption increased to 69% in December 2020. (FY 2019 : Less than 1%).
• Customers transacting across all of our digital lending and non-lending channels, increased by 53% to 539,828 (FY 2019: 352,564).
• PBT contribution to the group, from East and West markets grew from 18% in 2019 to 26% in 2020.
• Ghana PBT growth was over 600% year on year.
• 26 employees completed an international certification in Agile Working.
• 40 people working with partners using agile to implement the digital platform.
• Speed of delivery of our digital channels in all markets within 6 weeks during pandemic.
• Building our new digital platform within 6 months for implementation in 2021.
• EPS of 26.4 thebe (FY 2019: 29.2 thebe), a decrease of 10.
• ROE was 13% down from 16% for FY 2019: 16% and return on assets 5% (FY 2019: 6%).
• Funding from our new programmatic approach for social impact programs i.e. Green solutions assists Letshego to de-risk the business, particularly on MSE lending.