Sub Saharan Africa economies continued on the recovery path in the first half of the year. Economic recovery in most of our markets was slower than 2022 and growth is expected to taper down to 3.5% in 2023 before rebounding to 4.1% in 2024. Inflation rates eased in all our markets except in Nigeria where there was a further inflationary flare up that was a consequence of the removal of fuel subsidy and exchange rate liberalization.
Policy tightening continued in the first half, with monetary policy rates either increasing or remaining flat by June 2023 relative to start of the year. Currencies were under pressure; with Nigeria and Kenya recording material depreciation in the period. Currencies across our markets are projected to weaken further in 2023 and will remain sensitive to external global events.
Letshego’s business remained resilient in the face of continued pressure from challenging macro-economic conditions across Sub-Saharan Africa, mirroring global challenges that persisted from 2022 into the first half of this year. Letshego’s Transformation Strategy is well underway, with a strong balance sheet driven by a 5% increase in net loans and advances and well-diversified funding. Notwithstanding macro-economic headwinds, the Group closed the half with a solid cash position.
Interest income from advances and Interest income from mobile lending grew by 6% and 42% respectively year on year, although the increasing interest rate environment dampened Net Interest Income. Performance was however buoyed by insurance income that grew 33% year on year, supporting the Group’s Non Funded Income performance. Letshego has reduced its cost base by 5% year on year through improved efficiencies, targeted cost rationalization initiatives, and implementation of the business’ automation and tech-focused ‘Target Operating Model’.
Profit before tax declined 7% year on year to P417 million (H1: 2022: P446 million). Although Profit before tax was down 7%, Profit before tax and foreign exchange gain was up 4% year on year. Performance in the first half of last year was boosted by a P47 million exchange gain compared to P1.1 million gain in the current half-year period. The Group has seen volatile currency movements in this first half, more specifically in Nigeria and Ghana. The impact of this volatility for these two markets was a P14 million foreign exchange loss compared to a P23 million foreign exchange gain in the first half of 2022. Management continues to leverage treasury solutions and tools, including hedging to mitigate foreign currency risk. Profit after tax reduced 12% year-on-year to P219 million (H1 2022: P248 million).
Significant progress was made within the Turn Around Market cluster of markets (Kenya, Tanzania, Rwanda, Nigeria, and Ghana) during the first half of the year, despite volatilities in exchange rates in some of these markets. Key focus areas prioritized for Turn Around Markets to boost business fundamentals include people, distribution model, product selection, and product relevance. Additionally, the Group accelerated the establishment and deepening of strategic partnerships, reaping benefits for Nigeria, Kenya, and Tanzania and increasing customer access to scalable customer ecosystems. Through like-minded partnerships Letshego has deployed appropriate inclusive products in insurance, Instant Loans, and payments, this in line with Plan 5 targets set out within our 6-2-5 execution roadmap. The first half of the year also saw encouraging early indications, with the Turn Around Market cluster’s overall Cost to Income ratio, recording a significant improvement from 78% to 69%; down 14% year on year. This was despite incurring once-off costs in organizational restructuring and branch rationalization. The cluster’s Cost to Income ratio is expected to continue to improve towards our short term target range between 50% and 55%.
Within our focused product realignment initiatives, we adjusted our core Micro and Small Entrepreneur (MSE) proposition to deliver improved risk-adjusted returns while accelerating Deduction at Source penetration. Tanzania was successful in completing the amalgamation of our two Tanzania subsidiaries to form one new, more efficient entity, ‘Letshego Faidika Bank Limited’.
Fit for Growth markets continued to be the major contributor of profit to the Group. Insurance income grew primarily in Namibia and Mozambique, with improved performance in the newer Botswana Insurance Income.
The Group progressed on its ESG journey, concluding the publication of our second Impact Survey, which reiterated our commitment and purpose to improve lives and achieve a marked impact in supporting local economic development, while aligning our ESG strategy to international standards. In May this year, at the 2023 African Banker Awards instituted by the African Development Bank, Letshego Nigeria won the AFAWA Award (Affirmative Finance Action for Women in Africa), with over 60% of its customers being women in 2022, up from just over 20% in 2019.
Letshego’s capital base is solid with a capitalization ratio of 32%. All subsidiaries remain well capitalized.
- Net interest income down 3% to P891 million (H1 2022: P918 million)
- Non-funded income down 16% year-on-year to P212 million (H1 2022: P253 million)
- Profit before tax (PBT) down 7% year-on-year to P417 million (H1 2022: P446 million)
- Profit after tax (PAT) down 12% year-on-year to P219 million (H1 2022: P248 million)
- Net advances up 5% to P12.8 billion (H1 2022: P12.2 billion), while Gross Advances grew by 4% year-on-year
- Total assets increased 2% year-on-year to P17.2 billion (H1 2022: P16.8 billion)
- Customer deposits increased 15% year-on-year to P1.4 billion (H1 2022: P1.16 billion)
- Loan loss ratio (LLR) of 1.1% (H1 2022: 1.3%) reflected preserved loan book quality
- Cost-to-income ratio decreased 55% (H1 2022: 57%)
- Effective tax rate (ETR) up to 48% (H1 2022: 44%)
- Earnings per share 8.7 thebe (H1 2022: 10.1 thebe)
- Return on equity (ROE) 8% (H1 2022: 9%) and return on assets 3% (H1 2022: 3%)
- Capitalisation ratio 32% (H1 2022: 33%) alongside strong asset growth
- Debt-to-equity 149% in line with gearing ratio guidelines (H1 2022: 141%)
As risks to 2023/24 economic prospects continue to exist, the Group is closely watching the possible risk of inflationary flare ups that may arise from potential intensification of the Russia-Ukraine war, effects of El Nino; moreso if El Nino leads to long drought spells and extreme temperatures and ongoing geo-economic fragmentation. Risk of debt distress and debt servicing is also under our watch specifically for Kenya, Mozambique and Nigeria. Suspension of funding for Uganda by the World Bank will pile pressure on the country’s fiscal and budgetary gaps which may potential impact on the country’s economic prospects in the short term. The political risks in the Sahel region and ECOWAS‘ response are also under our close watch for the security, economic and foreign policy impact these developments portend for our West Africa operations in Nigeria and Ghana.
Whilst the challenging macro-economic conditions may persist, the Group will continue to pursue its 6-2-5 strategy. With Plan 5 well underway, the Group is confident that its Transformation Strategy remains relevant and attainable, particularly with the green shoots already seen in East and West Markets, reiterating the Group’s commitment to its Geographic Rebalancing Conversation. Letshego has made the right investments in technology and people to maintain momentum and continue its build of this future fit organisation. The Group will continue to focus on deepening its core portfolio in Deduction at Source, while piloting and learning from new inclusive finance solutions that support product diversification.
The condensed financial statements from which the financial information is set out in this announcement has been reviewed but not audited by Ernst & Young, Letshego Group’s external auditors. Their review report is available for inspection at the Group’s registered office.
Notice is hereby given that the Board has declared an interim dividend of 5.1 thebe per share for the period ended 30 June 2023. In terms of the Botswana Income Tax Act (Cap 50:01) as amended, Withholding Tax at the rate of 10% or any other currently enacted tax rate will be deducted from the dividend for the Half-Year ended 30 June 2023.
Important dates pertaining to this dividend are:
- Declaration date: 22 August 2023
- Therefore, the shares go ex-dividend from 16 November 2023
- Last date to register (LDR) is 20 November 2023
- Dividend payment date on or about, 30 November 2023
For and on behalf of the Board of Directors:
Aobakwe Aupa Monyatsi
Group Chief Executive
28 August 2023
Letshego Holdings Group Interim Results June 2023 – Fact Sheet.pdf
Letshego Holdings Group HY2023 Condensed Consolidated Financial Statements.pdf
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