The COVID0-19 pandemic has adversely impacted Letshego’s performance for the half year period ended 30 June 2020, financial statement from the pan African micro lender reveals.
The company which operates in 11 African countries explained in a commentary alongside the results that the Pandemic conditions and lockdown scenarios across its regional footprint had a direct impact on transaction volumes.
Profit before tax decreased by 20% from P600 million in the prior year to P483 million for the period under review while Profit after tax decreased by 24% to P278 million, from P364 million registered at half year 2019. Year on year Net Interest Income (NII) saw a single digit decline of 6% to P973 million, from P1, 037 million in the same period last year.
Letshego directors shared that with almost two months of trading lost to pandemic lockdowns, as well as the longer term impact of Letshego’s adjustment in affordability criteria (implemented at the end of 2019), the Group considers the single digit decline to be above expectations. A measured recovery of business momentum was experienced in the second quarter; however margin compression remains a reality in most of our markets.
Borrowing costs decreased by 20% year on year, as the Group continued its focus on retiring expensive borrowings and diversifying funding sources. Letshego Group CEO, explained that had the notional IFRS adjustment for mobile loans of P79 million been excluded from borrowings, the year-on-year decrease would have been 11%.
“The Group remains committed to diversifying its funding base and reducing foreign currency risk by securing improved rates in local funding across its operations,” he said. Non-funded income saw a steep decline of 51% year on year due to tougher economic conditions as a result of the pandemic, as well as adjustments to regulatory policy in Namibia. The impact was especially visible on income from insurance arrangements, which makes up 46% of other operating income.
This came down by 63% year on year as a result of a change in legislation in Namibia which resulted in the existing insurance arrangements being revised in October 2019 to meet new statutory requirements.
The Namibian subsidiary has since reviewed and adapted its loan structures to accommodate the regulatory adjustments, and continues to implement strategies to support longer term volume growth and volumes, despite narrowed loan margins.
Overall costs increased by 1% from prior year, with employee costs increasing 12% year-on-year and reflecting one-of exit costs. Other Operating Costs decreased by 6% as cost management efforts continued, coupled with reduced spend on historic expense lines due to support COVID-19 lockdowns.
“As expected, Letshego’s effective execution of our pandemic planning saw COVID-19 related expenses at P7.5 million, this includes donations to national COVID-19 relief efforts totaling P3.4million, and COVID-19 Operating Expenses of P4.1m,” Okai explained.
In the first half of 2020 expected credit losses, as a percentage of provisions, increased by 7% compared to Full Year figures for 2019. Gross loans and advances increased slightly by 0.4% as a result of prioritized improvement in asset quality, and the impact of COVID-19 on borrowers and associated sectors on the MSE portfolio.
The Group provided relief to customers in the form of repayment holidays, amounting to P683.6million as at 30 June, making up 7% of the Group’s total loan portfolio. Letshego also assisted customers by restructuring loans to accommodate individual changes in affordability.
90% of customers who were offered relief were Micro and Small Entrepreneurs (MSE customers) with a significant proportion of these customers from our Kenya subsidiary. The remaining 10% comprised Deduction at Source (DAS) Non-Government portfolios. Measures applied for smooth recovery of this book include enhanced collection and recovery strategies to cover potential impairment uplift up to and including December 2020.
The Group’s Cost to Income ratio was 49%, up from 41% in the prior period. This increase is primarily due to lowered operating income in the pandemic. Although Letshego has experienced a measured downside impact as a result of slowed transaction volumes in pandemic conditions, Okai says the Group’s business remains resilient.
“In the second half of 2020, Letshego’s progression in implementing the Group’s transformational strategy, alongside the concurrent execution of effective pandemic plans, the Group is confident in the business’ ability to maintain resilience throughout ongoing pandemic conditions, managing risk and supporting the potential upside of new business flows via its digitised channels.”
This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.
“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.
Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.
A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.
Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.
A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.
Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.
In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.
The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.
In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.
Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.
The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”
In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.
Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.
The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.