REG - ASA Intnl. Grp PLC - H1 2022 results
20/09/2022 07:00
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RNS Number : 9265Z ASA International Group PLC 20 September 2022
ASA International Group plc reports H1 2022 results
Amsterdam, The Netherlands, 20 September 2022 - ASA International Group plc,
('ASA International', the 'Company' or the 'Group'), one of the world's
largest international microfinance institutions, today announces its half-year
unaudited results for the six-month period from 1 January to 30 June 2022 (the
'Period').
Key performance indicators
(UNAUDITED) H1 2022 FY2021 H1 2021 FY2020 YoY YTD YTD % Change
(Amounts in USD millions)
% Change
% Change
(constant currency)
Number of clients (m) 2.4 2.4 2.5 2.4 -4% 1%
Number of branches 2,129 2,044 2,036 1,965 5% 4%
Profit before tax 23.8 25.7 7.5 2.6 217% 86% 91%
Net profit 13.1 6.4 1.4 -1.4 807% 311% 352%
OLP((1)) 378.4 403.7 415.0 415.3 -9% -6% 4%
Gross OLP 399.0 430.7 456.9 445.3 -13% -7% 2%
PAR > 30 days((2)) 5.1% 5.2% 12.3% 13.1%
((1)) Outstanding loan portfolio ('OLP') includes off-book Business
Correspondence ('BC') loans and Direct Assignment loans, excludes interest
receivable, unamortized loan processing fees, and deducts modification losses
and ECL provisions from Gross OLP.
((2)) PAR>30 is the percentage of on-book OLP that has one or more
instalment of repayment of principal past due for more than 30 days and less
than 365 days, divided by the Gross OLP.
H1 2022 highlights
· The Company's operational and financial performance continued to
improve with OLP growth and high portfolio quality in most markets leading to
pre-tax profit increasing from USD 7.5 million in H1 2021 to USD 23.8 million
in H1 2022.
· Almost all operating countries grew their OLP in constant currency
terms, maintain high portfolio quality, and make positive contributions to the
Group's profitability, with the exception of India, Myanmar and Sri Lanka.
· High OLP growth in Pakistan, the Philippines and Ghana, though
tempered by significant currency depreciation in these markets (PKR down 16%,
PHP down 8% and GHS down 30% against USD in the Period), which contributed to
the decrease of Group OLP in USD terms.
· As portfolio quality improved or stabilized across most markets, the
Company significantly reduced expected credit losses ('ECL') charged into the
Income Statement to USD 1.9 million (H1 2021: USD 22.1 million and FY 2021:
USD 37.5 million). Provisions for expected credit losses on OLP in the balance
sheet, including the off-book BC portfolio and interest receivables, reduced
from USD 27.5 million to USD 22.0 million primarily for the write offs in H1
2022.
· ASA India's OLP reduced in order to continue to prioritise the
recovery of existing and overdue loans with a responsible amount of
disbursement. As of 30 June 2022, ASA India has collected USD 1.8 million from
a total of USD 16.6 million in written-off loans since 2020, while collection
efficiency continued to improve reaching 85%.
· The Group remains well capitalized and has a strong funding pipeline
of fresh loans. At 30 June 2022, the Group had approximately USD 91 million of
unrestricted cash and cash equivalents, with a funding pipeline reaching
approximately USD 190 million. During the Period, the Group successfully
raised USD 85 million in fresh debt to fund its operations.
Outlook
Based on the positive developments during the first half of 2022, it is
expected that the Group's operating performance in terms of OLP growth and
portfolio quality will continue to improve. However, the impact of inflation
and related FX movements are expected to continue to dampen the financial
performance in USD terms in the second half of 2022.
Dirk Brouwer, Chief Executive Officer of ASA International, commented:
"I am pleased with the Company's operational and financial performance in the
first half of 2022. In most markets we saw good growth of our loan portfolio
and high portfolio quality, with pre-tax profits increasing to USD 23.8
million in the first half of 2022. Especially Pakistan, the Philippines and
Ghana reported high OLP growth, though tempered by significant currency
depreciation in these markets, which contributed to the decrease of Group OLP
in USD terms. We expect that the positive operating developments of the first
half of 2022 will continue to improve in the second half of 2022 but that the
impact of inflation and related FX movements will also continue and therefore
dampen the financial performance in USD terms in the second half of
2022.Despite the continuous challenging operating environments in India,
Myanmar and Sri Lanka, we expect higher demand in the second half of the year
from clients of our other subsidiaries which will drive the growth of the
Group's operating performance."
CHIEF EXECUTIVE OFFICER'S REVIEW
Business review H1 2022
The Company maintained and improved upon its return to growth in the first
half of 2022 with OLP increases and high portfolio quality achieved in most
markets leading to improved profitability. Due to a combination of significant
write-offs and reduced loan disbursements in India, and the significant
currency depreciation in our main countries Pakistan, the Philippines and
Ghana, the Group's net OLP decreased by 6% to USD 378 million. On a constant
currency basis, however, OLP increased by 4%. Excluding India, the Group's
Gross OLP increased by 12% in constant currency, and the Group's number of
clients, increased by 6%.
Despite the macroeconomic challenges faced in our operating markets due to the
global impact of food, commodities and energy inflation, demand from our
clients remained high and contributed to growth of our operations. Combined
with a high portfolio quality, this led to profitability in most of our
operating countries, including in particular, Pakistan, Philippines, Ghana,
Nigeria, Kenya and Tanzania.
In India, we continued to reduce the OLP as we focus on the recovery of
existing and overdue loans with a low level of disbursement, even as we see
gradual improvement in collections and recoveries. The continued challenging
operating environment in Myanmar due to Covid and the military takeover, and
the political and economic crisis in Sri Lanka also saw reduced operating and
financial performance from these subsidiaries.
As a result of the improved operating performance in H1 2022, the
significantly reduced ECL of 1.9 million (H1 2021: USD 22.1 million and FY
2021: USD 37.5 million) and having built up a strong provision in the balance
sheet in 2021, the Group realised net profits of USD 13.1 million, which was
substantially better than the USD 6.4 million generated in FY 2021.
ECL provision
The Company reduced its provision for expected credit losses from USD 27.5
million to USD 22.0 million, for its OLP, including the off-book BC portfolio
and interest receivables. Following an additional write-off of the outstanding
Covid affected portfolio (USD 7.5 million in H1 2022, in addition to USD 32.9
million in FY 2021), the Company maintained a significant provision, primarily
due to the overdue in India and Myanmar that remains high. The USD 22.0
million ECL provision on OLP and interest receivables is concentrated in India
(54%) and Myanmar (22%), with the remainder spread across the other countries
as percentage of each countries outstanding loan portfolio or as aggregate
amount. The assessment for the ECL provisions includes uncertainty in the
selected assumptions due to the lack of reliable historical data on the Covid
pandemic's impact on loan recovery. As such, the resulting outcome of losses
on the loan portfolio may be materially different. A management overlay for
the impact of the Russia-Ukraine conflict on global markets has also been
factored in our ECL. Further details on the ECL calculation including the
selected assumptions are provided in note 2.3.1 of the Interim Financial
Report.
Dividend
After careful consideration, the Board has decided to not declare a dividend
in 2022, however, the Company expects to return to its pre-Covid 30% dividend
policy in 2023, assuming the operating and financial performance continues to
improve.
Progress on digitalisation
During the Period, the Group recruited a Chief Information Officer and a team
of senior IT professionals in Amsterdam, who will strengthen the Group's IT
department and be involved in the implementation of our digital financial
services platform and the core banking system. The SMP app is expected to be
piloted in Ghana before the end of 2022. The DFS app in Ghana is scheduled to
go live in the second half of 2023, subject to a successful pilot.
The implementation of the Core Banking System in Pakistan continues as planned
and is targeted to go live in the second half of 2023.
Expenditure on digitalisation totalled USD 2.8 million in the first half of
2022.
Webcast
Management will be hosting an audio webcast and conference call, with Q&A
today at 14:00 (BST).
To access the audio webcast and download the 2022 H1 results presentation,
please go to the Investor section of the Company's website: Investors | Asa
(asa-international.com) (https://www.asa-international.com/investors/) .
or use the following link:
https://stream.brrmedia.co.uk/broadcast/6308b4a5da906b287e9a02c5
(https://stream.brrmedia.co.uk/broadcast/6308b4a5da906b287e9a02c5)
The presentation can be downloaded before the start of the webcast.
In order to ask questions, analysts and investors are invited to submit
questions via the webcast.
2022 Interim Financial Report
Today, the Company published the Interim Financial Report for the 6 months
period ended 30 June 2022 on Investors | Asa (asa-international.com)
(https://www.asa-international.com/investors/) .
Enquiries:
ASA International Group plc
Investor Relations
Véronique Schyns
+31 6 2030 0139
vschyns@asa-international.com (mailto:vschyns@asa-international.com)
GROUP FINANCIAL PERFORMANCE
(UNAUDITED) H1 2022 FY2021 H1 2021 FY2020 YoY YTD YTD % Change
(Amounts in USD thousands)
% Change
% Change
(constant currency)
Profit before tax 23,843 25,705 7,522 2,578 217% 86% 91%
Net profit 13,079 6,358 1,442 -1,395 807% 311% 352%
Cost/income ratio 66% 77% 85% 98%
Return on average assets (TTM)((1)) 4.6% 1.1% 0.5% -0.2%
Return on average equity (TTM)((1)) 25.5% 6.0% 2.8% -1.3%
Earnings growth (TTM)((1)) 807% 556% 197% -104%
OLP 378,371 403,738 415,009 415,304 -9% -6% 4%
Gross OLP 398,990 430,698 456,925 445,257 -13% -7% 2%
Total assets 546,093 562,554 585,300 579,260 -7% -3%
Client deposits ((2)) 86,291 87,812 86,922 80,174 -1% -2%
Interest-bearing debt ((2)) 299,652 314,413 334,565 337,632 -10% -5%
Share capital and reserves 100,451 103,443 105,020 107,073 -4% -3%
Number of clients 2,403,172 2,380,690 2,506,110 2,380,685 -4% 1%
Number of branches 2,129 2,044 2,036 1,965 5% 4%
Average Gross OLP per client (USD) 166 181 182 187 -9% -8% 1%
PAR > 30 days 5.1% 5.2% 12.3% 13.1%
Client deposits as % of loan portfolio 23% 22% 21% 19%
((1)) TTM refers to trailing twelve months.
((2)) Excludes interest payable.
Regional performance
South Asia
(UNAUDITED) H1 2022 FY2021 H1 2021 FY2020 YoY YTD YTD % Change
(Amounts in USD thousands)
% Change
% Change
(constant currency)
Profit before tax 7,409 -8,229 -8,187 -5,537 190% 280% 278%
Net profit 4,653 -12,393 -6,414 -4,360 173% 175% 183%
Cost/income ratio 60% 154% 335% 134%
Return on average assets (TTM) 4.5% -5.5% -5.5% -1.7%
Return on average equity (TTM) 22.1% -27.3% -24.4% -7.8%
Earnings growth (TTM) 173% -184% -1180% -131%
OLP 151,978 182,329 207,362 217,843 -27% -17% -6%
Gross OLP 164,092 201,405 237,031 238,738 -31% -19% -8%
Total assets 181,894 198,393 232,999 253,360 -22% -8%
Client deposits 1,445 2,464 2,588 2,610 -44% -41%
Interest-bearing debt 132,284 146,522 170,556 183,756 -22% -10%
Share capital and reserves 36,868 37,506 47,277 53,232 -22% -2%
Number of clients 1,071,710 1,106,469 1,231,989 1,185,656 -13% -3%
Number of branches 788 778 788 758 0% 1%
Average Gross OLP per client (USD) 153 182 192 201 -20% -16% -5%
PAR > 30 days 5.5% 9.6% 17.4% 21.3%
Client deposits as % of loan portfolio 1% 1% 1% 1%
· Pakistan continued to grow its OLP (up 17% in PKR), while maintaining
an excellent portfolio quality.
· ASA India continued to focus on collections with limited disbursements
and therefore intentionally shrinking its operations, while in Sri Lanka,
operations were substantially disrupted by the political and economic crisis
in the country.
ASA India
· Number of clients down from 541k to 451k (down 17% YTD)
· Number of branches down from 387 to 377 (down 3% YTD)
· OLP declined from INR 4.5bn (USD 61m) to INR 3.1bn (USD 39m) (down 33%
YTD in INR)
· Off-book portfolio declined from INR 2.7bn (USD 35.7m) to INR 2.4bn
(USD 30.7m) (down 9% in INR). This includes INR 94.6m (USD 1.2m) of the
portfolio transferred under a direct assignment ('DA') agreement to State Bank
of India
· Gross OLP/Client down from INR 16K to INR 14K (down 10% YTD in INR)
· PAR>30 decreased from 19.7% to 14.0%
· Outstanding amount of loans under RBI restructuring reduced to USD
16.2m from USD 27.1m in December 2021. The moratorium period for these loans
ended in June 2022. No further moratoriums were granted to clients.
*See note 12.1 to the consolidated financial statements for details on the
off-book portfolio.
ASA Pakistan
· Number of clients increased from 512k to 574k (up 12% YTD)
· Number of branches up from 325 to 345 (up 6% YTD)
· OLP up from PKR 13.8bn (USD 77.7m) to PKR 16.2bn (USD 78.9m) (up 17%
in PKR)
· Gross OLP/Client up from PKR 27.3K (USD 154) to PKR 28.6K (USD 139)
(up 5% YTD in PKR)
· PAR>30 remained at 0.2%
Lak Jaya (Sri Lanka)
· Number of clients down from 53k to 47k (down 12% YTD)
· Number of branches remained at 66
· OLP decreased from LKR 1.6bn (USD 7.7m) to LKR 1.3bn (USD 3.6m) (down
18% YTD in LKR)
· Gross OLP/Client down from LKR 32.0K (USD 158) to LKR 29.9K (USD 83)
(down 7% YTD in LKR)
· PAR>30 increased from 6.0% to 8.5%
South East Asia
(UNAUDITED) H1 2022 FY2021 H1 2021 FY2020 YoY YTD YTD % Change
(Amounts in USD thousands)
% Change
% Change
(constant currency)
Profit before tax 553 34 950 -4,348 -42% 3121% 337%
Net profit 171 -339 1,452 -3,366 -88% 201% 19%
Cost/income ratio 92% 97% 92% 135%
Return on average assets (TTM) 0.3% -0.3% 2.5% -2.7%
Return on average equity (TTM) 2.0% -1.8% 14.7% -16.1%
Earnings growth (TTM) -88% 90% 137% -163%
OLP 60,350 62,328 71,279 74,214 -15% -3% 4%
Gross OLP 66,428 66,784 79,037 80,832 -16% -0.5% 6%
Total assets 106,716 105,872 120,013 119,152 -11% 1%
Client deposits 21,445 20,956 24,572 24,000 -13% 2%
Interest-bearing debt 60,402 60,392 66,656 66,412 -9% 0%
Share capital and reserves 15,481 16,827 19,454 20,259 -20% -8%
Number of clients 415,506 400,021 455,197 428,645 -9% 4%
Number of branches 441 420 422 415 5% 5%
Average Gross OLP per client (USD) 160 167 174 189 -8% -4% 2%
PAR > 30 days 11.2% 2.1% 14.1% 4.1%
Client deposits as % of loan portfolio 36% 34% 34% 32%
· Pagasa Philippines' operational and financial performance continued to
improve.
· In Myanmar, client and OLP growth stalled, due in large part to
disruptions brought on by continuing civil unrest in certain regions.
Pagasa Philippines
· Number of clients up from 289k to 313k (up 8% YTD)
· Number of branches up from 324 to 345 (up 6% YTD)
· OLP up from PHP 2.3bn (USD 44.6m) to PHP 2.5bn (USD 45.5m) (up 10% YTD
in PHP)
· Gross OLP/Client increased from PHP 8.23K (USD 161) to PHP 8.24K (USD
150) (up 0.2% YTD in PHP)
· PAR>30 increased from 2.5% to 2.7%
ASA Myanmar
· Number of clients down from 111k to 103k (down 8% YTD)
· Number of branches remained at 96
· OLP down from to MMK 31.5bn (USD 17.7m) to MMK 27.6bn (USD 14.8m)
(down 13% YTD in MMK)
· Gross OLP/Client up from MMK 324K (USD 182) to MMK 353K (USD 190) (up
9% YTD in MMK)
· PAR>30 increased from 1.1% to 31.5%
West Africa
(UNAUDITED) H1 2022 FY2021 H1 2021 FY2020 YoY YTD YTD % Change
(Amounts in USD thousands)
% Change
% Change
(constant currency)
Profit before tax 14,979 35,583 15,859 19,268 -6% -16% -7%
Net profit 10,454 25,019 10,826 13,443 -3% -16% -8%
Cost/income ratio 42% 37% 39% 49%
Return on average assets (TTM) 17.2% 20.6% 20.0% 13.2%
Return on average equity (TTM) 34.6% 45.4% 45.5% 31.1%
Earnings growth (TTM) -3% 86% 104% -16%
OLP 87,796 94,201 81,905 77,835 7% -7% 8%
Gross OLP 89,669 95,879 84,007 79,499 7% -6% 8%
Total assets 120,512 134,719 122,729 107,748 -2% -11%
Client deposits 42,905 46,548 43,506 39,788 -1% -8%
Interest-bearing debt 5,504 7,100 9,427 10,255 -42% -22%
Share capital and reserves 62,749 61,222 58,204 49,033 8% 2%
Number of clients 439,004 457,302 446,727 447,122 -2% -4%
Number of branches 442 440 440 433 0% 0%
Average Gross OLP per client (USD) 204 210 188 178 9% -3% 13%
PAR > 30 days 3.5% 2.6% 2.4% 2.7%
Client deposits as % of loan portfolio 49% 49% 53% 51%
· West Africa saw a slight decrease in operational performance due to
challenges in the operating environment in Nigeria and Sierra Leone.
· Significant depreciation of GHS (30% down against USD in H1 2022) and
SLL (17% down against USD in H1 2022) impacted profitability and OLP growth in
USD terms.
· OLP continued to grow in Ghana (up 14% YTD in GHS), with excellent
portfolio quality.
ASA Savings & Loans (Ghana)
· Number of clients up from 158.4k to 165.7k (up 5% YTD)
· Number of branches remained at 133
· OLP up from GHS 301.7m (USD 48.9m) to GHS 343.7m (USD 42.8m) (up 14%
YTD in GHS)
· Gross OLP/Client up from GHS 1.9k (USD 310) to GHS 2.1k (USD 258) (up
9% YTD in GHS)
· PAR>30 remained at 0.3%
ASA Nigeria
· Number of clients down from 254k to 235k (down 7% YTD)
· Number of branches maintained at 263
· OLP up from NGN 15.9bn (USD 38.5m) to NGN 16.3bn (USD 39.3m) (up 3%
YTD in NGN)
· Gross OLP/Client up from NGN 65k (USD 157) to NGN 72k (USD 174) (up
12% YTD in NGN)
· PAR>30 increased from 4.6% to 6.0%
ASA Sierra Leone
· Number of clients down from 45k to 39k (down 15% YTD)
· Number of branches up from 44 to 46 (up 5% YTD)
· OLP down from SLL 76.1bn (USD 6.7m) to SLL 75.2bn (USD 5.7m) (down 1%
YTD in SLL)
· Gross OLP/Client up from SLL 1.7m (USD 154) to SLL 2.1m (USD 156) (up
18% YTD in SLL)
· PAR>30 increased from 7.5% to 10.1%
East Africa
(UNAUDITED) H1 2022 FY2021 H1 2021 FY2020 YoY YTD YTD % Change
(Amounts in USD thousands)
% Change
% Change
(constant currency)
Profit before tax 5,433 6,605 2,293 1,652 137% 65% 54%
Net profit 3,267 4,631 1,414 1,069 131% 41% 42%
Cost/income ratio 67% 75% 79% 90%
Return on average assets (TTM) 7.4% 6.5% 4.4% 1.8%
Return on average equity (TTM) 33.7% 25.5% 17.6% 6.7%
Earnings growth (TTM) 131% 333% 325% -83%
OLP 78,247 64,881 54,464 45,413 44% 21% 24%
Gross OLP 78,801 66,629 56,850 46,188 39% 18% 21%
Total assets 101,842 83,602 73,954 59,802 38% 22%
Client deposits 20,495 17,843 16,256 13,776 26% 15%
Interest-bearing debt 50,934 41,201 36,917 26,292 38% 24%
Share capital and reserves 22,036 19,973 16,728 16,313 32% 10%
Number of clients 476,952 416,898 372,197 319,262 28% 14%
Number of branches 458 406 386 359 19% 13%
Average Gross OLP per client (USD) 165 160 153 145 8% 3% 6%
PAR > 30 days 0.9% 1.3% 6.5% 13.2%
Client deposits as % of loan portfolio 26% 28% 30% 30%
· East Africa continued to improve its operational performance and
profitability due to continued growth in Tanzania, Kenya, Uganda and Rwanda.
ASA Kenya
· Number of clients up from 119k to 134k (up 13% YTD)
· Number of branches up from 112 to 121 (up 8% YTD)
· OLP up from KES 1.8bn (USD 16.1m) to KES 2.3bn (USD 19.1m) (up 23% YTD
in KES)
· Gross OLP/Client up from KES 16K (USD 140) to KES 17K (USD 144) (up 7%
YTD in KES)
· PAR>30 decreased from 1.1% to 0.8%
ASA Tanzania
· Number of clients up from 174k to 201k (up 16% YTD)
· Number of branches up from 143 to 174 (up 22% YTD)
· OLP up from TZS 79.0bn (USD 34.3m) to TZS 98.5bn (USD 42.2m) (up 25%
YTD in TZS)
· Gross OLP/Client up from TZS 460k (USD 200) to TZS 492k (USD 211) (up
7% YTD in TZS)
· PAR>30 decreased from 0.5% to 0.4%
ASA Uganda
· Number of clients up from 92k to 104k (up 14% YTD)
· Number of branches up from 103 to 109 (up 6% YTD)
· OLP up from UGX 31.8bn (USD 9.0m) to UGX 39.4bn (USD 10.5m) (up 24%
YTD in UGX)
· Gross OLP/Client down from UGX 378.1K (USD 107) to UGX 377.5K (USD
100) (down 0.1% YTD in UGX)
· PAR>30 decreased from 3.8% to 1.4%
ASA Rwanda
· Number of clients increased from 18.2k to 18.7k (up 3% YTD)
· Number of branches maintained at 30
· OLP up from RWF 3.4bn (USD 3.3m) to RWF 3.8bn (USD 3.7m) (up 12% YTD
in RWF)
· Gross OLP/Client up from RWF 193K (USD 187) to RWF 209K (USD 204) (up
8% YTD in RWF)
· PAR>30 increased from 4.5% to 4.6%
ASA Zambia
· Number of clients increased from 15k to reach 18k
· Number of branches increased from 18 to 24
· OLP up from ZMW 36.4m (USD 2m) to ZMW 46.1m (USD 3m)
· Gross OLP/Client up from ZMW 2.5k (USD 151) to ZMW 2.6k (USD 150)
· PAR>30 increased to 2.9%
Regulatory environment
The Company operates in a wide range of jurisdictions, each with their own
regulatory regimes applicable to microfinance institutions.
Key events H1 and H2 2022
India
· On 14 March 2022, the RBI announced the new regulation for the
microfinance sector in India, applicable to all banks and NBFC-MFIs, including
ASA India. Key changes include the removal of the interest rate cap and margin
cap, loans shall be collateral-free (also for banks providing microfinance
loans), and lenders will be restricted to provide microfinance loans to
clients up to a maximum of 50% of the client's household income. As a result,
the interest rate has been increased.
Pakistan
· On 24 May 2022, ASA Pakistan received the Microfinance Banking license
from State Bank of Pakistan. The license is subject to compliance with certain
requirements, mainly implementing the new core banking system and meeting
statutory capital requirements.
Sri Lanka
· On 10 June 2022, the Central Bank of Sri Lanka has withdrawn the
maximum interest rate cap on microfinance loans. As a result, Lak Jaya is now
charging interest based on expected risk.
Myanmar
· On 13 July 2022, the Central Bank of Myanmar ('CBM') suspended
interest and principal repayments on foreign loans and directed companies to
restructure these loans. This made ASA Myanmar unable to meet its payment
obligations to international lenders. On 16 August 2022, CBM announced that
certain transactions are permitted with prior approval from the Foreign
Currency Supervision Committee 'FCSC'). ASA Myanmar is now seeking approval
from the FCSC.
Tanzania
· ASA Tanzania continues to prepare the application for a deposit-taking
licence which is expected to be submitted to the central bank in 2022. A
deposit-taking license will enable ASA Tanzania to reduce the cost of funding
in the future.
Kenya
· ASA Kenya continues to prepare the application for a deposit-taking
licence which is expected to be submitted to the central bank in 2022. A
deposit-taking license will enable ASA Kenya to reduce the cost of funding in
the future.
Regulatory capital
Many of the Group's operating subsidiaries are regulated and subject to
minimum regulatory capital requirements. As of 30 June 2022, the Group and its
subsidiaries were in full compliance with minimum regulatory capital
requirements.
Asset/liability and risk management
ASA International has strict policies and procedures for the management of its
assets and liabilities as well as various non-operational risks to ensure
that:
· The average tenor of loans to customers is substantially shorter than
the average tenor of debt provided by third-party banks and other third-party
lenders to the Group and any of its subsidiaries.
· Foreign exchange losses are minimised by having all loans to any of
the Group's operating subsidiaries denominated or duly hedged in the local
operating currency and loans to any of the Group's subsidiaries denominated in
local currency are hedged in US Dollars.
· Foreign translation losses affecting the Group's balance sheet are
minimised by preventing over-capitalisation of any of the Group's subsidiaries
by distributing dividends and/or repaying capital as soon as reasonably
possible.
Nevertheless, the Group will always remain exposed to currency movements in
both (i) the profit and loss statement, which will be affected by the
translation of profits in local currencies into USD, and (ii) the balance
sheet, due to the erosion of capital of each of its operating subsidiaries in
local currency when translated in USD, in case the US Dollar strengthens
against the currency of any of its operating subsidiaries.
Funding
The funding profile of the Group has not materially changed during H1 2022:
In USD millions
30 Jun 22 31 Dec 21 30 Jun 21 31 Dec 20
Local Deposits 86.3 87.8 86.9 80.2
Loans from Financial Institutions 241.9 249.8 280.6 274.1
Microfinance Loan Funds 36.5 36.5 14.0 23.5
Loans from Dev. Banks & Foundations 21.3 28.1 40.0 40.0
Equity 100.5 103.4 105.0 107.1
Total Funding 486.4 505.7 526.5 524.9
The Group maintains a favourable maturity profile with the average tenor of
all funding from third parties being substantially longer than the average
tenor at issuance of loans to customers which ranges from 6-12 months for the
bulk of the loans.
The Group and its subsidiaries have existing credit relationships with more
than 60 lenders throughout the world, which has provided reliable access to
competitively priced funding for the growth of its loan portfolio.
During H1 2022, a number of loan covenants were breached across the Group,
particularly related to the portfolio quality in India. As of 30 June 2022,
the balance for credit lines with breached covenants that did not have waivers
amounted to USD 99.8 million out of which waivers for USD 34.3 million have
been subsequently received. The majority of the waivers which are pending
relate to our India operations where a majority of our lenders are local
institutions, who usually provide waivers after receiving the audited
statutory financial statements.
Based on the received waivers, ongoing discussions, prior experience, and new
funding commitments received, the Group has a high degree of confidence that
all the required waivers will be obtained. It should be noted that none of the
lenders have initiated any accelerated calls to any of the Group's outstanding
obligations during 2020, 2021 and H1 2022.
The Company has also received temporary waivers, no-action and/or comfort
letters from some of its major lenders for the remainder of 2022 due to
expected portfolio quality covenant breaches (primarily PAR>30). The impact
of these potential covenant breaches was further assessed in the evaluation of
the Company's going concern as disclosed in note 2.1.2 of the Interim
Financial Report, where the Directors have concluded that there is a material
uncertainty that may cast significant doubt over the Group's ability to
continue as a going concern.
Impact of foreign exchange rates
As a USD reporting company with operations in thirteen different currencies,
currency movements can have a major effect on the Group's USD financial
performance and reporting.
The effect of this is that generally (i) existing and future local currency
earnings translate into less US Dollar earnings, and (ii) local currency
capital of any of the operating subsidiaries will translate into less US
Dollar capital. The table below shows the trend of the various operating
currencies vis-à-vis the US Dollar.
Countries H1 2022 FY 2021 H1 2021 FY 2020 Δ H1 2021 Δ FY 2021
- H1 2022
- H1 2022
India (INR) 78.8 74.4 74.3 73.0 (6%) (6%)
Pakistan (PKR) 205.4 177.5 158.1 160.3 (30%) (16%)
Sri Lanka (LKR) 360.0 202.9 199.5 185.3 (80%) (77%)
The Philippines (PHP) 55.0 51.1 48.8 48.0 (13%) (8%)
Myanmar (MMK) 1858.1 1778.5 1647.0 1330.7 (13%) (4%)
Ghana (GHS) 8.0 6.2 5.9 5.9 (37%) (30%)
Nigeria (NGN) 415.2 411.5 411.4 384.6 (1%) (1%)
Sierra Leone (SLL) 13170.0 11289.0 10252.6 10107.0 (28%) (17%)
Kenya (KES) 117.9 113.2 107.9 109.0 (9%) (4%)
Uganda (UGX) 3765.9 3546.2 3557.5 3647.7 (6%) (6%)
Tanzania (TZS) 2332.1 2303.7 2319.1 2317.2 (1%) (1%)
Rwanda (RWF) 1026.0 1031.8 986.5 986.4 (4%) 1%
Zambia (ZMW) 17.0 16.7 22.7 21.1 25% (2%)
During H1 2022, the US Dollar particularly strengthened against PKR +16%, LKR
+77%, and GHS +30%. This had an additional negative impact on the USD earnings
contribution of these subsidiaries to the Group and also contributed to an
increase in foreign exchange translation losses. The total contribution to the
foreign exchange translation loss reserve during H1 2022 amounted to USD 17.7
million of which USD 5.7 million related to depreciation of the PKR, USD 1.3
million to the depreciation of the LKR, and USD 8.4 million to the
depreciation of the GHS.
Transfer pricing
The South East Asia and East Africa regions are contributing intercompany
franchise fees and corporate service fees to the holding companies of the
Group, whereas approval for most of such intercompany charges are pending in
certain countries in South Asia and West Africa. The intercompany charges per
region are detailed in the Segment Information as included in note 3 of the
Interim Financial Report.
Forward-looking statement and disclaimers
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