REG - ASA Intnl. Grp PLC - H1 2023 results
20/09/2023 07:00
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RNS Number : 9867M ASA International Group PLC 20 September 2023
Press release
ASA International Group plc reports H1 2023 results
Amsterdam, The Netherlands, 20 September 2023 - 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 2023 (the
'Period').
Key performance indicators
(UNAUDITED) H1 2023 FY2022 H1 2022 FY2021 YoY YTD YTD % Change
(Amounts in USD millions)
% Change
% Change
(constant currency)
Number of clients (m) 2.2 2.3 2.4 2.4 -7% -3%
Number of branches 2,073 2,028 2,129 2,044 -3% 2%
Profit before tax 13.8 46.3 23.8 25.7 -42% -40% -31%
Net profit 3.7 17.9 13.1 6.4 -72% -59% -45%
OLP((1)) 334.4 351.2 378.4 403.7 -12% -5% 6%
Gross OLP 346.8 367.5 399.0 430.7 -13% -6% 5%
PAR > 30 days((2)) 3.8% 5.9% 5.1% 5.2%
((1)) Outstanding loan portfolio ('OLP') includes off-book Business
Correspondence ('BC') loans and Direct Assignment loans, and loans valued at
fair value through the P&L ("FVTPL"), excludes interest receivable,
unamortised loan processing fees, and deducts ECL reserves 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 2023 highlights
· The Company's operational performance in constant currency terms
improved compared to the end of 2022, with OLP growing by 6% in constant
currency terms.
· Operational and financial results decreased in USD terms, with profit
before tax decreasing to USD 13.8 million in H1 2023 from USD 23.8 million in
H1 2022.
· The decline in profits was primarily due to (i) lower recovery of
overdue loans in India, (ii) higher ECL expense of USD 2.8 million charged to
the income statement, (iii) significant devaluations of our operating
currencies vis-a-vis the USD in H1 2023 especially in our major markets of
Pakistan (down 27%), Ghana (down 12%), Nigeria (down 70%) and Kenya (down
14%), and (iv) provision of USD 1.4 million for additional super-tax charged
in Pakistan applied on H1 2023 results and retrospectively on FY 2022 results.
· Pakistan, the Philippines, Ghana and Tanzania made significant
positive contributions to the Group's net profitability, due to high loan
portfolio quality in all these markets and no significant currency
devaluations in the Philippines and Tanzania.
· PAR>30 for the Group's operating subsidiaries improved to 3.8% in
H1 2023 from 5.1% in H1 2022, primarily due to the improving portfolio quality
across most markets with the exceptions of India and Nigeria.
· The Company increased expected credit losses ('ECL') charged to the
Income Statement to USD 2.8 million (H1 2022: USD 1.9 million and FY 2022: USD
0.6 million), primarily due to (i) low portfolio quality in India, and (ii)
deteriorating portfolio quality in Nigeria due to the adverse impact on
operations from the national elections and demonetization. Reserves for ECL on
OLP in the Balance Sheet, including the off-book BC portfolio in India and
interest receivables, reduced to USD 13.3 million in H1 2023 from USD 22.0
million in H1 2022.
· The devaluations of our operating currencies contributed to an
increase in foreign exchange translation losses from USD 17.7 million in H1
2022 to USD 24.8 million in H1 2023 and a decrease of the Company's total
equity from USD 100.5 million in H1 2022 to USD 69.2 million in H1 2023.
· The Group's cash and cash equivalents reduced to approximately USD 45
million as of 30 June 2023 from approximately USD 91 million as of 30 June
2022, following large debt settlements primarily in India. The Company has a
significant funding pipeline of USD 181 million and raised USD 75 million in
new debt in H1 2023.
Outlook
We continue to see improvements in the operating markets with stability
returning to markets that were recently adversely impacted by political and
economic events. As such, we continue to expect the Group's operational
performance in terms of OLP growth and portfolio quality to improve in the
second half of 2023. However, based on developments in the first half of 2023
and in the current macro environment, we expect net profit to be lower this
year compared to 2022. The reasons for this are related to (i) demonetization
and further inflation impact on our operations in Nigeria, (ii) further
devaluation of operating currencies against USD year-to-date in Pakistan,
Ghana, Kenya and Nigeria, and (iii) incidental tax claims in some of our
jurisdictions, including higher taxes now applicable in Pakistan than
expected.
Karin Kersten, Chief Executive Officer of ASA International, commented:
"The operating environment in some of our major operating entities has been
very challenging during the first six months of the year. In particular, the
unprecedented currency depreciation and inflation in some of our key markets
are the main drivers. Having travelled recently to multiple of our operations,
I see that our clients are struggling with rising food and fuel prices."
"Despite these challenges, we see growth in OLP on a constant currency basis
and portfolio quality improvement in some of our major markets such as
Pakistan, Philippines, Tanzania and Ghana. Additionally, we have made
substantial strides with the implementation of our digital strategy with the
imminent rollout of our core banking system in Pakistan."
"However, global market volatility, FX movements and demonetization events in
Nigeria have significantly impacted the Group OLP and portfolio quality. This,
and incidental taxes in Pakistan have reduced financial performance in USD
terms more than expected, resulting in lower growth and profitability compared
to H1 2022."
CHIEF EXECUTIVE OFFICER'S REVIEW
Business review H1 2023
The improvement in the operating environment in most of our markets saw demand
for our loan products increase as clients experienced an upturn in business
activity. Against the backdrop of the macroeconomic challenges faced in our
operating markets due to the global impact of food, commodities and energy
inflation, the high demand from clients contributed to the growth of our
operations in most markets. Ghana, Pakistan, Tanzania and the Philippines grew
their loan portfolios on a local currency basis and made significant
contributions to the Group's profitability.
The Group added 54 additional branches though overall client numbers across
the Group decreased due to operational challenges faced primarily in India and
Nigeria. On a constant currency basis, Gross OLP for the Group, grew to USD
384.7 million as at end of June 2023 from USD 367.5 million at the end of
December 2022. The growth in Gross OLP was combined with improved portfolio
quality in most markets with PAR>30 for the Group at 3.8% as of June 2023
from 5.9% in December 2022.
In India, the Group maintained its strategy to reduce disbursements and focus
on the recovery of existing and overdue loans, though at a slower pace which
resulted in on-book Gross OLP shrinking by USD 4.2 million in H1 2023.
However, overall Gross OLP in India increased by 11% as the off-book Gross OLP
increased to USD 31.5 million as of 30 June 2023 from USD 22.6 million as of
31 December 2022. This was due to new Business Correspondence partnerships
which commenced in H1 2023. We expect that the on-book portfolio will also
start to increase by year-end which should translate into a positive effect on
the future profitability of our operations in India.
In Nigeria, the operating environment became challenging in H1 2023 due to the
impact from recent national elections, demonetization and high inflation
following the removal of government fuel subsidies. This resulted in a
reduction of OLP and clients, increase in overdues, and high operating
expenses in H1 2023. This was compounded by significant devaluation of the
Nigerian Naira (down 70% against USD as of June 2023 YTD) which resulted in
reduced operational and financial results in USD terms from H1 2023. However,
we now see an improvement of the operating environment which is reflected in
the portfolio quality improving, as well as collections and disbursements
increasing. As such we expect the operations to gradually recover in the
second half of 2023 and contribute positively to the Group.
Against the backdrop of continued high inflation in many of our markets, we
continue to expect operations to improve across the Group in the second half
of 2023. The Group is focused on right-sizing average loan sizes to clients in
view of the inflationary environment, while improving branch productivity as
clients continue to demand our loans and our staff in the field remain
committed and focused on supporting clients in difficult operating
circumstances.
Expected credit losses
The Company reduced its reserves in the Balance Sheet for expected credit
losses from USD 16.9 million as per end of 2022 to USD 13.3 million as per end
of June 2023, for its OLP, including the off-book BC portfolio and interest
receivables. Following an additional write-off of the outstanding Covid
affected portfolio (USD 6.8 million as per end of June 2023 vs USD 10.8
million as per end of 2022), the Company maintained significant reserves,
primarily due to the overdue loans in India, Myanmar and Nigeria.
The USD 13.3 million ECL reserves on OLP is concentrated in India (55%),
Myanmar (15%) and Nigeria (15%), with the remainder spread across the other
countries as a percentage of each country's outstanding loan portfolio or as
an aggregate amount. Further details on the ECL calculation, including the
selected assumptions, are provided in note 2.3.1 to the Interim Financial
Report.
Digital financial services
In anticipation of a rapidly digitising world, also in the segment of our
low-income clients, the Group is making strides with the implementation of its
digital strategy to have a more attractive and competitive client proposition.
The implementation of the core banking system in Pakistan is well under way
and planned to go live in the coming months. In Ghana, the roll out of the
core banking system combined with the implementation of the digital app is
planned for the first half of next year. By the implementation of these new
systems, we can also significantly reduce manual processes and increase
back-office productivity.
Competitive environment
The competitive landscape remains the same across the Group. Our strongest
competitors are in India, the Philippines, Nigeria, Tanzania and Uganda. In
most other markets, we face less competition from traditional microfinance
institutions. Up until now, we have not been affected by competition from pure
digital lenders.
Dividend
Although the Board planned to return to its pre-Covid dividend policy in 2024
on the 2023 results, given the tough market circumstances, the company
believes it is prudent not to commit to a dividend payment at this stage.
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 2023 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://brrmedia.news/ASAI_IR23
(https://brrmedia.news/ASAI_IR23)
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.
2023 Interim Financial Report
Today, the Company published the Interim Financial Report for the 6 months
period ended 30 June 2023 on Investors | Asa (asa-international.com)
(https://www.asa-international.com/investors/) .
Enquiries:
ASA International Group plc
Investor Relations
Mischa Assink
ir@asa-international.com (mailto:ir@asa-international.com)
GROUP FINANCIAL PERFORMANCE
(UNAUDITED) H1 2023 FY2022 H1 2022 FY2021 YoY YTD YTD % Change
(Amounts in USD thousands)
% Change
% Change
(constant currency)
Profit before tax 13,815 46,281 23,843 25,705 -42% -40% -31%
Net profit 3,676 17,887 13,079 6,358 -72% -59% -45%
Cost/income ratio 77% 68% 66% 77%
Return on average assets (TTM)((1)) 1.5% 3.4% 4.6% 1.1%
Return on average equity (TTM)((1)) 8.7% 18.5% 25.5% 6.0%
Earnings growth (TTM)((1)) -72% 181% 807% 556%
OLP 334,400 351,151 378,371 403,738 -12% -5% 6%
Gross OLP 346,804 367,535 398,990 430,698 -13% -6% 5%
Total assets 452,332 489,752 546,093 562,554 -17% -8%
Client deposits ((2)) 72,718 84,111 86,291 87,812 -16% -14%
Interest-bearing debt ((2)) 245,314 257,466 299,652 314,413 -18% -5%
Share capital and reserves 69,249 89,661 100,451 103,443 -31% -23%
Number of clients 2,224,542 2,299,558 2,403,172 2,380,690 -7% -3%
Number of branches 2,073 2,028 2,129 2,044 -3% 2%
Average Gross OLP per client (USD) 156 160 166 181 -6% -2% 8%
PAR > 30 days 3.8% 5.9% 5.1% 5.2%
Client deposits as % of loan portfolio 22% 24% 23% 22%
((1)) TTM refers to the previous twelve months.
((2)) Excludes interest payable.
Regional performance
South Asia
(UNAUDITED) H1 2023 FY2022 H1 2022 FY2021 YoY YTD YTD % Change
(Amounts in USD thousands)
% Change
% Change
(constant currency)
Profit before tax 3,766 12,395 7,409 -8,229 -49% -39% -19%
Net profit 487 3,103 4,653 -12,393 -90% -69% -29%
Cost/income ratio 72% 64% 60% 154%
Return on average assets (TTM) 0.7% 1.9% 4.5% -5.5%
Return on average equity (TTM) 3.4% 8.8% 22.1% -27.3%
Earnings growth (TTM) -90% 125% 173% -184%
OLP 112,089 118,590 151,978 182,329 -26% -5% 9%
Gross OLP 119,869 128,460 164,092 201,405 -27% -7% 6%
Total assets 106,979 133,894 181,894 198,393 -41% -20%
Client deposits 1,718 1,345 1,445 2,464 19% 28%
Interest-bearing debt 65,357 85,878 132,284 146,522 -51% -24%
Share capital and reserves 20,526 33,393 36,868 37,506 -44% -39%
Number of clients 860,407 935,091 1,071,710 1,106,469 -20% -8%
Number of branches 661 670 788 778 -16% -1%
Average Gross OLP per client (USD) 139 137 153 182 -9% 1% 15%
PAR > 30 days 7.3% 11.1% 5.5% 9.6%
Client deposits as % of loan portfolio 2% 1% 1% 1%
· Pakistan continued to maintain a strong portfolio quality throughout
H1 2023.
· The significant currency depreciation in Pakistan (PKR down 27% YTD
against USD) contributed to overall OLP reduction in H1 2023.
Pakistan
ASA Pakistan grew its operations over the past 6 months:
· Number of clients increased from 606k to 608k (up 0.4% YTD).
· Number of branches remained at 345.
· OLP up from PKR 17.9bn (USD 79.1m) to PKR 18.8bn (USD 65.6m) (up 5% in
PKR).
· Gross OLP/Client up from PKR 29.8k (USD 131) to PKR 31.1k (USD 108)
(up 4% YTD in PKR).
· PAR>30 decreased from 0.7% to 0.3%.
India
ASA India intentionally shrank its operations over the past 6 months, as it
focused on recovery of overdue loans while growing the off-book portfolio:
· Number of clients down from 284k to 207k (down 27% YTD).
· Number of branches down from 261 to 252 (down 3% YTD).
· On-book portfolio decreased from INR 1.2bn (USD 14m) to INR 1.0bn (USD
12m) (down 18% YTD in INR).
· Off-book portfolio increased from INR 1.8bn (USD 21.5m) to INR 2.5bn
(USD 30.6m) (up 41% in INR).
· Gross OLP/Client up from INR 13K (USD 158) to INR 20k (USD 240) (up
51% YTD in INR).
· PAR>30 decreased from 49.0% to 32.9%, and PAR>30 amount
decreased from INR 903.4m (USD 10.9m) to INR 487.2m (USD 5.9m).
· ASA India's collection efficiency remained stable at 85% in June 2023.
As of 30 June 2023, ASA India had collected USD 5.5 million from a total of
USD 26.8 million in written-off loans since 2020.
*See note 13.1 to the consolidated financial statements 2022 for details on
the off-book portfolio.
Sri Lanka
Lak Jaya stabilized its operations over the past 6 months:
· Number of clients remained at 45k.
· Number of branches remained at 64.
· OLP decreased from LKR 1.4bn (USD 3.8m) to LKR 1.3bn (USD 4.1m) (down
8% YTD in LKR).
· Gross OLP/Client down from LKR 32.4k (USD 89) to LKR 30.1k (USD 98)
(down 7% YTD in LKR).
· PAR>30 decreased from 8.5% to 6.4%.
South East Asia
(UNAUDITED) H1 2023 FY2022 H1 2022 FY2021 YoY YTD YTD % Change
% Change
% Change
(constant currency)
(Amounts in USD thousands)
Profit before tax 2,342 4,217 553 34 323% 11% 10%
Net profit 1,694 1,910 171 -339 888% 77% 76%
Cost/income ratio 83% 82% 92% 97%
Return on average assets (TTM) 3.1% 1.8% 0.3% -0.3%
Return on average equity (TTM) 22.5% 12.0% 2.0% -1.8%
Earnings growth (TTM) 891% 663% -88% 90%
OLP 68,073 63,316 60,350 62,328 13% 8% 7%
Gross OLP 70,067 66,955 66,428 66,784 5% 5% 4%
Total assets 111,703 102,917 106,716 105,872 5% 9%
Client deposits 23,871 22,069 21,445 20,956 11% 8%
Interest-bearing debt 66,178 58,416 60,402 60,392 10% 13%
Share capital and reserves 14,666 14,980 15,481 16,827 -5% -2%
Number of clients 429,533 424,076 415,506 400,021 3% 1%
Number of branches 463 441 441 420 5% 5%
Average Gross OLP per client (USD) 163 158 160 167 2% 3% 3%
PAR > 30 days 1.7% 6.5% 11.2% 2.1%
Client deposits as % of loan portfolio 35% 35% 36% 34%
· South East Asia financial and operational results continued to improve
in H1 2023.
The Philippines
Pagasa Philippines operations grew over the last 6 months:
· Number of clients up from 325k to 332k (up 2% YTD).
· Number of branches up from 345 to 367 (up 6% YTD).
· OLP up from PHP 2.8bn (USD 49.6m) to PHP 2.9bn (USD 52.3m) (up 5% YTD
in PHP).
· Gross OLP/Client increased from PHP 8.6k (USD 153) to PHP 8.7k (USD
158) (up 2% YTD in PHP).
· PAR>30 increased from 1.7% to 1.9%.
Myanmar
ASA Myanmar saw an increase in OLP over the last 6 months despite the
challenging political situation and the related civil unrest halting
operations in certain regions:
· Number of clients down from 99k to 98k (down 2% YTD).
· Number of branches remained at 96.
· OLP up from MMK 28.9bn (USD 13.8m) to MMK 33.2bn (USD 15.8m) (up 15%
YTD in MMK).
· Gross OLP/Client up from MMK 362k (USD 172) to MMK 383k (USD 182) (up
6% YTD in MMK).
· PAR>30 decreased from 20.4% to 1.2%.
st Africa
(UNAUDITED) H1 2023 FY2022 H1 2022 FY2021 YoY YTD YTD % Change
% Change
% Change
(constant currency)
(Amounts in USD thousands)
Profit before tax 6,952 27,799 14,979 35,583 -54% -50% -44%
Net profit 4,220 19,215 10,454 25,019 -60% -56% -51%
Cost/income ratio 57% 43% 42% 37%
Return on average assets (TTM) 8.2% 15.8% 17.2% 20.6%
Return on average equity (TTM) 16.0% 33.2% 34.6% 45.4%
Earnings growth (TTM) -60% -23% -3% 86%
OLP 60,349 82,380 87,796 94,201 -31% -27% -8%
Gross OLP 62,914 84,853 89,669 95,879 -30% -26% -6%
Total assets 85,774 108,395 120,512 134,719 -29% -21%
Client deposits 30,798 39,544 42,905 46,548 -28% -22%
Interest-bearing debt 4,028 4,326 5,504 7,100 -27% -7%
Share capital and reserves 42,551 54,591 62,749 61,222 -32% -22%
Number of clients 379,467 433,897 439,004 457,302 -14% -13%
Number of branches 452 446 442 440 2% 1%
Average Gross OLP per client (USD) 166 196 204 210 -19% -15% 8%
PAR > 30 days 5.2% 4.2% 3.5% 2.6%
Client deposits as % of loan portfolio 51% 48% 49% 49%
· West Africa saw a deterioration in operational performance and
profitability in USD terms primarily due to the challenging operating
environment in Nigeria caused by the recent national elections and the impacts
of demonetization and depreciation of NGN (70% down against USD in H1 2023
compared to FY 2022).
Ghana
ASA Savings & Loans operations continued to improve with excellent
portfolio quality:
· Number of clients up from 177k to 181k (up 2% YTD).
· Number of branches up from 137 to 143 (up 4% YTD).
· OLP up from GHS 416.3m (USD 40.8m) to GHS 464.1m (USD 40.6m) (up 11%
YTD in GHS).
· Gross OLP/Client up from GHS 2.4k (USD 231) to GHS 2.6k (USD 226) (up
9% YTD in GHS).
· PAR>30 decreased from 0.6% to 0.2%.
Nigeria
ASA Nigeria saw a deterioration in financial and operational performance:
· Number of clients down from 220k to 163k (down 26% YTD).
· Number of branches maintained at 263.
· OLP down from NGN 16.7bn (USD 37.3m) to NGN 11.8bn (USD 15.6m) (down
29% YTD in NGN).
· Gross OLP/Client up from NGN 80k (USD 179) to NGN 81k (USD 107) (up 1%
YTD in NGN).
· PAR>30 increased from 7.1% to 15.5%.
Sierra Leone
ASA Sierra Leone saw a deterioration in financial and operational
performances:
· Number of clients down from 37k to 35k (down 4% YTD).
· Number of branches remained at 46.
· OLP down from SLE 80.7m (USD 4.3m) to SLE 79.6m (USD 4.2m) (down 1%
YTD in SLE).
· Gross OLP/Client up from SLE 2.3m (USD 123) to SLE 2.5m (USD 133) (up
9% YTD in SLE).
· PAR>30 increased from 10.7% to 11.3%.
East Africa
(UNAUDITED) H1 2023 FY2022 H1 2022 FY2021 YoY YTD YTD % Change
% Change
% Change
(constant currency)
(Amounts in USD thousands)
Profit before tax 5,993 11,241 5,433 6,605 10% 7% 9%
Net profit 3,717 6,913 3,267 4,631 14% 8% 10%
Cost/income ratio 69% 68% 67% 75%
Return on average assets (TTM) 6.8% 7.0% 7.4% 6.5%
Return on average equity (TTM) 30.4% 29.8% 33.7% 25.5%
Earnings growth (TTM) 14% 49% 131% 333%
OLP 93,889 86,865 78,247 64,881 20% 8% 13%
Gross OLP 93,955 87,267 78,801 66,629 19% 8% 13%
Total assets 116,542 113,791 101,842 83,602 14% 2%
Client deposits 16,332 21,153 20,495 17,843 -20% -23%
Interest-bearing debt 62,115 59,871 50,934 41,201 22% 4%
Share capital and reserves 26,878 26,445 22,036 19,973 22% 2%
Number of clients 555,135 506,494 476,952 416,898 16% 10%
Number of branches 497 471 458 406 9% 6%
Average Gross OLP per client (USD) 169 172 165 160 2% -2% 3%
PAR > 30 days 1.1% 0.9% 0.9% 1.3%
Client deposits as % of loan portfolio 17% 24% 26% 28%
· East Africa saw an improvement in operational performance due to
continued growth in Tanzania.
Tanzania
ASA Tanzania managed to expand its operations over the last 6 months:
· Number of clients up from 217k to 227k (up 5% YTD).
· Number of branches up from 180 to 190 (up 6% YTD).
· OLP up from TZS 119.5bn (USD 51.2m) to TZS 136.1bn (USD 56.3m) (up 14%
YTD in TZS).
· Gross OLP/Client up from TZS 553k (USD 237) to TZS 602k (USD 249) (up
9% YTD in TZS).
· PAR>30 increased from 0.4% to 0.7%.
Kenya
ASA Kenya expanded its operations over the 6 months period:
· Number of clients up from 141k to 180k (up 27% YTD).
· Number of branches up from 124 to 130 (up 5% YTD).
· OLP up from KES 2.1bn (USD 16.9m) to KES 2.6bn (USD 18.3m) (up 23% YTD
in KES).
· Gross OLP/Client down from KES 15K (USD 120) to KES 14k (USD 102)
(down 4% YTD in KES).
· PAR>30 decreased from 0.8% to 0.5%.
Uganda
ASA Uganda saw a slight deterioration in operations over the last 6 months:
· Number of clients down from 107k to 106k (down 0.4% YTD).
· Number of branches up from 110 to 118 (up 7% YTD).
· OLP up from UGX 43.0bn (USD 11.6m) to UGX 44.2bn (USD 12.0m) (up 3%
YTD in UGX).
· Gross OLP/Client down from UGX 405k (USD 109) to UGX 403k (USD 110)
(down 0.5% YTD in UGX).
· PAR>30 remained at 0.9%.
Rwanda
ASA Rwanda saw a deterioration in operations over the last 6 months:
· Number of clients down from 21k to 20k (down 7% YTD).
· Number of branches maintained at 30.
· OLP down from RWF 4.6bn (USD 4.3m) to RWF 4.4bn (USD 3.7m) (down 5%
YTD in RWF).
· Gross OLP/Client up from RWF 220k (USD 207) to RWF 227k (USD 194) (up
3% YTD in RWF).
· PAR>30 increased from 4.6% to 6.8%.
Zambia
ASA Zambia managed to expand its operations:
· Number of clients increased from 21k to 23k (up 8% YTD).
· Number of branches increased from 27 to 29 (up 7% YTD).
· OLP up from ZMW 51.7m (USD 2.9m) to ZMW 62.2m (USD 3.5m) (up 20% YTD
in ZMW).
· Gross OLP/Client increased from ZMW 2.5k (USD 139) to ZMW 2.8k (USD
161) (up 12% YTD in ZMW).
· PAR>30 decreased from 5.0% to 4.2%.
Regulatory environment
The Company operates in a wide range of jurisdictions, each with their own
regulatory regimes applicable to microfinance institutions.
Key events H1 2023
Pakistan
· ASA Pakistan received the Microfinance Banking ('MFB') licence from
the State Bank of Pakistan ('SBP') on 24 May 2022 and is awaiting receipt of
the certificate of commencement.
· ASA Pakistan declared a dividend on FY 2022 results, and has applied
to the SBP for approval of the remittance. The approval is still pending.
Ghana
· In Q1 2023, the Bank of Ghana approved the Company's application for
implementing Digital Financial Services.
· The dividend declared on 2022 results was approved by the Bank of
Ghana in September 2023, and it was partly paid.
Nigeria
· In 2022, the Central Bank delayed the approval of payment of dividends
declared in the past. The dividend declared on 2021 results was approved in
March 2023, and it was fully paid. The dividend declared on 2022 results is
still pending for approval.
Kenya
· In 2022, the Digital Credit Providers Act took effect, which prohibits
credit-only MFIs to take collateral. MFIs are required to apply for a
Digital Credit Providers licence, Microfinance Bank licence or any other
suitable licence.
· ASA Kenya submitted a pro forma application for Digital Credit
Providers licence in May 2023 to ensure it is compliant with the law, but is
desirous to acquire a deposit taking license.
Regulatory capital
Many of the Group's operating subsidiaries are regulated and subject to
minimum regulatory capital requirements. As of 30 June 2023, 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. In 2022, the
Group established an Asset-Liability Committee ('ALCO'), and the Terms of
Reference of the ALCO was approved by the Board. The ALCO will continuously
manage the Group's assets and liabilities 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. All loans from the Group to any of its subsidiaries
denominated in local currency are also 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 hedging capital.
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, where 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 2023:
In USD millions
30 Jun 23 31 Dec 22 30 Jun 22 31 Dec 21
Local Deposits 72.7 84.1 86.3 87.8
Loans from Financial Institutions 204.9 216.6 241.9 249.8
Microfinance Loan Funds 22.9 21.5 36.5 36.5
Loans from Dev. Banks & Foundations 17.5 19.4 21.3 28.1
Equity 69.2 89.7 100.5 103.4
Total Funding 387.2 431.3 486.5 505.6
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 six to twelve months
for majority of the loans.
Cash and cash equivalents reduced to approximately USD 45 million as of 30
June 2023 following large debt settlements, primarily in India. The Group
managed to raise approximately USD 75 million in new debt funding in H1 2023.
In line with market developments, funding rates have increased by
approximately 100 bps, which will have limited impact on our 2023 results, as
majority of the outstanding funding are with fixed interest rates. Also, the
Group has a strong funding pipeline of USD 181 million fresh loans, with over
91% having agreed terms and can be accessed in the short to medium term as of
30 June 2023.
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.
Over past three years and during H1 2023, a number of loan covenants were
breached across the Group, particularly related to the portfolio quality in
India. As of 30 June 2023, the balance for credit lines with breached
covenants and which did not have waivers amounts to USD 55 million out of
which waivers have been subsequently received for USD 36 million.
The Group has also received temporary waivers, no-action and/or comfort
letters from some of its major lenders for expected portfolio quality covenant
breaches (primarily PAR>30) in 2023 caused primarily by the overdue loans
in India. The impact of these potential covenant breaches was further assessed
in the evaluation of the Group's going concern as disclosed in note 2.1.2 of
the Interim Financial Report. However, the current economic and market
conditions make it difficult to assess the likelihood of further debt covenant
breaches and whether the waivers necessary to avoid the immediate repayment of
debt or further extension of loan terms will be forthcoming. As a result,
senior management and the Directors have concluded that this represents a
material uncertainty that may cast significant doubt over the Group's ability
to continue as a going concern. Nevertheless, given the historical and
continuing support received from lenders regarding these particular covenant
breaches and based on continued improved operating performance in most
markets, the Group has a reasonable expectation that it will have adequate
resources to continue in operational existence throughout the Going Concern
assessment period.
Impact of foreign exchange rates
As a US Dollar 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.
Countries 30 Jun 23 31 Dec 22 30 Jun 22 31 Dec 21 Δ 30 Jun 2022 Δ 31 Dec 2022
- 30 Jun 2023
- 30 Jun 2023
Pakistan (PKR) 287.1 226.4 205.4 177.5 (40%) (27%)
India (INR) 82.1 82.7 78.8 74.4 (4%) 1%
Sri Lanka (LKR) 308.2 366.3 360.0 202.9 14% 16%
The Philippines (PHP) 55.3 55.7 55.0 51.1 (1%) 1%
Myanmar (MMK) 2,102.2 2,100.0 1,858.1 1,778.5 (13%) (0.1%)
Ghana (GHS) 11.4 10.2 8.0 6.2 (42%) (12%)
Nigeria (NGN) 761.1 448.1 415.2 411.5 (83%) (70%)
Sierra Leone (SLE) 18.9 18.9 13.2 11.3 (44%) (0.1%)
Tanzania (TZS) 2,416.1 2,332.5 2,332.1 2,303.7 (4%) (4%)
Kenya (KES) 140.4 123.5 117.9 113.2 (19%) (14%)
Uganda (UGX) 3,673.8 3,717.6 3,765.9 3,546.2 2% 1%
Rwanda (RWF) 1,172.0 1,067.0 1,026.0 1,031.8 (14%) (10%)
Zambia (ZMW) 17.6 18.1 17.0 16.7 (3%) 3%
During H1 2023, the local currencies PKR -27%, GHS -12%, NGN -70% and KES -14%
particularly weakened against the USD. 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 2023
amounted to USD 24.8 million of which USD 8.8 million related to the
depreciation of the PKR, USD 2.3 million related to the depreciation of the
GHS, USD 12.7 million related to the depreciation of the NGN, and USD 0.8
million related to the depreciation of the KES.
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 to the
Interim Financial Report.
Forward-looking statement and disclaimers
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jurisdictions into which this announcement is released, published or
distributed should inform themselves about and observe such restriction.
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