TIDMASAI

RNS Number : 9832B

ASA International Group PLC

14 October 2020

ASA International Group plc reports H1 2020 results

Amsterdam, 14 October 2020 - ASA International, ("ASA International", the "Company" or the "Group"), one of the world's largest international microfinance institutions, today announces its half year results for the six-month period from 1 January to 30 June 2020 and provides an update on the impact of COVID-19 on its business.

Key performance indicators

 
 (UNAUDITED)             H1 2020    FY 2019    H1 2019     YoY    YTD   YoY % Change 
   (Amounts In USD                                                         (constant 
   millions)                                                               currency) 
 
 Number of clients 
  (m)                         2.3        2.5       2.3      1%    -8% 
 Number of branches         1,956      1,895     1,812      8%     3% 
 Net loss/profit             -1.5       34.5      16.1   -109%                 -105% 
 Outstanding Loan 
  Portfolio ("OLP") 
  (1)                       388.6      467.4     419.5     -7%   -17%            -1% 
 PAR > 30 days (2)           3.6%       1.5%      1.0% 
 
 (1) Includes off-book Business Correspondence loans and Direct 
  Assignment loans and excludes interest receivable and the unamortized 
  loan processing fee 
 (2) PAR>30 is the percentage of OLP that has one or more instalment 
  of repayment of principal past due for more than 30 days divided 
  by the total outstanding gross loan portfolio. 
 

H1 2020 Highlights

-- The Company's operational and financial performance was substantially affected by the unexpected, sudden emergence of COVID-19 and the associated disruption across all our operating countries with a net loss of USD 1.5m in H1 2020 compared to a net profit of USD 16.1m in H1 2019.

-- The reduction in profitability was primarily caused by (i) a modification loss of USD 13.3m on interest income due to the effective extension of the term of the Company's loans to clients during the lockdown period and the moratorium on payments granted to selective clients immediately after the end of the lockdowns, which meant that part of the recognition and payment of interest income scheduled for H1 moved to H2, and (ii) a USD 8.3m provision for expected credit losses in H1 2020 compared to USD 1.2m in H1 2019.

-- Immediate health impact on our staff and clients remained relatively low with no deaths amongst our approximately 12.5K employees and 15 deaths amongst our 2.3 million clients due to COVID-19.

-- Following the end of the lockdowns in our operating countries, the Group granted many clients a temporary moratorium of the payment of one or more loan instalments (which, in effect extends the loan for the period of moratorium), which peaked at USD 16.9m in June with 485K clients benefiting from the moratorium.

   --    PAR>30 increased to 3.6% (excluding loan instalments under moratorium) by the end of June. 

-- As of 30 June 2020, the Group had approximately USD 110m of unrestricted cash and cash equivalents, and the funding pipeline exceeded more than USD 200m.

September 2020 Trading Update

-- Collection efficiency continues to increase in almost all operating countries with 8 out of 13 countries achieving collections in the mid to high nineties.

-- Disbursements increased as well, which resulted in a gradual growth of the loan portfolio during the second half of 2020, from a gross OLP amount of USD 399.7m by 30 June 2020 to USD 422.3m as of 30 September 2020.

-- Since the start of the COVID-19 crisis, the Group granted many clients a temporary moratorium of loan repayments for an aggregate amount of USD 45.9m as of 30 September 2020, which is concentrated in four countries: India (32% of the total), the Philippines (34%), Kenya (10%) and Uganda (10%).

   --    As of 30 September, PAR>30 increased to 6.4%, excluding loan instalments under moratorium. 

-- The Group's liquidity remained strong throughout the COVID-19 crisis with unrestricted cash and cash equivalents increasing from USD 90m as of 30 March 2020 to approximately USD 105m as of 30 September 2020.

-- As of 30 September 2020, the Group has a pipeline of wholesale loans exceeding 185m from a large variety of local and international lenders.

-- In anticipation of potential covenant breaches with PAR>30 possibly exceeding 5% throughout the remainder of 2020, the Group secured waivers, no action or comfort letters from almost all its major lenders.

Outlook

The Company is positive about the expected operational and financial performance of the Group for the second half of the year. We have seen ongoing improvement of the business environment for our clients, which resulted in increased demand for loans, increased collection rates, reduced demand for moratoriums, and lower loan loss provisions. Unless the disruption to our clients' businesses caused by COVID-19 increases, it is expected that the Company's operational and financial performance will gradually normalize to more customary levels in terms of profitability and return on assets/equity during the second half of the year. Subject to COVID-19 related developments and any associated business disruptions, net profits are expected to be approximately USD 10m for the full year 2020.

Dirk Brouwer, Chief Executive Officer of ASA International, commented:

"Considering the challenging operating circumstances in the first half of 2020, we are pleased with the performance of the Group. From the start of the crisis we were determined to stay close to our clients and support them throughout these difficult times which prevented many of our clients from doing their regular daily business. Early on we decided to grant a payment holiday to our clients for the lockdown period in each of our operating countries, which in effect extended the term of each outstanding loan. We also granted selected clients a temporary extension on the payment of loan instalments for a period after the end of the nationwide lockdowns.

Our clients have shown strong resilience in rebuilding their businesses and adjust to the new operating circumstances. This ability to recover from adverse circumstances together with our support in providing more time for clients to settle their loans, have enabled our clients to increase their earnings capacity and gradually repay in full the loans granted by the Group.

We are grateful for the solid and consistent financial support we are receiving from almost all our lenders. Once the business environment has further stabilized, we will use these funds for accelerating the growth of our branch network, client base and loan portfolio in existing and new countries. At the start of 2020, we planned to further evaluate the entry of several new markets and due to COVID-19, we postponed these evaluations. Looking towards 2021, I expect we should be able to pick up these plans again and continue to explore opportunities in countries in Asia and Africa."

CHIEF EXECUTIVE OFFICER'S REVIEW

Business Review H1 2020

The first half year of 2020 probably has been the most challenging six months in the Company's history with lockdowns instituted in all our operating countries around the world in less than two weeks.

As result of the disruption to our clients' businesses, we focused more on collection of outstanding installments than disbursement of fresh loans during the first 6-8 weeks after the end of the lockdowns in order to re-assess the earning capacity of each of our clients. This resulted in a gradual reduction of the outstanding loan portfolio from USD 467.4 million by year-end 2019 to USD 388.6 million as of 30 June 2020. As of July 2020, the Group has started to increase its new loan disbursements across all markets, which lead to renewed growth of the Group's loan portfolio.

We have seen positive developments on the regulatory front with (i) ASA Pakistan securing an in-principle approval from the Central Bank to transform into a microfinance bank, (ii) ASA Myanmar receiving approval for taking voluntary savings from clients and (iii) completing the merger of the activities of ASIEA NGO into ASHA Microfinance Bank, our nationwide microfinance bank in Nigeria on 1 April 2020.

Despite the COVID-19 crisis, staff satisfaction remained high with hardly any staff drop-outs during the lockdown period. Most of our approximately 12,500 staff started working at ASA International immediately after university graduation and with many pursuing careers within the Company.

The competitive environment did not change much during the first half of the year as result of the crisis. Competition remains highest in India and the Philippines where our strongest competitors are three microfinance institutions which also follow the ASA model of microfinance as taught to them by ASA NGO Bangladesh more than 15 years ago. In most other markets, we face less competition of traditional microfinance institutions. As of now, we have experienced limited competition of digital lenders in any of our markets, as the loans and services offered are not particularly targeted to our client base as of yet. Digital lenders are often perceived by our clients as lenders of last resort who employ aggressive debt collectors, charge high interest rates and have little or no connection to the local communities. With our proprietary, real-time banking system, AMBS, we are well-positioned to offer our clients digital financial services, which we expect to be gradually introduced in our operating countries.

During H1 2020, we maintained a minimum foreign currency mismatch, and benefited from the shorter duration of our assets vis-à-vis our liabilities, which enabled us to draw some liquidity from the field at the height of the COVID-19 crisis.

Compared to 2018 and 2019, our operating currencies remained relatively stable vis-à-vis the US dollar during H1 2020, with the exception of Pakistan, India, Nigeria and Zambia which have seen significant depreciation of their currencies.

Modification loss

The modification loss of USD 13.3m on interest income and interest receivable relates to the effective extension of the term of the Company's loans to clients during lockdowns and individual moratoria granted after the lockdowns. We have estimated the modification loss through performing sample testing of borrowers across each country and extrapolating the difference across the remainder of the population. As such there is a degree of estimation uncertainty in the recording of income as the sample selected may not be indicative of the untested population. We have further explained the modification loss in note 2.3.2 of the interim condensed financial statements.

ECL provision

During H1 2020 the Company has increased its provision for expected credit losses ("ECL") from USD 4.3m to USD 11.1m for the combined OLP including the off-book BC portfolio. The related ECL expense amounts to USD 8.3m in H1 2020 compared to USD 1.2m in H1 2019. This increase mainly relates to an additional management overlay as part of the ECL policy under IFRS 9 due to the expected impact on our clients of recent government and regulatory actions related to COVID-19, like lockdowns and moratoria. Management has applied its previous experiences from natural calamities and other disruptive events like the Andhra Pradesh crisis and demonetisation in India, as well as the current developments in each of its operating countries, to determine the assumptions for the ECL calculation. Because the removal or relaxation of restrictions in certain countries occurred very recently, and in some countries regional restrictions continue, the impact on borrowers and the selection of the assumptions for the ECL provision include significant uncertainty. As such, the resulting outcome of losses on the loan portfolio may be materially different. Further details on the ECL calculation are provided in note 2.3.1 of the interim condensed financial statements.

Dividend

Due to the COVID-19 impact on the Group's financial and operating performance during H1 2020 and the resulting uncertainty, the Board ultimately decided not to declare a dividend on earnings for the year 2019. The Company plans to reinstate the standard dividend policy of 30% of Group earnings for the year 2020.

Webcast and Conference Call

Management will be hosting an audio webcast and conference call, with Q&A today at 14:00 (BST).

To access the audio webcast, please go to www.asa-international.com or use the following link: https://brrmedia.news/qdw47

In order to ask questions, analysts and investors are invited to submit questions via the webcast or dial into the conference call. Please use the dial-in details below, including the confirmation code:

 
Location         Phone Number 
United Kingdom   +44 (0)330 336 9411 
---------------  ------------------- 
Netherlands      +31 (0)20 703 8261 
---------------  ------------------- 
South Africa     +27 11 844 6118 
---------------  ------------------- 
India            +91 (0)80 7127 9031 
---------------  ------------------- 
Singapore        +65 6320 9075 
---------------  ------------------- 
United States    +1 323-794-2094 
---------------  ------------------- 
 

Confirmation code: 1817583

2020 Interim Financial Report

Today, we published our Interim Financial Report for the 6 months period ended 30 June 2020 on: www.asa-international.com

Enquiries:

   ASA International Group plc                                                       +31 6 2030 0139 

Investor Relations vschyns@asa-international.com

Véronique Schyns

GROUP FINANCIAL PERFORMANCE

 
 (UNAUDITED)                       H1 2020     FY 2019     H1 2019     YoY    YTD           YoY 
                                                                                       % Change 
   (Amounts in USD thousands)                                                         (constant 
                                                                                      currency) 
 
 Net loss/profit                    -1,487      34,497      16,133   -109%                -105% 
 
 Cost/income ratio                    108%         60%         61% 
 Return on average assets 
  (TTM)                              -0.5%        6.7%        6.7% 
 Return on average equity 
  (TTM)                              -2.8%       34.5%       36.0% 
 Earnings growth (TTM)               -109%          6%         -2% 
 
 OLP (1)                           388,649     467,429     419,493     -7%   -17%           -1% 
 Total assets                      530,984     559,958     517,884      3%    -5% 
 Client deposits (2)                74,488      78,080      69,395      7%    -5% 
 Interest-bearing debt 
  (2)                              301,094     317,810     298,093      1%    -5% 
 Share capital and reserves        104,131     111,169      92,943     12%    -6% 
 
 Number of clients               2,331,563   2,534,015   2,313,305      1%    -8% 
 Number of branches                  1,956       1,895       1,812      8%     3% 
 Average outstanding loan 
  per client (USD)                     167         184         181     -8%   -10%           -2% 
 
 PAR > 30 days                        3.6%        1.5%        1.0% 
 Client deposits as % of 
  loan portfolio                       19%         17%         17% 
 
 (1) Includes off-book Business Correspondence loans and Direct 
  Assignment loans and excludes interest receivable and unamortized 
  loan processing fees 
 (2) Excludes interest payable 
 

Regional performance

South Asia

 
 (UNAUDITED)                       H1 2020     FY 2019     H1 2019    YoY    YTD           YoY 
                                                                                      % Change 
   (Amounts in USD thousands)                                                        (constant 
                                                                                     currency) 
 
 Net profit                            594      14,098       7,492   -92%                 -87% 
 
 Cost/income ratio                     99%         50%         49% 
 Return on average assets 
  (TTM)                               0.5%        6.1%        6.5% 
 Return on average equity 
  (TTM)                               2.0%       26.6%       33.2% 
 Earnings growth (TTM)                -92%         -5%         -3% 
 
 OLP (1)                           226,401     254,361     234,869    -4%   -11%            7% 
 Total assets                      229,747     252,034     238,720    -4%    -9% 
 Client deposits (2)                 2,363       2,082       1,198    97%    13% 
 Interest-bearing debt 
  (2)                              159,136     177,257     174,728    -9%   -10% 
 Share capital and reserves         57,777      58,703      48,972    18%    -2% 
 
 Number of clients               1,191,888   1,234,638   1,135,004     5%    -3% 
 Number of branches                    766         751         699    10%     2% 
 Average outstanding loan 
  per client (USD)                     196         208         209    -6%    -5%          -14% 
 
 PAR > 30 days                        4.7%        2.0%        1.1% 
 Client deposits as % of 
  loan portfolio                        1%          1%          1% 
 
 (1) Includes off-book Business Correspondence loans and Direct 
  Assignment loans and excludes interest receivable and unamortized 
  loan processing fees 
 (2) Excludes interest payable 
 

Due to the impact of COVID-19 and associated lockdowns in each country, operations were largely disrupted in the South Asia region. A shrinking OLP along with increased provisions for expected losses as well as currency depreciation in Pakistan and India (PKR down 3% and INR down 9% YoY against USD) led to South Asia's USD net profits going down 92% YoY (87% YoY down on a constant currency basis).

   --    The quality of the loan portfolio declined with PAR>30 increasing from 1.1% to 4.7% 

-- Cost/Income ratio increased by 5,000 bps to 99% due to reduced income caused by the COVI-19 disruptions compared to an increased cost base YoY

-- Return on average assets was down 600 bps to 0.5% due to lower profits caused by a declining OLP, and increase in expected credit loss expenses

   --    Return on average equity down by 3,100 bps to 2.0% 

India

ASAI India grew its operations over the twelve-month period:

   --    Number of clients up from 639 k to 727 k (up 14 % YoY) 
   --    Number of branches up from 352 to 402 (up 14% YoY) 
   --    OLP up from INR 8.3bn (USD 120m) to INR 8.5bn (USD 113m) (up 3% YoY in INR) 

-- Off-book portfolio grew from INR 3.1bn (USD 45.5m) to INR 4.0bn (USD 53.8m) (up 30% in INR). This now includes INR 517.2m (USD 6.9m) of the portfolio transferred under a direct assignment (DA) agreement to State Bank of India

   --    OLP/Client down from INR 13K to INR 12K (down 9% YoY in INR) 
   --    PAR>30 increased from 0.7% to 3.0% 
   --    USD 5.8m in moratoriums granted to 182k clients in June 2020 

-- ASAI India continues to benefit from its strong business correspondent relationship with IDFC First Bank and the ongoing support of its many international and local lenders, including State Bank of India raising over USD 20m of new funding in H1 2020

Pakistan

ASA Pakistan saw its operations shrink due to COVID-19 impact and the uncertainty caused by the delay in securing the microfinance bank license during the second half of 2019:

   --    Number of clients declined from 429 k to 4 0 9k (down 5% YoY) 
   --    Number of branches up from 276 to 293 (up 6 % YoY) 

-- OLP down from PKR 9.8bn (USD 60.2m) to PKR 8.7bn (USD 51.5m) (down 12 % in PKR), OLP/Client down from PKR 22 .7 K (USD 141) to PKR 22 .2 K (USD 1 32 ) ( down 2% YoY in PKR) due to lower disbursements to clients during the period of uncertainty created by COVID-19

   --    PAR>30 increased from 0.6% to 7.6% 
   --    No moratoriums granted to clients up until the end of September 2020 

Sri Lanka

Lak Jaya continued to feel the negative impact of the political activism around the government's debt relief program and the Easter Sunday bombings, and additionally the disruption due to COVID-19:

   --    Number of clients down from 67 k to 56 k ( do wn 17% YoY) 
   --    Number of branches maintained at 71 
   --    OLP down from LKR 1.6bn (USD 9.1m) to LKR 1.5bn (USD 7.9m) (down 9% YoY in LKR) 
   --    OLP/Client up from LKR 22.6K (USD 145) to LKR 29.1K (USD 156) (up 29% Y oY in LKR) 
   --    PAR>30 increased from 10.0% to 10.2% 
   --    Up to USD 1.1m in moratoriums granted to 37k clients between March and June 2020 

-- Management implemented a strategy to focus on cost control and improving the portfolio quality by consolidating some branches and making a larger write-off of its bad loans

South East Asia

 
 (UNAUDITED)                     H1 2020   FY 2019   H1 2019     YoY    YTD           YoY 
                                                                                 % Change 
   (Amounts in USD thousands)                                                   (constant 
                                                                                currency) 
 
 Net loss/profit                  -3,969     5,349     2,279   -274%                -284% 
 
 Cost/income ratio                  464%       74%       78% 
 Return on average assets 
  (TTM)                            -6.7%      4.8%      4.5% 
 Return on average equity 
  (TTM)                           -38.3%     29.1%     27.7% 
 Earnings growth (TTM)             -274%       38%       37% 
 
 OLP (1)                          68,847    84,205    72,986     -6%   -18%          -13% 
 Total assets                    111,870   125,750   111,074      1%   -11% 
 Client deposits (2)              23,726    22,995    20,496     16%     3% 
 Interest-bearing debt (2)        59,140    72,419    64,558     -8%   -18% 
 Share capital and reserves       19,964    21,453    15,986     25%    -7% 
 
 Number of clients               448,707   491,813   468,424     -4%    -9% 
 Number of branches                  416       405       395      5%     3% 
 Average outstanding loan 
  per client (USD)                   173       173       157     10%     0%           -9% 
 
 PAR > 30 days                      1.1%      1.0%      0.9% 
 Client deposits as % of 
  loan portfolio                     34%       27%       28% 
 
 (1) Excludes interest receivable and the unamortized loan 
  processing fee 
 (2) Excludes interest payable 
 

In South East Asia, client and OLP growth declined in H1 2020 compared to year end 2019 due in large part to disruptions brought on by COVID-19 in especially the Philippines. The extended 10-week lockdown period and the ongoing disruption afterwards in the Philippines led to a reduction in OLP and higher expected credit losses resulting in lower earnings, while Myanmar continued to improve its profitability despite the subsequent decline in clients and OLP as result of COVID-19, supported by a stronger currency (9% up on USD from H1 2019 to H1 2020).

The Philippines

PPFC operations contracted due to impact from COVID-19:

   --    Number of clients down from 324k to 309k (down 5% YoY) 
   --    Number of branches up from 307 to 323 (up 5% YoY) 
   --    OLP down from PHP 2.4bn (USD 46.2m) to PHP 2.0bn (USD 39.5m) (down 16% YoY in PHP) 
   --    OLP/Client up from PHP 7K (USD 143) to PHP 8 K (USD 1 54 ) (up 5% YoY in PHP) 
   --    PAR>30 increased from 1.1% to 2.6% 
   --    Up to USD 7.0m in moratoriums granted to 145k clients between March and June 2020 

Myanmar

ASA Myanmar saw a decline in clients but marginal growth of its OLP:

   --    Number of clients down from 144k to 1 40 k (down 3% YoY) 
   --    Number of branches up from 88 to 93 (up 6 % YoY) 
   --    OLP down from to MMK 40.7bn (USD 26.8m) to MMK 40.5bn (USD 29.3m) (down 0.5% YoY in MMK) 
   --    OLP/Client up from MMK 295K (USD 187) to MMK 297K (USD 215) (up 1% YoY in MMK) 
   --    PAR>30 decreased from 0.5% to 0.6% 
   --    Up to USD 1.1m in moratoriums granted to 35k clients between March and June 2020 

West Africa

 
 (UNAUDITED)                     H1 2020   FY 2019   H1 2019    YoY    YTD           YoY 
                                                                                % Change 
   (Amounts in USD thousands)                                                  (constant 
                                                                               currency) 
 
 Net profit                        5,297    15,935     7,029   -25%                 -15% 
 
 Cost/income ratio                   55%       45%       47% 
 Return on average assets 
  (TTM)                            11.2%     17.3%     19.4% 
 Return on average equity 
  (TTM)                            28.5%     45.7%     51.8% 
 Earnings growth (TTM)              -25%       -6%       -3% 
 
 OLP (1)                          56,647    77,200    69,754   -19%   -27%          -10% 
 Total assets                     93,962    95,240    84,239    12%    -1% 
 Client deposits (2)              34,809    38,195    35,679    -2%    -9% 
 Interest-bearing debt (2)        11,212    11,919     5,368   109%    -6% 
 Share capital and reserves       37,003    37,452    34,771     6%    -1% 
 
 Number of clients               389,453   459,022   416,024    -6%   -15% 
 Number of branches                  431       423       420     3%     2% 
 Average outstanding loan 
  per client (USD)                   155       170       169    -8%    -9%           -5% 
 
 PAR > 30 days                      4.0%      1.5%      1.2% 
 Client deposits as % of 
  loan portfolio                     61%       49%       51% 
 
 (1) Includes off-book Business Correspondence loans and Direct 
  Assignment loans and excludes interest receivable and the unamortized 
  loan processing fee 
 (2) Excludes interest payable 
 

West Africa's operational and financial performance saw a decline due to the impact of COVID-19. Ghana saw a quick recovery of its operations following the end of lockdowns with collections back to pre-COVID levels within 2 weeks, while Nigeria faced a longer recovery from lockdowns due to prior challenging market conditions further impacted by COVID-19, including a depreciation of NGN (7% down against USD in H1 2020). OLP was down 19% YoY (down 10 % YoY on a constant currency basis), which was affected by lower disbursements to clients during the period of uncertainty following lockdowns in Nigeria and Ghana.

Ghana

ASA Savings & Loans operations declined due to COVID-19 but managed to recover and achieve good portfolio quality:

   --    Number of clients down from 152k to 134k (down 12% YoY) 
   --    Number of branches up from 123 to 129 (up 5% YoY) 
   --    OLP down from GHS 206.8m (USD 38.1m) to GHS 190.0 m (USD 32.8m) (down 8% YoY in GHS) 
   --    OLP/Client down to GHS 1.5k (USD 250) (down 1% YoY in GHS) 
   --    PAR>30 increased from 0.2% to 1.2% 
   --    No moratoriums granted to clients in the period 

Nigeria

ASHA Nigeria and ASIEA ('ASA Nigeria') saw a contraction of operations due to COVID-19:

   --    Number of clients down from 234k to 225k (down 4% YoY) 
   --    Number of branches maintained at 263 
   --    OLP down from NGN 10.5bn (USD 29.2m) to NGN 8.1bn (USD 21.0m) (down 22% YoY in NGN) 
   --    OLP/Client declined from NGN 45k (USD 126) to NGN 41k (USD 105) (down 11% YoY in NGN) 
   --    PAR>30 increased from 2.5% to 7.5% 
   --    Up to USD 0.6m in moratoriums granted to 10k clients between March and June 2020 

Sierra Leone

ASA Sierra Leone continued to successfully expand with high client and branch growth:

   --    Number of clients up from 29k to 30k (up 3% YoY) 
   --    Number of branches up from 34 to 39 (up 15% YoY) 
   --    OLP up from SLL 22.2bn (USD 2.5m) to SLL 27.8bn (USD 2.9m) (up 25% YoY in SLL) 
   --    OLP/Client up from SLL 746k (USD 86) to SLL 974k (USD 100) (up 31% YoY in SLL) 

-- PAR>30 increased from 1.4% to 8.9%, due to a substantial fraud in in one of its branches combined with the impact of COVID-19 on clients

   --    Up to USD 31k in moratoriums granted to 1.3k clients between March and June 2020 

East Africa

 
 (UNAUDITED)                     H1 2020   FY 2019   H1 2019    YoY    YTD           YoY 
                                                                                % Change 
   (Amounts in USD thousands)                                                  (constant 
                                                                               currency) 
 
 Net profit                          333     6,160     2,527   -87%                 -91% 
 
 Cost/income ratio                   97%       62%       63% 
 Return on average assets 
  (TTM)                             1.2%     12.6%     11.0% 
 Return on average equity 
  (TTM)                             4.3%     51.0%     48.3% 
 Earnings growth (TTM)              -87%       69%       60% 
 
 OLP (1)                          36,753    51,664    40,958   -10%   -29%          -10% 
 Total assets                     55,856    59,356    51,383     9%    -6% 
 Client deposits (2)              13,591    14,808    12,022    13%    -8% 
 Interest-bearing debt (2)        24,245    25,835    23,201     5%    -6% 
 Share capital and reserves       15,408    15,476    12,080    28%     0% 
 
 Number of clients               301,515   348,542   293,853     3%   -13% 
 Number of branches                  343       316       298    15%     9% 
 Average outstanding loan 
  per client (USD)                   131       149       140    -6%   -12%          -12% 
 
 PAR > 30 days                      1.9%      0.6%      0.4% 
 Client deposits as % of 
  loan portfolio                     37%       29%       29% 
 
 (1) Includes off-book Business Correspondence loans and Direct 
  Assignment loans and excludes interest receivable and the unamortized 
  loan processing fee 
 (2) Excludes interest payable 
 

East Africa saw a decline in operations and profitability attributable to COVID-19 impact on the operating countries though managing to maintain a good-quality loan portfolio.

Kenya

ASA Kenya decreased its operations:

   --    Number of clients down from 83k to 78k (down 7% YoY) 
   --    Number of branches up from 81 to 99 (up 22% YoY) 
   --    OLP down from KES 1.4bn (USD 14.0m) to KES 1.2bn (USD 11.6m) (down 14% YoY in KES) 
   --    OLP/Client declined from KES 18K (USD 169) to KES 17K (USD 159) (down 3% YoY in KES) 
   --    PAR>30 increased from 1.0% to 2.5% 
   --    Up to USD 4.1m in moratoriums granted to 20k clients between March and June 2020 

Tanzania

ASA Tanzania managed to expand its operations:

   --    Number of clients up from 102k to 104k (up 2% YoY) 
   --    Number of branches up from 98 to 112 (up 14% YoY) 
   --    OLP down from TZS 36.1bn (USD 15.7m) to TZS 32.8bn (USD 14.1m) (down 9% YoY in TZS) 
   --    OLP/Client down from TZS 415k (USD 155) to TZS 340k (USD 147) (down 18% YoY in TZS) 
   --    PAR>30 increased from 0.1% to 2.0% 
   --    Up to USD 267k in moratoriums granted to up to 5k clients between March and June 2020 

Uganda

ASA Uganda saw a reduction in operations in 2020 but growth overall YoY in terms of branches and clients while maintaining a high-quality loan portfolio:

   --    Number of clients up from 87k to 96k (up 10% YoY) 
   --    Number of branches up from 83 to 96 (up 16% YoY) 
   --    OLP down from UGX 31.4bn (USD 8.5m) to UGX 30.5bn (USD 8.2m) (down 3% YoY in UGX) 

-- OLP/Client down from UGX 395K (USD 97) to UGX 351K (USD 94) (down 11% YoY in UGX), which is expected to remain lower than in Kenya and Tanzania due to generally lower income levels in Uganda

   --    PAR>30 increased slightly from 0.1% to 0.4% 
   --    Up to USD 1.8m in moratoriums granted between March and June 2020 to up to 75k clients 

Rwanda

ASA Rwanda increased its operations YoY:

   --    Number of clients up from 18k to 20k (up 11% YoY) 
   --    Number of branches maintained at 30 
   --    OLP up from RWF 2.2bn (USD 2.4m) to RWF 2.6bn (USD 2.6m) (up 22% YoY in RWF) 
   --    OLP/Client up from RWF 128K (USD 134) to RWF 135K (USD 142) (up 6% YoY in RWF) 
   --    PAR>30 increased from 0.6% to 1.5% 
   --    Up to USD 393k in moratoriums granted to 7.8k clients between March and June 2020 

Zambia

ASA Zambia managed to keep expanding its operations in H1 2020:

   --    Number of clients reached 3k 
   --    Number of branches maintained at 6 
   --    Realized OLP of ZMW 3.6m (USD 197k) 
   --    OLP/Client reached ZMW 1.3k (USD 70) 
   --    PAR>30 increased to 22.6%, primarily due to a substantial fraud in one of its branches 
   --    No moratoriums granted to clients during the period 

Regulatory Environment

ASA International operates in a wide range of jurisdictions each with their own regulatory regimes applicable to microfinance institutions. At this time, the Company continues to pursue deposit-taking licenses in countries such as Pakistan and Tanzania.

Lockdowns in Pakistan, Ghana, Kenya, Nigeria, Myanmar, Rwanda, Sri Lanka, Sierra Leone, Tanzania and the Philippines have ended or relaxed, which enabled the Group to re-open branches and resume field activities prior to the end of H1 2020. India started collections after the end of the lockdown, but clients could request a moratorium instituted by the Government of India until 30 August 2020 and Uganda only fully resumed operations by mid-June. U p to 30 September, collection efficiency across the Group continued to strengthen with eight out of thirteen countries reporting collections in the mid to high nineties.

Key Events

Pakistan

-- On 3 January 2020 ASA Pakistan received a no-objection certificate ("NOC") by the State Bank of Pakistan for transforming ASA Pakistan (non-deposit taking) into ASA Microfinance Bank (MFB), subject to meeting certain requirements set by the central bank. It is the expectation that the license will be granted during the second half of 2020.

Sri Lanka

-- The market in Sri Lanka faced three major challenges in the past two years: (i) following the introduction of a debt relief program for microfinance loans in drought affected districts of Sri Lanka in 2018, the repayment discipline of clients across the country was eroded, which after-effects still persisted in 2019, (ii) the Easter Sunday bomb attack and the knock on effect on the economy, and (iii) the spread of COVID-19. The microfinance sector has not yet fully recovered from these shocks.

-- In addition, due to overall interest rate cuts by the government in the financial sector following the economic downturn due to COVID-19, there is concern that the interest rate cap of 35% introduced last year may be further reduced.

   --    In April 2019, Lak Jaya received the deposit-taking license under the Microfinance Act. 

Myanmar

-- ASA Myanmar secured the approval of the Central Bank of Myanmar for taking deposits in January of 2020.

-- The Central Bank of Myanmar cut the maximum lending rate on microfinance loans from 30% to 28% per annum.

Nigeria

-- The Central Bank approved the merger between ASHA Nigeria and ASIEA , which was completed by 1 April 2020.

Tanzania

-- ASA Tanzania submitted application for non-deposit taking microfinance institution under the new Microfinance Act.

Key events after 30 June 2020

-- On 9 July 2020, State Bank of Pakistan granted extension of the NOC to ASA Pakistan up to 31 December 2020.

-- On 20 July 2020, ASA Tanzania submitted the application to carry on business as non-deposit taking MFI to the Bank of Tanzania.

Regulatory Capital

Many of the Group's operating subsidiaries are regulated and subject to minimum regulatory capital requirements. As of 30 June 2020, 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 minimized by having all loans to any of the Group's operating subsidiaries denominated or duly hedged in the local operating currency and all 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 & 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 the first half of 2020:

In USD millions

 
                                             30 Jun 
                                               20               31 Dec 19            30 Jun 19 
 Local Deposits                                     74.5                   78.0               69.4 
 Loans from Financial Institutions                232.8                 260.6               243.1 
 Microfinance Loan Funds                            28.3                   27.2               15.0 
 Loans from Dev. Banks & Foundations                40.0                   30.0               40.0 
 Equity                                           104.1                 111.2                 92.9 
 Total Funding                                    479.7                 507.0               460.4 
 

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.

The Group and its subsidiaries have existing credit relationships with more than 50 lenders throughout the world, which has provided reliable access to competitively-priced funding for the growth of its loan portfolio.

Some subsidiaries did not fulfil some of the ratios as required in contracts for credit lines amounting to 54.2 million. Due to these breaches of covenant clauses, the lenders are contractually entitled to request for immediate repayment of the outstanding loan amounts. The Group already received waivers against all breaches except for USD 15.2 million from its lenders. The balance is presented as on demand as at 30 June 2020. The lenders have not requested any early repayment of the loan as of date.

In view of potential temporary portfolio quality covenant breaches from increased overdue by some of the Company's operating subsidiaries due to the disruption caused by COVID-19, the Company secured temporary waivers, no action and/or comfort letters from almost all its major lenders for the remainder of 2020.

Key events after 30 June 2020

-- ASA International Holding signed a loan facility agreement for USD 10 million with Citibank N.A., Jersey on 2 October 2020. The term of the loan is three years.

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 (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       H12020   FY2019   H12019    <DELTA>     <DELTA> 
                                                H12019 -    FY2019 - 
                                                 H12020      H12020 
     Pakistan 
       (PKR)        168.0    154.8    163.1      (3%)        (9%) 
   India (INR)       75.3     71.3     69.0      (9%)        (6%) 
    Sri Lanka 
       (LKR)        186.4    181.4    176.5      (6%)        (3%) 
 The Philippines 
       (PHP)         49.8     50.7     51.2       3%          2% 
  Myanmar (MMK)     1382.2   1487.0   1516.8      9%          7% 
  Nigeria (NGN)     387.7    362.5    360.0      (8%)        (7%) 
   Ghana (GHS)       5.8      5.7      5.4       (7%)        (2%) 
   Sierra Leone 
       (SLL)        9748.9   9782.7   8925.0     (9%)         0% 
   Kenya (KES)      106.6    101.4    102.3      (4%)        (5%) 
   Uganda (UGX)     3733.5   3665.4   3693.3     (1%)        (2%) 
     Tanzania 
       (TZS)        2316.7   2298.0   2299.3     (1%)        (1%) 
   Rwanda (RWF)     954.2    943.2    911.0      (5%)        (1%) 
   Zambia (ZMW)      18.2     14.1     12.8      (41%)       (29%) 
 

During H1 2020, the US dollar particularly strengthened against PKR +9%, INR +6% and NGN +7% as a result of the impact of COVID-19 on the individual countries' and global economy. 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, particularly due to ASA Pakistan's continued relatively high capital base related to its planned transformation into a microfinance bank. The total contribution to the foreign exchange translation loss reserve during H1 2020 amounted to USD 4.9m of which USD 2.1m related to the depreciation of the PKR and USD 1.6m to depreciation of the INR.

Forward Looking Statement and Disclaimers

This announcement does not constitute or form part of any offer or invitation to purchase, otherwise acquire, issue, subscribe for, sell or otherwise dispose of any securities, nor any solicitation of any offer to purchase, otherwise acquire, issue, subscribe for, sell, or otherwise dispose of any securities. The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions.

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END

IR FFUFADESSEIS

(END) Dow Jones Newswires

October 14, 2020 02:00 ET (06:00 GMT)

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