TIDMASAI
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 FY2022 H1 FY2021 YoY YTD YTD % Change
2023 2022
(Amounts in USD % Change % Change (constant
millions) 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) or use the
following link: 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) .
Enquiries:
ASA International Group plc
Investor Relations
Mischa Assink
ir@asa-international.com
GROUP FINANCIAL PERFORMANCE
(UNAUDITED) H1 FY2022 H1 FY2021 YoY YTD YTD %
2023 2022 Change
(Amounts in USD % Change % Change (constant
thousands) 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 FY2022 H1 FY2021 YoY YTD YTD % Change
2023 2022
(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 n ote 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
(Amounts in USD % Change % Change (constant
thousands) currency)
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
(Amounts in USD % Change % Change (constant
thousands) currency)
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
(Amounts in USD % Change % Change (constant
thousands) currency)
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 31 Dec 30 Jun 31 Dec
23 22 22 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 31 Dec 30 Jun 31 Dec <DELTA> <DELTA>
23 22 22 21 30 Jun 31 Dec 2022
2022 - 30 Jun
- 30 Jun 2023
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
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 restriction.
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END
IR SFMFUUEDSEIU
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