TIDMASAI
RNS Number : 1997N
ASA International Group PLC
23 September 2019
23 SEPTEMBER 2019
ASA International Group plc reports interim results for the
half-year ended 30 June 2019
Solid operational progress continues in line with
expectations
ASA International Group plc (LSE: ASAI), 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 2019.
Key performance indicators
(In USD millions) H12019 FY2018 H12018 YoY YTD YoY %
Change
(UNAUDITED) (UNAUDITED) (UNAUDITED) (constant
currency)
Number of clients 2.3 2.2 2.0 15% 6%
Number of branches 1,812 1,665 1,557 16% 9%
Net profit 16.1 24.5 8.5 89% 109%
Normalised net profit
(1) 16.1 32.4 16.4 -2% 8%
Outstanding Loan
Portfolio
("OLP") (2) 419.5 378.5 347.4 21% 11% 29%
PAR > 30 days(3) 1.0% 0.6% 0.4%
(1) Adjusted for one-off items. For 2018, these mainly relate
to IPO costs.
(2) Includes off-book Business Correspondence loans and excludes
interest receivable and the unamortized loan processing fee
(3) 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.
Highlights
-- Trading and outlook are broadly in line with expectations
-- OLP/client averaged USD 181, up by 5% YoY despite substantial
currency depreciation in Pakistan and Ghana (OLP/client up 12% in
constant currency YoY)
-- South Asian operations delivered better than expected
operating and financial performance despite the continued weakening
of the PKR vis-á-vis USD as well as slowdown of growth in Sri
Lanka
-- Financial performance in West Africa and South East Asia was
below expectations mainly due to worse than expected depreciation
of GHS and slower than expected growth in Nigeria and the
Philippines
-- East Africa delivered higher than expected operating and
financial performance in both local currency and USD, reaffirming
our confidence in this region as a major future profit generator
for the Group
-- Investments in IT infrastructure continued, supporting the
rollout of our proprietary ASA Microfinance Banking System (AMBS),
and is expected to be completed by year-end 2019, in preparation
for the gradual introduction of digital financial services across
our branch network
-- Operations in Zambia started in January 2019, in line with
our strategy to explore opportunities for expansion in other Asian
and African countries over time
Dirk Brouwer, Chief Executive Officer of ASA International,
commented:
"In the first half of 2019, we maintained our positive operating
and financial performance. With the exception of a slower growth
rate in West Africa, primarily due to customary seasonality
effects, we have continued to see strong branch, client and loan
portfolio growth across most of our markets. In particular, East
Africa continues to perform well with higher than expected
operational and earnings growth."
"As expected, currency movements continue to have an impact on
our USD performance, however, we remain focused on our long-term
growth strategy by growing our loan portfolio, expanding our
geographical footprint, aligning growth in assets and liabilities,
as well as enhancing our digital platform. As a result, we look
forward to continued growth with confidence."
Audio webcast and conference call
Management will be hosting a live audio webcast and conference
call today at 13:30 (BST).
To access the audio webcast, please use the following link:
https://brrmedia.news/ffzu3
To dial into the conference call, please use the details
below:
Location Phone Number
United Kingdom,
Local +44 (0)330 336 9411
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Netherlands, Amsterdam +31 (0)20 703 8261
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India, Mumbai +91 (0)22 6001 6430
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Singapore, Singapore +65 6320 9075
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United States,
Denver +1 720-543-0302
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Confirmation Code: 5580238
Interim Financial Statements for the period ended 30 June 2019
will be available on:
https://www.asa-international.com/investors/results-reports-presentations/
Enquiries:
ASA International Group plc +31 20 846 3554
Investor Relations +31 6203 00139
Véronique Schyns vschyns@asa-international.com
MHP Communications +44 20 3128 8572
Simon Hockridge ASAInternational@mhpc.com
About ASA International
ASA International is one of the world's largest international
microfinance institutions, with a strong and well-established
commitment to improving financial inclusion and enabling
socioeconomic progress. The company does this by providing small,
responsible loans to low-income, financially underserved
entrepreneurs and business owners, most of whom are women, across
its operations in South Asia, South East Asia, West and East
Africa.
CHIEF EXECUTIVE OFFICER'S REVIEW:
I am pleased to report overall solid operational performance
during the first half of 2019, with growth in branches, clients and
our loan portfolio broadly in line with previous guidance. USD
earnings are somewhat behind expectations, which is partly due to
larger than expected currency headwinds affecting two of our
largest markets, Ghana and Pakistan.
Regional Performance
East Africa performed particularly well again during the period,
with strong growth across metrics in all four markets,
outperforming our expectations. Zambia also made a good start to
the year by opening six branches and gaining more than 3,000
clients during its first six months of operation.
Operational performance in West Africa, South Asia and South
East Asia was broadly in line with expectations with variations at
individual country level. In India, we have taken active steps to
respond to signals that the North Eastern Indian market is at risk
of overleveraging. Whilst we are growing, our loan officers are
motivated not to overleverage their clients and very much focus on
a high portfolio quality.
In Sri Lanka, the previously reported nationwide deterioration
of credit discipline due to the debt relief programme, political
activism and aggressive lending practices by unregulated lenders
has been further aggravated by the Easter Sunday bombings, which
has led to a substantial increase in overdue payments. As a result,
management has been strongly focused on client retention, ensuring
we lend to high quality customers and tightening cost control. Sri
Lanka accounts for only 2.4% of our loan portfolio.
Investment in operations
Our major investment in IT, which has involved almost doubling
the size of the department over the last year, is starting to pay
off. We expect to complete the roll-out of our proprietary
real-time ASA Microfinance Banking System (AMBS) in all
subsidiaries before the end of the year. This will provide us with
the infrastructure to gradually roll out digital financial services
to our clients, such as doorstep banking, digital disbursements and
collections. Concurrently, we are further strengthening the
cybersecurity of our systems.
Regulation
We are pleased to have received the approval from the Nigerian
Central Bank for ASHA Microfinance Bank to absorb our microfinance
operations held by our Nigerian NGO. This will substantially
improve the capital efficiency of our operations in Nigeria. In
addition, we believe that we are inching towards receiving
preliminary approval from the State Bank of Pakistan for
transforming our non-deposit taking lending company into a
nationwide microfinance bank, which will give us the ability to
attract savings from our lending clients as well as the public.
Dividend
In accordance with our existing 30% dividend pay-out ratio, no
interim dividend will be paid. The 2019 dividend will be paid
following next year's AGM.
GROUP FINANCIAL PERFORMANCE
(UNAUDITED) H12019 FY2018 H12018 YoY YTD YoY %
Change
(In USD thousands) (constant
currency)
Net profit 16,133 24,454 8,519 89% 109%
Normalised net profit
(1) 16,133 32,352 16,443 -2% 8%
Cost/income ratio (1) 61% 55% 54%
Return on average assets
(TTM) ((1) 6.7% 7.3% 8.1%
Return on average equity
(TTM) (1) 36.0% 37.7% 39.0%
Earnings growth (TTM)
(1) -2% 20% 28%
OLP (2) 419,493 378,468 347,420 21% 11% 29%
Total assets 517,884 473,055 441,487 17% 9%
Client deposits (3) 69,395 63,944 55,949 24% 9%
Interest-bearing debt
(3) 298,093 277,137 275,842 8% 8%
Share capital and reserves 92,943 88,548 84,872 10% 5%
Number of clients 2,313,305 2,174,116 2,012,546 15% 6%
Number of branches 1,812 1,665 1,557 16% 9%
Average outstanding loan
per client (USD) 181 174 173 5% 4% 12%
PAR > 30 days 1.0% 0.6% 0.4%
Client deposits as % of
loan portfolio 17% 17% 16%
Regional performance
South Asia
(UNAUDITED) H12019 FY2018 H12018 YoY YTD YoY %
Change
(In USD thousands) (constant
currency)
Net profit 7,493 14,872 7,763 -3% 11%
Normalised net profit
(1) 7,493 15,200 7,763 -3% 11%
Cost/income ratio (1) 49% 45% 43%
Return on average assets
(TTM) ((1) 6.5% 7.1% 7.3%
Return on average equity
(TTM) (1) 33.2% 35.3% 36.8%
Earnings growth (TTM)
(1) -3% 27% 21%
OLP (2) 234,869 211,470 204,719 15% 11% 26%
Total assets 238,720 213,570 217,898 10% 12%
Client deposits (3) 1,198 73 83 1343% 1541%
Interest-bearing debt
(3) 174,728 156,707 166,501 5% 11%
Share capital and reserves 48,972 47,314 41,047 19% 4%
Number of clients 1,135,004 1,053,889 1,003,383 13% 8%
Number of branches 699 638 601 16% 10%
Average outstanding loan
per client (USD) 209 202 205 2% 3% 11%
PAR > 30 days 1.1% 0.8% 0.7%
Client deposits as %
of loan portfolio 1% 0% 0%
(1) Adjusted for one-off items
(2) Excludes interest receivable and
the unamortized loan processing fee
(3) Excludes interest payable
USD reported earnings were negatively affected by the
substantial currency depreciation that continued in Pakistan (PKR
down 17% against USD) and partly offset by stable currencies in
India (INR up 1% against USD), and Sri Lanka (LKR up 4% against
USD).
-- Net profit down 3% YoY (11% up YoY on a constant currency basis)
-- OLP up 15% YoY (26% up on a constant currency basis), which
is lower than expected due to higher than expected depreciation of
PKR relative to the USD
-- Number of clients crossed 1.1 million, up 13% YoY
-- Number of branches up 16% YoY
-- OLP/Client in USD up by 2% YoY (up 11% on a constant currency basis)
-- The quality of the loan portfolio declined with PAR>30 increasing from 0.8% to 1.1% YTD
-- Cost/Income ratio increased by 626 bps to 49% YoY due to (i)
increased funding costs in Pakistan resulting from higher hedging
cost associated with the substantial currency depreciation as well
as an increase in benchmark interest rates and (ii) lower than
expected operating and financial performance in Sri Lanka in the
aftermath of last year's government's debt relief programme and the
Easter Sunday bombings this year
-- Return on average assets was down 75 bps to 6.5% YoY due to
(i) the higher proportionate growth of the Indian operations, (ii)
temporary over-capitalization and excess liquidity in Pakistan
related to the microfinance bank application and (iii) reduced USD
profitability in Pakistan due to a combination of increased cost of
hedging USD-denominated debt and a substantial increase in the
Kibor rate
-- Return on average equity down by 353 bps to 33.2% YoY
India
ASA India continued to expand its operations but at a slower
pace than initially planned due to the signals we received that the
North Eastern Indian market is at risk of overheating:
-- Number of clients up from 545k to 639k (up 17% YoY)
-- Number of branches up from 281 to 352 (up 25% YoY), which is
expected to fuel continuing high growth in the second-half of
2019
-- OLP up from INR 6.5bn (USD 95m) to INR 8.3bn (USD 120m) (up 27% in INR YoY)
-- Off-book portfolio up from INR 2.3bn (USD 33.2m) to INR 3.1bn (USD 45.5m) (up 38% in INR)
-- OLP/Client up from INR 12.4K (USD 237) to INR 13.2K (USD 261)
(up 7% in INR), while PAR>30 remained stable at 0.7%, which is
an excellent achievement in this relatively competitive market
-- ASA India continues to benefit from its strong business
correspondent relationship with IDFC First Bank and the ongoing
support of its many local and international lenders
Pakistan
ASA Pakistan continued to expand its operations at a good pace
despite the presently difficult economic environment:
-- Number of clients up from 387k to 429k (up 11% YoY)
-- Number of branches up from 256 to 276 (up 8% YoY)
-- OLP up from PKR 8.2bn (USD 67.5m) to PKR 9.8bn (USD 60.2m) (up 19% in PKR YoY)
-- OLP/Client up from PKR 21K (USD 175) to PKR 23K (USD 141) (up 8% in PKR YoY)
-- PAR>30 increased slightly from 0.3% to 0.6% YTD
-- Despite the substantial devaluation of the PKR (down 17%
YTD), ASA Pakistan's operating and financial performance in PKR was
in line with expectations in terms of interest income and operating
expenses, with the exception of funding costs, which increased due
to a substantial increase in the KIBOR rate and higher hedging
costs
Sri Lanka
Lak Jaya Micro Finance was impacted by the ongoing challenging
political and regulatory environment:
-- Number of clients up from 70k to 67k (down 5% YoY)
-- Number of branches up from 64 to 71 (up 11% YoY)
-- OLP up from LKR 1.3bn (USD 8.5m) to LKR 1.6bn (USD 9.1m) (up 19% in LKR YoY)
-- OLP/Client up from LKR 20K (USD 123) to LKR 26K (USD 145) (up 31% in LKR YoY)
-- PAR>30 materially increased from 4.1% to 10.0% YTD due to
eroded clients' repayment habits and discipline
-- In addition, the introduction of an interest rate cap of 35%
for microfinance companies is expected to reduce the profitability
of the business in the short term. However, over time the ability
to mobilize substantial savings with the new deposit-taking MFI
license is expected to offset this.
-- In view of the difficult market circumstances, management is
primarily focused on client retention, cost control and improving
the portfolio quality at this time
South East Asia
(UNAUDITED) H12019 FY2018 H12018 YoY YTD % Change
(In USD thousands) (constant
currency)
Net profit 2,279 3,881 1,667 37% 33%
Normalised net profit
(1) 2,279 3,881 1,667 37% 33%
Cost/income ratio (1) 78% 75% 76%
Return on average assets
(TTM) ((1) 4.5% 4.4% 4.7%
Return on average equity
(TTM) (1) 27.7% 25.1% 25.4%
Earnings growth (TTM)
(1) 37% 11% 29%
OLP (2) 72,986 62,118 54,605 34% 17% 34%
Total assets 111,074 95,015 86,757 28% 17%
Client deposits (3) 20,496 17,801 16,585 24% 15%
Interest-bearing debt
(3) 64,558 54,306 47,558 36% 19%
Share capital and reserves 15,986 15,353 16,411 -3% 4%
Number of clients 468,424 442,254 425,735 10% 6%
Number of branches 395 369 356 11% 7%
Average outstanding
loan per client (USD) 157 141 129 21% 11% 21%
PAR > 30 days 0.9% 0.5% 0.2%
Client deposits as
% of loan portfolio 28% 29% 30%
(1) Adjusted for one-off items
(2) Excludes interest receivable and
the unamortized loan processing fee
(3) Excludes interest payable
Strong operating performance in our Myanmar and Philippines
operations, with the latter benefiting from the elimination of the
obligation to charge VAT on interest income. Both countries
performed in line with net profit expectations
-- Net profit up 37% YoY (33% up on a constant currency basis)
-- OLP up 34% YoY (34% up on a constant currency basis)
-- Number of clients up 10% YoY
-- Number of branches up 11% YoY
-- OLP/Client in USD up by 21% YoY
-- PAR>30 up from 0.5% to 0.9% YTD
-- Cost/Income ratio slightly increased to 78%
-- Return on average assets is stable at 4.5%
-- Return on average equity increased to 27.7%
The Philippines
Pagasa Philippines Finance Company, Inc. ("PPFCI") continued to
gradually expand:
-- Number of clients up from 305k to 324k (up 6% YoY)
-- Number of branches up from 284 to 307 (up 8% YoY)
-- OLP up from PHP 1.9bn (USD 35.6m) to PHP 2.4bn (USD 46.2m) (up 24% in PHP YoY)
-- OLP/Client up from PHP 6.3K (USD 117) to PHP 7.3K (USD 143) (up 17% in PHP)
-- PAR>30 increased from 0.4% to 1.1% YTD
Myanmar
ASA Myanmar achieved strong client and branch growth,
increasing:
-- Number of clients up from 121k to 144k (up 20% YoY)
-- Number of branches up from 72 to 88 (up 22% YoY)
-- OLP up from MMK 26.7bn (USD 19.0m) to MMK 40.7bn (USD 26.8m) (up 52% in MMK YoY)
-- OLP/Client up from MMK 223K (USD 158) to MMK 284K (USD 186) (up 28% in MMK YoY)
-- PAR>30 improved slightly from 0.6% to 0.5%
West Africa
(UNAUDITED) H12019 FY2018 H12018 YoY YTD YoY %
Change
(In USD thousands) (constant
currency)
Net profit 7,029 16,872 6,897 2% 9%
Normalised net profit
(1) 6,674 16,484 6,897 -3% 9%
Cost/income ratio (1) 47% 38% 41%
Return on average assets
(TTM) ((1) 19.4% 20.4% 19.4%
Return on average equity
(TTM) (1) 51.8% 56.6% 55.0%
Earnings growth (TTM)
(1) -3% 29% 25%
OLP (2) 69,754 71,840 63,315 10% -3% 19%
Total assets 84,239 88,359 83,826 0% -5%
Client deposits (3) 35,679 35,958 32,350 10% -1%
Interest-bearing debt
(3) 5,368 13,315 13,473 -60% -60%
Share capital and reserves 34,771 32,246 27,958 24% 8%
Number of clients 416,024 435,660 389,784 7% -5%
Number of branches 420 414 380 11% 1%
Average outstanding
loan per client (USD) 169 165 163 4% 2% 11%
PAR > 30 days 1.2% 0.4% 0.1%
Client deposits as
% of loan portfolio 51% 50% 51%
(1) Adjusted for one-off items
(2) Excludes interest receivable and
the unamortized loan processing fee
(3) Excludes interest payable
Higher than expected depreciation of primarily Ghanaian GHS
vis-à-vis the USD (12%) in H1 2019, limited further provisioning of
deposits held at a Ghanaian bank and somewhat larger than expected
seasonality effects led to West Africa's net profit growth being
behind expectations.
-- Net profit up 2% YoY (9% up on a constant currency basis)
-- OLP up 10% YoY (19% up YoY on a constant currency basis),
which is lower growth in USD terms than expected due to (i) higher
than expected depreciation of this segment's operating currencies
relative to the USD in the first half of 2019, and (ii) slower
growth of OLP in Nigeria
-- Number of clients up by 7% YoY
-- Number of branches up 11% YoY
-- OLP/Client in USD up by 4% YoY
-- PAR>30 increased to 1.2%
-- Cost/Income ratio increased from 41% to 47%
-- Return on average assets is stable at 19.4% YoY
-- Return on average equity down 202 bps to 53.0% YoY
Ghana
ASA Savings & Loans Ltd ("ASA S&L Ghana") continues to
expand, while maintaining a high portfolio quality:
-- Number of clients up from 139k to 152k (up 10% YoY)
-- Number of branches up from 113 to 123 (up 9% YoY)
-- OLP up from GHS 165.9m (USD 35m) to GHS 206.8m (USD 38m) (up 25% in GHS YoY)
-- OLP/Client up from GHS 1.2k (USD 250) to GHS 1.4K (USD 251) (up 14% in GHS YoY)
-- PAR>30 remained low at 0.2%
-- Due to turmoil in the finance sector resulting from the
shutdown of several financial institutions, ASA S&L Ghana was
not allowed by the Central Bank to open as many branches as
expected.
Nigeria
ASHA Microfinance Bank Ltd. (ASA Nigeria) and ASIEA's growth was
lower than expected, primarily due to relatively weak economic
growth:
-- Number of clients up from 228k to 235k (up 3% YoY)
-- Number of branches up from 239 to 263 (up 10% YoY)
-- OLP up from NGN 9.7bn (USD 26.9m) to NGN 10.5bn (USD 29.2m) (up 8% in NGN YoY)
-- OLP/Client increased from NGN 42.6K (USD 118) to NGN 45.4K (USD 126) (up 7% YoY)
-- PAR>30 increased to 2.5%
-- Challenges with staffing due to security concerns slowed
planned expansion into the Northern parts of Nigeria
Sierra Leone
ASA Sierra Leone continues to expand in client and branch
growth, with expansion in:
-- Number of clients up from 23k to 29k (up 29% YoY)
-- Number of branches up from 28 to 34 (up 21% YoY)
-- OLP up from SLL 13.5bn (USD 1.7m) to SLL 22.2bn (USD 2.5m) (up 65% in SLL YoY)
-- OLP/Client up from SLL 598K (USD 76) to SLL 766K (USD 86) (up 28% in SLL YoY)
-- PAR>30 increased from 1.1% to 1.4% YTD
East Africa
(UNAUDITED) H12019 FY2018 H12018 YoY YTD YoY %
Change
(In USD thousands) (constant
currency)
Net profit 2,527 3,647 1,583 60% 60%
Normalised net profit
(1) 2,527 3,647 1,583 60% 60%
Cost/income ratio (1) 63% 64% 64%
Return on average assets
(TTM) ((1) 11.0% 11.5% 8.5%
Return on average equity
(TTM) (1) 48.3% 47.9% 33.7%
Earnings growth (TTM)
(1) 60% 262% 274%
OLP (2) 40,958 33,040 24,781 65% 24% 66%
Total assets 51,383 38,556 32,278 59% 33%
Client deposits (3) 12,022 10,153 7,364 63% 18%
Interest-bearing debt
(3) 23,201 17,190 15,251 52% 35%
Share capital and reserves 12,080 8,687 6,922 75% 39%
Number of clients 293,853 242,313 193,644 52% 21%
Number of branches 298 244 220 35% 22%
Average outstanding
loan per client (USD) 140 137 129 8% 2% 9%
PAR > 30 days 0.44% 0.40% 0.40%
Client deposits as %
of loan portfolio 29% 31% 30%
(1) Adjusted for one-off items
(2) Excludes interest receivable and
the unamortized loan processing fee
(3) Excludes interest payable
East Africa's net profit was higher than expected with
significantly higher return on assets while maintaining a
high-quality loan portfolio with PAR>30 Stable at 0.4%.
-- Net profit up 60% YoY (61% up YoY on a constant currency basis)
-- OLP increased by 65% YoY (66% on a constant currency basis),
due to the continued expansion of operations in all countries
across the segment
-- Number of clients up 52% YoY
-- Number of branches up 35% YoY
-- OLP/Client up in USD by 8% YoY
-- PAR>30 stable at 0.4%
-- Cost/Income ratio improved by 63 bps to 63% YoY
-- Return on average assets up 247 bps to 11.0% YoY
-- Return on average equity up 1,471 bps to 48.4% YoY
Kenya
ASA Kenya substantially increased its operations, while
improving the quality of the portfolio:
-- Number of clients up from 58k to 84k (up 44% YoY)
-- Number of branches up from 62 to 81 (up 31% YoY)
-- OLP up from KES 0.9bn (USD 9.2m) to KES 1.4bn (USD 14.0m) (up 55% in KES YoY)
-- OLP/Client increased from KES 15.9K (USD 158) to KES 17.3K (USD 169) (up 8% in KES YoY)
-- PAR>30 deteriorated slightly from 0.7% to 1.0% YTD
Tanzania
ASA Tanzania is performing as expected with high branch, client
and OLP growth while improving the quality of the loan
portfolio:
-- Number of clients up from 66k to 102k (up 53% YoY)
-- Number of branches up from 72 to 98 (up 36% YoY)
-- OLP up from TZS 21.2bn (USD 9.3m) to TZS 36.1bn (USD 15.7m) (up 70% in TZS YoY)
-- OLP/Client averaged TZS 357K (USD 155) up from TZS 321k (USD 141) (up 11% in TZS YoY)
-- PAR>30 improved from 0.2% to 0.1%
-- ASA Tanzania's operations are expected to stay on a high growth path
Uganda
ASA Uganda's growth has been gradual in terms of branches,
clients and OLP combined with a stable quality of the loan
portfolio:
-- Number of clients up from 60k to 87k (up 45% YoY)
-- Number of branches up from 68 to 83 (up 22% YoY)
-- OLP up from UGX 19.6bn (USD 5.0m) to UGX 31.4bn (USD 8.5m) (up 60% in UGX YoY)
-- OLP/Client up from UGX 328K (USD 85) to UGX 359K (USD 97) (up
15% in UGX YoY), and are expected to remain lower than in Kenya and
Tanzania due to generally lower income levels in Uganda
-- PAR>30 remained stable at 0.1%
Rwanda
ASA Rwanda successfully increased its operations:
-- Number of clients up from 9k to 18k (up 102% YoY)
-- Number of branches up from 18 to 30 (up 67% YoY)
-- OLP up from RWF 1.bn (USD 1.3m) to RWF 2.2bn (USD 2.4m) (up 89% in RWF YoY)
-- OLP/Client down from RWF 123K (USD 143) to RWF 122K (USD 134) (down 6% YoY)
-- PAR>30 improved from 0.7% to 0.6%
-- The market environment in Rwanda remains favourable with limited competition
-- ASA Rwanda continues to expand and is in line to cross
break-even in 2019, three years after inception
Zambia
ASA Zambia successfully commenced its operations:
-- Number of clients reached 3k
-- 6 branches were opened during H1 2019
-- OLP grew to ZMW 4.6m (USD 361k)
-- OLP/Client averaged ZMW 1.4k (USD 111)
Regulatory Environment
ASA International operates in a wide range of jurisdictions each
with their own regulatory regimes applicable to microfinance
institutions. The Company strives to upgrade the licenses of its
non-deposit taking MFIs to deposit-taking MFIs or microfinance
banks over time, and/or merging any of its non-regulated operations
into regulated operations, where possible and if considered
appropriate.
Key Events
Pakistan
-- In 2018, ASA Pakistan submitted its updated application for
transforming its non-deposit taking microfinance company into a
microfinance bank, which is now under review by the State Bank of
Pakistan (SBP). ASA Pakistan hopes to obtain a NOC (No Objection
Clause) from SBP during the second half of 2019. We received
positive signals from SBP that the approval process is on
track.
Sri Lanka
-- In April 2019, the government of Sri Lanka introduced an
interest rate cap of 35% per annum on microfinance loans disbursed
by licensed microfinance companies.
Philippines
-- Pagasa Philippines received a finance company license in
November 2018. As a result, there is no longer a requirement to
charge VAT on interest income but only the lower GRT (Gross Receipt
Tax). As a result, PPFCI should be able to realise a 5% higher
return on gross interest income over time.
Myanmar
-- In June, the government announced an upcoming reduction in
the interest rate cap from 30% to 28%, but with the optionality to
charge up to 2% of other fees. In addition, the mandatory minimum
interest rate on deposits would also be reduced from 15% to 14% per
annum. This will come into effect in October 2019.
Nigeria
-- Post 30 June 2019 ASHA Microfinance Bank Ltd. received
approval by the Central Bank of Nigeria to absorb the microfinance
activities of ASIEA NGO. The Company is now preparing to actively
merge ASHA Microfinance Bank and ASIEA NGO.
Tanzania
-- ASA Tanzania is reviewing the possibility to upgrade its
license to a deposit-taking microfinance institution following the
adoption of the New microfinance Act which comes into effect in
December 2019.
Key events after 30 June 2019
-- In September 2019 ASAI India received a further capital
injection of USD 5.3 million to expand its operations.
Regulatory Capital
Many of the Group's operating subsidiaries are regulated and
subject to minimum regulatory capital requirements. As of 30 June
2019, 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 properly
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 be exposed to currency
movements in both (i) the profit & loss statement, which will
affect the translation into USD of local currencies of its local
operating subsidiaries and (ii) the balance sheet, due to gradual
erosion of capital of each of its operating subsidiaries 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 2019:
In USD millions
30 June 31 Dec 30 June
19 18 18
Local Deposits 69.4 64.0 56.4
Loans from Financial Institutions 243.1 221.2 215.0
Microfinance Loan Funds 15.0 17.8 21.2
Loans from Dev. Banks
& Foundations 40.0 40.0 40.0
Equity 92.9 88.4 84.9
Total Funding 460.4 431.4 417.4
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.
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.
During the first half of 2019, the US dollar strengthened more
than expected, particularly vis-à-vis a number of South Asia and
West African currencies where the Group has major operations. The
effect of this is (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 H12019 FY2018 H12018 <DELTA> <DELTA>
H12018 - FY2018 -
H12019 H12019
Pakistan (PKR) 163.1 139.4 121.7 -34% -17%
India (INR) 69.0 69.5 68.4 -1% 1%
Sri Lanka (LKR) 176.5 183.0 158.3 -11% 4%
The Philippines
(PHP) 51.2 52.5 53.3 4% 2%
Myanmar (MMK) 1516.8 1543.8 1411.4 -7% 1%
Nigeria (NGN) 360.0 364.3 360.0 0% 1%
Ghana (GHS) 5.4 4.9 4.8 -13% -12%
Sierra Leone (SLL) 8925.0 8616.8 7877.5 -13% -4%
Kenya (KES) 102.3 101.8 100.9 -1% 0%
Uganda (UGX) 3693.3 3715.6 3878.3 5% 1%
Tanzania (TZS) 2299.3 2298.3 2276.9 -1% 0%
Rwanda (RWF) 911.0 883.0 859.0 -6% -3%
Zambia (ZMW) 12.8 12.0 10.0 -29% -7%
The currency depreciation of, in particular, PKR and GHS were
substantially higher than expected which had an adverse impact on
the US dollar net profit growth of these affected subsidiaries.
It also led to an increase in foreign exchange translation
losses due to ASA Pakistan's relatively high capital base related
to its microfinance bank license application. The total
contribution to the foreign exchange loss reserve during the first
half of 2019 amounted to USD 4.6m of which USD 3.7m related to the
depreciation of the PKR and USD 1.7m to the depreciation of
GHS.
Impact of implementing IFRS 16 for leases
IFRS 16 supersedes IAS 17 Leases and applies to annual reporting
periods beginning on or after 1 January 2019. ASA International and
its component entities have rental lease agreements for 14 group
and country head offices as well as for its 1,812 branches. The
branch offices are usually simple residential apartments.
The Group has adopted and implemented IFRS 16 as at 1 January
2019 using the modified retrospective method, under which the
cumulative effect of initial application is recognised in the
retained earnings. Accordingly, comparative information presented
for 2018 has not been restated- i.e. it is presented, as previously
reported, in line with IAS 17.
The Group applied the practical expedient to grandfather the
definition of a lease on transition. This means that it will apply
IFRS 16 to all contracts entered into before 1 January 2019 and
identified as leases in accordance with IAS 17 and IFRIC 4.
ASA International recognised a lease liability as at 1 January
2019, measured at the present value of the remaining lease payments
and discounted at the incremental borrowing rate per country. A
right-of-use asset was also recognised at 1 January 2019 measured
at an amount equal to the lease liability which is adjusted for any
prepaid or accrued lease payments relating to the leases at that
date. There was no impact on retained earnings from the
implementation of IFRS 16.
The impact of implementing IFRS 16 is summarised as follows:
IAS 17 IFRS 16 IFRS 16
31.12.2018 Impact 01.01.2019
Statement of Financial Position USD USD USD
Assets
Right-of-use assets - 5,553,290 5,553,290
Prepayments 1,773,170 (1,773,170) -
Total Assets 1,773,170 3,780,120 5,553,290
----------- ------------ -----------
Liabilities
Lease liabilities - 3,723,124 3,723,124
Prepayments owing - 56,996 56,996
Total Liabilities - 3,780,120 3,780,120
----------- ------------ -----------
IAS 17 IFRS 16
30 June 30 June
2019 2019
Statement of Profit or Loss USD USD
Rent expense 1,968,636 -
Depreciation of Right-of-use assets
for existing contracts - 1,839,536
Total operating expenses 1,968,636 1,839,536
Interest expense of lease liability
for existing contracts - 179,631
Deferred tax impact - (164,476)
Total 1,968,636 1,854,691
========== ==========
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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SELFMEFUSEEU
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