TIDMASAI
RNS Number : 9265Z
ASA International Group PLC
20 September 2022
ASA International Group plc reports H1 2022 results
Amsterdam, The Netherlands, 20 September 2022 - ASA
International Group plc, ('ASA International', the 'Company' or the
'Group'), one of the world's largest international microfinance
institutions, today announces its half-year unaudited results for
the six-month period from 1 January to 30 June 2022 (the
'Period').
Key performance indicators
(UNAUDITED) H1 FY2021 H1 FY2020 YoY YTD YTD % Change
2022 2021
(Amounts in USD % Change % Change (constant
millions) currency)
Number of clients
(m) 2.4 2.4 2.5 2.4 -4% 1%
Number of branches 2,129 2,044 2,036 1,965 5% 4%
Profit before tax 23.8 25.7 7.5 2.6 217% 86% 91%
Net profit 13.1 6.4 1.4 -1.4 807% 311% 352%
OLP(1) 378.4 403.7 415.0 415.3 -9% -6% 4%
Gross OLP 399.0 430.7 456.9 445.3 -13% -7% 2%
PAR > 30 days(2) 5.1% 5.2% 12.3% 13.1%
(1) Outstanding loan portfolio ('OLP') includes off-book Business
Correspondence ('BC') loans and Direct Assignment loans, excludes interest
receivable, unamortized loan processing fees, and deducts modification
losses and ECL provisions from Gross OLP.
(2) PAR>30 is the percentage of on-book OLP that has one or more instalment
of repayment of principal past due for more than 30 days and less than
365 days, divided by the Gross OLP.
H1 2022 highlights
-- The Company's operational and financial performance continued
to improve with OLP growth and high portfolio quality in most
markets leading to pre-tax profit increasing from USD 7.5 million
in H1 2021 to USD 23.8 million in H1 2022.
-- Almost all operating countries grew their OLP in constant
currency terms, maintain high portfolio quality, and make positive
contributions to the Group's profitability, with the exception of
India, Myanmar and Sri Lanka.
-- High OLP growth in Pakistan, the Philippines and Ghana,
though tempered by significant currency depreciation in these
markets (PKR down 16%, PHP down 8% and GHS down 30% against USD in
the Period), which contributed to the decrease of Group OLP in USD
terms.
-- As portfolio quality improved or stabilized across most
markets, the Company significantly reduced expected credit losses
('ECL') charged into the Income Statement to USD 1.9 million (H1
2021: USD 22.1 million and FY 2021: USD 37.5 million). Provisions
for expected credit losses on OLP in the balance sheet, including
the off-book BC portfolio and interest receivables, reduced from
USD 27.5 million to USD 22.0 million primarily for the write offs
in H1 2022.
-- ASA India's OLP reduced in order to continue to prioritise
the recovery of existing and overdue loans with a responsible
amount of disbursement. As of 30 June 2022, ASA India has collected
USD 1.8 million from a total of USD 16.6 million in written-off
loans since 2020, while collection efficiency continued to improve
reaching 85%.
-- The Group remains well capitalized and has a strong funding
pipeline of fresh loans. At 30 June 2022, the Group had
approximately USD 91 million of unrestricted cash and cash
equivalents, with a funding pipeline reaching approximately USD 190
million. During the Period, the Group successfully raised USD 85
million in fresh debt to fund its operations.
Outlook
Based on the positive developments during the first half of
2022, it is expected that the Group's operating performance in
terms of OLP growth and portfolio quality will continue to improve.
However, the impact of inflation and related FX movements are
expected to continue to dampen the financial performance in USD
terms in the second half of 2022.
Dirk Brouwer, Chief Executive Officer of ASA International,
commented:
" I am pleased with the Company's operational and financial
performance in the first half of 2022. In most markets we saw good
growth of our loan portfolio and high portfolio quality, with
pre-tax profits increasing to USD 23.8 million in the first half of
2022. Especially Pakistan, the Philippines and Ghana reported high
OLP growth, though tempered by significant currency depreciation in
these markets, which contributed to the decrease of Group OLP in
USD terms. We expect that the positive operating developments of
the first half of 2022 will continue to improve in the second half
of 2022 but that the impact of inflation and related FX movements
will also continue and therefore dampen the financial performance
in USD terms in the second half of 2022.Despite the continuous
challenging operating environments in India, Myanmar and Sri Lanka,
we expect higher demand in the second half of the year from clients
of our other subsidiaries which will drive the growth of the
Group's operating performance."
CHIEF EXECUTIVE OFFICER'S REVIEW
Business review H1 2022
The Company maintained and improved upon its return to growth in
the first half of 2022 with OLP increases and high portfolio
quality achieved in most markets leading to improved profitability.
Due to a combination of significant write-offs and reduced loan
disbursements in India, and the significant currency depreciation
in our main countries Pakistan, the Philippines and Ghana, the
Group's net OLP decreased by 6% to USD 378 million. On a constant
currency basis, however, OLP increased by 4%. Excluding India, the
Group's Gross OLP increased by 12% in constant currency, and the
Group's number of clients, increased by 6%.
Despite the macroeconomic challenges faced in our operating
markets due to the global impact of food, commodities and energy
inflation, demand from our clients remained high and contributed to
growth of our operations. Combined with a high portfolio quality,
this led to profitability in most of our operating countries,
including in particular, Pakistan, Philippines, Ghana, Nigeria,
Kenya and Tanzania.
In India, we continued to reduce the OLP as we focus on the
recovery of existing and overdue loans with a low level of
disbursement, even as we see gradual improvement in collections and
recoveries. The continued challenging operating environment in
Myanmar due to Covid and the military takeover, and the political
and economic crisis in Sri Lanka also saw reduced operating and
financial performance from these subsidiaries.
As a result of the improved operating performance in H1 2022,
the significantly reduced ECL of 1.9 million (H1 2021: USD 22.1
million and FY 2021: USD 37.5 million) and having built up a strong
provision in the balance sheet in 2021, the Group realised net
profits of USD 13.1 million, which was substantially better than
the USD 6.4 million generated in FY 2021.
ECL provision
The Company reduced its provision for expected credit losses
from USD 27.5 million to USD 22.0 million, for its OLP, including
the off-book BC portfolio and interest receivables. Following an
additional write-off of the outstanding Covid affected portfolio
(USD 7.5 million in H1 2022, in addition to USD 32.9 million in FY
2021), the Company maintained a significant provision, primarily
due to the overdue in India and Myanmar that remains high. The USD
22.0 million ECL provision on OLP and interest receivables is
concentrated in India (54%) and Myanmar (22%), with the remainder
spread across the other countries as percentage of each countries
outstanding loan portfolio or as aggregate amount. The assessment
for the ECL provisions includes uncertainty in the selected
assumptions due to the lack of reliable historical data on the
Covid pandemic's impact on loan recovery. As such, the resulting
outcome of losses on the loan portfolio may be materially
different. A management overlay for the impact of the
Russia-Ukraine conflict on global markets has also been factored in
our ECL. Further details on the ECL calculation including the
selected assumptions are provided in note 2.3.1 of the Interim
Financial Report.
Dividend
After careful consideration, the Board has decided to not
declare a dividend in 2022, however, the Company expects to return
to its pre-Covid 30% dividend policy in 2023, assuming the
operating and financial performance continues to improve.
Progress on digitalisation
During the Period, the Group recruited a Chief Information
Officer and a team of senior IT professionals in Amsterdam, who
will strengthen the Group's IT department and be involved in the
implementation of our digital financial services platform and the
core banking system. The SMP app is expected to be piloted in Ghana
before the end of 2022. The DFS app in Ghana is scheduled to go
live in the second half of 2023, subject to a successful pilot.
The implementation of the Core Banking System in Pakistan
continues as planned and is targeted to go live in the second half
of 2023.
Expenditure on digitalisation totalled USD 2.8 million in the
first half of 2022.
Webcast
Management will be hosting an audio webcast and conference call,
with Q&A today at 14:00 (BST).
To access the audio webcast and download the 2022 H1 results
presentation, please go to the Investor section of the Company's
website: Investors | Asa (asa-international.com) .
or use the following link:
https://stream.brrmedia.co.uk/broadcast/6308b4a5da906b287e9a02c5
The presentation can be downloaded before the start of the
webcast.
In order to ask questions, analysts and investors are invited to
submit questions via the webcast.
2022 Interim Financial Report
Today, the Company published the Interim Financial Report for
the 6 months period ended 30 June 2022 on Investors | Asa
(asa-international.com) .
Enquiries:
ASA International Group plc
Investor Relations
Véronique Schyns
+31 6 2030 0139
vschyns@asa-international.com
GROUP FINANCIAL PERFORMANCE
(UNAUDITED) H1 FY2021 H1 FY2020 YoY YTD YTD % Change
2022 2021
(Amounts in USD thousands) % Change % Change (constant
currency)
Profit before tax 23,843 25,705 7,522 2,578 217% 86% 91%
Net profit 13,079 6,358 1,442 -1,395 807% 311% 352%
Cost/income ratio 66% 77% 85% 98%
Return on average
assets (TTM)(1) 4.6% 1.1% 0.5% -0.2%
Return on average
equity (TTM)(1) 25.5% 6.0% 2.8% -1.3%
Earnings growth (TTM)(1) 807% 556% 197% -104%
OLP 378,371 403,738 415,009 415,304 -9% -6% 4%
Gross OLP 398,990 430,698 456,925 445,257 -13% -7% 2%
Total assets 546,093 562,554 585,300 579,260 -7% -3%
Client deposits (2) 86,291 87,812 86,922 80,174 -1% -2%
Interest-bearing debt
(2) 299,652 314,413 334,565 337,632 -10% -5%
Share capital and
reserves 100,451 103,443 105,020 107,073 -4% -3%
Number of clients 2,403,172 2,380,690 2,506,110 2,380,685 -4% 1%
Number of branches 2,129 2,044 2,036 1,965 5% 4%
Average Gross OLP
per client (USD) 166 181 182 187 -9% -8% 1%
PAR > 30 days 5.1% 5.2% 12.3% 13.1%
Client deposits as
% of loan portfolio 23% 22% 21% 19%
(1) TTM refers to trailing twelve months.
(2) Excludes interest payable.
Regional performance
South Asia
(UNAUDITED) H1 FY2021 H1 FY2020 YoY YTD YTD % Change
2022 2021
(Amounts in USD thousands) % Change % Change (constant
currency)
Profit before tax 7,409 -8,229 -8,187 -5,537 190% 280% 278%
Net profit 4,653 -12,393 -6,414 -4,360 173% 175% 183%
Cost/income ratio 60% 154% 335% 134%
Return on average
assets (TTM) 4.5% -5.5% -5.5% -1.7%
Return on average
equity (TTM) 22.1% -27.3% -24.4% -7.8%
Earnings growth (TTM) 173% -184% -1180% -131%
OLP 151,978 182,329 207,362 217,843 -27% -17% -6%
Gross OLP 164,092 201,405 237,031 238,738 -31% -19% -8%
Total assets 181,894 198,393 232,999 253,360 -22% -8%
Client deposits 1,445 2,464 2,588 2,610 -44% -41%
Interest-bearing debt 132,284 146,522 170,556 183,756 -22% -10%
Share capital and
reserves 36,868 37,506 47,277 53,232 -22% -2%
Number of clients 1,071,710 1,106,469 1,231,989 1,185,656 -13% -3%
Number of branches 788 778 788 758 0% 1%
Average Gross OLP
per client (USD) 153 182 192 201 -20% -16% -5%
PAR > 30 days 5.5% 9.6% 17.4% 21.3%
Client deposits as
% of loan portfolio 1% 1% 1% 1%
-- Pakistan continued to grow its OLP (up 17 % in PKR), while
maintaining an excellent portfolio quality.
-- ASA India continued to focus on collections with limited
disbursements and therefore intentionally shrinking its operations,
while in Sri Lanka, operations were substantially disrupted by the
political and economic crisis in the country.
ASA India
-- Number of clients down from 541 k to 451 k (down 17 % YTD)
-- Number of branches down from 387 to 377 (down 3% YTD)
-- OLP declined from INR 4.5bn (USD 61m) to INR 3.1bn (USD 39m) (down 33% YTD in INR)
-- Off-book portfolio declined from INR 2.7bn (USD 35.7m) to INR
2.4bn (USD 30.7m) (down 9% in INR). This includes INR 94.6m (USD
1.2m) of the portfolio transferred under a direct assignment ('DA')
agreement to State Bank of India
-- Gross OLP/Client down from INR 16K to INR 14K (down 10% YTD in INR)
-- PAR>30 decreased from 19.7% to 14.0%
-- Outstanding amount of loans under RBI restructuring reduced
to USD 16.2m from USD 27.1m in December 2021. The moratorium period
for these loans ended in June 2022. No further moratoriums were
granted to clients.
* See n ote 12.1 to the consolidated financial statements for
details on the off-book portfolio .
ASA Pakistan
-- Number of clients increased from 512 k to 574k (up 12% YTD)
-- Number of branches up from 325 to 345 (up 6 % YTD)
-- OLP up from PKR 13.8bn (USD 77.7m) to PKR 16.2bn (USD 78.9m) (up 17 % in PKR)
-- Gross OLP/Client up from PKR 27.3K (USD 154) to PKR 28.6K (USD 1 39 ) ( up 5% YTD in PKR)
-- PAR>30 remained at 0.2%
Lak Jaya (Sri Lanka)
-- Number of clients down from 53 k to 47 k ( do wn 12% YTD)
-- Number of branches remained at 66
-- OLP decreased from LKR 1.6bn (USD 7.7m) to LKR 1.3bn (USD 3.6m) (down 18% YTD in LKR)
-- Gross OLP/Client down from LKR 32.0K (USD 158) to LKR 29.9K (USD 83) (down 7% YTD in LKR)
-- PAR>30 increased from 6.0% to 8.5%
South East Asia
(UNAUDITED) H1 FY2021 H1 FY2020 YoY YTD YTD % Change
2022 2021
(Amounts in USD thousands) % Change % Change (constant
currency)
Profit before tax 553 34 950 -4,348 -42% 3121% 337%
Net profit 171 -339 1,452 -3,366 -88% 201% 19%
Cost/income ratio 92% 97% 92% 135%
Return on average
assets (TTM) 0.3% -0.3% 2.5% -2.7%
Return on average
equity (TTM) 2.0% -1.8% 14.7% -16.1%
Earnings growth (TTM) -88% 90% 137% -163%
OLP 60,350 62,328 71,279 74,214 -15% -3% 4%
Gross OLP 66,428 66,784 79,037 80,832 -16% -0.5% 6%
Total assets 106,716 105,872 120,013 119,152 -11% 1%
Client deposits 21,445 20,956 24,572 24,000 -13% 2%
Interest-bearing debt 60,402 60,392 66,656 66,412 -9% 0%
Share capital and
reserves 15,481 16,827 19,454 20,259 -20% -8%
Number of clients 415,506 400,021 455,197 428,645 -9% 4%
Number of branches 441 420 422 415 5% 5%
Average Gross OLP
per client (USD) 160 167 174 189 -8% -4% 2%
PAR > 30 days 11.2% 2.1% 14.1% 4.1%
Client deposits as
% of loan portfolio 36% 34% 34% 32%
-- Pagasa Philippines' operational and financial performance continued to improve.
-- In Myanmar, client and OLP growth stalled, due in large part
to disruptions brought on by continuing civil unrest in certain
regions.
Pagasa Philippines
-- Number of clients up from 289k to 313k (up 8% YTD)
-- Number of branches up from 324 to 345 (up 6% YTD)
-- OLP up from PHP 2.3bn (USD 44.6m) to PHP 2.5bn (USD 45.5m) (up 10% YTD in PHP)
-- Gross OLP/Client increased from PHP 8.23K (USD 161) to PHP
8.24 K (USD 1 50 ) (up 0.2% YTD in PHP)
-- PAR>30 increased from 2.5% to 2.7%
ASA Myanmar
-- Number of clients down from 111k to 103k (down 8% YTD)
-- Number of branches remained at 96
-- OLP down from to MMK 31.5bn (USD 17.7m) to MMK 27.6bn (USD 14.8m) (down 13% YTD in MMK)
-- Gross OLP/Client up from MMK 324K (USD 182) to MMK 353K (USD 190) (up 9% YTD in MMK)
-- PAR>30 increased from 1.1% to 31.5%
West Africa
(UNAUDITED) H1 FY2021 H1 FY2020 YoY YTD YTD % Change
2022 2021
(Amounts in USD thousands) % Change % Change (constant
currency)
Profit before tax 14,979 35,583 15,859 19,268 -6% -16% -7%
Net profit 10,454 25,019 10,826 13,443 -3% -16% -8%
Cost/income ratio 42% 37% 39% 49%
Return on average
assets (TTM) 17.2% 20.6% 20.0% 13.2%
Return on average
equity (TTM) 34.6% 45.4% 45.5% 31.1%
Earnings growth (TTM) -3% 86% 104% -16%
OLP 87,796 94,201 81,905 77,835 7% -7% 8%
Gross OLP 89,669 95,879 84,007 79,499 7% -6% 8%
Total assets 120,512 134,719 122,729 107,748 -2% -11%
Client deposits 42,905 46,548 43,506 39,788 -1% -8%
Interest-bearing debt 5,504 7,100 9,427 10,255 -42% -22%
Share capital and
reserves 62,749 61,222 58,204 49,033 8% 2%
Number of clients 439,004 457,302 446,727 447,122 -2% -4%
Number of branches 442 440 440 433 0% 0%
Average Gross OLP
per client (USD) 204 210 188 178 9% -3% 13%
PAR > 30 days 3.5% 2.6% 2.4% 2.7%
Client deposits as
% of loan portfolio 49% 49% 53% 51%
-- West Africa saw a slight decrease in operational performance
due to challenges in the operating environment in Nigeria and
Sierra Leone.
-- Significant depreciation of GHS (30% down against USD in H1
2022) and SLL (17% down against USD in H1 2022) impacted
profitability and OLP growth in USD terms.
-- OLP continued to grow in Ghana (up 14% YTD in GHS), with excellent portfolio quality.
ASA Savings & Loans (Ghana)
-- Number of clients up from 158.4k to 165.7k (up 5% YTD)
-- Number of branches remained at 133
-- OLP up from GHS 301.7m (USD 48.9m) to GHS 343.7m (USD 42.8m) (up 14% YTD in GHS)
-- Gross OLP/Client up from GHS 1.9k (USD 310) to GHS 2.1k (USD 258) (up 9% YTD in GHS)
-- PAR>30 remained at 0.3%
ASA Nigeria
-- Number of clients down from 254k to 235k (down 7% YTD)
-- Number of branches maintained at 263
-- OLP up from NGN 15.9bn (USD 38.5m) to NGN 16.3bn (USD 39.3m) (up 3% YTD in NGN)
-- Gross OLP/Client up from NGN 65k (USD 157) to NGN 72k (USD 174) (up 12% YTD in NGN)
-- PAR>30 increased from 4.6% to 6.0%
ASA Sierra Leone
-- Number of clients down from 45k to 39k (down 15% YTD)
-- Number of branches up from 44 to 46 (up 5% YTD)
-- OLP down from SLL 76.1bn (USD 6.7m) to SLL 75.2bn (USD 5.7m) (down 1% YTD in SLL)
-- Gross OLP/Client up from SLL 1.7m (USD 154) to SLL 2.1m (USD 156) (up 18% YTD in SLL)
-- PAR>30 increased from 7.5% to 10.1%
East Africa
(UNAUDITED) H1 FY2021 H1 FY2020 YoY YTD YTD % Change
2022 2021
(Amounts in USD thousands) % Change % Change (constant
currency)
Profit before tax 5,433 6,605 2,293 1,652 137% 65% 54%
Net profit 3,267 4,631 1,414 1,069 131% 41% 42%
Cost/income ratio 67% 75% 79% 90%
Return on average assets
(TTM) 7.4% 6.5% 4.4% 1.8%
Return on average equity
(TTM) 33.7% 25.5% 17.6% 6.7%
Earnings growth (TTM) 131% 333% 325% -83%
OLP 78,247 64,881 54,464 45,413 44% 21% 24%
Gross OLP 78,801 66,629 56,850 46,188 39% 18% 21%
Total assets 101,842 83,602 73,954 59,802 38% 22%
Client deposits 20,495 17,843 16,256 13,776 26% 15%
Interest-bearing debt 50,934 41,201 36,917 26,292 38% 24%
Share capital and reserves 22,036 19,973 16,728 16,313 32% 10%
Number of clients 476,952 416,898 372,197 319,262 28% 14%
Number of branches 458 406 386 359 19% 13%
Average Gross OLP per
client (USD) 165 160 153 145 8% 3% 6%
PAR > 30 days 0.9% 1.3% 6.5% 13.2%
Client deposits as
% of loan portfolio 26% 28% 30% 30%
-- East Africa continued to improve its operational performance
and profitability due to continued growth in Tanzania, Kenya,
Uganda and Rwanda.
ASA Kenya
-- Number of clients up from 119k to 134k (up 13% YTD)
-- Number of branches up from 112 to 121 (up 8% YTD)
-- OLP up from KES 1.8bn (USD 16.1m) to KES 2.3bn (USD 19.1m) (up 23% YTD in KES)
-- Gross OLP/Client up from KES 16K (USD 140) to KES 17K (USD 144) (up 7% YTD in KES)
-- PAR>30 decreased from 1.1% to 0.8%
ASA Tanzania
-- Number of clients up from 174k to 201k (up 16% YTD)
-- Number of branches up from 143 to 174 (up 22% YTD)
-- OLP up from TZS 79.0bn (USD 34.3m) to TZS 98.5bn (USD 42.2m) (up 25% YTD in TZS)
-- Gross OLP/Client up from TZS 460k (USD 200) to TZS 492k (USD 211) (up 7% YTD in TZS)
-- PAR>30 decreased from 0.5% to 0.4%
ASA Uganda
-- Number of clients up from 92k to 104k (up 14% YTD)
-- Number of branches up from 103 to 109 (up 6% YTD)
-- OLP up from UGX 31.8bn (USD 9.0m) to UGX 39.4bn (USD 10.5m) (up 24% YTD in UGX)
-- Gross OLP/Client down from UGX 378.1K (USD 107) to UGX 377.5K
(USD 100) (down 0.1% YTD in UGX)
-- PAR>30 decreased from 3.8% to 1.4%
ASA Rwanda
-- Number of clients increased from 18.2k to 18.7k (up 3% YTD)
-- Number of branches maintained at 30
-- OLP up from RWF 3.4bn (USD 3.3m) to RWF 3.8bn (USD 3.7m) (up 12% YTD in RWF)
-- Gross OLP/Client up from RWF 193K (USD 187) to RWF 209K (USD 204) (up 8% YTD in RWF)
-- PAR>30 increased from 4.5% to 4.6%
ASA Zambia
-- Number of clients increased from 15k to reach 18k
-- Number of branches increased from 18 to 24
-- OLP up from ZMW 36.4m (USD 2m) to ZMW 46.1m (USD 3m)
-- Gross OLP/Client up from ZMW 2.5k (USD 151) to ZMW 2.6k (USD 150)
-- PAR>30 increased to 2.9%
Regulatory environment
The Company operates in a wide range of jurisdictions, each with
their own regulatory regimes applicable to microfinance
institutions.
Key events H1 and H2 2022
India
-- On 14 March 2022, the RBI announced the new regulation for
the microfinance sector in India, applicable to all banks and
NBFC-MFIs, including ASA India. Key changes include the removal of
the interest rate cap and margin cap, loans shall be
collateral-free (also for banks providing microfinance loans), and
lenders will be restricted to provide microfinance loans to clients
up to a maximum of 50% of the client's household income. As a
result, the interest rate has been increased.
Pakistan
-- On 24 May 2022, ASA Pakistan received the Microfinance
Banking license from State Bank of Pakistan. The license is subject
to compliance with certain requirements, mainly implementing the
new core banking system and meeting statutory capital
requirements.
Sri Lanka
-- On 10 June 2022, the Central Bank of Sri Lanka has withdrawn
the maximum interest rate cap on microfinance loans. As a result,
Lak Jaya is now charging interest based on expected risk.
Myanmar
-- On 13 July 2022, the Central Bank of Myanmar ('CBM')
suspended interest and principal repayments on foreign loans and
directed companies to restructure these loans. This made ASA
Myanmar unable to meet its payment obligations to international
lenders. On 16 August 2022, CBM announced that certain transactions
are permitted with prior approval from the Foreign Currency
Supervision Committee 'FCSC'). ASA Myanmar is now seeking approval
from the FCSC.
Tanzania
-- ASA Tanzania continues to prepare the application for a
deposit-taking licence which is expected to be submitted to the
central bank in 2022. A deposit-taking license will enable ASA
Tanzania to reduce the cost of funding in the future.
Kenya
-- ASA Kenya continues to prepare the application for a
deposit-taking licence which is expected to be submitted to the
central bank in 2022. A deposit-taking license will enable ASA
Kenya to reduce the cost of funding in the future.
Regulatory capital
Many of the Group's operating subsidiaries are regulated and
subject to minimum regulatory capital requirements. As of 30 June
2022, the Group and its subsidiaries were in full compliance with
minimum regulatory capital requirements.
Asset/liability and risk management
ASA International has strict policies and procedures for the
management of its assets and liabilities as well as various
non-operational risks to ensure that:
-- The average tenor of loans to customers is substantially
shorter than the average tenor of debt provided by third-party
banks and other third-party lenders to the Group and any of its
subsidiaries.
-- Foreign exchange losses are minimised by having all loans to
any of the Group's operating subsidiaries denominated or duly
hedged in the local operating currency and loans to any of the
Group's subsidiaries denominated in local currency are hedged in US
Dollars.
-- Foreign translation losses affecting the Group's balance sheet are minimised by preventing over-capitalisation of any of the Group's subsidiaries by distributing dividends and/or repaying capital as soon as reasonably possible.
Nevertheless, the Group will always remain exposed to currency
movements in both (i) the profit and loss statement, which will be
affected by the translation of profits in local currencies into
USD, and (ii) the balance sheet, due to the erosion of capital of
each of its operating subsidiaries in local currency when
translated in USD, in case the US Dollar strengthens against the
currency of any of its operating subsidiaries.
Funding
The funding profile of the Group has not materially changed
during H1 2022:
In USD millions
30 Jun 31 Dec 30 Jun 31 Dec
22 21 21 20
Local Deposits 86.3 87.8 86.9 80.2
Loans from Financial Institutions 241.9 249.8 280.6 274.1
Microfinance Loan Funds 36.5 36.5 14.0 23.5
Loans from Dev. Banks
& Foundations 21.3 28.1 40.0 40.0
Equity 100.5 103.4 105.0 107.1
Total Funding 486.4 505.7 526.5 524.9
The Group maintains a favourable maturity profile with the
average tenor of all funding from third parties being substantially
longer than the average tenor at issuance of loans to customers
which ranges from 6-12 months for the bulk of the loans.
The Group and its subsidiaries have existing credit
relationships with more than 60 lenders throughout the world, which
has provided reliable access to competitively priced funding for
the growth of its loan portfolio.
During H1 2022, a number of loan covenants were breached across
the Group, particularly related to the portfolio quality in India.
As of 30 June 2022, the balance for credit lines with breached
covenants that did not have waivers amounted to USD 99.8 million
out of which waivers for USD 34.3 million have been subsequently
received. The majority of the waivers which are pending relate to
our India operations where a majority of our lenders are local
institutions, who usually provide waivers after receiving the
audited statutory financial statements.
Based on the received waivers, ongoing discussions, prior
experience, and new funding commitments received, the Group has a
high degree of confidence that all the required waivers will be
obtained. It should be noted that none of the lenders have
initiated any accelerated calls to any of the Group's outstanding
obligations during 2020, 2021 and H1 2022.
The Company has also received temporary waivers, no-action
and/or comfort letters from some of its major lenders for the
remainder of 2022 due to expected portfolio quality covenant
breaches (primarily PAR>30). The impact of these potential
covenant breaches was further assessed in the evaluation of the
Company's going concern as disclosed in note 2.1.2 of the Interim
Financial Report, where the Directors have concluded that there is
a material uncertainty that may cast significant doubt over the
Group's ability to continue as a going concern.
Impact of foreign exchange rates
As a USD reporting company with operations in thirteen different
currencies, currency movements can have a major effect on the
Group's USD financial performance and reporting.
The effect of this is that generally (i) existing and future
local currency earnings translate into less US Dollar earnings, and
(ii) local currency capital of any of the operating subsidiaries
will translate into less US Dollar capital. The table below shows
the trend of the various operating currencies vis-à-vis the US
Dollar.
Countries H1 2022 FY 2021 H1 2021 FY 2020 <DELTA> <DELTA>
H1 2021 FY 2021
- H1 - H1
2022 2022
India (INR) 78.8 74.4 74.3 73.0 (6%) (6%)
Pakistan (PKR) 205.4 177.5 158.1 160.3 (30%) (16%)
Sri Lanka (LKR) 360.0 202.9 199.5 185.3 (80%) (77%)
The Philippines
(PHP) 55.0 51.1 48.8 48.0 (13%) (8%)
Myanmar (MMK) 1858.1 1778.5 1647.0 1330.7 (13%) (4%)
Ghana (GHS) 8.0 6.2 5.9 5.9 (37%) (30%)
Nigeria (NGN) 415.2 411.5 411.4 384.6 (1%) (1%)
Sierra Leone
(SLL) 13170.0 11289.0 10252.6 10107.0 (28%) (17%)
Kenya (KES) 117.9 113.2 107.9 109.0 (9%) (4%)
Uganda (UGX) 3765.9 3546.2 3557.5 3647.7 (6%) (6%)
Tanzania (TZS) 2332.1 2303.7 2319.1 2317.2 (1%) (1%)
Rwanda (RWF) 1026.0 1031.8 986.5 986.4 (4%) 1%
Zambia (ZMW) 17.0 16.7 22.7 21.1 25% (2%)
During H1 2022, the US Dollar particularly strengthened against
PKR +16%, LKR +77%, and GHS +30%. This had an additional negative
impact on the USD earnings contribution of these subsidiaries to
the Group and also contributed to an increase in foreign exchange
translation losses. The total contribution to the foreign exchange
translation loss reserve during H1 2022 amounted to USD 17.7
million of which USD 5.7 million related to depreciation of the
PKR, USD 1.3 million to the depreciation of the LKR, and USD 8.4
million to the depreciation of the GHS.
Transfer pricing
The South East Asia and East Africa regions are contributing
intercompany franchise fees and corporate service fees to the
holding companies of the Group, whereas approval for most of such
intercompany charges are pending in certain countries in South Asia
and West Africa. The intercompany charges per region are detailed
in the Segment Information as included in note 3 of the Interim
Financial Report.
Forward-looking statement and disclaimers
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 SFWFMUEESEEU
(END) Dow Jones Newswires
September 20, 2022 02:00 ET (06:00 GMT)
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