REG - ASA Intnl. Grp PLC - FY 2023 Results
23/04/2024 07:00
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RNS Number : 5909L ASA International Group PLC 23 April 2024
Press Release
ASA International Group plc reports FY 2023 results
Improved performance in H2 2023, with momentum continuing in early 2024
London, United Kingdom, 23 April 2024 - ASA International Group plc ('ASA
International', the 'Company' or the 'Group'), one of the world's largest
international microfinance institutions, today announces its unaudited results
for the year ended 31 December 2023.
Key performance indicators
(UNAUDITED) FY2023 H1 2023 FY2022 % Change % Change % Change
(Amounts in USD millions)
FY 2022 -
FY 2022 - FY 2023
H1 2023 -
(constant currency)
FY 2023
FY 2023
Number of clients (m) 2.3 2.2 2.3 1% 5%
Number of branches 2,016 2,073 2,028 -1% -3%
Profit before tax((1)) 32.2 13.8 46.3 -30% -16% 33%
Net profit((1)) 8.8 3.7 17.9 -51% -31% 38%
OLP((2)) 369.2 334.4 351.2 5% 21% 10%
Gross OLP((2)) 377.2 346.8 367.5 3% 18% 9%
PAR > 30 days((3)) 2.1% 3.8% 5.9%
((1)) Profit before tax and net profit for FY 2023 include an IAS 29
hyperinflation adjustments loss of USD 5.4 million, and profit before tax and
net profit for H1 2023 excludes hyperinflation adjustments, as hyperinflation
accounting was applied for the first time in the 2023 consolidated financial
statements.
((2)) Outstanding loan portfolio ('OLP') includes off-book Business
Correspondence ('BC') loans and Direct Assignment loans, and loans valued at
fair value through profit and loss ("FVTPL"), excludes interest receivable,
unamortised loan processing fees, and deducts ECL reserves from Gross OLP.
((3)) 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.
FY 2023 highlights
· The Company's financial results improved in H2 2023 with net profit
increasing to USD 8.8 million by year end 2023 from USD 3.7 million in H1
2023. The Company's overall FY 2023 financial performance decreased compared
to FY 2022, with net profit declining by 51%, primarily due to adverse FX
movements, demonetisation in Nigeria, and the application of hyperinflation
accounting to Ghana and Sierra Leone.
· The impact of the application of hyperinflation accounting for Ghana
and Sierra Leone caused a decrease in net profit by USD 5.4 million and an
increase in total equity of USD 0.6 million in 2023. This adjustment was not
included in the reported H1 2023 numbers as the application of IAS 29
Hyperinflation accounting occurred for the first time in these consolidated
accounts for the financial year ended 31 December 2023.
· Pakistan, the Philippines, Ghana, Tanzania, and Kenya made significant
positive contributions to the Group's net profitability, due to increased loan
demand and high loan portfolio quality in all these markets.
· Group operating results improved in H2 2023 with OLP growing by 10%
to USD 369.2 million from USD 334.4 million in H1 2023, and portfolio quality
improved to 2.1% as of 31 December 2023 from 3.8% as of 30 June 2023. The 5%
year-on-year OLP growth in USD (21% in constant currency) was driven by
improved performances in Pakistan, the Philippines, Ghana, Tanzania, and
Kenya.
· High portfolio quality has been maintained as a result of improvements
in the operating environments. PAR>30 for the Group's operating
subsidiaries significantly improved from 5.9% as at 31 December 2022 to 2.1%
as at 31 December 2023, primarily due to write-offs of long overdue loans in
India and Myanmar, combined with growth in OLP in US Dollar terms in other
major countries. Pakistan, Ghana, and Kenya had an outstanding portfolio
quality in the period, with PAR>30 less than 0.5% as at 31 December 2023.
· Reserves for expected credit losses ('ECL') on OLP in the balance
sheet, including the off-book BC portfolio in India and interest receivables,
reduced to USD 8.3 million in FY 2023 from USD 16.9 million in FY 2022. The
decrease primarily relates to write-off of the outstanding Covid-affected
portfolio and improved portfolio quality.
· The devaluation of our operating currencies contributed to foreign
exchange translation losses of USD 24.1 million in FY 2023 (FY 2022: USD 34.0
million) and a decrease of the Company's total equity from USD 89.7 million as
at 31 December 2022 to USD 76.6 million as at 31 December 2023.
· The Group did not recognise deferred tax assets amounting to USD 5.6
million which related to past losses for mainly India, as it failed to meet
the future profitability threshold required under IFRS. Additionally, prior
year tax adjustments of USD 3.0 million primarily in Pakistan, India,
Tanzania, and Nigeria were taken in 2023. These resulted in a substantial
increase in our tax expenses and a high effective tax rate for FY 2023.
· The unrestricted cash and cash equivalents remained at a healthy
level of USD 48 million as of 31 December 2023 (31 December 2022: USD 55
million). The Company maintains a significant funding pipeline.
Outlook
The outlook for 2024 remains positive with improved business performance
expected for our operations compared to 2023 on the back of better performance
in H2 2023. However, inflation and related foreign exchange ('FX') movements
are expected to continue to impact the Group's operating subsidiaries'
performances. The reported net income for the Group will also depend on which
countries will be classified as hyperinflationary at the end 2024. Based on
current preliminary inflation projections, it is expected that the accounting
for hyperinflation will be applicable for Ghana and Sierra Leone in 2024.
Pakistan and Nigeria are currently on the watchlist.
Karin Kersten, Chief Executive Officer of ASA International, commented:
"We are pleased that the Group has returned to seeing growth in its operations
and increased profitability in H2 2023, with the operating environment and
profits improving across most of the Group's operating markets when compared
to the first half of the year. Demand has picked up as our clients and staff
continued to demonstrate their resilience while operating in economic
circumstances that have remained challenging. This activity and resilience led
to an improved performance in our major operating countries, Pakistan, the
Philippines, Ghana, Kenya, and Tanzania, almost all of which recorded
excellent portfolio quality, growth, and profitability. As previously
announced, against the backdrop of global market volatility, the improved
performance in our major operating markets was offset by FX movements in these
markets which has significantly impacted the Group OLP and profitability in
USD terms.
We are excited to observe the rollout of the new Core Banking System in
Pakistan and Ghana in 2024, in line with the implementation of our digital
strategy.
Whilst the impact of inflation including hyperinflation accounting and the
related FX movements are expected to continue to dampen the Group's financial
performance in USD terms in 2024, given improved operating developments in H2
2023, we are confident of being able to deliver improved performance within
our operations in 2024."
CHIEF EXECUTIVE OFFICER'S REVIEW
Business review FY 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 increased food, commodities, and
energy prices, the high demand from clients contributed to the growth of our
operations in most markets. Pakistan, the Philippines, Ghana, Tanzania and
Kenya continued to grow their loan portfolios in local currency and each made
significant contributions to the Group's profitability.
The number of branches remained broadly stable, which was the result of the
Group's stated strategy to reduce its presence in India while at the same time
increasing our branches in many other countries, particularly in the
Philippines and our operations in East Africa. Client numbers across the Group
increased as the operating environment improved in most of our markets. On a
constant currency basis, Gross OLP for the Group grew to USD 433.6 million at
the end of December 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 2.1% as of December 2023 compared to
5.9% in December 2022.
In India, the Group maintained its strategy to focus on the recovery of
overdue loans and the growth of its off-book portfolio, which resulted in
on-book Gross OLP shrinking by USD 16.2 million in FY 2023. However, overall
Gross OLP in India increased by 2% as the off-book Gross OLP increased to USD
39.8 million as of 31 December 2023 from USD 22.6 million as of 31 December
2022. This was due to new Business Correspondence ('BC') partnerships which
commenced in 2023. We expect that the on-book portfolio will also start to
increase in 2024 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 a
number of factors: such as the national elections in February 2023,
demonetisation and also the impact of high inflation experienced by the
country following the removal of government fuel subsidies. This resulted in a
reduction of OLP and clients, an increase in overdues, and higher operating
expenses in H1 2023. This was compounded by significant devaluation of the
Nigerian Naira (down 70% against USD as of 30 June 2023 compared to 31
December 2022) which resulted in reduced operational and financial results in
USD terms for H1 2023. Notwithstanding the headwinds experienced during H1
2023, we saw an improvement of the operating environment in H2 2023, which was
reflected in improved portfolio quality and profitability and increased
collections and disbursements. The period also saw a decreased currency
depreciation (down 18% against USD as of 31 December 2023 compared to 30 June
2023). As such we expect the operations to continue to gradually recover in
2024 and contribute positively to the Group.
In Ghana and Sierra Leone, the three-year cumulative inflation in 2023
exceeded 100%. As a result, hyperinflation accounting has been applied for the
first time for these two countries at the Group level. The application of
hyperinflation accounting resulted in a non-cash decrease of the Group's net
profit of USD 5.4 million and an increase of total equity of USD 0.6 million
for the year ended 31 December 2023.
Against the backdrop of continued high inflation and currency depreciation in
many of our markets, we continue to expect operations to improve across the
Group in 2024. The Group is focused on right-sizing average loan sizes to
clients in view of the inflationary environment in many operating countries,
while improving branch productivity as clients continue to demand our loans,
and our staff remain committed and focused on supporting clients in difficult
operating circumstances.
Financial performance
As a result of the improved operating performance in H2 2023 compared to H1
2023, the Group realised a net profit of USD 8.8 million (after the USD 5.4
million impact of IAS 29) in FY 2023, which demonstrates the improvement in
the operating performance in H2 2023 over the USD 3.7 million achieved in H1
2023. It should also be noted that hyperinflation accounting was not applied
in the reported figures for H1 2023, as the impact of IAS 29 is only applied
to the consolidated audited accounts at the year end 2023. I am pleased that
the performance of most of our operating countries, particularly Pakistan, the
Philippines, Ghana, Kenya, and Tanzania, was excellent in terms of portfolio
quality, growth and profitability.
The Group maintains a diversified risk profile with operations across thirteen
markets in Asia and Africa. As the impact of global market volatility,
inflation and adverse FX movements varies substantially per country, the
Company benefits from this diversification.
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 8.3 million as per end
of December 2023, for its OLP, including the off-book BC portfolio and
interest receivables. The decrease primarily relates to write-off of the
outstanding Covid-affected portfolio (USD 12.9 million in 2023 versus USD 10.8
million in 2022) and improved portfolio quality.
The USD 8.3 million ECL reserves as per 31 December 2023 mainly relate to
overdue loans in India (28%), Myanmar (23%) and Nigeria (23%), with the
remainder spread across the other countries as a percentage of each country's
OLP or as an aggregate amount. Further details on the ECL calculation,
including the selected assumptions, are provided in note 2.5.1 to the
consolidated financial statements.
Digital strategy
The Group's digital strategy entails the implementation of our Core Banking
System and our digital financial services platform ('DFS app'). Alongside the
digitalisation of client procedures, the Group will seek to make further
progress in enhancing employee processes. On 25 February 2024, we reached a
major milestone, by migrating more than 600,000 clients in Pakistan from our
incumbent loan system to the Temenos Transact Core Banking System. This
migration enables ASA Pakistan to start taking deposits and grow their client
base in a highly regulated environment. Also, it sets the stage for the
rollout of the new Core Banking System to our other markets and provides a
foundation for a broader, more sophisticated product offering in the near
future.
The rollout of the Core Banking System combined with the implementation of the
digital app in Ghana is planned for this year. The Supplier Market Place app
is currently operating in Ghana, with more than 3,000 customers onboarded and
placing their online orders. The service is expected to be expanded following
the rollout of the digital loan and banking app.
Competitive environment
The competitive landscape remains unchanged 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 directly affected by competition
from pure digital lenders.
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 FY results presentation,
please go to the Investor section of the Company's website: Investors | Asa
(asa-international.com) (https://www.asa-international.com/investors/) or use
the following link: https://brrmedia.news/ASAI_FY23
(https://brrmedia.news/ASAI_FY23)
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.
The audio webcast will be available for playback on the Company website after
the event.
2023 Statutory accounts
The financial information contained in this announcement do not constitute
statutory accounts within the meaning of section 434 of the Companies Act 2006
('the Act'). A copy of the accounts for the year ended 31 December 2022 was
delivered to the Registrar of Companies. The auditors' report on those
accounts was not qualified but made reference to a material uncertainty in
respect of going concern and did not contain statements under section 498 (2)
or 498 (3) of the Companies Act 2006.
The audit of the statutory accounts for the year ended 31 December 2023 is not
yet complete. The Directors expect the auditors' report to be unqualified and
to make reference to a material uncertainty in respect of going concern due to
lender covenant breaches and expect not to contain a statement under section
498 (2) or (3) of the Act. These accounts will be finalised on the basis of
the financial information presented by the Directors in these preliminary
results and will be delivered to the Registrar of Companies following the
Company's annual general meeting.
2023 Preliminary Unaudited Consolidated Financial Statements
Today, the Company published the Preliminary Unaudited Consolidated Financial
Statements for the 12 months period ended 31 December 2023 on the investor
relations page of the Group web site (www.asa-international.com/investors/
(http://www.asa-international.com/investors/) ).
Full Year Annual Report and Accounts
It is expected that the Company will publish its Annual Report and Accounts
for the 12 months period ended 31 December 2023 on 26 April 2024 which will be
available on the investor relations page of the Group web site
(www.asa-international.com/investors/
(http://www.asa-international.com/investors/) ).
Annual General Meeting
The Annual General Meeting will be held on 20 June 2024.
Enquiries:
ASA International Group plc
Investor Relations
Mischa Assink
ir@asa-international.com (mailto:ir@asa-international.com)
GROUP FINANCIAL PERFORMANCE
(UNAUDITED) FY2023 H1 2023 FY2022 % Change % Change % Change
(Amounts in USD thousands)
FY 2022 -
FY 2022 - FY 2023
H1 2023 -
(constant currency)
FY 2023
FY 2023
Profit before tax((1)) 32,195 13,815 46,281 -30% -16% 33%
Net profit((1)) 8,757 3,676 17,887 -51% -31% 38%
Cost/income ratio 72% 77% 68%
Return on average assets (TTM)((2)) 1.8% 1.5% 3.4%
Return on average equity (TTM)((2)) 10.5% 8.7% 18.5%
Earnings growth (TTM)((2)) -51% -72% 181%
OLP 369,215 334,400 351,151 5% 21% 10%
Gross OLP 377,219 346,804 367,535 3% 18% 9%
Total assets 490,027 452,332 489,752 0.1% 8%
Client deposits ((3)) 79,073 72,718 84,111 -6% 9%
Interest-bearing debt ((3)) 268,464 245,314 257,466 4% 9%
Share capital and reserves 76,611 69,249 89,661 -15% 11%
Number of clients 2,330,498 2,224,542 2,299,558 1% 5%
Number of branches 2,016 2,073 2,028 -1% -3%
Average Gross OLP per client (USD) 162 156 160 1% 16% 4%
PAR > 30 days 2.1% 3.8% 5.9%
Client deposits as % of loan portfolio 21% 22% 24%
Debt-to-equity ratio 3.5 3.5 2.9
((1)) Profit before tax and net profit for FY 2023 include an IAS 29
hyperinflation adjustments loss of USD 5.4 million, and profit before tax and
net profit for H1 2023 excludes hyperinflation adjustments, as hyperinflation
accounting was applied for the first time in the 2023 consolidated financial
statements.
((2)) TTM refers to the previous 12 months.
((3)) Excludes interest payable.
Regional performance
South Asia
(UNAUDITED) FY2023 H1 2023 FY2022 % Change % Change % Change
(Amounts in USD thousands)
FY 2022 - FY 2023
FY 2022 - FY 2023
H1 2023 -
(constant currency)
FY 2023
Profit before tax 10,021 3,766 12,395 -19% 11% 66%
Net profit 3,298 487 3,103 6% 77% 478%
Cost/income ratio 68% 72% 64%
Return on average assets (TTM) 2.8% 0.7% 1.9%
Return on average equity (TTM) 11.3% 3.4% 8.8%
Earnings growth (TTM) 6% -90% 125%
OLP 117,460 112,089 118,590 -1.0% 13% 4.8%
Gross OLP 119,730 119,869 128,460 -7% 6% -0.1%
Total assets 102,803 106,979 133,894 -23% -4%
Client deposits 1,663 1,718 1,345 24% -3%
Interest-bearing debt 53,569 65,357 85,878 -38% -18%
Share capital and reserves 24,995 20,526 33,393 -25% 22%
Number of clients 842,001 860,407 935,091 -10% -2%
Number of branches 589 661 670 -12% -11%
Average Gross OLP per client (USD) 142 139 137 4% 17% 2%
PAR > 30 days 1.8% 7.3% 11.1%
Client deposits as % of loan portfolio 1% 2% 1%
Debt-to-equity ratio 2.1 3.2 2.6
· South Asia's financial and operational results improved in H2 2023
compared to H1 2023, with net profit increasing to USD 3.3m by year end 2023
from USD 0.5m in H1 2023, OLP increasing to USD 117.5m from USD 112.1m, and
PAR>30 improving to 1.8% from 7.3%, despite the number of branches
decreasing by 72 to 589 and the number of clients decreasing by 18k to 842k.
Pakistan
ASA Pakistan grew its operations over the past 12 months:
· Number of clients increased from 606k to 616k (up 2% YoY).
· Number of branches remained at 345.
· OLP increased from PKR 17.9bn (USD 79.1m) to PKR 19.4bn (USD 69.5m)
(up 9% YoY in PKR).
· Gross OLP/Client increased from PKR 29.8k (USD 131) to PKR 31.6k (USD
113) (up 6% YoY in PKR).
· PAR>30 improved from 0.7% to 0.3%.
India
ASA India intentionally shrank its operations over the past 12 months, as it
focused on recovery of overdue loans while growing the off-book portfolio:
· Number of clients reduced from 284k to 183k (down 36% YoY).
· Number of branches reduced from 261 to 180 (down 31% YoY).
· On-book portfolio decreased from INR 1.2bn (USD 14.2m) to INR 0.43bn
(USD 5.2m) (down 63% YoY in INR).
· Off-book portfolio increased from INR 1.8bn (USD 21.5m) to INR 3.2bn
(USD 38.3m) (up 79% in INR).
· Gross OLP/Client increased from INR 13.1k (USD 158) to INR 20.8k (USD
251) (up 60% YoY in INR).
· PAR>30 improved from 49.0% to 16.4%, and PAR>30 amount
decreased from INR 903.4m (USD 10.9m) to INR 83.4m (USD 1.0m).
· ASA India's collection efficiency improved to 97% in December 2023.
As of 31 December 2023, ASA India had collected USD 7.3 million from a total
of USD 30.5 million in loans written-off since 2021.
*See note 13.2 to the consolidated financial statements for details on the
off-book portfolio.
Sri Lanka
Lak Jaya stabilised its operations over the past 12 months:
· Number of clients decreased from 45k to 43k (down 4% YoY).
· Number of branches remained at 64.
· OLP increased from LKR 1.39bn (USD 3.8m) to LKR 1.43bn (USD 4.4m) (up
2% YoY in LKR).
· Gross OLP/Client reduced from LKR 32.4k (USD 89) to LKR 31.5k (USD
97) (down 3% YoY in LKR).
· PAR>30 improved from 8.5% to 5.0%.
South East Asia
(UNAUDITED) FY2023 H1 2023 FY2022 % Change % Change % Change
(Amounts in USD thousands)
FY 2022 -
FY 2022 - FY 2023
H1 2023 -
(constant currency)
FY 2023
FY 2023
Profit before tax 4,627 2,342 4,217 10% 10% -2%
Net profit 3,376 1,694 1,910 77% 77% -1%
Cost/income ratio 84% 83% 82%
Return on average assets (TTM) 3.0% 3.1% 1.8%
Return on average equity (TTM) 23.0% 22.5% 12.0%
Earnings growth (TTM) 77% 891% 663%
OLP 73,979 68,073 63,316 17% 16% 9%
Gross OLP 76,988 70,067 66,955 15% 14% 10%
Total assets 119,510 111,703 102,917 16% 7%
Client deposits 26,146 23,871 22,069 18% 10%
Interest-bearing debt 69,804 66,178 58,416 19% 5%
Share capital and reserves 14,341 14,666 14,980 -4% -2%
Number of clients 444,210 429,533 424,076 5% 3%
Number of branches 458 463 441 4% -1%
Average Gross OLP per client (USD) 173 163 158 10% 9% 6%
PAR > 30 days 2.8% 1.7% 6.5%
Client deposits as % of loan portfolio 35% 35% 35%
Debt-to-equity ratio 4.9 4.5 3.9
· South East Asia's net profit increased to USD 3.4m by year end 2023
from USD 1.7m in H1 2023. The region's OLP increased in H2 2023 compared to H1
2023 by 9% from USD 68.1m to USD 74.0m, despite the number of branches
decreasing by 1% from 463 to 458 and PAR>30 increasing from 1.7% to 2.8%.
The Philippines
Pagasa Philippines' operations grew over the last 12 months:
· Number of clients increased from 325k to 333k (up 2% YoY).
· Number of branches increased from 345 to 370 (up 7% YoY).
· OLP increased from PHP 2.8bn (USD 49.6m) to PHP 3.0bn (USD 54.2m) (up
9% YoY in PHP).
· Gross OLP/Client increased from PHP 8.6k (USD 153) to PHP 9.2k (USD
166) (up 8% YoY in PHP).
· PAR>30 increased from 1.7% to 3.8%.
Myanmar
ASA Myanmar saw an increase in number of clients and OLP over the last 12
months:
· Number of clients increased from 99k to 111k (up 12% YoY).
· Number of branches decreased from 96 to 88 (down 8% YoY), as the
Group decided to cease operations in these branches which were located in
conflict zones.
· OLP increased from MMK 28.9bn (USD 13.8m) to MMK 41.6bn (USD 19.8m)
(up 44% YoY in MMK).
· Gross OLP/Client increased from MMK 361.8k (USD 172) to MMK 409.5k
(USD 195) (up 13% YoY in MMK).
· PAR>30 improved significantly from 20.4% to 0.2%.
West Africa
(UNAUDITED) FY2023 H1 2023 FY2022 % Change % Change % Change
(Amounts in USD thousands)
FY 2022 -
FY 2022 - FY 2023
H1 2023 -
(constant currency)
FY 2023
FY 2023
Profit before tax((1)) 14,632 6,952 27,799 -47% -38% 10%
Net profit((1)) 7,514 4,220 19,215 -61% -55% -22%
Cost/income ratio 48% 57% 43%
Return on average assets (TTM) 7.6% 8.2% 15.8%
Return on average equity (TTM) 15.6% 16.0% 33.2%
Earnings growth (TTM) -61% -60% -23%
OLP 72,260 60,349 82,380 -12% 19% 20%
Gross OLP 74,501 62,914 84,853 -12% 20% 18%
Total assets 89,494 85,774 108,395 -17% 4%
Client deposits 35,642 30,798 39,544 -10% 16%
Interest-bearing debt 3,752 4,028 4,326 -13% -7%
Share capital and reserves 41,912 42,551 54,591 -23% -2%
Number of clients 425,058 379,467 433,897 -2% 12%
Number of branches 452 452 446 1% 0%
Average Gross OLP per client (USD) 175 166 196 -10% 23% 6%
PAR > 30 days 3.3% 5.2% 4.2%
Client deposits as % of loan portfolio 49% 51% 48%
Debt-to-equity ratio 0.1 0.1 0.1
( )
((1)) Profit before tax and net profit for FY 2023 include an IAS 29
hyperinflation adjustments loss of USD 5.4 million, and profit before tax and
net profit for H1 2023 excludes hyperinflation adjustments, as hyperinflation
accounting was applied for the first time in the 2023 consolidated financial
statements.
· West Africa's financial result decreased in H2 2023, compared to H1
2023, due to the application of hyperinflation accounting on the full year
results, with net profit amounting to USD 7.5m for the full year 2023 compared
to USD 4.2m in H1 2023. When including the impact of hyperinflation accounting
in H1 2023, the results for H2 2023 would show a significant increase. The
region's operational result in H2 2023 improved with OLP increasing 20% from
USD 60.3m to USD 72.3m and PAR>30 improving from 5.2% to 3.3%.
Ghana
ASA Savings & Loans operations continued to improve with excellent
portfolio quality:
· Number of clients increased from 177k to 201k (up 14% YoY).
· Number of branches increased from 137 to 143 (up 4% YoY).
· OLP increased from GHS 416.3m (USD 40.8m) to GHS 620.9m (USD 51.9m)
(up 49% YoY in GHS).
· Gross OLP/Client increased from GHS 2.4k (USD 231) to GHS 3.1k (USD
259) (up 31% YoY in GHS).
· PAR>30 improved from 0.6% to 0.1%.
Nigeria
ASA Nigeria saw a deterioration in financial and operational performance:
· Number of clients reduced from 220k to 184k (down 16% YoY).
· Number of branches maintained at 263.
· OLP reduced from NGN 16.7bn (USD 37.3m) to NGN 14.2bn (USD 15.8m)
(down 15% YoY in NGN).
· Gross OLP/Client increased from NGN 80.2k (USD 179) to NGN 85.7k (USD
96) (up 7% YoY in NGN).
· PAR>30 increased from 7.1% to 12.1%.
Sierra Leone
ASA Sierra Leone saw an improvement in operational performance:
· Number of clients increased from 37k to 39k (up 7% YoY).
· Number of branches remained at 46.
· OLP increased from SLE 80.7m (USD 4.3m) to SLE 104.3m (USD 4.6m) (up
29% YoY in SLE).
· Gross OLP/Client increased from SLE 2.3m (USD 123) to SLE 2.8m (USD
122) (up 21% YoY in SLE).
· PAR>30 improved from 10.7% to 4.6%.
East Africa
(UNAUDITED) FY2023 H1 2023 FY2022 % Change % Change % Change
(Amounts in USD thousands)
FY 2022 - FY 2023
FY 2022 - FY 2023
H1 2023 -
(constant currency)
FY 2023
Profit before tax 11,859 5,993 11,241 5% 12% -2%
Net profit 6,781 3,717 6,913 -2% 3% -18%
Cost/income ratio 69% 69% 68%
Return on average assets (TTM) 5.3% 6.8% 7.0%
Return on average equity (TTM) 24.7% 30.4% 29.8%
Earnings growth (TTM) -2% 14% 49%
OLP 105,516 93,889 86,865 21% 36% 12%
Gross OLP 106,000 93,955 87,267 21% 36% 13%
Total assets 139,762 116,542 113,791 23% 20%
Client deposits 15,622 16,332 21,153 -26% -4%
Interest-bearing debt 86,014 62,115 59,871 44% 38%
Share capital and reserves 28,360 26,878 26,445 7% 6%
Number of clients 619,229 555,135 506,494 22% 12%
Number of branches 517 497 471 10% 4%
Average Gross OLP per client (USD) 171 169 172 -1% 11% 1%
PAR > 30 days 1.1% 1.1% 0.9%
Client deposits as % of loan portfolio 15% 17% 24%
Debt-to-equity ratio 3.0 2.3 2.3
· East Africa's operational result improved in H2 2023 compared to H1
2023 with OLP increasing 12% from USD 93.9m to USD 105.5m, and the number of
branches increasing by 20 to 517. Client deposits decreased 26% in FY 2023 due
to operations in Kenya having to fully refund security deposits of clients as
a requirement for its new operating licence. The region's financial result in
H2 2023 was lower than in H1 2023 with net profit decreasing by 18%.
Tanzania
ASA Tanzania expanded its operations over the last 12 months:
· Number of clients increased from 217k to 248k (up 14% YoY).
· Number of branches increased from 180 to 202 (up 12% YoY).
· OLP increased from TZS 119.5bn (USD 51.2m) to TZS 162.5bn (USD 64.7m)
(up 36% YoY in TZS).
· Gross OLP/Client increased from TZS 553.1k (USD 237) to TZS 660.4k
(USD 263) (up 19% YoY in TZS).
· PAR>30 increased from 0.4% to 0.9%.
Kenya
ASA Kenya expanded its operations over the 12-month period:
· Number of clients increased from 141k to 205k (up 45% YoY).
· Number of branches increased from 124 to 132 (up 6% YoY).
· OLP increased from KES 2.1bn (USD 16.9m) to KES 3.3bn (USD 20.9m) (up
57% YoY in KES).
· Gross OLP/Client increased from KES 14.9K (USD 120) to KES 15.9k (USD
101) (up 7% YoY in KES).
· PAR>30 improved from 0.8% to 0.3%.
Uganda
ASA Uganda saw an improvement in operations over the last 12 months:
· Number of clients increased from 107k to 121k (up 13% YoY).
· Number of branches increased from 110 to 120 (up 9% YoY).
· OLP increased from UGX 43.0bn (USD 11.6m) to UGX 49.3bn (USD 13.0m)
(up 15% YoY in UGX).
· Gross OLP/Client increased from UGX 404.9k (USD 109) to UGX 405.5k
(USD 107) (up 0.1% YoY in UGX).
· PAR>30 slightly improved from 0.9% to 0.8%.
Rwanda
ASA Rwanda saw a modest improvement in operations over the last 12 months:
· Number of clients reduced from 21.2k to 20.8k (down 2% YoY).
· Number of branches increased from 30 to 32 (up 7% YoY).
· OLP increased from RWF 4.6bn (USD 4.3m) to RWF 5.1bn (USD 4.0m) (up
11% YoY in RWF).
· Gross OLP/Client increased from RWF 220.5k (USD 207) to RWF 253.0k
(USD 201) (up 15% YoY in RWF).
· PAR>30 increased from 4.6% to 6.8%.
Zambia
ASA Zambia expanded its operations and improved its portfolio quality:
· Number of clients increased from 21k to 25k (up 19% YoY).
· Number of branches increased from 27 to 31 (up 15% YoY).
· OLP increased from ZMW 51.7m (USD 2.9m) to ZMW 73.8m (USD 2.9m) (up
43% YoY in ZMW).
· Gross OLP/Client increased from ZMW 2.5k (USD 139) to ZMW 3.1k (USD
119) (up 22% YoY in ZMW).
· PAR>30 improved from 5.0% to 2.6%.
Regulatory environment
The Company operates in a wide range of jurisdictions, each with their own
regulatory regimes applicable to microfinance institutions.
Key events
Pakistan
· ASA Pakistan was granted approval for 'Commencement of Microfinance
Banking Business' on 13 November 2023. The mobilisation of deposits was
dependent upon the successful implementation of its Core Banking System (which
migration to Temenos Transact Core Banking System was completed on 25 February
2024).
· The State Bank of Pakistan approved an interim dividend of
approximate USD 900k on 2022 results, which was fully paid in February 2024.
The approval of a second interim dividend declared on FY 2022 results remains
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 fully paid.
Nigeria
· In 2022 and 2023, 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 was approved in March 2024.
Kenya
· ASA Kenya submitted a pro forma application for a Digital Credit
Providers licence ('DCP licence') in October 2023 to ensure it was compliant
with the law.
· Ultimately, the Company would like to obtain a deposit-taking licence
as a microfinance bank instead of a DCP licence that does not allow for
deposits. The Company was in discussions with the Central Bank of Kenya
regarding the application for such a microfinance bank licence.
Tanzania
· The Company was also in discussions with the Bank of Tanzania
regarding the application of a microfinance bank licence.
Regulatory capital
Many of the Group's operating subsidiaries are regulated and subject to
minimum regulatory capital requirements. As of 31 December 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 were 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 H2 2023:
(UNAUDITED) 31 Dec 23 30 Jun 23 31 Dec 22
(Amounts in USD millions)
Local Deposits 79.1 72.7 84.1
Loans from Financial Institutions 214.7 204.9 216.6
Microfinance Loan Funds 28.2 22.9 21.5
Loans from Dev. Banks and Foundations 25.6 17.5 19.4
Equity 76.6 69.2 89.7
Total Funding 424.2 387.2 431.3
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 the majority of the loans.
The unrestricted cash and cash equivalents remained at a healthy level of USD
48 million as of 31 December 2023 (30 June 2023: USD 45 million and 31
December 2022: USD 55 million). The Group managed to raise USD 179 million in
new debt funding in 2023, where USD 104 million was raised in H2 2023 and USD
75 million was raised in H1 2023. Funding costs across the Group stabilised in
2023 compared to 2022 as benchmark rate increases in some markets were
tempered by improved pricing on funding from local sources. Also, the Group
has a strong funding pipeline of USD 171 million for fresh loans, with over
93% having agreed terms and can be accessed in the short to medium term as of
31 March 2024.
Net debt at the Holding level reduced to USD 61 million as at 31 December 2023
from USD 70 million as at 31 December 2022. The Group maintains the strategy
of reducing the proportion of debt funding sourced at the Holding level over
time. This will be achieved by (i) our operating subsidiaries increasing more
funding from local and international lenders, and (ii) increasing remittances
from our subsidiaries to the Holdings which have recently improved, as well as
accelerating our deposit taking capabilities over time.
As per 1 April 2024, the Holdings acquired the outstanding principal debt and
interest receivable totalling USD 4.4 million held by ASA Myanmar from various
international debt funds managed by Symbiotics and Frankfurt School Financial
Services.
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 the past three years and during 2023, a number of loan covenants were
breached across the Group, particularly related to the portfolio quality in
India. As of 31 December 2023, the balance for credit lines with breached
covenants amounts to USD 23 million and subsequently waivers have been
received for all these breaches.
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) caused primarily by the overdue loans in India.
However, these waivers are not for the full going concern assessment period up
to May 2025. The impact of these potential covenant breaches was further
assessed in the evaluation of the Group's going concern as disclosed in note
2.1.1 to the consolidated financial statements. 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 evidenced by the
last four years where the Group has been continuously able to raise new funds
and receive waivers for such 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 fewer US Dollar earnings, and (ii) local currency
capital of any of the operating subsidiaries will translate into a lower US
Dollar capital.
Countries 31 Dec 23 30 Jun 23 31 Dec 22 Δ 31 Dec 2022 Δ 31 Dec 2023
- 31 Dec 2023
- 30 Jun 2023
Pakistan (PKR) 279.7 287.1 226.4 (24%) 3%
India (INR) 83.2 82.1 82.7 (1%) (1%)
Sri Lanka (LKR) 323.9 308.2 366.3 12% (5%)
The Philippines (PHP) 55.4 55.3 55.7 1% (0%)
Myanmar (MMK) 2,101.2 2,102.2 2,100.0 (0.1%) 0%
Ghana (GHS) 12.0 11.4 10.2 (17%) (5%)
Nigeria (NGN) 896.6 761.1 448.1 (100%) (18%)
Sierra Leone (SLE) 22.9 18.9 18.9 (21%) (21%)
Tanzania (TZS) 2,512.4 2,416.1 2,332.5 (8%) (4%)
Kenya (KES) 157.0 140.4 123.5 (27%) (12%)
Uganda (UGX) 3,780.2 3,673.8 3,717.6 (2%) (3%)
Rwanda (RWF) 1,259.5 1,172.0 1,067.0 (18%) (7%)
Zambia (ZMW) 25.8 17.6 18.1 (43%) (47%)
During FY 2023, the local currencies PKR (-24%), NGN (-100%), KES (-27%), and
ZMW (-43%) particularly depreciated 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 FY 2023 amounted to USD 24.1 million of which USD 7.7 million
related to the depreciation of the PKR, USD 15.1 million related to the
depreciation of the NGN, USD 1.5 million related to the depreciation of the
KES, and USD 0.7 million related to the depreciation of the ZMW. The local
currency GHS (-17%) depreciated against the USD, however, this did not
contribute to an increase in foreign exchange translation losses due to the
application of hyperinflation accounting to Ghana.
The local currencies PKR, GHS, NGN and KES depreciated against the USD at a
slower pace in H2 2023 compared to H1 2023, and the local currencies ZMW
started to depreciate against the USD in H2 2023.
Accounting for hyperinflation
The IFRS standard IAS 29 "Financial Reporting in Hyperinflationary Economies"
('IAS 29') requires the Group to adjust the 2023 financial information of
operating entities, which have a three-year cumulative inflation exceeding
100% in the period 2021-2023, so that all items are presented to reflect the
current purchasing power at the reporting date. In 2023, the three-year
cumulative inflation in Ghana and Sierra Leone exceeded 100%.
Based on this, hyperinflation accounting is applied for the first time in the
consolidated financial statements of the Group. The application of IAS 29
results in non-cash adjustments in the presentation of the financial
information of the Group. Net profit decreased by USD 5.4 million, however,
total comprehensive income remained similar and total equity increased by USD
0.6 million after the IAS 29 adjustments. Further details are provided in note
2.5.8 to the consolidated financial statements.
Based on current preliminary inflation projections, it is expected that the
accounting for hyperinflation will be applicable for Ghana and Sierra Leone in
2024. Pakistan and Nigeria are currently on the watchlist.
High effective tax rate
The Group did not recognise deferred tax assets amounting to USD 5.6 million,
which related to past losses for mainly India, as it failed to meet the future
profitability threshold required under IFRS. The Group will be able to
recognise these deferred tax assets provided these entities turn profitable
again. Additionally, prior year tax adjustments of USD 3.0 million primarily
in Pakistan (due to retroactive application of super tax), India, Tanzania and
Nigeria were taken in 2023. These resulted in a substantial increase in our
tax expenses and effective tax rate for the year. Further details are provided
in note 11 to the consolidated financial statements.
Forward-looking statement and disclaimers
This announcement does not constitute or form part of any offer or invitation
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distributed should inform themselves about and observe such restriction.
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