The Botswana Stock Exchange (BSE) listed group, which operates in 11 African countries, said its business remained resilient in the face of continued pressure from challenging macro-economic conditions across sub-Saharan Africa, mirroring global challenges that persisted from 2022 into the first half of this year. Policy tightening continued in the first six months of the year, with monetary policy rates either increasing or remaining flat relative to start of the year.
Interest income from loans increased by 6 percent while interest income from mobile lending grew by 42 percent year on year, although the increasing interest rate environment dampened net interest income, which dropped by 3 percent to 891 million in the six months period. Performance was however buoyed by insurance income that grew 33 percent year on year, supporting the group’s non-funded income performance.
Though total costs decreased to P613 million from P644 million, profit before tax in the six months period fell by 7 percent to P417 million. Profit after tax reduced by 12 percent to P219 million.
“Our turnaround strategy which we announced at the beginning of the year is putting the business on a solid footing in East and West Africa markets and the resilience is evident,” said Aobakwe Aupa Monyatsi, the group’s chief executive officer.
He said the group’s transformation Strategy is well underway, with a strong balance sheet driven by increase in lending and well diversified funding. Letshego reduced its cost base through improved efficiencies, targeted cost rationalisation initiatives and implementation of the business’ automation and tech focused ‘target operating model’, according to the company.
The first half of the year also saw encouraging early indications, with significant progress was made within the turnaround market cluster of markets, made up of Kenya, Tanzania, Rwanda, Nigeria and Ghana, during the first half of the year, despite volatilities in exchange rates in some of these markets. The turnaround market’s overall cost to income ratio, recorded a significant improvement from 78 percent to 69 percent, down 14 percent year on year.
Fit for Growth markets, comprising of Botswana, Namibia and Mozambique, continued to be the major contributor of profit to the group. Insurance income grew primarily in Namibia and Mozambique, with improved performance in the newer Botswana insurance income.
Letshego is diversifying its product offering to include multiproduct retail and instant loans, whilst deduction at source (DAS) remains a core and solid foundation for the business.
“Within our focused product realignment initiatives, we adjusted our core Micro and Small Entrepreneur (MSE) proposition to deliver improved risk adjusted returns while accelerating deduction at source penetration,” said Monyatsi.
In light of the tightening monetary policy cycle, the group’s treasury strategy was followed to secure fixed rate funding to curb the adverse impact on cost of funds. The group focused on local currency funding with subsidiaries tasked to borrow in the local market, to reduce translation risk. The group’s bond programmes in Botswana, Namibia and Ghana, which constituted 18 percent of funding, assisted with funding diversification and the thrust towards local currency funding.
In Botswana, the group recently listed 29 Bonds and 20 commercial papers, totaling P850.1 million, part of Letshego’s P2.5 billion medium term note launched in November 2012 on the BSE.
Letshego’s latest debt instruments and restructuring came after the company’s profit before tax fell by 30 percent to P801 million for the financial year ended December 2022, dragged down by high interest rates that led to double digit growth in cost of funding.