Spike in Letshego Nam’s impairment charge

05 March 2021 | Business

The group remains well placed to grow revenues through ongoing innovation and pursuit of its inclusive finance strategy. – Letshego Holdings Namibia

Jo-Maré Duddy – Letshego Holdings Namibia’s (LHN) impairment charge for the year ended 31 December 2020 spiked by about 239% on an annual basis, contributing to the locally-listed group reporting a drop of nearly N$60 million in profit compared to its previous book-year.

The group yesterday released its unaudited annual results on the Namibian Stock Exchange (NSX), which showed a profit of about N$341.4 million, down nearly 15% year-on-year.

Its impairment charge rose from about N$9.2 million in 2019 to nearly N$31.3 million in 2020. An impairment charge usually reflects a fall in value or worse-than-expected performance of the asset.

Also impacting profit was a restatement in the annual results of 2018 and 2019 to rectify a loan to preference share conversion transaction done in March 2018.

The reclassification of the loan from the parent company, Botswana-based Letshego Holdings Limited, as inter-company funding and not preference share funding resulted in interest expense increasing in the 2019 and 2018 financial years. This is, however, more tax efficient and beneficial to all shareholders, Cirrus Securities commented yesterday.

IMPAIRMENTS

Cirrus said due to LHN’s deduction-at-source business model, the group’s impairments have historically been kept to a minimum. The majority of the group’s clients are government employees, whose monthly debt to LHN is deducted from their salaries.

Cirrus believes the increase in impairments is due to LHN not charging insurance income since late in its 2019 financial year until April 2020.

“With the increase in impairments, the credit loss ratio increased to 94 basis points [bps] from 34 bps on 31 December 2019 and 35 bps on 30 June 2020,” the analysts said.

INCOME, ADVANCES

By not charging insurance income for a large part of its 2020 financial year, non-interest revenue decreased substantially, Cirrus said.

“In the 2019 financial year, non-interest revenue (fee and other operating income) made up 27.1% of total operating income at N$232.1 million. Over the last twelve months, this decreased to N$174.6 million resulted in non-interest revenue only contributing 22% to total operating income. This has, however, increased from the interim results,” they said.

LHN gained market share in its past financial year, Cirrus pointed out.

“LHN managed to increase gross advances to customers by 23.4% to N$3.6 billion. This is in line with management’s strategy and should be complimented,” they said.

However, Cirrus added: “Given that outstanding advances on 30 June 2020 totalled N$3.1 billion, the N$480 million worth of new advances will have been extended at much lower interest rates. The decreased interest income has, however, been countered by the increased advances and resulted in interest income remaining flat.”

Compared to its 2019 financial year, LHN’s deposits increased substantially – from around N$43.4 million to nearly N$187.9 million.

“We believe this is due to the lower interest rate environment and Letshego Bank offering more attractive interest rates. By implication LHN is paying up, which would hamper the net interest margin going forward,” Cirrus said.

‘MARKET CONFIDENCE’

“Although the local economic conditions and coronavirus (Covid-19) have affected market confidence and consumer spending patterns, the group remains well placed to grow revenues through ongoing innovation and pursuit of its inclusive finance strategy,” LHN said.

The directors have evaluated the financial impact of Covid-19 on the group and cannot identify a going concern risk within the medium term, it added.

LHN did not declare a dividend with the release of yesterday’s unaudited financials. It said a notice pertaining to dividends will be made at the time of the released of the audited financial statements for the year ended 31 December 2020, but made no mention of a date.

LHN is listed on the Local Index of the NSX. It ended Wednesday at N$2.20 per share. The share price has fallen by nearly 17.3% since the end of last year.

Similar News

 

COMPANY NEWS IN BRIEF

9 hours ago | Business

Deliveroo orders more than doubled in Q1Food delivery company Deliveroo said its orders more than doubled in the quarter to end-March in its first trading...

Bank Windhoek awards vehicle sales people

9 hours ago | Business

STAFF REPORTERBank Windhoek awarded salespeople and dealerships in the motor vehicle industry at its first Northern Selekt Sales Awards ceremony hosted in Oshakati last week.Ongwediva...

Zimbabwe seeks new investors for ZISCO

1 day - 15 April 2021 | Business

Zimbabwe's state-controlled iron and steel company ZISCO has invited new investors to help revive operations at the company that has been the target of interest...

COMPANY NEWS IN BRIEF

1 day - 15 April 2021 | Business

Tesco reports 2 billion pounds profit Tesco, Britain's biggest retailer beat its guidance by reporting total adjusted retail operating profit of 1.99 billion pounds (US$2.74...

Namibia’s new vehicle sales speeding

2 days ago - 14 April 2021 | Business

PHILLEPUS UUSIKUFor the first quarter of 2021, Namibia’s new vehicles sales increase by 12.3% when compared the first quarter of 2020 amounting to 2494 units.Similarly,...

PwC Business School launches new programme

2 days ago - 14 April 2021 | Business

Carlin Schumann – As part of PwC’s efforts to expand its Business School initiatives, we’ve joined forces with Unmatched Potential (Pty) Ltd and the founder...

Bourse Briefs

2 days ago - 14 April 2021 | Business

FirstRand Namibia (FNB)FNB reported a profit of about N$564.9 million for the six months ended 31 December 2020, a drop of 9.4% year-on-year (y/y). Operating...

Bull of a month for Capricorn

2 days ago - 14 April 2021 | Business

Jo-Maré Duddy – A jump of nearly 31% in its share price in March catapulted Capricorn Group (CGP) to the biggest company on the Local...

AMTA to create capacity for //Kharas farmers

2 days ago - 14 April 2021 | Business

Agro-Marketing and Trade Agency (AMTA) Managing Director, Lucas Lungameni has urged farmers in the //Kharas Region to register with the Ministry of Agriculture, Water and...

COMPANY NEWS IN BRIEF

2 days ago - 14 April 2021 | Business

Discovery signs licensing deal with Sanofi Drug developer C4X Discovery said on Monday it has signed an exclusive licensing deal worth up to 414 million...

Latest News

Trans-Zambezi railway extension studied

9 hours ago | Economics

Government has commenced with a feasibility study to help determine the viability of developing and extending the Trans-Zambezi railway to link Namibia with other member...

‘I won’t humiliate ministers’

9 hours ago | Government

STAFF REPORTERWINDHOEKPresident Hage Geingob yesterday said he will not humiliate ministers accused of corruption by firing them, as questions mount against his administration’s preference to...

DJ Omzala falls on hard...

9 hours ago | People

TUYEIMO HAIDULAOSHAKATI Former radio personality DJ Omzala, who graced the NBC airwaves in the 1990s, is a broken man.Off the airwaves, divorced and having had...

High-level panel members land plum...

9 hours ago | Government

OGONE TLHAGEWINDHOEKSeveral of the individuals who served on the High-Level Panel on the Namibian Economy (HLPNE) have been landed cushy government jobs since playing advisor...

Jobless Kenyans tackle illegal logging

9 hours ago | Economics

Kagondu Njagi - Standing under a thick green canopy in coastal Kenya's Shim Hills, Mohamed Mwaramuno squints at his fellow forest ranger's smartphone.With about a...

Another uninspiring SONA

9 hours ago | Opinion

President Hage Geingob’s State of the Nation Address (Sona) yesterday was as empty as the state coffers. Off the script, he offered better soundbites to...

Rehoboth Basters fight over Kaptein

9 hours ago | Cultural

JEMIMA BEUKESREHOBOTHA group of disgruntled Rehoboth Baster Community members yesterday protested the "irregular" election process of the Rehoboth Baster Kaptein slated for 24 April.The group,...

SSA to see world's slowest...

9 hours ago | Economics

JOHANNESBURG - Sub-Saharan Africa is set to record the slowest economic growth of any world region this year as the continent struggles to bounce back...

Plots handed over to residents

9 hours ago | Economics

OTJIWARONGO – Eighty residents of Otjiwarongo in the Otjozondjupa region on Wednesday received plots where they are expected to build houses through the Build Together...

Load More