2020 Year End Trading Update

RNS Number : 4144Q

ASA International Group PLC

26 February 2021

 

ASA International Group plc announces 2020 Year End Trading Update

Amsterdam, 26 February 2021 - ASA International Group plc, ("ASA International", the "Company" or the "Group"), one of the world's largest international microfinance institutions, today releases its trading update for the twelve-month period from 1 January 2020 to 31 December 2020.

Key highlights:  

	FY 2020 (UNAUDITED)	H1 2020 (UNAUDITED)	FY 2019 (AUDITED)	% Change FY 2019 - FY 2020	% Change FY 2019 - FY 2020 (constant currency)	% Change H1 2020 - FY 2020
Number of clients (mn)	2.4	2.3	2.5	-6%		2%
Number of branches	1,961	1,956	1,895	3%		0%
OLP (1) (USD mn)	418.5	387.7	467.4	-10%	-9%	8%
Gross OLP	446.5	411.7	471.3	-5%	-4%	8%
Average OLP per client (USD)	188	177	186	1%	-3%	6%
PAR > 30 days (2)	13.1%	3.5%	1.5%

⁽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 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.

· 2020 operating results are expected to be below the Company's expectations given the challenging operating environment with collection efficiency recovering at a slower pace than anticipated in India and, as result, higher than expected credit losses with PAR>30 in India having increased to 31.7% by year-end 2020.

· The Philippines also struggled to increase collection efficiency to satisfactory levels following the initial two months lockdown and subsequent moratoriums granted to clients, which resulted in substantial modification losses and relatively high expected credit losses in 2020.

· Despite ongoing COVID-19 related disruption since the end of the lockdowns, the Group's other operating subsidiaries, where traditionally more than two-thirds of our customary operating profits are generated, generally have been more successful in increasing collection efficiency into the high eighties or nineties. As a result, the Group's operating subsidiaries, excluding India, collectively have been able to maintain PAR>30 at 5.4%.

· With the exception of Ghana, all major operating countries reported lower operating results in 2020 than in 2019.

· Despite the deduction of modification and expected credit losses, OLP recovered to USD 419m from a low of USD 388m as at 30 June 2020, compared with USD 467m for FY 2019. Gross OLP reduced by 5% from USD 471m at the end of 2019 to USD 447m at the end of 2020.

· By year-end 2020, modification losses on interest income and receivables amounted to approximately USD 3.7m, which was substantially less than the USD 13.3m as at 30 June 2020. As fewer moratoriums are granted to clients, modification losses are expected to reverse and, assuming no further long lockdowns or moratoriums are imposed or granted, to further reduce.

· Unrestricted cash and cash equivalents remained high at approximately USD 101m at year-end 2020 with the majority of the Company's USD 225m pipeline of future wholesale loans supported by (agreed) term sheets and/or draft loan documentation.

Dirk Brouwer, Chief Executive Officer of ASA International Group plc, commented:

"2020 has been one of the most challenging years for our company with lockdowns, curfews and many other measures taken by Governments to reduce the spread of COVID-19. We have been fortunate that up until now none of our staff and few of our clients' health have been badly affected by COVID-19. Nevertheless, it has been difficult for many of our clients to run their businesses and for our staff to service them.

In India and the Philippines, two of our larger markets in terms of number of clients, COVID-19 has ultimately led to our clients struggling to meet their financial obligations to our Company. Besides the ongoing disruption in the market places where many of our clients usually trade, political activism in the State of Assam (India) against MFIs with the threat of local government intervention as well as the long-term impact of cyclone Amphan, adversely affected the repayment discipline and capacity of many of our clients in this region. The situation in the Philippines has been very challenging, although in January 2021 we saw improvement in the collection of loan instalments, which has given us confidence that the situation will gradually normalise during the course of this year.

While the general expectation is that the situation will improve over time, we nevertheless, consider it appropriate to substantially increase the provision for expected credit losses from USD 10.6m last June to approximately USD 24.4m now. India accounted for USD 10.4m and the Philippines for USD 2.9m of the aggregate USD 13.8m increase in the provision for expected credit losses in the second half of 2020. The consequence of this is that the USD 10m of expected net income of the Group for 2020 will now be reduced to almost zero. This is disappointing, but in our opinion appropriate in view of the current situation on the ground.

We expect that the operating situation in many countries will remain challenging in 2021. Nevertheless, a substantial improvement of the operating environment with less disruption caused by COVID-19 should lead to better operational and financial performance during the course of 2021, albeit still below levels of past performance in prior years. "

Notes:

Please note that the financial information provided in this Trading Update is still subject to audit and therefore subject to change.

Regional performance:

South Asia

	FY 2020 (UNAUDITED)	H1 2020 (UNAUDITED)	FY 2019 (AUDITED)	% Change FY 2019 - FY 2020	% Change FY 2019 - FY 2020 (constant currency)	% Change H1 2020 - FY 2020
Number of clients (mn)	1.2	1.2	1.2	-4%		0%
Number of branches	756	766	751	1%		-1%
OLP (1) (USD mn)	220.6	225.5	254.4	-13%	-11%	-2%
Gross OLP	240.1	234.1	256.5	-6%	-4%	3%
Average OLP per client (USD)	203	197	208	-3%	-2%	3%

· ASAI India faced a number of challenges with its collection efficiency being below optimal levels, caused by the threat of government intervention and political activism in Assam, which may lead to restrictions on some of the customary operating procedures of MFIs, like collecting loan instalments at the client's doorstep and even suggestions by some parties of possible loan waivers. Collections in districts of West Bengal which are neighbouring Assam, including Jalpaiguri and Cooch Behar, have also been affected by the situation in Assam. Collections also remained relatively weak in the southern districts of West Bengal, including the Midnapore and the 24 Parganas, which were most severely affected by cyclone Amphan that hit West Bengal in May 2020. With no further moratoriums being offered to clients, PAR>30 increased from 1.5% at year-end 2019 to 31.7% by year-end 2020 in India.

· ASAI India's number of clients was down 3% from 732K in 2019 to 714K by year-end 2020 with its portfolio (own and BC) decreasing from USD 182.0m year-end 2019 to USD 149.7m by year-end 2020. BC portfolio in India decreased from USD 55.9m to USD 47.9mn, down 14% (down 10% on constant currency basis). The reduction in portfolio size was partially caused by the increase of the provision for expected credit losses from USD 1.1m at year-end 2019 to about USD 14.5m at year-end 2020.

· ASA Pakistan weathered the COVID-19 pandemic relatively well with the number of clients down by 23K to 416K, down 5%, and number of branches up by 11 to 292. OLP/Client increased from USD 143 to USD 155, up by 8% (up 12% on a constant currency basis). PAR>30 is up from 2% year-end 2019 to 4% year-end 2020. ASA Pakistan expects to complete its transformation into a microfinance bank before the end of June 2021.

· Lak Jaya, our operating subsidiary in Sri Lanka, has seen its number of clients go down by 11% from 63K to 56K with its number of branches down 5 to 66. OLP/Client increased slightly from USD 160 to USD 164. Despite a USD 500K write-off in June 2020 related to the long-term overdue payment of loan instalments caused by the Easter Sunday Bombings and political activism linked to a Government instituted debt relief program, PAR>30 improved from 9.7% to 7.4% by year-end 2020.

South East Asia

	FY 2020 (UNAUDITED)	H1 2020 (UNAUDITED)	FY 2019 (AUDITED)	% Change FY 2019 - FY 2020	% Change FY 2019 - FY 2020 (constant currency)	% Change H1 2020 - FY 2020
Number of clients (mn)	0.4	0.4	0.5	-13%		-5%
Number of branches	415	416	405	2%		0%
OLP (1) (USD mn)	74.7	68.8	84.2	-11%	-18%	9%
Gross OLP	80.8	77.7	84.9	-5%	-12%	4%
Average OLP per client (USD)	189	173	173	9%	-4%	9%

· Pagasa Philippines' collection efficiency suffered due to the lengthy lockdown in the Philippines as well as the subsequent ongoing disruption of our clients' businesses with, amongst others, substantial restrictions of public transport, closed market places, and the closure of communities following increased infection rates. This forced Pagasa to provide many clients with loan extensions and/or successive moratoriums on the payment of loan instalments, which triggered a USD 0.3m modification loss and a USD 4.1m provision for expected credit losses in 2020.

· Pagasa's number of clients was down 12% from 340K in 2019 to 299K by year-end 2020 with its loan portfolio decreasing from USD 52.7m year-end 2019 to USD 45.8m year-end 2020. PAR>30 increased from 1.3% at year-end 2019 to 6.4% at year-end 2020.

· ASA Myanmar performed well with collection efficiency in the mid-nineties soon after the end of the relatively short lockdown in Myanmar. However, the restriction on collections in Yangon and Bago Region with no allowance to accrue interest for the months of November and December 2020, where the majority of ASA Myanmar's branches are based, had a major adverse effect on its operating performance for the year 2020.

· ASA Myanmar's number of clients was down 15% from 152K in 2019 to 129K by year-end 2020 with its loan portfolio decreasing from USD 31.5m year-end 2019 to USD 28.9m year-end 2020. PAR>30 increased from 0.4% at year-end 2019 to 0.5% at year-end 2020.  

West Africa

	FY 2020 (UNAUDITED)	H1 2020 (UNAUDITED)	FY 2019 (AUDITED)	% Change FY 2019 - FY 2020	% Change FY 2019 - FY 2020 (constant currency)	% Change H1 2020 - FY 2020
Number of clients (mn)	0.4	0.4	0.5	-3%		15%
Number of branches	433	431	423	2%		0%
OLP (1) (USD mn)	77.8	56.6	77.2	1%	5%	37%
Gross OLP	79.5	60.2	78.1	2%	6%	32%
Average OLP per client (USD)	178	155	170	5%	9%	15%

· Despite the disruption caused by COVID-19, ASA Savings & Loans Ghana had a good year with client numbers down from 165K to 158K serviced from 129 branches, up 6, but with OLP increasing from USD 41.6m to USD 42.3m, and OLP/Client increasing from USD 253 to USD 269, up 6%. PAR>30 increased from 0.2% in 2019 to 0.4% in 2020.

· ASA Nigeria performed resiliently with client numbers only slightly down from 260K to 253K serviced from 263 branches, with OLP down from USD 32.7m to USD 31.2m, and OLP/Client unchanged at USD 129. PAR>30 increased from 2.7% in 2019 to 5.5% in 2020. ASHA Microfinance Bank successfully completed the acquisition of the Group's Nigerian NGO branches in 2020.

· ASA Sierra Leone increased its number of clients from 34.3k to 36.4k serviced from 41 branches, up 4. OLP increased from USD 2.8m to USD 4.3m and OLP/Client increased from USD 85 to USD 123 PAR>30 improved marginally from 5.1% to 4.5%

East Africa

	FY 2020 (UNAUDITED)	H1 2020 (UNAUDITED)	FY 2019 (AUDITED)	% Change FY 2019 - FY 2020	% Change FY 2019 - FY 2020 (constant currency)	% Change H1 2020 - FY 2020
Number of clients (mn)	0.3	0.3	0.3	-8%		6%
Number of branches	357	343	316	13%		4%
OLP (1) (USD mn)	45.4	36.8	51.7	-12%	-9%	23%
Gross OLP	46.1	39.6	51.9	-11%	-8%	17%
Average OLP per client (USD)	145	131	149	-3%	2%	10%

· ASA Kenya's number of clients went down from 101k to 92k serviced from 100 branches, up 10. OLP decreased from USD 17.7m to USD 12.6m and OLP/Client decreased from USD 175 to USD 142. PAR>30 increased from 1.3% to 22%, once ASA Kenya stopped providing moratoriums to existing clients.

· ASA Uganda's number of clients went down from 101k to 81k serviced from 98 branches, up 10. OLP decreased from 10.4m to USD 8.0m and OLP per client decreased from USD 103 to USD 100. PAR>30 increased from 0.1% to 29.2%, once ASA Uganda stopped providing moratoriums to existing clients.

· ASA Tanzania's number of clients went down from 123k to 121k serviced from 121 branches, up 19. OLP increased from USD 20.5m to USD 21.5m and OLP/Client increased from USD 167 to USD 178. PAR>30 increased from 0.1% to 2.5%.

· ASA Rwanda's number of clients went down from 21k to 19k serviced from 30 branches. OLP decreased from USD 3.0m to USD 2.9m and OLP/Client increased from USD 14 to USD 156. PAR>30 increased from 0.8% to 10.1%.

· ASA Zambia increased it number of clients from 2.1k to 5.4k serviced from 8 branches, up 2. OLP increased from USD 179k to USD 372k and OLP/Client decreased from USD 86 to USD 72. PAR>30 decreased from 31.4% in 2019, due to a fraud case in one of its eight branches that was identified and dealt with, to 5.8%.

Impact of foreign exchange rates

During FY 2020, currency movements of operating currencies in Asia and Africa remained fairly stable against the US dollar with some gains recorded in the Philippines and Myanmar. However, the US dollar strengthened more than expected against currencies in three markets, Kenya, Nigeria and Zambia which reduced the reported OLP and OLP/client figures in USD. Overall, the currency movements resulted in an increase of the FX translation reserve losses by approximately USD 2m.

Funding

Unrestricted cash and cash equivalents remained high at approximately USD 101m at year-end 2020. The Group managed to raise approximately USD 174m in new funding in 2020. At end of 2020, the Company had a funding pipeline of USD 225m future wholesale loans, majority of which are supported by (agreed) term sheets and/or draft loan documentation. 

The Group has managed to secure waivers and/or no-action letters from most Holding level lenders and a majority of the lenders to our operating entities and we are confident that we will succeed in obtaining waivers from our remaining lenders over the next few months.

Outlook

We expect that the operating environment will remain challenging in most of our markets in 2021. While we expect that there will be a certain level of normalization of activities, we also anticipate that there will be more COVID-19 related disruptions in various countries in 2021, along with political uncertainties in some markets such as in Myanmar.

Nevertheless, a substantial improvement of the operating environment with less disruption caused by COVID-19 should lead to better operational and financial performance.

While 2020 will go into the annals of our company as a lost year in terms of growth and profits, we expect the business environment to improve in 2021, continuing on the more positive trends we observed in the second half of 2020, albeit below the level of past performance in prior years.

Notice of Full Year Results

The Company expects to announce its results for the year ended 31 December 2020 in mid-May 2021. The date will be confirmed in due course.

Enquiries:

ASA International Group plc

Investor Relations  [phone]

Véronique Schyns     [e-mail]

 

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