TIDMATMA
RNS Number : 2196O
ATLAS Mara Limited
30 September 2019
30 September 2019
Atlas Mara Limited Interim Results -- Six Months Ended 30 June
2019
Atlas Mara Limited ("Atlas Mara" or the "Company" and, including
its subsidiaries, the "Group"), the sub-Saharan African financial
services group, today releases its reviewed results for the six
months ended 30June 2019.
Key highlights for the period:
-- Adjusted profit after tax of $17.0 million for the six months
ended June 2019 (H1 2018: $13.5 million) with adjusted earnings per
share of $0.10 (H1 2018 $0.08).
-- At 30 June 2019, book value per share was $2.96 (31 December
2018: $3.83) and tangible book value per share was $2.84 per share
(31 December 2018: $3.00), primarily impacted by IFRS 5 adjustments
as detailed below.
-- On 6 February 2019, the Group announced that the Board was
undertaking a review of strategic options to determine the key
strategic priorities and actions for 2019 and beyond to drive
shareholder value. The Company has since made substantial progress
on the key strategic priorities identified, as follows:
-- The Group now holds a 49.9% combined share of Union Bank of
Nigeria ("UBN") compared to 49.0% at year-end 2018 and is
positioned to obtain the necessary additional shares in UBN to
reach a majority position, pending regulatory engagements. This
reflects strong progress on our stated strategic goal of obtaining
a majority shareholding in and consolidating UBN. On a pro forma
basis (as at 30 June 2019), consolidation of UBN would have
resulted in total assets of $7.2 billion, loans and advances of
$2.4 billion and $3.4 billion in deposits. Book value per share
would have increased to $3.07 and tangible book value would have
decreased marginally to $2.82 per share.
-- Following the announcement of the proposed transaction with
Equity Group Holdings ("EGH") on 30 April 2019, the Group has made
substantial progress to finalise definitive agreements for the
share exchange strategic transaction involving Atlas Mara's banks
in Rwanda, Mozambique, Tanzania and Zambia. Confirmatory due
diligence has been substantially concluded and the Group expects to
announce the final terms of the transaction in due course.
-- Following completion of the strategic transaction with EGH,
the Group will be reoriented as a streamlined holding company
without significant centralised cost structures. Accordingly, the
Group's holding companies will continue to be reoriented to reduce
costs and focus on targeted avenues for value creation in the
operating banks.
-- UBN has shown strong progress and is well positioned to
create value for its shareholders. UBN continues to deliver
improving results, as evidenced by first half return on equity at
10.3% (FY 2018: 6.4%), solid loan book expansion, and growth across
all digital channels, with good business momentum continuing in the
second half of the year.
-- UBN contributed $18.7 million (H1 2018: $17.4 million) of net
income to Atlas Mara's H1 2019 results. A notable improvement has
been the positive reduction in the reported NPL ratio of the bank
to 7.3% at 30 June 2019 from 8.1% at 31 December 2018 due to the
ongoing efforts on loan recoveries and credit risk management.
-- The Group's franchises in Zimbabwe and Botswana remain
resilient. Management teams are focused on strategies to grow the
banks and enhance shareholder value. With our strategic review well
underway we will continue to explore ways to grow value while
mitigating the macro economic challenges the banking sector faces
on the ground in Zimbabwe.
Financial highlights during the period
-- On an adjusted profit basis, which excludes the impact of the
IFRS 5 remeasurement loss explained below and other transaction and
restructuring related gains or losses, profit after tax for the
period was $17 million, an increase of 25.9% year-on-year (H1 2018:
$13.5 million).
-- As a result of the announcement of the strategic transaction
with EGH, IFRS 5 requires the Group to reclassify the four
subsidiaries included in the transaction as discontinued operations
or non-current assets held for sale, which triggered the
remeasurement of these assets to the lower of cost or fair value
less cost to sell, resulting in a loss of $125.6 million. This
remeasurement is required by IFRS 5 even though completion of the
transaction has yet to occur. Primarily as a result of this
remeasurement, the Group reported a net loss after tax for the
first half of 2019 of $126.4 million compared to $28.6 million
profit for the prior year period. The write down is primarily
related to goodwill and other intangible assets allocated to the
four subsidiaries.
-- Other highlights from continuing operations (Botswana and Zimbabwe):
-- Total expenses attributable to continuing operations declined
by 15.9% demonstrating our focus on reducing costs and establishing
a more efficient structure.
-- Non--interest income (NIR) increased by 36.0% demonstrating
continued strong revenues from our Markets and Treasury
business.
-- Total loans and advances were $604.6 million at 30 June 2019,
a decrease of 17.8% from $735.9 million at 30 June 2018. This
decline is primarily due to the currency devaluation in
Zimbabwe.
-- Non-performing loans (NPLs) decreased to 9.6%, illustrating
the improving credit quality of the loan book for these
operations.
-- Deposits were $684.0 million, a decrease of 31.3% from $996.5
million also as a result of the currency devaluation in
Zimbabwe.
-- UBN's financial performance in H1 2019 improved across
several key metrics compared to both the comparable period and FY
2018. Return on Equity was 10.3% for the first six months of 2019,
supported by profit after tax growth and a substantial decline in
NPLs.
-- Equity attributable to shareholders as at June 2019 was
$501.0 million (December 2018: $646.8 million), reflecting the net
impact of the loss associated with IFRS 5 remeasurement of assets
held for sale, and the negative FX translation impact from
converting our investments from local currency into US dollars as
reporting currency over H1 2019, which includes the significant
devaluation of the Zimbabwe dollar since December 2018.
-- Reflecting the above impacts, at 30 June 2019 our book value
per share was $2.96 (31 December 2018: $3.83) and our tangible book
value per share was $2.84 (31 December 2018: $ 3.00).
Key operational highlights during the period for continuing
operations
-- UBN:
-- Subsequent to period end, signed agreements for a $200
million ten-year senior debt facility from the Overseas Private
Investment Corporation ("OPIC"), the development finance
institution of the US government. This landmark financing will
accelerate a number of UBN's key growth customer segments,
including SMEs, women's banking, and its digital efforts.
-- Customer count increased by c. 400 thousand to 4.9 million customers.
-- Continued adoption of alternative service channels, with
mobile banking customers growing to 1.7 million vs. 1.4 million as
at December 2018 and online banking customers 616k (vs. 452k in
December 2018), illustrating improved scalability and cost
optimisation potential.
-- Risk management, a key focus among the bank's core
competencies, continues to improve (evidenced by NPL ratio
decreasing substantially from 8.1% at December 2018 to 7.3% at the
end of the current period, and oil and gas sector loan book
concentration decreasing from 38% to 34% since December 2018).
-- Management's share capital reconstruction exercise has
concluded, putting the bank in a substantially improved position to
pay shareholder dividends in the near-term
(Capital Adequacy Ratio of 19.4% versus minimum regulatory
requirement of 15%).
Botswana:
-- Opened four new Sales and Service Centres to double footprint
outside Gaborone. Performance better than expected.
-- Hired a new, experienced leadership in Corporate &
Investment Banking and in Operations to drive growth in Corporate
& GMT divisions and to support the Bank's transformation
agenda.
-- Completed and launched new credit card product.
-- Enhanced and reengineered legacy processes for improved
efficiencies and reducing inherent operational risk.
-- Signed five new lending schemes as part of the push to diversify the loan book.
-- Launched state-of the art corporate banking platform
BancOnline, with additional functionality which brings the bank's
transactional banking at par with the most competitive in the
market.
-- Challenging conditions For Markets and Treasury in first quarter affected results.
Zimbabwe:
-- Appointed a new CEO, Dr. Lance Mambondiani, with effect from
July 1, following retirement of the prior CEO Joe Sibanda. Dr.
Mambondiani, an experienced banker in the region, joins the bank
with a successful track record in pioneering fintech solutions in
Zimbabwe.
-- Closed a US$15 million trade and commodity financing
transaction with one of the biggest agri-processors, which will
serve as a precedent for similar deals in the near term.
-- Despite unprecedented economic circumstances, our Zimbabwe
Markets and Treasury team continues to deliver strong revenues,
demonstrated by an 88.4% increase in non-interest income on a US
dollar basis, compared to H1 2018.
-- Total bank assets doubled in the first half of 2019 driven by
changes in functional currency and the revaluation of foreign
denominated assets. Capital adequacy ratio increased to 57.6% as at
30 June 2019 from 35.1% at 31 December 2018,as a result of organic
capital generation.
-- We note that the conditions in Zimbabwe have continued to
deteriorate over the course of the year with the country entering a
period of hyperinflation. Management is focusing on value
preservation strategies in the second half of the year.
Strategic Transaction
On 30 April 2019, the Company announced that it had signed term
sheets with EGH for the exchange of certain banking assets of the
Company in four countries for ordinary shares in EGH. The
transaction contemplates that EGH will acquire, for shares in EGH,
the Company's 62% shareholding in Banque Populaire du Rwanda (BPR)
and, via the Company's subsidiary ABC Holdings Limited, the
Company's indirect interests in African Banking Corporation Zambia
(BancABC Zambia), African Banking Corporation Tanzania (BancABC
Tanzania), and African Banking Corporation Mozambique (BancABC
Mozambique). The Company and EGH have made substantial progress and
continue to anticipate mergers, subject to regulatory approval, of
their respective banks within each of Rwanda and Tanzania. Due
diligence has been substantially completed and the parties are now
in the process of finalising definitive legal agreements. The
transaction also remains subject to final board approvals,
regulatory approvals and other final conditions customary for
transactions of this nature.
H1 Results Review -- Investor Conference Call
Atlas Mara's senior management will today be holding a
conference call for investors at 12:30pm EDT / 5:30pm BST.
A presentation will be available in the Investor Relations
section of the Company's website, http://www.atlasmara.com.
Dial--in details are as follows:
United States: +1 (631) 913 1422
United Kingdom: +44 3333000804
Participant PIN Code: 80494960#
Contacts
Investors
Kojo Dufu, +1 212 883 4330
Media
Anthony Silverman, +44 (0)7818 036 579
Atlas Mara Limited
Consolidated Summary Statement of Comprehensive Income
USD'million Six months ended 30 June
Reviewed Reviewed CC Var
2019 2018 %
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
Net interest income 8.8 35.7 44.5 22.2 46.0 68.3 (19.0%)
Non-interest income 29.7 21.3 51.0 21.8 22.1 43.9 46.4%
------------ ------------- -------- ------------ ------------- -------- --------
Total income 38.5 57.0 95.5 44.1 68.1 112.2 (6.4%)
Credit impairment (0.7) (2.0) (2.7) 1.4 (5.6) (4.3) 46.6%
-----------------------------
Operating income 37.8 55.0 92.8 45.5 62.5 108.0 9.5%)
Operating expenses (39.5) (63.6) (103.1) (47.0) (61.5) (108.5) (9.5%)
----------------------------- ------------ ------------- -------- ------------ ------------- -------- --------
Net operating (loss)/income (1.8) (8.5) (10.3) (1.5) 1.0 (0.5) (9.2%)
Income from associates 18.7 - 18.7 36.6 - 36.6 (49.0%)
----------------------------- ------------ ------------- -------- ------------ ------------- -------- --------
Profit/(loss) before
tax 16.9 (8.5) 8.4 35.1 1.0 36.1 (69.2%)
Taxation (7.4) (1.0) (8.4) (5.4) (1.5) (6.9) (95.9%)
Profit/(loss) after
tax 9.5 (9.5) 0.0 29.7 (0.5) 29.2 (99.9%)
Loss on remeasurement - (125.6) (125.6) - - - 0.0%
----------------------------- ------------ ------------- -------- ------------ ------------- -------- --------
Profit/(loss) for
the period 9.5 (135.1) (125.6) 29.7 (0.5) 29.2 (>100%)
Minority interest (0.6) (0.3) (0.9) 0.1 (0.7) (0.6) 60.5%
----------------------------- ------------ ------------- -------- ------------ ------------- -------- --------
Profit/(loss) attributable
to equity holders 8.9 (135.3) (126.4) 29.8 (1.2) 28.6 (>100%)
----------------------------- ------------ ------------- -------- ------------ ------------- -------- --------
Net interest margin
(earning assets) 10.5% 6.3%
Net interest margin
(total assets) 3.6% 4.4%
Credit loss ratio 0.5% 0.7%
Cost to income
ratio 108.0% 96.7%
Return on assets (5.1%) 1.8%
Return on equity (25.4%) 7.6%
----------------------------- ------------ ------------- -------- ------------ ------------- -------- --------
Atlas Mara Limited
Consolidated Summary Statement of Financial Position
USD million Period ended 30 June
2019
Reviewed Audited
Q1 2019 H1 2019 FY 2018 CC Var
%
404.3 Cash and short-term funds 124.6 382.0 (64.8%)
Financial assets held at fair value
29.1 through profit or loss 23.9 24.9 2.6%
1,097.3 Loans & advances to customers 604.6 1,154.1 (44.3%)
318.5 Investments 120.9 369.8 (61.6%)
546.2 Investment in associates 559.1 532.2 5.1%
96.2 Property and equipment 34.1 78.4 (50.7%)
160.2 Intangible assets 74.3 159.0 (52.3%)
109.0 Other assets 39.8 104.2 (55.8%)
------------------- --------------------------------------- --------- ------------------- ---------------
2,760.8 1,581.4 2,804.7 (39.8%)
Assets included in disposal groups
- classified as held for sale 915.2 - 0.0%
------------------- --------------------------------------- --------- ------------------- ---------------
2,760.8 Total assets 2,496.6 2,804.7 (4.9%)
------------------- --------------------------------------- --------- ------------------- ---------------
1,557.5 Customer deposits 684.0 1,631.8 (54.7%)
436.4 Borrowed funds 413.5 410.2 2.7%
71.9 Other liabilities 43.5 73.8 (19.9%)
------------------- --------------------------------------- --------- ------------------- ---------------
2,065.8 1,141.0 2,115.8 (42.0%)
Liabilities included in disposal groups
- classified as held for sale 809.8 - 0.0%
------------------- --------------------------------------- --------- ------------------- ---------------
2,065.8 Total liabilities 1,950.8 2,115.8 (0.8%)
------------------- --------------------------------------- --------- ------------------- ---------------
695.0 Capital and reserves 545.8 688.9 (17.2%)
------------------- --------------------------------------- --------- ------------------- ---------------
2,760.8 Total equity and liabilities 2,496.6 2,804.7 (4.9%)
------------------- --------------------------------------- --------- ------------------- ---------------
11.5% NPL ratio 9.6% 11.1%
------------------- --------------------------------------- --------- ------------------- ---------------
70.5% Loans: deposits ratio 88.4% 70.7%
------------------- --------------------------------------- --------- ------------------- ---------------
Executive Chairman's Statement
On behalf of the Board of Directors, I am pleased to present the
Company's results for the first half of 2019. I believe the Company
has achieved a number of important milestones during this period
even though our financial results were negatively impacted by the
accounting effects of the strategic transaction announced with EGH.
Further, our core operations achieved improving adjusted results
over the first half of the year. Our focus for 2019 is driven by
the ongoing strategic review announced in February, and as of today
we have made substantial progress toward those stated goals.
Most notably, we increased our total shareholding in UBN to
49.9% as of today, and we expect to achieve a majority shareholding
in UBN imminently, following ongoing regulatory engagements. As we
stated in February, UBN and Nigeria remain central to our overall
strategy. We continue to support UBN's management team on several
fronts as they successfully execute on their growth plans, as
evidenced by another strong interim period from the bank and the
successful $200 million financing entered into with OPIC. Obtaining
a controlling stake will result in consolidation of UBN and enable
us to deepen our support of the bank.
On a more sombre note, we lament the passing of Cyril Odu, our
dear friend, partner, and UBN's esteemed Chairman since 2015, and a
board member since 2012. We extend our condolences to his family
and loved ones.
We have also made substantial progress towards definitive
agreements with EGH for the strategic transaction, in which we will
exchange our interests in our banks in Zambia, Tanzania,
Mozambique, and Rwanda for a meaningful shareholding in EGH
(pending regulatory approval). This strategic transaction will
provide us with an attractive equity position in one of the
region's best banking groups and exposure to six new countries in
Africa. This transaction will enable us to concentrate our efforts
on markets where we have the scale necessary for long-term success
or a clear path to achieving it. Although we are managing
substantial macroeconomic and other external challenges in parts of
the footprint, these franchises all remain strong and we expect
they will continue to perform in the long-term.
We see incredible long-term potential in EGH's franchise and its
growth strategy as a strong operator. Our two companies also see
strong synergies in our existing capabilities and talented people.
I am thrilled to say that our teams are already working on efforts
that would add value to both sides, and the Board believes this
partnership should only deepen over time.
Zimbabwe is currently undergoing severe economic and other
challenges that are outside of our control, including but not
limited to hyperinflation, a rapid currency devaluation, slow
macroeconomic growth, and fiscal and foreign reserve crises at the
national level. These factors have resulted in direct negative
impacts to our business, including the impairment of capital as
described in our year-end 2018 results. Notwithstanding these macro
trends, our Zimbabwe franchise followed 2018 with another period of
strong profits in the first half of 2019, which illustrates the
potential of our operations at the necessary scale and focus. At
the same time, we must caution that the market's challenges and the
considerable uncertainty about the near-term future mean we cannot
confidently predict what results will be in the second half of 2019
or in 2020. Our teams both in Zimbabwe and in the Group remain
vigilant, pursuing growth while maintaining prudent management of
our balance sheet. Our board and management continue to support our
employees, their families and their communities as they face
unprecedented and extremely difficult circumstances.
While our consolidated results showed a significant loss for the
period, it is worth highlighting that this was largely driven by
the discontinued operations that are part of the transaction with
EGH. Our Adjusted Operating Profit improved over the comparable
period, reflecting better interim performances from Zimbabwe and
UBN. Our tangible book value per share was $2.84 at 30 June 2019,
more than double the current market price of our ordinary
shares.
For the remainder of 2019 we are focused on advancing the
progress we have made on our stated strategic goals, including: the
streamlining of the group as a narrowly focused holding company
rather than a bank operating group; protecting our core in Botswana
and Zimbabwe; and increasing our support of and involvement with
UBN. Our priorities at UBN will include supporting management to
drive organic growth through digital initiatives, improving
efficiency, enhancing credit quality, establishing a sustainable
dividend policy, all with the objective of generating shareholder
value. We believe that our strategic review has put the Company on
the path to long-term success, which will be proven out in the
coming months as our core operations demonstrate strength in their
markets, and our partnership with EGH deepens to our mutual
benefit.
Michael Wilkerson
Executive Chairman
Omar Khan, Chief Financial Officer Overview
This year Atlas Mara is focused on executing the priorities
which came out of the strategic review initiated in February 2019.
These priorities include the planned sale of four subsidiaries to
EGH in exchange for shares in EGH (pending regulatory approval),
achieving consolidation of UBN following regulatory engagement, and
executing on value creation for our stakeholders under the new
asset composition. Our H1 results should be viewed as a work in
progress, with tremendous potential as a narrower, focused, and
more efficient platform.
Our adjusted operating profit for the period ended 30 June 2019
was $17.0 million compared to $13.5 million on a similar basis for
the period ended 30 June 2018, representing an increase of 25.9%.
Adjusted operating profit excludes non-recurring revenues and costs
that are not part of the ongoing earnings base, to make us more
comparable to other market peers by separately identifying and
excluding one-off gains and charges, including all transaction
related gains or losses as well as the remeasurement loss resulting
from remeasuring the assets and liabilities of the disposal group
of four banks held for sale as part of the transaction with
EGH.
Our continuing operations that are not part of the transaction
with EGH reported a profit to equity holders of $8.9 million during
H1 2019, reflecting the strong operational performance in Zimbabwe
and UBN.
UBN reported favourable results, enhanced in particular by
improved recoveries and cost management, compared to the same
period last year, our share of the income from UBN (accounted for
as associate income) increased from $17.4 million for the period
ended 30 June 2018 to $18.7 million in H1 2019, benefiting from a
3.4% growth in UBN profit (on a dollar basis) and Atlas Mara's
increased shareholding.
H1 2019 showed higher profitability in Zimbabwe of $18.8
million, an increase of more than 100% on a constant currency
basis. This performance is attributed to exceptional balance sheet
management and improved treasury and client business under
challenging conditions. Several initiatives are underway including
focus on digital banking, loan growth, continued cost containment
measures and more aggressive collections for non-performing loans,
however, continued performance will be subject to stabilisation of
the market.
Zimbabwe is currently undergoing severe currency and economic
challenges. Following the launch of Zimbabwe's new currency in
February 2019 at a rate of 2.5 to USD, the RTGS dollar depreciated
to 6.6 at the end of June 2019. Annual inflation increased from 31%
in October 2018 to 175.5% at June 2019. In his mid-term fiscal
policy review, the Minister of Finance suspended the announcement
of annual inflation until February 2020 citing lack of RTGS$ base
prices for the period before the introduction of the RTGS$.
Interest rates on the central bank's overnight window have
increased from 15% to 50% per annum in line with inflation.
Guidance on implementation of Hyper-Inflation Accounting for
Zimbabwe is still pending from the country's Public Accountants and
Auditors Board. Reviews of the accounting treatment being followed
by other Foreign Holding Companies with Subsidiaries in the country
are also ongoing.
Botswana's H1 2019 performance was weakened by high cost of
funds, subdued loan growth, and a decline in trading income,
although these trends improved towards the latter part of H1. We
believe that our Botswana bank will continue its transformation
journey, with the launch of Bank Online expected to increase
transactional activity in Corporate Banking.
With the announcement on 30 April 2019 of the proposed strategic
transaction involving four subsidiaries, the operations of the four
subsidiaries have been classified as non-current assets and
disposal groups held for sale. The remeasurement of these assets at
lower of (i) the carrying amount and (ii) fair value less costs to
sell, resulted in a loss of $125.6 million, which predominantly
impacted the intangible part of the book value. In addition, the
recycling of the foreign currency translation losses and NCI
through the P&L will result in a further decrease in book value
($25.1 million as at 30 June 2019).
Excluding one-off and transaction-related expenses or gains, our
cost to income ratio was 94.7% versus the comparable figure in June
2018 of 96.8%. Substantial cost reduction will be a key focus for
management as we transition the Group to a more simplified
structure following the completion of the strategic transaction
with Equity Group.
Statement of comprehensive income review
Table 1: Total income
$'million 30 June 2019 30 June 2018 Var % CC Var %
Continuing Discontinued Total Continuing Discontinued Total
----------- ------------- ------ ----------- ------------- ------
Net interest income 8.8 35.7 44.5 22.3 46.0 68.3 (34.9) (19.0)
----------- ------------- ------ ----------- ------------- ------ ------- ---------
Non-interest revenue 29.7 21.3 51.0 21.8 22.1 43.9 16.1 46.4
----------- ------------- ------ ----------- ------------- ------ ------- ---------
Total income 38.5 57.0 95.5 44.1 68.1 112.2 (14.9) 6.4
----------- ------------- ------ ----------- ------------- ------ ------- ---------
Net interest income
Net interest income declined by 34.9% (19.0% on a constant
currency basis), mainly driven by the decline in interest income on
loans, as a result of contraction of the loan book, lower margins
and higher cost of funds experienced in some of the
subsidiaries.
Interest expense declined by 6.0% (0.9% on a constant currency
basis) compared to the prior period as a result of a decline in
deposits. The subsidiaries are focused on reducing cost of funds
through attrition of expensive deposits and replacement with sticky
deposits. In Zimbabwe, cost of funds increased from 2.0% in H1 2018
to 2.4% in H1 2019.
Non-interest income
Non-interest income increased during the period by 16.1% (46.4%
on a constant currency basis) mainly as a result of higher trading
income in Zimbabwe. In other countries, there has been lower fee
and commission income, driven by the pressure on loan growth.
Total expenses
Total costs of $103.1 million ($90.4 million excluding
one-offs), represented a decrease of 5.0% (increase of 9.5% on a
constant currency basis).
Shared Services and Centre costs increased to $14.9 million from
$12.3 million in H1 2018. Excluding the one-off costs related to
restructuring of $1.7 million, the increase in costs are $0.9
million which translates into an increase of 7.5%, however, a
portion of these costs are expected to be non-recurring. The Group
continues to focus on driving these costs lower as the Group is
transforms into a narrowly focused and more efficient platform.
Staff costs remained relatively constant at $47.3 million (30
June 2018: $48.4 million) for the period, but the contribution to
total expenditure has increased to 45.9% from 44.6%. On an adjusted
operating profit basis, Atlas Mara reported a cost to income ratio
of 94.7% (30 June 2018: 96.8%), compared to 108.0% (30 June 2018:
96.7%) on an IFRS basis.
Loan impairment charges
Credit impairment charges reduced by 37.1% from $4.3 million in
H1 2018 to $2.7 million in H1 2019 as a result of significant
recovery efforts across the Group led by Mozambique, Zambia and
Zimbabwe.
We continue to focus on restructuring and recovering further
from the legacy NPL book and have made good progress on large
single obligor exposures in Mozambique, Tanzania and Zimbabwe,
resulting in increased profitability and reduction of our overall
NPL ratios.
The NPL ratio across the Group was reduced from 11.1% at 31
December 2018 to 9.6% at 30 June 2019. This reduction was achieved
by significant collection effort across the portfolio including
large corporate recoveries.
Share of profit of associates
This represents Atlas Mara's share of profit from the 49.75%
stake in UBN at 30 June 2019 (30 September 2019: 49.9%), based on
their published results for the first half of 2019. The impact of
intangible amortisation is also included.
UBN's financial performance improved across several key metrics
in H1 2019 as compared to both H1 2018 and FY 2018. Return on
equity improved to 10.3% from 7.3% for the comparative period,
supported by profit before tax growth of 4% over the same period
last year. During the course of the first six months of 2019, UBN
also focused on rebuilding the loan book, recording loan growth of
8% from the level as at Dec 2018, while driving recoveries of loans
previously written off. Customer deposits also improved by 4%,
demonstrating the success of on-going acquisition of low-cost
deposits driven by strengthened brand affinity. UBN's aggressive
focus on recoveries and improving asset quality resulted in the
continued decline in NPL ratio, from 8.1% as at December 2018 to
7.3% at the end of the current period.
The cost optimisation programmed initiated by the bank also
started to yield positive results as total expenses declined by 4%,
from $128.4 million in H1 2018 to $122.3 million in H1 2019, also
resulting in a decline in cost to income ratio from 77.1% to 76.3%.
UBN remains well-capitalised, with its Capital Adequacy Ratio (CAR)
sitting at 19.4% as at 30 June 2019, higher than the Nigeria
regulatory minimum of 15.0%.
Statement of financial position review
Assets and liabilities in disposal group held for sale
During the period, the asset and liability balances of the
entities classified as disposal groups in line with IFRS 5 were
reclassified to assets and liabilities held for sale and presented
as single line items on the face of the statement of financial
position. The reclassification of these balances impacted all the
other line items presented in the statement of financial position,
resulting in a general decline in these other balances, as noted in
the subsequent paragraphs.
Total assets (excluding assets included in disposal group held
for sale)
Customer loans and advances comprise 38.2% of the Group's total
assets. Cash, short-term funds and marketable securities represent
c. 17.0%, other assets (made up of Property, plant and equipment,
Investment property, prepayment and other receivables etc.)
represent 4.7%, the investment in associate (UBN) accounts for
35.4% of the asset base with goodwill and intangible assets making
up the remainder at c. 4.7% of total assets (excluding assets held
for sale).
Total assets contracted by 11.0% (4.9% on a constant currency
basis) reflecting the impact of the persistent currency devaluation
in Zimbabwe.
Customer loans and deposits
Table 2: Customer loans and deposits
June 2019 December 2018 ($'m) Var CC Var
($'m) (%) (%)
--------- --------- ------------------- ------ ------
Loans 604.6 1,154.1 (47.6) (44.3)
--------- --------- ------------------- ------ ------
Deposits 684.0 1,631.8 (58.1) (54.7)
--------- --------- ------------------- ------ ------
Loans and credit quality
As presented in Table 2 above, loans and advances decreased by
$549.5 million to $604.6 million at 30 June 2019 from $1,154.1
million at 31 December 2018. The decline is mainly due to the
reclassification of the balances totalling $491.3 million related
to the disposal groups held for sale. Other factors impacting the
contraction of the loan book include market liquidity constraints
and a lower than anticipated demand for credit due to challenging
economic environment in our countries of operations.
Loans in continued operations showed a marginal increase of 1.6%
at constant currency basis for H1 2019 due to lower than expected
growth in the loan book in Botswana and a marginal decline in
Zimbabwe.
NPLs as a percentage of the loan book declined to 9.6% (31
December 2018: 11.1%), reflecting our focused efforts on credit
monitoring and the collection processes. The year-on-year
improvement was particularly supported by asset recoveries secured
in Zimbabwe.
Deposits
There was a decline in total deposits compared to the prior year
mainly as a result of reclassification of the total of $834.2
million, relating to disposal group held for sale. Loss of deposits
in Tanzania and Botswana, and the continued devaluation of the
currency in Zimbabwe also impacted the decline in total
deposits.
Term deposits remained the highest percentage of deposits while
in the decline in transactional deposits and overnight deposits
reflect the tight liquidity situation experienced in most of our
countries of operation especially Zimbabwe.
Customer deposits comprise c.59.9% of the liability base
(excluding liabilities held for sale) and represent 27.4% of the
aggregate of liabilities and equity (includes balances held for
sale). The loan to deposit ratio for at 30 June 2019 was 88.4% (31
December 2018: 70.7%).
For continued operations, deposits declined by 7% (at constant
currency basis) mainly due to reduction in expensive deposits in
Botswana compensated to a large extent due to 40% growth (at
constant currency basis) in deposits in Zimbabwe.
Capital position
As at 30 June 2019, all of Atlas Mara's operating banks complied
with local minimum capital requirements relevant in that country,
as summarised below.
Table 3: Capital adequacy ratios
Capital Ratios June 2019 December 2018 June 2018 Regulatory Minimum
---------------- ---------- -------------- ---------- -------------------
Botswana 18.4% 17.6% 19.1% 15.0%
Mozambique 22.4% 23.8% 25.8% 9.0%
---------------- ---------- -------------- ---------- -------------------
Rwanda 23.4% 23.7% 21.3% 15.0%
---------------- ---------- -------------- ---------- -------------------
Tanzania 13.1% 14.8% 17.0% 14.5%
Zambia 19.9% 15.9% 17.0% 10.0%
Zimbabwe 57.6% 39.0% 35.3% 12.0%
---------------- ---------- -------------- ---------- -------------------
The Bank of Tanzania has announced that, with effect from July
2019, investment in capital software is no longer deductible
against capital, and the abolishment of 1% general provision on
loans categorised as unclassified. The announced changes will
result in increase in Tanzania's capital by $3.8 million resulting
in CAR of ca. 18%.
Investment in associate: UBN
Our total shareholding in Union Bank of Nigeria increased to c.
49.75% as at 30 June 2019 from c.49.0% at 31 December 2018. The
investment is equity-accounted for in the statement of financial
position as an investment in associate, with a closing balance of
$557.5 million (31 December 2018: $530.6 million). The value of the
asset increased due to the additional shareholding acquired during
the period and the increased profits reported by UBN during the
period.
Goodwill and intangibles
Due to the acquisitions made in the prior years and in
compliance with IFRS 3: Business Combinations, the statement of
financial position incorporates goodwill and intangible assets of
$74.3 million at 30 June 2019 (31 December 2018: $159.0 million).
The 53.3% decline in this balance is attributable to the
reclassification of balances relating to the disposal groups held
for sale. These assets represent 4.7% of the Group's asset base
(excluding assets held for sale), resulting in a tangible book
value of $2.84 per share (31 December 2018: $3.00 per share) and
book value per share of $2.96 (31 December 2018: $3.83).
Segment information
The segmental results and statement of financial position
information represent management's view of its underlying
operations. In previous periods, management's view of the Group's
operations was on a geographically grouped basis. However,
following the announcement of the strategic transaction, the
Group's activities were re-segmented based on countries of domicile
of our operating banks. The countries of operation are as listed
below:
Nigeria: Through our 49.9% stake in UBN as at 30 September 2019
and Board representation, Atlas Mara has a footprint in Africa's
largest economy, Nigeria. Nigeria continues to represent a
long-term destination for investment, particularly in financial
services, and our stake in UBN is a key facet of our strategy for
the region.
Atlas Mara, through its board seats, is working closely with UBN
management to monitor the impact of oil price and currency changes
on the credit and capital positions. We see positive medium-term
growth potential for UBN irrespective of the near-term challenges
from the macroeconomic environment.
Our share of profit from the 49.75% stake (as at 30 June 2019)
in UBN is based on UBN's published unaudited H1 2019 results.
Botswana remains on track to execute its transformation for
growth strategy. While the performance for H1 2019 was softer,
there are several initiatives underway in the second half of the
year that should drive better momentum, including building on the
launch of the new Corporate online banking platform and the
onboarding of several new lending scheme clients.
Our business in Zimbabwe reported strong results driven by
effective balance sheet management, good trading income, and
digital banking, among other factors, notwithstanding a very
challenging environment.
Discontinued operations
With the ongoing strategic transaction as announced on 30 April
2019, our operations in the following countries were reclassified
as discontinued operations: Mozambique, Tanzania, Zambia and
Rwanda.
Prior to reclassification, these four countries contributed less
than 2% of total Group net income while accounting for 40% of the
Group's total assets.
Other
Included in this segment are Atlas Mara Limited, the BVI
incorporated holding company, and Atlas Mara's Dubai subsidiary, as
well as all other intermediate Group holding entities acquired
through the acquisitions of ABCH and ADC in August 2014, also
referred to as the Shared Services and Centre.
Segment report for the period ended 30 June 2019
Group Continuing operations Discontinued
operations
-------- ------------------------------------------ -------------
Botswana Zimbabwe Nigeria Corporate
------------------------------- -------- --------- --------- -------- ---------- -------------
Total Income 95.5 22.9 33.0 - (17.4) 57.0
------------------------------- -------- --------- --------- -------- ---------- -------------
Loan impairment charge (2.7) 0.5 (0.3) - (0.9) (2.0)
------------------------------- -------- --------- --------- -------- ---------- -------------
Operating expenses (103.1) (17.1) (9.3) - (13.1) (63.6)
Share of profits of associate 18.7 - - 18.7 - -
Profit / (loss) before
tax 8.4 6.2 23.5 18.7 (31.5) (8.5)
Loss on IFRS 5 remeasurement (125.6) - - - - (125.6)
Profit / (loss) after
tax and NCI (126.4) 3.8 18.8 18.7 (32.4) (135.3)
Loans and advances 604.6 558.6 31.6 - 14.4 -
Total assets 2,496.6 800.1 165.4 557.5 58.4 915.2
Total liabilities 1,950.8 684.5 121.0 - 335.5 809.8
Deposits 684.0 603.7 80.3 - - -
Net interest margin -
total assets 3.6% 4.5% 7.2%
Net interest margin -
earning assets 10.5% 5.1% 10.3%
Cost to income ratio 108.0% 74.8% 28.1%
Statutory credit loss
ratio 0.5% (0.2%) 1.7%
Return on equity (25.4%) 10.6% 84.5%
------------------------------- -------- --------- --------- -------- ---------- -------------
Return on assets (5.1%) 0.9% 22.7%
Loan to deposit ratio 88.4% 92.5% 39.3%
------------------------------- -------- --------- --------- -------- ---------- -------------
Segment report for the period ended 30 June 2018
Group Continuing operations Discontinued
operations
------------------ ------------------------------------------ -------------
Botswana Zimbabwe Nigeria Corporate
------------------------ -------- -------- --------- --------- -------- ---------- -------------
Total Income 112.2 29.6 23.7 - (9.2) 68.1
---------------------------------- -------- --------- --------- -------- ---------- -------------
Loan impairment charge (4.3) - (0.6) - 2.0 (5.6)
---------------------------------- -------- --------- --------- -------- ---------- -------------
Operating expenses (108.5) (18.5) (16.9) - (11.6) (61.5)
Share of profits of associate 36.6 - - 17.4 19.2 -
Profit / (loss) before
tax 36.1 11.1 (6.2) 17.4 0.4 1.0
Profit / (loss) after
tax and NCI 28.6 8.5 4.9 17.4 (1.0) (1.1)
Loans and advances 1,280.9 550.6 185.3 - 16.1 528.9
Total assets 3,104.3 806.8 522.3 535.6 11.4 1,228.3
Total liabilities 2,328.1 715.0 431.9 - 117.9 1,063.4
Deposits 1,910.2 629.6 366.9 - - 913.6
Net interest margin -
total assets 16.1 5.5% 5.1%
Net interest margin -
earning assets 11.4 6.3% 5.8%
Cost to income ratio 117.9 62.5% 71.3%
Statutory credit loss
ratio 16.1 0.0% 0.6%
Return on equity 11.4 18.6% 10.8%
---------------------------------- -------- --------- --------- -------- ---------- -------------
Return on assets 117.9 2.1% 1.9%
Loan to deposit ratio 16.1 87.5% 50.5%
---------------------------------- -------- --------- --------- -------- ---------- -------------
Principal Risks
The principal risks as listed and described on pages 28-29 of
the 2018 Annual Report have been evaluated and individually
considered by Management.
These risks are deemed to be still applicable and no material
additional risks have been identified as at the period ended 30
June 2019.
Directors' Responsibilities Statement in Respect of the Interim
Results
We confirm that to the best of our knowledge:
The condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
The interim management report includes a fair review of the
information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
By order of the Board Michael Wilkerson Chairman
30 September 2019
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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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