Letshego Group COVID-19 Update Andrew F. Okai Group Chief - PowerPoint PPT Presentation

Letshego Group COVID-19 Update Andrew F. Okai Group Chief Executive 30 April 2020

AGENDA 1 COVID-19 impact: Globally and Letshego footprint 2 COVID-19 : Our Response 3 Business Continuity: Impact Analysis 4 Deduction@Source (DAS) 5 Micro and Small Entrepreneurs (MSE) 6 Alternative Channels 7 Financial Performance 8 Transition to the ‘New Normal’ 2

1 COVID-19 Impact: Globally and within Letshego’s footprint Global COVID-19 impact Letshego Footprint COVID-19 impact Total Deaths Total Recoveries Total Infections Total Deaths Total Recovered Total Infections Lesotho 0 Ocenia 8,322 Botswana 23 Sub-Saharan Africa Namibia 16 4,353 Eswatini 71 Africa 6,734 Mozambique 76 Uganda South America 79 156,112 Rwanda 212 Asia Tanzania 504,803 299 Kenya North America 374 1,131,197 Nigeria 1,532 Europe Ghana 1,341,306 1,671 3 https://www.worldometers.info

1 Our markets are impacted to varying degrees with majority in lockdown Number of Infections Number of Recoveries Number of Deaths 8 out of 11 Countries on lockdown 212 95 0 79 52 0 374 124 14 0 out of 1,863 Staff infections 1,671 188 16 COVID 19 totals 299 10 48 1,532 255 44 Letshego footprint 76 12 0 4353 754 124 16 8 0 Infections Recoveries Deaths 23 5 1 71 10 1 Lesotho only market without a 0 0 0 recorded case Last updated: 29 April 06:45 GMT. Source: WHO; Johns Hopkins; nCoV. 4

2 COVID-19: Summarised response to pandemic phases Pre lockdown Lockdown Post Lockdown § Set up a Daily Corona Crisis § Ran stress testing scenarios across § Planning for transition to ‘new Committee and a governance the business. normal’, envisaging a ‘W curve’ framework across the group. recovery versus a ‘V or U curve’. § Enforced work space and work § Activated BCM with a focus on place safety protocols as per § Driving digital campaigns and protecting staff and customers WHO,CDC and respective Country using digital channels to health guidelines. disseminate critical COVID-19 § Commenced an awareness messages to our customers. campaign to engage staff, § Adapted remote working customers and key supply chain framework to minimize risk of § Adopting Enterprise Agility as a suppliers guided by WHO, CDC infection. way of working to accelerate and local health department response to the changing § Deployed additional digital guidelines. landscape. channels in record time; visible § Accelerated the deployment of shift evident in customer adoption § Accelerating key aspects of our 6- digital channels to enable remote of channels. 2-5 Strategic plan by leveraging customer service . technology and regional/global § Launched financial interventions partnerships. § Engaged key stake holders to assist customers and (regulators, funders, customers, communities (repayment holidays, § Providing an ongoing counselling staff). over P3mn in donations). platform to staff to support them through the transition. 5

3 Business Continuity: Impact Analysis Potential risks Mitigating actions § Increased impairments due to inability of § Repayment holiday open to MSE customers customers and MSE’s to operate during country § Stress tests and sensitivity analysis with overlay lockdowns of internal sales assumptions § Customer forbearance programs § Review of risk appetite and concentration risk Credit Risk § Cashflow pressures § Continuous engagement with funders on franchise strength § Risk appetite of funders as a result of COVID-19 § Continuous stress testing of liquidity position § Maintaining high repayment rates due to employment retention in the DAS portfolio Funding Letshego maintains strong capital and liquidity levels to meet payment obligations (Dividend payments, operational and funding costs) 6

3 Business Continuity Impact Analysis Potential risks Mitigating actions § Health and safety of staff & customers § COVID-19 Crisis Committee - early March 2020 § Negative impact of COVID-19 on communities § Continuous engagement with staff and customers on safety precautions § Remote working policy implemented § Critical supplier assessments done for each Operations market § Lower sales growth due to slow down in § Shifted business away from physical delivery economic activity channels to digital channels e.g. WhatsApp loan applications, Web applications, USSD for DAS § Restricted movement of persons in affected regions, affecting sales § Focusing on sales to existing customers (through top-ups) Sales & Income 7

4 Deduction@Source (DAS) portfolio remains resilient Total Loan book All Deduction@Source salaries continue to be paid as Governments Informal seek to minimise retrenchments over this period MSE 3% 9% DAS resilient business with 2% growth of net advances Even as new loans are slowing down the bulk of the business DAS (circa 70%) is coming from loan top-ups. 88% DAS Collection Rate High collection rates at 92% (97% including unallocated receipts) even during varying levels of National Lockdown 8% Loan Loss Ratios (LLRs) for DAS at 0.9% Employers have option to negotiate repayment holidays within non- Collection Rate government sector segment 92% 8

5 Micro and Small Entrepreneurs (MSE) portfolio under pressure Total Loan book MSE sector is severely impacted. We have introduced a repayment holiday to support all MSE customers Increased impairments expected due to inability of MSEs to operate Informal during country lockdown periods 3% MSE 9% Restructuring of loans for affected MSE customers DAS Loan Loss Ratios (LLRs) at 3.3% - expected to deteriorate further on 88% the back of specific sector risk Extensive analysis of high risk sectors e.g. import/export, travel, tourism, manufacturing, trade & education. 9

5 Government Responses to COVID-19 in our Subsidiaries

6 Response to COVID-19: Alternative Channels 2019 Gross Payouts Contribution by Channel 2020 Gross Payouts Contribution by Channel 0% 0% 11% 2% 1% 15% Alternative Channels Contribution 35% Dec 2019 April 2020 14% Dec 2019 April 2020 21% (Actual ) (MTD) 2% 31% 1% 66% 34% Branch DSA RO Call centre WhatsApp Web Accelerated Alternative channels - WhatsApp channel contributed 15% of Aggressive digital marketing across 31% contribution in April 2020 total new loans in the foot print to support adoption of versus 2% in 2019 month of April 2020 alternative channels 11

7 Q1 Financial performance generally in line with expectations Financial results to 31 March 2020 The business remains profitable and resilient Return to growth: Run rates Q1 2020 PBT ahead of Q4 2019 (albeit slightly behind Q1 2020) Expect impact in Q2 and Q3 2020 due to COVID-19 Cost to income (CIR) ratio flat year on year, in line with expectation. Loan Loss Ratio at 1.8% within annual target range of 1.7% -2.5%. Net advances to customers up 2% year on year All subsidiaries well capitalised and compliant with local capital requirements Our cash position remains strong with 20% year on year increase Q1 2020 Q1 2019 % Change Loan Loss ratio (%) 1.8% 3.5% - 48% Total number of customers 550,000 519,326 5% 209,807 Total Retail Deposits (P’ 000) 104,014 102% Business momentum expected to recover as the year progresses aided by digital enablement. 12 Stress testing results indicate LLR could peak at 2.9% in Q2, ending the year at 2.4% (worst case scenario).

8 COVID-19: Transition to a ‘New Normal’ Approach Potential phases in returning to ‘New Normal’ Reported cases flatten with cautious 1 Economic Recovery opening of economies a. W-shape recovery expected Partial return of staff onsite § b. Align business with govn interventions (office premises) Phase Maintain lockdown protocols and limited § 1 face-to-face interaction. High dependence 2 Our People & Customers on digital channels a. Revised workspace management Declining reported cases & economic b. New workplace standards activities recovering c. Customer touchpoints reviewed More staff getting back to office albeit § Phase with shift working 3 Technology Enablement 2 Essential business travel § a. Remote Working capabilities b. End-to-end digitisation ‘New Normal’ - minimal number of infections and high number of recoveries, limited fatalities 4 Business Continuity Resume business as usual while § Phase a. Sales momentum maintaining focus on staff health and 3 safety b. Risk management Scale up digitalisation § c. Operational resilience 13

8 6-2-5 Plan on track - Accelerating digitalisation initiatives through regional and global partnerships Creating a world class Retail Financial services organisation Short term: Leverage on our strengths to deepen impact Medium /Long term : Customer ; Talent, Innovation and technology CREATE the future organisation § Talent mobility. § Relentless Innovation culture. § Digital delivery – Innovation hubs / Platform/Ecosystem thinking. BECOME customer led § Invest in Customer Experience. § Leverage on emerging transformative technologies. STRENGTHEN our foundation Customer led, speed to market. § Enterprise Agility as a methodology . Build on core business, DAS. § § Key digital channels to improve DAS § productivity. Diversify solutions & Funding . § Productivity Of Solutions Transformative Technologies Platform Thinking 6 2 5 Months Years Years 14