Letshego Holdings Ltd COVID-19 Update Version 2 June 2020 AGENDA - PowerPoint PPT Presentation

Letshego Holdings Ltd COVID-19 Update Version 2 June 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 Africa , Europe and USA Trends Letshego Country COVID-19 @ 2 June 2020 Infections and Recoveries Cases @2 June 2020 2 500 000 12 000 10 819 2 020 381 10 000 2 000 000 1 881 205 8 297 8 000 1 500 000 6 000 1 023 701 1 000 000 4 000 645 974 2 093 500 000 2 000 175 758 159 838 108 059 509 489 384 68 985 307 294 4 520 40 25 2 - - Infections Deaths Recoveries a e i o a a a a a a n a n u y d i h i d n i b n i t r a q t n n n a a a o i e i m e a w w a h b s z g K g w G s a n m s e i N t U a E L N R o a T B z o M Africa wide Europe USA Infections Recoveries 3 SOURCE: 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 various levels 384 269 2 of lockdown 489 82 0 509 183 21 9 out of 1,863 Staff infections 8,297 2,986 38 COVID-19 totals 2,093 499 71 10,819 3,240 314 Letshego footprint 307 98 2 23,259 7,595 452 25 16 0 Infections Recoveries Deaths 294 198 3 Lesotho latest market 40 23 1 to record cases 2 1 0 Last updated: 02 June 2020 00:00 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% Alternative Channels 15% 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% 550,000 519,326 5% Total number of customers Total Retail Deposits (P’ 000) 209,807 104,014 102% 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