TIDMATMA
RNS Number : 2960K
ATLAS Mara Limited
31 August 2021
31 August 2021
Atlas Mara provides audited results for the 14-month period
ended 28 February 2021
Atlas Mara Limited ("Atlas Mara" or the "Company," and including
its subsidiaries, the "Group"), the sub-Saharan African financial
services group, releases its summary financial highlights for the
14-month period ended 28 February 2021. This represents an extract
from the audited financial statements .
The full audited financial statements will be released shortly
and published on our website.
Principal highlights:
-- On 29 June 2021, the Group announced that it had changed its
accounting reference date and financial year end from 31 December
to 28 February, effective for the 2020 financial year. As a result
of this change, the results and prior year information presented
herein on an IFRS basis are not comparable.
-- Adjusted net profit of $1.5 million (2019: $5.8 million)
which excludes the impact of IFRS 5 remeasurement of subsidiaries
held-for-sale and other transaction and restructuring related
expenses.
-- Union Bank of Nigeria ("UBN") contributed associate income of
$25.5 million for the 14-month period (2019: $31.2 million). The
associate income reported reflects the impact of the currency
devaluation in 2020, being translated at an average US dollar FX
rate of NGN384.4 compared to NGN306.4 in 2019. This represents a
14-month pro-rated 30% decrease in US dollar terms (12.1% on a
constant currency basis)
o Despite the impact of the COVID-19 pandemic and related
macro-economic challenges as well as government policy responses,
UBN's underlying performance for the 14-month period remained
strong, with the NPL ratio decreasing to 4% compared to 5.8% in
December 2019.
o Capital adequacy remains strong with total CAR above 17% at
period-end.
o BVPS increased by NGN 0.41 to 9.05 as at December 2020.
-- On 14 July 2021 the Group announced that it had successfully
executed a binding and comprehensive debt restructuring agreement
(the "Support and Override Agreement" or "restructuring agreement")
with the majority of the Company's and its subsidiary ABC Holdings
Limited's ("ABCH's") creditors. This followed the initial
announcement on 29 December 2020 that the Group had entered into a
new secured facility agreement and a standstill agreement with
certain creditors in respect of the Company's and ABCH's financing
arrangements (the "Standstill"). Additional information related to
the terms of this agreement are set out in the Company's previous
announcement.
-- Successful execution of the restructuring agreement enables
the Company to continue its focus on its previously announced
strategic priorities. In the period from September 2020 to date,
the company has announced divestments in Mozambique, Rwanda,
Tanzania and Botswana. The Group continues its efforts to
streamline the holding company and centralised cost structures.
Additionally, the Company continues to evaluate all options that
could include a take-private or delisting of the Company and will
keep the market apprised as appropriate.
-- Reported net loss to equity holders of $58.7 million (2019:
loss of $143.2 million) or $0.35 per share (2019: loss of $0.84 per
share).This result includes a loss from continuing operations of
$46.6 million (2019: loss of $8.5 million) and a loss from
discontinued operations of $12.0 million (2019: loss of $134.7
million). The loss from continuing operations includes a loss on
the monetary position in Zimbabwe of $16.9 million and reflects the
impact of the currency devaluation of >100% in Zimbabwe and 20%
in Nigeria.
-- The Group's operating businesses evolved in response to the
challenges brought by the COVID-19 pandemic as well as the ever-
increasing customer expectations, new technologies and a rapidly
changing competitive environment. Key changes were implemented in
health and safety of clients and employees, Information Technology
systems and cyber security, capital and liquidity buffers, internal
controls, and robust loan management systems.
-- All operating banks maintained adequate capital adequacy
ratios, reflecting stable balance sheets. Continued focus on
deposit growth, loan book quality, and growth business lines.
Commenting on these results, Chairman Michael Wilkerson said,
"The past financial year was the most challenging in the Company's
history. Nonetheless, I am pleased to report that the Group was
successful in working with its creditors to complete its debt
restructuring. The Company also achieved several milestones in the
strategic review aimed at maximizing creditor and shareholder value
in the context of extraordinary market disruptions and highly
regulated banking environments. D espite the challenging
macroeconomic environment in Africa, most of our banks generated
positive recurring operating profit during the period. "
Events subsequent to year end
-- Debt Restructuring
o On 14 July 2021 the Group announced the successful execution
of the restructuring agreement. Creditors representing 88% of the
aggregate amount of debt outstanding under the Company's direct and
contingent financial liabilities agreed to enter the Restructuring
Agreement.
o This agreement provides for a high level of support from the
creditors to enable a long-term stable platform to allow the
Company to complete its strategic review and divestiture
program.
-- Update on strategic transactions
o On 25 August 2021, the Group announced that after successfully
securing the necessary regulatory approvals and consents, and
fulfilling all other agreed closing conditions, the transaction for
the sale of 62.06% shareholding in Banque Populaire du Rwanda Plc
("BPR") had been completed.
o On 19 May 2021, the Group announced the completion of the sale
of its subsidiary African Banking Corporation Mozambique ("BancABC
Mozambique"). The transaction was initially announced on 29
September 2020.
o On 19 April 2021, the Group announced that it had entered into
definitive agreements for the sale of ABCH's holdings in African
Banking Corporation Botswana ("BancABC Botswana"). This transaction
has received all requisite regulatory approvals and is expected to
close by the end of 2021.
-- Classification of BancABC Botswana as a non-current asset
held for sale
o Following the announcement of the planned divestiture of
BancABC Botswana, effective 31 August 2021, the Group will be
required to classify its investment in BancABC Botswana as a
non-current asset held for sale. As required by IFRS 5, this will
result in the investment being deconsolidated and remeasured to the
lower of its carrying value or fair value less cost to sell. The
transaction is expected to result in a loss primarily due to the
carrying value of goodwill and intangible assets associated with
BancABC Botswana of c$25 - 28 million.
o At completion, this transaction will result in release of
translation losses to P&L of c. $13.2 million.
Additional operational highlights during the period:
-- BancABC Botswana
o Implemented a new Retail Digital Banking platform (SARUMoney)
in 2020 before the introduction of mandatory COVID-19 related
country-wide lockdowns.
o Digital subscriptions increased by 60% during the year and
monthly engagement levels exceed 80% on the platform. The Bank also
introduced cardless cash withdrawal on its digital platform. These
innovations contributed to the Retail deposit book's increase by
over 16% by end of February 2021 compared to December 2019.
o Aligned to the ambition to become a transactional bank for
corporate clients, additional functionality was added to the
Corporate Banking Online platform, which resulted in significant
volume and subscription growth during the year.
o Global Markets profit after tax recorded over 40% year on year
increase, supported by a 176% increase in trading income driven by
increased client relationships.
o Extended repayment and interest moratoriums were offered to
select impacted clients in both the retail and corporate business -
mostly small exposures in the tourism sector.
o Tools were provided to staff to enable them to work from home.
Allowances were granted to employees to purchase office equipment
and internet facilities to improve productivity. This ensured that
employees were fully equipped to work during the pandemic.
-- BancABC Zimbabwe
o Digital income contributed 9% to core revenue, a substantial
increase from 2019.
o A 348% increase in Visa card holders from 7.5 thousand as at
February 2020 to 33.8 thousand as at February 2021. 11% increase
between December 2020 (30.5k) and February 2021 (33.8
thousand).
o A 33% increase in mobile banking subscribers from 107 thousand
in February 2020 to 164 thousand in February 2021.
o A 63% and 424% increase in mobile transaction volumes and
values ($3.7 million vs. $2.3 million) respectively.
o The Bank NPL ratio improved to 1.35% as at February 2021 from
3.10% in February 2020.
o Entered into partnership to open total of 28 kiosks which are
a low-cost substitute to branches.
o Launched the local remittance service in September 2020, $2
million sent through the service between September 2020 and
February 2021.
o Launched the A360 mobile app in July, 33 thousand
registrations by December 2020 and 45 thousand registrations by
February 2021.
o Added QR code payment functionality on the A360 mobile
app.
o Optimized KYC account opening through the website launched in
October 2020.
o As part of the annual #777 CSR Campaign, the Bank donated over
200 litres of sanitiser and detergent, 500 face masks and other PPE
to 7 different medical and vulnerable health organisations
including an Old Peoples Home, Antenatal Clinic, Children's
Hospital and Infectious Diseases Hospital.
-- UBN
o Non-interest income increased by 4% for the 12 months ended 31
December 2020 compared to December 2019, with this trend continuing
into Q1 and H1 2021 with UBN reporting a 9.5% and 22.3% increase
respectively compared to the comparable period.
o The NPL ratio decreased to 4% at 31 December 2020 compared to
5.8% reported in December 2019. As at 30 June 2021, the NPL ratio
has stabilized at 4.3%.
o Active users on digital platforms grew 1.3x and new features
were added such as end-to-end account opening and enhanced card
services including home delivery of cards, boosting revenues from
digital channels by 1.5x.
o UnionDirect network was increased to over 18,000 agents,
representing a 6x increase. Transaction volume and value grew 10x
and 12x respectively delivering 14x revenue growth.
o Relaunched UnionVibe, UnionLegend and UnionInfinity, a suite
of products targeting the key youth and teen demographic; and
disbursed over NGN9.4 billion loans with new credit
propositions.
o Core systems were upgraded to strengthen the performance,
reliability, security and processing capacity of various
platforms.
o Measures to prioritize the health and safety of employees,
customers and other stakeholders to help weather the challenges of
the pandemic.
o One of the first in the Nigerian banking industry to adopt the
remote working model, with over 70% of workforce operating remotely
at the height of the lockdowns, made possible due to pre-pandemic
strategic investments made in digital technologies.
o Investments as part of business continuity measures taken in
the face of this crisis including additional tools, measures and
investments to facilitate work from home and avoid reduced
productivity.
.
Contact Details:
Investors
Kojo Dufu, +1 212 883 4330
Media
Apella Advisors, +44(0) 7818 036 579
Anthony Silverman
About Atlas Mara
Atlas Mara Limited (LON: ATMA) is a financial services
institution listed on the London Stock Exchange. For more
information, visit www.atlasmara.com.
Summary of audited results
Table 1: Adjusted operating profit and reconciliation to IFRS
profit for 14-months ended 28 February 2021
$'million 14-months ended 28 February 2021 Year ended 31 December 2019 CCY*
Var %
--------
Adjusted profit after tax 1.5 5.8 2.0%
----------------------------------------- --------------------------------- ---------------------------- --------
Transaction and M & A related items (12.6) (109.5) 88.5%
----------------------------------------- --------------------------------- ---------------------------- --------
Reorganisations and restructuring costs (4.3) (13.1) 67.4%
----------------------------------------- --------------------------------- ---------------------------- --------
Impact of hyperinflation accounting (16.9) (11.1) (45.7%)
----------------------------------------- --------------------------------- ---------------------------- --------
Tax and NCI (26.4) (15.3) 45.5%
----------------------------------------- --------------------------------- ---------------------------- --------
Reported net profit (58.7) (143.2) 61.0%
----------------------------------------- --------------------------------- ---------------------------- --------
Reported cost to income ratio 114.4% 115.7%
----------------------------------------- --------------------------------- ---------------------------- --------
Adjusted cost to income ratio 106.1% 106.6%
----------------------------------------- --------------------------------- ---------------------------- --------
Reported return on equity (20.5%) (28.5%)
----------------------------------------- --------------------------------- ----------------------------
Adjusted return on equity 0.9% 1.2%
----------------------------------------- --------------------------------- ----------------------------
Reported return on assets (2.3%) (5.5%)
----------------------------------------- --------------------------------- ----------------------------
Adjusted return on assets 0.1% 0.2%
----------------------------------------- --------------------------------- ----------------------------
Reported EPS ($) (0.35) (0.84)
----------------------------------------- --------------------------------- ----------------------------
Operational EPS ($) 0.01 0.03
----------------------------------------- --------------------------------- ----------------------------
Book value per share ($) 1.99 2.97
----------------------------------------- --------------------------------- ----------------------------
Tangible book value per share ($) 2.01 2.87
----------------------------------------- --------------------------------- ----------------------------
Total Shares in issue ('000) 144,002 169,191
----------------------------------------- --------------------------------- ---------------------------- --------
(*) Unaudited
Statement of financial position as at 28 February 2021
$'million 28 February FY 2019 Variance (%)
2021
------------------
Total CCY
-------- --------
ASSETS
---------------------------------- ------------ -------- -------- --------
Cash and short-term funds 141.9 130.5 8.7% 14.1%
---------------------------------- ------------ -------- -------- --------
Financial assets at FVTPL 17.3 25.2 (31.3%) (30.5%)
---------------------------------- ------------ -------- -------- --------
Loans & advances 580.5 644.1 (9.9%) (7.2%)
---------------------------------- ------------ -------- -------- --------
Investments 119.6 107.8 10.9% 17.6%
---------------------------------- ------------ -------- -------- --------
Investment in associates 471.5 582.1 (19.0%) (19.0%)
---------------------------------- ------------ -------- -------- --------
Goodwill and other intangible
assets 63.9 73.0 (12.5%) (10.7%)
---------------------------------- ------------ -------- -------- --------
Other assets 112.5 85.1 32.2% 42.2%
---------------------------------- ------------ -------- -------- --------
Assets included in disposal
groups held for sale 1,101.4 979.6 12.4% 12.4%
---------------------------------- ------------ -------- -------- --------
Total assets 2,608.6 2,627.4 (0.7%) 0.8%
---------------------------------- ------------ -------- -------- --------
LIABILITIES
---------------------------------- ------------ -------- -------- --------
Deposits 672.5 723.7 (7.1%) (3.9%)
---------------------------------- ------------ -------- -------- --------
Borrowed funds 441.7 366.8 20.4% 21.3%
---------------------------------- ------------ -------- -------- --------
Other liabilities 141.3 115.5 22.3% 25.6%
---------------------------------- ------------ -------- -------- --------
Liabilities included in disposal
groups held for sale 1,022.6 874.2 17.0% 17.0%
---------------------------------- ------------ -------- -------- --------
Total liabilities 2,278.1 2,080.2 9.5% 11.1%
---------------------------------- ------------ -------- -------- --------
EQUITY
---------------------------------- ------------ -------- -------- --------
Equity attributable to parent 286.8 502.5 (42.9%) (41.9%)
---------------------------------- ------------ -------- -------- --------
Minority interests 43.7 44.7 (2.2%) (2.2%)
---------------------------------- ------------ -------- -------- --------
Total equity 330.5 547.2 (39.6%) (38.6%)
---------------------------------- ------------ -------- -------- --------
Total equity and liabilities 2,608.6 2,627.4 (0.7%) 0.8%
---------------------------------- ------------ -------- -------- --------
Loan to deposit ratio 86.3% 89.0%
---------------------------------- ------------ -------- ------------------
NPL ratio 11.4% 11.4%
---------------------------------- ------------ -------- -------- --------
Net book value per share - $ 1.99 2.97
---------------------------------- ------------ --------
Tangible book value per share
- $ 2.01 2.87
---------------------------------- ------------ -------- -------- --------
Executive chairman's statement
Dear fellow Atlas Mara shareholders,
We entered the 2020 financial year with both optimism and
positive momentum for most of our underlying banks. The previously
announced strategic transaction in 2019 was intended to strengthen
our position in markets where we did not have top five stand-alone
market positions, and, through meaningful share ownership in the
combined group, provide a broader strategic partnership with one of
the region's leading banking franchises. At the same time, a
strategic fund-raising was underway to strengthen the Group's
balance sheet and to allow the Group to focus on and invest in
FinTech and digital banking in its top-performing markets. Both of
these opportunities were severely impacted by the unexpected global
developments of the first quarter of 2020.
The visible onset of the pandemic caused by SARS-CoV-2,
government responses in attempt to contain it, and the resulting
period of market panic had a substantial and immediate detrimental
impact on our business and on our markets that was outsized
relative to other regions, including other emerging markets, and
even other industries in the region. For example, during the first
quarter of 2020, African equity markets declined by nearly 40%,
double the decline of the S&P 500 in the same quarter, and of
the African equity markets in the worse quarter of the global
financial crisis (4Q08). Foreign exchange markets were similarly
impacted, with greater than 20% declines against the dollar in the
quarter for local currencies in countries such as Zambia, Zimbabwe,
and South Africa. The major currency depreciations across the
African markets in which the Group operates resulted in a more than
$145 million reduction in the US dollar value of the Company's
assets and thus a reduction in the Company's debt capacity. Debt
funding and liquidity dried up almost overnight. In our largest
market, Nigeria, the equity markets declined by over 25% and the
Naira by over 7%, while the sovereign yield blew out by over 110
basis points, foreign currency was unavailable in any size. The
equity market decline in Africa was 60% worse than in other
emerging markets, reflecting a particular "risk-off" view of Africa
investment.
While COVID-19 infections remained relatively low, strict
lockdowns and travel restrictions led to a substantial decrease in
business activity in the region. Many African central banks
struggled to provide the liquidity support necessary for local
banks impacted by the crisis, while at the same time political
pressures led to the imposition of regulatory restrictions on
interest rate increases, imposition of fees and other actions that
would ordinarily be available to defend liquidity and capital, if
not profitability.
As the year progressed, it became apparent that neither the
strategic transaction nor the strategic fundraising and
repositioning of the balance sheet would be able to go forward
under the circumstances. The Board made the difficult decision to
undertake a formal restructuring of the Group's holding company
debt and hired legal and financial advisors to assist in the
process. At the same time, the Board broadened its review of
strategic options to ensure that all possible alternatives to
preserve value would be considered.
I am pleased to report that the Group was successful in
completing the debt restructuring. In July 2021, the Company
announced an agreement with creditors representing 88% of the total
outstanding debt of the Group's holding companies. This critical
agreement includes forbearance of debt service and other conditions
favourable to the Group. The agreement also enabled the Company to
continue its strategic review and certain associated divestitures,
which are discussed below. The high level of creditor support was
an affirmation of the alignment of the Company with its creditors,
regulators and other stakeholders. I want to thank our creditors
for their constructive engagement in reaching the agreement.
The Company also achieved several milestones in the strategic
review aimed at maximizing creditor and shareholder value in the
context of highly regulated banking environments. In the past year,
we have completed or announced several important divestitures in
line with this goal, including the Company's banking subsidiaries
in Mozambique, Tanzania, Rwanda, and Botswana. Additionally, the
company is in ongoing discussions regarding the Group's Zambian
subsidiary. These announced transactions demonstrated the value of
the Company's assets and represented the culmination of tremendous
effort on the part of our colleagues, for which the Board and I are
grateful. Today, the Company has a clear trajectory for completing
the strategic review and restructuring that we began more than a
year ago.
Despite the challenging macroeconomic environment in Africa, I
am also pleased to report resilient operating performance from our
underlying banks during the financial year. Most banks generated
positive recurring operating profit during the period. Our local
management teams demonstrated dedicated - and in some cases heroic
- performance during this extraordinary period, and I want to thank
our teams for their commitment and hard work.
Digital banking continued its rapid expansion across the
footprint, particularly given the disruptions to traditional
in-person banking activities, and we expect increasing contribution
to income from these channels. UBN achieved an increase in profit
from continuing operations (in local currency terms), due in part
to improved cost efficiency, and despite the significant hit to
Nigeria's economy and very limited access to hard currency.
Across the Group, the banks' balance sheets contracted as
expected, given pandemic and lockdown related disruptions, but all
banks remained above their minimal required capital adequacy
ratios. We believe a stronger macroeconomic turnaround will enable
the banks, which have improved operational efficiency in this
crisis, to achieve faster growth and improved profitability in the
future.
For the moment, the macroeconomic environments in our countries
of operation remain precarious. The 2021 recovery seen elsewhere
around the world has been slow to come to sub-Saharan Africa. The
region's GDP contracted by 2.6% in 2020 and is expected to reach
only 3.2% positive growth in 2021 (a respectable figure for Western
markets, but far below a normal environment for sub-Saharan
Africa). The muted economic activity has had widespread effects,
from decreased credit book quality, negative credit growth, and
lower interest income due in part to regulatory policy
decisions.
With already constrained fiscal environments and relatively
limited assistance from central banks, African markets have been
unable to mount economic responses as impactful as those in the US
or the EU, and local currencies, debt and capital markets remain
under considerable pressure.
The Company continues to work with the subsidiaries to maximize
value both in operations and, where appropriate, in potential
partnerships or divestments. We have received expressions of
interest in our remaining banking assets, and the board continues
to explore all options to maximize the value of its franchises.
In July 2021, Atlas Mara's ordinary shares were suspended from
trading at the Company's request, while critical elements of the
strategic review were completed, and while financial results were
prepared for publication following the completion of the debt
restructuring. Shareholders can expect the shares to resume trading
following the publication of the annual results. The Board
continues to evaluate all potential options that could include a
take-private or delisting of the Company and will keep the market
apprised as appropriate.
The past financial year was the most challenging in the
Company's history. I am proud of our teams' persistence and
unwavering commitment to their customers. We continue to believe in
the long-term growth story for Africa and for the banking sector,
especially as it relates to financial technology and digital
banking. In the short-term we remain focused first and foremost on
exploring every available option for value realization. Thank you
for your continued support.
Michael Wilkerson
Chairman
Chief Financial Officer's review of financial performance
Consistent with the Atlas Mara's continued efforts to monitor
and mitigate the effects of the COVID-19 pandemic, the Company
implemented measures to prioritise the health and safety of
employees, customers, and other stakeholders and activated the
business continuity processes. COVID-19 and the scale of its impact
on the Group's countries of operations continues to evolve, we
remain hopeful that with greater access to vaccinations, the coming
months could be a bridge to "normalcy," and many aspects of social
and economic life can resume. In 2020, the sub-Saharan Africa
('SSA') region contracted by 2.6% due to the adverse impact of the
pandemic and the associated lockdown measures, which disrupted
economic activity through multiple channels. Economic growth in the
SSA region is expected to rebound by 3.2% in 2021, which is still
below typical levels for the region.
Despite these challenges, during the 14-month period ended 28
February 2021, the banking subsidiaries in Botswana and Zambia
respectively reported profit after tax of $8.3 million (12-month
period ended 31 December 2019: Profit after tax of $11.3 million)
and $5.2 million (12-month period ended 31 December 2019: reported
loss of $9.8 million), despite the significant headwinds posed by
the COVID-19 pandemic.
The banking subsidiary in Zimbabwe, BancABC Zimbabwe, reported a
loss of $0.4 million for the 14-month period ended 28 February 2021
(12-month period ended 31 December 2019: Profit after tax of $7.8
million). Performance was impacted by an increase in loss on net
monetary position as well as increased operating costs due to
hyperinflationary pressures and currency depreciation. As part of
balance sheet management, BancABC Zimbabwe invested in inflation
and exchange rate hedging assets, which resulted in net asset value
increasing to $60.7 million for February 2021 compared to $53.6
million for December 2019.
The Group's performance for the period was negatively impacted
by the restrictions on business activity in each of our markets as
a result of lockdowns, travel restrictions, and entire sectors of
the economy being closed as "non-essential" during the height of
the pandemic. Excluding IFRS 5 remeasurement loss of $1.4 million
(12-month period ended 31 December 2019: $105.5 million), the Group
recorded a loss of $57.3 million for the 14-month period ended 28
February 2021 (12-month period ended 31 December 2019: $37.7
million). In addition to the negative impact of the pandemic on the
Group's operations, current period performance was also negatively
impacted by additional losses arising from write-off of deferred
tax assets of $10.9 million, additional fair value loss of $2.8
million arising on the revaluation of the Group's financial assets
measured at FVTPL as well as $6.1 million net monetary loss based
on hyperinflation accounting in Zimbabwe. Excluding the impact of
these additional losses and that of IFRS 5 remeasurement loss, the
reported loss for the
14-month period ended 28 February 2021 remained flat at $37.6
million (12-month period to 31 December 2019: $37.7 million).
Adjusted profit for the 14-month period ended 28 February 2021
was $1.5 million (12-month period ended 31 December 2019: $5.8
million), while the adjusted cost to income ratio remained flat at
106.1% (12-month period to 31 December 2019: 106.6%). Nearly all
other key financial performance metrics were negatively impacted
with the adjusted ROE declining to 0.9% for the 14-month period
ended 28 February 2021 from 1.2% for the 12-month period ended 31
December 2019.
The Group has been stress testing its portfolios in the current
environment. As of 28 February 2021, there was a decline in the ECL
estimate, thereby keeping the NPL ratio constant at 11.4%. We will
continue to monitor the portfolios and act as the situation
unfolds.
Change in financial year-end
The Group extended its reported date by two months from 31
December 2020 to 28 February 2021.
New financing
On 29 December 2020, the Company entered into a new secured
facility agreement with a fund entity managed by UBS O'Connor LLC.
The facility was for a new investment in the principal amount of
US$25,824,075 with a duration of 18 months. The facility has been
used to fund the near-term operating expenses and working capital
requirements of the Group, and to finance the purchase of
26,435,188 ordinary shares of the Company held by the lender at a
price of $0.40 per share, reflecting the closing market price on
the day the funding was agreed between the parties. The repurchased
shares are held in treasury.
Strategic transactions
On 30 September 2020, ABCH entered into a definitive agreement
for the sale of the Group's shareholding in African Banking
Corporation Mozambique Limited. The transaction was completed on 17
May 2021.
On 26 November 2020, ABCH entered into a definitive agreement
for the sale of the Group's 97.3% shareholding in African Banking
Corporation Tanzania Limited. The transaction, which has been
approved by the Bank of Tanzania, is now subject to fulfilment of
customary conditions precedent.
On 26 November 2020, ATMA entered into a definitive agreement
for the sale of the Group's 62.06% shareholding in Banque Populaire
du Rwanda Plc ("BPR"). The Transaction was completed on 25 August
2021.
On 19 April 2021, ABCH entered into a definitive agreement for
the sale of its 78.15% shareholding in African Banking Corporation
Botswana Limited. The transaction, which has already been approved
by the Bank of Botswana, is now near completion.
African Banking Corporation Zambia limited is, for accounting
purposes, still classified as a disposal group held for sale in
terms of International Financial Reporting Standard ("IFRS") 5:
Non-current assets held for sale and discontinued operations. The
discussions with a potential investor for the sale of the
subsidiary are ongoing.
Restructuring agreement
On 14 July 2021, the Support and Override agreement was signed
by majority of the company lenders representing 88% of the
aggregate amount of debt outstanding under the company direct and
contingent facilities. The lenders who are a party to the Support
and Override Agreement have agreed to forbearances in respect of
certain events of default under their relevant facilities, while
the Support and Override Agreement is effective, including (i)
non-payment of amounts due under the company's financing
agreements, (ii) any deterioration in the financial or operational
performance of the Group as a result of COVID-19, and (iii) any
breach of any financial covenant under the company's financing
agreements. The Support and Override Agreement governs and provides
a stable framework for company ongoing liquidity needs as the
Company continues to work on the milestones set out in the
agreement. Details of the restructuring agreement and milestones
are set out in the Company's previous announcement. These
milestones include Strategic Transactions required for successful
implementation of the Support and Override agreement.
Country performance summary
Nigeria
UBN has shown resilient performance which has resulted in profit
after tax increasing by 3.1% in local currency for continued
operations for 12-month period ended December 2020 in comparison to
12-month period ended December 2019. Including the results of the
discontinued operations, profit after tax declined by 6.1% in local
currency for 12-month period ended December 2020 in comparison to
12-month period ended December 2019.
Overall, UBN sustained its cost to income ratio to 75.4% for
12-month period ended December 2020 compared to 74.1% reported in
December 2019. The NPL ratio has decreased to 4.0% for 12-month
period ended December 2020 from 5.8% for 12-month period ended
December 2019. The NPL coverage ratio remained strong at 127.5% for
the period ended 31 December 2020 (31 December 2019: 138.1%).
Despite the impact of the contraction in earnings, UBN remains
well capitalised with its CAR at 17.5% at December 2020, well above
the regulatory minimum of 15%.
UBN continues to show resilience in 2021 and is well capitalized
over its regulatory minimum, NPL ratio hovering at 4.3% and
sustained profitability with cost to income ratio hovering at
76%.
Zimbabwe
Zimbabwe's recession persisted in 2020 amid continued structural
economic weaknesses, adverse climate conditions and the outbreak of
the COVID-19 pandemic. Inflation reached a peak of 838%
year-on-year in July 2020, and then trended downward to 349%
year-on-year in December 2020. The economy has benefited from the
currency reforms, which led to the adoption of the auction exchange
rate system in June 2020.
African Banking Corporation of Zimbabwe Limited reported a loss
of $0.45 million for the 14-month period ended February 2021
compared to reported profit of $7.8 million for the 12-month period
ended December 2019. The numbers have been impacted by an increase
in loss on net monetary position of $5.8 million compared to
corresponding period due to hyperinflation. As part of balance
sheet management, the Bank invested in inflation and exchange rate
hedging assets, which resulted in net asset value being sustained
year-on-year.
Botswana
Botswana's economy is estimated to have contracted by a record
of 10% during the year as the country suffered from the collapse of
international trade, which adversely affected diamond exports and
tourism. In response to the pandemic, the Bank of Botswana ("BoB")
cut its policy rate by 100 bps in April 2020 to provide sufficient
liquidity in the economy.
The banking subsidiary in Botswana reported profit after tax of
$8.3 million for the 14 months ended February 2021 compared to
profit of $11.3 million for the 12-month period ended December 2019
despite the significant headwinds posed by the COVID-19 outbreak.
Profitability was supported by cost reduction and containment
measures implemented.
Discontinued operations
Zambia delivered a solid performance for the year after posting
a profit after tax of $5.2 million for the
14-month period ended February 2021 compared to a loss of $9.8
million in 2019 largely due to increase in interest income,
improved FX trading income and reduction in impairment charge.
Interest income was propelled by earnings on short term structured
finance deals and improved yields on government securities.
Rwanda reported a profit of $4.8 million for the 14-month period
ended February 2021 compared to the profit of $2.6 million for the
12-month period in 2019. This performance has been supported by
cost reduction and containment initiatives.
In Tanzania, performance was adversely impacted by the reduction
in transactional activity caused by the COVID-19 pandemic and
liquidity challenges, partially offset by recoveries of loans
written off in previous years.
Performance summary
The Group recorded an adjusted net profit of $1.5 million for
the 14-month period ended 28 February 2021 (12-month period 31
December 2019: adjusted profit of $5.8 million).
Statement of comprehensive income review
Total income
Total income at $186.2 for the 14-month period ended 28 February
2021 has shown a decline due to decrease in net interest
income.
Table 1: Total income for the year ended 28 February 2021
$'million 14 months to 28 February 2021 12 months to 31 December 2019
Continuing Discontinued Total Continuing Discontinued Total
----------- ------------- ------ ----------- ------------- ------
Net interest income 1.1 81.1 82.2 11.4 74.8 86.2
---------------------- ----------- ------------- ------ ----------- ------------- ------
Non-interest revenue 51.7 52.3 104.0 53.7 49.9 103.6
---------------------- ----------- ------------- ------ ----------- ------------- ------
Total income 52.8 133.4 186.2 65.1 124.7 189.8
---------------------- ----------- ------------- ------ ----------- ------------- ------
Net interest income
Net interest income declined by $4 million resulting from an
increase in interest expense. This was mainly as a result of an
increase in borrowed funds and the impact of liquidity pressures
experienced in some of our markets, resulting in more expensive
deposits. This is reflected in the increase in the cost of funds to
6.6% for the 14-month period ended 28 February 2021 from 5.9% as
reported for the 12-month period ended 31 December 2019.
Non-interest income
Non-interest income increased by $0.4 million resulting from
improved earnings from digital channels and offset by a reduction
in loan-related fees and foreign currency trading income. Lower
loan growth and decline in business activities resulting from the
impact of the COVID-19 pandemic negatively impacted the Group's
ability to improve non-interest income during the period.
Total expenses
Total expenses declined to $213.1 million ($209.5 million
excluding one-offs) for the 14-month period ended 28 February 2021
from $219.5 million reported for the 12-month period ended 31
December 2019, largely due to strategic cost management initiatives
across the Group. Cost to income ratio decreased to 114.4% from
115.7% reported in December 2019; however, on an adjusted operating
profit basis, cost to income ratio decreased to 106.1% in the
14-month period ended 28 February 2021 from 106.6% for the 12-month
period ended 31 December 2019).
Staff costs decreased by 2.4% from $93.0 million reported for
the 12-month period ended 31 December 2019 to $90.8 million
reported for the current period ended 28 February 2021, while the
contribution to total expenses decreased from 42.6% to 42.4%.
The Group continued to focus on reducing holding companies'
expenses and for the 14-month period ended 28 February 2021,
normalised expenses (net of restructuring costs) holding companies
declined by $6.56 million for the 14-month period ended February
2021 compared to the 12-month period ended 31 December 2019. This
has been achieved due to reduction in head count across the
Holdcos, cost rationalization and process reengineering.
Impairment charges on financial assets
The loan book reduced by 9.9% during the 14-month reporting
period ended February 2021, largely due to the conservative credit
appetite, as lending was halted in the high-risk sectors and a
cautious approach was taken for all new lending. COVID-19 related
restrictions including lockdowns and travel restrictions also
negatively impacted on Customer drawdown. Notwithstanding the 9.8%
reduction in the loan book, the NPL ratio remained constant at
11.4%, however reduced in actual stock by $14.6 million or 10.2% to
end the period at $142.6 million. This was due to proactive
remedial management strategies and hard collection efforts in some
high value cases.
While most of the retail loan portfolio consists of lending to
the government sector, constrained incomes have resulted in subdued
increase of credit in some markets. Corporate and SME borrowers in
sectors such as transport, tourism, hospitality, private education
and manufacturing have experienced increasing levels of default
which are the main drivers of increases in NPL and impairments.
Whilst these loans are collateralized by immovable property,
adjustments have been made to the expected recovery rates and time
to liquidate these assets, as prices remain under pressure and
asset disposals take longer to effect.
Several enhancements were made to the ECL model during the year.
Some of these enhancements included development of separate PD term
structures for stage 1 and stage 2 loans; improving the ECL code to
compute a weighted ECL based on base, best and worse-case scenarios
to account for non-linearities in the scenarios and to incorporate
forward looking information; development of a macro- economic
linkage model to estimate changes in macro-economic factors on PD;
introduction of a Floor LGD as a minimum ECL appropriate for each
of the country portfolios and segmenting the retail secured and
unsecured loan portfolios to accommodate for the different PD
behaviour of these portfolios.
Share of profit of associates
This represents the Group's 47.68% share of UBN's profit for the
14-month period ended 28 February 2021. The impact of the
amortisation of acquisition-related intangible assets is also
included.
The Group booked $25.5 million of profit from UBN for the
14-month period ended Feb 2021 compared to $31.2 million for
12-month period ended Dec 2019. The reduction in profit has been
due to the change in exchange rate index from Central Bank Rate to
Nafex and devaluation of the currency. (Exchange rate on February
2021: 410 Naira, Exchange rate on December 2019: 306 Naira)
Statement of financial position review
Loans and advances comprise 22.3% of total assets; Cash,
short-term funds and marketable securities represent 10.7%;
investment in associate (UBN) balance accounts for 18.1%; goodwill
and other intangible assets make up 2.4%; other assets (made up of
derivatives, property and equipment, investment property,
prepayments and other receivables etc.) make up 4.3% of total
assets, while assets included in disposal groups account for the
balance of 42.2%.
Total assets contracted by 0.7% reflecting the impact of
currency movements in the Group's core markets (Botswana and
Nigeria) and the slow-down in business operations resulting from
the disruptions caused by COVID-19.
Deposits comprise 29.5% of the total liability base and
represent 25.8% of the aggregate of liabilities and equity. The
loan to deposit ratio for the period was 86.3% (December 2019:
89.0%).
Loans and deposits
Table 2: Loans and deposits composition by country at 28
February 2021
28 February 2021 31 December 2019 Var CC Var Var CC Var
($'m) ($'m) (%) (%) (%) (%)
Loans Deposits Loans Deposits Loans Deposits
Continuing operations
Botswana 549.4 581.5 606.3 662.5 (9.4) (6.9) (12.2) (9.8)
Zimbabwe 18.4 91.0 22.7 61.2 (18.9) (9.6) 48.7 65.8
Other 12.7 - 15.1 - (15.9) (15.9) - -
Total 580.5 672.5 644.1 723.7 (9.9) (7.2) (7.1) (3.9)
--------- ------- ------
Loans and deposits
As presented in Table 2 above, loans and advances to customers
declined by 9.9% (7.2% on a ccy basis) while deposits also declined
by 7.1% (3.9% on a ccy basis).
Decline in loans and deposits was attributable to the impact of
currency devaluation in Botswana and Zimbabwe and the slowdown in
business activities due to the COVID-19 pandemic. The economic
environment was challenging in the period as a result of the
business disruptions caused by the pandemic. Market liquidity
constraints in our countries of operations hindered the writing of
new loans (as there was a market-wide decline in the demand for
credit) and resulted in the loss of some significant deposits.
Term deposits remained the highest contributor to deposits,
making up 58.2% of total deposits as at the end of February 2021
(31 December 2019: 72.0%). There was an increase in overnight
deposits/interbank borrowings reflecting the tight liquidity
situation experienced in Botswana and Zimbabwe.
Credit quality
NPLs as a percentage of the loan book remained constant at 11.4%
(31 December 2019: 11.4%). This is due to the impact of the
COVID-19 pandemic on business activities which in turn increased
the credit risk on the Group's loan portfolio.
Capital position
As at 28 February 2021, all of Atlas Mara's operating banks and
affiliates complied with local minimum capital requirements
relevant in respective countries, as summarised below.
Table 3: Capital adequacy ratios
February December Regulatory
2021 2019 Minimum
------------------------ -------- -------- ----------
Continuing operations
------------------------ -------- -------- ----------
Botswana 18.4% 18.6% 12.5%
------------------------ -------- -------- ----------
Zimbabwe 35.9% 58.7% 12.0%
------------------------ -------- -------- ----------
Discontinued operations
------------------------ -------- -------- ----------
Mozambique 12.1% 19.6% 12.0%
Rwanda 23.4% 23.5% 15.0%
------------------------ -------- -------- ----------
Tanzania 12.9% 16.6% 12.0%
------------------------ -------- -------- ----------
Zambia 12.8% 14.3% 10.0%
------------------------ -------- -------- ----------
Investment in associate: UBN
Our total shareholding in Union Bank of Nigeria was 47.68% as at
28 February 2021 compared to 49.97% as at 31 December 2019. The
investment is equity-accounted for in the statement of financial
position as an investment in associate, with a closing balance of
$469.9 million (December 2019: $580.6 million). Reduction in
carrying value is mainly attributable to the dividend income earned
from UBN in the year of $8.5 million and the impact of currency
translation losses of $114.2 million.
Goodwill and other intangible assets
The statement of financial position incorporates goodwill and
intangible assets of $63.9 million at 28 February 2021 (31 December
2019: $73.0 million). The decline in this balance is attributable
to the amortisation for the period as well as currency translation
losses on the balances reported by Group's foreign operations (UBN
and Botswana).
Statement of Equity
The net equity balance of $330.5 million at 28 February 2021 was
down from $547.2 million at 31 December 2019. $145.9 million of the
reduction was due to FX translation losses taken by the Group
during the
14-month period ended February 2021. As of 28 February 2021, the
tangible book value of the Group was $2.01 per share (31 December
2019: $2.87 per share) and book value per share of the Group $1.99
(31 December 2019: $2.97).
Segment information
The segmental results and statement of financial position
information represents management's view of its underlying
operations.
Nigeria : Through our 47.68% stake in UBN and Board
representation, Atlas Mara has a footprint in Nigeria, Africa's
largest economy. Our share of profit from our stake in UBN is based
on UBN's reviewed management accounts for the 14-month period ended
28 February 2021.
Botswana: Represents the Group's 78.15% investment in BancABC
Botswana and its subsidiaries. BancABC Botswana has been listed on
the Botswana Stock Exchange since 2018. The Group is currently in
the process of completing the sale of its stake to Access Bank Plc.
This transaction is expected to be completed before the end of the
year.
Zimbabwe: Represents the Group's 100% owned investment in
BancABC Zimbabwe and its subsidiaries.
Discontinued operations
Our operations in Mozambique, Tanzania, Zambia and Rwanda remain
classified as discontinued operations as the Group. On 17 May 2021,
the transaction was completed for the sale of African Banking
Corporation Mozambique Limited. On 25 August 2021, the transaction
was completed for the sale of ATMA shareholding in Banque Populaire
du Rwanda Plc ("BPR").
Corporate
Included in this segment are Atlas Mara Limited, the BVI
incorporated holding company, Atlas Mara Management Services, the
Dubai subsidiary, and all other intermediate Group holding
entities, also referred to as the Shared Services and Centre.
Segment report for the year ended 28 February 2021
$'million Group Continuing operations Discontinued
operations
---------------------- ------- -------------------------------------- ------------
Botswana Zimbabwe Nigeria Corporate
---------------------- ------- -------- -------- ------- --------- ------------
Total income 186.2 55.4 51.0 - (53.6) 133.4
Impairment charge
on financial assets (12.2) (0.6) (0.8) - 1.5 (12.3)
---------------------- ------- -------- -------- ------- --------- ------------
Total expenses (213.1) (42.5) (31.1) - (16.6) (122.9)
---------------------- ------- -------- -------- ------- --------- ------------
Net loss on monetary
position (16.9) - (13.0) - (3.9) -
---------------------- ------- -------- -------- ------- --------- ------------
Share of profits
of associate 25.5 - - 25.5 - -
(Loss)/profit before
tax (30.5) 12.2 6.2 25.5 (72.6) (1.8)
Net change on IFRS
5 remeasurement (1.4) - - - - (1.4)
(Loss)/profit after
tax and NCI (58.7) 6.5 (0.4) 25.5 (78.2) (12.0)
Loans and advances 580.5 549.4 18.4 - 12.7 -
Total assets 2,608.6 727.9 197.7 470.6 111.0 1,101.4
---------------------- ------- -------- -------- ------- --------- ------------
Total liabilities 2,278.1 619.9 137.1 - 498.5 1,022.6
---------------------- ------- -------- -------- ------- --------- ------------
Deposits 672.5 581.5 91.0 - - -
Net interest margin
- total assets 3.2% 5.9% 4.2%
--------------------------------
Net interest margin
- earning assets 4.7% 6.0% 6.4%
---------------------- ------- -------- -------- ------- --------- ------------
Cost to income ratio 114.4% 76.8% 60.9%
Statutory credit
loss ratio 1.2% 0.1% 4.4%
---------------------- ------- -------- --------
Return on equity (20.5%) 6.0% (0.7%)
Return on assets (2.3%) 0.9% (0.2%)
---------------------- ------- -------- --------
Loan to deposit ratio 86.3% 94.5% 20.2%
---------------------- ------- -------- -------- ------- --------- ------------
Segment report for the year ended 31 December 2019
$'million Group Continuing operations Discontinued
operations
Botswana Zimbabwe Nigeria Corporate
Total income 189.8 50.1 38.3 - (23.2) 124.6
Loan impairment charge (11.4) 1.5 (0.2) - (0.3) (12.4)
Operating expenses (230.6) (37.4) (21.6) - (33.6) (138.0)
----------------------------- ------- -------- -------- ------- --------- ------------
Share of profits of
associate 31.1 - - 31.2 (0.1) -
----------------------------- ------- -------- -------- ------- --------- ------------
Profit/(loss) before
tax (21.1) 14.2 16.5 31.2 (57.2) (25.8)
----------------------------- ------- -------- -------- ------- --------- ------------
Loss on IFRS 5 remeasurement (105.5) - - - - (105.5)
Profit/(loss) after
tax and NCI (143.2) 8.9 7.8 31.2 (56.4) (134.7)
Loans and advances 644.1 606.3 22.7 - 15.1 -
Total assets 2,627.4 856.7 161.3 580.6 49.2 979.6
Total liabilities 2,080.2 736.1 107.9 - 362.0 874.2
----------------------------- ------- -------- -------- ------- --------- ------------
Deposits 723.7 662.5 61.2 - - -
----------------------------- ------- -------- -------- ------- --------- ------------
Net interest margin
- total assets 3.3% 4.5% 6.1%
--------------------------------
Net interest margin
- earning assets 4.7% 5.0% 14.4%
----------------------------- ------- -------- -------- ------- --------- ------------
Cost to income ratio 115.7% 74.6% 56.4%
----------------------------- ------- -------- --------
Statutory credit loss
ratio 1.0% (0.2%) 0.8%
----------------------------- ------- -------- --------
Return on equity (28.5%) 11.2% 14.7%
Return on ----assets (5.5%) 1.3% 4.8%
----------------------------- ------- -------- --------
Loan to deposit ratio 89.0% 91.5% 37.1%
----------------------------- ------- -------- -------- ------- --------- ------------
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