TIDMATMA
RNS Number : 3647K
ATLAS Mara Limited
01 September 2021
31 August 2021
Atlas Mara Limited
Atlas Mara audited results for the 14-month period ended 28
February 2021
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.
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
---------------------------------- ------------ -------- -------- --------
ATLAS MARA LIMITED
ANNUAL FINANCIAL REPORT FOR THE 14-MONTH PERIODED 28 FEBRUARY
2021
BUSINESS REVIEW
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.
EXECUTIVE CHAIRMAN'S LETTER
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
FINANCE REVIEW
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%
----------------------------- ------- -------- -------- ------- --------- ------------
Omar Khan
Chief Financial Officer
CORPORATE GOVERNANCE REPORT
Introduction
The governance structures and practices detailed in this Report
underpin the Company's purpose and strategic objectives. We believe
that building a sound corporate governance framework is the bedrock
of the Company. Indeed, although the Company is not required to
comply with the UK Corporate Governance Code issued by the
Financial Reporting Council in 2018 (the 'Code') because of its
standard listing, the Company nevertheless has taken the decision
to continue to voluntarily apply the provisions of the Code to the
greatest extent possible in order to drive sound decision-making
and facilitate effective and prudent management of the Company.
Throughout this report, we highlight our progress to date in
complying with the recently revised provisions of the Code that
came into force on 1 January 2019. A copy of the revised Code can
be found on the FRC's website at
https://www.frc.org.uk/directors/corporate-governance-and-stewardship/uk-corporate-governance-code.
In addition, the Company also applies the corporate governance
regime applicable to the Company pursuant to the laws of the
British Virgin Islands ('BVI'). The corporate governance standards
outlined in the BVI Business Companies Act 2004 have been
incorporated into the Company's memorandum and articles and
association. The Board has also voluntarily adopted a share dealing
code which incorporates the provisions relating to transactions in
securities by directors and persons discharging managerial
responsibilities ('PDMRs') contained in the Market Abuse
Regulations (EU 596/2014). The Board is responsible for taking all
proper and reasonable steps to ensure compliance with these rules
by the Directors and PDMRs.
How We Comply with the Principles of the Code
Although Atlas Mara is a standard listed company on the London
Stock Exchange, we continue to work towards achieving conformity
with the provisions of the Code where feasible, taking into account
the Company's size, operations, markets and strategic objectives.
Below we highlight the measures we've taken to comply with the
principles set out in the Code and also provide explanations for
instances where our practices depart from the provisions set out in
the Code.
The first table below sets out how we applied the principles of
the Code for the financial year ended 28 February 2021, and the
second table below identifies and explains areas where we continue
to work towards achieving full conformity with the standards of the
Code.
Section of the Code How we comply
-----------------------------------------------------------------
Section 1. Board Leadership and Company Purpose
--------------------------------------------------- -----------------------------------------------------------------
A. Generating Long-term Value
* The Board recognises its responsibility for to
provide effective oversight of the Company's business
for the benefit of all stakeholders.
* In response to the unprecedented challenges wrought
across the globe and our jurisdictions of operation
by the COVID-19 pandemic, the Board met frequently to
monitor the health and economic effects of the
pandemic on our businesses, as well as the effects of
the various mandatory lock downs and government
policies on our businesses. The Board also monitored
the resilience of the businesses in response to the
deep stress wrought upon our operations and
customers. The Board ensured a range of tools were
available to the operations to help weather the
health and economic effects of the pandemic,
including the appropriate policy, hygiene and
technology tools.
* Every year the Board holds a focused strategy session
that provides the Directors with an opportunity to
reassess the Company's vision and ensure financial
and non-financial targets are set in alignment with
the Company's overarching purpose and long-term
objectives. As previously reported, in the year 2019,
the Board undertook a review of the Company's
strategic options, assessing the risks and
opportunities in the Company's countries of operation
to determine the key strategic priorities and actions
for 2019 and beyond to drive shareholder value. The
process included a review of each banking operation
to ensure that top five market leadership is
practicably achievable in the near term, or to
explore transactions that will reduce risk exposure
where such leadership is unlikely on a stand-alone
basis. In parallel, the Company was also engaged in a
strategic fundraising initiative targeting both debt
and equity, to be utilized to support operations as
well as address a balance sheet realignment given
debt maturities expected in 2020. The strategic
review resulted in a number of strategic initiatives
aimed at creating a more sustainable business model.
In response to the effects of the COVID-19 pandemic
which fundamentally affected the strategic
transactions, the Board pivoted the strategic
priorities to focus on steps that will assure a
stable platform and sustainability.
* The Board also understands the importance of
preserving value through effective risk management
and oversight. To this end, the Board continuously
works to ensure that internal reporting mechanisms
are operating effectively in order to receive timely
information relating to emerging material risks
affecting the Company's operations, and monitor
measures being taken to manage such risks.
--------------------------------------------------- -----------------------------------------------------------------
B. Aligning Purpose and Culture
* The Board is responsible for setting the right tone
at the top and shaping the cultural norms that
influence behaviour and decision-making throughout
the Company.
* In addition to the annual strategy session, the Board
sets the tone and regularly monitors culture on an
ongoing basis throughout the year. Directors receive
regular reports from the Head of Human Capital to
enable them to oversee staff-related issues or
concerns and measures being taken by management to
address them.
* Incentive structures are used to encourage the right
culture and behaviour. The Board also receives
regular reports from the Group General Counsel and
Chief Compliance Officer on compliance or as well as
on matters which may signal concerns around culture
that require close monitoring and action.
* Further details on the Company's culture and values
can be found under the Corporate Governance Report
--------------------------------------------------- -----------------------------------------------------------------
C. Effective Controls and Risk Management
* The Audit, Risk and Compliance Committee is
responsible for supporting the Board in overseeing
the effectiveness of the Company's internal controls
and risk management systems.
* In response to the challenges presented by the
COVID-19 pandemic, the Board received frequent stress
testing reports and challenged the scenarios on
stress testing of the portfolios and operations of
the Company and its subsidiaries. The Board also more
frequently monitored risk-mitigation strategies and
implemented early warning requirements for a range of
matters.
* The Committee receives regular updates from the Chief
Risk Officer, Head of Internal Audit, Group General
Counsel and Chief Compliance Officer and Chief
Financial Officer and closely monitors emerging risks
identified by management, and oversees the measures
being taken to manage such risks. A comprehensive
Risk Report is included below.
* The Board oversees the Company's digital strategy and
monitors the Company's information technology
capabilities to ensure effective management of
information security, fraud, cyber security risks.
* The Board also reviews the Company's infrastructure
to ensure it is capable of meeting the short and
long-term information technology needs of the
Company.
* In addition, through the anonymous whistleblowing
line externally managed, the company receives reports
on matters of concerns which are thoroughly invested
and addressed.
* In addition, through regular internal and external
audits and assessments, the Board oversees areas
identified for improvement, which are regularly
monitored through reports to the Audit, Risk and
Compliance Committee.
--------------------------------------------------- -----------------------------------------------------------------
D. Effective Stakeholder and Shareholder
Engagement * The Company regularly evaluates its stakeholder
engagement practices to identify ways to improve how
we connect and communicate with our colleagues,
customers, shareholders, regulators, business
partners and the communities we operate in.
* During 2020, the Chairman of the Board and Executive
Management met with many of the major shareholders of
the Company to interact on various topics on the
minds of the shareholders.
* The Board regularly requests reports from management
to ensure that the Non -- Executive Directors have an
understanding of the views of major shareholders and
senior management regularly provide updates to the
Board to ensure awareness of the issues and concerns
of major shareholders.
* The Board leverages the Investor Relations Department
to keep abreast of shareholder feedback.
* The Company's AGM provides an additional platform to
engage constructively with our shareholders. The
Company's last AGM was held on 30 October 2020. At
this meeting, all resolutions put to the shareholders
were passed on a poll with votes cast in favour of
the proposed resolutions ranging from 82.5% to 100%
of the total votes cast. None of the resolutions
proposed by the Board at the 2020 AGM received 20% or
more votes cast against the resolution.
--------------------------------------------------- -----------------------------------------------------------------
E. Sound Workforce Policies and Practices
* The Remuneration Committee is responsible for
advising the Board in respect of the Company's
workforce policies and practices aimed at attracting
talented staff and aligning managements with long
term interest of the Company. The Committee receives
quarterly updates from the Head of Human Capital and
monitors how rewards, incentives, terms of employment
and disciplinary measures are structured to impact
recruitment, retention, development and performance
in the workplace.
* The company has in place comprehensive work force
policies and procedures focused on ensuring the right
skills and work practices, fostering diversity,
preventing harassment and ensuring sustainability of
our businesses.
* The Company has put in place measures for staff
members to raise concerns confidentially. An
anonymous whistleblowing service provides a secure
and confidential means for staff and other
stakeholders to raise any concerns regarding criminal
or unethical activity. Compliance personnel undertake
awareness campaigns to ensure staff are aware of
reporting procedures and feel encouraged to speak up
and utilize the whistleblowing service.
* Remuneration Committee as well as the Audit, Risk and
Compliance Committee receive regular and
comprehensive reports on whistleblowing reports and
any issues or internal investigations arising from
such reports. The Committee is responsible for
monitoring how these issues are being addressed by
management.
--------------------------------------------------- -----------------------------------------------------------------
Section 2. Division of Responsibilities
--------------------------------------------------- -----------------------------------------------------------------
F. Role of the Board Chair
* The Board Chair sets the tone for Board discussions,
keeping the full board focused on the organization's
mission, vision, and strategic direction and
facilitating open and constructive dialogue during
the meetings and actively inviting the views of all
Non-Executive Directors. The Board Chair is
responsible for setting the agenda for meetings and
manages the calendar and timetable of meetings,
leveraging the assistance of the Company Secretary.
* The division of responsibilities between the Chair
and Chief Executive are clearly defined, however at
times the Board has for an interim period deemed it
in the best Interest of the Company for the Chair of
the Board to act in an executive capacity, in
particular given the Board's current focus on the
strategic priorities of the Company.
* Since 30 April 2019, the Chairman of the Board has
served as the Executive Chair, thereby taking on an
executive role. In this capacity, the Board Chair is
fully abreast of emerging issues, organization's
goals and strategies and works together with the
executive to achieve the goals of the organization.
--------------------------------------------------- -----------------------------------------------------------------
G. Board Composition and Independence
* The Board is currently composed of five Directors,
two of whom are considered independent.
* The Board delegates certain responsibilities to its
Committees to assist in discharging its functions.
The duties of the Audit, Risk and Compliance
Committee, Remuneration Committee and Nomination
Committee are set out in writing in each Committee's
Terms of Reference, which are available on the
Company's website at
http://atlasmara.com/about-us/corporate-governance/board-c
ommittees/.
* The Board also delegates the operational management
of the Group's business to the Executive Committee,
which executes the strategy set by the Board.
* It is a standard agenda item at most Board meetings
for the Chairman to hold a session with Non-Executive
Directors without the Executive Management in
attendance to openly discuss matters relating to the
business of the Company.
* In 2020, the Chairman held several meetings with the
Non-Executive Directors without the Executive
Management present, to discuss a number of matters
relating to performance and remuneration.
* Rachel Robbins serves as the Board's Senior
Independent Director. The Senior Independent Director
and the Independent Directors constructively and
rigorously challenge the Executive Management team on
matters important to all stakeholders. The
Independent Board members also hold regular
Interaction with senior management to receive reports
on various matters.
--------------------------------------------------- -----------------------------------------------------------------
H. Time Commitment
* On appointment, Directors are notified of the time
commitment expected from them in discharging their
duties. Directors are also expected to disclose any
jobs, external directorships or similar commitments
so that an assessment of available time and
commitment can be independently made by the Company.
* Following their appointment, any external
directorships, which may impact on the existing time
commitments of the Directors, must be agreed with the
Chairman in consultation with the Company Secretary.
External appointments held by the Chairman and all
the Directors on the Board are disclosed under
section Composition of the Board.
* The Board meets regularly to discharge its duties
with meetings held at least once a month, and
in-person every quarter.
* During the reporting period, the Board and Committees
held an aggregate of 28 meetings and received
frequent written updated in between meetings in order
to remain fully abreast of the dynamic and
everchanging challenges wrought by the COVID-19
pandemic. Meeting attendance by the Directors has
been high for all meetings held during this period,
as further detailed under section Board and Committee
meetings.
--------------------------------------------------- -----------------------------------------------------------------
I. Information and Support
* Directors have access to independent professional
advice to discharge their responsibilities as and
when required and also ensure that the Board is kept
up to date on regulatory developments and corporate
governance requirements.
* The Board receives monthly written and verbal reports
on the performance of the operating businesses, key
or emerging risks, engagement with key stakeholders,
and progress made in implementing key strategic
initiatives. At each monthly Board meeting, the Board
has an opportunity to engage and challenge management
on these matters.
--------------------------------------------------- -----------------------------------------------------------------
Section 3. Composition, Succession and Evaluation
--------------------------------------------------- -----------------------------------------------------------------
J. Appointments to the Board
* The Nomination Committee leads the process for Board
appointments and ensures that the Board and its
Committees have an appropriate balance of skills,
experience, availability, independence and knowledge
of the Company to enable them to discharge their
responsibilities effectively.
* The Nomination Committee takes into account a variety
of factors including skills and experience needed to
enhance diversity on the Board. Each Board candidate
is interviewed by the Non-Executive Directors and
relevant members of the Executive Committee prior to
appointment.
* During 2020 the Committee spent time reviewing the
composition of the Board and its Committees with a
keen focus on ensuring that the Board was composed of
the appropriate skills to deliver on the strategic
initiatives.
* Amadou Raimi stepped down from the Board in
2020.Following this change, it was vital for the
Committee to rigorously assess the balance of skills
and expertise on the Board and its Committees and
make recommendations to the Board on Committee
reassignments as necessary, to ensure each Committee
was appropriately composed. The Committee concluded
that the current number of Board members was the
right size to help achieve the Company's goals while
also being consistent with corporate governance
requirements.
* The Committee oversaw the nomination process for
Jawaid Mirza, to the chairmanship of the Audit Risk
and Compliance Committee.
* The Committee acknowledges the need to continue to
improve gender balance and diversity across the Board
and senior management team. The Committee will
continue to seek opportunities to address diversity
and inclusion.
* The Committee will also continue to ensure that our
Directors are well-equipped to provide the
appropriate oversight to meet the challenges wrought
upon the globe by the COVID-19 Pandemic.
* The Committees Terms of Reference are available on
the Company website at
http://atlasmara.cI-us/corporate-governance/board-committe
es/
--------------------------------------------------- -----------------------------------------------------------------
K. Board Composition and Skills
* The Board is currently composed of five Directors who
possess the right mix of skills, background and
knowledge relevant to driving the company's strategic
imperatives, and the particular challenges and
opportunities faced by the Company. Further details
on the Directors' backgrounds and experience can be
found under section Leadership and is included on the
Company website.
* Michael Wilkerson, the current Chairman of the Board,
assumed the position of Board Chair in February 2019
and has held the position for less than nine years.
* Although not applicable to the Company at this time,
In accordance with the company's policy, any
non-executive Director who has served for more than
nine years will be thorough reassessed and only
presented for annual re-election if consistent with
the strategic requirements.
--------------------------------------------------- -----------------------------------------------------------------
L. Board Evaluation
* Every year, the Board conducts a formal and rigorous
evaluation of its own performance and that of its
Committees and individual Directors. The annual
evaluation is an important exercise that offers
valuable insight into how effectively the Board is
working together to achieve its objectives.
* The Board Chair works with the Group General Counsel
and Company Secretary to oversee the annual
evaluation process. The Board evaluation is tailored
specifically for the Company and designed to elicit
constructive feedback and identify areas that are
working well and those requiring improvement.
* Considering the challenges posed by the COVID-19
pandemic, the 2020 Board evaluation did not take
place.
--------------------------------------------------- -----------------------------------------------------------------
Section 4. Audit, Risk and Internal Controls
--------------------------------------------------- -----------------------------------------------------------------
M. Internal and External Audit
* The Audit, Risk and Compliance Committee is
responsible for reviewing and reporting to the Board
on the Group's financial performance, audit matters,
internal controls and risk management systems, the
Company's compliance with legal and regulatory
requirements, and the independence and effectiveness
of the external auditors.
* The Committee meets regularly throughout the year and
at every meeting receives detailed reports from the
Company's CFO, Head of Internal Audit, Chief Risk
Officer and Group General Counsel and Chief
Compliance Officer.
* The Chairman of the Committee provides regular
updates to the Board following every Committee
meeting. The Chairman of the Committee also regularly
monitors the Company's financial reporting processes,
meeting with the external auditors every quarter and
providing updates to the Board. In addition, the
Chairman of the Audit Committee receives one-on-one
updates from the Head of Internal Audit, Chief
Financial Officer and Group General Counsel, on a
regular basis.
* Full details on the Committee's duties and
responsibilities are set out in its Terms of
Reference, which are available on the Company's
website at
http://atlasmara.com/about-us/corporate-governance/bo
ard-committees/
* During the reporting period, the Committee focused on
the following matters, especially as it relates to
the preparation of the consolidated financial
statements of the Atlas Mara Group.
o Provided oversight, ensuring the balanced nature and
reliability of accounting estimates.
o During the year, the Committee focussed on the following
estimates specifically and performed
the activities as set out below:
Credit impairments
o Reviewed, discussed and assessed the detailed credit risk
report presented by the head of
risk on a quarterly basis.
o Received frequent stress-testing reports on the portfolio
and operations, especially to
mitigate risks in response to the COVID-19 pandemic
o Challenged management's assumptions specifically in terms
of high risk portfolios and appropriateness
of impairments held against specific large exposures.
Valuation of financial instruments
o The committee reviewed and assessed the report presented
by management and challenged management
on the appropriateness of the assumptions and inputs
applied in determining the calculations.
o Valuation of investment in associate
o Reviewed and debated the valuation report presented by
management.
o Challenged management's assumptions and inputs,
especially those related to the exchange
rate and risk adjusted discount rate.
Goodwill impairment assessment
o The Committee reviewed the financial forecasts and
challenged management's assumptions and
inputs, especially those related to the exchange rate and
risk adjusted discount rate.
o Valuation and ongoing or new classification of the assets
and related liabilities included
in disposal groups held for sale
o Evaluated and challenged assumptions and inputs used by
management in determining the classification
and fair values of the assets and related liabilities of
the disposal groups held for sale
in line with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations.
Events after the reporting date
o Reviewed management's justification for treating the
event as a non-adjusting event in the
28 February 2021 consolidated financial statement.
Going Concern
o Reviewed and debated the key risks to the going concern
of the Group.
o Reviewed and challenged the cash flow forecast presented
by management for the holding company
and Group.
o Reviewed and challenged assumptions in respect of
committed obligations and the impact of
the terms of debt restructuring agreement concluded on 14
July 2021.
Assessment of the External Auditor
o During the reporting period, the committee monitored the
performance, objectivity and independence
of the external auditor, KPMG Inc, including:
o assessment and determination of the scope of KPMG's Group
Audit Plan
o approval of the terms of the audit engagement letter and
approved, on behalf of the Board,
the audit fees payable;
o meetings with the KPMG audit partner to discuss external
auditor's findings with which KPMG
handled the key accounting and audit judgements
o assessment of the independence of the external auditor,
including a review of the non-audit
services provided;
o Assessment of any other matters that could potentially
affect the independence of the auditor.
o As a result of the need for frequent Board meetings in
response to the pandemic and the
strategic initiatives, the Committee met less frequently on
a standalone basis and instead
received frequent updates on a full range of audit matters
during the full Board meetings.
--------------------------------------------------- -----------------------------------------------------------------
N. Financial Reporting
* In accordance with its terms of reference, the
Committee is also responsible for reviewing the
financial accounts of the Company and advising the
Board on whether, taken as a whole they are fair,
balanced and understandable and provides the
information necessary for shareholders to assess the
Company's performance, business model and strategy.
* Every annual report includes a Statement of Directors
Responsibilities which explains the responsibility
Directors have in preparing the Annual Financial
Statements and the Group financial statements in
accordance with applicable law and regulations. The
Statement of Directors Responsibilities for the
reporting period can be found under Statement of
Directors Responsibilities.
The Board's responsibilities in financial reporting include
assessing the Group's ability
to continue as a going concern and disclosing, as applicable,
matters related to going concern.
A statement from the Directors on the going concern of the
Company is set out under section
Going concern assessment (audited).
--------------------------------------------------- -----------------------------------------------------------------
O. Risk Management and Internal Controls
* The Audit, Risk, and Compliance Committee Board
assists the Board in Its oversight of current risk
exposures and future risk strategy and assists the
Board in monitoring and reviewing the effectiveness
of the credit and risk functions in the context of
Company's overall risk management framework. The
Committee also monitors the Company's capability to
identify and manage emerging risks and overall
effectiveness of the Company's internal financial
controls and internal controls and risk management
systems.
* Every annual report includes a comprehensive Risk
Report that sets out the Group's risk management
objectives, approach to measuring and managing risk,
and an assessment of risk covering the applicable
reporting period.
* The Risk Report for the reporting period can be found
under section Risk Report
--------------------------------------------------- -----------------------------------------------------------------
Section 5. Remuneration --
--------------------------------------------------- -----------------------------------------------------------------
P. Aligning Remuneration Policies and Practices to
Long-term Success * The Remuneration Committee is responsible for setting
and overseeing policies on matters relating to
remuneration practices and ensuring they remain
relevant and aligned with the Company's strategy,
talent acquisition, risk appetite, and long-term
objectives of the Company.
* In accordance with its Terms of Reference, the
Committee's responsibilities include setting and
reviewing the remuneration policy for all directors
and the Executive Management team.
* The Committee also advises the Board on the Company's
human resources policies, staff recruitment criteria,
staff development, compensation and benefits, health
and safety, performance evaluation and promotion
criteria, gender equality, discipline and grievance
procedures, diversity, and the overall wellbeing of
employees.
* Full details on the Committee's duties and
responsibilities are set out in its Terms of
Reference, which are available on the Company's
website at
http://atlasmara.com/about-us/corporate-governance/board-c
ommittees/
.
* During the reporting period, in response to the
challenges wrought by the pandemic, the Committee
spent time:
o receiving reports on the health and welfare of the employees,
and approved policies to facilitate
rapid response to the everchanging and dynamic work environment
as a result of the pandemic;
o monitoring the rates of COVID-19 infections among our
employees and received reports on
testing and isolation of employees that were affected;
o approved policies to facilitate a seamless transition to
work-from home. As a result of
the policy changes and tools made available to them, although
many of our employee were affected
by the mandatory work from home policies imposed by governments
in several jurisdictions of
operation for several consequent months, the employees were able
to continue seamlessly continue
to work and serve our customers while working from home; and
o providing oversight in the application of the Company's
remuneration policy to ensure continued
alignment with shareholder interests, by determining the
appropriate balance between immediate
and deferred remuneration for senior management of the Company.
* As a result of the need for frequent Board meetings
in response to the pandemic and the strategic
initiatives, the Committee met less frequently on a
standalone basis and instead received frequent
updates on Human Capital matters during the full
Board meetings.
--------------------------------------------------- -----------------------------------------------------------------
Q. Executive Remuneration
* The Remuneration Committee determines the
compensation of executive management team, as well as
the Executive Chair, and sets policies which create
align incentives and rewards with setting the right
tone and delivering on strategic goals.
* The Executive Management do not participate in Board
discussions relating to their own remuneration. The
Remuneration Committee and the Board meet in an
executive session when determining the compensation
of the Executive team.
--------------------------------------------------- -----------------------------------------------------------------
R. Remuneration Policies and Practices
* The Remuneration Committee oversees the remuneration
policy of the Company and ensures its alignment with
the Company's business strategy and objectives, risk
appetite, values, and the long-term interests of the
Company and its shareholders. The Committee oversees
the Company's human resource policies.
* The Committee also reviews the design of, and targets
for, any performance-related pay schemes, and all
share incentive plans operated by the Company.
* In making compensation decisions, the Committee
reviews proposals from management and quantitative
market data. The Committee relies on its own
knowledge and business judgement to review and
challenge management proposals and make compensation
decisions. The full terms of reference of the
Committee covering the authority delegated to it by
the Board are available on the Company's website at:
www.atlasmara.com.
--------------------------------------------------- -----------------------------------------------------------------
Areas of the Code that the Company Continues to Work On
The table below sets out areas where the Company continues with
efforts to achieve conformity with the Code and explanations for
any areas of deviation.
Section of the Code Provision of the Code Explanation for Areas of Non-Compliance
------------------------------------------------------------
2. Division of Responsibilities Provision 5
* The corporate governance requirements set out in
section 172 of the Companies Act 2006 do not apply to
Atlas Mara since the Company is incorporated in the
BVI and holds a standard listing on the London Stock
Exchange.
-------------------------------- ---------------------- ------------------------------------------------------------
2. Division of Responsibilities Provision 9
* Michael Wilkerson was appointed as Executive Chairman
of the Board effective 6 February 2019. While Michael
Wilkerson is not independent, the Board elected to
appoint him as Chairman of the Board to ensure
continuity in executing the Company's strategic
priorities. With Michael as CEO of Fairfax Africa
Holdings Corporation ("Fairfax Africa"), the largest
shareholder of Atlas Mara, it reflects the commitment
of our largest shareholder to the strategic
priorities to accelerate the transformation of the
Group and create shareholder value. Michael Wilkerson
will remain Chairman of the Board for the foreseeable
future to help oversee the implementation of the
Board's recently announced strategic priorities and
actions.
-------------------------------- ---------------------- ------------------------------------------------------------
2. Division of Responsibilities Provision 12
* In accordance with our standard Board evaluation
practices, the Board Chair's performance is appraised
every year when the Directors conduct their annual
Board evaluation. In light of the challenges
presented by the COVID-19 pandemic in 2020, an
appraisal of the Board Chair's performance during did
not take place.
-------------------------------- ---------------------- ------------------------------------------------------------
3. Composition, Succession and Provision 17
Evaluation * The Nomination Committee is currently composed of
four members, two of whom are considered independent.
While less than a majority of the Committee members
are independent, the composition of the Committee is
appropriate in light of recent changes to the Board's
composition as well as the recently announced
strategic priorities of the Board. Importantly, the
Committee has continued to discharge Its duties
effectively, and notably regularly interacting and
contributing to important strategy decisions. As and
when additional Directors are appointed to join the
Board, Committee compositions will be reassessed to
identify opportunities to appoint additional
independent Directors to the Nomination Committee.
* The Board recognizes the importance of improving
diversity on the Board and senior management team and
remains committed to addressing any gaps in its
future appointments and succession plans.
-------------------------------- ---------------------- ------------------------------------------------------------
3. Composition, Succession and Provision 21
Evaluation * In light of the challenges posed by the COVID-19
pandemic, the 2020 Board evaluation did not take
place.
-------------------------------- ---------------------- ------------------------------------------------------------
4. Audit, Risk, and Internal Provision 24
Control * The Audit, Risk and Compliance Committee is currently
composed of four members, three of whom are
considered independent. While not every member of the
Committee is independent, the Board is satisfied that
at least a majority of the Committee's members are
independent and that the Committee as a whole is
appropriately composed with members that bring the
financial skills and knowledge required to
effectively carry out their duties.
-------------------------------- ---------------------- ------------------------------------------------------------
5. Remuneration Provision 32
* The Remuneration Committee is currently composed of
three members, one of whom is considered independent.
While not every member of the Committee is
independent, the composition of the Committee is
appropriate in light of recent changes to the Board's
composition as well as the recently announced
strategic priorities of the Board. Notably, the
current Committee Chair, Rachel Robbins, is an
independent Director, and the Board is satisfied that
the Committee as a whole brings the knowledge and
experience required to effectively carry out its
duties. Importantly, the Committee has continued to
discharge its duties effectively, and notably
regularly interacting and contributing to important
strategy development and execution decisions, as well
as overseeing efforts to right size the company to
align with the Board's strategic priorities.
-------------------------------- ---------------------- ------------------------------------------------------------
5. Remuneration Provision 34
* As at 28 February 2021, the former Chairman of the
Board, Bob Diamond, held stock options which were
awarded to him as part of a new Management Incentive
Plan that was put in place pursuant to the terms of
the strategic financing transaction executed between
the Company and Fairfax Africa, which closed on 31
August 2017. The current Chairman of the Board,
Michael Wilkerson, does not hold stock options.
-------------------------------- ---------------------- ------------------------------------------------------------
5. Remuneration Provision 41
* As a BVI-incorporated company and with its standard
listing on the LSE, Atlas Mara is not required to
comply with the full disclosure requirements of the
provision and have complied only to the extent
required by IFRS or as disclosed in note 28.3.
-------------------------------- ---------------------- ------------------------------------------------------------
Leadership
Overview of governance structures
The Board of Directors oversees the business of Atlas Mara on
behalf of the Company's shareholders. The Board is accountable for
the long-term success of the Company and delivery of sustainable
value to shareholders. The Board sets the right tone and provides
leadership of the Company within a framework of prudent and
effective controls to appropriately assess and manage risks. The
Board has delegated certain responsibilities to Board Committees to
assist it with discharging its duties. Additionally, the
implementation of matters approved by the Board and oversight of
the day-to-day operations of the Company is delegated to the Atlas
Mara Executive Committee ('EXCO'), which consists of senior
management from the Company's key business lines and functional
areas. Following recent changes made at the senior management
level, in 2020 Atlas Mara's Executive Committee consisted of
Michael Wilkerson, as Chairman of the Executive Committee, Muhammad
Omar Khan (Group CFO); Beatrice Hamza Bassey (Group General
Counsel); Kenroy Dowers (Group MD Strategy and Corporate
Development); Sanjeev Anand (Group MD Retail and Commercial
Banking) and Jonathan Muthige (head of Human Capital).
Role of the Board
Specifically, the Board:
-- sets and reviews the strategy and risk appetite for the
Company;
-- oversees corporate governance activities of the Company, as
well as compliance with the Code and any other corporate governance
code the Board considers appropriate from time to time, as well as
disclosures on corporate governance in the Annual Report and
Accounts;
-- defines the Company's purpose and shared values, and promotes
and monitors its culture;
-- approves capital and operating plans presented by management
for the achievement of the strategic objectives it has set;
-- selects and evaluates the CEO and selected senior management
hires;
-- sets the remuneration policy of the Company and approves the
remuneration of the Executive Management team, as well as the
remuneration of the Board;
-- is responsible for the Company's preparedness to respond in
the event of a crisis;
-- oversees and approves major investments; and
-- reviews annually the Board's terms of reference and its own
effectiveness.
The Board is also responsible for ensuring compliance with the
general secretarial functions required under the BVI Companies Act
and for compliance with the Company's continuing obligations as a
company listed on the Official List and trading on the main market
of the London Stock Exchange. The Company's company secretarial
functions are performed and managed by the General Counsel, who has
been approved as Company Secretary pursuant to BVI legal
requirements.
Matters reserved for the Board
The Board maintains and periodically reviews a formal schedule
of matters that are reserved to, and can only be approved by, the
Board. The full schedule is available on the Atlas Mara website at
http://atlasmara.com/about-us/corporate-governance/governance-framework/.
This schedule covers areas including:
-- the overall direction and approval of the Group's
strategy;
-- changes relating to the Group's capital or corporate
structures;
-- major investments, acquisitions and divestments;
-- risk appetite and oversight of risk and internal control;
-- approval of contracts, loans, repayments, borrowings,
acquisitions and disposals greater than the thresholds established
in the Company's related Schedule of Authorisations; and
-- authorising conflicts of interest where permitted by the
Company's Articles of Association.
The matters that have not been expressly reserved to the Board
are delegated by the Board to its Committees, as set out in their
terms of reference, or to the Executive Committee of the Company.
The Executive Committee executes the Company's strategy and is
responsible to the Board for the management, development and
performance of Atlas Mara and those matters for which the Board has
delegated authority.
Composition of the Board
As at 28 February 2021, the Board was comprised of five members:
the Chairman and four Non-Executive Directors. Effective 7 October
2020, Amadou Raimi, Chair of the Audit Committee, retired from the
Board of Directors of the Company. Following this change, the Board
is currently comprised of 5 members: Michael Wilkerson, as Chairman
of the Board, and Bob Diamond, Rachel Robbins, , Simon Lee, and
Jawaid Mirza as Non-Executive Directors. Further details on the
Board of Directors and its composition are set out under section
Board and Committee meetings and the Directors' Report.
Meetings of the Board
The Board holds regularly scheduled meetings every month with
in-person meetings scheduled each quarter, however, following the
impact of the Covid 19 Pandemic related travel restrictions, all
meetings were conducted via telephone conference In 2020, special
meetings were held in between scheduled meetings as often as
necessary in order to enable the Board to fulfil its role or to
consider and approve corporate activity of the Company. The
Directors allocated sufficient time to the Company to perform their
responsibilities effectively which includes time to prepare for
Board meetings and review information packs circulated to the Board
ahead of each meeting. During the reporting period, the Board and
its Committees held 28 meetings in the aggregate. Board and Board
Committee meetings are conducted in accordance with the articles of
association of the Company.
The Board information packs include detailed reports with
updates on the following key areas: financial performance; risk
management; Internal Audit; legal, compliance and regulatory
matters; banking and operations; Fintech and digital; global
markets and treasury; and corporate development and strategic
initiatives. The reports shared with the Board are agreed and
prepared by in consultation with the Chairman of the Board and
Chairs of the respective Committees. The Board also receives
quarterly reports from external auditors. The management also makes
available ad hoc information at the Board's request and endeavours
to do so in a timely manner to ensure the Board has sufficient time
to review materials.
In the few instances where Directors are unable to attend
meetings due to conflicts in their schedule, they receive papers in
the normal manner and have the opportunity to relay their comments
in advance of the meeting, as well as follow up with the Chairman
if necessary. The same process applies in respect of the various
Board Committees.
The tables under section Board and Committee meetings set out
the attendance by Directors at Board and Committee meetings during
the reporting period.
Committees of the Board
The Board has delegated authority to its Committees to undertake
various tasks on its behalf and to ensure compliance with
regulatory requirements. This enables the Board to operate
efficiently. The Board Committee terms of reference were drafted
with the aim of promoting best practice in corporate governance. A
summary of the terms of reference for each Committee is set out
below. The full terms of reference are available on our website
http://atlasmara.com/about-us/corporate-governance/board-committees/
.
Committee Role and terms of reference Minimum meetings per year
--------------------------------------------
Nomination Leads the process for Board appointments At least twice per year, and more
and ensures that the Board and its frequently as requirements dictate.
Committees have
an appropriate balance of skills,
experience, availability, independence and
knowledge of
the Company to enable them to discharge
their responsibilities effectively.
--------------------------- ------------------------------------------- --------------------------------------------
Audit, Risk and Compliance Reviews and reports to the Board on the At least four times a year in person at
Group's financial reporting, internal appropriate intervals in the financial
controls and reporting and
risk management systems, the Company's audit cycle and otherwise as required.
compliance with legal and regulatory
requirements,
internal audit and the independence and
effectiveness of the external auditors.
--------------------------- ------------------------------------------- --------------------------------------------
Advises the Board on developing an overall At least four times per year, and more
Remuneration remuneration policy that is aligned with frequently as requirements dictate.
the business
strategy and objectives, risk appetite,
values and long-term interests of the
Company, recognising
the interests of all stakeholders.
--------------------------- ------------------------------------------- --------------------------------------------
Board and Committee meetings
The attendance of Directors at Board and Committee meetings
during 2020 is set out below.
Board meeting attendance in 2020(1)
------------------------------------- --------
Michael Wilkerson 20 (20)
------------------------------------- --------
Robert E. Diamond, Jr. 21 (21)
------------------------------------- --------
Rachel F. Robbins 21 (21)
------------------------------------- --------
Amadou Raimi(2) 7 (7)
------------------------------------- --------
Simon Lee 19 (20)
------------------------------------- --------
Jawaid Mirza 21 (21)
------------------------------------- --------
In attendance Absent
Note:
1. Board meetings in 2020 covers period from 1 Jan 2020 to 28 February 2021.
2. Amadou Raimi stepped down from the Board effective 7 October 2020
Audit, Risk and Compliance Committee meeting attendance in 2020(1)
-------------------------------------------------------------------- ------
Amadou Raimi(2) 4 (4)
-------------------------------------------------------------------- ------
Rachel F. Robbins 5 (5)
-------------------------------------------------------------------- ------
Simon Lee 5 (5)
-------------------------------------------------------------------- ------
Jawaid Mirza(3) 5 (5)
-------------------------------------------------------------------- ------
In attendance Absent
Note:
1. Audit, Risk and Compliance meetings in 2020 covers period from 1 Jan 2020 to 28 February 2021.
2. Amadou Raimi stepped down from the Board effective 7 October 2020
3. Jawaid Mirza assumed the role of chairman of the Committee effective 7October 2020.
Remuneration Committee meeting attendance in 2020(1)
------------------------------------------------------ ------
Rachel Robbins 2 (2)
------------------------------------------------------ ------
Robert E. Diamond, Jr. 2 (2)
------------------------------------------------------ ------
Michael Wilkerson 2 (2)
------------------------------------------------------ ------
In attendance Absent
Note:
1. Remuneration Committee meetings in 2020 covers period from 1 Jan 2020 to 28 February 2021.
Nomination Committee meeting attendance in 2020(1)
---------------------------------------------------- ------
Robert E. Diamond, Jr. 1 (1)
---------------------------------------------------- ------
Simon Lee 1 (1)
---------------------------------------------------- ------
Rachel F. Robbins 1 (1)
---------------------------------------------------- ------
Jawaid Mirza 1 (1)
---------------------------------------------------- ------
Michael Wilkerson 1 (1)
---------------------------------------------------- ------
In attendance Absent
Note:
1. Nomination Committee meetings in 2020 covers period from 1 Jan 2020 to 28 February 2021.
What the Board focused its time on in 2020
Strategy and Corporate Development
-- Undertook an assessment of the key priorities and actions for
2020.
-- Considered and approved strategic transactions, including
potential M&A transactions involving certain banking assets of
the Company.
-- Continued to monitor progress with implementing strategic
priorities throughout the year.
-- Ensured strategic objectives were designed to preserve value
for shareholders.
-- Considered and approved leadership and organisational changes
aimed at repositioning the Company.
-- Reviewed the capital and funding structure of the Group's
businesses and assessed strategic proposals for enhancing growth
and financial performance.
-- Oversaw the repositioning of the business and discussions
aimed at restructuring of the Company's balance sheet.
Financial and operational performance of Retail & Commercial
Banking Division
-- Provided leadership and oversight to weather the effects of
the challenges presented by the COVID-19 pandemic including
frequent stress testing and meetings to provide direction on ever
changing environment.
-- Assessed management proposals for addressing key
macroeconomic challenges impacting financial performance and
addressing the health and economic effects of the pandemic.
-- Received and reviewed regular updates on the operating
environment and key drivers of the Company's performance.
-- Assessed and monitored the financial performance of the
Company and its operating subsidiaries against the targets set for
2020.
-- Assessed and approved financial statements to be released to
the market.
-- Oversaw efforts to further streamline the holding company and
remove centralised cost structures
-- Monitored implementation of IFRS 9 requirements.
-- Assessed the liquidity and solvency of the Company.
-- Considered and approved capital injections into subsidiaries
to capitalise subsidiaries to meet regulatory capital requirements
where needed.
-- Considered and approved cost control and growth initiatives
to drive financial performance of the Company.
Risk and Governance
-- Provided oversight and advice on the Company's risk strategy
and effectiveness of the overall risk management framework.
-- Reviewed and received reports on risk management and key risk
exposures.
-- Considered and discussed proposals to enhance internal
controls and risk management systems.
-- Reviewed and monitored effectiveness of the Company's
compliance policies and procedures.
-- Provided oversight over the implementation of the Company's
compliance program.
-- Monitored adherence to the Board Committee terms of
reference.
-- Discussed key regulatory engagement and interactions.
Shareholders and Investors
-- Engaged with shareholders through proactive and Intensive
Investor relations programme of conference calls and regular
updates.
-- Engaged with shareholders in connection with fundraising
initiatives, including prospective divestments targeted at ensuring
focus on the core business of the Company.
-- Discussed shareholders' views and concerns on a regular
basis.
-- Discussed share price performance and investor feedback.
People, Culture and Values
-- Focused on leadership and culture during challenges wrought
by the pandemic.
-- Monitored ongoing implementation of the Company's People
Agenda, aimed at embedding the Company's purpose, culture and
values across the group, and engaging and re-energising staff
around a common vision and unified people proposition.
-- Considered and reviewed compensation structures of senior
management to ensure alignment with values and interests of the
Company.
-- Monitored implementation of cost-rationalisation projects to
ensure operational stability and effective engagement with staff
impacted by organisational changes.
-- Provided oversight over the Company's human resource policies
and received regular updates on staff recruitment and
performance.
-- Monitored ongoing efforts to standardise human capital
policies and procedures across the group.
-- Reviewed incentive structures to ensure alignment with the
Company's purpose, vision and culture.
Effectiveness
Independence
Following the previously reported changes to the Board's
composition during 2019, the Board currently consists of the
Chairman and four Non-Executive Directors, three of whom are
considered to be independent. The two Independent Non-Executive
Directors on the Board are: Rachel F. Robbins and Jawaid Mirza.
Robert E. Diamond, Jr., Non-Executive Director on the Board, is
a co-founder of the Company and an affiliate of AFS Partners LLC,
one of the Founding Entities of the Company that holds Founder
Preferred Shares issued by the Company at the time of its
incorporation. Bob Diamond is not considered independent by virtue
of his role in founding the Company
Out of the 5 current Board members, two were appointed to the
Board pursuant to the terms of the strategic financing transaction
executed between the Company and Fairfax Africa in August 2017:
Michael Wilkerson and Simon Lee. Under this strategic partnership,
Fairfax Africa was granted certain rights to appoint Directors to
the Company's Board, which were incorporated into the Articles of
the Company and approved by the shareholders of the Company at an
extraordinary general meeting held on 14 July 2017. These 2
Directors are not considered independent by virtue of their
appointment to the Board by Fairfax Africa, which holds a
substantial minority interest in the Company.
Following recent changes to the composition of the Board, half
of the Board members, excluding the Chairman, are considered
independent as defined by the 2018 Code. In light of ongoing
strategic initiatives, the composition of the Board will remain as
is, until such time the Board determines appropriate to initiate a
search for additional independent Board members.
Director election
The Code recommends that all Directors be subject to annual
re-election by the shareholders. At the Company's last AGM, all
Directors were submitted for re-election by the shareholders and
were re-appointed accordingly.
Diversity
Atlas Mara remains committed to promoting diversity across the
Group, however the Board acknowledges the need to improve gender
balance across the Board and senior management team. The Company's
policy on diversity is embedded in the Group's Human Capital
Policy, which outlines key principles and guidelines for enhancing
diversity and inclusivity at all levels within the organisation.
Achieving balanced representation is important for encouraging
meaningful dialogue and empowering staff, Management and Directors
to work towards the Company ' s common strategic objectives.
Further details on our values and culture, and commitment to
diversity in the workplace, can be found under section Corporate
Governance.
Accountability
Risk management
The Board recognises its responsibility with respect to risk
management with a particular focus on determining the nature and
extent of the Company's risk appetite for achieving its strategic
objectives.
The Audit, Risk and Compliance Committee takes responsibility
for overseeing the effectiveness of sound risk management and
setting the framework. The Board is very clear that risks and
uncertainties are a necessary facet of the businesses in which we
operate. Within this context, the Board trusts and empowers the
Company's management and employees to manage risks, providing a
framework designed to provide reasonable assurance that our
resources are safeguarded and that the risks and uncertainties
facing the business are being properly assessed, managed and
mitigated.
Internal controls
The Board gives primacy to its responsibility for establishing
and maintaining the Group's system of internal controls. The Board
receives regular reports from management identifying, evaluating
and managing the risks within the business. The system of internal
controls is designed to manage, as opposed to eliminate, the risk
of failure to achieve business objectives and can provide only
reasonable and not absolute assurance against material losses or
misstatements. The Audit, Risk and Compliance Committee reviews the
system of internal controls by way of reports from the Chief Risk
Officer, the General Counsel, the Head of Internal Audit, as well
as the Company's external auditors.
During 2020, the Company's management continued efforts to
strengthen internal controls and ensure a sound internal controls
environment is established and adhered to by all the Company's
subsidiaries. The Audit, Risk and Compliance Committee provided
close monitoring and review of progress being undertaken by
Management to improve internal controls. Management will continue
to strive to ensure key issues are brought to the attention of the
Committee and the Board.
The Board and the Audit, Risk and Compliance Committee has
carried out a review of the effectiveness of the system of internal
controls during the period ended 28 February 2021 and for the
period up to the date of approval of the consolidated financial
statements contained in the Annual Report. The review covered all
material controls, including financial, operational and compliance
controls, and risk management systems. The Board confirms that the
actions it considers necessary have been, or are being, taken to
remedy any significant weaknesses identified from its review of the
system of internal control. This has involved considering the
matters reported to it and developing plans and programmes that it
considers are reasonable in the circumstances. The Board also
confirms that it has not been advised of material weaknesses in the
part of the internal control system that relates to financial
reporting.
Relations with shareholders
The Board emphasises the importance of communicating with its
shareholders to ensure that its strategy, business model and
performance are clearly understood and that it remains accountable
to shareholders.
Responsibility for maintaining regular communications with
shareholders rests with the CFO and other members of the Executive
team, as appropriate. Additionally, Atlas Mara has made available
the Chairman of the Board and the Senior Non-Executive Director to
investors reflecting our desire to promote shareholder access to
the Company. The Company sets itself the target of providing
information that is timely, clear and concise. We have a programme
of communication with shareholders based on our financial reporting
calendar, including the Interim and Annual Report, AGM and the
Investor Relations section of the corporate website at
http://atlasmara.com/investor-relations/.
Investor activity during the last financial year included:
-- earnings calls for investors, analysts and stakeholders in
conjunction with key financial announcements;
-- attendance at various investment bank-sponsored institutional
investor conferences;
-- investor briefings and meetings held virtually; and
-- ad hoc meetings with the Chairman of the Board and other
Non-Executive Directors on request, where calendar and regulatory
requirements allow.
To further support engagement with our shareholders, the senior
management team arranged meetings for investors in our countries of
operations including meetings with the Company's local management
teams.
RISK REPORT
The Group operates in an environment where taking considered
business risks within the jurisdictions in which we operate is key
to delivering on our strategy and to delivering value to
shareholders.
In executing our business strategy, it is important to navigate
uncertainties deftly, to optimise growth opportunities and to
ensure that attendant risks fall within the Group's risk appetite
framework of whichever risk type, with appropriate risk mitigants
in place.
Group risk management objectives
The Board recognises that it is ultimately responsible and
accountable to shareholders for:
-- the process of risk management and the systems of internal control;
-- identifying, evaluating and managing the significant risks faced by the Group;
-- ensuring that effective internal control systems are in place
to mitigate significant risks faced;
-- ensuring that a documented and tested process is in place to
allow the Group to continue its critical business in the event of a
severe incident impacting its activities; and
-- reviewing the efficacy of the internal control system.
The Group risk management function, as mandated by the Board of
Directors is to:
-- coordinate risk management activities across the
organisation, by ultimately becoming the custodian of Atlas Mara '
s risk management culture;
-- analyse, monitor and manage all aspects of exposures across risk classes;
-- ensure risk parameters and limits are set, approved and
implemented and ensure that they are consistently adhered to;
and
-- facilitate various risk management committees as part of the
Group ' s risk management process.
Group risk management objectives
The Group's approach to risk management involves a number of
fundamental elements. The procedures and methodology are enshrined
in the evolving Atlas Mara Enterprise-wide Risk Management ('ERM')
Framework.
The Group's risk appetite sets out the level of risk that the
Group is willing to take in pursuit of its business objectives.
This risk appetite is calibrated against the Group's broad
financial targets including profitability and impairment targets,
dividend coverage and capital levels. The Group's risk
methodologies include systems that enable the Group to measure,
aggregate and report risk for internal and regulatory purposes in
line with best practice.
ERM in business includes the methods and processes used by
organisations to manage risks and identify opportunities related to
the achievement of their objectives. ERM provides a framework for
risk management, which typically involves identifying particular
events or circumstances relevant to the organisation's objectives
(risks and opportunities), assessing them in terms of likelihood
and magnitude of impact, determining a response strategy, and
monitoring progress.
The Group's risk management framework defines the risk
management Principles and Standards followed by the Group. These
Principles and Standards ensure that risks are consistently managed
throughout the Group through a set of internal controls. The
Principles and Standards also ensure that risk awareness filters
down through every level of the Group, and that every employee
understands their responsibility in managing risk. At each
operating subsidiary entity, the following sub-committees,
comprising executives and senior management, are responsible for
dealing with the risks facing the Group in a structured manner:
-- Executive Credit Committee ( ' EXCO Credit ' ) - responsible for credit risk;
-- Assets and Liability Committee ( ' ALCO ' ) - responsible for
interest rate, market, liquidity, counterparty, currency and
capital adequacy risk; and
-- Operational Risk Committee ( ' ORCO ' ) - responsible for
technology, compliance, legal, human resources, reputational,
operational and regulatory risk.
Atlas Mara has adopted the three lines of defence model to
address how specific duties related to risk and control can be
assigned and coordinated within the various business units. The
model's underlying premise is that, under the oversight and
direction of senior management and the Board of Directors, three
separate groups (or lines of defence) within Atlas Mara are
necessary for effective management of risk and control.
The three lines of defence are:
-- Business operations;
-- Risk and control functions; and
-- Internal audit.
Each of the three lines plays a distinct role within Atlas
Mara's wider governance framework. When each performs its assigned
role effectively, the prospects of Atlas Mara being successful in
achieving its overall objectives are highly enhanced.
Role of Atlas Mara Group Risk Management
Atlas Mara Group Risk Management is responsible for maintaining
a culture of risk awareness throughout the Group. While each
business unit is primarily responsible for managing its own risks,
Group Risk Management independently monitors, manages and reports
on all risks facing the Group, as mandated by the Board of
Directors. It coordinates risk management activities across the
Group to ensure that risk parameters are properly set and adhered
to across all risk categories and in all Group companies. It also
ensures that all risk exposures can be measured and monitored
across the Group. Managing risk effectively is one of the key
drivers of the Group's continuous investment in technology. Group
Risk Management continually seeks new ways to enhance its risk
management techniques.
It also updates the Group risk management framework on a regular
basis to reflect new policies adopted by the Board of Directors.
Group Risk Management overseeing the banking operations regularly
reports to the Atlas Mara Executive Committee and the Atlas Mara
Board Audit, Risk and Compliance Committee, to provide the Board
with assurance that risks are being appropriately identified,
managed and controlled. Group Risk Management is headed by an
executive manager who reports to the Group CEO of banking
subsidiaries who in turn reports to the Executive Chairman.
The Board has approved the Group risk management framework which
applies to all Group companies and deals with enterprise-wide risk
and governance protocol. Risk management in the Group is
underpinned by governance structures as well as risk ownership,
identification and evaluation. Ownership and management of risks
begins in the business units of each subsidiary, who identify and
evaluate risks particular to their function. Group Risk Management
reviews actions taken by business units to mitigate identified
risks.
Each subsidiary or business unit produces risk reports which
along with the detailed risk information provided by Group Risk
Management, is discussed by the Board. The risk reports present a
balanced assessment of significant risks and the effectiveness of
risk management procedures, and management actions in mitigating
those risks.
Credit risk
Credit risk is the risk of loss to the Group from the failure of
clients, customers or counterparties, to fully honour their
obligations to the Group, including the whole and timely payment of
principal, interest, collateral and other receivable. Credit risk
management is the most significant risk to which the Group is
exposed to.
Significant changes in the economy, or in the health of a
particular industry segment that represents a concentration in the
Group's portfolio, could result in losses that are different from
those provided for at the reporting date. Country (or Sovereign)
risk is part of overall credit risk and is managed as part of the
credit risk management function as it has a major impact on
individual counterparties' ability to perform. Management therefore
carefully manages its exposure to credit risk.
Credit exposures arise principally in loans and advances, debt
securities and other similar instruments. There is also credit risk
in off-balance sheet financial arrangements such as loan
commitments and guarantees. The Group Risk team reviews subsidiary
risk exposures regularly and reports to the Atlas Mara Board of
Directors.
Credit risk management and strategy
Credit risk is managed across the Group in terms of its Board
approved risk management framework, encompassing credit principles
and standards, mandate limits and governance structures.
The governance structures mandated with accountability for loan
approvals, monitoring and risk management include the
following:
-- In Country Management Committee Credit Committee (Manco
Credit Committee) (including BancABC entities and BPR).
-- In Country Board Credit Committee including (BancABC entities and BPR).
-- ABCH Group Credit Committee.
-- ABCH Board Credit Committee.
-- ABCH Board Loans Review Committee.
Atlas Mara Group credit risk management objectives are to:
-- enable sustainable asset growth in line with the Group Risk appetite;
-- optimise credit governance and operational structures;
-- create a robust control environment;
-- invest in skills, training and appropriate experience;
-- simplify risk management processes;
-- implement and refine appropriate models for credit granting;
-- improve early warning, problem recognition and remedial management capability; and
-- improve credit policies and governance framework.
The Board has defined and documented a credit policy for the
Group which forms the basis of credit decisions. This policy
includes a framework of limits and delegation of credit approval
authority which are strictly adhered to. No one individual has the
power to authorise credit exposures. Each subsidiary has a credit
committee which operates within the defined limits set by the
Board. These committees are responsible for the management of
credit risk within their country including credit decisions,
processes, legal and documentation risk and compliance with
impairment policies. The Group Risk Department regularly reviews
each subsidiary's adherence to required standards.
The Group Executive Committee ('EXCO') reports to the Board and
is responsible for approval of credit decisions that are above
country limits, recommendations on exposure limits and impairment
policies. There is also a Board Credit Committee that approves any
loans above the EXCO limit.
Credit life cycle
The credit life cycle consists of target market identification
and quantification, principles of credit evaluation and
decisioning, post-sanctioning fulfilment, credit administration,
portfolio monitoring, early warning triggers, problem recognition
and remedial management. The business, risk and senior management
are integrated into the end-to-end credit life cycle. Atlas Mara
Group uses a Risk Grading tool for corporate exposures to determine
a minimum credit rating for acceptance for credit granting
purposes.
The rating is the result of qualitative and quantitative
criteria, based on statement of financial position and profit or
loss inputs including critical ratios, industry benchmarking,
management experience and capability. Risk ratings awarded to
obligors are reviewed annually with the latest financial
information and account conduct for corporate exposures.
Measuring credit risk
The Group's approach to measuring credit risk aims to align with
the requirements set out under IFRS 9, in all substantial aspects,
aligned with the standard approach and methodology employed by
international financial institutions.
In line with IFRS 9, the Group has adopted the Expected Credit
Loss approach effective 1 January 2018. Credit risk is broken down
into the common risk components of Probability of Default ('PD'),
Exposure at Default ('EAD') and Loss Given Default ('LGD'),
modelled at a client, facility and portfolio level. These risk
components are used in the calculation of the Expected Credit Loss
('ECL'). The models used by the Group are compliant with Basel II
and regulatory requirements. These risk measures would be used as
inputs to calculate the collective impairment amounts.
Component Definition
----------------------------------------------------------------------------------------
Probability of default (PD) The probability that a counterparty will default, over the next 12 months from the
reporting
date (stage 1) or over the lifetime of the product (stage 2).
The PD estimates will fluctuate in line with the economic cycle. The lifetime (or term
structure)
PDs are based on statistical models, calibrated using historical data.
---------------------------- ----------------------------------------------------------------------------------------
Loss given default (LGD) The loss that is expected to arise on default, which represents the difference between
the
contractual cash flows due and those that the bank expects to receive.
The Group estimates LGD based on the history of recovery rates and considers the
recovery
of any collateral that is integral to the financial asset.
---------------------------- ----------------------------------------------------------------------------------------
Exposure at default (EAD) The expected statement of financial position exposure at the time of default, taking
into
account the expected change in exposure over the lifetime of the exposure. This
incorporates
the impact of drawdowns of committed facilities, repayments of principal and interest,
amortisation
and prepayments.
---------------------------- ----------------------------------------------------------------------------------------
To determine the expected credit loss ('ECL'), these components
are multiplied together (PD for the reference period (up to 12
months or lifetime) x LGD at the beginning of the period x EAD at
the beginning of the period) and discounted to the balance sheet
date using the effective interest rate as the discount rate.
Expected credit loss and capital requirements
The three components, PD, EAD and LGD, are building blocks used
in a variety of measures of risk across the entire portfolio. ECL
is the measurement of loss, which enables the application of
consistent credit risk measurement across all retail and corporate
credit exposures. LGD, EAD and PD estimates are also used in a
range of business applications, including pricing, customer and
portfolio strategy and performance measurement. ECL estimates can
be compared directly to portfolio impairment figures within the
regulatory capital calculation to ensure that the organisation's
estimates of ECL from doing business are sufficiently covered by
the level of general impairments raised. Any situations in which
general impairments are insufficient to cover total ECL in totality
have a direct bearing on the Group's capital requirement to ensure
that these potential losses are absorbed.
Forbearance and restructuring
Forbearance refers to obligations for which the contractual
terms of the facilities availed are modified or formalised into a
new transaction. Atlas Mara Group Credit Principles and Standards
documents the criteria to be applied in assessing clients that will
qualify for restructure. Great emphasis is placed on sustainability
of cash flows to repay the restructured instalments.
Restructuring activities include extended payment arrangements
or the modification and deferral of payments. If the terms of a
loan are modified or an existing loan is replaced with a new loan,
then a qualitative as well as quantitative assessment is made to
determine whether the original loan should be derecognised. The
quantitative test determines whether the net present value of the
cash flows under the new terms discounted at the original effective
interest rate is at least 10% different from the carrying amount of
the original debt. The qualitative test assesses whether there has
been a significant change in the terms and conditions of the new
loan compared to the original loan.
If it is determined that the expected restructuring will not
result in derecognition of the existing loan, then the gain or loss
due to modification is computed as the difference between the gross
carrying amount of the original loan at the time of the
restructure, and the discounted cash flows of the modified loan
contract using the original effective interest rate as the discount
factor.
If the expected restructuring will result in derecognition of
the existing loan, then the expected fair value of the new loan is
treated as the final cash flow from the existing loan at the time
of its derecognition. This amount is included in calculating the
cash shortfalls from the existing loan that are discounted from the
expected date of derecognition to the reporting date using the
original effective interest rate of the existing loan. These
policies are kept under continuous review.
With the onset of the COVID-19 pandemic, assistance was offered
to customers by way of granting payment holidays of 2 - 6 months,
reducing the instalment amounts and extending loan tenures. Policy
guidelines document the criteria to be applied to determine the
loans that qualify for a restructure. For the COVID-19 related
restructures, the Group determined that the restructuring did not
result in the derecognition of the original loan. The gain or loss
on modification of the loan was computed as the difference between
the gross carrying amount of the original loan at the time of the
restructure, and the discounted cash flows of the modified loan
using the original effective interest rate as the discount
rate.
Risk limit control and mitigation policies
The Group manages, limits and controls concentrations of credit
risk in respect of individual counterparties and groups, and to
industries and countries. The Group structures the levels of credit
risk it undertakes by placing limits on the amount of risk accepted
in relation to one borrower, or groups of borrowers, and to
geographical and industry segments. Such risks are monitored on a
revolving basis and subject to an annual or more frequent review,
when considered necessary. Limits on the level of credit risk by
product, industry sector and by country are approved by the Board
of Directors (intermediate holding company) and relevant
sub-committees and reviewed regularly. Exposure to credit risk is
also managed through regular analysis of the ability of borrowers
and potential borrowers to meet interest and capital repayment
obligations and by changing these lending limits where appropriate.
Some other specific control and mitigation measures are outlined
below.
a. Collateral
The Group employs a range of policies and practices to mitigate
credit risk. The most traditional of these is the taking of
security for funds advanced, which is common practice.
The Group implements guidelines on the acceptability of specific
classes of collateral for credit risk mitigation. The principal
collateral types for loans and advances are:
-- cash collateral;
-- charges over assets financed;
-- mortgages over residential and commercial properties;
-- charges over business assets such as premises, inventory and
accounts receivable; and
-- charges over financial instruments such as debt securities and equities.
Loans and advances to corporates are generally secured. In
addition, in order to minimise credit loss, the Group will seek
additional collateral from the counterparty as soon as impairment
indicators are noticed for the relevant individual loans and
advances. Collateral held as security for financial assets other
than loans and advances is determined by the nature of the
instrument. Debt securities, treasury and other eligible bills are
generally unsecured, with the exception of asset-backed securities
and similar instruments, which are secured by portfolios of
financial instruments.
b. Credit-related commitments
The primary purpose of these instruments is to ensure that funds
are available to a customer as required. Guarantees and standby
letters of credit carry the same credit risk as loans. Documentary
and commercial letters of credit - which are written undertakings
by the Group on behalf of a customer authorising a third party to
draw drafts on the Group up to a stipulated amount under specific
terms and conditions - are collateralised by the underlying
shipments of goods to which they relate and therefore carry less
risk than a direct loan.
Commitments to extend credit represent unused portions of
authorisations to extend credit in the form of loans, guarantees or
letters of credit. With respect to credit risk on commitments to
extend credit, the Group is potentially exposed to loss in an
amount equal to the total unused commitments. However, the likely
amount of loss is less than the total unused commitments, as most
commitments to extend credit are contingent upon customers
maintaining specific credit standards. The Group monitors the term
to maturity of credit commitments because longer-term commitments
generally have a greater degree of credit risk than shorter-term
commitments.
c. Derivatives
The Group maintains strict control limits on net open derivative
positions (that is, the difference between purchase and sale
contracts) by both amount and term. The amount subject to credit
risk is limited to expected future net cash inflows of instruments,
which in relation to derivatives are only a fraction of the
contract, or notional values used to express the volume of
instruments outstanding. This credit risk exposure is managed as
part of the overall lending limits with customers, together with
potential exposures from market movements. Collateral or other
security is not always obtained for credit risk exposures on these
instruments, except where the Group requires margin deposits from
counterparties.
Impairment policies
The Group has adopted standard impairment policies which at a
minimum comply with the prudential guidelines of the respective
countries' Central Banks. Impairments are determined monthly at
subsidiary level and are subject to regular review by EXCO
Credit.
The impairments shown in the statement of financial position are
measured in line with the expected credit loss model prescribed by
IFRS 9. IFRS 9 outlines a 'three-stage' model for impairment based
on changes in credit quality since initial recognition. Refer to
the table below for further details:
Stage Description ECL recognised
----------------------------------------
Stage 1: Financial assets that have had no 12-month expected credit losses.
12-month ECL significant increase in credit risk Losses expected on defaults which may
since initial recognition occur within the next 12 months.
or that have low credit risk at the
reporting date.
For example: a newly originated loan on
which repayments are being received and
there are
no other indicators of a significant
increase in credit risk.
---------------------------------- ---------------------------------------- ----------------------------------------
Stage 2: Financial assets that have had a Lifetime expected credit losses.
Lifetime ECL not credit impaired significant increase in credit risk Losses expected on defaults which may
since initial recognition occur at any point in a loan's
but that do not have objective evidence lifetime. Losses are
of impairment. adjusted for probability weighted
For example: a loan on which payment is macroeconomic scenarios.
30 days overdue.
---------------------------------- ---------------------------------------- ----------------------------------------
Stage 3: Financial assets that are credit Lifetime expected credit losses.
Lifetime ECL credit impaired impaired or in default and represent Losses expected on defaults which may
those that are at least occur at any point in a loan's
90 days past due in respect of lifetime. Losses are
principal and/or interest. Financial adjusted for probability weighted
assets are considered macroeconomic scenarios.
to be credit impaired where the Interest income is calculated on the
obligors are unlikely to pay on the carrying amount of the loan net of
occurrence of one or more credit allowance.
observable events that have a
detrimental impact on the estimated
future cash flows of the
financial asset.
---------------------------------- ---------------------------------------- ----------------------------------------
Maximum exposure and effects of collateral and other credit
enhancements (audited)
The following table shows the maximum exposure to credit risk by
class of financial asset (excluding equity instruments which are
not subject to credit risk). For on-balance sheet financial assets,
the maximum exposure to credit risk equals their carrying amount
and is net of the allowance for ECL. For financial guarantees, the
maximum exposure is the maximum amount that the Group would have to
pay if the guarantees were called upon. For loan commitments and
other credit-related commitments, the maximum exposure is the full
amount of the committed facilities.
It also shows the total fair value of collateral, any surplus
collateral (the extent to which the fair value of collateral held
is greater than the exposure to which it relates), and the net
exposure to credit risk.
28 February 2021 Maximum Fair value of collateral Net exposure
exposure and credit enhancements held
$'000
-----------------------------------------
Cash Letters Property Other Net collateral
of credit/ (2) (1,2)
guarantees
On balance sheet:
---------------------- --------- ------- ------------- --------- ------ -------------- ----------------
Cash and short-term
funds (3) 112,339 - - - - - 112,339
Loans and advances 580,527 2,918 - 200,207 25,266 228,391 352,136
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Investment securities
at amortised cost 119,223 - - - - - 119,223
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Derivative financial
assets 5,543 - - - - - 5,543
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Other financial
assets (4) 37,708 - - - - - 37,708
====================== ========= ======= ------------- --------- ------ -------------- ------------
Total on-balance
sheet 855,340 2,918 - 200,207 25,266 228,391 626,949
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Off-balance sheet:
Loan commitments 4,868 470 - - - 470 4,398
Financial guarantees 47,300 164 21,941 183 - 22,288 25,012
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Total liabilities 5,637 4,058 - - - 4,058 1,579
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Total off-balance
sheet 57,805 4,692 21,941 183 - 26,816 30,989
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Total 913,145 7,610 21,941 200,390 25,266 255,207 657,938
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Notes
4. Vehicles, machinery, other fixed assets, inventory and trade receivables.
5. These collateral items are not readily convertible into cash
as these items are sold in the market and are dependent on a buyer
and seller.
6. Represents bank balances and placements held with other banks
and excludes cash in hand. Included in $183.9 million cash and
short-term funds balance in the statement of financial
position.
7. Excludes prepayments and other non-financial assets. Balance
disclosed is included in the $54.6 million other assets balance in
the statement of financial position.
31 December 2019 Maximum Fair value of collateral Net exposure
exposure and credit enhancements held
$'000
-----------------------------------------
Cash Letters Property Other Net collateral
of credit/ (2) (1,2)
guarantees
On balance sheet:
---------------------- --------- ------- ------------- --------- ------ -------------- ----------------
Cash and short-term
funds (3) 117,588 - - - - - 117,588
Loans and advances 682,747 612 - 224,507 3,466 228,585 454,162
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Financial assets
at FVTPL 4,955 - - - - - 4,955
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Investment securities
at amortised cost 107,667 - - - - - 107,667
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Derivative financial
assets 5,692 - - - - - 5,692
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Other financial
assets (4) 15,588 - - - - - 15,588
Total on-balance
sheet 934,237 612 - 224,507 3,466 228,585 705,652
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Off-balance sheet:
Financial guarantees 19,720 5,345 - - - 5,345 14,375
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Letters of credit 8,578 - 4,913 - - 4,913 3,665
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Loan commitments 11,529 - - - - - 11,529
Total off-balance
sheet 39,827 5,345 4,913 - - 10,258 29,569
---------------------- --------- ------- ------------- --------- ------ -------------- ------------
Total 974,064 5,957 4,913 224,507 3,466 238,843 735,221
====================== ========= ======= ============= ========= ====== ============== ============
Notes
8. Vehicles, machinery, other fixed assets, inventory and trade receivables.
9. These collateral items are not readily convertible into cash
as these items are sold in the market and are dependent on a buyer
and seller.
10. Represents bank balances and placements held with other
banks and excludes cash in hand. Included in $183.9 million cash
and short-term funds balance in the statement of financial
position.
11. Excludes prepayments and other non-financial assets. Balance
disclosed is included in the $54.6 million other assets balance in
the statement of financial position.
Credit quality analysis (audited)
The Group manages the credit quality of financial assets using
internal credit ratings. Financial assets are segmented into five
rating classes. The Group's rating scale, which is shown below,
reflects the range of default probabilities defined for each rating
class. This means that, in principle, exposures migrate between
classes as the assessment of their probability of default changes.
The rating tools are kept under review and upgraded as necessary.
The Group regularly validates the performance of the rating and
their predictive power with regard to default events.
Category Description
------------------------------------------------------------------------------------------------
Performing The credit appears satisfactory.
---------------- ------------------------------------------------------------------------------------------------
Special mention The credit appears satisfactory but exhibits potential for inherent weakness which, if not
attended to, may weaken the asset or prospects of collection in full e.g. poor documentation.7
---------------- ------------------------------------------------------------------------------------------------
Special mention Special mention
---------------- ------------------------------------------------------------------------------------------------
Doubtful Credit facilities with above weaknesses and has deteriorated further to the extent that even
with the existing security, full recovery will not be possible, or 180 days but less than
12 months in arrears.
---------------- ------------------------------------------------------------------------------------------------
Loss Facilities considered impossible to collect with little or no realisable security, or more
than 12 months in arrears.
---------------- ------------------------------------------------------------------------------------------------
Distribution of financial assets by credit quality
The table below shows the distribution of the Group's financial
assets by credit quality:
28 February 2021 Performing Special Substandard Doubtful Loss Gross ECL Net total
mention total
$'000
---------- --------- ----------- -------- ------ --------- ---------- ---------
Cash and short-term
funds 112,339 - - - - 112,339 - 112,339
------------------------ ---------- --------- ----------- -------- ------ --------- ---------- ---------
Loans and advances 552,481 9,209 7,692 3,711 38,162 611,255 (30,728) 580,527
------------------------ ---------- --------- ----------- -------- ------ --------- ---------- ---------
Investment securities
at amortised cost 119,481 - - - - 119,481 (258) 119,223
------------------------ ---------- --------- ----------- -------- ------ --------- ---------- ---------
Derivate financial
assets 5,543 - - - - 5,543 - 5,543
------------------------ ---------- --------- ----------- -------- ------ --------- ---------- ---------
Other financial
assets 37,736 - - - - 37,736 (28) 37,708
------------------------ ========== ========= =========== ======== ====== ========= ========== =========
Total carrying
amount on balance
sheet 825,442 9,209 7,692 3,711 38,162 886,354 (31,014) 855,340
========== ========= =========== ======== ====== ========= ========== =========
Off-balance sheet
Financial guarantees 47,393 - - - - 47,393 (93) 47,300
------------------------ ---------- --------- ----------- -------- ------ --------- ---------- ---------
Letters of credit 5,637 - - - - 5,637 - 5,637
------------------------ ---------- --------- ----------- -------- ------ --------- ---------- ---------
Loan commitments 4,868 - - - - 4,868 - 4,868
------------------------ ========== ========= =========== ======== ====== ========= ========== =========
Total carrying
amount
off-balance
sheet 57,898 - - - - 57,898 (93) 57,805
------------------------ ========== ========= =========== ======== ====== ========= ========== =========
31 December 2019 Performing Special Substandard Doubtful Loss Gross ECL Net total
mention total
$'000
---------- --------- ----------- -------- ------ --------- ---------- ---------
Cash and short-term
funds 117,588 - - - - 117,588 - 117,588
------------------------ ---------- --------- ----------- -------- ------ --------- ---------- ---------
Loans and advances 587,585 33,400 5,164 14,607 41,991 682,747 (38,635) 644,112
------------------------ ---------- --------- ----------- -------- ------ --------- ---------- ---------
Investment securities
at amortised cost 107,667 - - - - 107,667 (377) 107,290
------------------------ ---------- --------- ----------- -------- ------ --------- ---------- ---------
Derivate financial
assets 5,692 - - - - 5,692 - 5,692
------------------------ ---------- --------- ----------- -------- ------ --------- ---------- ---------
Other financial
assets 15,588 - - - - 15,588 - 15,588
------------------------ ========== ========= =========== ======== ====== ========= ========== =========
Total carrying
amount on balance
sheet 834,120 33,400 5,164 14,607 41,991 929,282 (39,012) 890,270
========== ========= =========== ======== ====== ========= ========== =========
Off-balance sheet
Financial guarantees 19,720 - - - - 19,720 (187) 19,533
------------------------ ---------- --------- ----------- -------- ------ --------- ---------- ---------
Letters of credit 8,587 - - - - 8,587 - 8,587
------------------------ ---------- --------- ----------- -------- ------ --------- ---------- ---------
Loan commitments 11,529 - - - - 11,529 - 11,529
------------------------ ========== ========= =========== ======== ====== ========= ========== =========
Total carrying
amount
off-balance
sheet 39,827 - - - - 39,827 (187) 39,640
------------------------ ---------- --------- ----------- -------- ------ --------- ---------- ---------
Distribution of loans and advances, financial guarantees and
loan commitments by credit quality and stage allocation
The tables below set out the credit quality of loans and
advances, financial guarantees and loan commitments, based on the
Group's internal credit rating system and by ECL stage allocation.
The amounts presented are gross of impairment allowances. For loans
commitments and financial guarantees, the amounts in the table
represent the amounts committed or guaranteed, respectively.
i) Loans and advances
$'000 28 February 2021 31 December 2019
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
---------- ---------- ---------- -------- ---------- ---------- ---------- --------
Performing 552,481 - - 552,481 592,203 70 - 592,273
----------------- ---------- ---------- ---------- -------- ---------- ---------- ---------- --------
Special mention - 9,209 - 9,209 - 30,740 1,429 32,169
----------------- ---------- ---------- ---------- -------- ---------- ---------- ---------- --------
Sub-standard - - 7,692 7,692 - 178 6,123 6,301
----------------- ---------- ---------- ---------- -------- ---------- ---------- ---------- --------
Doubtful - - 3,711 3,711 - - 7,402 7,402
----------------- ---------- ---------- ---------- -------- ---------- ---------- ---------- --------
Loss - - 38,162 38,162 - - 44,602 44,602
----------------- ---------- ---------- ---------- -------- ---------- ---------- ---------- --------
550,343 9,209 49,565 611,255 592,203 30,988 59,556 682,747
----------------- ---------- ---------- ---------- -------- ---------- ---------- ---------- --------
ii) Financial guarantees, loan commitments and other off-balance sheet items
$'000 28 February 2021 31 December 2019
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
---------- ---------- ---------- -------- ---------- ---------- ---------- --------
Performing 57,898 - - 57,898 39,640 70 - 39,640
------------ ---------- ---------- ---------- -------- ---------- ---------- ---------- --------
57,898 - - 57,898 592,203 30,988 59,556 39,640
------------ ---------- ---------- ---------- -------- ---------- ---------- ---------- --------
iii) Credit quality analysis for stage 3 loans and advances
$'million 28 February 2021 31 December 2019
Carrying Fair value of Over Carrying Carrying Over
amount collateral collateralisation amount amount collateralisation
--------------- -------------- ------------------ --------------- --------------- ------------------
Retail 9,740 14,458 4,718 10,173 17,504
----------- --------------- -------------- ------------------ --------------- --------------- ------------------
Corporate 17,250 24,441 7,191 19,362 28,551
----------- --------------- -------------- ------------------ --------------- --------------- ------------------
26,990 38,899 11,909 29,535 46,055
----------- --------------- -------------- ------------------ --------------- --------------- ------------------
Collateral taken for this category includes cash, mortgages over
residential properties, charges over business assets such as
premises, inventory and accounts receivable, and charges over
financial instruments such as debt securities and equities.
Modified financial assets (audited)
The contractual terms of a loan may be modified for a number of
reasons, including changing market conditions, customer retention
and other factors not related to a current or potential credit
deterioration of the customer. With the onset of the COVID-19
pandemic, assistance was offered to customers by way of granting
payment holidays of 2 - 6 months, reducing the instalment amount
and extending loan tenures.
The Group considered whether the restructure will result in
derecognition of the original loan by applying quantitative as well
as qualitative test. The quantitative test determined whether the
net present value of the cash flows under the new terms discounted
at the original effective interest rate is at least 10% different
from the carrying amount of the original debt while the qualitative
test assessed whether there has been a significant change in the
terms and conditions of the new loan compared to the original
loan.
For the COVID-19 related restructures, the Group determined that
the restructuring did not result in the derecognition of the
original loan. The gain or loss on modification of the loan was
computed as the difference between the gross carrying amount of the
original loan at the time of the restructure, and the discounted
cash flows of the modified loan using the original effective
interest rate as the discount rate. Most of the loans that were
restructured under the Group's COVID-19 restructure policy were not
in arrears at the time of restructure. The Group continues to
monitor these loans to assess whether there is a subsequent
significant increase in credit risk.
The following table provides information on financial assets
that were modified during the reporting period as part of the
Group's restructuring activities and the resulting modification
loss:
28 February 2021
--------------------------------------------- -----------------
Financial assets modified during the period
--------------------------------------------- -----------------
Amortised cost before modification 1,027
--------------------------------------------- -----------------
Net modification loss (249)
--------------------------------------------- -----------------
a. Geographical sectors
The following table breaks down the Group's main credit exposure
at their carrying amounts, as categorised by geographical region.
For this table, the Group has allocated exposures to regions based
on the country of domicile of its counterparties:
28 February 2021 Botswana Mozambique Tanzania Zimbabwe Zambia Other Total
$'000
On-balance sheet
Cash and short-term
funds (1) 60,773 - 4,944 44,792 1,855 112,364
---------------------- -------- ---------- -------- -------- ------ ----- -------
Loans and advances 549,363 - 12,733 18,431 - 580,527
---------------------- -------- ---------- -------- -------- ------ ----- -------
Investment securities
(2) 67,265 - - 51,958 - 119,223
---------------------- -------- ---------- -------- -------- ------ ----- -------
Derivative financial
assets 5,543 - - - - 5,543
---------------------- -------- ---------- -------- -------- ------ ----- -------
Other financial
assets (3) 4,290 3,923 11,483 13,155 4,857 37,708
---------------------- ======== ========== ======== ======== ====== ===== =======
Total on balance
sheet 687,234 3,923 17,677 126,664 13,155 6,712 855,365
======== ========== ======== ======== ====== ===== =======
Off-balance sheet
-------- ---------- -------- -------- ------ ----- -------
Financial guarantees 5,022 - - 42,278 - - 47,300
---------------------- -------- ---------- -------- -------- ------ ----- -------
Letters of credit 1,579 - - 4,058 - - 5,637
---------------------- -------- ---------- -------- -------- ------ ----- -------
Loan commitments 4,398 - - 470 - - 4,868
---------------------- ======== ========== ======== ======== ====== ===== =======
Total off-balance
sheet 10,999 - - 46,806 - - 57,805
======== ========== ======== ======== ====== ===== =======
Total 698,233 3,923 17,677 173,470 13,155 6,712 913,170
---------------------- ======== ========== ======== ======== ====== ===== =======
Notes
1. Represents cash balances and placements held with other banks
and excludes cash in hand. Included in $183.9 million cash balance
per statement of financial position.
2. Excludes equity instruments. Balance disclosed is included in
the $106.6 million investment securities balance per statement of
financial position.
3. Excludes prepayments and other non-financial assets. Balance
disclosed is included in the $54.6 million other assets balance in
the statement of financial position.
31 December 2019 Botswana Tanzania Zimbabwe Other Total
$'000
On-balance sheet
Cash and short-term funds
(1) 85,693 1,128 29,234 1,533 117,588
---------------------------- -------- -------- -------- ------ -------
Financial assets at FVTPL
(2) 3,925 - 1,030 - 4,955
---------------------------- -------- -------- -------- ------ -------
Loans and advances 606,297 7,368 22,733 7,714 644,112
---------------------------- -------- -------- -------- ------ -------
Investment securities (2) 64,747 - 42,543 - 107,290
---------------------------- -------- -------- -------- ------ -------
Derivative financial assets 109 - - 5,583 5,692
---------------------------- -------- -------- -------- ------ -------
Other financial assets (3) 3,782 11,805 - 1 15,588
---------------------------- ======== ======== ======== ====== =======
Total on balance sheet 764,553 20,301 95,540 14,831 895,225
Off-balance sheet
-------- -------- -------- ------ -------
Financial guarantees 5,264 - 14,269 - 19,533
---------------------------- -------- -------- -------- ------ -------
Letters of credit 8,578 - - - 8,578
---------------------------- -------- -------- -------- ------ -------
Loan commitments 8,414 - 3,115 - 11,529
---------------------------- ======== ======== ======== ====== =======
Total off-balance sheet 22,256 - 17,384 - 39,640
Total 786,809 20,301 112,924 14,831 934,865
---------------------------- ======== ======== ======== ====== =======
Notes
1. Represents cash balances and placements held with other banks
and excludes cash in hand. Included in $130.5 million cash balance
per statement of financial position.
2. Excludes equity instruments. Balance disclosed is included in
the $107.8 million investment securities balance per statement of
financial position.
3. Excludes prepayments and other non-financial assets. Balance
disclosed is included in the $29.1 million other assets balance in
the statement of financial position.
b. Industry sectors
The following table breaks down the Group's main credit exposure
at their carrying amounts, as categorised by industry sectors of
the counterparties:
28 February Agriculture Construction Corporate, Public Real Mining Financial Transport Individuals Tourism Other Total
2021 retail sector estate and energy services
and trade
$'000
On-balance
sheet
Cash and
short-term
funds (1) - - - - - - 112,341 - - - 23 112,364
------------ ----------- ------------ ---------- ------ ------ ---------- --------- --------- ----------- ------- ------ -------
Loans and
advances 6,342 29 23,860 9,865 388 810 5,640 116 522,523 2,428 8,526 580,527
------------ ----------- ------------ ---------- ------ ------ ---------- --------- --------- ----------- ------- ------ -------
Investment
securities
(2) - - - 2,272 - - 116,951 - - - - 119,223
------------ ----------- ------------ ---------- ------ ------ ---------- --------- --------- ----------- ------- ------ -------
Derivative
financial
assets - - - - - - 5,543 - - - - 5,543
------------ ----------- ------------ ---------- ------ ------ ---------- --------- --------- ----------- ------- ------ -------
Other
financial
assets (3) - - - 11,483 - - 21,368 - - - 4,857 37,708
------------ =========== ============ ========== ====== ====== ========== ========= ========= =========== ======= ====== =======
Total on
balance
sheet 6,342 29 23,860 23,620 388 810 261,843 116 522,523 2,428 13,406 855,365
=========== ============ ========== ====== ====== ========== ========= ========= =========== ======= ====== =======
Off-balance
sheet
----------- ------------ ---------- ------ ------ ---------- --------- --------- ----------- ------- ------ -------
Financial
guarantees - 13,263 5,022 - - - 19,999 - 9,016 47,300
------------ ----------- ------------ ---------- ------ ------ ---------- --------- --------- ----------- ------- ------ -------
Letters of
credit 4,058 - 1,579 - - - - - - 5,637
------------ ----------- ------------ ---------- ------ ------ ---------- --------- --------- ----------- ------- ------ -------
Loan
commitments 470 - 3,200 - - - - 1,198 - 4,868
------------ =========== ============ ========== ====== ====== ========== ========= ========= =========== ======= ====== =======
Total
off-balance
sheet 4,528 13,263 9,801 - - - 19,999 1,198 9,016 57,805
=========== ============ ========== ====== ====== ========== ========= ========= =========== ======= ====== =======
Total 10,870 13,292 33,661 23,620 388 810 281,842 116 523,721 2,428 22,422 913,170
------------ ----------- ------------ ----------
Notes
1. Represents cash balances and placements held with other banks
and excludes cash in hand. Included in $183.9 million cash balance
per statement of financial position.
2. Excludes equity instruments. Balance disclosed is included in
the $106.6 million investment securities balance per statement of
financial position.
3. Excludes prepayments and other non-financial assets. Balance
disclosed is included in the $54.6 million other assets balance in
the statement of financial position.
28 February Agriculture Construction Corporate, Public Real Mining Financial Transport Individuals Tourism Other Total
2021 retail sector estate and services
and trade energy
$'000
On-balance
sheet
Cash and
short-term
funds (1) - - - - - - 117,588 - - - - 117,588
------------ ----------- ------------ ---------- ------- --------- --------- ----------- ------- ------ -------
Financial
assets
at FVTPL
(2) - - - - 1,030 - 3,925 - - - - 4,955
------------ ----------- ------------ ---------- ------- --------- --------- ----------- ------- ------ -------
Loans and
advances 4,613 9,973 28,852 6,949 69,224 2,096 22,165 2,546 475,929 6,229 15,536 644,112
------------ ----------- ------------ ---------- ------- --------- --------- ----------- ------- ------ -------
Investment
securities
(2) - - - 103,028 - - 4,262 - - - - 107,290
------------ ----------- ------------ ---------- ------- --------- --------- ----------- ------- ------ -------
Derivative
financial
assets - - - - - - 5,692 - - - - 5,692
------------ ----------- ------------ ---------- ------- --------- --------- ----------- ------- ------ -------
Other
financial
assets (3) - - - - - - - - - - 15,588 15,588
------------ =========== ============ ========== ======= ========= ========= =========== ======= ====== =======
Total
on-balance
sheet 4,613 9,973 28,852 109,977 70,254 2,096 153,632 2,546 475,929 6,229 31,124 895,225
Off-balance
sheet
----------- ------------ ---------- ------- --------- --------- ----------- ------- ------ -------
Financial
guarantees - 10,066 5,264 3 - - 29 - - - 4,171 19,533
------------ ----------- ------------ ---------- ------- --------- --------- ----------- ------- ------ -------
Letters of
credit - - 208 8,370 - - - - - - - 8,578
------------ ----------- ------------ ---------- ------- --------- --------- ----------- ------- ------ -------
Loan
commitments - - 5,528 - - - - - 2,886 - 3,115 11,529
------------ =========== ============ ========== ======= ========= ========= =========== ======= ====== =======
Total
off-balance
sheet - 10,066 11,000 8,373 - - 29 - 2,886 - 7,286 39,640
=========== ============ ========== ======= ========= ========= =========== ======= ====== =======
Total - 10,066 5,264 3 - - 29 - - - 4,171 19,533
------------
Notes
4. Represents cash balances and placements held with other banks
and excludes cash in hand. Included in $130.5 million cash balance
per statement of financial position.
5. Excludes equity instruments. Balance disclosed is included in
the $107.8 million investment securities balance per statement of
financial position.
6. Excludes prepayments and other non-financial assets. Balance
disclosed is included in the $29.1 million other assets balance in
the statement of financial position.
Measurement of ECLs
ECL for exposures in stage 1 is calculated by multiplying the
12-month PD by LGD and EAD. Lifetime ECL is calculated by
multiplying the lifetime PD by LGD and EAD.
Credit risk grades are a primary input into the determination of
the term structure of PD for exposures. The Group collects
performance and default information about its credit risk exposures
analysed by type of product and borrower as well as by credit risk
grading. For some portfolios, information purchased from external
credit reference agencies is also used.
The Group employs statistical models to analyse the data
collected and generate estimates of the remaining lifetime PD of
exposures and how these are expected to change as a result of the
passage of time.
LGD is the magnitude of the likely loss if there is a default.
The Group estimates LGD parameters based on the history of recovery
rates of claims against defaulted counterparties. The LGD models
consider the structure, collateral, seniority of the claim,
counterparty industry and recovery costs of any collateral that is
integral to the financial assets. For mortgages, loan to value
('LTV') ratios are a key parameter in determining LGD. LGD
estimates are recalibrated for different economic scenarios and,
for mortgage lending, to reflect possible changes in property
prices. They are calculated on a discounted cash flow basis using
the effective interest rate as the discounting factor.
EAD represents the expected exposure in the event of a default.
The Group derives the EAD from the current exposure to the
counterparty and potential changes to the current amount allowed
under the contract and arising from amortisation. The EAD of a
financial asset is its gross carrying amount at the time of
default. For lending commitments, the EAD represents the amount of
the guaranteed exposure when the financial guarantee becomes
payable.
As described above, and subject to using a maximum of a 12-month
PD for stage 1 financial assets, the Group measures ECL considering
the risk of default over the maximum contractual period (including
any borrower's extension options) over which it is exposed to
credit risk, even if, for credit risk management purposes, the
Group considers a longer period. The maximum contractual period
extends to the date at which the Group has the right to require
repayment of an advance or terminate a loan commitment or
guarantee.
ECLs for retail overdrafts that include both a loan and an
undrawn commitment component are measured over a period longer than
the maximum contractual period if the Group's contractual ability
to demand repayment and cancel the undrawn commitment does not
limit the Group's exposure to credit losses to the contractual
notice period. These facilities do not have a fixed term or
repayment structure and are managed on a collective basis. The
Group can cancel them with immediate effect; however this
contractual right is not enforced in the normal day-to-day
management, but only when the Group becomes aware of an increase in
credit risk at the facility level. This longer period is estimated
after taking into account the credit risk management actions that
the Group expects to take, and that serve to mitigate ECL. These
include a reduction in limits, cancellation of the facility and/or
turning the outstanding balance into a loan with fixed repayment
terms.
Where modelling of a parameter is carried out on a collective
basis, the financial instruments are grouped on the basis of shared
risk characteristics that include:
-- instrument type;
-- credit risk gradings;
-- collateral type;
-- LTV ratio for mortgages;
-- date of recognition;
-- remaining term to maturity;
-- industry; and
-- geographic location of the borrower.
The exposures are subject to regular reviews to ensure that
exposures within a particular group remain appropriately
homogeneous. For portfolios for which the Group has limited
historical data, external benchmark information is used to
supplement the internally available data.
Definition of default
The Group considers a financial instrument to be in default
when:
-- the borrower is unlikely to pay its credit obligations to the
Group in full, without recourse by the Group to actions such as
realising security (if any is held);
-- the borrower is more than 90 days past due on any material
credit obligation to the Group. Overdrafts are considered as being
past due once the customer has breached an advised limit or been
advised of a limit smaller than the current amount outstanding;
or
-- it is becoming probable that the borrower will restructure
the asset as a result of bankruptcy due to the borrower ' s
inability to pay its credit obligations.
In assessing whether a borrower is in default, the Group
considers indicators that are:
-- qualitative: e.g. breaches of covenant;
-- quantitative: e.g. overdue status and non-payment on another
obligation of the same issuer to the Group; and
-- based on data developed internally and obtained from external sources.
Inputs into the assessment of whether a financial instrument is
in default and their significance may vary over time to reflect
changes in circumstances. The definition of default largely aligns
with that applied by the Group for regulatory capital purposes.
Credit impaired financial assets
Financial assets that are credit impaired (or in default)
represent those that are at least 90 days past due in respect of
principal and/or interest. Financial assets are also considered to
be credit impaired where the obligors are unlikely to pay on the
occurrence of one or more observable events that have a detrimental
impact on the estimated future cash flows of the financial asset.
It may not be possible to identify a single discrete event but
instead the combined effect of several events may cause financial
assets to become credit impaired. Evidence that a financial asset
is credit impaired includes observable data about the following
events:
-- Significant financial difficulty of the issuer or borrower;
-- Breach of contract such as default or a past due event;
-- For economic or contractual reasons relating to the borrower
' s financial difficulty, the lenders of the borrower have granted
the borrower concessions that lenders would not otherwise consider.
This would include forbearance actions.
-- Pending or actual bankruptcy or other financial
reorganisation to avoid or delay discharge of the borrower ' s
obligations;
-- The disappearance of an active market for the applicable
financial asset due to financial difficulties of the borrower;
Incorporation of forward-looking information
Forward-looking macroeconomic information has been incorporated
into expected loss estimates based on the key macroeconomic
variables including GDP growth, inflation and exchange rates. The
impact of these variables have been forecasted using quantitative
modelling techniques and judgements.
The macroeconomic scenarios are defined by taking into account
the macroeconomic conditions prevalent in the Group's countries of
operation and their impact on the probability of the default (PD),
Exposure at Default (EAD) and Loss Given Default (LGD). Forecasts
are developed using a probability weighted scenario-based approach
to ensure that the asymmetry of the various economic outcomes is
captured in the estimation of ECL. The Group has modelled three
scenarios as follows:
Base case scenario
Botswana - Economic growth contracts substantially during 2020
but economic recovery is evident in 2021 (although not quite at
prior levels). Government interventions to support the economy, a
recovery in the Diamond prices and the gradual roll out of a
vaccine support a rebound in GDP growth rates ranging from 3% to
7%. This is considered the most likely scenario.
Zimbabwe - Government and regulator will continue taking steps
to contain the spread of the virus and support the economy. No
significant change in legislation expected. Inflation is expected
to peak at 667.6%. the spread of Covid-19 is limited a further
3-6-week lockdown. Businesses is expected to be back to full
capacity in 2021.
Moderate case scenario
Botswana - The economy is expected to rebound quickly in 2021
post the initial COVID crisis with GDP growth reach pre-COVID19
levels. The tourism and hospitality sector is buoyed by increased
number of tourists while higher Diamond prices and increased export
volumes boost the economy. Unemployment is stemmed. International
markets open and regional flows of goods and services resume
quickly.
Zimbabwe - COVID 19 is contained. The exchange rate stablises as
a result of prudent financial management. Exports rebound as demand
for raw materials increases globally resulting in greater economic
activity in Zimbabwe. Business growth is further supported by
stable input prices. Unemployment is contained.
Worst case scenario
Botswana - Economic recovery is expected to be very slow with
output remaining constrained. Job losses continue and sectors such
as tourism, transport, hospitality continue to struggle. Government
support programs are not enough to stimulate the required economic
recovery. The Diamond market remains suppressed. Vacine roll out is
delayed and the government is forced to maintain tighter lock down
regulations.
Zimbabwe - Inflation is expected to peak at 1500% with
persistent hyperinflation. COVID-19 is not contained resulting in
low productivity, lower international commodity prices as world
economies take longer to recover. The local currency remains under
pressure with limited forex in Zimbabwe. Banks withdraw from the
interbank market. Business continue to close due to the limited
economic activity resulting in higher levels of unemployment and
economic hardship.
ECL results are calculated as the probability-weighted average
across multiple macroeconomic scenarios. The final ECL results are
dependent on the assumptions applied during the process. The
scenario probability weightings applied in measuring ECL are as
follows:
Base case Moderate case Worst case
85% 10% 5%
Scenario probability weighting - Botswana 22% 70% 8%
Scenario probability weighting - Zimbabwe 85% 10% 5%
The Group has identified and documented key drivers of credit
risk and credit losses for each portfolio of financial instruments
and, using statistical analysis of historical data, has estimated
relationships between macro-economic variables and credit risk and
credit losses. The key drivers of credit risk for retail portfolios
include GDP growth, changes in the prime lending rate, inflation,
and exchange rates. The key drivers for credit risk for corporate
portfolios are GDP growth, inflation, and exchange rates.
The table below lists the macroeconomic assumptions used in the
base, upside and downside scenarios over the three-year forecast
period for the Group's key operating markets i.e. Botswana and
Zimbabwe. The assumptions represent the absolute percentage for
GDP, Inflation, Change in the prime lending rate and exchange rate.
The impact of COVID 19 was considered in estimating the forecasts
of these macro-economic factors.
a) Base case economic assumptions
GDP growth rate Year-on-Year Inflation Change in Prime Lending
year-on-year Rate Rate for next quarter Exchange Rate
Scenario probability
weighting - Botswana 3.6% n/a -0.25% n/a
Scenario probability
weighting - Zimbabwe n/a 350.6% n/a 100
b) Best case economic assumptions
GDP growth rate Year-on-Year Inflation Change in Prime Lending
year-on-year Rate Rate for next quarter Exchange Rate
Scenario probability
weighting - Botswana 5.5% n/a -0.25% n/a
Scenario probability
weighting - Zimbabwe n/a 350.6% n/a 86
b) Worst case economic assumptions
GDP growth rate Year-on-Year Inflation Change in Prime Lending
year-on-year Rate Rate for next quarter Exchange Rate
Scenario probability
weighting - Botswana 1.8% n/a -0.25% n/a
Scenario probability
weighting - Zimbabwe n/a 676.6% n/a 140
Post-model adjustments and management overlays
Where there is uncertainty due to inherent limitations of the
model, additional provisions via post model adjustments are made,
through management overlays. Management applies expert judgement to
determine the overlay ECL to incorporate the impact of
forward-looking information in these cases. Any overlay ECL is
based on available information and qualitative risk factors within
a governed process. Management will evaluate a range of possible
outcomes, taking into account past events, current conditions and
the economic outlook. Additional considerations not addressed in
the model are incorporated and include: (1) individual loss
assessments of large exposures on watchlists; (2) observed model
limitations; and (3) stress-test outputs.
Expected credit loss analysis (audited)
Analysis of gross loans and advances and ECL by business
segment
The table below presents an analysis of loans and advances at
amortised cost by gross exposure, impairment allowance and coverage
ratio by stage allocation and business segment.
$'000 28 February 2021 31 December 2019
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
---------- ---------- ---------- -------- ---------- ---------- ----------
Gross exposure
---------------- ---------- ---------- ---------- -------- ---------- ---------- ----------
Retail 522,653 6,983 30,859 560,495 522,577 31,133 31,174 584,884
---------------- ---------- ---------- ---------- -------- ---------- ---------- ----------
Corporate 29,828 2,226 18,706 50,760 65,008 2,267 30,588 97,863
----------------
Total 552,481 9,209 49,565 611,255 587,585 33,400 61,762 682,747
---------------- ---------- ---------- ---------- -------- ---------- ---------- ----------
Expected credit
loss
Retail 5,827 693 18,931 25,451 5,876 1,072 18,793 25,741
Corporate 498 130 4,649 5,277 1,465 203 11,226 12,894
Total 6,325 823 23,580 30,728 7,341 1,275 30,019 38,635
Net exposure
Retail 516,826 6,290 11,928 535,044 516,701 30,061 12,381 559,143
Corporate 29,330 2,096 14,057 45,483 63,543 2,064 19,362 84,969
Total 546,156 8,386 25,985 580,527 580,244 32,125 31,743 644,112
Coverage ratio
Retail 1.1% 9.9% 61.3% 4.5% 1.1% 3.4% 60.3% 4.4%
------
Corporate 1.7% 5.8% 24.9% 10.4% 2.3% 8.9% 36.7% 13.2%
------
Total 1.1% 8.9% 47.6% 5.0% 1.2% 3.8% 48.6% 5.7%
------
*Compared to the loan staging analysis disclosed in the 2019
financial statements, the 2019 staging analysis for gross and net
loan balances have been re-presented in the current period
financial statements to align with the final classification
disclosed in the statutory financial statements of the Group's
banking components. This is a mere reclassification between stages
and has no impact on the net loan balance.
Analysis of gross loans and advances and ECL by product
classification
The table below presents a breakdown of loans and advances and
the ECL allowance with stage allocation by product
classification.
$'000 28 February 2021 31 December 2019
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
Gross exposure
Retail loans 522,653 6,983 30,859 560,495 522,577 31,133 31,174 584,884
Mortgage 68,474 1,231 9,109 78,814 64,097 5,264 8,287 77,648
Overdraft 2,417 147 1,664 4,228 1,899 255 3,642 5,796
Personal loans (including credit
card and other retail lending) 451,762 5,605 20,086 477,453 456,581 25,614 19,245 501,440
Corporate 29,828 2,226 18,706 50,760 65,008 2,267 30,588 97,863
Term loans 26,850 1,792 17,974 46,616 57,986 1,814 29,839 89,639
Overdrafts 2,978 434 732 4,144 7,022 453 749 8,224
Total - Gross exposure 552,481 9,209 49,565 611,255 587,585 33,400 61,762 682,747
$'000 28 February 2021 31 December 2019
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
Expected credit loss
Retail loans 5,827 693 18,931 25,451 5,876 1,072 18,793 25,741
Mortgage 460 50 73 583 385 45 1,712 2,142
Overdraft 471 32 1,100 1,603 44 32 3,043 3,119
Personal loans (including credit
card and other retail lending) 4,896 611 17,758 23,265 5,447 995 14,038 20,480
Corporate 498 130 4,649 5,277 1,465 203 11,226 12,894
Term loans 224 32 4,395 4,651 1,172 193 10,638 12,003
Overdrafts 274 98 254 626 293 10 588 891
Total - Expected credit loss 6,325 823 23,580 30,728 7,341 1,275 30,019 38,635
$'000 28 February 2021 31 December 2019
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
Net exposure
Retail loans 516,826 6,290 11,928 535,044 516,701 30,061 12,381 559,143
Mortgage 68,014 1,181 9,036 78,231 63,712 5,219 6,575 75,506
Overdraft 1,946 115 564 2,625 1,855 223 599 2,677
Personal loans (including credit
card and other retail lending) 446,866 4,994 2,328 454,188 451,134 24,619 5,207 480,960
Corporate 29,330 2,096 14,057 45,483 63,543 2,064 19,362 84,969
Term loans 26,626 1,760 13,579 41,965 56,814 1,621 19,201 77,636
Overdrafts 2,704 336 478 3,518 6,729 443 161 7,333
Total - Net exposure 546,156 8,386 25,985 580,527 580,244 32,125 31,743 644,112
Movement in gross exposures and impairment allowance
The following tables present a reconciliation of the opening to
the closing balance of the gross loan exposures and ECL allowance
as at 28 February 2021.
28 February 2021 Stage 1 Stage 2 Stage 3 Stage 4
$'000
Gross ECL Gross ECL Gross ECL Gross ECL
Opening balance 587,585 7,341 33,400 1,275 61,762 30,019 682,747 38,635
Transfer to stage 1 14,228 163 (14,056) (143) (172) (20) - -
Transfer to stage 2 (6,729) (56) 6,822 62 (93) (6) - -
Transfer to stage 3 (8,156) (121) (2,383) (44) 10,539 165 - -
New financial assets originated 286,844 2,502 3,342 488 2,288 439 292,474 3,429
Repayment and other movements (297,883) (90) (11,063) (312) (15,217) (2,818) (324,163) (3,220)
Impaired accounts written-off (7) (7) (5) (5) (4,399) (4,399) (4,411) (4,411)
Exchange rate adjustment (23,401) (3,407) (6,848) (498) (5,143) 200 (35,392) (3,705)
Closing balance 552,481 6,325 9,209 823 49,565 23,580 611,255 30,728
31 December 2019 Stage 1 Stage 2 Stage 3 Stage 4
$'000
Gross ECL Gross ECL Gross ECL Gross ECL
Opening balance 1,080,990 33,253 41,498 5,888 145,071 74,305 1,267,559 113,446
Transfer to stage 1 6,843 (857) (6,087) 57 (756) 800 - -
Transfer to stage 2 (28,288) 1 28,955 (683) (667) 682 - -
Transfer to stage 3 (10,208) (4,681) (2,584) 258 12,792 4,423 - -
Business activity in the year 319,161 6,376 1,564 - 1,241 - 321,966 6,376
Repayment and other movements (237,260) - (3,236) - (8,225) - (248,721) -
Impaired accounts written-off - (2,962) - (688) (707) (3,699) (707) (7,349)
Exchange rate adjustment (62,401) (7,732) (9,159) (1,583) (2,681) (918) (74,241) (10,233)
Reclassified as part of
disposal group held for sale (481,252) (16,057) (17,551) (1,974) (84,306) (45,574) (583,109) (63,605)
Closing balance 587,585 7,341 33,400 1,275 61,762 30,019 682,747 38,635
Measurement uncertainty and sensitivity of ECL estimates to
future economic conditions
ECL estimates are sensitive to judgements and assumptions made
regarding formulation of forward-looking scenarios and how such
scenarios are incorporated into the ECL computations.
The table below shows the loss allowance on loans and advances
to corporate and retail customers assuming each forward-looking
scenario (e.g. central, upside and downside) were weighted 100%
instead of applying scenario probability weights across the three
scenarios. For ease of comparison, the table also includes the
balances that are reflected in the financial statements.
$'000 28 February 2021
Base case Best case Worst case Carrying
amounts
Gross exposure
Retail 551,072 551,072 551,072 551,072
Corporate 60,183 60,183 60,183 60,183
Total 611,255 611,255 611,255 611,255
Expected credit loss
Retail 20,147 21,369 25,110 25,562
Corporate 14,079 14,065 14,177 5,166
Total off-balance sheet 34,226 35,434 39,287 30,728
Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its
obligations when they fall due as a result of customer deposits
being withdrawn, cash requirements from contractual commitments, or
other cash outflows, such as debt maturities or margin calls for
derivatives. Such outflows would deplete available cash resources
for client lending, trading activities and investments.
Analysis of liquidity risk (audited)
Non-derivative cash flow
The table below presents the cash flows payable by the Group
under non-derivative financial liabilities and assets held for
managing liquidity risk by remaining contractual maturities at the
reporting date of the consolidated statement of financial position.
The amounts disclosed in the table are the contractual undiscounted
cash flows.
28 February 2021 Up to 1-3 3-12 Greater Total Effect of Total
1 month than 1 discount/
year financing
rates
$'000 months months
Financial assets
Cash and short-term
funds 136,959 - 4,944 24 141,927 - 141,927
Financial assets
at FVTPL - - 3,385 13,917 17,302 - 17,302
Loans and advances 24,334 1,075 33,519 1,137,680 1,196,608 (616,081) 580,527
Investment securities 41,827 12,542 - 68,183 122,552 (2,906) 119,646
Other financial assets
(1) 144 15,629 15,720 6,215 37,708 - 37,708
Total financial assets
(contractual) 203,264 29,246 57,568 1,226,019 1,516,097 (618,987) 897,110
Financial liabilities
Deposits 234,205 9,261 42,614 398,434 684,514 (11,980) 672,534
Borrowed funds 408,196 3,320 25,679 52,479 489,674 (47,970) 441,704
Lease liabilities - - - - - - -
Other financial liabilities
(2) 18,279 1,437 76,493 6,116 102,325 (2,084) 100,241
Loan commitments 4,398 470 - - 4,868 - 4,868
Financial guarantee
contracts 83 17,339 24,671 278 42,371 - 42,371
Total liabilities
(contractual) 665,161 31,827 169,457 457,307 1,323,752 (62,034) 1,261,718
Liquidity gap (461,897) (2,581) (111,889) 768,712 192,345
Cumulative liquidity
gap (461,897) (464,478) (576,367) 192,345
Notes
1. Excludes prepayments and other non-financial assets. Balance
disclosed is included in the $54.6 million other assets balance in
the statement of financial position.
2. Excludes provisions and other non-financial liabilities.
Balance disclosed is included in the $111.4 million other
liabilities balance in the statement of financial position.
31 December 2020 Up to 1-3 3-12 Greater Total Effect of Total
1 month than 1 discount/
year financing
rates
$'000 months months
Financial assets
Cash and short-term
funds 130,324 - - 209 130,533 - 130,533
Financial assets
at FVTPL - - 3,925 21,318 25,243 - 25,243
Loans and advances 16,436 20,244 88,674 886,474 1,011,828 (367,716) 644,112
Investment securities 70,344 19,726 11,839 5,960 107,869 (91) 107,778
Other financial assets
(1) 10,462 5,125 - 1 15,588 - 15,588
Total financial assets
(contractual) 227,566 45,095 104,438 913,962 1,291,061 (367,807) 923,254
Financial liabilities
Deposits 319,782 199,313 180,166 32,656 731,917 (8,191) 723,726
Borrowed funds 12,384 9,666 184,738 209,257 416,045 (49,236) 366,809
Lease liabilities - - - - - - -
Other financial liabilities
(2) 73,054 12,524 3,384 - 88,962 - 88,962
Loan commitments 3,115 - - - 3,115 - 3,115
Financial guarantee
contracts 1,282 1,188 3,494 8,316 14,280 - 14,280
Total liabilities
(contractual) 409,617 222,691 371,782 250,229 1,254,319 (57,427) 1,196,892
Liquidity gap (182,051) (177,596) (267,344) 663,733 36,742 (310,380) (273,638)
Cumulative liquidity
gap (182,051) (359,647) (626,991) 36,742
Notes
3. Excludes prepayments and other non-financial assets. Balance
disclosed is included in the $29.1 million other assets balance in
the statement of financial position.
4. Excludes provisions and other non-financial liabilities.
Balance disclosed is included in the $97.0 million other
liabilities balance in the statement of financial position.
Market risk
This defines the risk that movements in market prices will
adversely affect the value of on- or off-balance sheet positions.
It encompasses risks arising from changes in investment market
values or other features correlated with investment markets, in
particular, changes in interest rates, foreign exchange rates, and
equity and commodity prices. Market risk is often propagated by
other forms of financial risk such as credit and market-liquidity
risks.
Analysis of market risk (audited)
Sensitivity analysis of market price
The Group holds, directly or through its subsidiaries, listed
equities with a fair value of $1.2 million and unlisted equities of
$15.3 million. The Group is therefore exposed to gains or losses
related to the variability in the market prices of the equities
held.
Market risk comprises three types of risk: interest rate risk,
currency risk and other price risk, such as equity price risk and
commodity risk. The exposure to equity price risk is described
below.
Equity price risk
The Group's listed and unlisted equity securities are
susceptible to market price risk arising from uncertainties about
future values of the investment securities. The Group manages the
equity price risk through diversification and by placing limits on
individual and total equity instruments. The Group's Board of
Directors reviews and approves all equity investment decisions.
Further details on key assumptions in valuations, and
sensitivity analysis of equity instruments and price risk are shown
in note 5.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future
cash flows of an exposure will fluctuate because of changes in
foreign exchange rates. The Group's exposure to the risk of changes
in foreign exchange rates relates primarily to the Group's
operating activities and the Group's net investments in foreign
subsidiaries.
The Group takes on exposure due to the effects of fluctuations
in the prevailing foreign currency exchange rates on its financial
position and cash flows. Group Risk sets limits on the level of
exposure by currency and in aggregate for both overnight and
intra-day positions, which are monitored daily. The following table
summarises the Group's exposure to foreign currency exchange rate
risk.
28 February 2021 USD EUR BWP ZWL TZS ZAR MZN AED Other Total
$'000
Financial assets
Cash and short-term
funds 28,845 10,221 71,497 12,868 4,580 12,802 - 545 569 141,927
Financial assets
at FVTPL 12,569 - - 3,385 1,348 - - - - 17,302
Loans and advances 14,883 - 548,885 16,758 - 1 - - - 580,527
Investment securities 33,247 - 67,265 18,889 245 - - - - 119,646
Derivative financial
assets - - 5,543 - - - - - - 5,543
Other financial
assets (1) 19,975 1 4,387 11,340 - 2 2,003 - - 37,708
Total financial
assets 109,519 10,222 697,577 63,240 6,173 12,805 2,003 545 569 902,653
Financial liabilities
Deposits 78,861 16,243 522,794 45,089 8,765 782 672,534
Borrowed funds 378,051 58,714 4,939 441,704
Derivative financial
liabilities 5,564 5,564
Other financial
liabilities (2) 87,639 45 11,172 1,130 32 220 3 100,241
Total financial
liabilities 544,551 16,288 598,244 51,157 32 8,985 785 1,220,043
Net FCY exposure (435,032) (6,066) 99,333 12,082 6,141 3,820 2,003 545 (216) (317,390)
Notes
5. Excludes prepayments and other non-financial assets. Balance
disclosed is included in the $54.6 million other assets balance in
the statement of financial position.
6. Excludes provisions and other non-financial liabilities.
Balance disclosed is included in the $111.4 million other
liabilities balance in the statement of financial position.
31 December 2019 USD EUR BWP ZWL TZS ZAR MZN AED Other Total
$'000
Financial assets
Cash and short-term
funds 66,021 2,531 51,979 5,796 1,045 170 5 1,211 1,775 130,533
Financial assets
at FVTPL 19,860 - 3,925 - 1,439 19 - - - 25,243
Loans and advances 4,968 - 604,832 - 3,866 22,733 - - 7,713 644,112
Investment securities 42,702 - 64,747 - 329 - - - - 107,778
Derivative financial
assets - - 5,583 109 - - - - - 5,692
Other financial
assets (1) 11,806 - 3,782 - - - - - - 15,588
Total financial
assets 145,357 2,531 734,848 5,905 6,679 22,922 5 1,211 9,488 928,946
Financial liabilities
Deposits 99,956 2,145 616,118 4,401 - - - - 1,106 723,726
Borrowed funds 8 25 5,577 - - - - - - 5,610
Derivative financial
liabilities 352,529 - 8,179 - - 6,101 - - - 366,809
Other financial
liabilities (2) 5,493 5 12,789 80 - - - - 70,595 88,962
Total financial
liabilities 457,986 2,175 642,663 4,481 - 6,101 - - 71,701 1,185,107
Net FCY exposure (312,629) 356 92,185 1,424 6,679 16,821 5 1,211 (62,213) (256,161)
Notes
7. Excludes prepayments and other non-financial assets. Balance
disclosed is included in the $54.6 million other assets balance in
the statement of financial position.
8. Excludes provisions and other non-financial liabilities.
Balance disclosed is included in the $111.4 million other
liabilities balance in the statement of financial position.
Sensitivity analysis (audited)
The Group is exposed to a number of currencies as a result of
its investments in different countries. The impact of the weakening
of the major currencies of the Group's operating components against
the US Dollar is presented below:
$'000 28 February 2021 31 December 2019
Effect on equity Effect on profit or loss Effect on equity Effect on profit or loss
EUR: 5% movement (2019: 5%
movement) 289 289 (17) (17)
BWP: 5% movement (2019: 10%
movement) (4,730) (4,730) (8,380) (8,380)
ZWL: 50% movement (2019: 50%
movement) (4,027) (4,027) (5,607) (5,607)
ZAR: 10% movement (2019: 30%
movement) (347) (347) (328) (328)
TZS: 1% movement (2019: 1%
movement) (61) (61) (66) (66)
MZN: 1% movement (2019: nil) (20) (20) - -
All other currencies: 1%
movement (2019: 5% movement) (3) (3) 2,905 2,905
(8,899) (8,899) (5,886) (5,886)
Interest rate risk (audited)
Cash flow interest rate risk is the risk that the future cash
flows of a financial instrument will fluctuate because of changes
in market interest rates. Fair value interest rate risk is the risk
that the value of a financial instrument will fluctuate because of
changes in market interest rates. The Group takes on exposure to
the effects of fluctuations in the prevailing levels of market
interest rates on both its fair value and cash flow risks. Interest
margins may increase as a result of such changes but may reduce
losses in the event that unexpected movements arise. In order to
reduce interest rate risk, the majority of the Group's lending is
on a variable interest rate with a term of less than one year. This
approach has been adopted as a result of the scarcity of term
deposits in the region which limits the Group's ability to build a
substantial, stable pool of fixed rate funding.
The table below summarises the Group's total exposure to
interest rate risks on financial instruments. It includes the
Group's financial instruments at carrying amounts, categorised by
the earlier of contractual re-pricing or maturity dates.
Up to 1-3 3-12 1-5 Non-interest Total
1 month months months years bearing
Financial assets
Cash and short-term
funds 98,789 - 4,944 - 38,194 141,927
Financial assets
at FVTPL - - - - 17,302 17,302
Loans and advances 561,115 424 2,674 6,600 9,714 580,527
Investment securities 84,204 12,587 4,177 18,255 423 119,646
Derivative financial
assets 96 5,447 - - - 5,543
Other financial assets
(1) - - - - 37,708 37,708
Total financial assets 744,204 18,458 11,795 24,855 103,341 902,653
Financial liabilities
Deposits 234,177 9,261 42,614 386,482 - 672,534
Borrowed funds 277,150 77,677 22,546 45,240 19,091 441,704
Derivative financial
liabilities - - - - 5,564 5,564
Other financial liabilities
(2) 83 249 664 4,250 94,995 100,241
Total financial liabilities 511,410 87,187 65,824 435,972 119,650 1,220,043
Net interest rate
risk gap 232,794 (68,729) (54,029) (411,117)
Cumulative interest
rate gap 232,794 164,065 110,036 (301,081)
Notes
9. Excludes prepayments and other non-financial assets. Balance
disclosed is included in the $54.6 million other assets balance in
the statement of financial position.
10. Excludes provisions and other non-financial liabilities.
Balance disclosed is included in the $111.4 million other
liabilities balance in the statement of financial position.
Net interest income sensitivity to interest rate risk
(audited)
The following is an analysis of the sensitivity of the Group's
net interest income to increase or decrease in market interest
rates. Based on a review of the movements in interest rates,
especially as a result of the crisis caused by the COVID-19
pandemic, a 100-basis points ('bps') stress was deemed to be
reflective of current interest rate movements.
$'000 28 February 2021 31 December 2019
Increase in rate Decrease in rate Increase in rate Decrease in rate
Pre-tax Post-tax Pre-tax Post-tax Pre-tax Post-tax Pre-tax Post-tax
African Banking Corporation of
Botswana Limited
Change in net interest income:
+/-100 basis points (2019: +/-100
basis points) (4,398) (3,430) 4,398 3,430 (1,944) (1,517) 1,944 1,517
As a percentage of total shareholders'
equity (4.07%) (3.18%) 4.07% 3.18% (1.92%) (1.50%) 1.92% 1.50%
African Banking Corporation (Zimbabwe)
Limited
Change in net interest income:
+/-1000 basis points (2019: +/-1,000
basis points) 1,925 1,449 (1,925) (1,449) 377 280 (377) (280)
As a percentage of total shareholders'
equity 3.17% 2.39% (3.17%) (2.39%) 0.71% 0.53% (0.71%) (0.53%)
The table below illustrates the impact of interest rate
movements for each banking subsidiary, on the subsidiary. Based on
a review of the movements in interest rates at country level, a 100
bps (2019: 100 bps) stress was deemed to be reflective of current
interest rate movements, except for ABC Zimbabwe, where a higher
rate has been assumed to account for the impact of inflation.
Risks arising from the impact of COVID-19
The COVID-19 pandemic, which developed and was prevalent
throughout 2020, with a second wave being experienced in the second
half of the year, negatively impacted the Group's customers as well
as the performance of the Group for the 14-month period ended 28
February 2021. The second wave, as well as the third wave being
experienced across nations has significantly caused uncertainty
over how the future development of the outbreak will impact the
Group's business and customer demand for its products and services.
Whilst COVID-19 vaccine roll-outs gathered momentum around the
world, there still remains uncertainty over the impact of the
vaccine roll-outs in the markets the Group has footprints in as
well as the efficacy of the vaccine against the emerging variants
of the COVID-19 virus.
Containment measures taken by governments, including travel
bans, border closures, mandatory 'stay at home' policies,
quarantines, social distancing, closures of non-essential services
and in some countries full lockdown, triggered significant
disruptions to businesses activities worldwide and also to the
Group's staff, customers and other stakeholders. Global economies
as well as the economic environments of the Group's countries of
operations were adversely impacted by the slowdown of economic
activities caused by the pandemic.
Across the globe, governments and central banks responded with
monetary and fiscal interventions, such as stimulus packages,
quantitative easing, interest rate cuts, reduction in deposit
statutory reserves, reduction in minimum capital adequacy
requirements, removal of fees and charges on certain customer
transactions, directing all banks to support customers during these
uncertain times by providing access to credit, moratorium, and
flexibility on repayment of loans, placing embargos on any
reduction of workforce during the crisis and injection of liquidity
into the markets, amongst other measures, to stabilise economic
conditions.
The Group implemented a comprehensive range of measures to
support staff and customers, with focus on the health and safety of
staff. Some of the measures implemented include work from home
policies, reconfiguration of offices, social distancing, provision
of masks and other protective gear, periodic testing of staff,
virtual meetings and provision of sanitisers. Some of the measures
implemented to support customers include the restructuring of
customer loans on a case by case basis; improvement of digital
platforms, especially mobile and internet banking channels to ease
the conduct of banking transactions by customers; provision of
working capital to productive sectors and reduction of bank charges
especially on digital platforms.
A number of digital innovations were undertaken by the Group.
BancABC Zimbabwe launched Ally A.I. Chatbot, which allows customers
to conduct transactions on social media platforms such as WhatsApp.
In addition, the first virtual branch in Zimbabwe was launched,
which makes virtual banking services accessible through channels
including Skype, WhatsApp and Telephone Banking, coupled with
Dial-A-Visa service and a Virtual Ignition Hub for SMEs. Other
subsidiaries enhanced their internet and mobile platforms including
offering of SaruMoney application in Botswana.
Across the Group's network of operations, business continuity
plans ('BCP') were activated to ensure that business operations
continued, while developing resilience against the crisis. Despite
the activation of the BCPs, the Group's operations was vulnerable
to the business disruptions caused by the pandemic, with attendant
impacts on the Group's financial performance and position. Some of
the actions taken by the Group such as payment holidays, extension
of moratorium and loan restructures negatively impacted the
interest income earned on the Group's loans and also resulted in
lower fee income on credit. In addition, the rate cuts implemented
by some central banks also negatively impacted the interest income
earned by the Group during the period.
The effect of the pandemic on business activities also resulted
in lower digital transaction volumes, thereby resulting in lower
digital fee income. In addition, the economic slowdown impaired the
ability of the Group's ability to grow its loan book, 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. The Group was able to keep the NPL ratio constant by
proactively implementing remedial strategies and driving loan
recovery efforts.
The weakening of market and macroeconomic indices such as GDP
growth forecasts, inflation, exchange rates etc. could trigger
impairments of the Group's assets such as investments in
subsidiaries and associates (UBN) as well as goodwill and other
intangible assets.
The economic outlook in the markets of operation remains
uncertain with the longer-term impact on the Group's business,
financial position and performance, liquidity and capital position,
dependent on the severity and length of the pandemic and the
mitigating impact of containment measures imposed by governments
and other bodies as well as the success of the vaccination efforts
across countries. Throughout this period of uncertainty, the Group
will continue to work closely with customers, colleagues,
regulators and the government and keep a close eye on the
performance of the portfolios with frequent stress testing and
scenario analysis.
Operational risk management
Managing operational risk requires timely, reliable as well as a
strong control culture. We seek to manage our operational risk
through:
-- active participation of all business units in identifying and
mitigating key operational risks across the Group;
-- the training and development of the bank ' s employees;
-- independent control and support functions that monitor
operational risk periodically; and
-- a network of systems and tools throughout the bank to
facilitate the collection of data used to analyse and assess our
operational risk exposure.
Operational risk is overseen by senior management under the
Operational Risk Committee Framework. Our operational risk
framework is in part designed to comply with operational risk
measurement and assessment rules under Basel II. The Group's
operational risk management processes focus primarily on risk
assessment, loss data collection and the tracking of key risk
indicators. The results of these processes are used to raise
awareness of operational risk management and to enhance the
internal control environment, with the ultimate aim of reducing
losses.
Compliance risk management
Compliance risk is the risk of non-compliance with all relevant
regulatory statutes, Central Bank supervisory requirements and
industry codes of practice. The compliance function is an integral
part of the overall Group Risk Management function. A decentralised
compliance function has been implemented within business units and
subsidiaries, and compliance officers have been appointed in each
operating entity.
Compliance risk is effectively managed through developing and
implementing compliance processes, developing effective policies
and procedures affecting the respective regulatory frameworks, and
providing advice and training on the constantly changing regulatory
environment. A key role of compliance officers in the Group is to
develop and maintain sound working relationships with its various
regulators in the Group's operating countries.
Legal risk management
Group Chief Legal Counsel is responsible for ensuring that legal
risk is adequately managed. This is achieved through standard
approved legal documentation wherever possible; however,
specialised external legal advisers are used when required for
non-standard transactions. Group Chief Legal Counsel ensures that
only approved legal advisers provide legal opinions or draw up
specialised agreements for the Group.
Group internal audit
The primary function of Internal Audit is to give objective
assurance to the Board that adequate management processes are in
place to identify and monitor risks, and that effective internal
controls are in place to manage those risks. Group Internal Audit
independently audits and evaluates the effectiveness of the Group's
risk management, internal controls and governance processes.
Internal Audit operates under terms of reference approved by the
Audit, Risk and Compliance Committee. The terms of reference define
the role and objectives, authority and responsibility of the
internal audit function. The Group's reporting structures ensure
that the Group internal auditor has unrestricted access to the
Chairman of the Audit, Risk and Compliance Committee.
At the outset of each financial year, Group Internal Audit
carries out a risk assessment for all business units and
subsidiaries. A comprehensive audit plan for the year that
identifies specific areas of focus is then derived from this
assessment. The audit plan is reviewed regularly, and any changes
must be approved by the Audit, Risk and Compliance Committee. The
areas of focus are confirmed with executive management before being
submitted to the Audit, Risk and Compliance Committee for
approval.
Going concern assessment (audited)
The Group reported a loss of $57.3 million for the 14-month
period ended 28 February 2021 (12-month period ended 31 December
2019: $141.0 million). As at that date, total assets exceeded total
liabilities by $330.5 million (31 December 2019: $547.2
million).
The financial statement of the Group for the 14-month period
ended 28 February 2021, were prepared on a going concern basis with
the following matters identified as events or conditions requiring
significant consideration with regards to the appropriateness of
the going concern assumption:
-- Strategic options: The ability of the Group and Company to
close the on-going strategic transactions which have been announced
and thus transform the overall financial status of the Group and
Company.
-- Liquidity challenges: Beginning in 2019, the Group launched a
review of strategic options to partner in or exit certain markets.
In parallel, the Group was also engaged in a strategic fundraising
initiative targeting both debt and equity, to be utilised to
support operations as well as address a balance sheet realignment
given certain debt maturities expected in 2020. This initiative
focused only on the holding companies, i.e. ATMA BVI, the Group's
ultimate holding company and ABC Holdings Limited ('ABCH'), the
intermediate holding company.
The extraordinary economic challenges related to the COVID-19
pandemic resulted in delays in the strategic fundraising
initiative, which was paused because of tightening global
liquidity. Emerging markets were affected more significantly due to
the tightening of global liquidity. Further compounding these
challenges, the major currency depreciations across the African
markets in which the Group operates resulted in significant
reduction in the US dollar value of the Group's assets and thus a
reduction in the Group's debt capacity.
The cumulative effect of these challenges, and the pandemic's
effects on growth and liquidity of the Group, led to an
acceleration of potential transactions, as well as discussions with
bilateral lenders towards an overall restructuring of the balance
sheet of the holding companies. These discussions explored a range
of options to provide stability to position the Group to weather
the downturn and continue to pursue its strategic options. These
discussions culminated in the standstill agreement announced on 29
December 2020, which was replaced by a long-term restructuring
agreement that became effective on 14 July 2021 with the
participating lenders in the form of the Support and Override
agreement. The Support and Override agreement sets out the terms,
milestones and timing of the debt repayments. While the signing of
this definitive agreement provided the foundation for the
stabilisation of the platform, given that the settlement of the
Group's outstanding debt is dependent on a number of milestones,
including the strategic transactions as set out below, the
successful ongoing implementation of the Support and Override
agreement results in a material uncertainty in respect of the going
concern assumption.
Strategic transactions
The Group remains focused on executing the publicly announced
strategic transactions, as listed below, to maximise value for its
lenders and other stakeholders.
On 30 September 2020, ABCH entered into a definitive agreement
with Access Bank Plc 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
with KCB Group Plc 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
with KCB Group Plc 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 with
Access Bank Plc 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. The Group expects the change of ownership and control
to be completed before the end of the year.
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.
Discussions with a potential investor for the sale of the
subsidiary are at an advanced stage.
Support and override agreement ('SOA')
On 14 July 2021, the SOA was signed by majority of the lenders
representing 88% of the aggregate amount of debt outstanding under
ATMA BVI ('the Company') and ABCH's direct and contingent
facilities. The key terms of the SOA include:
-- The creditors who are a party to the SOA (the ' participating
creditors ' ) agreed to forbearances in respect of certain events
of default under their relevant facilities while the SOA is
effective, including: (i) non-payment of amounts due under certain
of the Company's and ABCH'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 certain of the Company's and ABCH's
financing agreements;
-- The participating creditors with direct facilities with the
Company have agreed to forbearances in respect of the maturities of
their facilities to 30 September 2021, with the possibility of
further extension;
-- The participating creditors with direct facilities with ABCH
have agreed to waive the maturities of their facilities until 31
December 2022, with the possibility of further extension;
-- Proceeds received in respect of the Group's on-going
strategic divestments will be held by Wilmington Trust, acting as
Global Agent, to support repayments of the Company and ABCH's
creditors in accordance with agreed "waterfall" arrangements;
-- Participating creditors have agreed to either support, or not
object to, the Company and ABCH proposing a restructuring procedure
if required, including a UK restructuring plan, UK scheme of
arrangement or a scheme of arrangement under Part IX of the British
Virgin Islands Business Companies Act 2004, to ensure that all of
the Company's financial creditors become bound by the terms of the
SOA; and
-- The SOA will terminate either automatically, or upon notice
from certain participating creditors, if specific criteria are not
met, such as divestment milestones or any successful liquidation
applications.
The Group, through ABCH, is in discussions with AATIF in
relation to its participation in the restructuring. For Norsad, the
Group continues to explore a consensual agreement while continuing
to contest the petition filed by Norsad. Details on the Norsad
litigation are provided under note 35.6 Norsad litigation.
In addition to the matters presented above, the Directors also
considered the capital forecast, liquidity and funding position of
individual banking entities within the Group, compared with minimum
requirements set by banking regulators in each country as well as
reasonable commercial headroom or so-called buffers in line with
the Group's risk appetite. The Directors also considered forecasts
for the parent company itself.
Based on the above, the Directors believe that the use of the
going concern assumption in the preparation of the consolidated
financial statements of the Group for the period ended 28 February
2021 is appropriate. This assumption is contingent on the
availability of funds to finance future operations and that the
realisation of assets and settlement of liabilities, contingent
obligations and commitments will occur in the ordinary course of
business. However, should the SOA not be successfully implemented,
a material uncertainty exists which may cast significant doubt on
the Group's ability to continue as a going concern.
DIRECTORS' REPORT
Corporate governance and management report
DTR 7.2 requires that certain information be included in a
corporate governance statement. The Corporate Governance Report is
included in the Company's 2020 Annual Report.
For the purposes of compliance with DTR 4.1, the required
content of the 'Management Report' can be found in the Business
review, Executive Chairman's letter and Finance review sections of
this report and in this Directors' report.
Results
The consolidated statement of profit or loss shows a reported
loss of $58.7 million for the year ended 28 February 2021
Dividends
The Directors do not propose paying a dividend in respect of the
year ended 28 February 2021.
Events after the reporting date
Please see note 35 the Financial statements, which is
incorporated into this Report by reference.
Branches
In respect of the year 2020, Atlas Mara had subsidiaries and
investment vehicles domiciled and/or operating in Botswana,
Germany, Luxembourg, Mauritius, Mozambique, Nigeria, Rwanda,
Tanzania, United Arab Emirates, Zambia and Zimbabwe.
Financial risk management objectives and policies
Details on financial risk management are set out in the Risk
Report and are incorporated into this Report by reference.
Change of control
The Company is party to the following contracts that are subject
to change of control provisions in the event of a takeover bid. In
connection with the placement of senior secured convertible notes
initially due 2020 (and now extended by agreement to 2021) and the
placement of secured bonds due 2021 (the "Bonds"), the Company is
party to contracts that give Bondholders the right to require
redemption of their Bonds upon a change of control. In addition, a
change of control triggers a downward adjustment to the conversion
applicable to the Convertible Bonds due 2020 (but extended to
2021), for a limited period of time following the change of
control. The Company is also party to facility agreements that give
the Lenders the right to declare all amounts outstanding under the
loans immediately due and payable upon a change of control. There
are no agreements between the Company and its Directors or
employees providing compensation for loss of office or employment
that occurs because of a takeover bid. However, if options are
granted to senior executive officers, the vesting of issued options
is accelerated in the case of a change of control.
Significant contracts
Details of related party transactions are set out under note 28
Related Parties and is incorporated into this Report by
reference.
Going concern
The going concern of the Company is dependent on successfully
funding the balance sheet of Atlas Mara and its subsidiaries ('the
Group') and maintaining adequate levels of capital. In order to
satisfy themselves that the Company has adequate resources to
continue to operate for the foreseeable future, the Directors have
considered a number of key dependencies relating to funding,
liquidity and capital. Having considered these, the Directors
consider that it is appropriate to adopt the use of the going
concern assumption in the preparation of the consolidated financial
statements of the Group for the period ended 28 February 2021.This
assumption is contingent on the successful execution of the
restructuring agreement the Company entered into with the majority
of its creditors on July 14, 2021 ( the "SOA") and other factors,
as described in the risk report and financial statements. Should
the SOA not be successfully implemented, a material uncertainty
exists which may cast significant doubt on the Group's and
Company's ability to continue as going concerns. (A fuller
discussion of the going concern assessment is provided in the
section going concern assessment in the risk report).
Directors
The names of the current members of the Board of Directors of
the Company, as at 31 August 2021, are listed in the table below.
The Directors' interests in shares in the Company are provided
below. The composition of the Board and dates of appointment are
shown in the table below:
Director(1) Date of appointment
Robert E. Diamond, Jr. 3 December 2013
Rachel F. Robbins 3 December 2013
Michael Wilkerson 3 October 2017
Simon Lee 24 April 2018
Jawaid Mirza 1 April 2019
Note:
1. Amadou Raimi, who was appointed to the Board in January 2015,
stepped down from the Board, effective 7 October 2020.
Directors' indemnities
As at the date of this Report, indemnities granted by the
Company to the Directors are in force to the extent permitted under
BVI law. The Company also maintains Directors' and Officers'
liability insurance, the level of which is reviewed annually.
Rights to appoint and remove Directors
On 31 August 2017, the Company entered a strategic financing
transaction with Fairfax Africa (now 'Helios Fairfax Partners'),
which resulted in Fairfax Africa acquiring a 42.4% ownership stake
in the Company (the 'Strategic Financing'). On 22 December 2017
Fairfax Africa acquired additional ordinary shares of Atlas Mara,
increasing its ownership stake to 43.3%. Pursuant to the terms of
the Strategic Financing, Fairfax Africa was granted certain rights
to appoint and remove directors to the Company's Board, which were
incorporated into the Articles of the Company and approved by the
shareholders of the Company at an extraordinary general meeting
held on 14 July 2017. The amended Articles of the Company are
available for inspection at the Company's registered office.
In December 2020, Fairfax Africa's holdings in the Company were
transferred to Fairfax Financial Holdings Limited ('Fairfax
Financial') along with certain rights to appoint and remove
Directors pursuant to the Strategic Financing agreement. Fairfax
Financial has the right to nominate four persons as Directors of
the Company (the 'Investor Directors'), and the Directors shall
appoint such persons to the Board, subject to the BVI Companies Act
and the Articles. In the event Fairfax Financial notifies the
Company to remove an Investor Director from the Board, the
Directors shall remove such Investor Director, and Fairfax
Financial shall have the right to nominate an Investor Director to
fill such vacancy. For so long as Fairfax Financial has the right
to appoint four Directors to the Board, the Directors retain the
right, acting by majority, to nominate five persons as Directors of
the Company (the 'Non-Investor Directors').
Following completion of the Strategic Financing, and subsequent
to the changes in the governance arrangements of the Company, a
holder of Founder Preferred Shares (being a Founding Entity
together with its affiliates) owning 20% or more of the Founder
Preferred Shares in issue, is no longer entitled to nominate a
person as a Director of the Company.
Powers of the Directors
Subject to the provisions of the BVI Companies Act and the
Articles, the business and affairs of the Company shall be managed
by, or under the direction or supervision of, the Directors. The
Directors have all the powers necessary for managing, and for
directing and supervising, the business and affairs of the Company.
The Directors may exercise all the powers of the Company to borrow
or raise money (including the power to borrow for the purpose of
redeeming shares) and secure any debt or obligation of or binding
on the Company in any manner including by the issue of debentures
(perpetual or otherwise) and to secure the repayment of any money
borrowed, raised or owing by mortgage charge pledge or lien upon
the whole or any part of the Company's undertaking property or
assets (whether present or future) and also by a similar mortgage
charge pledge or lien to secure and guarantee the performance of
any obligation or liability undertaken by the Company or any third
party.
Substantial shareholders
As at 31 August 2021, the Company has been notified of the
following significant holdings (being 5% or more of the voting
rights in the Company) in the Company's ordinary share capital.
Shareholder % fully diluted interest(1) Transaction
date(1)
Fairfax Financial Holdings Limited 42.3 08/12/2020
Wellington Management Company, LLP 9.9 19/01/2017
Citigroup 5.0 12/02/2020
Note:
1. Per public TR-1 filings with the Financial Conduct Authority.
Share capital
General
As at 29 February 2021, the Company had in issue 174,618,767
ordinary shares of no-par value and 1,250,000 Founder Preferred
Shares of no-par value. As at 31 August 2021 (the latest
practicable date prior to the publication of this document) the
Company had a total number of 174,618,767 ordinary shares in issue,
of which 26,653,711 are held in treasury and 3,298,298 are held in
escrow as part of the contingent consideration for the acquisition
of Finance Bank Zambia Limited.
Founder Preferred Shares
Details of the Founder Preferred Shares can be found in note 3
and are incorporated into this Report by reference.
Directors' interest in shares
The Directors' beneficial shareholding in the Company, as of 31
August 2021 (the latest practicable date prior to the publication
of this document) is as follows:
Directors Number of ordinary shares held % ownership
Robert E. Diamond, Jr. 3,948,991 2.73%
Rachel F. Robbins 315,113 0.22%
Michael Wilkerson 508,927 0.35%
Simon Lee 206,881 0.14%
Jawaid Mirza 193,471 0.13%
Note:
1. Amadou Raimi stepped down from the Board, effective 7 October 2020.
Securities carrying special rights
Save as disclosed above in relation to the shares held by
Fairfax and the Founder Preferred Shares, no person holds
securities in the Company carrying special rights with regard to
control of the Company.
Voting rights
Holders of ordinary shares will have the right to receive notice
of and to attend and vote at any meetings of members. Each holder
of ordinary shares being present in person or by proxy at a meeting
will, upon a show of hands, have one vote and upon a poll each such
holder of ordinary shares present in person or by proxy will have
one vote for each ordinary share held by him.
In the case of joint holders of a share, if two or more persons
hold shares jointly each of them may be present in person or by
proxy at a meeting of members and may speak as a member, if only
one of the joint owners is present he may vote on behalf of all
joint owners, and if two or more joint holders are present at a
meeting of members, in person or by proxy, they must vote as
one.
Restrictions on voting
No member shall, if the Directors so determine, be entitled in
respect of any share held by him to attend or vote (either
personally or by proxy) at any meeting of members or separate class
meeting of the Company or to exercise any other right conferred by
membership in relation to any such meeting if he or any other
person appearing to be interested in such shares has failed to
comply with a notice requiring the disclosure of shareholder
interests and given in accordance with the Articles within 14
calendar days, in a case where the shares in question represent at
least 0.25% of their class, or within seven days, in any other
case, from the date of such notice. These restrictions will
continue until the information required by the notice is supplied
to the Company or until the shares in question are transferred or
sold in circumstances specified for this purpose in the
Articles.
Transfer of shares
Subject to the BVI Companies Act and the terms of the Articles,
any member may transfer all or any of his certificated shares by an
instrument of transfer in any usual form or in any other form which
the Directors may approve. The Directors may accept such evidence
of title of the transfer of shares (or interests in shares) held in
uncertificated form (including in the form of depositary interests
or similar interests, instruments or securities) as they shall in
their discretion determine. The Directors may permit such shares or
interests in shares held in uncertificated form to be transferred
by means of a relevant system of holding and transferring shares
(or interests in shares) in uncertificated form. No transfer of
shares will be registered if, in the reasonable determination of
the Directors, the transferee is or may be a Prohibited Person (as
defined in the Articles) or is or may be holding such shares on
behalf of a beneficial owner who is or may be a Prohibited Person.
The Directors shall have power to implement and/or approve any
arrangements they may, in their absolute discretion, think fit in
relation to the evidencing of title to and transfer of interests in
shares in the Company in uncertificated form (including in the form
of depositary interests or similar interests, instruments or
securities).
Independent auditor and audit information
Each person who is a Director at the date of approval of this
report confirms that, so far as the Director is aware, there is no
relevant audit information of which the Company's auditor is
unaware and each Director has taken all the steps that he or she
ought to have taken as a Director to make himself or herself aware
of any relevant audit information and to establish that the
Company's auditor is aware of that information.
Annual General Meeting
The AGM of the Company will be held on a date to be announced in
due course in New York City at 477 Madison Avenue, 22nd Floor, New
York, NY, 10022. All shareholders have the opportunity to attend
and vote, in person or by proxy, at the AGM. The Notice of the AGM
will be mailed out and made available on the Company's website at
least 20 working days prior to the date of the AGM. The Notice of
the AGM sets out the business of the meeting and explanatory notes
on all resolutions. Separate resolutions will be proposed in
respect of each substantive issue. The Chairman of the Board and
the Chairpersons of the Board Committees will be available to
answer shareholders' questions.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Annual Financial
Statements and the Group financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare Group financial
statements for each financial year. Under that law they are
required to prepare the Group financial statements in accordance
with International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU) and applicable law.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and of their profit or
loss for that period. In preparing each of the Group Company
financial statements, the directors are required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and estimates that are reasonable, relevant
and reliable;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the EU;
-- assess the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Group or to cease operations or have no
realistic alternative but to do so.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the parent Company. They are
responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic report, Risk report and
Directors' report that complies with that law and those
regulations.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the directors in respect of the
annual financial statements
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the group and the undertakings included in the consolidation
taken as a whole; and
-- the management report, Risk report and Directors' report
includes a fair review of the development and performance of the
business and the position of the issuer and the undertakings
included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they
face.
Signed on behalf of the Board
Michael Wilkerson
Chairman
31 August 2021
INDEPENT AUDITOR'S REPORT
1 Our opinion is unmodified
We have audited the financial statements of Atlas Mara Limited
("the Group") for the period ended 28 February 2021 which comprise
the consolidated statement of financial position, consolidated
statement of profit and loss, consolidated statement of other
comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows and related notes,
including the accounting policies in note 1, as well as the credit
risk, liquidity risk and market risk information identified as
"audited" in the risk report and the going concern assessment
marked as audited.
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's affairs at 28 February 2021 and of the Group's
loss for the period then ended; and
-- the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU).
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to the
audit committee.
We were first appointed as auditor by the directors on 3
December 2013. The period of total uninterrupted engagement is for
the eight financial years ended 28 February 2021. We have fulfilled
our ethical responsibilities under, and we remain independent of
the Group in accordance with, UK ethical requirements including the
FRC Ethical Standard as applied to listed public interest entities.
No non-audit services prohibited by that standard were
provided.
2 Material uncertainty related to going concern
The risk Our response
Going concern Disclosure quality Our procedures included:
We draw attention The financial statements Assessing transparency:
to the going concern explain how the Board Considering whether
assessment on page has formed a judgement the going concern
32 of the published that it is appropriate disclosure in the
financial statements to adopt the going going concern assessment
(included in the Risk concern basis of preparation on page 32 of the
Report) which indicates for the Group. published financial
that the ability to That judgement is statements (included
settle the Group's based on an evaluation in the Risk Report)
outstanding debt is of the inherent risks to the financial statements
dependent on a number to the Group's business gives a full and accurate
of milestones, including model and how those description of the
the strategic transactions risks might affect Directors' assessment
and the successful the Group's financial of going concern,
execution of the support resources or ability including the identified
and override agreement. to continue operations risks and, dependencies,
These events and conditions, over a period of at and related sensitivities.
along with the other least a year from Our assessment of
matters explained the date of approval management's going
in the going concern of the financial statements. concern assessment
assessment on page There is little judgement also included:
32 of the published involved in the Directors' Our sector experience:
financial statements conclusion that risks Reviewing the cash
(included in the Risk and circumstances flow forecasts and
Report), constitute described in note assumptions in line
a material uncertainty 1 and the going concern with current market
that may cast significant assessment on page conditions and pending
doubt on the Group's 32 of the published transactions.
ability to continue financial statements Evaluating assumptions:
as a going concern. (included in the Risk Evaluating whether
Our opinion is not Report) to the financial the assumptions, used
modified in respect statements represent in the cash flow forecasts,
of this matter. a material uncertainty are realistic and
over the ability of achievable, and consistent
the Group to continue with the external
as a going concern and/or internal environment
for a period of at and other matters
least a year from identified in the
the date of approval audit.
of the financial statements.
However, clear and Funding assessment:
full disclosure of Evaluating management's
the facts and the assessment of compliance
Directors' rationale with debt covenants.
for the use of the This included reviewing
going concern basis levels of capital
of preparation, including and liquidity and
that there is a related understanding the
material uncertainty, extent of breaches
is a key financial during the year.
statement disclosure Reviewing regulatory
and so was the focus correspondence which
of our audit in this included evaluating
area. Auditing standards whether regulatory
require that to be capital requirements
reported as a key have been met as well
audit matter. as the approval of
some of the strategic
transactions.
Evaluating Directors'
intent:
Challenging management's
plans for future actions,
and assessed the reliability
and relevance of data
including cash flows
from strategic initiatives
and the expected timing
of current liabilities
and expenses.
Reviewing the "Support
and Override Agreement"
as signed on 14 July
2021 and challenged
the likelihood of
meeting the necessary
milestones.
Our results:
We found the going
concern disclosure
on page 32 (going
concern assessment)
of the published financial
statements (included
in the Risk Report)
with a material uncertainty
to be acceptable (2019
result: We found the
going concern disclosure
with no material uncertainty
to be acceptable).
3 Other key audit matters: our assessment of risks of material
misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. Going concern is a
significant key audit matter and is described in section 2 of our
report.
We summarise below the other key audit matters (unchanged from
2019), in decreasing order of audit significance, in arriving at
our audit opinion above, together with our key audit procedures to
address those matters and, as required for public interest
entities, our results from those procedures. These matters were
addressed, and our results are based on procedures undertaken, in
the context of, and solely for the purpose of, our audit of the
financial statements as a whole, and in forming our opinion
thereon, and consequently are incidental to that opinion, and we do
not provide a separate opinion on these matters.
Impairment of loans and advances
Refer to accounting policies: (iii) Financial assets and liabilities
as well as notes 10 and 12 to the financial statements.
Key audit matter How the matter was addressed
in our audit
The Group's core business involves Our procedures included the following:
providing loans and advances We evaluated the design and implementation,
to corporate and retail customers. and where applicable, the operating
In the consolidated financial effectiveness of key controls
statements, gross loans and advances over the loan impairment process,
amount to USD 611 million and focusing on the identification
the expected credit losses amount of the ECL, the governance processes
to USD 31 million as at 28 February implemented for credit models
2021. and inputs, and management's
The expected credit loss (ECL) oversight over the ECL.
model applied to measure impairment We evaluated the design and implementation
requires management to exercise and the operating effectiveness
significant judgement in the of controls relating to the Group's
determination of expected credit loan origination process and
losses. credit reviews.
Management calculates the ECL Where expected credit losses
using statistical models. The were calculated on a modelled
following inputs to these models basis, we performed the following
require significant management procedures, in conjunction with
judgement: our credit risk specialists:
* Determination of significant increase in credit risk * We critically assessed the ECL models developed by
(SICR); management by using our credit risk specialists in
the evaluating the appropriateness of the ECL model,
data, inputs and the resultant outputs. This include
* Determination of macroeconomic inputs and forward d
looking information into the SICR assessment and ECL assessing the ability of the model to reflect the
measurement; and impact of COVID-19 through appropriate calibration;
* Estimation of the probability of default, the * We assessed the completeness, accuracy and validity
exposure at default and the loss given default. of data and inputs used during the development and
application of the ECL models; and
In addition to the above, judgement * We challenged the parameters and significant
is also applied to determine assumptions applied in the calculation models which
whether any post model overlays included SICR, the estimated probability of default,
are required for credit risk exposure at default and loss given default by
elements which are not captured evaluating these assumptions against internal
by the models. business practices, industry norms and our own
Due to the significance of the independent assumptions.
loans and advances and the increased
significant estimation uncertainty
and judgement involved in determining
the ECL, the impairment of loans We assessed how management have
and advances was considered to considered the uncertainties
be a key audit matter. of COVID-19 in the estimate of
ECL, specifically regarding macro-economic
forecasts and behaviors of borrowers
subject to payment holidays as
well as the criteria set by management
for determining whether there
has been a SICR.
We evaluated the appropriateness
of management's additional post
model overlays by independently
assessing the reasonability of
these assumptions.
We evaluated the adequacy of
the financial statement disclosures
against the requirements of IFRS
9: Financial Instruments and
IFRS 7: Financial Instruments
Disclosures.
We concluded that the Group's
ECL provisions were reasonable
and recognised in accordance
with IFRS 9.
Valuation of goodwill
Refer to note 17 to the financial statements.
Key audit matter How the matter was addressed
in our audit
Goodwill has been allocated to Our procedures include:
two cash-generating units (CGUs) We compared the current methods
for the purposes of impairment and significant assumptions with
testing, namely Botswana and the methods and assumptions used
West Africa. in previous impairment testing
and valuations for consistency.
An annual impairment test was We performed a forecast comparison
performed on goodwill by determining of the current year forecasts
the recoverable amounts of the compared to forecasts received
CGUs based on their value in in the prior year.
use. We evaluated management's assumptions
on growth rates and discount
Management's determination of rates by comparing them to known
the value in use required the market and industry trends.
application of significant judgements We evaluated the adequacy of
in the following areas: the disclosures made in the financial
* future cash flows; statements against the requirements
of IAS 36 Impairment of Assets.
We found the resulting estimate
* discount rate applied; of goodwill to be acceptable.
* the assumptions underlying the forecast growth and
terminal growth rates.
The judgements applied by management
have a significant impact on
the valuation on the CGU's. Consequently,
the valuation of goodwill was
therefore considered to be a
key audit matter.
Disposal groups classified as held for sale
Refer to note 32 to the financial statements.
Key audit matter How the matter was addressed
in our audit
On 30 April 2019, the Group publicly Our procedures included the following:
announced its intention to dispose
of its investments in the following We assessed the appropriateness
subsidiaries: African Banking of the classification of the
Corporation (Tanzania) Limited, investments/disposal group as
African Banking Corporation (Moçambique) held for sale by assessing the
S.A., African Banking Corporation terms and conditions of the offer
Zambia Limited and Banque Populaire term sheets or signed agreements.
du Rwanda Limited.
As relates to the Tanzania, Mozambique
On 29 September 2020, the Group and Rwanda sales, we inspected
announced that it had entered the signed sale agreements and
into definitive agreements with confirmed that the offer price
Access Bank Plc for the sale represented the lower of carrying
of the Group's banking asset value and fair value less costs
in African Banking Corporation to sell.
Mozambique, subject to regulatory
approval and other customary As relates to the Zambia sale,
conditions precedent. we interrogated and compared
the accuracy of the inputs, used
On 26 November 2020, the Group to determine the lower of carrying
announced that it had entered value and fair value less costs
into an agreement with KCB Group to sell, against the signed term
Plc for the sale of the Group's sheet and third party comparable
banking assets in African Banking data.
Corporation (Tanzania) Limited
and Banque Populaire du Rwanda We evaluated the accuracy of
Limited, pending regulatory approvals the consolidation journal entries
and other customary conditions. between continued and discontinued
operations to assess the appropriate
Atlas Mara Limited successfully application of IFRS 5.
completed the sale of 100% of
its shareholding in African Banking We evaluated the adequacy of
Corporation (Moçambique) the financial statement disclosures
S.A on 17 May 2021 and the sale against the requirements of IFRS
of 62.06% of its shareholding 5.
in Banque Populaire du Rwanda
Limited on 25 August 2021. The We found the Group's classification
change of control was effective and disclosure of disposal groups
on the same dates. classified as held for sale to
be acceptable.
The application of IFRS 5, Non-current
assets held for sale (IFRS 5)
as a result of the announcements
had a significant effect on the
profit or loss, the carrying
values of its assets and on the
presentation of results, and
as such this was considered to
be a key audit matter.
4 Our application of materiality and an overview of the scope of
our audit
Materiality for the group financial statements as a whole was
set at USD 7.3 million (2019: USD 7.8 million), determined with
reference to a benchmark of total assets of continued assets.
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole.
Performance materiality was set at 65% (2019: 65%) of
materiality for the financial statements as a whole, which equates
to USD 4.7 million (2019 : USD 5.1 million) for the group. We
applied this percentage in our determination of performance
materiality based on the increased aggregation risk.
We agreed to report to the audit committee any corrected or
uncorrected identified misstatements exceeding USD 0.29 million
(2019: 0.3 million), in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Scope
The group team performed the audit of the group as if it was a
single aggregated set of financial information. The audit was
performed using the materiality levels set out above.
5 Going concern basis of preparation
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Group or
to cease its operations, and as they have concluded that the
Group's financial position means that this is realistic for at
least a year from the date of approval of the financial statements
("the going concern period"). As stated in section 2 of our report,
they have also concluded that there is a material uncertainty
related to going concern.
An explanation of how we evaluated management's assessment of
going concern is set out section 2 of our report.
Our conclusions based on this work:
-- we consider that the directors' use of the going concern
basis of accounting in the preparation of the financial statements
is appropriate
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the above conclusions are not a guarantee that the Group
will continue in operation.
6 Fraud and breaches of laws and regulations - ability to
detect
Identifying and responding to risks of material misstatement due
to fraud
To identify risks of material misstatement due to fraud ("fraud
risks") we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. Our risk assessment procedures included:
-- Enquiring of directors, as to the Group's high-level policies
and procedures to prevent and detect fraud, as well as whether they
have knowledge of any actual, suspected or alleged fraud.
-- Reading the Board and Audit, Risk and Compliance Committee minutes.
-- Using analytical procedures to identify any unusual or unexpected relationships.
-- Using our own forensic specialists to assist us in
identifying fraud risks based on discussions of the circumstances
of the Group.
We communicated identified fraud risks throughout the audit team
and remained alert to any indications of fraud throughout the
audit. This included communication from the group to full scope
component audit teams of relevant fraud risks identified at the
Group level and request to full scope component audit teams to
report to the Group audit team any instances of fraud that could
give rise to a material misstatement at group.
As required by auditing standards, we perform procedures to
address the risk of management override of controls and the risk of
fraudulent revenue recognition.
We also identified a fraud risk related to the overlays on the
ECL and the accuracy of the selling price of the disposal group
classified as held for sale given the level of judgement applied by
management.
Identifying and responding to risks of material misstatement due
to non-compliance with laws and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience, and
through discussion with the directors and other management (as
required by auditing standards), and from inspection of the Group's
regulatory and legal correspondence and discussed with the
directors and other management the policies and procedures
regarding compliance with laws and regulations.
As the Group is regulated, our assessment of risks involved
gaining an understanding of the control environment including the
entity's procedures for complying with regulatory requirements.
We communicated identified laws and regulations throughout our
team and remained alert to any indications of non-compliance
throughout the audit. This included a request for full scope
component auditors to report to the group team any instances of
non-compliance with laws and regulations that could give rise to a
material misstatement at group.
Auditing standards limit the required audit procedures to
identify non-compliance with these laws and regulations to enquiry
of the directors and inspection of regulatory and legal
correspondence, if any. Therefore if a breach of operational
regulations is not disclosed to us or evident from relevant
correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches
of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance
with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the
inherently limited procedures required by auditing standards would
identify it.
In addition, as with any audit, there remained a higher risk of
non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
7 We have nothing to report on the other information in the
Annual Financial Statements
The directors are responsible for the other information
presented in the Annual Financial Statements together with the
financial statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not express
an audit opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
8 We have nothing to report on the other matters on which we are
required to report by exception
We have nothing to report in these respects.
9 Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out in the
Statement Of Directors' Responsibilities, the directors are
responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such
internal control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern; and using the going concern basis
of accounting unless they either intend to liquidate the Group or
to cease operations, or have no realistic alternative but to do
so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities .
10 The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company's members, as a body.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members, as a body,
for our audit work, for this report, or for the opinions we have
formed.
KPMG Inc
Pierre Fourie
Chartered Accountant
85 Empire Road
Parktown
Johannesburg
2193
31 August 2021
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
for the period ended 28 February 2021
$'000 14 months to 28 February 2021 12 months to 31 December 2019
Note Continuing Discontinued Total Continuing Discontinued Total
Interest and similar income 15 81,418 143,787 225,205 77,085 133,643 210,728
Interest and similar expense 8 (80,274) (62,694) (142,968) (65,712) (58,846) (124,558)
Net interest income 1,144 81,093 82,237 11,373 74,797 86,170
Impairment credit/(charge) on
financial assets 12 79 (12,290) (12,211) 967 (12,388) (11,421)
Net interest income after loan
impairment charges 1,223 68,803 70,026 12,340 62,409 74,749
Non-interest income 23 51,743 52,345 104,088 53,741 49,925 103,666
Share of profit of associates 16 25,510 - 25,510 31,101 - 31,101
Total operating income 78,476 121,148 199,624 97,182 112,334 209,516
Operating expenses 24 (90,240) (123,923) (214,163) (81,405) (136,732) (218,137)
Transaction and integration expenses - 1,000 1,000 - (1,350) (1,350)
Loss on monetary position (16,872) - (16,872) (11,081) - (11,081)
Net movement on IFRS 5 remeasurement - (1,435) (1,435) - (105,461) (105,461)
(Loss)/profit before tax* (28,636) (3,210) (31,846) 4,696 (131,209) (126,513)
Income tax expense 25.1 (18,393) (7,042) (25,435) (12,459) (2,061) (14,520)
Loss for the period (47,029) (10,252) (57,281) (7,763) (133,270) (141,033)
Attributable to:
Ordinary shareholders (46,593) (12,006) (58,599) (8,451) (134,768) (143,219)
Non-controlling interests (436) 1,754 1,318 688 1,498 2,186
Loss for the period (47,029) (10,252) (57,281) (7,763) (133,270) (141,033)
Basic loss per share ($) 26 (0.28) (0.07) (0.35) (0.05) (0.79) (0.84)
Diluted loss per share ($) 26 (0.28) (0.07) (0.35) (0.05) (0.79) (0.84)
* The IFRS 5 remeasurement loss was incorrectly presented after
the profit/(loss) before tax line for the year 2019 but has been
correctly reported for the current year. Refer to note 34 for
further details of the correction of this prior year error current
year. Refer to note 34 for further details of the correction of
this prior year error
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
for the period ended 28 February 2021
$'000 14 months to 28 February 2021 12 months to 31 December 2019
Continuing Discontinued Total Continuing Discontinued Total
-----------
Loss for the period (47,029) (10,252) (57,281) (7,763) (133,270 (141,033)
Other comprehensive income/(loss)
-----------
Items that may be reclassified to profit or
loss: (122,830) (28,805) (151,635) 11,239 (11,613) (374)
-----------
Exchange differences on translating foreign
operations (119,534) (28,469) (148,003) (1,163) (11,663) (12,826)
-----------
Net change in FVOCI reserves (net of tax (19) (336) (355) (150) 50 (100)
-----------
Share of OCI of equity-accounted investees
(net of tax) (3,277) - (3,277) 12,552 - 12,552
-----------
Items that will not be reclassified to
profit or loss: - - - (414) - (414)
-----------
Revaluation of land and buildings (net of
tax) - - - (414) - (414)
-----------
Total other comprehensive (loss)/income,
net of tax (122,830) (28,805) (151,635) 10,825 (11,613) (788)
-----------
Total comprehensive (loss)/income for the
period (169,859) (39,057) (208,916) 3,062 (144,883) (141,821)
-----------
Attributable to:
-----------
Ordinary shareholders (168,897) (39,074) (207,971) 1,666 (145,045) (143,379)
-----------
Non-controlling interests (962) 17 (945) 1,396 162 1,558
-----------
Total comprehensive (loss)/income for the
period (169,859) (39,057) (208,916) 3,062 (144,883) (141,821)
-----------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 28 February 2021
$'000 Notes 28 February 2021 31 December 2019
Assets
Cash and short-term funds 14 141,927 130,533
Financial assets at fair value through profit or loss 9 17,302 25,243
Loans and advances 10 580,527 644,112
Investment securities 11 119,646 107,778
Derivative financial assets 13 5,543 5,692
Investment in associates 16 471,496 582,141
Property and equipment 18 36,768 41,232
Investment property 19 11,644 6,586
Goodwill and intangible assets 17 63,864 73,005
Current tax assets 25.3 78 2,243
Deferred tax assets 25.4 2,388 149
Other assets 20 56,012 29,052
1,507,195 1,647,766
Assets included in disposal groups classified as held for sale 32 1,101,383 979,645
Total assets 2,608,578 2,627,411
Liabilities
Deposits 7 672,534 723,726
Borrowed funds 6 441,704 366,809
Derivative financial liabilities 13 5,564 5,610
Current tax liabilities 25.3 1,157 767
Deferred tax liability 25.4 25,629 12,107
Other liabilities 21 108,867 96,974
1,255,455 1,205,993
Liabilities included in disposal groups classified as held for sale 32 1,022,648 874,235
-Total liabilities 2,278,103 2,080,228
Equity
Founder preference shares 3 11,300 11,300
Ordinary share capital 3 993,192 993,192
Capital reserves (31,101) (38,478)
Accumulated loss (195,972) (128,951)
Fair value through OCI reserves (36) 310
Foreign currency translation reserve (457,190) (311,450)
Treasury shares (33,426) (23,393)
Equity attributable to ordinary shareholders 286,767 502,530
Non-controlling interest 43,708 44,653
Total equity 330,475 547,183
Total equity and liabilities 2,608,578 2,627,411
CONSOLIDATED STATEMENT OF CASH FLOWS
for the period ended 28 February 2021
$'000 14 months to 28 February 2021 12 months to 31 December 2019
Continuing Discontinued Total Continuing Discontinued Total
Cash flow from operating activities:
(Loss)/profit before tax(i) (28,636) (3,210) (31,846) 4,696 (131,209) (126,513)
Adjusted for:
Foreign exchange gain (15,851) (18,469) (34,320) (21,866) (14,755) (36,621)
Impairment (credit)/charge on financial
assets (79) 12,290 12,211 (967) 12,388 11,421
Depreciation and amortisation 9,378 17,016 26,394 8,649 16,729 25,378
Fair value loss/(gain) on derivative
financial instruments 86 - 86 (296) (110) (406)
Fair value (gain)/loss on financial
instruments at FVTPL (1,609) - (1,609) 3,084 - 3,084
Share of profit of associates (25,510) - (25,510) (31,101) - (31,101)
Fair value loss/(gain) on investment
property 315 (184) 131 (4,586) - (4,586)
Revaluation loss on property and equipment 2,440 - 2,440 - - -
(Gain)/loss on disposal of property and
equipment - (85) (85) (21) 115 94
Gain on disposal of investment property - - - - (1,164) (1,164)
Write-off of intangible asset - - - - 1,848 1,848
Equity-settled share-based payment
transactions 4,754 - 4,754 4,682 - 4,682
IFRS 5 remeasurement loss(ii) - 1,435 1,435 - 105,461 105,461
Net cash flow from operating activities
before changes in operating funds (54,712) 8,793 (45,919) (40,766) (16,106) (56,872)
Net change in operating funds 22,390 158,571 180,961 (60,923) 171,321 110,398
Decrease/(increase) in operating assets 62,542 41,018 103,560 38,548 (31,843) 6,705
Increase/(decrease) in operating
liabilities (40,152) 117,553 77,401 (99,471) 203,164 103,693
Tax paid (3,553) (3,953) (7,506) (3,040) (5,409) (8,449)
Net cash from operating activities (35,875) 163,411 127,536 (101,689) 155,215 53,526
Cash flow from investing activities
Purchase of property and equipment (3,067) (6,513) (9,580) (2,888) (27,587) (30,475)
Purchase of investment property (879) - (879) (1,572) (768) (2,340)
Purchase of intangible assets (4,061) (2,610) (6,671) (4,618) (4,353) (8,971)
Additions to associates - - - (5,877) - (5,877)
Dividend received from associate 8,521 - 8,521 - - -
Disposal/(purchase) of financial assets
held at FVTPL 4,135 - 4,135 (3,942) - (3,942)
Net (purchase)/disposal of investment
securities (19,952) (77,767) (97,719) 39,083 (65,887) (26,804)
Proceeds from disposal of property and
equipment - 173 173 284 175 459
Proceeds from disposal of investment
property - - - - 2,531 2,531
Net cash from investing activities (15,303) (86,717) (102,020) 20,470 (95,889) (75,419)
Cash flow from financing activities
Net proceed from new borrowings 130,554 79,812 210,366 96,277 313 96,590
Repayment of borrowings (26,018) (35,897) (61,915) (20,499) (12,228) (32,727)
Lease payments (1,019) (4,364) (5,383) (996) (4,925) (5,922)
Proceeds from partial disposal of
shareholding in subsidiary - - - 2,142 - 2,142
Dividends paid to noncontrolling interests - - - (490) - (490)
Net purchase of treasury shares (10,033) - (10,033) (918) - (918)
Net cash from financing activities 93,484 39,551 133,035 75,516 (16,840) 58,676
Increase/(decrease) in cash and cash
equivalents 42,306 116,245 158,551 (5,703) 42,486 36,783
Cash and cash equivalents at the beginning
of the year 130,533 245,685 376,218 161,577 220,411 381,988
Effect of exchange rate fluctuations on
cash and cash equivalents held (30,912) (53,142) (84,054) (25,341) (17,212) (42,553)
Cash and cash equivalents related to
disposal groups classified as held for
sale - (308,788) (308,788) - (245,685) (245,685)
Cash and cash equivalents at the end of
the year 141,927 - 141,927 130,533 - 130,533
Analysed as follows:
Cash and cash equivalents 133,821 - 133,821 129,102 - 129,102
Statutory reserve balances 8,106 - 8,106 1,431 - 1,431
141,927 - 141,927 130,533 - 130,533
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 28 February 2021
$'000 Founder Ordinary Capital FVOCI FCTR Treasury (Accumulated Equity Non-controlling Total
Preference share reserves(1) reserves shares(2) loss) attributable interests equity
Shares capital to ordinary
shareholders
Opening
balance
as at 1
January
2020 11,300 993,192 (38,478) 310 (311,450) (23,393) (128,951) 502,530 44,653 547,183
(Loss)/profit
for the
period - - - - - - (58,599) (58,599) 1,318 (57,281)
Other
comprehensive
income:
Exchange
differences
on translating
foreign
operations - - - - (145,740) - - (145,740) (2,263) (148,003)
Movement
in FVOCI
reserves - - - (355) - - - (355) - (355)
Equity-accounted
investees
- OCI - - - - - - (3,277) (3,277) - (3,277)
Total
comprehensive
loss for
the period - - - (355) (145,740) - (61,876) (207,971) (945) (208,916)
Transactions
within equity
Employee
share awards - - 4,754 - - - 4,754 - 4,754
Shares buy-back - - - - - (10,574) - (10,574) - (10,574)
Movements
within reserves - - 2,623 9 - 541 (5,145) (1,972) - (1,972)
Closing
balance
as at 28
February
2021 11,300 993,192 (31,101) (36) (457,190) (33,426) 195,972 286,767 43,708 330,475
Opening
balance
as at 1
January
2019 11,300 993,192 (38,314) 488 (299,252) (23,551) 2,981 646,844 42,094 688,938
(Loss)/profit
for the
year - - - - - - (143,219) (143,219) 2,186 (141,033)
Other
comprehensive
income:
Exchange
differences
on translating
foreign
operations - - - - (12,198) - - (12,198) (628) (12,826)
Movement
in FVOCI
reserves - - - (100) - - - (100) - (100)
Equity-accounted
investees
- OCI - - - - - - 12,552 12,552 - 12,552
Revaluation
of property
and equipment - - 80 - - - (494) (414) - (414)
Total
comprehensive
income for
the year - - 80 (100) (12,198) - (131,161) (143,379) 1,558 (141,821)
Transactions
within equity
Employee
share awards - - 3,983 - - 699 - 4,682 - 4,682
Shares buy-back - - - - - (918) - (918) - (918)
Share of
equity in
subsidiary
transferred
to NCI - - 650 - - - - 650 1,491 2,141
Dividends
paid to
NCI - - - - - - - - (490) (490)
Movements
within reserves - - (4,877) (78) - 377 (771) (5,349) - (5,349)
Closing
balance
as at 31
December
2019 11,300 993,192 (38,478) 310 (311,450) (23,393) (128,951) 502,530 44,653 547,183
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODED
28 FEBRUARY 2021
This section describes the Group's significant accounting
policies and critical accounting estimates and judgements that
relate to the financial statements and notes as a whole. If an
accounting policy or a critical accounting estimate relates to a
specific note, the applicable accounting policy and/or critical
accounting estimate is contained within the relevant note.
1. Significant accounting policies
REPORTING ENTITY
These financial statements have been prepared for Atlas Mara
Limited (the 'Company'), a company domiciled in the BVI, and its
subsidiaries (the 'Group'). The Group is a financial services
provider, engaged in retail banking, credit cards, wholesale
banking, investment banking, wealth management and investment
management services.
COMPLIANCE WITH IFRS
The consolidated financial statements of the Group (the
'financial statements') have been prepared in accordance with
International Financial Reporting Standards ('IFRS') and IFRS
Interpretations Committee ('IFRIC') interpretations as issued by
the International Accounting Standards Board ('IASB') and as
adopted by the European Union ('EU'). The financial statements of
all material subsidiaries and associates are prepared in accordance
with IFRS as issued by the IASB and there are no material
inconsistencies in the accounting policies applied.
IFRS as endorsed by the EU may differ from IFRSs as issued by
the IASB if, at any point in time, new or amended IFRSs have not
been endorsed by the EU. As at 28 February 2021, there were no
unendorsed standards effective for the period ended 28 February
2021 that affect these consolidated financial statements, and there
was no difference between IFRSs endorsed by the EU and IFRSs issued
by the IASB in terms of their application to the Group.
BASIS OF PREPARATION
The financial statements have been prepared under the historical
cost convention adjusted for the effects of inflation where
entities operate in hyperinflationary economies and for the
revaluation of certain financial instruments, property and
equipment, investment property and non-current assets held for sale
to fair value. All amounts disclosed in the financial statements
and notes have been rounded off to the nearest thousand currency
units unless otherwise stated.
Change of financial year-end
The financial year end of the Group was changed from 31 December
to 28 February, driven by the ongoing strategic review of the
Group's operations.
Accordingly, these consolidated financial statements present the
statements of financial position as at 28 February 2021 and 31
December 2019, and the results of operations for the 14 months
ended 28 February 2021 and 12 months ended 31 December 2019. The
comparative figures stated in the income statement, statement of
changes in equity, cash flow statement and the related notes are
not comparable.
Going concern
The financial statements have been prepared on a going concern
basis, as the directors have a reasonable expectation that the
Group will continue to have the necessary resources to continue in
business for the foreseeable future.
When considering the going concern basis of the Group, the
Directors have referenced the Financial Reporting Council's
Guidance on the Going Concern Basis of Accounting and Reporting on
Solvency and Liquidity Risks, as was published in April 2016. The
assessment of the appropriateness of the going concern basis of
accounting for the Group's annual report and accounts has been
subject to a thorough process involving analysis and discussion by
Management, the Executive Committee, the Audit, Risk and Compliance
Committee and the Board. As a result of the assessment, the
Directors identified certain events and conditions which may cast
significant doubt about the Group's ability to continue as a going
concern.
Refer to the Going concern assessment included in the Risk
Report for further information on these conditions that indicate
the existence of a material uncertainty which may cast significant
doubt over the Group's ability to continue as a going concern. The
Directors believe that actions taken by the Group to resolve the
uncertainty are sufficient to support the position that the use of
the going concern assumption is appropriate.
ACCOUNTING POLICIES
The Group's significant accounting policies relating to specific
financial statement items, together with a description of the
accounting estimates and judgements that were critical to preparing
them, are set out under the relevant notes. Accounting policies
that affect the financial statements as a whole are set out
below:
Consolidation
The Group applies IFRS 10 Consolidated financial statements. The
consolidated financial statements combine the financial statements
of Atlas Mara Limited and all its subsidiaries. Subsidiaries are
entities over which the Group has control. The Group has control
over another entity when the Group has all of the following:
-- power over the relevant activities of the investee, for
example through voting or other rights;
-- exposure to, or rights to, variable returns from its
involvement with the investee; and
-- the ability to affect those returns through its power over
the investee.
The assessment of control is based on the consideration of all
facts and circumstances. The Group reassesses whether it controls
an investee
if facts and circumstances indicate that there are changes to
one or more of the three elements of control.
Intra-group transactions and balances are eliminated on
consolidation. Consistent accounting policies are used throughout
the Group for the purposes of the consolidation. Changes in
ownership interests in subsidiaries are accounted for as equity
transactions if they occur after control has already been obtained
and they do not result in loss of control.
Foreign currency translation
Functional and presentation currency
The Directors consider US dollars ($) as the currency that
represents the economic effects of the underlying transactions,
events and conditions. The financial statements of the Company are
presented in US dollars, which is also the Company's functional
currency. The presentation currency of the Group is also US dollars
($).
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates at the dates of the transactions.
Foreign exchange gains or losses resulting from the settlement of
such transactions and from the translation of monetary assets and
liabilities denominated in foreign currencies at closing rates, are
recognised in the statement of profit or loss.
Foreign operations
The results and the financial position of Group subsidiaries and
associates which are not accounted for as entities which operate in
hyperinflationary economies and that have a functional currency
that is different from the presentation currency of the Group are
translated into the presentation currency as follows:
-- Assets and liabilities, including goodwill and fair value
adjustments arising on acquisition, are translated into US dollars
at the spot exchange rates at the reporting date.
-- Income and expenses are translated into US dollars at the at
the average exchange rates for the period presented; and
-- All resulting translation differences are recognised in other
comprehensive income and presented as a separate component of
equity in the foreign currency translation reserve (FCTR).
The results and the financial position of Group entities which
operate in hyperinflationary economies and that have a functional
currency that is different from the presentation currency of the
Group are translated into US Dollars at the exchange rates ruling
at the reporting date.
When a foreign operation is disposed of or sold and the Group
loses control of or significant influence over a foreign operation,
all of the exchange differences accumulated in equity in respect of
that operation attributable to the equity holders of the Group are
reclassified to the statement of profit or loss. On partial
disposal of a foreign subsidiary, where a change occurs in the
absolute ownership percentage held by the Group and control is not
lost, a proportionate share of all related exchange rate
differences recognised in other comprehensive income is
re-attributed to the non-controlling interests in that foreign
operation. On partial disposal of a foreign associate, where a
change occurs in the absolute ownership percentage held by the
Group and significant influence is not lost, a proportionate share
of all related exchange rate differences recognised in other
comprehensive income are reclassified from equity to the statement
of profit or loss.
Hyperinflation
The results and the financial position, including comparative
amounts, of Group entities whose functional currencies are the
currencies of hyperinflationary economies are adjusted in terms of
the measuring unit current at the end of the reporting period.
As the presentation currency of the Group is that of a
non-hyperinflationary economy, comparative amounts are not adjusted
for changes in the price level or exchange rates in the current
year. Differences between these comparative amounts and the
hyperinflation adjusted equity opening balances are recognised in
equity.
Items in the statement of financial position not already
expressed in terms of the measuring unit current at the reporting
period, such as non-monetary items carried at cost or cost less
depreciation, are restated by applying a general price index. The
restated cost, or cost less depreciation, of each item is
determined by applying to its historical cost and accumulated
depreciation the change in a general price index from the date of
acquisition to the end of the reporting period. An impairment loss
is recognised in profit or loss if the restated amount of a
non-monetary item exceeds its estimated recoverable amount.
Losses on the net monetary position are recognised separately on
the statement of profit or loss.
All items recognised in the statement of comprehensive income
are restated by applying the change in the general price index from
the dates when the items of income and expenses were initially
earned or incurred.
At the beginning of the first period of application, the
components of owners' equity, except retained earnings, are
restated by applying a general price index from the dates the
components were contributed or otherwise arose. Restated retained
earnings are derived from all other amounts in the restated
statement of financial position.
At the end of the first period and in subsequent periods, all
components of owners' equity are restated by applying a general
price index from the beginning of the period or the date of
contribution, if later.
All items in the statement of cash flows are expressed in terms
of the general price index at the end of the reporting period.
Financial assets and liabilities
The Group applies IFRS 9 Financial Instruments to the
recognition, classification and measurement, and derecognition of
financial assets and financial liabilities and the impairment of
financial assets
Initial recognition, measurement and derecognition
Financial assets and liabilities are recognised initially when
the Group becomes a party to the contractual provisions of the
instruments. Trade date or settlement date accounting is applied
depending on the classification of the financial asset.
The Group classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance
of the contractual arrangement
At initial recognition, the Group measures all financial assets
and liabilities at fair value plus or minus, in case of a financial
asset or financial liability not at fair value through profit or
loss, transactions costs that are incremental and directly
attributable to the acquisition or the issue of the financial asset
or financial liability, such as fees and commissions. Transaction
costs on financial assets and liabilities at fair value through
profit or loss are immediately recognised in profit or loss. The
fair value of a financial instrument at initial recognition is
generally its transaction price.
Immediately after initial recognition, an expected credit loss
allowance (ECL) is recognised for financial assets measured at
amortised cost and investments in debt instruments measured at
FVOCI, which results in an accounting loss being recognised in
profit or loss when an asset is newly originated.
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at
the proceeds received, net of direct issue costs.
Financial assets are derecognised when rights to receive cash
flows from the financial asset have expired or where the Group has
transferred substantially all contractual risks and rewards of
ownership. On derecognition of a financial asset, the difference
between the carrying amount of the asset (or the carrying amount
allocated to the portion of the asset derecognised) and the sum of
(i) the consideration received (including any new asset obtained
less any new liability assumed) and (ii) any cumulative gain or
loss that had been recognised in OCI is recognised in profit or
loss.
The Group derecognises financial liabilities when its
contractual obligations are discharged, cancelled, or expire.
Financial assets - Classification and subsequent measurement
The Group's financial assets comprise cash and short-term funds,
financial assets at fair value through profit or loss (FVTPL),
derivative financial assets, loans and advances to customers, other
assets and investment securities. The Group classifies all its
financial assets on the basis of two criteria:
-- the business model within which financial assets are managed,
and
-- their contractual cash flow characteristics (whether the cash
flows represent 'solely payments of principal and interest'
(SPPI)).
Business model assessment
The Group assesses the objective of a business model in which an
asset is held at a portfolio level because this best reflects the
way the business is managed, and information is provided to
management. The information considered includes:
-- the stated policies and objectives for the portfolio and the
operation of those policies in practice;
-- how the performance and risks of the portfolio are managed,
evaluated and reported to the Group's management; and
-- the frequency, volume and timing of sales in prior periods,
the reasons for such sales and its expectations about future sales
activity.
SPPI
The contractual cash flow characteristics of financial assets
are assessed with reference to whether the cash flows represent
SPPI. In assessing
whether contractual cash flows are SPPI compliant, interest is
defined as consideration primarily for the time value of money and
the credit risk of
the principal outstanding. The time value of money is defined as
the element of interest that provides consideration only for the
passage of time
and not consideration for other risks or costs associated with
holding the financial asset. Terms that could change the
contractual cash flows so that it would not meet the condition for
SPPI are considered, including:
-- (i) contingent and leverage features,
-- (ii) non-recourse arrangements and
-- (iii) features that could modify the time value of money.
The classification requirements for debt and equity instruments
are as described below:
Debt instruments
Amortised cost: Financial assets that are held for collection of
contractual cash flows where those cash flows represent solely
payments of principal and interest ('SPPI'); and that are not
designated at FVTPL, are measured at amortised cost. The carrying
amount of these assets is adjusted by any expected credit loss
allowance recognised. Interest income from these financial assets
is included in 'Interest income' using the effective interest rate
method.
Fair value through other comprehensive income (FVOCI): Financial
assets that are held for collection of contractual cash flows and
for selling the assets, where the assets' cash flows represent
solely payments of principal and interest ('SPPI'); and that are
not designated at FVTPL, are measured at fair value through other
comprehensive income. Movements in carrying amounts are taken
through OCI, except for the recognition of impairment gains or
losses, interest revenue and foreign exchange gains and losses on
the instrument's amortised cost which are recognised in profit or
loss. When the asset is derecognised, the cumulative gain or loss
previously recognised in OCI is reclassified from equity to profit
or loss. Interest income from these financial assets is included in
'Interest income' using the effective interest rate method.
Fair value through profit or loss (FVTPL): Financial assets that
do not meet the criteria for amortised cost or FVOCI are measured
at fair value through profit or loss. Financial assets that are
held for trading or managed and whose performance is evaluated on a
fair value basis are measured at FVTPL because they are neither
held to collect contractual cash flows nor held both to collect
contractual cash flows and to sell financial assets. In addition,
on initial recognition, the Group may irrevocably designate a
financial asset that otherwise meets the requirements to be
measured at amortised cost or at FVOCI as at FVTPL if doing so
eliminates or significantly reduces an accounting mismatch that
would otherwise arise. Subsequent changes in fair value for these
financial assets are recognised in the statement of profit or loss
within 'Non-interest income".
Equity instruments
Equity instruments are instruments that meet the definition of
equity from the issuer's perspective; that is, instruments that do
not contain a contractual obligation to pay and that evidence a
residual interest in the issuer's net assets.
The Group subsequently measures all equity instruments at fair
value through profit or loss, except where the Group's management
has elected, at initial recognition, to irrevocably designate an
equity instrument at FVOCI. When this election is used, fair value
gains and losses are recognised in OCI and are not subsequently
reclassified to profit or loss, including on disposal. Impairment
losses (and reversal of impairment losses) are not reported
separately from other changes in fair value.
Impairment
The Group assesses on a forward-looking basis the expected
credit loss (ECL) associated with its debt instruments carried at
amortised cost and FVOCI and with the exposure arising from loan
commitments and financial guarantee contracts. The Group recognises
a loss allowance for such losses at each reporting date. The
measurement of ECL reflects:
-- An unbiased and probability-weighted amount that is
determined by evaluating a range of possible outcomes;
-- The time value of money; and
-- Reasonable and supportable information that is available
without undue cost or effort at the reporting date about past
events, current conditions and forecasts of future economic
conditions.
Reclassifications
Financial assets are not reclassified subsequent to their
initial recognition, except in the period after the Group changes
its business model for managing financial assets.
Financial liabilities - Classification and subsequent
measurement
Financial liabilities are classified as financial liabilities at
amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis, except for
financial liabilities at fair value through profit or loss. For
financial liabilities measured at amortised cost, transaction costs
are included in the initial measurement and accounted for in profit
or loss as part of the effective interest while that of financial
liabilities measured at FVTPL are expensed immediately.
Financial liabilities at fair value through profit or loss are
classified as such where the financial liability is either held for
trading (derivative financial liabilities) or it is designated as
at fair value through profit or loss (borrowed funds).
Financial liabilities comprise other liabilities, deposits,
derivative financial liabilities and borrowed funds. The Group
derecognises financial liabilities when its contractual obligations
are discharged, expired or cancelled.
Interest income and expense
Interest income and expense for all financial instruments,
excluding those classified as held for trading or designated at
fair value, are recognised in 'Interest income' and 'Interest
expense' in the statement of profit or loss using the effective
interest method. The effective interest method is a method of
calculating the amortised cost of a financial asset and of
allocating interest income over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future
cash receipts (including all fees on points paid or received that
form an integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the expected life of
the financial asset, or, where appropriate, a shorter period. When
calculating the effective interest rate, the Group estimates future
cash flows considering all contractual terms of the financial
instrument, excluding credit losses. Interest on credit impaired
financial assets is recognised using the rate of interest used to
discount the future cash flows for the purpose of measuring the
impairment loss.
Derivative financial assets and liabilities
Derivative instruments are contracts whose value is derived from
one or more underlying financial instruments or indices defined in
the contract. They include swaps and forward-rate agreements.
Derivatives are normally recorded in the statement of financial
position at fair value. Notional amounts of the contracts are not
recorded on the statement of financial position. Derivatives held
by the Group are for risk management purposes and are used to hedge
interest rate and exchange rates risks.
Derivatives are classified as assets when their fair value is
positive or as liabilities when their fair value is negative.
Derivative assets and liabilities arising from different
transactions are only offset where there is a legal right of offset
of the recognised amounts and the parties intend to settle the cash
flows on a net basis or realise the asset and settle the liability
simultaneously.
Derivatives are recognised initially at fair value; attributable
transaction costs are recognised in profit or loss when incurred.
Subsequent to initial recognition, derivatives are measured at fair
value with changes in fair value recognised in profit or loss.
Compound instruments
Convertible Bonds entitle bondholders to convert their bonds
into a fixed number of shares of the issuing company usually at the
time of their maturity. Convertible bonds are compound financial
instruments. This implies the instrument has the characteristics of
both liability and equity.
On initial recognition the liability component of the instrument
is measured at fair value (in terms of IFRS 13 Fair Value) and the
equity component is the residual amount which is the issued price
less the fair value of the liability component.
Subsequently, the liability will be accounted for at amortised
cost using the effective interest method. The equity component will
not be remeasured. On conversion of the instrument, the liability
component is reclassified to equity. No gain or loss is recognised
in profit or loss.
Write-off
Loans and debt securities are written off (either partially or
in full) when there is no reasonable expectation of recovering a
financial asset in its entirety or a portion thereof. This is
generally the case when the Group determines that the borrower does
not have the assets or sources of income that could generate
sufficient cash flows to repay the amounts subject to the
write-off. This assessment is carried out at the individual asset
level.
Recoveries of amounts previously written off are included in
'impairment charges on financial instruments' in the statement of
profit or loss.
Financial assets that are written off could still be subject to
enforcement activities in order to comply with the Group's
procedures for recovery of amounts due.
Offsetting financial instruments
Financial assets and liabilities are offset, and the net amount
is reported in the statement of financial position when there is a
legally enforceable right to offset the recognised amounts and
there is an intention to settle on a net basis, or to realise the
asset and settle the liability simultaneously. Deferred loan income
reduces the outstanding loans and advances balance on the basis
that the revenue will be recognised over the terms of the loans.
During the current period, there was no offsetting of financial
assets and liabilities.
NEW AND AMED STANDARDS AND INTERPRETATIONS
The accounting policies adopted are consistent with those of the
previous financial year. A number of new standards are effective
from 1 January 2020, but they do not have a material effect on the
Group's financial statements.
STANDARDS AND INTERPRETATIONS ISSUED AND NOT YET APPLICABLE
The following amendments, issued by the IASB, are not yet
effective and are not expected to have a significant impact on the
Group's consolidated financial statements:
-- Amendment to IAS 37: Onerous contracts - cost of fulfilling a contract
-- Amendment to IFRS 16: COVID-19 related rent concessions
-- Amendment to IAS 16: Property, Plant and Equipment: proceeds before intended use
-- Amendment to IFRS 3: Reference to conceptual framework
-- Amendment to IAS 1: Classification of liabilities as current or non-current.
USE OF ESTIMATES AND JUDGEMENTS
In preparing these consolidated financial statements, management
has made judgements, estimates and assumptions that affect the
application of the Group's accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to estimates are recognised prospectively. The
Group's estimates and assumptions are based on historical
experience and expectation of future events and are reviewed
periodically. Further information about key assumptions concerning
the future, and other key sources of estimation uncertainty, are
set out in the relevant disclosure notes for the following
areas:
-- fair value of financial instruments (note 5);
-- assessment of the investment in associates for impairment
(note 16);
-- assessment of control over equity-accounted investment (note
16)
-- assessment of goodwill and intangible assets for impairment
(note 17);
-- impairment charges (note 12);
-- share-based payment valuations (note 33);
-- recognition of deferred tax assets (note 25);
-- fair value of investment properties (note 19); and
-- fair value of assets and liabilities included in disposal
groups held for sale (note 32).
OTHER DISCLOSURES
To improve transparency and ease of reference, by concentrating
related information in one place, certain disclosures required
under IFRS have been included within the Risk review section as
follows:
Credit risk
Liquidity risk
Market risk
These disclosures are covered by the Audit opinion where
referenced as audited.
2. Segmental reporting
Segment information
Segment results that are reported to the Group's Executive
Committee (EXCO - being the chief operating decision maker) include
items that are directly attributable to a segment as well as those
that can be allocated on a reasonable basis. Unallocated items
comprise mainly of corporate assets (primarily the Group's
headquarters), head office expenses and tax assets and
liabilities.
For management purposes, the Group is organised into business
units based on the countries of operation of its components as
follows: Botswana, Zimbabwe, Nigeria, Mozambique, Tanzania, Zambia
and Rwanda. All entities and/or consolidation adjustments not part
of operating banks, are included as 'Corporate'.
The operations of Mozambique, Tanzania, Zambia and Rwanda have
been reclassified and reported as discontinued operations in line
with the Group's strategic decision to dispose of its interests in
these entities.
Transfer prices between operating segments are on an
arm's-length basis in a manner similar to transactions with third
parties. The Group's transfer pricing policy is in line with OECD
requirements and also in line with both Group and country-level tax
and regulatory best practice.
Revenue from external parties reported to the EXCO is measured
in a manner consistent with that in the consolidated statement of
profit or loss.
As the banking operations comprise of stand-alone banks, each
banking operation is funded with Tier I and II Capital from the
holding and intermediate holding company.
Other material items of income or expense between the operating
segments comprise of management fees and dividends.
The Group's management reporting is based on a measure of
operating profit comprising net interest income, loan impairment
charges, net fee and commission income, non-interest income and
operating expenses.
The CFO's review of financial performance describes the impact
of non-recurring items of income and expenses.
The information provided about each segment is based on the
internal reports about segment profitability, assets and
liabilities composition, and other information, which are regularly
reviewed by the EXCO.
An analysis of the Group's performance by countries of operation
has been presented below:
Statement of profit or loss for the 14-month period ended 28
February 2021
$'000 Continuing operations Total
Botswana Zimbabwe Nigeria Corporate(1)
Interest and similar income 72,166 11,271 - (2,019) 81,418
Interest and similar expense (29,518) (2,922) - (47,834) (80,274)
Net interest income/(expense) 42,648 8,349 - (49,853) 1,144
Impairment (charge)/credit on
financial assets (625) (805) - 1,509 79
Net interest income after loan
impairment charges 42,023 7,544 - (48,344) 1,223
Non-interest income 12,706 42,659 - (3,623) 51,742
Total operating income 54,729 50,203 - (51,967) 52,965
Operating expenses (42,525) (31,055) - (16,660) (90,240)
Loss on net monetary position - (12,951) - (3,921) (16,872)
Net income from operations 12,204 6,197 - (72,548) (54,147)
Share of profit of associates - - 25,470 40 25,510
Profit/(loss) before tax 12,204 6,197 25,470 (72,508) (28,637)
Income tax expense (3,932) (6,617) - (7,843) (18,392)
Profit/(loss) for the year 8,272 (420) 25,470 (80,351) (47,029)
Non-controlling interest (1,808) - - 2,243 435
Profit/(loss) attributable to
ordinary shareholders 6,464 (420) 25,470 (78,108) (46,594)
Note:
1. Corporate segment includes Dubai, Germany, BVI,
Mauritius and all other regions.
Statement of profit or loss for the 14-month period ended 28
February 2021
$'million Discontinued operations Total
Mozambique Tanzania Zambia Rwanda Other(1)
Interest and similar income 19,336 18,455 69,028 46,344 (9,375) 143,788
Interest and similar expense (8,217) (8,569) (32,971) (14,730) 1,793 (62,694)
Net interest income 11,119 9,886 36,057 31,614 (7,582) 81,094
Impairment charge on financial assets (1,013) 316 (7,506) (4,087) - (12,290)
Net interest income after loan impairment
charges 10,106 10,202 28,551 27,527 (7,582) 68,804
Non-interest income 8,397 1,719 33,030 9,199 - 52,345
Total operating income 18,503 11,921 61,581 36,726 (7,582) 121,149
Total expenses (18,725) (13,651) (52,197) (30,046) (8,305) (122,924)
(Loss)/profit before tax (222) (1,730) 9,384 6,680 (15,887) (1,775)
Income tax expense (1,089) (63) (4,168) (1,929) 207 (7,042)
(Loss)/profit after tax (1,311) (1,793) 5,216 4,751 (15,680) (8,817)
Net movement on IFRS 5 remeasurement - - - - (1,435) (1,435)
Loss for the period (1,311) (1,793) 5,216 4,751 (17,115) (10,252)
Non-controlling interest - 49 - (1,802) - (1,753)
(Loss)/profit attributable to ordinary
shareholders (1,311) (1,744) 5,216 2,949 (17,115) (12,005)
Note:
1. Others include intercompany eliminations between continuing and
discontinued operations.
Statement of profit or loss for the year ended 31 December
2019
$'000 Continuing operations Total
Botswana Zimbabwe Nigeria Corporate(1)
Interest and similar income 69,170 12,560 - (4,645) 77,085
Interest and similar expense (30,889) (2,790) - (32,033) (65,712)
Net interest income 38,281 9,770 - (36,678) 11,373
Loan impairment charges 1,455 (180) - (308) 967
Income/(loss) from lending
activities 39,736 9,590 - (36,986) 12,340
Non-interest income 11,809 39,569 - 2,363 53,741
Total operating income 51,545 49,159 - (34,623) 66,081
Operating expenses (37,392) (21,569) - (22,444) (81,405)
Loss on monetary position - (11,081) - - (11,081)
Net income from operations 14,153 16,509 - (57,067) (26,405)
Share of profit of associates - - 31,230 (129) 31,101
Profit/(loss) before tax 14,153 16,509 31,230 (57,196) 4,696
Income tax expense (2,834) (8,688) - (937) (12,459)
Profit/(loss) for the year 11,319 7,821 31,230 (58,133) (7,763)
Non-controlling interest (2,440) - - 1,752 (688)
Profit/(loss) attributable
to ordinary shareholders 8,879 7,821 31,230 (56,381) (8,451)
Note:
1. Corporate segment includes Dubai, Germany,
BVI, Mauritius and all other regions.
Statement of profit or loss for the year ended 31 December
2019
$'million Discontinued operations Total
Mozambique Tanzania Zambia Rwanda Other(1)
Interest and similar income 21,997 17,597 64,749 37,686 (8,386) 133,643
Interest and similar expense (10,252) (8,318) (31,544) (10,118) 1,386 (58,846)
Net interest income 11,745 9,279 33,205 27,568 (7,000) 74,797
Loan impairment charges 2,363 (535) (9,597) (3,742) (877) (12,388)
Income/(loss) from lending activities 14,108 8,744 23,608 23,826 (7,877) 62,409
Non-interest income 8,201 2,352 28,569 10,803 - 49,925
Total operating income 22,309 11,096 52,177 34,629 (7,877) 112,334
Operating expenses (26,049) (14,835) (60,970) (27,639) (8,589) (138,082)
(Loss)/profit before tax (3,740) (3,739) (8,793) 6,990 (16,466) (25,748)
Income tax expense 1,422 (63) (1,011) (2,425) 16 (2,061)
(Loss)/profit after tax (2,318) (3,802) (9,804) 4,565 (16,450) (27,809)
Loss on remeasurement to fair value less costs
to sell - - - - (105,461) (105,461)
(Loss)/profit for the year (2,318) (3,802) (9,804) 4,565 (121,911) (133,270)
Non-controlling interest - 103 - (1,732) 131 (1,498)
(Loss)/profit attributable to ordinary
shareholders (2,318) (3,699) (9,804) 2,833 (121,780) (134,768)
Note:
1. Others include intercompany eliminations between continuing and
discontinued operations.
Segment assets and liabilities comprise the majority of items
appearing in the consolidated statement of financial position.
Statement of financial position for the period ended 28 February
2021
$'000 Continuing operations Discontinued operations Group total
Botswana Zimbabwe Nigeria Corporate(1)
Loans and advances 549,363 18,431 - 12,733 - 580,527
Total assets 777,052 197,747 470,630 61,766 1,101,383 2,608,578
Deposits 581,491 91,043 - - - 672,534
Total liabilities 669,098 137,098 - 449,259 1,022,648 2,278,103
Note:
1. Corporate segment includes Dubai, Germany, BVI, Mauritius and
all other regions .
Statement of financial position for the year ended 31 December
2019
$'000 Continuing operations Discontinued operations Group
total
Botswana Zimbabwe Nigeria Corporate(1)
Loans and advances 606,297 22,733 - 15,082 - 644,112
Total assets 856,680 161,262 580,622 49,202 979,645 2,627,411
Deposits 662,487 61,239 - - - 723,726
Total liabilities 736,112 107,904 - 361,977 874,235 2,080,228
Note:
1. Corporate segment includes Dubai, Germany, BVI, Mauritius and
all other regions .
3. Capital and reserves
SHARE CAPITAL
Founder Preferred Shares and ordinary share capital are
classified as equity. Incremental costs directly attributable to
the issue of new ordinary shares are shown in equity as a deduction
from the proceeds.
OTHER RESERVES
Other reserves excluding capital reserves and treasury shares
reserves recorded in equity (other comprehensive income) on the
Group's statement of financial position include:
1) Foreign currency translation reserve
The currency translation reserve represents the cumulative gains
and losses on the retranslation of the Group's net investment in
foreign operations.
2) Fair value through OCI reserve
The fair value reserve represents the changes in the fair value
of FVOCI investments since initial recognition.
3.1. Authorised and issued share capital
28 February 2021 31 December 2019
No. of $'000 No. of shares $'000
shares '000
'000
Opening balance(1) 171,321 993,192 171,321 993,192
Shares held in escrow(2) 3,298 - 3,298 -
Total shares in issue 174,619 993,192 174,619 993,192
Shares in issue excluding escrow
shares 171,320 - 171,320 -
Founder preference shares(3) 1,130 11,300 1,130 11,300
172,450 1,004,492 172,450 1,004,492
Note:
1. Comprises ordinary shares.
2. Shares held in escrow are part of the contingent
consideration for the acquisition of Finance Bank Zambia and has no
voting rights associated to it.
3. As allowed, under Article 5.2 of the Company's Articles, a
holder of Founder Preferred Shares (FPS) has the right to request
for conversion of FPS into Ordinary Shares at any time, by
providing notice in writing to the Company requiring such
conversion of FPS into an equal number of ordinary shares.
3.2. Issued and fully paid
$'000 28 February 31 December
2021 2019
Ordinary share capital 993,192 993,192
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at the AGM of the Company.
TERMS OF THE FOUNDER PREFERRED SHARES
The Founder Preferred Shares do not carry the same voting rights
as are attached to the ordinary shares. The Founder Preferred
Shares do not carry any voting rights except in respect of any
variation or abrogation of class rights or on any Resolution of
Members required, pursuant to BVI law, to approve either an
acquisition or, prior to an acquisition, a merger or
consolidation.
Once the average price per ordinary share is at least $11.50 for
10 consecutive trading days, the holders of Founder Preferred
Shares will be entitled to receive an 'annual dividend amount',
payable in ordinary shares, equal in value to 20% of the increase
each year, if any, in the market price of the ordinary shares
multiplied by the then outstanding number of ordinary shares. On
the last day of the seventh full financial year following
completion of the BancABC acquisition, the Founder Preferred Shares
will automatically convert to ordinary shares on a one-for-one
basis.
The shares have a monetary value, and the fair value is based on
future performance of the share price. Given the limited market
data available that would be required to measure the shares, it is
impractical to assign a value to the shares. IFRS 2 allows for
valuing the shares at the intrinsic value in circumstances where a
fair value cannot be reliably determined. Given that no dividend
has been paid as yet and the trigger has not been met, the
intrinsic value of the optionality is deemed to be $nil.
4. Capital planning
For the purpose of the Group's capital management, capital
includes issued share capital, convertible preference shares, share
premium and all other equity reserves attributable to the equity
holders of the Company.
The Group's principal objectives when managing capital are:
-- to optimise business activities and ensure return on capital
targets is achieved through efficient capital management and
allocation;
-- to ensure the Group and operating banks hold sufficient risk
capital in compliance with regulatory requirements in relevant
jurisdictions;
-- to ensure that the Group's ability to operate as a going
concern and to provide returns to shareholders is safeguarded;
and
-- to support the development of the Group's business by
maintaining a strong and sustainable capital base.
These objectives are delivered through regular reviews of the
capital position of operating banks both in-country and at Group.
Group management closely monitors capital adequacy and the use of
regulatory capital and is actively involved in country level
discussions to ensure compliance with local supervisory
requirements. An annual capital plan is prepared by each operating
entity and submitted to Group for review and approval as part of
the annual budget process. A buffer of 2% above regulatory minimum
capital limit is generally set and monitored by country management
and Group as part of the Asset and Liability Management Committee
('ALCO'). In addition, operating entities carry out stress testing
of capital position as part of the Internal Capital Adequacy
Assessment Process ('ICAAP').
Subject to compliance with laws and regulations in relevant
jurisdictions, no significant restrictions exist on transfer of
funds and regulatory capital within the Group.
Capital adequacy computations - 28 February 2021
$'000 Continuing operations Discontinued operations
ABC Botswana ABC (Zimbabwe) ABC Zambia ABC (Tanzania) ABC (Moçambique) BP
Limited Limited Limited Limited S.A Rwanda
Tier I capital
Share capital and premium 20,367 34,651 47,028 53,026 26,541 45,149
Capital reserves and
retained earnings 87,586 - (11,203) (36,596) (10,686) 4,087
Intangible assets
(software)/deferred
charges (9,105) 7,453 (6,801) - (3,147) 744
Deferred tax asset - - - (4,439) - -
Prepayments - 7,584 (2,127) (440) - -
Exposures to insiders - 177 - - (2,102) -
Total qualifying for
tier I capital 98,848 49,865 26,897 11,551 10,606 49,980
Tier II capital
Shareholder's loan 24,777 - 2,923 - 4,004 -
General debt provision 6,295 367 - - 15 -
Fair value revaluation - - - - 211 -
Revaluation reserves - - - - - -
(limited to tier I
capital)
Profit for the year 8,606 - - - - -
Total qualifying for
tier II capital 39,678 367 2,923 11,551 4,230 -
Total capital
Risk weighted assets(1)
Market risk 184,986 12,441 - 3,789 1,550 1,096
Operational risk 66,177 54,016 - 7,904 2,761 18,886
Credit risk 503,617 73,474 232,864 77,637 117,836 193,897
Total risk weighted
assets 754,780 139,931 232,864 89,330 122,147 213,879
Capital adequacy ratio 18.4% 35.9% 12.8% 12.9% 12.1% 23.4%
Minimum regulatory
capital adequacy ratio 12.50% 12.00% 10.00% 12.00% 12.00% 15.00%
Note:
1. Weighting of assets is based on the nature of the asset and
the weighting as prescribed by the relevant regulatory
authority.
Capital adequacy computations - 31 December 2019
$'000 Continuing operations Discontinued operations
ABC Botswana ABC (Zimbabwe) ABC Zambia ABC (Tanzania) ABC (Moçambique) BP
Limited Limited Limited Limited S.A Rwanda
Tier I capital
Share capital and premium 20,934 27,924 72,829 53,504 32,341 47,525
Capital reserves and
retained earnings/
(accumulated loss) 76,360 23,873 (24,292) (31,513) (7,498) 1,590
Intangible assets
(software)/deferred
charges (7,855) - (10,484) - (4,530) (1,879)
Deferred tax asset - - - (6,722) - -
Prepayments - - (1,591) (557) - -
Exposures to insiders - (1) - - (543) -
Total qualifying for
Tier I capital 89,439 51,796 36,462 14,712 19,770 47,236
Tier II capital
Shareholder's loan 16,184 - 3,434 - 4,442 -
General debt provision 7,233 322 - - 15 -
Revaluation reserves
(limited to Tier I
capital) - - - - 800 -
Profit for the year 11,460 18,429 - - - -
Total qualifying for
Tier II capital 34,877 18,751 3,434 - 5,257 -
Total capital 124,316 70,547 39,896 14,712 25,027 47,236
Risk weighted assets(1)
Market risk 29,029 2,285 - 2,099 2,061 10,296
Operational risk 63,234 18,663 - 7,890 3,763 24,256
Credit risk 576,875 99,132 279,336 78,419 122,046 166,197
Total risk weighted
assets 669,138 120,080 279.336 88,408 127,870 200,749
Capital adequacy ratio 18.6% 58.7% 14.3% 16.6% 19.6% 23.5%
Minimum regulatory
capital adequacy ratio 15.0% 12% 10% 12.0% 11.0% 15%
Note:
1. Weighting of assets is based on the nature of the asset and
the weighting as prescribed by the relevant regulatory
authority.
5. Fair value of financial instruments
Fair value determination
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at measurement date.
The fair values of quoted investments are based on current bid
prices. If the market for a financial asset is not active (and for
unlisted securities), the Group establishes fair value by using
valuation techniques. These include the use of recent arm's-length
transactions, reference to other instruments that are substantially
the same, discounted cash flow analysis, and option pricing models
making maximum use of market inputs and relying as little as
possible on entity-specific inputs.
The Group classifies fair value measurements using a fair value
hierarchy that reflects the significance of the inputs used in
making the measurements. The fair value hierarchy has the following
levels:
-- quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1);
-- inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices) (level 2); and
-- inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (level 3).
-- The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustments based on
unobservable inputs, that measurement is a level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
Fair value determination as included in the measurement and
disclosure requirements of IFRS 13 is applicable to all elements of
the statement of financial position, and not only financial
instruments.
Critical accounting estimates and judgements
The valuation of financial instruments often involves a
significant degree of judgement and complexity, in particular where
valuation models make
use of unobservable inputs ('Level 3' assets and liabilities).
This note provides information on these instruments, including the
related unrealised
gains and losses recognised in the period, a description of
significant valuation techniques and unobservable inputs, and a
sensitivity analysis.
The following table shows the Group's assets and liabilities
that are held at fair value disaggregated by fair value
hierarchy:
28 February 2021 Quoted Significant Significant Total at
observable unobservable fair value
inputs inputs
$'000 prices
Level Level 2 Level 3
1
Assets measured at fair value:
Fair value through profit or
loss
Listed equities 1,168 - - 1,168
Unlisted equities - - 13,917 13,917
Unlisted debentures - - 4 4
Property units - - 2,214 2,214
Derivative financial assets - 96 5,447 5,543
Investment securities at FVOCI:
unlisted equities - - 422 422
Fair value hierarchy for financial
assets measured at fair value 1,168 96 22,004 23,268
Liabilities measured at fair
value:
Derivative financial liabilities - 98 5,466 5,564
Borrowed funds - 19,690 - 19,690
Fair value hierarchy for financial
liabilities measured at fair
value - 19,788 5,466 25,254
There were no transfers between levels in the current
period.
31 December 2019 Quoted Significant Significant Total at
observable unobservable fair value
inputs inputs
$'000 prices
Level Level 2 Level 3
1
Assets measured at fair value:
Fair value through profit or
loss 803 3,925 20,515 25,243
Money market funds - 3,925 - 3,925
Listed equities 803 - - 803
Unlisted equities - - 19,467 19,467
Unlisted debentures - - 18 18
Property units - - 1,030 1,030
Derivative financial assets - 109 5,583 5,692
Investment securities at FVOCI:
unlisted equities - - 488 488
Fair value hierarchy for financial
assets measured at fair value 803 4,034 26,586 31,423
Liabilities measured at fair
value:
Derivative financial liabilities - 100 5,510 5,610
Borrowed funds - 24,857 - 24,857
Fair value hierarchy for financial
liabilities measured at fair
value - 24,957 5,510 30,467
There were no transfers between levels in the period.
Level 3 fair value movements
The following table shows a reconciliation from the beginning
balances to the ending balances for fair value measurements in
level 3 of the fair value hierarchy:
28 February 2021 Debt or equity Derivative Total assets Derivative Total liabilities
financial at financial at
assets liabilities
$'000 investments fair value fair value
Opening balance 21,003 5,583 26,586 5,510 5,510
Total gains or losses
- in profit/(loss) (3,556) 14 (3,542) 101 101
- in other comprehensive
income 64 - 64 - -
Exchange rate adjustment (954) (150) (1,104) (145) (145)
Closing balance 16,557 5,447 22,004 5,466 5,466
31 December 2019 Debt or Derivative Total assets Derivative Total liabilities
equity financial at financial at
assets liabilities
$'000 investments fair value fair value
Opening balance 23,635 5,376 29,011 5,444 5,444
Total gains or losses
- in profit/(loss) (2,790) (102) (2,892) 14 14
- in other comprehensive
income (26) - (26) - -
Exchange rate adjustment 184 309 493 52 52
Closing balance 21,003 5,583 26,586 5,510 5,510
Total gains or losses for the period in the above table are
presented in the statement of profit or loss and statement of other
comprehensive income as follows:
28 February 2021 Debt or Derivative Total Derivative Total liabilities
equity financial assets financial at fair
assets at fair liabilities value
value
$'000 investments
Total gains or losses recognised
in profit/loss for the year (3,556) 14 (3,541) 101 101
Total gains or losses recognised
in other comprehensive income 64 - 64 - -
31 December 2019 Debt or Derivative Total Derivative Total liabilities
equity financial assets financial
investments assets at fair liabilities
value
$'000 at fair
value
Total gains or losses recognised
in profit/loss for the year (2,790) (102) (2,892) 14 14
Total gains or losses recognised
in other comprehensive income (26) - (26) - -
Description of significant unobservable inputs to valuation
The table below sets out information about significant
unobservable inputs used at year end in measuring financial
instruments categorised as level 2 and 3 in the fair value
hierarchy.
Type of financial instrument Valuation technique Significant Range of estimates
unobservable input (weighted average) for
. unobservable input
Market comparison technique:
The valuation model is
based on market multiples
derived from
quoted prices of companies
comparable to the investee
on actual Earnings before
Interest,
Tax, Depreciation and
Amortisation (EBITDA). The
estimate is adjusted for
the effect of the
non-marketability of the
equity securities.
Dividend discount model:
Unlisted equity and This valuation model
investment securities estimates the value of the
measured at FVOCI and Company based on
borrowed funds future dividends payable by Adjusted price to book
Unlisted equity, unlisted, the Company, discounted ratio. Adjusted Enterprise
property units and unlisted back to the present value value (EV)/EBITDA, Discount
debentures measured at using the cost rate, Terminal
FVTPL of equity. growth rate. 12 % - 25%
Each Credit Default Swap
(CDS) is BWP denominated
and is valued by
discounting the expected
payments of the CDS to the
valuation date.
The discount factors for
the cash flows for each
future payment date are
calculated off a BWP Bond
curve. This is the most
liquid risk-free curve
available for Botswana.
In addition to the
calculation of the
risk-neutral value, the
Group also calculates a
credit
and debt value adjustment
for each CDS. A
semi-analytical approach
was used to generate the
various potential fair
values of the CDS margin
payments to their maturity,
based on option
pricing theory. In this
approach, volatilities are
used to calculate future
fair values, which
in turn are used to
approximate the Expected
Positive Exposures (EPE)
and Expected Negative
Exposure (ENE). These are
then used in the Recovery rates, Credit
Derivative financial assets calculation of fair value ratings for BancABC and
and liabilities balances. each of its counterparties. 20% - 40%
Sensitivity analysis
Unlisted financial assets - equities, debentures and property
units.
For unlisted financial assets measured at fair value, changes at
the reporting date to one of the significant unobservable inputs,
holding other inputs constant, would have the following
effects:
$'000 28 February 2021 31 December 2019
Profit or loss Equity Profit or loss Equity
Increase Decrease Increase Decrease Increase Decrease Increase Decrease
Average price to book ratio
(5% movement) 51 (51) 51 (51) 52 (52) 52 (52)
Book value
(2% movement) 4 (4) 4 (4) 21 (21) 21 (21)
Adjusted EV/EBITDA
(5% movement) 51 (51) 51 (51) 52 (52) 52 (52)
EBITDA
(2% movement) 4 (4) 4 (4) 21 (21) 21 (21)
Sensitivity analysis - derivative financial instruments
Credit valuation adjustment ('CVA') and debit valuation
adjustment ('DVA') are incorporated into derivative valuations to
reflect the impact on fair value of counterparty credit risk and
the Group's own credit quality respectively: CVA for the asset and
DVA for the liability. CVA and DVA are calculated using estimates
of exposure at default, probability of default and recovery rates,
at a counterparty level. CVA is calculated as the discounted
product of the counterparties' marginal Probability of Defaults
('PDs'), Loss Given Defaults ('LGDs') and Expected Positive
Exposures at every node while DVA is calculated as the discounted
product of the Group's marginal PDs, LGDs and Expected Negative
Exposures at every node.
Because of the uncertainty attached to recovery rates, the
sensitivity analysis of the fair values of derivatives have been
performed for a range of possible recovery rates (20%, 30% and
40%).
Derivative financial asset
$'000 28 February 2021 31 December 2019
20% 30% 40% 20% 30% 40%
20% (12) (12) (12) (21) (21) (21)
30% (11) (11) (11) (19) (19) (19)
40% (9) (9) (9) (16) (16) (16)
Derivative financial liability
$'000 28 February 2021 31 December 2019
20% 30% 40% 20% 30% 40%
20% 12 12 12 7 7 7
30% 11 11 11 6 6 6
40% 9 9 9 5 5 5
Comparison of carrying amounts and fair values for assets and
liabilities not held at fair value:
The following tables show the breakdown of carrying amounts and
fair values of financial assets and financial liabilities by class
and category of financial instrument measured at amortised cost,
where the carrying values differ from the fair values
$'000 28 February 2021 31 December 2019
Carrying Fair value Carrying Fair value
amount (Level 2) amount (Level 2)
Financial assets measured
at amortised cost
Loans and advances 580,527 503,616 644,112 644,112
Investments securities held
at amortised cost 119,223 112,637 107,290 106,548
Financial liabilities measured
at amortised cost
Deposit 672,534 674,201 723,726 723,726
Borrowed funds 422,014 419,947 341,952 333,797
Other financial instruments not carried at fair value are
typically short term in nature and reprice to current market rates
frequently. Accordingly, their carrying amount is a reasonable
approximation of fair value. They include cash and short-term
funds, loans and advances to customers, deposits, other assets and
other liabilities.
The fair values of the financial instruments not carried at fair
value disclosed in the table above were determined as follows:
i. Loans and advances
The fair value of loans and advances, for the purpose of this
disclosure, is derived from discounting expected cash flows in a
way that reflects the current market price for lending to issuers
of similar credit quality.
ii. Investment securities held at amortised cost
Fair value is estimated using quoted market prices for
securities with similar credit, maturity and yield
characteristics.
iii. Borrowed funds
The estimated fair value of borrowed funds is based on
discounted cash flows using interest rates for new debts with
similar remaining maturity.
iv. Deposits
Deposit balances are made up of deposits that are short-term in
nature or have interest rates that reprice frequently, hence the
fair values of such deposits have been assessed to approximate
their carrying values. The fair value for deposits with longer-term
maturities, mainly term deposits, are estimated using discounted
cash flows applying either market rates or current rates for
deposits of similar remaining maturities.
6. Borrowed funds
Refer to accounting policy pertaining to financial
instruments.
$'000 28 February 31 December
2021 2019
Convertible bonds (a)* 91,518 80,016
Other borrowed funds (b) 350,186 286,793
Total 441,704 366,809
*Included in other borrowed funds balance in the 31 December
2019 financial statement was $16,705 convertible bonds balance
relating to Fairfax. This has been correctly disclosed as part of
other convertible bonds in the 2019 comparative in this year's
financial statement. This is a mere reclassification between
borrowed funds and has no impact on the total borrowed funds
balance.
The following table illustrates the carrying value compared to
the fair value of the borrowed funds:
$'000 Carrying value Fair value
28 February 31 December 28 February 31 December
2021 2019 2021 2019
Convertible bonds - liability
component 91,518 80,016 91,518 77,069
Fairfax Financial Holdings
Limited 46,412 41,061 46,412 40,809
Afrexim bank 45,948 49,098 45,948 46,726
Helios Fairfax Partners Corporation 43,576 - 43,576 -
U.S. International Development
Finance Corporation ('DFC') 27,651 40,207 26,417 37,715
Nineteen77 Global Multi-Strategy
Alpha Master Ltd. 21,811 - 21,811 -
Export Development Canada
('EDC') 20,876 19,816 20,863 19,798
Standard Chartered 19,690 24,857 19,690 24,857
Africa Agriculture and Trade
Investment Fund S.A. 18,029 21,039 18,029 21,080
HFP Investments Limited 17,130 14,033 17,130 14,874
Nineteen77 Capital Solutions
A LP 15,026 12,948 15,026 13,388
Other 74,037 63,734 73,217 62,338
Total 441,704 366,809 439,637 358,654
a. Convertible bonds
The following section presents the details of the convertible
bonds outstanding as of 28 February 2021:
-- On 1 October 2015 Atlas Mara placed $63.4 million five-year
senior secured convertible bonds with a maturity date in 2020. The
bonds carry a coupon of 8.0% and were issued at an issue price of
82.7% of their principal amount, have a maturity date of 31
December 2020 and are convertible into the ordinary shares of Atlas
Mara at a price of $11.00 per share at the option of the
bondholder.
-- The fair value of the liability at inception was determined
using a market-based rate of 17.7% calculated using the US
five-year treasury rate adjusted for the average yield on similar
instruments with similar risk exposure to discount the contractual
cash flows.
-- The equity component was determined as the residual value
after deducting the fair value of the liability component from the
receipts of the issue of the bond. The equity portion of $14
million is included in capital reserves.
-- On 22 April 2017, following discussions with both existing
and prospective investors, including reverse inquiries, and given
remaining capacity under the bonds' structure, Atlas Mara placed a
further $17.4 million of its 8.00% senior secured convertible notes
due in 2020. The additional issuance was undertaken on identical
terms to the October 2015 tranche, except that these bonds were
issued at a price of $84, as opposed to $82.7 in October, to
account for the intervening passage of time.
-- As of 28 February 2021, the convertible bond has a balance of
$71.2million (31 December 2019: $63.3 million).
-- On 24 April 2018, the Group reached an agreement in principle
for a $36 million debt facility by issuing bonds to Fairfax Africa
Holdings Investments Limited, the Company's largest shareholder.
Tranche A of $16 million, which was structured as convertible bonds
issued by Atlas Mara limited, was drawn down on 17 May 2018 and has
a maturity date of 31 December 2020. The bonds accrue interest at
the rate of 11%, payable on maturity and are convertible to
ordinary shares by dividing the principal amount of the Bond by 90%
of the 30-day volume weighted average price (VWAP) of the ordinary
shares calculated on the dealing day prior to final maturity date.
The facility was amended during the year, with maturity date
extended to December 2021.
-- As of 28 February 2021, the convertible bonds issued to
Fairfax has a balance of $20.3 million (31 December 2019: $16.7
million).
b. Other borrowed funds
$'000 28 February 31 December
2021 2019
Borrowed funds - At fair value through profit/loss 19,690 24,857
Borrowed funds - Amortised cost 422,014 261,936
441,704 286,793
The following represents a summary of significant Group borrowed
funds, i.e. funding obtained to support business growth other than
through banking products and customer accounts, rather third-party
lenders supporting the liability side of the consolidated statement
of financial position.
Afrexim Bank Limited
This relates to loan for $54 million advanced in November 2018
to ABCH by Afrexim Bank Limited. The loan attracts interest of 3
months LIBOR + 7.3%, payable quarterly, with the principal amount
to be repaid over four years, which includes a grace period of one
year from the closing date of the transaction. In October 2019, $5
million was repaid out of the loan principal amount. On 4 August
2020, a new facility of $15 million was availed to the Group under
Afrexim's COVID-19 relief fund.
Africa Agriculture and Trade Investment Fund S.A.
A loan agreement was entered with AATIF in December 2018 with
the repayment of the outstanding principal of $20 million
commencing on 30 June 2020 until the maturity date of 30 June 2022
with five equal semi-annual repayments of $4 million each at an
interest rate of LIBOR plus 6.5%.
Standard Chartered
The loan from Standard Chartered is a US dollar denominated loan
obtained to finance the funding from ADC to UGPL, on 19 July 2012.
The loan was repayable in December 2020; however, the termination
date was extended to 31 December 2021. The loan can be further
extended further based on mutual agreement. The loan is measured at
fair value based on the determined fair value of the UBN shares at
NGN5.35 per share as of 28 February 2021.
Nineteen77 Capital Solutions A LP
This represents $20 million secured bonds issued in November
2018 and due in 2021 to the bondholder - Nineteen77 Capital
Solutions A LP. The bond attracts an interest rate of 9% per annum,
with the interest payable half-yearly on 30 June and 31
December.
Nineteen77 Global Multi-Strategy Alpha Master Limited
On 28 December 2020, the Group secured a $25.8 million facility
due in June 2022 from Nineteen77 Global Multi-Strategy Alpha Master
Limited. The facility attracts an interest rate of 15% per annum
for the first 12 months after which interest increases to 20% per
annum. The interest is capitalised and added to principal amount on
which interest is accrued. The facility is secured by a portion of
the Company's shareholding in Union Bank of Nigeria.
United States International Development Finance Corporation
"DFC" (previously Overseas Private Investment Corporation)
In March 2017, Banc ABC Botswana finalised a $40 million Fintech
and Financial Inclusion Debt Facility provided by DFC. The funding
is part of the $200 million multi-country facility the DFC approved
for Atlas Mara's banks in Botswana, Zambia and Mozambique in August
2015. The debt facility was used to provide access to finance for
SME's and support the company's efforts to accelerate its digital
finance initiatives, which are key areas of the Company's strategy.
The loan has a seven-year tenor with a three-year moratorium on
capital. Interest is paid quarterly during the three years and
capital is paid in 16 equal instalments after year three. The rate
is three-month LIBOR plus a margin of 4.5%.
During the year, the Group entered into an amendment agreement
with DFC to defer the principal payments for the period August 2020
till February 2021 for ABC Zambia DFC facility. After the year end,
DFC signed the Support and override agreement. Refer to note 35 for
further details.
Export Development Canada ('EDC')
On 11 December 2018, the Group secured a three-year $20 million
debt facility from Export Development Canada ('EDC') for general
corporate purposes. The first tranche of the facility $13.6
million, was drawn on 18 December 2018 and the second draw down of
$6.4 million in April 2019. The facility attracts an interest rate
of 9.0%, payable half yearly. The facility is secured by a portion
of the Company's indirect shareholding in Union Bank of
Nigeria.
Helios Fairfax Partners Corporation (previously Fairfax Africa
Holdings Corporation)
On 26 March 2020, the Group entered into another $40 million
loan facility agreement with Fairfax Africa holdings Corporation
Fairfax secured against BancABC Botswana shares owned indirectly by
Group (and directly by ABC Holdings Limited). The facility accrues
interest at the rate of 10% per annum, payable quarterly and
matures in March 2021 with the option to extend further by mutual
agreement. This loan was not repaid since Fairfax Africa Holdings
Corporation had entered into the Standstill agreement with the
Group.
Fairfax Financial Holdings Limited
On 26 June 2019, the Group obtained a $40 million secured loan
facility from Fairfax Financial Holdings Limited. The loan accrues
interest at the rate of 10%, payable quarterly with a new maturity
date of June 2022. The original maturity date was 30 June 2020.
HFP Investments Limited (previously Fairfax Africa Holdings
Investments Limited)
On 24 April 2018, the Group reached an agreement in principle
for a $36 million debt facility by issuing convertible bonds to
Fairfax Africa Holdings Investments Limited. The agreement was
amended and restated on 5 July 2018 and on 6 November 2018, with a
further amendment to the deed poll on 11 December 2018. The
facility is analysed as follows:
-- Tranche A $16 million convertible bonds: The tranche was
drawn down on 17 May 2018 and is repayable in December 2020. The
facility accrues interest at the rate of 11%, payable on maturity.
Refer to the convertible bonds note in section a above for further
details.; and
-- Tranche B $20 million facility: The tranche was obtained on 6
July 2018, with a three-year term maturing in July 2021 and an
interest rate of 9%, payable half-yearly - 30 June and 31 December.
The facility is secured over UBN shares and was amended during the
year, with maturity date extended to December 2021.
Other
Other borrowings relate to medium to long-term funding from
international financial institutions for working capital financing
and onward lending to the Group's clients. Included in other
are:
-- Norsad loan of $10 million attracting quarterly interest at
six-month Libor plus 7.5%, which matured in December 2020 but is
yet to be settled;
-- TLG Limited ('TLG') loan of $10 million with semi-annual
interest payments at an interest rate of 9.8% with $5 million
maturing in January 2021 and the balance due in March 2021. The
loan is deemed to have been settled subsequent to year end, after
TLG assumed ownership of the UBN shares pledged as collateral under
the facility agreement;
-- Sanlam loan of $5 million attracting quarterly interest at
three-month Libor plus 7%, maturing in December 2021. The loan is
deemed to have been settled subsequent to year end, after Sanlam
assumed ownership of the UBN shares pledged as collateral under the
facility agreement; and
-- TLG Credit Opportunities Fund loan of $8 million which was
guaranteed by Fairfax Africa Holdings Corporation, maturing in
January 2021. The loan was settled by Fairfax Africa Holdings
Corporation upon maturity after the lender called-in the guarantee.
Refer to note 35.3 for further details.
Following the assessment of the cashflow position of ATMA and
its main subsidiary, ABCH, prior to the end of the year 2020, the
Group engaged majority of its lenders in a bid to refinance its
debts and provide a stable runway and time for the Company and its
lenders at ATMA and ABCH group levels to work on a common solution
with the goal of preserving value for the stakeholders. This
resulted in the signing of the standstill agreement, which
precluded ATMA and ABCH from making interest payments and/or
principal repayments in preference to any lender. Norsad and TLG
did not sign and the standstill agreement, and as a result of the
default, they subsequently initiated winding up proceedings against
ABCH and ATMA respectively. Refer to notes 35.5 and 35.6 for
further details on the TLG and Norsad litigations. This action
relates only to ATMA and ABCH obligations and have no effect on the
debts of the operating subsidiaries.
Standstill agreement
On 29 December 2020, the Group publicly announced that it had
entered into a Standstill agreement ("Standstill") or similar
bilateral agreements with certain participating lenders in respect
of the Group's financing arrangements. Parties to the Standstill
then proceeded with negotiations to agree and final documentation
for a binding Support and Override agreement.
The participating lenders under the standstill agreement agreed
not to exercise certain rights, or otherwise take actions, in
respect of rights and repayments that may arise under the
facilities as a result of the Group not making principal and
interest payments until termination of the Standstill. These
agreements relate to the holding companies only, ATMA and ABCH, and
exclude facilities of the Group's operating subsidiary companies.
The Standstill was replaced by a long-term restructuring agreement
signed on 14 July 2021 with the participating lenders in the form
of a Support and Override agreement.
Support and override agreement ("SOA")
On 14 July 2021, the SOA was signed by a majority of the Group's
lenders. The lenders who are a party to the SOA have agreed to
forbearances in respect of certain events of default under their
relevant facilities, while the SOA is effective, including (i)
non-payment of amounts due under the 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 financing agreements. Refer to note
35.2 for further details on the SOA.
Maturity analysis
The table below presents the maturity analysis based on
contractual maturity.
$'000 28 February 31 December
2021 2019
On demand to one month 307,096 390
One to three months 2,862 606
Three months to one year 86,506 146,915
Over one year 45,240 218,898
Total 441,704 366,809
7. Deposits
Refer to accounting policy pertaining to financial
instruments.
$'000 28 February 31 December
2021 2019
Deposits from banks 20,527 18,893
Deposits from other customers 652,007 704,833
672,534 723,726
Current 281,434 687,056
Non-current 391,100 36,670
The table below presents the analysis of deposits by
segment:
$'000 28 February 2021 31 December 2019
Payable Term and Total Payable Term and Total
on demand savings on demand savings deposits
deposits
Corporate customers 106,934 250,161 357,095 69,656 87,830 157,486
Public sector 35,827 79,641 115,468 24,707 162,862 187,569
Retail customers 102,632 33,360 135,992 75,521 41,262 116,783
Other financial institutions 15,514 27,938 43,452 18,178 224,817 242,995
Banks 20,527 - 20,527 14,590 4,303 18,893
281,434 391,100 672,534 202,652 521,074 723,726
8. Interest and similar expense
Refer to accounting policy pertaining to financial
instruments.
$'000 14 months to 28 February 12 months to 31 December
2021 2019
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
Deposits (23,990) (53,495) (77,485) (24,775) (47,697) (72,472)
Borrowed funds (54,648) (8,260) (62,908) (39,846) (9,941) (49,787)
Other (1,636) (939) (2,575) (1,091) (1,208) (2,299)
(80,274) (62,694) (142,968) (65,712) (58,846) (124,558)
Other interest expense includes $1.3 million (2019: $1.8million)
relating to IFRS 16 lease interest expenses.
9. Financial assets at fair value through profit or loss
Accounting for financial assets at fair value through profit or
loss
Refer to accounting policy pertaining to financial
instruments.
28 February 31 December
$'000 2021 2019
Money market fund - 3,925
Listed equities 1,168 803
Unlisted equities 13,917 19,467
Unlisted debentures 4 18
Property units 2,213 1,030
17,302 25,243
Current - 3,925
Non-current 17,302 21,318
10. Loans and advances
Accounting for loans and advances
Refer to accounting policy pertaining to financial
instruments.
Critical accounting estimates and judgements
The measurement of the expected credit loss allowance for loans
and advances is an area that requires the use of complex models and
significant assumptions about future economic conditions and credit
behaviour (e.g. the likelihood of customers defaulting) and the
resulting losses.
A number of significant judgements are also required in applying
the accounting requirements for measuring ECL, such as:
-- determining criteria for significant increase in credit risk
('SICR');
-- choosing appropriate models and assumptions for the
measurement of ECL; and
-- establishing groups of similar financial assets for the
purposes of measuring ECL.
When determining whether the risk of default on a financial
instrument has increased significantly since initial recognition,
the Group considers reasonable and supportable information that is
relevant and available without undue cost or effort. This includes
both quantitative and qualitative information and analysis, based
on the Group's historical experience and expert credit assessment.
The objective of this assessment is to identify whether a SICR has
occurred for an exposure by comparing:
-- the remaining lifetime PD as at the reporting date; with
-- the remaining lifetime PD for this point in time that was
estimated at the time of initial recognition of the exposure
(adjusted where relevant for changes in prepayment
expectations).
The Group uses three criteria for determining whether there has
been a SICR:
-- quantitative test based on movement in PD;
-- qualitative indicators; and
-- a backstop of 30 days past due.
The Group monitors the effectiveness of the criteria used to
identify SICR by regular reviews to confirm that:
-- the criteria are capable of identifying SICR before an
exposure is in default;
-- the criteria do not align with the point in time when an
asset becomes 30 days past due;
-- the average time between the identification of a significant
increase in credit risk and default appears reasonable;
-- exposures are not generally transferred directly from
12-month ECL measurement to credit impaired; and
-- there is no unwarranted volatility in loss allowance from
transfers between 12-month PD (stage 1) and lifetime PD (stage
2).
$'000 28 February 31 December
2021 2019
Gross loans and advances 611,255 682,747
Expected credit loss (30,728) (38,635)
Net loans and advances 580,527 644,112
Current 39,372 152,629
Non-current 541,155 491,483
11. Investment securities
Accounting for investment securities
Refer to accounting policy pertaining to financial
instruments
$'000 28 February 31 December
2021 2019
Amortised cost:
Treasury bills 87,892 97,540
Corporate bonds 2,443 -
Government bonds 29,146 10,127
Amortised cost - gross balance 119,481 107,667
Less: Expected credit loss (258) (377)
Amortised cost - net balance 119,223 107,290
Fair value through OCI: unlisted equities 423 488
Total - investment securities 119,646 107,778
Current 40,005 101,837
Non-current 79,641 5,941
Included in investment securities at amortised cost are pledged
assets of $22.7 million (31 December 2019: $35.4 million).
12. Impairment charges on financial assets
Accounting for the impairment of financial assets
Refer to accounting policy pertaining to financial
instruments.
Critical accounting estimates and judgements
The Group reviews its loan portfolios to assess impairment at
least on a monthly basis. In determining whether an impairment loss
should be recorded in the statement of profit or loss, the Group
makes judgements as to whether there is any observable data
indicating that there is a measurable decrease in the estimated
future cash flows from a portfolio of loans before the decrease can
be identified with an individual loan in that portfolio. This
evidence may include observable data indicating that there has been
an adverse change in the payment status of borrowers in a group, or
national or local economic conditions that correlate with defaults
on assets in the Group. Management uses estimates based on
historical loss experience for assets with credit risk
characteristics and objective evidence of impairment similar to
those in the portfolio when scheduling its future cash flows. The
methodology and assumptions used for estimating both the amount and
timing of future cash flows are reviewed monthly to reduce any
differences between loss estimates and actual loss experience.
$'000 14 months to 28 February 12 months to 31 December
2021 2019
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
Stage 1 - 12-month
ECL 331 (156) 175 1,120 (3,970) (2,850)
Stage 2 - Lifetime
ECL not credit impaired (391) 74 (317) 1,122 (3,390) (2,268)
Stage 3 - Lifetime
ECL credit impaired (1,934) (13,626) (15,560) (3,347) (5,443) (8,790)
Net movement in ECL
on loans and advances (1,994) (13,708) (15,702) (1,105) (12,803) (13,908)
Recoveries of bad debts
previously written-off 2,917 2,134 5,051 1,951 3,300 5,251
Other (844) (716) (1,560) 121 (2,885) (2,764)
79 (12,290) (12,211) 967 (12,388) (11,421)
Analysed as follows:
Continuing operations 14 months to 28 February 12 months to 31 December
$'000 2021 2019
Impairment Recoveries Total Impairment Recoveries Total
charge charge
Loans and advances (1,994) 2,917 923 (1,105) 1,951 846
Investment securities
at amortised cost (155) - (155) (48) - (48)
Other financial assets
at amortised cost (689) - (689) 169 - 169
(2,838) 2,917 79 (984) 1,951 967
Discontinued operations 14 months to 28 February 12 months to 31 December
$'000 2021 2019
Impairment Recoveries Total Impairment Recoveries Total
charge charge
Loans and advances (13,708) 2,134 (11,574) (12,803) 3,300 (9,503)
Investment securities
at amortised cost (592) - (592) (2,885) - (2,885)
Other financial assets
at amortised cost (124) - (124) - - -
(14,424) 2,134 (12,290) (15,688) 3,300 (12,388)
13. Derivative financial instruments
Accounting for derivative financial instruments
Refer to accounting policy pertaining to financial
instruments.
The table below shows the fair values of derivative financial
instruments recorded as assets or liabilities together with their
notional amounts. The notional amount, recorded gross, is the
amount of a derivative's underlying asset, reference rate or index
and is the basis upon which changes in the value of derivatives are
measured. The notional amounts indicate the volume of transactions
outstanding at the year-end and are indicative of neither the
market nor the credit risk.
$'000 28 February 2021 31 December 2019
Assets Liabilities Notional Assets Liabilities Notional
amount amount
Derivatives held for
trading
Forward foreign exchange
contracts 96 98 8 109 100 9
Derivatives designated
at fair value through
profit or loss
Credit default swap 5,447 5,466 4,988 5,583 5,510 5,127
5,543 5,564 4,996 5,692 5,610 5,136
Credit default swaps (CDS)
Credit default swap contracts involve an arrangement between the
Group and various counterparties which allows one party to protect
against losses incurred as a result of credit default. The two
parties to the transaction are referred to as (i) the buyer of
protection and (ii) the seller of protection. The buyer of
protection makes periodic premium payments to the seller of
protection in exchange for the seller of protection's promise to
make payments if certain defined credit events occur.
The CDS contract involves an arrangement between ABC Botswana
and other counterparties. In the first leg of the transaction which
resulted in the recognition of the derivative liability, ABC
Botswana is the seller of credit protection and earns periodic
premiums at the rate of 13% annually. In the second leg of the
transaction which resulted in the derivative asset, ABC Botswana is
the buyer of credit protection, paying a premium of 11% per
annum.
The table below presents the cash flows payable by the Group for
derivative financial liabilities by remaining contractual
maturities at the date of the consolidated statement of financial
position. The amounts disclosed in the table are the contractual
undiscounted nominal currency swap cash flows for the liability leg
of such swaps, whereas the Group manages the inherent liquidity
risk based on expected undiscounted cash inflows:
$'000 28 February 2021 31 December 2019
Up to 1 - 3 Total Up to 3 - 12 Total
1 month months 1 month months
Forward foreign exchange
contracts 98 - 98 100 - 100
Credit default swap - 5,466 5,466 - 5,510 5,510
Total derivatives financial
liabilities 98 5,466 5,564 100 5,510 5,610
With the exception of swaps where ongoing cash flows are settled
on a gross basis, all derivative financial liabilities are settled
on a net basis.
14. Cash and short-term funds
Accounting for cash and short-term funds
Cash and cash equivalents comprise of balances with banks that
are short-term highly liquid investments with an original maturity
of three months or less that are readily convertible into known
amounts of cash. Cash and cash equivalents are carried at amortised
cost in the statement of financial position.
Statutory reserve balances are restricted minimum statutory
balances not available for the banking operations' daily
operations. These balances do not accrue interest.
$'000 28 February 31 December
2021 2019
Cash on hand 21,455 11,514
Balances with central banks 17,684 16,531
Balances with other banks 59,543 30,067
Money market placements maturing within
three months 35,139 70,990
Cash and cash equivalents 133,821 129,102
Statutory reserve balances 8,106 1,431
Cash and short-term funds 141,927 130,533
15. Interest and similar income
Accounting for interest and similar income
Refer to accounting policy pertaining to financial
instruments
$'000 14 months to 28 February 12 months to 31 December
2021 2019
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
Interest income calculated using effective interest method:
Cash and short-term funds 902 4,466 5,368 779 4,629 5,408
Investment securities
at amortised cost 4,384 31,683 36,067 6,650 19,290 25,940
Investment securities
at fair value through
OCI - 2,466 2,466 - 4,924 4,924
Loans and advances 75,695 105,172 180,867 69,026 104,800 173,826
Total interest income
calculated using EIR
method 80,981 143,787 224,768 76,455 133,643 210,098
Other interest income 437 - 437 630 - 630
81,418 143,787 225,205 77,085 133,643 210,728
Interest income includes $12.6 million (31 December 2019: $2.3
million) accrued on impaired loans.
16. Investment in associates
Accounting for investment in associate
Associates are entities in which the Group has significant
influence, but not control, over the operating and financial
policies.
The Group's investments in associates are recognised using the
equity method. These investments are initially recorded at cost and
increased (or decreased) each year by the Group's share of the
post-acquisition profit (or loss). The Group ceases to recognise
its share of the losses of equity accounted associates when its
share of the net assets and amounts due from the entity have been
written off in full, unless it has a contractual or constructive
obligation to make good its share of the losses. When the Group
acquires an additional share in the investment, while still
maintaining significant influence, the investment is accounted for
at cost. The incremental fair value adjustments of the assets and
liabilities of the investment is determined and included in the
carrying amount of the investment.
Impairment losses
After application of the equity method, including recognising
the associate's losses, the entity applies IAS 36 Impairment of
Assets to determine whether it is necessary to recognise any
additional impairment loss with respect to its net investment in
the associate or joint venture.
The entity also applies IAS 36 to determine whether any
additional impairment loss is recognised with respect to its
interest in the associate or joint venture that does not constitute
part of the net investment and the amount of that impairment
loss.
Goodwill forms part of the carrying amount of an investment in
an associate and is not separately recognised, it is therefore not
tested for impairment separately by applying the requirements for
impairment testing goodwill in IAS 36 Impairment of Assets.
Instead, the entire carrying amount of the investment is tested for
impairment in accordance with IAS 36 as a single asset, by
comparing its recoverable amount (higher of value in use and fair
value less costs to sell) with its carrying amount, whenever there
are indications that the investment may be impaired.
An impairment loss recognised in those circumstances is not
allocated to any asset, including goodwill, that forms part of the
carrying amount of the investment in the associate. Accordingly,
any reversal of that impairment loss is recognised in accordance
with IAS 36 to the extent that the recoverable amount of the
investment subsequently increases.
In determining the value in use ('VIU') of the investment, an
entity estimates its share of the present value of the estimated
future cash flows expected to be generated by the associate,
including the cash flows from the operations of the associate and
the proceeds from the ultimate disposal of the investment. The
recoverable amount of an investment in an associate shall be
assessed for each associate, unless the associate does not generate
cash inflows from continuing use that are largely independent of
those from other assets of the entity.
Assets of the associate
The investor should measure its interest in an associate's
identifiable net assets at fair value at the date of acquisition of
an associate. If the value that the investor attributes to the
associate's net assets differs from the carrying value amounts in
the associate's books, the investor should restate any impairment
losses recognised by the associate.
Investment in the associate
As well as applying the equity method, IAS 28 requires an
investor to apply the requirements of IAS 36 to determine whether
any impairment loss should be recognised with regards to the
investor's net investment in the associate.
Intangible assets
Included in the fair value of UBN are intangible assets of $3.4
million (31 December 2019: $5.9 million).
Share of profit and OCI
The value of equity accounted earnings in the statement of
comprehensive income for Atlas Mara represents the reported profit
and other comprehensive income for UBN, based on the estimated
profit of UBN for the 14-month period ended 28 February 2021.
Critical accounting estimates and judgements
Determination of control over the associate
Determining whether the Group has control of an entity is
generally straightforward based on ownership of the majority of the
voting capital. However, in certain instances, this determination
will involve significant judgement, particularly in the case of UBN
where the Group has approximately 47.68% (2020: 49.78%; 2019:
48.99%) shareholding and has representation on the Board of
Directors.
Based on the assessment performed by management, UBN is not a
controlled entity of the Group because the Group is not exposed,
and has no right, to variable returns from this entity and is not
able to use its power over the entity to affect those returns.
$'000 28 February 31 December
2021 2019
Opening balance 582,141 532,233
Share of profits 25,510 31,101
Share of OCI (3,277) 12,552
Exchange rate adjustment (114,203) -
Dividend income (8,521) -
Disposals during the period (10,170)
Additions during period 16 6,255
Investment in associates 471,496 582,141
Investment in Union Bank of Nigeria ('UBN')
The Group effectively holds total direct and indirect share of
UBN's voting rights of 47.68% as at 28 February 2021. The
investment in UBN is equity accounted using the management accounts
of UBN for the period ended 28 February 2021. The local currency of
UBN is the Nigerian Naira.
The following table presents the summarised financial
information of UBN for the period ended 28 February 2021. The
financial information for the years ended 31 December 2020 and 2019
were extracted from UBN's published annual financial statements for
2020 and 2019 respectively, while the financial information for the
14-month period ended 28 February 2021, were based on the estimate
of UBN's financial performance derived from a combination of the
published annual financial statements for 2020 and the Q1 2021
published unaudited financial statement.
$'000 28 February 31 December 31 December
2021 2020 2019
Cash and cash equivalents 700,838 676,210 1,045,034
Loans and advances 1,695,028 1,730,580 1,796,454
Investment securities 1,076,810 1,259,164 980,610
Other assets 1,716,644 1,807,097 2,286,323
Total assets 5,189,320 5,473,051 6,108,421
Deposits from customers 2,716,875 2,813,396 2,891,560
Borrowed funds 649,649 655,454 499,103
Other liabilities 1,180,206 1,343,949 1,894,457
Total liabilities 4,546,730 4,812,799 5,285,120
Group's share of equity (47.68%) (2020:
49.78%; 2019: 48.99%) 297,996 320,387 400,772
Intangible assets 4,826 4,978 5,930
Share of total identifiable net assets 302,822 325,365 406,702
Carrying value of the investment in
associate including intangible assets 469,945 481,866 580,622
$'000 28 February 31 December 31 December
2021 2020 2019
Net interest income 169,584 150,244 171,399
Non-interest income 131,593 116,419 139,798
Impairment credit/(charges) on financial
instruments 5,942 6,701 (600)
Total expenses (232,124) (205,379) (231,764)
Profit for the period 54,861 48,872 64,862
Other comprehensive income for the
period (6,746) 963 25,116
Total comprehensive income for the
period 48,115 49,835 89,978
The risks directly associated with the investment are foreign
exchange risk, equity pricing risk and the country risk. UBN is a
banking entity in Nigeria and, accordingly, Atlas Mara is exposed
to the key underlying risks of UBN, namely credit risk, liquidity
risk, market risk and operational risk.
Impairment testing
At 28 February 2021, the Group performed an impairment test on
the carrying amount of the investment in UBN. The test confirmed
that there was no impairment at 28 February 2021. The table below
illustrates the value-in-use ('VIU'), carrying value and fair value
of the Group's 47.68% (31 December 2019: 49.97%) investment in
UBN:
$'000 28 February 2021 31 December 2019
VIU Carrying Fair value VIU Carrying Fair value
amount* amount*
Union Bank of Nigeria 485,753 483,028 297,996 614,981 598,143 285,171
*Carrying amount includes the investment in associate balance of
$469.9 million (31 December 2019: $580.6 million) and associated
goodwill balance of $13.1 million (31 December 2019: $17.5
million).
Basis of recoverable amount
The impairment test was performed by comparing the recoverable
amount of the Group's investment in UBN with the carrying amount.
The recoverable amount, calculated as value in use ("VIU"), has
been determined using cash flow predictions based on financial
budgets approved by UBN's management, covering a five-year period.
Forecast risk weighted assets have been calculated to ensure that
the bank maintains the capital adequacy requirements in order to
calculate the movement in regulatory reserve requirements. This
movement has been deducted from forecast cash flows.
Key assumptions in VIU calculation
The key assumptions used in the calculation of value in use were
as follows. The values assigned to the key assumptions represent
management's assessment of future trends in the earnings of UBN and
have been based on historical data from both external and internal
sources.
28 February 2021 31 December 2019
Discount rate 28.5% 31.1%
Long-term growth rate 2.3% 2.3%
Exchange rate (USD/NGN) 410.5 306.5
Long-term growth rate
The long-term growth rate is used to extrapolate the cash flows
in perpetuity. This has been derived as the lower of the forecast
GDP growth rate for Nigeria and the long-term compound annual
profit before taxes, depreciation and amortisation growth rate
estimated by management.
Discount rate
The discount rate is a pre-tax rate, derived using the capital
asset pricing model ('CAPM'). CAPM depends on a number of inputs
reflecting financial and economic variables, including the
risk-free rate and a premium to reflect the inherent risk of the
business being evaluated.
The VIU based on the above assumptions was computed as $499.8
million (2019: $615.0 million); resulting in a headroom of $4.5
million (2019: $16.8 million).
Sensitivity of VIU to changes in key assumptions
The tables below illustrate the impact of changes in the key
assumptions on VIU, especially given the shock to the market
resulting from the COVID-19 outbreak. This reflects the sensitivity
of the VIU to each key assumption on its own, while keeping other
inputs constant. It is possible that more than one favourable
and/or unfavourable change may occur at the same time. The selected
rates of reasonably possible changes to key assumptions are largely
based on external analysts' forecasts.
Exchange rate sensitivity
As at 28 February 2021, if exchange rates move in the directions
specified in the table below, the adjusted carrying value of the
Group's investment in UBN will be as follows:
$'000 VIU
Devaluation to NGN410.5/$1 485,753
Devaluation to NGN440.0/$1 453,163
Devaluation to NGN460.0/$1 433,460
Devaluation to NGN480.0/$1 415,399
Devaluation to NGN500.0/$1 398,783
Changes in other assumptions - 1% change in discount rate and
long-term growth rate
Favourable change Unfavourable change
Revised VIU Headroom Revised VIU (Impairment)
rate rate
Long-term growth
rate 3.3% 492,127 9,099 1.3% 479,848 (3,169)
Discount rate 27.5% 504,113 21,085 29.5% 468,659 (14,369)
A reduction in the forecast cash flows of 10% per annum is
estimated to reduce the recoverable amount by $48.6 million.
Reduction in ATMA's shareholding in Union bank of Nigeria
Following the Group's default on its debts, TLG and Sanlam
exercised their rights to assume ownership of the portion of the
Group's shares in UBN pledged as collateral under their respective
facility agreements. As at 28 February 2021, TLG assumed ownership
of 616,500,000 units of UBN shares representing 2.11% shareholding,
effectively reducing the Group's shareholding in UBN to 47.68% as
at that date (2020: 49.78%; 2019: 48.99%).
Subsequent to the reporting date, additional 187,083,320 units
of UBN shares, representing 0.64% shareholding were transferred to
TLG, totalling 803,583,320 units of UBN shares transferred to TLG,
while 442,747,459 units were transferred to Sanlam, representing
1.51% shareholding in UBN. On a total basis, the Group transferred
1,246,330,779 units of UBN shares, representing 4.26% of the
Group's shareholding in UBN, to both lenders to fully settle the
obligation to these lenders. The Group's shareholding currently
sits at 45.56% after completion of the transfer of shares
post-period end.
17. Goodwill and intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries and
associates and represents the excess of the fair value of the
purchase consideration over the fair value of the Group's share of
the assets acquired and the liabilities and contingent liabilities
assumed on the date of the acquisition. Goodwill arising on the
acquisition of subsidiaries and associates is measured at cost less
accumulated impairment losses. Goodwill has an indefinite useful
life. An annual impairment evaluation is performed in respect of
goodwill, or more frequently when there are indications that an
impairment may be necessary. The evaluation involves comparing the
carrying value of goodwill with the present value of the pre-tax
cash flows, discounted at a rate of interest that reflects the
inherent risks, of the cash-generating unit ('CGU') to which the
goodwill relates, or the CGU's fair value if this is higher.
Intangible assets
Intangible assets other than goodwill are accounted for in
accordance with IAS 38 Intangible Assets. Intangible assets include
trade names, customer relationships, core deposits, core
overdrafts, software, licences and other contracts. They are
initially recognised when they are separable or arise from
contractual or other legal rights, the cost can be measured
reliably and, in the case of intangible assets not acquired in a
business combination, where it is probable that future economic
benefits attributable to the assets will flow from their use.
Intangible assets are stated at cost (which is, in the case of
assets acquired in a business combination, the acquisition date
fair value) less amortisation and provisions for impairment, if
any, and are amortised over their useful lives in a manner that
reflects the pattern to which they contribute to future cash flows,
generally over 10 years. Intangible assets are reviewed for
impairment when there are indications that an impairment may be
necessary.
Amortisation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
Subsequent expenditure is capitalised only when it increases the
future economic benefits embodied in the specific asset to which it
relates. All other expenditure, including expenditure on internally
generated goodwill and brands, is recognised in profit or loss as
incurred.
The intangible assets have the following amortisation method and
useful lives:
Goodwill Other intangibles
Useful lives Indefinite From 3 to 10 years
Amortisation method n/a Straight-line
Critical accounting estimates and judgements
The Group assesses goodwill for impairment on an annual basis
based on value in use calculations. Significant estimates and
judgements are applied in projecting the future pre-tax cash flows,
the appropriate growth and discount rates as set out below.
28 February 31 December
$'000 2021 2019
Goodwill 40,623 45,827
Software and other intangibles 23,241 27,178
63,864 73,005
The table below shows the movement in goodwill and intangible
assets balance for the year
$'000 28 February 2021 31 December 2019
Goodwill Other intangible Total Goodwill Other intangible Total
assets assets
Cost
Opening balance 45,827 74,986 120,813 82,941 141,808 224,749
Exchange rate adjustment (5,204) (3,280) (8,484) (2,899) 3,523 624
Additions during the
period - 4,061 4,061 - 8,971 8,971
Disposals during the
period - - - (34,215) (79,316) (113,531)
Closing balance 40,623 75,767 116,390 45,827 74,986 120,813
Impairment losses and
amortisation
Opening balance - (47,808) (47,808) (2,936) (62,793) (65,729)
Exchange rate adjustment - 266 266 440 (634) (194)
Amortisation during
the period - (4,984) (4,984) - (11,819) (11,819)
Disposals during the
period - - - 2,496 27,438 29,934
Closing balance - (52,526) (52,526) - (47,808) (47,808)
Carrying value at period
end 40,623 23,241 63,864 45,827 27,178 73,005
Goodwill has been allocated to the Group's CGUs (operating
banks) as follows:
$'million 28 February 2021 31 December 2019
Allocation Allocation
Retail Corporate Retail Corporate
Botswana 27.5 15.2 12.3 28.3 15.6 12.7
West Africa 13.1 - 13.1 17.5 - 17.5
Total 40.6 15.2 25.4 45.8 15.6 30.2
Impairment testing
IFRS requires annual impairment testing of goodwill, or more
frequently when there is an indication that the CGU may be
impaired. Where there is no impairment trigger, there is no need
for the two-step approach.
The annual impairment test was performed for goodwill. A
comprehensive assessment of the underlying CGUs has taken place.
This assessment included a review of the forecast financial
information. The review and testing of goodwill for impairment
inherently requires significant management judgement as it requires
management to derive the best estimates of the identified CGUs'
future cash flows.
The recoverable amounts for the CGUs have been calculated based
on their value in use (VIU), determined by discounting the future
cash flows expected to be generated from the continuing use of the
CGUs' assets. No impairment losses were recognised during the
period ended 28 February 2021 (31 December 2019: nil) because the
recoverable amounts of these CGUs were determined to be higher than
their carrying amounts.
The principal assumptions considered in determining the VIUs
were as follows:
Future cash flows - The forecast periods adopted reflect a set
of cash flows that, based on management judgement and expected
market conditions, could be sustainably generated over such a
period. The cash flow projections covering a five-year period were
based on financial budgets approved by management.
Discount rates - The CoE percentages were derived from an equity
pricing model deemed appropriate based on the entities under
review. The risk-free rate used to determine the CoE has been
derived from the 10-year US treasury bonds as at 28 February 2021.
The future cash flows are discounted using the CoE assigned to the
appropriate CGUs and by nature can have a significant effect on
their valuations.
The following table summarises the key inputs used in testing
the Group's goodwill for current and prior years.
28 February 2021 31 December 2019
Botswana West Africa Botswana West Africa
Discount rate (%) 16.1% 28.5% 20.0 31.1
Terminal growth rate (%) 5.1% 2.3% 4.4 2.3
Forecast period (years) 5 5 5 5
The key assumptions described above may change as economic and
market conditions change. The Group estimates that for Botswana, 1%
change in the discount rate or terminal growth rate would increase
the recoverable amount by $20.7 million (31 December 2019: $14.5
million) and $38.9 million (31 December 2019: $8.9 million)
respectively or decrease the recoverable amount by $17.1 million
(31 December 2019: $12.7 million) and $26.9 million (31 December:
$7.8 million), respectively. A reduction in the forecast cash flows
of 10% per annum would reduce the recoverable amount by $17.7
million (31 December 2019: $16 million). Changes in these
assumptions would not cause the recoverable amount of the Botswana
CGU to decline below the carrying amount.
West Africa segment goodwill
A goodwill test was also performed in respect of the West Africa
segment. This segment houses the investment in associate. Refer to
note 17 for details of the valuation performed to determine the
value-in-use of the investment. As at 28 February 2021, the
carrying value of the investment of $495.3 million is less than the
VIU of $499.8 million and therefore no impairment is required.
Other intangible assets
The other intangible assets have been assessed for indications
of impairment and at 28 February 2021, there were no indications of
impairment.
18. Property and equipment
Accounting for property and equipment
Land and buildings are shown at fair value based on annual
valuations by external independent valuers under hyperinflationary
economies, otherwise at least once every three years. However,
management conducts annual assessments, to ensure that the carrying
amount of land and buildings is not significantly different from
fair value. Surpluses and deficits arising thereon are transferred
to the property revaluation reserve included under capital reserves
in equity.
All other items of property and equipment are stated at cost
less accumulated depreciation and impairment losses. Where parts of
an item of property and equipment have different useful lives, they
are accounted for as separate items of property and equipment.
Owner-occupied properties are held for use in the supply of
services or for administrative purposes.
Depreciation is charged to the statement of profit or loss on a
straight-line basis over the estimated useful life of the property
and equipment. Land is not depreciated.
The estimated useful lives are as follows:
-- Buildings: 20-50 years;
-- Motor vehicles: 4 years;
-- Computer and office equipment: 3-5 years; and
-- Furniture and fittings: 4-10 years.
The assets' residual values, depreciation methods and useful
lives are reviewed, and adjusted if appropriate, at each statement
of financial position date. Subsequent costs are included in the
asset's carrying amount or are recognised as a separate asset, as
appropriate only when it is probable that future economic benefits
associated with the item will flow to the Group. The cost of
day-to-day servicing of property and equipment are recognised in
the statement of profit or loss as incurred.
Any gain or loss on disposal of an item of property and
equipment is recognised within non-interest income in the statement
of profit or loss.
The tables below show the movement in property and equipment
balance for the current and prior years
At 28 February 2021 Land and Motor vehicles Computer Furniture Total
buildings and office and fittings
equipment
$'000
Cost or valuation
Opening balance at 1 January
2020 42,729 1,772 19,791 11,697 75,989
Exchange rate adjustment
including hyperinflation
impact 2,438 (38) (361) (265) 1,774
Additions during the period 523 41 2,140 363 3,067
Revaluation (2,440) - - - (2,440)
Reclassification to investment
property (3,041) - - - (3,041)
Cost or valuation at 28
February 2021 40,209 1,775 21,570 11,795 75,349
Accumulated depreciation
Opening balance (10,969) (1,348) (14,719) (7,721) (34,757)
Exchange rate adjustment
including hyperinflation
impact 58 24 205 135 422
Reclassification to investment
property 148 - - - 148
Charge for the period (2,225) (30) (1,264) (875) (4,394)
Accumulated depreciation
at 28 February 2021 (12,988) (1,354) (15,778) (8,461) (38,581)
Carrying value at 28 February
2021 27,221 421 5,792 3,334 36,768
As at 28 February 2021, property and equipment included
right-of-use assets of $5.4 million (31 December 2019: $6.4
million) related to leased branches and office premises. Refer to
note 31 for further details.
Land and building with a market value of $3.4 million has been
pledged as security for the Botswana Building Society loan of $0.6
million, included as part of the other borrowed funds balance.
Principal and interest amounts are repayable monthly. The loan
matures on 30 December 2022.
At 31 December 2019 Land and Motor vehicles Computer Furniture Total
buildings and office and fittings
equipment
$'000
Cost or valuation
Opening balance at 1 January
2019 70,236 5,434 43,549 25,061 144,280
Recognition of right-of-use
asset on initial application
of IFRS 16 18,597 384 - - 18,981
Adjusted balance at 1 January
2019 88,833 5,818 43,549 25,061 163,261
Exchange rate adjustment
including hyperinflation
impact 6,465 260 4,962 356 12,043
Additions during the year 17,359 806 8,597 3,713 30,475
Revaluation (563) - - - (563)
Write-off (1,061) - (56) (6) (1,123)
Reclassification from investment
property 405 - - - 405
Disposal during the year (173) (703) (7,163) (2,977) (11,016)
Reclassified as part of
disposal groups held for
sale (68,536) (4,409) (30,098) (14,450) (117,493)
Cost or valuation at 31
December 2019 42,729 1,772 19,791 11,697 75,989
Accumulated depreciation
Opening balance (15,512) (4,228) (32,032) (14,091) (65,863)
Exchange rate adjustment
including hyperinflation
impact (4,655) (376) (3,696) (616) (9,343)
Disposals during the year 102 658 7,131 2,571 10,462
Write-off 703 - 22 - 725
Reclassified as part of
disposal groups held for
sale 14,943 2,840 17,800 7,238 42,821
Charge for the year (6,550) (242) (3,944) (2,823) (13,559)
Accumulated depreciation
at 31 December 2019 (10,969) (1,348) (14,719) (7,721) (34,757)
Carrying value at 31 December
2019 31,760 424 5,072 3,976 41,232
19. Investment property
Accounting for investment property
Investment property is initially measured at cost and
subsequently at fair value, with any change therein recognised in
profit or loss within non-interest income.
Any gain or loss on disposal of investment property (calculated
as the difference between the net proceeds from disposal and the
carrying amount of the item) is recognised in profit or loss.
When the use of a property changes such that it is reclassified
as property and equipment, its fair value at the date of
reclassification becomes its cost for subsequent accounting.
Critical accounting estimates and judgements
The Group obtains independent valuations for its investment
properties at least annually. At the end of each reporting period,
the directors update their assessment of the fair value of each
property, taking into account the most recent independent
valuations. The directors determine a property's value within a
range of reasonable fair value estimates.
The fair values of the investment properties at 28 February 2021
have been determined based on the valuations performed by
accredited independent valuers. The Group has no restrictions on
the realizability of its investment properties and no contractual
obligations to either purchase, construct or develop investment
properties or for repairs, maintenance and enhancements.
Valuation technique and significant unobservable inputs
The fair values of the investment properties have been
determined using the market sales comparison approach, which uses
the market prices from recent sale of similar properties to value
the investment properties. The fair values of investment properties
have been categorised under level 3 in the fair value hierarchy
based on the inputs used. These inputs include:
-- Sales price of comparable properties
-- Replacement costs of a building
-- Adjustments due to specific building components
-- Rental rates per square meter: $3.50 - $4.50
-- Market yields: 6% to 10%
The estimated fair value would increase/(decrease) if:
-- Expected market rental growth were higher/(lower)
-- The occupancy rates were higher (lower)
$'000 28 February 31 December
2021 2019
Opening balance 6,586 12,414
Exchange rate adjustment 1,601 (2,017)
Fair value gain (315) 4,586
Additions during the period 879 2,341
Reclassifications from/(to) property and
equipment 2,893 (405)
Disposals during the period - (1,367)
Reclassified as part of disposal groups held
for sale - (8,966)
Closing balance 11,644 6,586
20. Other assets
Accounting for other assets
Included in other assets are prepayments, security deposits and
other receivables. Except for prepayments and some balances
included in other receivables, other assets are financial assets
carried at amortised cost. Refer to the accounting policy on
financial instruments for further details. Prepayments are
non-financial assets and are stated at their nominal values.
$'000 28 February 31 December
2021 2019
Other financial assets measured at amortised
cost
Accounts receivable 13,273 5,100
Security deposits 3 28
Legacy debt receivable 11,367 10,443
Other receivables (i) 13,065 17
37,708 15,588
Other non-financial assets
Prepayments 17,073 4,967
Other assets (ii) 1,231 8,497
56,012 29,052
Current 47,859 23,622
Non-current 8,153 5,430
Notes:
i) Other receivables relate mainly to balances due from Group
entities classified as disposal groups.
ii) Other assets include stationery and other inventory
balances.
21. Other liabilities
Accounting for other liabilities
Other liabilities include financial and non-financial
liabilities. For other financial liabilities, refer to accounting
policy pertaining to financial instruments.
Non-financial liabilities are made up mainly of provisions.
Refer to note 21.1 below for details of the Group's policy on
provisions.
$'000 28 February 31 December
2021 2019
Other financial liabilities measured at amortised
cost
Accruals 6,412 8,361
Accounts payable(i) 76,127 68,322
Lease liability 6,171 6,670
Other liability accounts 11,531 5,189
100,241 88,542
Other non-financial liabilities
Provisions (note 21.1) 8,294 8,222
Other liabilities 332 210
108,867 96,974
Current 103,687 94,185
Non-current 5,180 2,789
Notes:
1. Included in accounts payable are balances due to Group
entities classified as disposal groups. This was included as part
of other liability accounts in the prior year financial statement
but has now been reclassified in the prior year balance included in
the current period financial statement.
21.1. Provisions
Accounting for provisions
The Group applies IAS 37 Provisions, Contingent Liabilities and
Contingent Assets in accounting for non-financial liabilities.
Provisions are recognised for present obligations arising as
consequences of past events where it is more likely than not that a
transfer of economic benefit will be necessary to settle the
obligation, which can be reliably estimated.
The table below sets out the movement in provisions:
$'000 28 February 2021 31 December 2019
Retention Restructuring Other Total Retention Restructuring Other Total
and bonus cost provisions and bonus cost provisions
pay pay
At 1 January 5,178 910 2,134 8,222 4,778 - 11,644 16,422
Additions 3,076 4,819 1,276 9,171 5,648 3,017 950 9,615
Amounts utilised - (4,229) (1,845) (6,074) (2,607) - (1,088) (3,695)
Unused amounts
reversed (2,338) - (96) (2,434) (1,979) (2,107) - (4,086)
Exchange and
other movements (1,718) - 1,127 (591) (662) - (9,372) (10,034)
At 31 December 4,198 1,500 2,596 8,294 5,178 910 2,134 8,222
Included in other provisions are leave pay provision, provisions
on off-balance sheet items and others.
22. Off-balance sheet items
Loan commitments and other financial facilities
The timing profile of the contractual amounts of the Group's
off-balance sheet financial instruments that commit it to extend
credit to customers and other facilities for the period ended 28
February 2021 are summarised below:
$'000 28 February 31 December
2021 2019
Financial guarantees 47,393 19,720
Letters of credit 5,637 8,578
Loan commitments 4,868 11,529
Gross balance 57,898 39,827
Expected credit loss allowance (93) (187)
Net balance 57,805 39,640
Maturity analysis
Less than one year 50,838 29,304
Between one and five years 1,371 10,336
Over five years 5,596 -
Total 57,805 39,640
b. Capital commitments
The Groups capital commitments for the period ended 28 February
2021 are summarised below. Funds to meet these commitments will be
provided from existing Group resources.
$'000 28 February 31 December
2021 2019
Approved and contracted for 1,493 1,181
Approved but not contracted for 7,041 15,823
Total 8,534 17,004
23. Non-interest income
Accounting for non-interest income
Fees and commission
Fees and commission income and expense that are integral to the
effective interest rate on a financial asset or financial liability
are included in the measurement of the effective interest rate.
Other fees and commission income - including account servicing
fees, investment management fees, sales commission, placement fees
and syndication fees - are recognised as the related services are
performed. If a loan commitment is not expected to result in the
draw-down of a loan, then the related loan commitment fees are
recognised on a straight-line basis over the commitment period.
Other fees and commission expenses relate mainly to transaction
and service fees, which are expensed as the services are
received.
Net trading income
Net trading income comprises gains less losses related to
trading assets and liabilities, and includes all realised and
unrealised fair value changes, interest, dividends and foreign
exchange differences.
$'000 14 months to 28 February 12 months to 31 December
2021 2019
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
Net fee and commission income: 30,213 29,625 59,838 19,365 30,367 49,732
Fee income on loans and
advances 5,371 7,187 12,558 6,294 9,943 16,237
Fee income from trust and
fiduciary activities 706 307 1,013 735 5,821 6,556
Cash transaction fees 13,381 5,705 19,086 2,903 5,664 8,567
Fee income on digital transactions 8,677 5,236 13,913 1,414 4,359 5,773
Account maintenance fees 3,521 8,154 11,675 2,948 4,368 7,316
Other fee income 2,236 4,192 6,428 5,071 1,194 6,265
Fee and commission expense (3,679) (1,156) (4,835) - (982) (982)
Net gains/(losses) on financial
instruments at FVTPL: 1,609 - 1,609 (3,084) - (3,084)
Financial assets at FVTPL (3,556) - (3,556) (1,574) - (1,574)
Financial liabilities at
FVTPL 5,165 - 5,165 (1,510) - (1,510)
Net trading income: 22,025 19,639 41,664 31,033 15,054 46,087
Gains on foreign exchange
transactions 15,851 18,469 34,320 30,375 14,755 45,130
Other net income from non-proprietary
trading 6,174 1,170 7,344 658 299 957
Other non-interest income: (2,104) 3,081 977 6,427 4,504 10,931
Dividends received 816 4 820 1,166 368 1,534
Gains/(losses) on disposal
of property and equipment - 85 85 21 (115) (94)
Gains/(losses) on disposal
of investment property (2,433) (2,433) - 1,164 1,164
Gains on derivatives - - - 296 110 406
Rental income on investment
property 158 1,216 1,374 30 1,174 1,204
Gain on revaluation of investment
property (315) 184 (131) 4,586 - 4,586
Other income (330) 1,592 1,262 328 1,803 2,131
51,743 52,345 104,088 53,741 49,925 103,666
24. Operating expenses
$'000 14 months to 28 February 12 months to 31 December
2021 2019
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
Administrative expenses (38,501) (50,479) (88,980) (31,265) (62,243) (93,508)
Property lease rentals (364) (1,395) (1,759) (930) (516) (1,446)
Staff costs (note 24.1) (36,456) (54,326) (90,782) (36,337) (56,662) (92,999)
Auditor's remuneration (note
24.2) (2,423) (707) (3,130) (1,242) (582) (1,824)
Depreciation (4,394) (11,074) (15,468) (3,314) (10,245) (13,559)
Amortisation charge (4,984) (5,942) (10,926) (5,335) (6,484) (11,819)
Directors' remuneration
(note 28.3) (3,118) - (3,118) (2,982) - (2,982)
(90,240) (123,923) (214,163) (81,405) (136,732) (218,137)
24.1. Staff costs
Accounting for staff costs
The Group applies IAS 19 Employee Benefits in its accounting for
most of the components of staff costs.
Short-term employee benefits - Short-term employee benefits are
expensed as the related service is provided. A liability is
recognised for the amount expected to be paid if the Group has a
present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the obligation
can be estimated reliably.
Post-retirement benefits - The Group operates a defined
contribution scheme and recognises contributions due in respect of
the accounting period in the income statement. Any contributions
unpaid at the balance sheet date are included as a liability.
$'000 14 months to 28 February 12 months to 31 December
2021 2019
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
Salaries (26,063) (40,224) (66,287) (23,203) (46,419) (69,622)
Employer contributions
to post-retirement funds (2,123) (2,459) (4,582) (1,884) (2,802) (4,686)
Other staff costs (8,270) (11,643) (19,913) (11,250) (7,441) (18,691)
(36,456) (54,326) (90,782) (36,337) (56,662) (92,999)
Notes:
1. Total equity-settled share-based payments costs of $2.3
million (2019: $2.5 million) have been included in other staff
costs. Other staff costs comprise incentive pay, medical aid
contributions, staff training and other staff-related expenses.
24.2. Auditor's remuneration
$'000 14 months to 28 February 12 months to 31 December
2021 2019
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
Fees paid to external auditors (2,423) (707) (3,129) (1,242) (582) (1,824)
Fees paid for audit services (2,057) (655) (2,711) (1,131) (582) (1,713)
Fees paid for non-audit services: (366) (52) (418) (111) - (111)
Taxation-related services (43) (35) (78) (52) - (52)
Other assurance services (323) (17) (340) (59) - (59)
25. Taxation
Accounting for taxation
Income tax comprises current tax and deferred tax. Income tax is
recognised in the income statement except to the extent that it
relates to items recognised in other comprehensive income or
directly in equity, in which case the tax is recognised in the same
statement as the related item appears.
Current tax is the tax expected to be payable on the taxable
profit for the year and any adjustment to tax payable in respect of
previous years. Potential current tax liabilities that may arise on
the basis of the amounts expected to be paid to the tax authorities
are provided for. Deferred tax is recognised on temporary
differences between the carrying amounts of assets and liabilities
in the statement of financial position, and the amounts attributed
to such assets and liabilities for tax purposes. Deferred tax is
calculated using the tax rates expected to apply in the periods in
which the assets will be realised or the liabilities settled.
Current and deferred tax is calculated based on tax rates and laws
enacted, or substantively enacted, at the reporting date.
Critical accounting estimates and judgements
The recognition of a deferred tax asset relies on an assessment
of the probability and sufficiency of future taxable profits,
future reversals of existing taxable temporary differences and
ongoing tax planning strategies. In the absence of a history of
taxable profits, the most significant judgements relate to expected
future profitability and to the applicability of tax planning
strategies, including corporate reorganisations. The Group has
concluded that the deferred tax assets will be recoverable using
the estimated future taxable income based on the approved business
plans and budgets of the affected subsidiaries. The subsidiaries
are expected to generate taxable profit from 2021 onwards. This
estimate would be most sensitive to a change in the underlying
projected profits, where a change of $1 million would have an
approximate impact on the carrying value of +/- 25% (based on
average tax rate for entities in tax jurisdictions).
25.1 Income tax expense
$'000 14 months to 28 February 12 months to 31 December
2021 2019
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
Current tax expense
Current period tax
expense (4,446) (2,928) (7,374) 162 (915) (753)
Withholding tax (1,436) (1,606) (3,042) (288) (1,298) (1,586)
Bank levies (1,110) - (1,110) - - -
(6,992) (4,534) (11,526) (126) (2,213) (2,339)
Deferred tax
Impairment losses (769) - (769) (3,798) 3,883 85
Property and
equipment (3,437) 235 (3,202) (1,398) (3,894) (5,292)
Gains/(losses) from
investments 776 - 776 (419) - (419)
Utilisation of
assessed losses - (3,367) (3,367) (635) 1,837 1,202
Write-off of
deferred tax
assets (10,086) (808) (10,894) - - -
Currency revaluation (2,595) - (2,595) (3,829) (4,114) (7,943)
Other 4,710 1,432 6,142 (2,254) 2,440 186
Total deferred tax (11,401) (2,508) (13,909) (12,333) 152 (12,181)
Total tax expense
per statement
of profit or loss (18,393) (7,042) (25,435) (12,459) (2,061) (14,520)
Reconciliation of
effective
tax charge:
(Loss)/profit before
tax* (28,636) (3,210) (31,846) 4,696 (131,209) (126,513)
Income tax using
corporate
tax rates 12,515 (4,698) 7,817 (4,126) 3,299 (827)
Non-taxable income 3,595 - 3,595 (362) - (362)
Tax exempt revenues (4,104) - (4,104) 3,374 34 3,408
Bank levies (1,110) - (1,110) - - -
Non-deductible
expenses 6,282 390 6,672 (41) (1,928) (1,969)
Income tax at
different rates - (1,373) (1,373) 2 (432) (430)
Unrecognised
deferred tax (606) (250) (856) (10,291) - (10,291)
Impact of IAS 29
application (7,303) - (7,303) - - -
Tax and fair value
losses
of prior years
claimed (426) (64) (490) 280 - 280
Write-off of
deferred tax
assets (10,086) (808) (10,894) - - -
Other (1) (17,150) (239) (17,389) (1,295) (3,034) (4,329)
Current tax expense
per statement
of profit or loss (18,393) (7,042) (25,435) (12,459) (2,061) (14,520)
Effective tax rate 64.2% 219.4% 79.9% 265.3% 1.6% 11.5%
(1) (Loss/profit) before tax line is restated. Refer to note
34.1 for further details of the restatement.
(2) Other relates to legal fees, entertainment charges,
depreciation and amortization not deductible and effects of tax
rate on foreign income
25.2. Income tax effects relating to components of other
comprehensive income
14 months to Continuing operations Discontinued operations Total
28 February 2021
$'000
Before Tax After Before Tax After Before Tax After
tax charge tax tax charge tax tax charge tax
Exchange
differences
on translating
foreign
operations (119,534) - (119,534) (28,469) - (28,469) (148,003) - (148,003)
Share of
associate
OCI (3,277) - (3,277) - - - (3,277) - (3,277)
Movement in FVOCI
reserves (8) (11) (19) (349) 13 (336) (357) 2 (355)
(122,819) (11) (122,830) (28,818) 13 (28,805) (151,637) 2 (151,635)
12 months to 31 Continuing operations Discontinued operations Total
December 2019
$'000
Before Tax After Before Tax After Before Tax After
tax charge tax tax charge tax tax charge tax
Exchange differences
on translating
foreign operations (1,163) - (1,163) (11,663) - (11,663) (12,826) - (12,826)
Share of reserves
in associate 12,552 - 12,552 - - - 12,552 - 12,552
Movement in fair
value reserves (149) (1) (150) 62 (12) 50 (87) (13) (100)
Revaluation of
land and buildings (563) 149 (414) - - - (563) 149 (414)
10,677 148 10,825 (11,601) (12) (11,613) (924) 136 (788)
25.3. Current tax assets and liabilities
Movements on current tax assets and liabilities were as
follows:
$'000 28 February 31 December
2021 2019
Balance at the beginning of the year 1,476 753
Exchange rate adjustment (529) (1,522)
Statement of profit or loss charge (6,992) (2,549)
Corporate income tax paid 3,553 8,098
Prior year over/(under) provision 1,413 5,460
Income tax relating to disposal group classified
as held for sale - (8,764)
Closing balance (1,079) 1,476
Disclosed as follows:
Current tax asset 78 2,243
Current tax liability (1,157) (767)
Total (1,079) 1,476
25.4 Deferred tax assets and liabilities
Movements on deferred tax assets and liabilities were as
follows:
$'000 28 February 31 December
2021 2019
Balance at the beginning of the year (11,958) 22,118
Exchange rate adjustment 129 1,897
Statement of profit or loss charge (note 25.1) (11,401) (12,181)
Deferred tax on amounts charged to equity (note
25.2) (11) 136
Deferred tax relating to disposal group classified
as held for sale - (23,928)
Closing balance (23,241) (11,958)
Disclosed as follows:
Deferred tax asset 2,388 149
Deferred tax liability (25,629) (12,107)
Total (23,241) (11,958)
Tax effects of temporary differences:
Impairment losses 2,816 3,383
Property and equipment (6,680) (3,495)
Investment property (782) (406)
Unrealised gains on investment (3,347) (1,322)
Revaluation surplus (1,567) (2,878)
Other (13,681) (7,240)
(23,241) (11,958)
26. Earnings per share
Accounting for earnings per share
The Group presents basic and diluted EPS data for its ordinary
shares. Basic earnings per ordinary share is calculated by dividing
the profit attributable to ordinary shareholders of the parent
company by the weighted average number of ordinary shares
outstanding, excluding own shares held. Diluted earnings per
ordinary share is calculated by dividing the basic earnings, which
require no adjustment for the effects of dilutive potential
ordinary shares, by the weighted average number of ordinary shares
outstanding, excluding own shares held, plus the weighted average
number of ordinary shares that would be issued on conversion of
dilutive potential ordinary shares.
$'000 14 months to 31 December 2019
28 February 2021
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
Loss attributable to ordinary
shareholders (46,593) (12,006) (58,599) (8,451) (134,768) (143,219)
Basic and diluted earnings (46,593) (12,006) (58,599) (8,451) (134,768) (143,219)
Weighted-average ordinary
shares (number of shares)
Recognised as treasury shares (5,395) (5,395) (5,395) (1,327) (1,327) (1,327)
Ordinary shares in issue 172,450 172,450 172,450 172,450 172,450 172,450
Total weighted-average ordinary
shares (number of shares) 167,055 167,055 167,055 171,123 171,123 171,123
Diluted number of ordinary
shares (number of shares)
Diluted shares 343 343 343 362 362 362
Total diluted number of ordinary
shares (number of shares) 167,399 167,399 167,399 171,485 171,485 171,485
Basic loss per share - $ (0.28) (0.07) (0.35) (0.05) (0.79) (0.84)
Diluted loss per share - $ (0.28) (0.07) (0.35) (0.05) (0.79) (0.84)
27. Analysis of changes in financing during the period
Reconciliation of movements of liabilities to cash flows arising
from financing activities
$'000 28 February 2021 31 December 2019
-------
Borrowings Leases Borrowings Leases
Balance at 1 January 366,809 6,670 410,157 18,981
Changes from financing cash flows
Proceeds from borrowings 131,223 - 97,645 -
Transaction costs related to borrowings (669) - (1,055) -
Repayment of borrowings (26,018) - (32,727) -
Lease payments - (1,019) - (5,922)
Total changes from financing cash
flows 96,170 (1,019) 63,863 (5,922)
Other changes
Interest expenses 54,648 565 49,787 1,757
Interest paid (22,662) (455) (30,101) (309)
Fair value adjustments (5,165) - 1,510 -
Reclassified as part of disposal
groups held for sale - - (96,705) (7,270)
Foreign exchange and other movements (56,462) 410 (31,702) (567)
Total other changes (29,641) 520 (107,211) (6,389)
Closing balance 441,704 6,171 366,809 6,670
28. Related parties
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the other party in making financial or operational
decisions, or one other party controls both. Related parties of the
Group include subsidiaries, associates, and key management
personnel ('KMP'). KMPs are defined as those persons having
authority and responsibility for planning, directing and
controlling the activities of Atlas Mara Limited (directly or
indirectly) and comprise the Directors and senior management.
Parent company
The parent company, which is also the ultimate parent company,
is Atlas Mara Limited.
Subsidiaries and associates
The main subsidiaries include:
-- ABC Holdings Limited ('ABCH'): This is the holding company of
the ABC Group subsidiaries made up of African Banking Corporation
of Botswana Limited; African Banking Corporation (Zimbabwe)
Limited, Tanzania Development Finance Company Limited; and the
subsidiaries held for sale: African Banking Corporation
(Moçambique) S.A.; African Banking Corporation (Tanzania) Limited
and African Banking Corporation Zambia Limited.
-- Banque Populaire du Rwanda Limited ('BPR').
-- Atlas Mara Financial Services Limited ('AMFS').
The Group also has investment in Union Bank of Nigeria which is
accounted for as an investment in associate.
28.1 Transactions and balances with related parties
Related party transactions
$'000 14 months to 28 February 12 months to 31 December
2021 2019
Management Interest Others Total Management Interest Others Total
fees income/ fees income/
expense expense
Transactions between
Atlas Mara and ABCH - 2,787 - 2,787 (1,881) 2,580 827 1,526
Transactions between
Atlas Mara and ABC
Group subsidiaries - (1,468) - (1,468) 2,451 (2,136) - 315
Transactions between
Atlas Mara and Atlas
Mara Digital Ltd - - 179 179 - - 66 66
Transactions between
Atlas Mara and founder
shareholders' affiliated
companies - - 34 34 - - (632) (632)
Transactions between
Atlas Mara and shareholder
companies (1) - (17,464) (137) (17,601) - (5,974) (256) (6,230)
- (16,145) 76 (16,069) 570 (5,530) 5 (4,955)
Related party balances
$'000 28 February 2021 31 December 2019
Loans Loans Other Total Loans Loans Other Total
to Group from Group to Group from Group
companies companies companies companies
Balances between
Atlas Mara and ABCH 470 - - 470 15,692 - - 15,692
Balances between
Atlas Mara and Banc
ABC subsidiaries - (13,432) (3,289) (16,721) - (11,964) 917 (11,047)
Transactions between
Atlas Mara and Atlas
Mara Digital Ltd - - 118 118 - - (61) (61)
Balances between
Atlas Mara and founder
shareholders' affiliated
companies - - (838) (838) - - (1,514) (1,514)
Balances between
Atlas Mara and shareholder
companies (1) - (137,045) (79) (137,124) - (71,799) - (71,799)
Other related party
balances (BPR, AMFS
and Eagle) - - - - 190 - (147) 43
470 (150,477) (4,088) (154,095) 15,882 (83,763) (805) (68,686)
Note:
1. Transactions and balances with shareholder companies relate
to transactions with Fairfax Africa Holdings Corporation and
Fairfax Financial Holdings Limited.
All outstanding balances with these related parties, apart from
the balances with shareholder companies, are to be settled in cash
within twelve to twenty-four months (two years) of the reporting
date. None of the balances are secured. Please refer to note 6 on
borrowed funds for details of the balances with Fairfax Africa
Holdings Corporation and Fairfax Financial Holdings Limited.
28.2 Transactions with key management personnel
$'000 14 months 12 months
to to
28 February 31 December
2021 2019
Short-term employee benefits 2,284 3,118
Post-employment benefits 304 183
Share-based payment expenses 861 1,510
Other benefits 2,621 1,941
6,070 6,752
28.3 Directors' remuneration
$'000 14 months 12 months
to to
28 February 31 December
2021 2019
Executive Directors
Salary, performance-related remuneration and
other (292) (500)
Non-Executive Directors
Fees as Director of holding company (2,826) (2,482)
Total directors' remuneration (3,118) (2,982)
Notes:
-- The executive directors' fees include the cash component of
$145.8k (2019: $171.9k) and share based component of $145.8k (2019:
$183k).
-- Non-executive directors' fees include a cash component of
$654.2k (2019: $475k), share based component of $291.2k (2019:
$419k) and share options of $1.7 million (2019: $1.59 million).
29. Funds under management
$'000 28 February 31 December
2021 2019
Funds under management 87,697 36,777
The Group provides asset management and unit trust activities to
pension funds, individuals, trusts and other institutions, whereby
it holds and manages assets. The Group receives a management fee
for providing these services. The Group is not exposed to any
credit risk relating to such placements as these do not represents
assets held by the Group.
30. Collateral
Liabilities for which collateral is pledged:
$'000 28 February 31 December
2021 2019
Deposits from banks 856 4,530
Deposits from customers 134 1,859
Borrowed funds 29,870 52,743
30,860 59,132
Assets pledged to secure these liabilities are as follows:
$'000 28 February 31 December
2021 2019
Advances 43,005 45,122
Financial assets at FVTPL - 3,925
Investment securities 22,612 35,418
Property and equipment 3,170 3,258
68,787 87,723
These transactions are conducted under terms that are usual and
customary to standard lending and borrowing activities.
31. Leases
Accounting for leases
The Group applies IFRS 16 using the modified retrospective in
accounting for its leases.
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. At commencement or on modification of a contract
that contains a lease component, the Group allocates consideration
in the contract to each lease component on the basis of its
relative standalone price. However, for leases of branches and
office premises the Group has elected not to separate non-lease
components and accounts for the lease and non-lease components as a
single lease component.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an
estimate of costs to dismantle and remove any improvements made to
branches or office premises.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the end of the
lease term. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the Group's incremental
borrowing rate. The Group determines its incremental borrowing rate
by analysing its borrowings from various external sources and makes
certain adjustments to reflect the terms of the lease and type of
asset leased.
Lease payments included in the measurement of the lease
liability comprise the following:
-- fixed payments, including in-substance fixed payments;
-- variable lease payments that depend on an index or a rate,
initially measured using the index or rate as at the commencement
date;
-- amounts expected to be payable under a residual value
guarantee; and
-- the exercise price under a purchase option that the Group is
reasonably certain to exercise, lease payments in an optional
renewal period if the Group is reasonably certain to exercise an
extension option, and penalties for early termination of a lease
unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a change
in future lease payments arising from a change in an index or rate,
if there is a change in the Group's estimate of the amount expected
to be payable under a residual value guarantee, if the Group
changes its assessment of whether it will exercise a purchase,
extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the
right-of-use asset or is recorded in profit or loss if the carrying
amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets in 'property and
equipment' and lease liabilities in 'Other liabilities' in the
statement of financial position
31.1 Right-of-use assets
Right-of-use assets relate to leased branch and office premises
that are presented as part of Land and buildings, within property
and equipment.
$'000 28 February 31 December
2021 2019
Balance at 1 January 6,391 18,981
Additions - 33
Depreciation charge for the period (1,222) (4,548)
Foreign exchange adjustment 235 (617)
Reclassified as part of disposal groups held
for sale - (7,458)
5,404 6,391
31.2 Lease liabilities
$'000 28 February 31 December
2021 2019
Current 1,329 1,173
Non-current 4,842 5,497
6,171 6,670
31.3 Amounts recognised in the statement of cash flow
$'000 28 February 31 December
2021 2019
Total cash outflow for leases 1,474 5,921
31.4 Amounts recognised in the statement of profit or loss
$'000 28 February 31 December
2021 2019
Depreciation charge on right-of-use assets 1,222 5,122
Interest expense on lease liabilities 565 1,757
Lease expenses included in operating expenses - 266
32. Disposal groups classified as held for sale and discontinued
operations
Critical accounting estimates and judgements
In determining the fair value less costs to sell of the disposal
groups held for sale, the Group makes use of estimates based on the
proposed multiples as part of the on-going negotiation with
potential buyers. The fair value of the disposal groups has been
determined as the estimated recoverable amount based on
negotiations with potential buyers. The non-recurring fair value
measurement for the disposal group has been categorised as a level
3 fair value based on the inputs to the valuation technique
used.
On 30 April 2019, the Group publicly announced its intention to
dispose of its investments in the following subsidiaries: African
Banking Corporation (Moçambique) S.A.; African Banking Corporation
(Tanzania) Limited; African Banking Corporation Zambia Limited; and
Banque Populaire du Rwanda Limited ('BPR'). The assets and
associated liabilities of the disposal groups were classified as
held for sale at that date and reported at the lower of fair value
less to sell.
Current year update on sale transaction
On 29 September 2020, the Group through its subsidiary, ABCH,
entered into a definitive agreement with Access Bank Plc for the
sale of the Group's 100% shareholding in African Banking
Corporation Mocambique S.A. Following regulatory approvals and
conclusion of other customary conditions precedent, the transaction
was completed and ownership as well as control transferred to
Access Bank Plc on 17 May 2021. Of the assets and related
liabilities of the disposal groups classified as held for sale as
at 28 February 2021, the fair value of assets relating to ABC
Moçambique was $199.9 million while the related liabilities was
$183.5 million.
On 26 November 2020, the Group entered into a definitive
agreement with KCB Group Plc for the sale of the Group's 97.3%
shareholding in African Banking Corporation Tanzania Limited and
62.06% shareholding in BPR. The transactions have been approved by
the respective regulatory authorities and in the case of BPR, the
sale was subsequently finalised on 25 August 2021 and control of
the subsidiary transferred to KCB as at that date. Sale of ABC
Tanzania is expected to be concluded before the end of the year. Of
the assets and related liabilities of the disposal groups
classified as held for sale as at 28 February 2021, the fair value
of assets relating to BPR was $433.9 million while the related
liabilities was $401.0 million.
The Group is still actively engaged in negotiations with other
potential buyers for African Banking Corporation Zambia Limited,
with a view to completing the disposal of the subsidiary by or
before the end of the year; hence it still remains classified as a
disposal group held for sale in line with IFRS 5: Non-current
assets held for sale and discontinued operations .
The assets included in disposals groups classified as held for
sale and the associated liabilities are presented in the table
below:
$'000 28 February 31 December
2021 2019
Assets included in disposal groups classified
as held for sale
Cash and short-term funds 308,788 245,685
Loans and advances 392,444 371,489
Investment securities 224,317 181,453
Property and equipment 50,984 64,358
Investment property 6,671 8,965
Current tax assets 8,152 5,192
Deferred tax assets 3,465 13,685
Other assets 106,562 88,818
1,101,383 979,645
Liabilities included in disposal groups classified
as held for sale
Deposits 832,826 697,063
Borrowed funds 126,118 96,705
Current tax liabilities 1,671 17
Deferred tax liability 4,438 7,212
Other liabilities 57,595 73,238
1,022,648 874,235
Net assets directly associated with disposal
group 78,735 105,410
33. Share-based payment transactions
Accounting for share-based payments
Employees (including senior executives) of the Group receive
remuneration in the form of share-based payments, whereby employees
render services as consideration for equity instruments
(equity-settled transactions). Employees working in the business
development group are granted share appreciation rights, which are
settled in cash (cash-settled transactions).
Equity-settled transactions
The CoE-settled transactions is determined by the fair value at
the date when the grant is made using an appropriate valuation
model. That cost is recognised, together with a corresponding
increase in other capital reserves in equity, over the period in
which the performance and/or service conditions are fulfilled in
employee benefits expense. The cumulative expense recognised for
equity-settled transactions at each reporting date until the
vesting date reflects the extent to which the vesting period has
expired and the Group's best estimate of the number of equity
instruments that will ultimately vest. The statement of profit or
loss expense or credit for a period represents the movement in
cumulative expense recognised as at the beginning and end of that
period and is recognised in employee benefits expense.
No expense is recognised for awards that do not ultimately vest,
except for equity-settled transactions for which vesting is
conditional upon a market or non-vesting condition. These are
treated as vesting irrespective of whether or not the market or
non-vesting condition is satisfied, provided that all other
performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the
minimum expense recognised is the expense had the terms not been
modified, if the original terms of the award are met. An additional
expense is recognised for any modification that increases the total
fair value of the share-based payment transaction or is otherwise
beneficial to the employee as measured at the date of
modification.
Cash-settled transactions
The cost of cash-settled transactions is measured initially at
fair value at the grant date using a binomial model. This fair
value is expensed over the period until the vesting date with
recognition of a corresponding liability. The liability is
remeasured to fair value at each reporting date up to and including
the settlement date, with changes in fair value recognised in
employee benefits expense.
Critical accounting estimates and judgements
Atlas Mara has entered into equity-settled share-based payment
arrangements with its employees and Directors as compensation for
services provided. The grant-date fair value of share-based payment
awards - i.e. stock options - granted to employees is recognised as
personnel expenses, with a corresponding increase in equity, over
the period in which the employees become unconditionally entitled
to the awards.
The amount recognised as an expense is adjusted to reflect the
number of awards for which the related service and non-market
performance conditions are expected to be met, such that the amount
ultimately recognised as an expense is based on the number of
awards that meet the related service and non-market performance
conditions at the vesting date. For share-based payment awards with
non-vesting conditions, the grant-date fair value of the
share-based payment is measured to reflect such conditions and
there is no true-up for differences between expected and actual
outcomes.
Fair value is determined by using appropriate valuation models.
Vesting conditions include service conditions. Vesting conditions
are not taken into account in the initial estimate of the fair
value at the grant date. They are taken into account by adjusting
the number of equity instruments included in the measurement of the
share-based payment transaction. In determining the grant date fair
value of the equity-settled share-based payments, the Group has
made key assumptions in relation to inputs included in the
valuation methodology, the most significant thereof, relating to
the expected volatility of the Atlas Mara shares. In making these
assumptions the following were taken into account to determine a
proxy volatility:
-- Volatility of the traded shares of the significant investments held by the Group.
-- Volatilities of peer group companies in the same markets as the significant investments
Description of share-based payment arrangements
Atlas Mara currently operates three share-based remuneration
arrangements for key management, directors and employees. These
programmes are limited to Directors, key management and senior
employees. The key terms and conditions related to these
arrangements are listed below. All options/grants are settled by
the physical delivery of shares. A number of options were granted
to employees to buy Atlas Mara shares, as traded on the London
Stock Exchange, in the future at a predetermined price (strike
price).
Employee/consultant options
These options were granted to employees and consultants of Atlas
Mara. These options were granted under terms similar to the Atlas
Mara Global Share Plan. Under this plan the employee/consultant is
required to remain employed or engaged with the Group during the
vesting period. Requirements are subject to Board discretion.
One-third of the options vests on the grant date (8 September 2014
and 15 November 2014 respectively), one-third of the options vests
on the first anniversary of the grant date and the remaining third
vests on the second anniversary of the grant date. All vested
options expire seven years from the grant date. Management
indicated that the employees are not entitled to dividends (if any)
prior to the vesting date, nor will they receive the value of the
dividends that they would have earned if they had been the owner of
the shares from grant date.
Summary of Share Awards Scheme operation
Awards C - M
The employee must remain in the employment of the Group for the
duration of the vesting period in order to be eligible to receive
the shares.
The vesting of the shares occurs on variable dates as summarised
below.
The employees are not entitled to dividends (if any) prior to
the vesting date, nor will they receive the value of the dividends
that they would have earned if they had been the owner of the
shares from grant date.
Share Options Scheme
Employee options
Award Award Award Award Award Award Award Award Award
C D E F G H I J K
31-Mar-15 19-Nov-15 11-Jan-16 11-Jan-16 27 Apr 25 Aug 03 Oct 4-Oct-17 1-May-18
Grant date 16 16 17
Vesting 31-Mar-15 19-Nov-15 11-Jan-16 11-Jan-16 27 Apr 25 Aug 03 Oct 4-Oct-22 1-Nov-19
dates 17 16 22
31-Mar-16 19-Nov-16 1-Mar-16 11-Jan-17 27 Apr 25 Aug 1-May-23
18 17 - -
31-Mar-17 19-Nov-17 11-Jan-17 11-Jan-18 27 Apr 25 Aug
19 18 - -
1-Mar-17 - - - -
11-Jan-18 - - - -
Expiry 31 Mar 19 Nov 11 Jan 11 Jan 27 Apr 25 Aug 04 Oct 4-Oct-27 4-May-28
date 22 22 23 23 23 23 27
Share Awards Scheme
Award Award Award Award Award Award Award Award Award Award Award Award Award
A C D E F G H I J K L M M
Grant 8 Sep 31 Mar 19 Nov 14 Dec 11 Jan 11 Jan 27 Apr 27 Apr 27 Apr 27 Apr 25 Aug 22-Mar-17 22-Mar-17
date 14 15 15 15 16 16 16 16 16 16 16
Vesting 8 Sep 31 Mar 1 Mar 14 Dec 1 Mar 1 Mar 27 Apr 27 Apr 27 Apr 1 Mar 1 Mar 22-Mar-17 1-Apr-17
dates 14 15 16 15 16 17 17 16 16 17 17
1 Apr 31 Mar 1 Mar 1 Mar 1 Mar 1 Mar 27 Apr 27 Apr 1 Mar 1 Mar 1 Mar 22-Mar-18 1-Apr-18
15 16 17 17 17 18 18 17 17 18 18
1 Apr 31 Mar 1 Mar 1 Mar 1 Mar 27 Apr 27 Apr 27 Apr 1 Mar 22-Mar-19 1-Apr-19
16 17 18 18 18 - 19 18 17 - 19
1 Apr 1 Mar
17 - - - - - - 18 - - - -
Expiry 27 Apr
date - - - - - - - 18 - - - -
Reconciliation of outstanding share options
The following table illustrates the number and weighted average
exercise prices ('WAEP') of, and movements in, share options during
the year:
28 February 2021 31 December 2019
Number of WAEP ($) Number of WAEP
options options ($)
Outstanding at 1 January 12,950,666 3.43 14,783,999 3.31
Granted during the period - - - -
Forfeited during the period - - (1,800,000) 2.36
Expired during the period - - (33,333) 7.18
Outstanding at period-end 12,950,666 3.43 12,950,666 3.43
Exercisable at period-end 7,555,666 4.20 7,555,666 4.20
The options outstanding at 28 February 2021 had an exercise
price in the range of $2.00-11.50 (31 December 2019: $2.00-11.50)
and a weighted-average contractual life of 4.7 years (31 December
2019: 5.89 years).
Measurement of fair values of options granted
The fair value of the share grants have been measured using the
binomial model. Service conditions attached to the transactions
were not taken into account in the measurement of fair value. The
fair value of a share award is based on the share price at the date
of the grant. The model and key assumptions used in the valuation
are as follows:
Expected volatility (%) 25.63/38.17
Risk-free interest rate (%) 0.90/1.20/1.70
Expected life of share options (years) <10
Weighted average share price ($) 3.59
The expected life of the share options is based on historical
data and current expectations and is not necessarily indicative of
exercise patterns that may occur. The expected volatility reflects
the assumption that the historical volatility over a period similar
to the life of the options is indicative of future trends, which
may not necessarily be the actual outcome.
Share options outstanding at the end of the year have the
following expiry dates, exercise prices and fair values:
Grant date Expiry date Exercise Fair value Spot Share options Share options
Price per option price 28 February 31 December
2021 2019
08 September
08 September 2014 2021 11.00 2.29 10.10 436,333 436,333
15 November
15 November 2014 2021 9.50 2.41 9.50 145,000 145,000
26 March
26 March 2015 2022 7.18 1.69 7.00 416,000 416,000
26 March
26 March 2015 2025 7.18 1.69 7.00 500,000 500,000
19 November
19 November 2015 2022 5.68 1.68 5.68 313,333 313,333
11 January
11 January 2016 2023 5.00 1.49 5.25 700,000 700,000
27 April
27 April 2016 2023 4.28 1.24 4.30 925,000 925,000
25 August
25 August 2016 2023 3.05 0.81 3.00 20,000 20,000
3 October
3 October 2017 2026 2.36 2.17 3.53 8,100,000 8,100,000
4 October
4 October 2017 2027 2.36 1.99 3.56 1,395,000 1,395,000
12,950,666 12,950,666
Weighted average remaining contractual 4.72 5.90 years
life (years)
The spot prices are the prices per Atlas Mara share as traded on
the London Stock Exchange, as at the respective grant dates, and
were sourced from Bloomberg.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions
recognised during the period as part of employee benefit expense
were as follows:
14 months 12 months
to to
28 February 31 December
2021 2019
Expenses relating to staff share options 2,726,817 2,427,351
Expenses relating to staff share awards - 51,390
2,726,817 2,478,741
34. Correction of prior period error
34.1 IFRS 5 remeasurement loss
During the year, management realised that the IFRS 5
remeasurement loss was incorrectly presented after the
profit/(loss) before tax line on the consolidated statement of
profit or loss for the year 2019. This constitutes a prior year
error in terms of IAS 8. As a result of this error, "profit/(loss)
before tax" presented in the consolidated statements of profit or
loss and cash flows, was overstated in 2019 but has now been
corrected. The impact of the correction of this error on the
consolidated statements of comprehensive income and cash flow has
been shown in the table below:
a) Consolidated statement of comprehensive income
$'000 Previously
reported Adjustments As restated
IFRS 5 remeasurement loss (105,461) - (105,461)
Profit/(loss) before tax (25,748) (105,461) (131,209)
Loss for the year (133,270) - (133,270)
b) Consolidated statement of cash flows
$'000 Previously
reported Adjustments As restated
Profit/(loss) before tax (25,748) (105,461) (131,209)
IFRS 5 remeasurement loss - 105,461 105,461
Net cash outflow from operating activities
before changes in operating funds (104,748) - (104,748)
35. Events after the reporting date
Sale of African Banking Corporation of Botswana Limited
On 19 April 2021, the Group announced that it has entered into
definitive agreements with Access Bank Plc for the sale of the
remaining 78.15% shareholding in African Banking Corporation
Botswana. The transaction is subject to fulfilment of various
customary conditions precedent. The transaction is expected to
conclude before the end the year. Based on management's assessment
as at reporting date, the subsdiairy did not meet the requirements
to be classified as held for sale in line with IFRS 5 as management
was not fully committed to the plan to sell the subsidiary until
regulatory approval was obtained.
Support and override agreement ("SOA")
On 14 July 2021, the SOA was signed by majority of the Group's
lenders The lenders who are a party to the SOA 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
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 financing
agreements.
Below are the lenders that have accepted to the revised terms
and signed the SOA:
-- Nineteen77 Global Multi-Strategy Alpha Master Limited
-- Convertible bonds - CERVO (Majority)
-- Nineteen77 Capital Solutions A LP
-- HFP Investments Limited
-- Helios FairFax Partners Corporation
-- Fairfax Financial Holdings Limited
-- Export Development Canada ('EDC')
-- U.S. International Development Finance Corporation
('DFC')
-- Afrexim Bank Limited
Under the new restructuring agreement, the debt and repayment
profile of the lenders that signed the SOA are as follows:
Nineteen77 Global Multi-Strategy Alpha Master Limited
In accordance with the SOA, all recoveries from sale of UBN
shares shall be distributed to the first lien UBN secured creditors
based on the proportion of the UBN Shares held as security.
Nineteen77 Global Multi-Strategy Alpha Master Limited hold 8.7% of
first lien UBN Security and 13.4% of second lien UBN Security.
Nineteen77 Global Multi-Strategy Alpha Master Limited qualifies for
21.5% of fund recovery from the proceeds received by the Group with
respect to the UBN share disposal, which will be utilised to repay
the lenders dues, as per the first lien UBN security.
If funds under second Lien UBN recoveries are insufficient to
repay the Nineteen77 Global Multi-Strategy Alpha Master Limited in
full, the Nineteen77 Global Multi-Strategy Alpha Master Limited
shall recover excess UBN recoveries in its capacity as an unsecured
ATMA Creditor.
Convertible bonds - CERVO (Majority)
Majority of the convertible bondholders under the SOA implies
that participating bondholders are in aggregate at least 60% of the
principal amount outstanding under the Convertible Bonds.
Convertible Bondholders are secured bondholders under first lien
UBN security, holding 12.8% of shares in UBN as first lien UBN
security and 8.7% of second lien UBN Security. Pursuant to the
agreement, 31.7% of recoveries from disposal of UBN Shares due to
the Group will be utilised to settle the Bondholders under first
lien UBN security. Under the Convertible bond second Lien UBN
Security, any excess UBN Recoveries attributable to Nineteen77
Global Multi-Strategy Alpha Master Limited First Lien UBN Security
will be repaid to the Convertible Bond Trustee provided that
Nineteen77 Global Multi-Strategy Alpha Master Limited facility is
settled in full. In addition, bondholders will be eligible for
recoveries from redemption of the preference share instrument
issued to ABCH by its subsidiary, ABC Tanzania, as part of a
recapitalisation of ABC Tanzania, subject to priority given to
Nineteen77 Global Multi-Strategy Alpha Master Limited and ranking
pari passu with EDC with respect to these proceeds.
In the event that the funds of the Convertible Bond Second Lien
UBN Recoveries is not enough to repay the Convertible Bonds in
full, the Convertible Bond Trustee shall only be entitled to
recover excess UBN Recoveries on behalf of the Convertible
Bondholders in its capacity as an unsecured ATMA Creditor.
Nineteen77 Capital Solutions A LP
The Nineteen77 Capital Solutions A LP bondholders hold a
proportion of 6.7% of UBS bonds first lien UBN security because of
which 16.6% of funds recovered by the Group from UBN share disposal
shall be distributed to settle Nineteen77 Capital Solutions A LP
outstanding balance.In the event, where the funds from UBN
Recoveries under first lien are not enough to repay the entire
liability of Nineteen77 Capital Solutions A LP, the lender shall
recover excess UBN Recoveries in its capacity as an unsecured ATMA
Creditor.
HFP Investments Limited (previously Fairfax Africa Holdings
Investments Limited)
Fairfax Convertible Bondholders hold 6.7% of UBN shares under
first lien UBN security. According to the restructuring terms,
16.6% proceeds received by the Group from sale of UBN Shares shall
be allocated to settle the Bondholders under the first lien UBN
security. In circumstances, where the amount recovered from UBN
proceeds under first lien are inadequate to repay the HFP
Investments Limited facility entirely, the lender is entitled to
recover excess UBN Recoveries in its capacity as an unsecured ATMA
Creditor.
Helios Fairfax Partners Corporation "HFP" (previously Fairfax
Africa holdings Corporation) and HFP TLG Guarantee
0.7% of UBN shares are collateralised to HFP under first lien
UBN security. In line with the restructuring terms, 1.7% recoveries
by the Group from the sale of UBN Shares will be utilised to pay
off the Helios Fairfax Partners Corporation outstanding liability
under first lien UBN security. The remaining balance of Fairfax
Africa holdings Corporation and TLG Guarantee paid by HFP is due to
be settled from 90% of the net upfront recoveries from ABC Botswana
Proceeds in the proportions agreed among the ABC Botswana Secured
Creditors.
Fairfax Financial Holdings Limited
Based on the SOA, 90% of the net upfront recoveries from ABC
Botswana Proceeds (net of the intercompany debt owed by ABCH to ABC
Botswana) will be distributed to the discharge liabilities from ABC
Botswana Secured Creditors such as Fairfax Financial Holdings
Limited in the proportions agreed among the ABC Botswana Secured
Creditors and notified to the ABC Global Agent.
Export Development Canada ('EDC')
In agreement with the terms, 4.8% of UBN shares are held as
security to EDC under first lien UBN security, due to which, 11.9%
of UBN proceeds received by the Group will be distributed to EDC to
settle the outstanding balance. Furthermore, funds obtained from
redemption of the preference share instrument issued to ABCH by its
subsidiary, ABC Tanzania, as part of a recapitalisation of ABC
Tanzania, subject to priority given to Nineteen77 Global
Multi-Strategy Alpha Master Limited and ranking pari passu with the
Convertible Bondholders, will be applied to discharge the remaining
EDC liability.
U.S. International Development Finance Corporation ('DFC')
With reference to the SOA, $7.5 million of BPR recoveries shall
be distributed to ABC Zambia by ABCH for issuance of a preference
share instrument by ABC Zambia in favour of ABCH to effect a
recapitalisation of ABC Zambia in accordance with the terms of the
sale and purchase agreement with respect to the disposal of ABC
Zambia.This consideration shall be utilised by ABC Zambia for
settlement of the DFC Zambia Facility in order to complete the
disposal of ABC Zambia. The remaining balance to be settled from
DFC from ABC Zambia sale proceeds. In case the DFC ABC Zambia
milestone is not achieved, all BPR recoveries (other than the funds
for working capital assigned to Group as per SOA), shall be paid to
DFC.
Afrexim Bank Limited, AATIF and Norsad Finance Limited
As specified under the terms of the SOA, settlement of ABCH
creditors will be in staggered installments with 10% of the net
upfront proceeds from the disposal of ABC Botswana (after offset of
the intercompany debt owed by ABCH to ABC Botswana) applied towards
the discharge of liability from AFREXIM, AATIF and Norsad, on a
pari passu basis.
The remaining balance to be settled from 50% of the earn out
recoveries from ABC Botswana, ABC Mozambique proceeds (after
adjustment the Central Bank of Mozambique Claim), ABC Tanzania
proceeds, TDFL proceeds utilised to repay AFREXIM, AATIF and
Norsad, on a pro rata and pari passu basis. In addition to this,
ABC Zimbabwe recoveries shall be paid to Afrexim to discharge ABC
Zimbabwe's guarantee obligations under the Afrexim facility
agreement.
Of the three ABCH lenders, only Afrexim Bank Limited consented
to the restructuring terms and signed the SOA.
35.3 Settlement of debt obligation to TLG Credit Opportunities
Fund ("TLG Credit")
On 31 December 2019, the Group reached a $20 million loan
agreement with TLG Credit, out of which $8 million was drawn down
in 2020. The loan was secured against BancABC Botswana shares owned
indirectly by Group (and directly by ABC Holdings Limited) and
backed by a guarantee from Fairfax Africa Holdings Corporation. The
loan accrued interest at the rate of 10%, payable half-yearly every
30 June and 31 December, maturing in January 2021.
On 7 December 2020, TLG Credit issued a notice to the Group and
Fairfax Africa demanding repayment of the total outstanding
commitment and subsequently called in the guarantee on 8 January
2021. Fairfax Africa Holdings Corporation discharged its obligation
as a guarantor and settled the outstanding dues to TLG Credit
Opportunities Fund.
35.4 Demand for settlement of AATIF Facility
On 8 June 2021, Group received a notice from AATIF for repayment
of outstanding balance due to AATIF of $16.9 million. The Group is
in discussions with AATIF to find a mutually acceptable resolution
since the SOA prevents the Group from repayment to any lenders
unless explicitly stated in the SOA.
35.5 TLG litigation against ATMA
On 17 February 2021, TLG filed an application with the High
Court of Justice (Commercial Division) in the British Virgin
Islands Court against Atlas Mara Limited, seeking to appoint joint
liquidators. The Group successfully defended the TLG Application.
On 21 July 2021, the High Court of Justice dismissed the
Application in all respects.
35.6 Norsad litigation against ABCH
On 9 April 2021, Norsad filed a petition in terms of the
Botswana Companies Act [Cap 42:01] seeking that the Group's
subsidiary, ABCH be placed under provisional winding up. This
action relates to ABCH and does not affect the operating
subsidiaries.
The Group, through ABCH, opposes the request for a winding-up
order and has appealed that the Court dismiss the liquidation
application citing that the liquidation application invokes the
interest of numerous stakeholders whose interests extend beyond the
mere commercial relationship between the applicant and
defendant.
The Group is in discussions with Norsad to find a mutually
acceptable resolution. A procedural hearing in relation to Norsad's
application is scheduled for September 2021 before the High Court
of Botswana.
35.7 Sale and transfer of ownership of disposal groups held for
sale
During the period ended 28 February 2021, the Group completed
the sale process for two (2) out of the four (4) subsidiaries
classified as disposal groups held for sale. These subsidiaries
include African Banking Corporation (Moçambique) S.A and Banque
Populaire du Rwanda Limited. Details of the sale are summarised
below:
i. Sale of ABC Mozambique
The Group successfully completed the sale of 100% of its
shareholding in African Banking Corporation (Moçambique) on 17 May
2021. The transfer of control to Access Bank Mozambique was
effective on the same date. Details of the sale of the subsidiary
are shown below:
$'000 17 May 2021
Cash 11,915
Fair value of deferred consideration 7,367
Total consideration 19,282
Carrying value of ABC Mozambique's net assets as at date
of disposal 18,220
Gain on disposal 1,062
Reclassification of foreign currency translation reserve (8,286)
Net impact of disposal (7,224)
ii. Sale of BPR
The Group successfully completed the sale of its 62.06%
shareholding in BPR to KCB on 25 August 2021. The transfer of
control to KCB was effective as at that date. Details of the sale
of the subsidiary are shown below:
$'000 25 August 2021
Cash 33,028
Fair value of deferred consideration 2,831
Total consideration 35,859
Carrying value of BPR's net assets as at date of disposal 32,922
Gain on disposal 2,937
Reclassification of foreign currency translation reserve
(net of NCI) 8,085
Net impact of disposal 11,022
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END
ACSLBMRTMTIMMBB
(END) Dow Jones Newswires
September 01, 2021 03:51 ET (07:51 GMT)
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