Letshego : Africa Full Year Results 2023

LETSHEGO AFRICA HOLDINGS LIMITED

2023 Annual Results Presentation

Presented by
Aupa Monyatsi	Gwen Muteiwa

Group Chief Executive

Group Chief Financial Officer

Agenda

01

Strategy and Operational Review

Group Chief Executive Officer

Aupa Monyatsi

1 Strategy & Operational Review

2 Financial Review

3 Looking Ahead

Strategy Overview

Execution on Plan 5 of Our 6-2-5 Strategy Remains Resilient despite Macroeconomic Headwinds

1 Product Diversification

• Mobile Lending income increased by 307% vs. 2022, reaching P541m in Total Revenue.
• Strong growth in Global Franchise Agreements with leading MNOs and Fintechs on Balance Sheet as a Service opportunities.
• Insurance revenue increased by 46% vs. 2022 to reach P363m.
• Customer Deposits grew 37% y-o-y to over P1.5 billion.

4 Execution Engine

• Automation and Target Operating Model restructuring in H2 resulting in greater operating efficiencies going forward
• New Talent acquired to leverage and optimise income generation from investments in Technology capabilities.
• Innovation through Agile ways of working to bolster test and learn methodology and practice.

2 Digitisation

• Over 3.5 million registered users, up 218% from 2022.
• Digital Mall user base reached over 477,000 active customers in 2023.
• Over 89% of traditional customer base have been successfully migrated to the Digital Mall.
• Migrated 8 subsidiaries to Cloud enabling increased scale of operations.
• IT Investments made to curb inherent Cybersecurity threats.

3 Geographic Rebalancing

• Total Operating Income up 18% to P762m in East and West African Markets.
• Interest Income up 12% to P2.2 billion in Southern African Markets.
• Stronger balance sheet and revenue contribution from DAS and Mobile Loans, following deliberate actions to derisk from MSE portfolio.

5 Sustainable Stakeholder Value

• Strong balance sheet growth supported by well capitalised subsidiaries
• Strong regulatory relationships in all markets.
• Strong ESG Agenda.
• Despite positive fundamental business performance, several once-off items negatively impacted our financial performance.
• We remain optimistic about sustaining and increasing business momentum across all lines.

Strategic and Operational Overview

Accelerated Execution of Product Diversification Strategy

Mobile Loan Performance

Live in 8Markets

11Fintech/MNO

Partners

Over 12.5m Loans

Issued

P541m Total

Revenue

Insurance Highlights

6Product Types

2 New Products

Launched

Over 105k Individual

Policies

P362m Fee

Income

Digital Mall Uptake

89 Migration and

% Uptake by DAS

and MSE Clients

Over 3.5m Registered Users

Over 477k Active

Users

P400m Revenue Generated

Strategic Overview: Sustainability

World Class ESG practices are core to Letshego's Purpose, Business and Pan-African Operations

Impact Financing	Sustainability Framework
❖ Over 50% of Letshego's customer base are	❖ Tactical strides made to develop Robust
Sustainability Framework that encompasses the
Women or Women Owned Businesses.	multi-stream of benefits social and
❖ Letshego Nigeria launched First Solar Financing	environmental governance achieves for our
Solution.	regional operations, stakeholders and communities
❖ Affordable Housing went green with affordable	❖ Accessing sustainability-linked funding
grey water and solar power assets.	instruments to diversify funding, increase access
	to new capital and demonstrate our impact
	financing credentials

Global Standards	Governance
❖ Letshego Botswana eligible for Membership in 2X	❖ Group Sustainability Committee Established to
Challenge - international forum for investors and	track and manage ESG and Impact financing
investees to track financial Support to Women	strategy, risk management and reporting.
and Women Owned Businesses.	❖ Letshego takes its Environmental & Social Risk
❖ Letshego Nigeria won AfDB AFAWA Award for the	Management System from policy into daily
extending the reach of its Financial Solutions to	business operations with formal training,
More Women.	workshops, updating of policy and guidelines along
❖ Letshego Uganda won Digital Awards for	with post implementation by expert consultant to
Customer Financial Inclusion.	assure success.

2023 Review: Strong Growth on Core and New Business

Letshego Africa Showed Resilient Growth from Core Operations across Traditional and New Business Lines

Core Business Highlights

DAS Loan Book

P11,872m	5%	2022: P11,332m
Mobile Loans Book
P803m	90%	220%
		2022: P421m

Customer Deposits

P1,537m	37%	2022: P1,121m
Insurance Revenue
P363m	46%	2022: P249m

	2023 Income Performance
Interest Income	9%
P3,425m	2022: P3,146m
Non-Funded Income
P514m	17%	2022: P439m
*Excluding FX Gains
Operating Income: South
P1,890m	1%	2022: P1,910m
Operating Income: East & West
P758m	17%	2022: P647m

2023 Review: Navigating a Challenging Operating Environment

2023 Macroeconomic Headwinds

Rising Inflation

• Several African countries grappled with rising inflation.

• Most notably, Ghana (+50%) and Nigeria (+25%).

• Most Letshego Africa operating countries recorded average inflation outside target range, incl. Botswana and Mozambique.

Interest Rate Hikes

• Letshego bore the full year impact of interest hikes from 2022 and 2023 to counter rising inflation.
• Floating debt, new debt and rollover funds repriced higher leading to reduced margins
• Interest Expenses rose faster than interest income growth.

Constrained Macroeconomic Growth

• SSA economy grew 2.5% vs 3.6% in 2022.
• Letshego entities recorded balance sheet and top-line earnings growth in all major geographies, driven largely by core DAS product.

2023 Key Challenges

Change in ECL Stage 3 Discounting

• During the year, our auditors changed their professional view and judgement on discounting of Stage 3 ECLs.

• In prior periods, Letshego had discounted ECLs across all three stages. In 2023 their view was that discounting should not be applied at Stage 3 ECLs.

• Management agreed to the adjustments for prudence.

Individual Lending Portfolio

• Our leading market, Botswana, still faces challenges with portfolio deterioration on the discontinued test-and-learn open market lending product.

Ghana Hyper-Inflationary Adjustment

• The Ghanaian economy was judged to be a hyper-inflationary, leading to a income write-downs and other downward accounting adjustments, eroding what was rather a very strong year.

Currency Depreciation

• Operating entities posted good growth in local currency terms but was more muted when translated to BWP.

Agenda

02

Financial

Review

Group Chief Financial Officer

Gwen Muteiwa

1 Strategy & Operational Review

2 Financial Review

3 Looking Ahead

Key Performance Highlights: Balance Sheet

Balance Sheet Grew against Key Metrics Despite Challenging Macroeconomic Context

P14,346m	P13,488m	P18,110m
9% Gross Advances	7% Loans and Advances	8% Total Assets
2022: P13,132m	2022: P12,655m	2022: P16,719m

P9,626m	P673m	P1,538m
20% Borrowings	19% Retail Deposits	37% Customer Deposits
2022: P8,028m	2022: P565m	2022: P1,121m

Balance Sheet Summary

Strong Performance Driven by Core Product Demand and New Product Introductions

Assets (BWP'000s)	31 Dec 2023	31 Dec 2022	Δ%
Cash and similar instruments	1,401,824	1,020,771	37%		Commentary
Investment securities	866,718	692,101	25%
Financial assets at fair value	963,648	1,222,076	-21%	1		Strong Loan Book Growth:
Advances to customers	13,487,892	12,654,857	7%		• Asset Base grew 8%, led by 7% growth in Loans and
Other Assets	1,390,010	1,129,883	23%			Advances, bolstered by Letshego's Flagship DAS
		product, with growing contribution from Mobile Loans.
Total assets	18,110,092	16,719,688	8%
						Growing Customer Deposits:
Liabilities	31 Dec 2023	31 Dec 2022	Δ%
Financial liabilities at fair value	980,519	1,201,095	-18%			• Customer Deposits grew 37%. Retail deposits contribute
2		43% of all customer deposits.
Customer deposits	1,537,984	1,120,827	37%
	• Further Growth expected through increased uptake of
Borrowings	9,626,301	8,027,840	20%			payments products and Digital Mall on the Retail end.
Other Liabilities	1,045,402	784,375	33%
		Borrowings:
Total liabilities	13,190,206	11,134,137	18%
		• Borrowings grew by 20% to support:
Equity	31 Dec 2023	31 Dec 2022	Δ%	3		• Subsidiary liquidity buffers following strong
Stated capital	917,909	899,571	2%		customer demand for core loan products
Other Reserves	3,559,146	4,217,103	-16%			• To facilitate growing requests for Balance Sheet as
		a Service solutions from Fintech/MNO partners .
Equity Attributable to Parent	4,477,055	5,116,674	-13%
Non-controlling interests	442,831	468,877	-6%
Total Shareholders' Equity	4,919,886	5,585,551	-12%
Total Liabilities and Equity	18,110,092	16,719,688	8%