ASA International Group plc announces 2021 Year End Trading Update

Amsterdam, 24 February 2022 - ASA International Group plc, ('ASA International', the 'Company' or the 'Group'), one of the world's largest international microfinance institutions, today releases a trading update for the year ended 31 December 2021.

Key highlights:

·    Group operating results have significantly improved compared with 2020 despite the challenging operating environment, especially in India and Myanmar.

·    The Group's operating subsidiaries, excluding India, collectively have been able to reduce PAR>30 to 1.7% during the year. Ghana, Pakistan and Tanzania led the recovery with substantial OLP growth and high portfolio quality, with PAR>30 less than 0.5%.

·    Given the challenging environment in India, disbursements of new loans declined with the focus on recovery of loans. Reduced loan disbursements and significant write-offs led to OLP decreasing by 36%. With moratoriums being offered to clients and significant write-offs, PAR>30 improved to 19.5%.

·    Due to the combination of significant write-offs and reduced loan disbursements with the focus more on recovery of overdue than loan disbursement, OLP for the Group decreased by 3% to USD 402m and Gross OLP reduced by 4% to USD 429m.

·    Modification losses on interest income and receivables amounted to approximately USD 1.2m, slightly less than the USD 1.5m as at 30 June 2021. As no new moratoriums were granted to clients in 2022, except for India, where 38% of loans are restructured until June 2022, modification losses are expected to reverse, assuming no further long lockdowns or moratoriums are imposed or granted.

·    Unrestricted cash and cash equivalents remained high at approximately USD 91m with the majority of the Company's USD 187m pipeline of future wholesale loans supported by (agreed) term sheets and/or draft loan documentation.

·    The Company expects a substantial improvement compared to 2020 in pre-tax profit and net profit. Net profit will be impacted by the introduction of a provision of deferred taxes for future dividend payments by the Company's operating subsidiaries.

 Dirk Brouwer, Chief Executive Officer of ASA International Group plc, commented:

"We are pleased that all but two of our major operating subsidiaries recovered to near pre-covid operating performance in 2021. Despite the ongoing challenges we face in India and Myanmar, the performance of most of our other operating countries, including, particularly, Ghana, Pakistan and Tanzania, was excellent in terms of portfolio quality, growth and profitability. Most of our clients in these countries faced significantly less disruption to their businesses compared to 2020. ASA Nigeria and Pagasa Philippines also substantially improved their operating performance in 2021.

As a result of the improved operating performance in 2021 and despite estimated additional ECL expenses of USD 38m primarily due to the ongoing challenges we face in India, we now expect pre-tax income and net income of the Group for 2021 to be substantially better than what was achieved in 2020.

While the impact of the pandemic remains unpredictable on our operating subsidiaries, we expect that the operating environment for our clients continues to improve in most of our operating markets. The operating environment in Myanmar remains challenging not only due to Covid, but also because of the military takeover, which has had a major negative effect on Myanmar's economy. Our strategy in India continues to be to shrink the OLP and focus rigorously on the recovery of overdue loans, while strictly controlling costs.

As most of the Group's operating subsidiaries have returned to growth and increased profitability, and subject to the performance in India, we are confident that operational and financial performance will continue to strengthen in 2022."

Regional performance:

South Asia

·    ASA Pakistan continued to grow its business with the number of clients up 23% from 416k to 512k, and number of branches up by 33 to 325. OLP increased from USD 62.5m to USD 77.7m. Gross OLP/Client decreased from USD 155 to USD 154, down by 1% (up 10% on a constant currency basis). PAR>30 improved from 4.0% as at year-end 2020 to 0.2% year-end 2021.

·    ASA Pakistan continues to await final approval from the State Bank of Pakistan for a microfinance banking license having met all outstanding requirements.  

·    ASA India continued to shrink its OLP as it focused on recovery of overdue loans as clients are trying to recover from the disruptions caused by the impact of the disruption caused by Covid-19 in 2020 and 2021.  With moratoriums being offered to clients, PAR>30 improved from 31.9% at year-end 2020 to 19.5% by year-end 2021 in India.

·    ASA India's number of clients was down 24% from 714k in 2020 to 541k and number of branches down by 13 to 387 by year-end 2021, with its portfolio (own and BC) decreasing from USD 146.9m year-end 2020 to USD 94.8m by year-end 2021. BC portfolio in India decreased from USD 46.4m to USD 33.8m, down 27% (down 26% on constant currency basis). 

·    Lak Jaya, the Group's operating subsidiary in Sri Lanka, has seen its number of clients go down by 5% from 56k to 53k with its number of branches remained at 66. OLP decreased from USD 8.4m to USD 7.7m. Gross OLP/Client decreased from USD 163 to USD 158. PAR>30 improved to 6.0% at the end of 2021 from 7.6% in 2020. 

South East Asia

·    Pagasa Philippines' number of clients was down 4% from 299k in 2020 to 289k by year-end 2021 and number of branches up by 2 to 324 with its loan portfolio decreasing from USD 45.3m year-end 2020 to USD 44.6m year-end 2021. PAR>30 improved from 6.4% to 2.5%.  

·    ASA Myanmar struggled to increase collection efficiency to satisfactory levels following the military's takeover of the Government leading to nation-wide protests and lockdowns imposed by the government due to Covid-19. The number of clients in Myanmar was down 14% from 129k to 111k and number of branches up by 3 to 96 by year-end 2021 with its loan portfolio decreasing from USD 28.9m to USD 18.1m and PAR>30 increased from 0.5% to 1.1%.  

West Africa

·    ASA Savings & Loans, the Groups operating subsidiary in Ghana, had an excellent year with operating performance exceeding pre-Covid levels.

·    Client numbers were up from 158.0k to 158.4k serviced from 133 branches, up 4. OLP increased from USD 42.3m to USD 48.9m, and Gross OLP/Client increasing from USD 269 to USD 310, up 15%. PAR>30 improved from 0.4% to 0.3%. 

·    ASA Nigeria performed well with client numbers up from 252.7k to 253.6k serviced from 263 branches, and OLP up from USD 31.2m to USD 38.5m. Gross OLP/Client was up from USD 129 to USD 157. PAR>30 improved from 5.5% to 4.6%. 

·    ASA Sierra Leone increased its number of clients from 36.4k to 45.3k, serviced from 44 branches, up 3. OLP increased from USD 4.3m to USD 6.7m and Gross OLP/Client increased from USD 123 to USD 154. PAR>30 increased from 4.4% to 7.5%.

East Africa

·    ASA Kenya expanded its operations as number of clients increased from 92k to 119k serviced from 112 branches, up 12. OLP increased from USD 12.7m to USD 16.1m and Gross OLP/Client decreased from USD 142 to USD 140. PAR>30 improved materially from 21.9% to 1.1%. 

·    ASA Tanzania's significantly expanded its operation as number of clients went up from 121k to 174k serviced from 143 branches, up 22. OLP increased from USD 21.4m to USD 34.3m and Gross OLP/Client increased from USD 178 to USD 200. PAR>30 improved from 2.5% to 0.5%. 

·    ASA Uganda's number of clients went up from 81k to 92k serviced from 103 branches, up 5. OLP increased from USD 8.0m to USD 9.0m and Gross OLP per client increased from USD 100 to USD 107. PAR>30 significantly improved from 29.1% at year-end 2020 to 3.8% in 2021. 

·    ASA Rwanda's number of clients went down from 19k to 18k serviced from 30 branches. OLP increased from USD 2.9m to USD 3.3m and Gross OLP/Client increased from USD 153 to USD 187. PAR>30 improved from 10.1% to 4.5%. 

·    ASA Zambia increased its number of clients from 5k to 15k serviced from 18 branches, up 8. OLP increased from USD 372k to USD 2m and Gross OLP/Client increased from USD 76 to USD 141. PAR>30 improved from 5.8% in 2020 to 0.7% in 2021.

Impact of foreign exchange rates

During FY 2021, currency movements of operating currencies in Asia and Africa mostly depreciated against the US dollar.  The US dollar strengthened more than expected against currencies in Pakistan, the Philippines, Sri Lanka and Myanmar in Asia, and Ghana, Nigeria, and Sierra Leone in Africa, which reduced the reported OLP and Gross OLP/client figures in USD. Overall, the currency movements resulted in an increase of the FX translation reserve losses by approximately USD 10.9m. 

Funding

Unrestricted cash and cash equivalents remained high at approximately USD 91m as at 31 December 2021. The Group managed to raise approximately USD 191m in new debt funding in 2021. At end of 2021, the Company had a funding pipeline of USD 187m future wholesale loans, majority of which are supported by (agreed) term sheets and/or draft loan documentation. 

The Group has managed to secure waivers and/or no-action letters from most Holding level lenders and a majority of the lenders to our operating entities and we are confident that we will succeed in obtaining waivers from our remaining lenders over the next few months for loan covenant breaches during 2021. 

Digitisation 

In anticipation of a future with increasingly cashless transactions, the Group made progress with the development of a digital financial services platform. A pilot scheme planned in Ghana during 2022. If successful and upon the approval of the Bank of Ghana, this will be followed by the launch of a range of other digital financial services in Ghana to support the growth of ASA Savings & Loans clients' small businesses. 

Additionally, as part of its digital strategy to provide future online deposits to the public, the Group signed an agreement in December 2021 to purchase the license of the financial inclusion banking software system developed by Temenos for all its operating subsidiaries, with implementation started in 2022 in Ghana and Pakistan. 

Outlook

Whilst the impact of the pandemic remains unpredictable on the Group's operating subsidiaries, based on the positive developments in 2021, the Company expects the operating environment for its clients to continue to improve in most of its operating markets.

As most of the Group's operating subsidiaries have returned to growth and increased profitability, and subject to performance in India, the Company is confident that during the course of 2022 it will be able to substantially improve operational and financial performance.  

Notice of Full Year Results and AGM

The Company expects to announce its results for the year ended 31 December 2021 on 26 April 2022. The Company's Annual General Meeting will be held on 22 June 2022.

Please note that the financial information provided in this Trading Update is still subject to audit and, therefore, subject to change.

Enquiries:

ASA International Group plc

Investor Relations

Véronique Schyns

+31 6 2030 0139

vschyns@asa-international.com