Letshego Holdings Limited Consolidated Annual Financial Statements For the year ended 31 December 2020 CONTENTS ____________________________________________________________ Details Group corporate information 3 Directors’ report 4 Directors’ responsibility statement 6 Independent auditor’s report 7 Consolidated financial statements Consolidated statement of financial position 12 Consolidated statement of profit or loss and other comprehensive income 13 Consolidated statement of changes in equity 1 4 Consolidated statement of cash flows 1 5 Significant accounting policies 16 Notes to the consolidated financial statements 29 2 GROUP CORPORATE INFORMATION Letshego Holdings Limited is incorporated in the Republic of Botswana Registration number: UIN BW00000877524 and previously Co. 98/442 Date of incorporation: 4 March 1998 A publicly listed commercial entity whose liability is limited by shares Company Secretary and Registered Office Matshidiso Kimwaga Second Floor Letshego Place Plot 22 Khama Crescent Gaborone, Botswana Independent External Auditors Ernst and Young 2nd Floor, Plot 22 Khama Crescent Gaborone, Botswana Transfer Secretaries PricewaterhouseCoopers (Pty) Limited Plot 50371 Fairground Office Park Gaborone, Botswana Attorneys and Legal Advisors Armstrongs Acacia House Plot 53438 Cnr Khama Crescent Extension and PG Matante Road Gaborone, Botswana 3 DIRECTORS’ REPORT The Directors have pleasure in submitting to the Shareholders their report and the audited consolidated financial statements of Letshego Holdings Limited (the Company) and its subsidiaries (together “the Group”) for the year ended 31 December 2020. Nature of business Letshego Group is a retail financial services organisation involved in banking and microfinance activities in 11 African countries across East, West and Southern Africa. Six of the 11 operations have deposit-taking licenses with the rest being microfinance institutions. The Group’s ambition is to increase its deposit taking capabilities across the footprint. Stated capital Stated capital of the Group at 31 December 2020 amounted to P872,169,337 (31 December 2019: P862,621,720). On the 6th April 2020, 4,483,050 ordinary shares were issued in terms of the Group’s Long Term Incentive Plan. These were issued from shares currently held as treasury shares and the remaining treasury shares at the end of the year were 14,571,140 (2019: 19,054,190). In the prior year no ordinary shares were issued in terms of the Group`s Long Term Incentive Plan. Dividends An interim dividend of 3.9 thebe per share (prior year: 4.3 thebe per share) was declared on 27 August 2020. A second and final dividend of 8.3 thebe per share (prior year: 7.7 thebe) was declared on 26 February 2021 and will be paid on or about 12 May 2021. Directors The following persons were directors of the Group: Non-executive Name Details Nationality E.N Banda Chairman South Africa S. Price UK H. Karuhanga Uganda Dr G.Somolekae Botswana R. N. Alam USA C. Lesetedi Botswana G. Van Heerde South Africa P. Odera Kenya A. Odubola Nigeria R. Hoekman Appointed 22 January 2020 Holland 4 DIRECTORS’ REPORT (continued) Directors (continued) Executive Name Position Nationality D. Ndebele Interim Chief Executive Officer – appointed 27 Botswana March 2019 and resigned 30 January 2020 A.F. Okai Group Chief Executive Officer - appointed 01 Ghana February 2020 G.T Muteiwa Group Chief Financial Officer – appointed 24 March Zimbabwe 2020 Directors' shareholdings The aggregate number of shares held directly by Directors at 31 December 2020 were at 28,987 (31 December 2019: 4,014,987). Full details of this shareholding are available at the registered office of the Company or at the office of the transfer secretaries. Long Term Incentive Plan The Group operates an equity-settled conditional Long-Term Incentive Plan (LTIP), which was approved by shareholders at an Extraordinary General Meeting held on 20 December 2005. Under the plan, conditional share awards are granted to management and key employees. The estimation of shares to vest for a year is based on internal projections as to the specified non-market conditions being achieved. Shares are awarded in the holding company, Letshego Holdings Limited, which is listed on the Botswana Stock Exchange. 5 LETSHEGO HOLDINGS LIMITED DIRECTORS’ RESPONSIBILITY STATEMENT The Directors are responsible for the preparation of the consolidated annual financial statements of Letshego Holdings Limited the “Group” that give a true and fair view, comprising the consolidated statement of financial position at 31 December 2020, and the consolidated statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards and the Botswana Companies Act. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and effective system of risk management, as well as the preparation of the supplementary schedules included in these financial statements. The Directors have made an assessment of the ability of the Group to continue as a going concern and have no reason to believe the businesses will not be a going concern in the year ahead. The external auditor is responsible for reporting on whether the consolidated annual financial statements give a true and fair view in accordance with International Financial Reporting Standards. Approval of the consolidated annual financial statements: The consolidated annual financial statements of Letshego Holdings Limited as identified in the first paragraph, were approved by the Board of Directors on 25 March 2021 and are signed on its behalf by: _____________________ __________________________________ E.N. BANDA A.F. OKAI CHAIRMAN GROUP CHIEF EXECUTIVE LETSHEGO HOLDINGS LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2020 Restated Restated 31 December 31 December 31 December 2020 2019 2018 Note P’000 P’000 P’000 ASSETS Cash and cash equivalents 3 1,043,864 1,035,513 1,188,402 Advances to customers 4 10,161,534 9,071,484 8,698,831 Other receivables 5 263,202 247,996 252,491 Financial assets at fair value through profit or loss 6 140,804 - - Financial assets at fair value through other comprehensive income 10 59,408 53,591 53,591 Income tax receivable 102,633 82,741 44,829 Property, plant and equipment 7 94,229 99,671 80,532 Right-of-use assets 8 131,703 61,436 - Intangible assets 9 39,091 45,221 45,488 Goodwill 11 65,598 68,233 106,229 Deferred tax assets 26.1 124,139 144,699 201,088 Total assets 12,226,205 10,910,585 10,671,481 LIABILITIES AND EQUITY Liabilities Financial liabilities at fair value through profit or loss 12 152,855 15,390 13,902 Customer deposits 13 664,393 426,673 497,718 Cash collateral 16 18,838 21,721 27,028 Trade and other payables 14 714,548 553,772 492,584 Lease liabilities 15 133,377 64,760 - Income tax payable 103,057 239,743 232,132 Borrowings 17 5,649,561 4,966,785 5,315,417 Deferred tax liabilities 26.1 - 805 3,205 Total liabilities 7,436,629 6,289,649 6,581,986 Shareholders’ equity Stated capital 18 872,169 862,621 862,621 Foreign currency translation reserve (885,673) (675,885) (653,010) Legal reserve 19 214,835 195,793 73,519 Fair value adjustment reserve 10 5,817 - - Share based payment reserve 20 31,295 24,304 18,089 Retained earnings 4,133,314 3,823,280 3,454,814 Total equity attributable to equity holders of the parent company 4,371,757 4,230,113 3,756,033 Non - controlling interests 417,819 390,823 333,462 Total shareholders' equity 4,789,576 4,620,936 4,089,495 Total liabilities and equity 12,226,205 10,910,585 10,671,481 *Refer to note 27 for details on the restatement 12 LETSHEGO HOLDINGS LIMITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020 Restated 31 December 31 December 2020 2019 Note P’000 P’000 Interest income at effective interest rate 21 2,712,278 2,974,839 Interest expense at effective interest rate 22 (819,324) (913,909) Other interest expense 22.1 (31,640) (9,905) Net interest income 1,861,314 2,051,025 Fee and commission income 23 71,033 59,451 Other operating income 23.1 212,536 273,018 Operating income 2,144,883 2,383,494 Employee benefits 24 (493,497) (454,023) Other operating expenses 25 (595,308) (622,737) Net income before impairment and taxation 1,056,078 1,306,734 Expected credit losses 4 (25,771) (169,101) Profit before taxation 1,030,307 1,137,633 Taxation 26 (399,434) (411,295) Profit for the year 630,873 726,338 Attributable to : Equity holders of the parent company 575,718 652,239 Non - controlling interest 55,155 74,099 Profit for the year 630,873 726,338 Other comprehensive income, net of tax Items that may be reclassified to profit or loss net of tax Fair value adjustment of financial asset 10 5,817 - Foreign operations - foreign currency translation differences (219,197) (18,634) Total comprehensive income for the year 417,493 707,704 Attributable to : Equity holders of the parent company 371,747 629,364 Non - controlling interest 45,746 78,340 Total comprehensive income for the year 417,493 707,704 Earnings per share Basic earnings per share – (thebe) 28 27.1 30.7 Diluted earnings per share – (thebe) 28 25.7 30.1 *Refer to note 27 for details on the restatement.