Letshego shareholders lose out

  • Earnings Per Share declined by 9 thebe
  • Return On Equity also declines
  • Return on Assets fall 3 percent


For the full ending December 2018, shareholder returns at the behemoth micro-finance firm, Letshego Holdings Limited declined significantly, which means shareholders’ earnings in the company as well as profitability also took a nosedive.

For the 2018 full year, Letshego’s Return on Equity (ROE) was 12.2 percent, after declining by exactly 4.5 percent. Not only did the ROE decline, Letshego’s Return On Assets also declined to 5 percent, compared to the 8 percent seen during the previous corresponding period.

Letshego shareholders also lost in terms of Earnings per share (EPS), which declined by 31 percent to 20.7 thebe, from 29.8 thebe seen during the 2017 reporting period. When the EPS declined, it means that the money that shareholders get allocated per share as dividend also declines. In this case the money declined by 31 percent during the 2018 reporting period. Earnings Per Share (EPS) is the portion of a company’s profit allocated to each share of common stock. Earnings per share serve as an indicator of a company’s profitability.

Letshego’s financials for the year ended December 2018 were muted, but largely in line with expectations. Top line performance with a Profit Before Tax (PBT) of P1.0 billion has been anchored by Letshego core Deduction at Source (DAS) business segment. Smit Crouse, the new Group Managing Director appointed last September worries that Letshego has not been growing because the business was not being managed efficiently, which he promised to rectify.

“Shareholders have not been getting increased benefits in terms of Net Asset Value (NAV) and Earnings Per Share (EPS),” he said. Half of Letshego’s pretax profit was swallowed by tax. Letshego paid P510 million in tax. The unfavourable Group effective tax rate of 50 percent is as the result of three main factors: partial write-down of the carrying value of deferred tax assets at Letshego Holdings; higher withholding tax charge on dividends from subsidiaries and tax provisions in respect to two subsidiaries. The Company resubmitted historical tax returns to Botswana Unified Revenue Service (BURS) in 2018 pursuant to legal advice on the appropriate treatment of foreign tax credits for its Botswana tax returns for the periods 2014 to 2016. The Group effective tax rate is expected to improve in 2019, according to Crouse.

He said Letshego impairment on loans also grew 52 percent to P361.4 million. Loans and advances (gross) grew by 17 percent to P9.5 billion. Crouse said the Group is strengthening its risk management and reviewing its impairment methodology. Letshogo revealed they have identified key priorities that will guide their business operations in the year 2019.The micro financier intends to refocus on the core deduction at source business while at the same time rationalizing operational expenses by investing in management depth to strengthen key fundamental operational areas. Another area of focus is that of rationalizing operational expenses with a target of 40 percent of income ratio in 2019.

The loan book firmed by 17 percent to P9.5billion while yields on loans to customers and the cost of borrowings were largely unchanged.

The new CEO, Smit Crouse seems to know the challenges that are hindering the growth of the business.

According to Crouse, the restructuring is part of transformational steps required to put Letshego on a winning path.He has undertaken a detailed review of the business, its strategy, operations, and workforce and customer base. The conclusions of that review have led to the launch of a transformation programme that will refocus Letshego, which in turn will create a clear business model underpinned by a strategy supported by continued advanced analysis of data.