BIHL holds steady in Letshego despite P106m hit

Mukushi says Letshego is a long term investiment
Mukushi says Letshego is a long term investiment

Botswana Insurance Holdings Limited (BIHL) suffered a P106 million impairment from its associate company, Letshego Holdings for the six months ended June 30, but has no immediate plans of reducing its investment in the microlender.

The loss continues a pattern seen last year when, for the year ended March 31, 2018, BIHL incurred a P140 million impairment from Letshego.  BIHL holds a 26.2% stake, the largest by any single shareholder.

In its recently unveiled results for the half-year to June 2019 BIHL, which is the country’s largest diversified financial group, saw its pretax profits fall 29% to P223.5 million largely as a result of lower profits from associate companies.

Besides Letshego, BIHL also holds 50% equity in Botswana Insurance Company, 36% in the Funeral Services Group (FSG) and 25.1% in Malawi’s Nico Holdings Limited. The group, however, said apart from Letshego, the other associates had performed satisfactorily in the six months to June 2019.

On Wednesday, BIHL group chief financial officer, Kudakwashe Mukushi told BusinessWeek that the impairments from Letshego were due to value assumptions arising from assessments done by BIHL.

“The BIHL group values its investments in associates using the discounted cashflow valuation method to arrive at the fair value of the group’s investment in line with IFRS requirements, done every six months,” he said.

“The drop in the valuation of Letshego resulted from a tightening of our valuation assumptions, especially around the interest rate margin.” Despite the impairments suffered by BIHL, Letshego’s own earnings have been solid, a fact acknowledged by BIHL in a profit cautionary in August where the group noted that the ‘core earnings’ remained strong.

Letshego recently posted pretax profits of P600.1 million for the six months ended June 30, 2019, marginally higher than the P598.9 million reported in the previous corresponding period.

The pan-African microlender also declared a 4.3 thebe dividend for that period, down from 8.7 thebe the previous reporting period. However, Letshego’s share price has crumbled on the Botswana Stock Exchange this year, shedding 48% in value amidst apparent boardroom tensions that have seen an exodus of directors. 

Investor consternation was evident at the June AGM, where a third of investors voted against the reappointment of chair, Enos Banda, who, however, did scrape through. Mukushi told BusinessWeek BIHL was not looking at paring down its exposure to Letshego despite the impairments.

“BIHL remains committed to its shareholding in Letshego Holdings Limited (LHL) as a long term investor.

“The BIHL board is constantly reviewing investments and looking at opportunities of growth.  “This is no different for our shareholding in Letshego or any of our other investments,” he said. Letshego has since announced a strategic review of its operations, which include an assessment of its footprint in Africa.

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