Good day, ladies and gentlemen, and welcome to ASA International 2025 interim results. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session through the phone lines, and instructions will follow at that time. I would like to remind all participants that this call is being recorded. I will now hand over to Jonathan Berger, Head of Investor Relations, to open the presentation. Please go ahead.
Thank you. Good afternoon, and thank you for joining ASA International Group PLC's 2025 interim results webcast. As you will no doubt already see, we released our 2025 interim results first thing this morning. I am joined here on the call by ASA International Group PLC's CEO, Rob Keijsers, and CFO, Tanwir Rahman. Rob and Tanwir will run through the results presentation. Afterwards, we'll be happy to take any questions you may have. Before we begin, let me draw your attention to the disclaimer at the end of the presentation. Please be advised that if you continue to listen to this presentation, you are bound by this disclaimer. With the formalities out of the way, I would like to now hand over to Rob for his opening remarks.
Thank you, Jonathan. I would also like to add my own warm welcome to today's results webcast. Let's move to our performance in the first half of 2025. It is clear that ASA International has carried over the positive momentum seen in 2024 into the first half of 2025. I am pleased to note that we're seeing sustained growth, enhanced profitability, and a strengthened balance sheet. We've seen continued operational excellence with our client base, having grown by 9% versus the same period in 2024, as our client base stands at over 2.6 million. Alongside this client growth, the outstanding loan portfolio, or OLP, increased to over $540 million and represents an 18% growth versus the end of last year. From an efficiency and productivity perspective, on average, individual loan officers are serving more clients than last year.
This strong operational performance has also translated into significantly improved financial performance, with net profit growing by 99% to $26.8 million in the first half of 2025. This net profit includes a one-off gain from hyperinflation accounted for by Ghana and Sierra Leone of $2.5 million. Excluding this item, underlying net profit amounted to $24.2 million, which still represents a 73% increase compared to H1 2024. This profitability has boosted our return on equity to 46% in the first half of this year. I also want to take the opportunity to note that this robust profitability and returns profile has meant that there's no longer material uncertainty in relation to the going concern in the 2025 interim financial report.
Encouragingly, total comprehensive income increased significantly to $43.5 million in the first half of this year, compared to $4.1 million in the first half of 2024, as the negative FX devaluation impact was much reduced. It is this financial performance which means we can continue returning capital to our shareholders in line with our dividend policy. Today, this morning, we announced an interim dividend of $0.048 per share, which equates to a 30% payout ratio in line with last year's interim dividend and represents a 60% growth compared to last year. Tanwir will dive into the financials in much greater detail later in this presentation. Next, taking you along in our OLP growth, our outstanding loan portfolio. Here you can see that our well-diversified portfolio is driving OLP growth with the portfolio effect, helping to drive the improved operational performance we are reporting today.
On a regional basis, three out of four of our regional reporting segments have demonstrated loan growth in the first half of 2025 versus the end of last year. In particular, we can see that our African regions are now the two largest from an OLP point of view. Ghana's strong contribution following a combination of operational growth and, of course, the impact of the appreciating Ghanaian cedi has been the main contributor to West Africa's material increase in OLP this year. It is very pleasing to see the growth in Nigeria and Sierra Leone this year, given the historic performance issues seen in the two countries before. East Africa continues as the largest segment with growth from each country seen in the first half. Accelerating growth from Uganda, Rwanda, and Zambia is also highly encouraging, alongside our traditionally larger markets in Tanzania and Kenya.
In South Asia, we did see a reduction of OLP in the first half of this year. This is a direct result of the intentional shrinkage of our operation in India, as we work to consolidate our business there. It is important to stress that ASA International is still growing significantly in Pakistan and Sri Lanka, with both of these countries now benefiting from a refreshed local leadership that's now in place. Lastly, the Philippines and Myanmar both continue to perform well, and this is reflected in the region's positive contribution in the first half of this year. Myanmar's portfolio growth is a testament to the resilience of our operations and colleagues in that country following the devastating earthquake that struck earlier this year. I want to touch on our excellent loan portfolio quality. This really reinforces the fact that we're not sacrificing asset quality in the pursuit of growth.
One of the benefits of the ASA model is that it consistently delivers high portfolio quality, as evidenced in the low group PAR 30 of 2%. This is a 0.2 percentage point improvement compared to the same period in 2024 and at the end of 2024. Outstanding portfolio quality was consistently recorded in Ghana, Kenya, Uganda, and Myanmar, with a PAR 30 less than 0.5%. Also, we see a sharp improvement in portfolio quality in both Nigeria and Sri Lanka. Other items to note include the low legacy portfolio quality in India, which festered the decision to withdraw from this market. Also, the Philippines' higher PAR levels seen in the last two time periods were due to the multiple typhoons which hit the country in 2024. Now, let's turn to our microinsurance partnership in Africa.
This is something we've been rightly vocal about across our comms channels and has gained traction with the local media outlets, as you can see on this slide. Following a very successful soft launch of ASA Life Care in Uganda in May, the product has now officially launched in Uganda, Kenya, and Nigeria, with plans to expand across ASA International Group PLC's other African markets. This approach embeds enhanced credit life into ASA International Group PLC's loan prompts, providing affordable protection for our clients for just $0.30 per month, covering credit, life, and health-related risks. We expect that this will bolster client retention and generate additional non-interest income. This product brings added value and protection to our clients as we seek to deepen and broaden financial inclusion. I'll now hand over to Tanwir to review our financial performance in greater detail. Over to you, Tanwir.
Thank you, Rob. On this slide, we have set out the key financial highlights for H1 2025. Pleasingly, all these major metrics have moved in the right direction when compared to the relevant prior period. As Rob mentioned, we have seen strong profitability delivered by the business, with reported as well as underlying net profit in H1 2025 growing markedly. This time around, we have used $2.5 million hyperinflation accounting adjustments, whereas in recent periods, this has been a drag on the income statement. This improved income profile has materially reduced our cost-to-income ratio, which demonstrates the operational leverage inherent within the business. On the balance sheet side, total assets have grown strongly since the end of 2024. Total assets have now comfortably surpassed the $600 million mark. This is yet another positive indicator with respect to the resurgence of the business and indeed our prospects going forward.
Total equity has also strengthened, supported by higher profitability and hence retained earnings and a positive impact from foreign currency translation reserve. Lastly, we have total comprehensive income, which grew to $43.5 million in H1 2025 compared to $4.1 million in H1 2024. Alongside the increase in net profit, this was also driven by currency appreciation, notably in Ghana. Now, turning to yield and NIM, here we can see the continuing positive yield and NIM trends. Gross yield increased to 48.4%, as we saw a positive mix effect with subsidiaries with higher yields increasing their proportion of overall OLP. Funding rates remained stable since 2024. This meant that NIM increased by more than 4 percentage points to 39.6% in H1 2025. Lastly, in terms of the NIM buildup, we can see that the increase in NIM was predominantly driven by interest income.
Now, moving to the income statement, the NIM expansion I covered on the previous slide, alongside a growing loan portfolio growth, the $38.2 million year-on-year increase in net interest income. In essence, there was a positive volume mix effect seen in H1 2025. On the face of it, other operating income decreased in H1 2025, but H1 2024 was positively affected by the incidental gain of the $3 million from a loan assignment agreement with ASA Myanmar lenders. Excluding this one-off item, other operating income remained broadly flat, period on period. As a result of these components, total operating income increased by 39% year on year. This improved income profile was a key driver to the significant increase in profitability seen in H1 2025 versus H1 2024.
I also wanted to flag that the effective tax rate reduced from 52.4% in H1 2024 to 43.9% in H1 2025 due to a change in profit mix with greater contribution from lower ETR countries. Structural reduction in our effective tax rate is still dependent on the implementation of franchise fees in three countries and the ability to capitalize tax losses in India and the holding companies. Moving to the cost side, on the face of it, we can see a 24% increase in total operating expenses year on year. This increase in total operating expenses is due to the combination of business expansion and the impact of appreciation of Ghanaian cedi on USD transfer rated expenses. As mentioned earlier, the cost-to-income ratio improved to 56.4% in H1 2025 from 61.7% in H1 2024.
As can be seen from the bridge, this is mainly due to the growth in net interest income. From a funding standpoint, we saw the company's funding position significantly increase to $597.3 million at the end of H1 2025 compared to $499.3 million at the end of 2024. We can observe growth in every funding category except for microfinance loan funds, which in any event is the smallest category. As you can see on the chart, local deposits have increased in line with our funding strategy with the intention to grow further with focus on fixed deposits. The appreciation of the Ghanaian cedi also contributed to the growth in local deposits. Excuse me. It is also worth noting that the overall funding profile remains stable. $117.7 million of new debt was also raised in H1 in line with our overall funding strategy to support the growth of the business.
Lastly, we want the opportunity to highlight our favorable maturity profile with term loan maturities exceeding our client loan tenor, an indication of efficient asset liability management. Here, we provide a quick update on hyperinflation accounting. As a reminder, IAS 29 is applicable to hyperinflation economies, and a key indicator for this is cumulative three-year inflation to exceed 100%. Under this accounting standard, the balance sheet and P&L are adjusted to reflect the current purchasing power at the reporting date. These are non-cash adjustments. As of 30th June 2025, hyperinflation was applicable for both Ghana and Sierra Leone. For the remainder of 2025, Ghana and Sierra Leone are expected to no longer be considered hyperinflationary. Nigeria and Myanmar are currently on the watchlist. A key aspect of hyperinflation accounting is determining the net monetary position, which is monetary assets minus monetary liabilities.
This time around, net monetary position loss of $1.8 million has been more than offset by a positive CPI adjustment for the other P&L items of $4.3 million. This amounted to a net positive impact of $2.5 million on profitability in H1 2025. As you can see from the top chart, hyperinflation accounting had a negative impact on the FX translation difference in other comprehensive income. The CPI adjustments balance out the FX impact. This contributed to a positive impact to equity for H1 2025. Now, over to you, Rob.
Yeah, thanks, Tanwir. I want to take the opportunity to update you on the progress we've made in the first half of this year in driving long-term sustainable growth at ASA International Group PLC. In the top right-hand corner, you can see the strategy of the House we shared at the time of the full-year results. This demonstrates how we will seek to fulfill our mission of enhancing socioeconomic progress of low-income entrepreneurs by increasing financial inclusion. As a reminder, the House has three pillars, which cover our plans to drive growth, build resilience, and achieve sustainable impacts. In terms of driving growth, we can see the progress across the board with strong operational and financial growth. We're right-sizing loans to better reflect the needs of our clients and consequently drive portfolio growth and client retention. Linked to this is the work well underway to develop a micro-SME proposition.
This will ensure we can grow with our clients and close the gap between microfinance and traditional banks. Further product innovation has taken place in relation to a microinsurance offering that I just alluded to, which should boost client retention as well. There have also been productivity enhancements with an increase of clients per loan officer. Lastly, the imminent deployment of digital financial services (DFS), which is starting with Ghana and Tanzania, should herald the acceleration of long-term growth. The growth indicators I just highlighted need to be fully backed by greater resilience across the organization, including our internal controls. In terms of that, H1 has also seen progress across a number of areas. This includes a strengthened Executive Committee at the group level, alongside refreshed leadership teams in a number of countries.
We are about to see greater system resilience with the migration to T24 as our core banking system in both Ghana and Tanzania later this year. Grace Thiongo, our Chief Risk and Compliance Officer, has already reinvigorated the risk and compliance functions. We've seen improving financial resilience with reduced effective tax rates, rebuilt equity base, and a much lower cost-to-income ratio. The last pillar of our strategy relates to achieving a sustainable impact. Financial performance is the thing that will drive the achievement of our sustainability goals. As I mentioned already, we've seen robust profitability levels in the first half of 2025. A key initiative has been ASA International joining the client protection pathway as we seek to ensure our clients are treated fairly and responsibly. We've also continued our community social and environmental programs. There's clearly much still to do, but I firmly believe we're on the right track.
As I referred to in the previous slide, a substantial program has been made in our digital transformation program this year. Last year, we successfully completed the migration of more than 600,000 clients in Pakistan from our incumbent loan system to the T24 core banking system. The new platform means that the work to transition to Sharia compliant financial services is much, much easier than before. This success positions us well to move to the next stage of the rollout, which will focus on Ghana and Tanzania. That calls a combined more than 500,000 customers. This time around, it will involve a core banking system migration alongside a digital financial services implementation, our DFS. Both of these cashier rollouts are due for later this year and will be key milestones for the business.
Work is already well underway in the rollout in Kenya as well, which is scheduled for the first half of next year. Once Kenya has gone live, 60% of our client base will be managed through the new digital platform. Now moving to the outlook for the remainder of the financial year. We expect continued strong client demand for our products and greater efficiency in the business, which should translate into robust financial performance. We're providing some signposts for this performance. We still expect around a 20% growth in OLP this year with a cost-to-income ratio that now stands at circa 60%. The latter is an improved outlook metric compared to what we disclosed at the time of the full-year results. As a reminder, currency movements and inflation will continue to affect financial performance for ASA International.
I'd like now to wrap up the presentation by drawing out the key highlights from the first half of 2025. I firmly believe we've demonstrated that the first half of this year has indeed seen sustained growth, enhanced profitability, and a strengthened balance sheet. We will continue to drive operational excellence with further loanable growth combined with an exceptional portfolio quality. This operational excellence has driven significantly improved financial performance both in terms of net profit, but also in terms of balance sheet metrics such as total assets and, of course, the total equity. We've got a very stable funding position with a healthy pipeline to support future growth. This financial performance will support the continued and growing capital returns to shareholders.
As a final remark, I would encourage everyone to watch out for our new video titled "Her Power," which is featured in the Climate Week interview series on CNBC.com. The link can be found at this morning's announcement and, of course, from our website. We've now concluded the formal part of this presentation. I'll hand back to the operators to open the floor to questions from the conference lines. Thank you very much.
Thank you, ladies and gentlemen. This begins the question and answer session. As a reminder, participants can also submit questions in written format via the webcast page by clicking the "Ask a Question" button. If you are dialed into the call and would like to ask a question, please signal by pressing star one on your telephone keypad. We will pause for a moment to assemble the queue. Our first question comes from the line of Milo Bussell with Cavendish. Please go ahead, your line is open.
Afternoon, guys. Congrats on another great set of results and the progress you've made. A couple of questions from me. The microinsurance feels like a very interesting opportunity for you. Are there other regions you're looking to roll this out across? Secondly, related, are there other adjacent service offerings you're thinking about introducing to enhance that client retention further? Do you expect the NIM to be maintained around the 39 to 40% in the first half? Finally, how should we think about growth going forward? I mean, what do you think the split will be between further penetration in existing markets versus potential expansion into new geographies? Thanks very much.
Thank you. Yeah, let's start on the microinsurance. First, let's focus on rolling out our ASA Life Care offering to all of Africa. That is our first priority. Whether there's opportunities outside of Africa is to be seen. As you rightly said, this is a main driver for client retention. Of course, it will give us a fee income, non-interest income. In the end, once people have the insurance with us, they feel that safety net that they have from a financial inclusion perspective, that's extremely important. For us, from a client retention perspective and to reduce the churn on our clients, this is one of the pillars that will help drive client growth in the near future. Maybe to your question on the NIM, 39% is high. We expect it to be roughly at this level.
It might soften a little bit in the course of the year and next year. Broadly, we believe that these levels can be sustained. On your question on new markets, it's a very interesting one. On the one hand, I always say there's so much more opportunity that is untapped in our markets. I always use the example of Nigeria, for instance. I mean, 220 million people, 110 million women, 70% of the feed in the informal sector. That gives us a potential market of 70 to 80 million people. We have less than 200,000 clients there. In Lagos alone, 20 million people are there. Yes, we can grow substantially, significantly further, and we will do so in the near future. However, we shouldn't close our eyes for other opportunities. We want to grow further and further and faster and faster. That means we don't close our eyes for that.
We have a couple of countries on our radar screen. Let me not be too specific for now, but African markets are very close on our radar screen to at least test the waters next year.
That's great. Thanks very much.
Your next question comes from the line of Ben Maher with Keefe Bruyette & Woods Inc. Please go ahead.
Thanks. Take my questions. I've two quick ones. The first is on fintech competition in your present markets. I think you said in your press release that the competition from these pure digital lenders hasn't really had a meaningful impact yet. I'm just interested to see your thoughts on why that's the case. Are you targeting different segments? Is it a different strategy? That's my first question. Just on the second one, just around the dividend policy, I saw your interim dividend you've announced that's about 20% payout, which is in line with our share equation reminders. Again, of the dividend policy going forward, please guide us around that. Thank you.
Thanks. Let's start with fintech competition. Of course, we should never close our eyes for it. Every potential competition is something to be very wary of. That means that anyway, in order to compete with fintech, we need to make sure that our client journey is top-notch. We go from a very manual process, via our digital financial services (DFS) proposition, to a fintech-like client journey for our clients, where you can basically do everything on your app. If you look at the current fintech, there's a difference between full digital and the hybrid human-led technology that we plan to do. We will never take out the human interface because the fact that it's easy to disburse money, but very difficult to collect money.
If big tech is disbursing money, they find it until now extremely difficult to also do all the collections with a PAR rate that is not even close to what we can offer. Never strike out the middleman. Take out all the non-value-add manual processes, replace that for digital to ease the client journey, make our offering a lot more efficient so that we can scale in a very efficient way, whereby operational leverage is key. It doesn't mean that we will remain very entrenched in our communities, that we're very close to our people, that the loan officers know our clients, and that will never go away. That is the difference between the full fintech and what we do. I think we've got a winning proposition with that. On the different segments, I highlighted shortly the micro-SME proposition. That doesn't mean that we're drifting away from our core.
The only thing is that we want to grow with our customers. What happens is microfinance often stops at roughly $500 and banks start at $5,000. After a couple of years that we've served them, let's take an example of a barbershop. The lady starts with a $50 kind of loan with a comb and a pair of scissors, and all of a sudden, she's in a brick-and-mortar store. She has three wash bowls, and all of a sudden, she needs $2,000 or $3,000. It's not into a new client persona. It's stretching our client persona. We want to grow with our customers and therefore be able to serve them. We stretch it from real microfinance portfolio that will always be the core of our offering, but also offer something slightly bigger that we call micro-SME. That's broadening the segments without venturing into new clients' base.
Last but not least, you asked about the dividend policy. I think that is in line with last year, whereby we have an interim dividend of 20% of the earnings. For the full-year dividend, we aim to pay out 25% like last year. Of course, you've seen that the payout on the 20% is 60% higher than last year. Last year, we had a $0.03 payout in the interim period, and now we have a $0.048 payout, which we're very proud of, very thankful, also towards our longstanding investors that have been very patient with us.
Great. Thank you.
There are no further questions on the conference line. I will now hand over to Jonathan to address written questions submitted via the webcast page.
Thank you. I have two submitted questions.
Thank you.
The first question is around the digital transformation program, and I guess the expected returns profile from that substantial investment.
Yeah, so what you normally see, if you do a core banking transformation, you're either never earning backward tax of at least 10 years. Let's be very clear on that. It's also a licensed operator. It's not only an investment in digitalization and our client journey improvement, but it's also in order to stay in business. If we want to grow, if we want to have a mature and stable platform, if we want to pursue further licenses, for instance, you need to have a proper off-the-shelf core banking system because it's never allowed by a regulator to have a homegrown system.
That aside, yes, what we see with, if we take a very conservative stance on the payback period based on the increased number of clients per loan officer that we can serve, the sheer amount of what we can run on the machine will earn this back in roughly three years, which is basically second to none in these kinds of transformations.
The second question for Tanwir is the expected likely impact of any hyperinflation accounting for the second half of this year.
Yeah, so according to the latest IMF information from which we base our IAS 29 application, Ghana and Sierra Leone are no longer hyperinflationary, and Nigeria and Myanmar are on the watch list. The exact calculation will come out at year-end, December 31, based on what we have at that time from IMF.
Great. That's the end of the written questions.
Thank you very much. Thank you, Jonathan.
Thank you.