14 November 2018. 4finance Holding S.A. (the ‘Group’ or ‘4finance’), one of Europe’s largest digital consumer lending groups, today announces unaudited consolidated results for the nine months ending 30 September 2018 (the ‘Period’).
INTEREST INCOME UP 10%, ADJUSTED EBITDA €114.1 MILLION, STRONG INTEREST COVERAGE RATIO
Operational Highlights
- Online loan issuance volume stable overall at €932.4 million (up 0.5% year-on-year) in the Period compared with €927.9 million in 9M 2017.
- Instalment Loan issuance volume up 42% year-on-year to €152.5 million from €107.5 million in 9M 2017.
- Single Payment Loan issuance volume down 8% year-on-year to €665.7 million, in line with expectations and reflecting greater focus on longer term products.
- Line of Credit issuance volume up 16% year-on-year to €114.3 million from €98.8 million in 9M 2017.
- The number of online lending active customers was 0.44 million as of 30 September 2018 compared with 0.53 million a year ago.
- TBI Bank loan issuance volume during the Period grew by 12% year-on-year to €197.0 million from €175.9 million in 9M 2017.
- TBI Bank active borrowing customers reached 0.40 million, up 8% from a year ago, with 0.24 million current accounts as of 30 September 2018, up 35% from a year ago.
Financial Highlights
- Interest income up 10% year-on-year to €361.5 million in the Period compared with €327.2 million in the prior year period.
- Operating income (revenue) up 11% year-on-year to €328.6 million in the Period from €296.1 million in 9M 2017.
- Net receivables reached €540.8 million as of 30 September 2018, up 2% compared with 1 January 2018 opening balance.
- Pre-provision operating profit up 22% year-on-year to €157.6 million in the Period compared with €129.5 million in the prior year period.
- Foreign exchange movements resulted in a €17.9 million negative impact on profit before tax in the Period, due to Argentinian Peso depreciation, Polish Zloty weakness and a stronger US Dollar vs Euro during the Period.
- Adjusted EBITDA was €114.1 million for the Period, up 7% year-on-year, following another strong quarterly contribution in Q3 2018 and adjusted interest coverage for the Period increased to 2.5x.
- Profit before tax for the Period was €39.0 million, decreasing 21% year-on-year from €49.5 million in 9M 2017, reflecting FX losses and increased impairment charges, which are largely due to the transition to IFRS 9 and Instalment Loan issuance growth.
- Cost to income ratio for the Period was 52%, vs. 56% for 9M 2017, reflecting cost discipline and faster revenue growth.
- Improvement in asset quality following move to 360 DPD write-off, with an overall gross NPL ratio of 19.6% as of 30 September 2018 (22.2% for online) compared with 26.7% as of 31 December 2017 (33.5% for online).
- The annualised cost of risk for the online business was 23.7% for the Period, compared to 18.9% in 9M 2017, and in TBI Bank it was 8.6% for the Period, compared to 5.3% in 9M 2017. The increases reflect the impact of IFRS 9 and removal of 360-730 DPD online receivables.
- Operating cash flow before movements in portfolio and deposits was €211.2 million in the Period up from €175.6 million in the prior year period.
Strategic Highlights
- Strong underlying customer demand for Instalment Loans, particularly in Poland and the Baltics. Continued selective approach to instalment loan sales and marketing in Q3, with issuance levels similar to Q2, to monitor portfolio performance and implement further product refinements.
- Ongoing migration of single payment loan customers to longer-term instalment or line of credit products in selected markets, with single payment loans now representing only 26% of the Group’s net receivables.
- Continued development of near-prime products, with the pilot in Spain being extended, the Lithuanian near-prime lending business close to reaching a sustainable scale, and preparations for the pilot launch in Sweden underway.
- Continued focus on earlier debt collection and forward flow debt sales, underlining the robust value of the Group’s loan portfolios and conservative nature of IFRS 9 provisioning.
- Ongoing review of each market to ensure the businesses meet our financial return criteria. Quarter-on-quarter reduction in interest income mainly due to wind down of certain markets/brands in Q2 and Q3, and financial impact has been offset by corresponding reduction in cost base.
Oyvind Oanes, CEO of 4finance, commented:
“These strong results, with Adjusted EBITDA up 7% year-on-year, demonstrate solid profitability despite challenging conditions in some markets. As indicated last quarter, we continue to be disciplined about which products and markets we invest in. Whilst these decisions have resulted in a lower rate of revenue growth, they have improved our cost efficiency and profitability.
“We continue to evolve and broaden our business model. This means developing our traditional single payment loan products into instalment loans and lines of credit in some markets, and continuing to advocate for appropriate and evidence-based regulation of sub-prime consumer lending. And it means gradually diversifying into the near-prime segment, as we are already doing in Lithuania with our existing Vivus brand, in Spain in partnership with mobile app Fintonic and will be piloting in Sweden with a new brand, as well as with TBI Bank, which lends predominantly to near-prime clients. Our recent investment in exciting Nordic digital bank Monobank is also part of this approach and is the first step in exploring a potential cooperation.
“We will be sorry to say goodbye to Daniel Stenberg, our Regional Manager for Nordics & Baltics, who steps down in January. Having started our Swedish business nearly 10 years ago, Daniel leaves us with a strong regional presence that is well positioned for the future. I remain convinced of the great opportunity we have there and across the business at 4finance to build a multi-segment, multi-product, consumer credit specialist.”
