29 August 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 six months ending 30 June 2018 (the ‘Period’).
INTEREST INCOME UP 15%, ADJUSTED EBITDA €74.2 MILLION, STRONG CASH GENERATION
Operational Highlights
- Online loan issuance volume during the Period grew by 6% year-on-year to €643.0 million from €604.3 million in H1 2017.
- Instalment Loan issuance volume up 74% year-on-year to €108.4 million from €62.4 million in H1 2017.
- Single Payment Loan issuance volume down 4% year-on-year to €459.3 million, with greater focus on longer term products.
- Line of Credit issuance volume up 17% year-on-year to €75.3 million from €64.3 million in H1 2017 (including “Vivus” brand products in Denmark, Sweden and Armenia previously classified as SPLs).
- The number of online lending active customers(1) was 0.36 million as of 30 June 2018 compared with 0.42 million a year ago.
- TBI Bank loan issuance volume during the Period grew by 13% year-on-year to €122.7 million from €108.9 million in H1 2017.
- TBI Bank active borrowing customers reached 0.41 million up 13% from a year ago, with 0.22 million current accounts as of 30 June 2018, up 15% from a year ago.
Financial Highlights
- Interest income up 15% year-on-year to €245.4 million in the Period compared with €213.6 million in the prior year period.
- Operating income (revenue) up 16% year-on-year to €223.7 million in the Period from €193.3 million in H1 2017.
- Net receivables reached €537.2 million as of 30 June 2018, up 2% compared with 1 January 2018 opening balance.
- Pre-provision operating profit up 7% year-on-year to €87.7 million in the Period compared with €82.2 million in the prior year period.
- Foreign exchange movements had €14.7 million negative impact on profit before tax in Q2 2018, with Argentinian Peso depreciation, Polish Zloty weakness and a stronger US Dollar vs Euro.
- Adjusted EBITDA was €74.2 million for the Period, up 5% year-on-year, following a record quarterly contribution in Q2 2018 and adjusted interest coverage of 2.4x.
- Profit before tax for the Period was €24.5 million, decreasing 31% year-on-year from €35.3 million in H1 2017, reflecting FX losses of €12.3 million and increased impairment charges, largely due to the transition to IFRS 9 and Instalment Loan issuance growth.
- Cost to income ratio for the Period was 54%, vs. 58% for H1 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 20.0% as of 30 June 2018 (22.0% 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 22.7% for the Period, compared to 17.5% in H1 2017, and in TBI Bank it was 10.4% for the Period, compared to 5.2% in H1 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 €141.7 million in the Period up from €100.5 million in the prior year period.
Strategic Highlights
- Strong underlying customer demand for Instalment Loans, particularly in Poland and the Baltics. Slightly more conservative approach to instalment loan issuance in Q2 2018, after record first quarter levels, to monitor portfolio performance and implement further product refinements.
- “Vivus” brand products in Denmark, Sweden and Armenia have evolved into minimum-to-pay or open-ended products and so are now classified as Lines of Credit (previously Single Payment Loans).
- Ongoing migration of single payment loan customers to longer-term instalment or line of credit products in various markets, with single payment loans now representing only 28% of the Group’s net receivables.
- Initial test loans issued on new IT platform, designed to better support business growth, deliver faster product and scorecard innovation and facilitate IT cost reduction in the medium term.
- Continued development of near-prime products, with the pilot in Spain progressing well, the Lithuanian near-prime lending business reaching a sustainable scale, and the pilot launch in Sweden underway.
- TBI Bank annualised cost of deposit funding reduced to 1.0% in the Period from 1.6% in H1 2017 and ready to accept deposits in Germany on the Raisin platform.
- Focus on earlier debt collection and portfolio sales had a particularly positive impact in second quarter, 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. Limiting new online lending issuance in Romania given the tightening regulatory environment and reviewing the outlook in Georgia.
- Oyvind Oanes joined as CEO in August with Mark Ruddock returning to the Supervisory Board.
Oyvind Oanes, CEO of 4finance, commented:
“These strong results, with interest income up 15% year-on-year and Adjusted EBITDA up 5% year-on-year, reflect the solid financial position we have at 4finance. We maintain a broad mix of interest income by geography, and have made good progress in diversifying our loan portfolio, with single payment loans now representing less than 30% of net receivables. Our discipline on reducing issuance in products that are not demonstrating sufficient returns, and on overall costs, will continue as we optimise our current business performance.
“Alongside this, we have the foundations in place for a new IT platform, development of near-prime products and a securitisation capability, which are prerequisites to success in further diversifying our product suite. These are critical as we seek to build a sustainable, diversified and growing business – I would like to thank Mark Ruddock in particular for driving these initiatives and for his continued support from our supervisory board.
“In July, we passed the €6 billion loan issuance milestone, underscoring the scale of 4finance. We have a great opportunity to build a global online/mobile consumer finance business with focus on the underserved and near-prime segments. I look forward to working with the supervisory board, management team and all our staff to deliver on this goal.“
