Revenue up 25%, Net Profit EUR 32.1 Million, Demonstrating Steady Progress
RIGA, Latvia--(BUSINESS WIRE (http://www.businesswire.com/))-- Regulatory News:
4finance Holding S.A. (the ‘Group’), Europe’s largest online and mobile consumer
lending group, today announces unaudited consolidated results for the six months
ending 30 June 2016 (the ‘Period’).
Financial Highlights
· Revenue up 25% to EUR 182.8 million in the Period compared with EUR 146.1
million in the prior year period.
· Adjusted EBITDA was EUR 62.2 million for the Period, up 15%, leading to an
adjusted interest coverage ratio of 4.0x.
· The Group’s profit from continuing operations for the six months to 30 June
2016 was EUR 32.1 million, an increase of 8% from EUR 29.8 million in 2015.
· Average net loan portfolio for the Period, excluding acquisitions, of EUR
305.9 million, up 17% from a year ago.
· Cost to revenue ratio for the Period was 46%, vs. 39% for the six months to
30 June 2015, reflecting a 50% increase in staff numbers and investment across
the platform for future growth and geographic / product diversification.
· Financial strength remains solid, with a capital-to-assets ratio of 34% as
of 30 June 2016 (37% as of 30 June 2015).
· Credit discipline maintained, with non-performing loans to loan issuance
ratio of 9.5% as of 30 June 2016 within expected range given growth of higher
return markets with higher non-performing loan ratios.
Operational Highlights
· The number of registered customers, pre acquisitions, reached 5.3 million as
of 30 June 2016, up 32% from a year ago.
· EUR 100 million bond with 5 year maturity issued in May and now listed on
the regulated market segment in Frankfurt.
· Continued progress in Instalment Loan rollout with Spain launched in May and
Romania in August.
· Strong business performance in Poland and Latvia following implementation of
regulatory changes in first quarter.
· Corporate governance enhancements, with roles of Chairman and CEO separated
in May and new Supervisory Board established at 4finance Group S.A. level in
July.
· Successful completion of TBI Bank acquisition in August following receipt of
all regulatory approvals.
· Acquisition of 80% of Friendly Finance, a profitable online consumer lender
in five European countries, at end of June to diversify brand portfolio and
consolidate market position.
George Georgakopoulos, CEO of 4finance, commented:
"These results for the first half of the year, with revenue up 25% and net
profit of EUR 32.1 million, demonstrate steady progress for 4finance in line
with our plans. Our diversified business continues to grow at the same time as
investing for the future and adapting to market changes.
"We are pleased to have closed two acquisitions that both contribute towards
building a long-term sustainable business. TBI Bank is a significant strategic
addition to the Group and enhances our overall financial profile. The
integration process will be gradual, but the bank gives us immediate scale in
Bulgaria and Romania and we can deploy our cutting edge technology to enhance
their customer experience and value proposition.
"The Friendly Finance acquisition adds strong brands to our portfolio and their
database of over one million registered customers adds to our valuable
proprietary data assets. It reinforces our position in core markets such as
Poland, Czech Republic and Spain - and as the clear European market leader.
"We see a substantial growth opportunity in coming years as we diversify our
portfolio of responsible lending products in Europe and develop in Latin
America. The carefully planned investments we are making this year will allow
4finance to capture this opportunity fully."
Key Financial Ratios
Six Six Year Year
Months Months Ended Ended
Ended 30 Ended 30 31 31
June 2016 June 2015 December December
2015 2014
2016 2015 2015 2014
Net loan portfolio (in 322.7 283.3 308.3 241.4
millions of EUR)(1)
Capital/assets ratio(2) 34% 37% 40% 35%
Capital/net loan 63% 51% 56% 47%
portfolio(3)
Adjusted interest 4.0x 4.1x 4.2x 3.7x
coverage(4)
Profit before tax 21% 26% 23% 27%
margin(5)
Return on average 34% 37% 41% 54%
equity(6)
Cost/revenue ratio(7) 46% 39% 42% 37%
Net impairment to 26% 26% 25% 25%
revenue ratio(8)
Non-performing loans to 9.5% 8.9% 9.0% 8.8%
loan issuance ratio(9)
Notes:
(1) Gross loan portfolio less provisions for bad debts.
(2) Total equity/total assets (2014 assets adjusted for effect of bond
defeasance).
(3) Total equity/net loan portfolio.
(4) Adjusted EBITDA/interest expense.
(5) Profit before tax/interest income.
(6) Profit from continuing operations/average equity (total equity as of the
start and end of each period divided by two).
(7) General administrative expenses/interest income.
(8) Net impairment losses on loans and receivables/interest income.
(9) Non-performing loans with a delay of over 90 days/value of loans issued. The
value of loans issued represents loans issued for the two-year period before
commencement of the 90 day past-due period, eg for 30 June 2016: 1 April 2014 to
31 March 2016.
Contacts
Email: investorrelations@4finance.com
HQ Lielirbes iela 17a-8, Riga, LV-1046, Latvia
Address:
Website:
www.4finance.com (http://cts.businesswire.com/ct/CT?id=smartlink&url=http
%3A%2F%2Fwww.
4finance.com&esheet=51408699&newsitemid=0&lan=en
-US&anchor=www.4finance.com&index=1&md5=963e27f0def9514c4557d4f1eb84
f8c4)
Conference call
A conference call with management to discuss these results is scheduled
for Wednesday, August 31 at 15:00 UK time. To register, please
visit www.4finance.com/investors (http://cts.businesswire.com/ct/CT?id=smartlink
&
url=http%3A%2F%2Fwww.4finance.com%2Finvestors&esheet=51408699&newsitemid=0&lan=e
n
-US&anchor=www.4finance.com%2Finvestors&index=2&md5=0a74f7331e7e3fc2b36382e2e98a
6
f6c).
About 4finance
Established in 2008, 4finance is the largest and fastest growing online and
mobile consumer lending group in Europe with operations in 15 countries. Putting
innovative data-driven analysis into all aspects of the business, 4finance has
grown rapidly, issuing over EUR 3 billion in single payment and instalment loans
to date.
4finance operates through a portfolio of market leading brands with strong
regional presence including Vivus, SMSCredit and Zaplo. A responsible lender,
offering simple, convenient and transparent products and service, 4finance is
meeting growing customer demand from those under-served by conventional lending.
4finance has group offices in Riga (Latvia), London (UK) and Miami (USA), and
currently operates in Argentina, Armenia, Bulgaria, the Czech Republic, Denmark,
Finland, Georgia, Latvia, Lithuania, Mexico, Poland, Romania, Spain, Slovakia
and Sweden. To support its international expansion, 4finance continues to pursue
a twin-track strategy of strong organic growth bolstered by targeted
acquisition.
Forward looking statements
Certain statements in this document are “forward-looking statements”. These
statements are based on management’s current expectations and are subject to
uncertainty and changes in circumstances. Actual results may differ materially
from those included in these statements.
FINANCIAL REVIEW
Income Statement
The table below sets out the condensed consolidated statement of profit and loss
for the six months ending 30 June 2016 and 30 June 2015.
6 months to 30 June
2016 2015
(unaudited) (unaudited) % change
(in millions of EUR)
Interest income 182.8 146.1 +25%
Interest expense (15.4) (13.4) +15%
Net interest income 167.4 132.7 +26%
Net impairment losses (46.8) (37.5) +25%
on loans and
receivables
General administrative (84.0) (56.8) +48%
expenses
Other income/(expense) 2.5 (0.9) n.m.
Profit before tax 39.1 37.5 +4%
Corporate income tax (7.0) (7.7) (9)%
for the reporting
period
Profit from continuing 32.1 29.8 +8%
operations
Profit from — 5.6 (100)%
discontinued
operations, net of tax
Profit for the period 32.1 35.4 (9)%
Interest income
The table below shows key drivers of interest income, or revenue, i.e. business
volumes and interest rates.
6 months to 30 June
2016 2015 % change
(in millions of EUR)
Total value of loans issued 537.2 505.5 +6 %
Average net loan portfolio 305.9 262.4 +17 %
(excluding Friendly
Finance)
Average annualized interest 120% 111%
rate on loans to customers
Interest income, or revenue, for the Period was EUR 182.8 million, a 25%
increase compared with EUR 146.1 million for the six months ending 30 June 2015.
This reflects the 17% increase in the average balance of the net loan portfolio
(excluding Friendly Finance) and the 9 percentage point increase in average
interest rate. The value of loans issued increased across the majority of our
markets, and higher growth continues to be seen in Poland and Spain, where
interest rates are also typically higher. Volumes continue to be lower in
Lithuania due to the more restrictive legislation and our reduced marketing
during this period of regulatory adjustment.
Interest expense
Interest expense for the Period was EUR 15.4 million, a 15% increase compared
with EUR 13.4 million for the six months ending 30 June 2015. This increase is
mainly due to the SEK bonds issued in 2015 and the new EUR bond issued in May
2016. The average balance of the Group’s indebtedness in the Period increased to
EUR 279.1 million from EUR 223.2 million, with an average interest rate of
11.0%, an improvement from 12.0% in the prior year.
Net impairment losses on loans and receivables
Net impairment losses for the Period were EUR 46.8 million, a 25% increase
compared with EUR 37.5 million for the six months ending 30 June 2015. The
increase in net impairment losses was in line with the increase in revenue, and
primarily reflects the expansion and seasoning of the Group’s portfolio in both
existing and new jurisdictions, as well as its application of prudent,
conservative impairment policies. Net impairment losses represented 26% of
interest income, the same ratio as last year.
General administrative expenses
General administrative expenses reported for the Period were EUR 84.0 million, a
48% increase compared with EUR 56.8 million reported for the six months ending
30 June 2015. The Group continued its significant investment across the business
to support future growth. The increase in personnel costs reflects the
significant staff growth over the past year, mainly attributable to hiring in
product development, IT, risk, legal & compliance and finance as well as in new
markets. The Group has also continued its investment in IT platforms to ensure
the appropriate infrastructure is in place to support the development of the
business. Legal and consulting expense and other costs include certain one-off
items related to the evaluation of potential acquisitions and funding
opportunities.
Marketing expense has been reduced as a proportion of revenue as a result of
media buying efficiencies, economies of scale and greater use of marketing
technologies. This has contributed to a 2 percentage point improvement in the
cost to revenue ratio this year from the first quarter (47%) to the second
quarter (45%).
The table below sets out a breakdown of the Group’s general administrative
expenses.
6 months to 30 June
2016 2015
(in millions of EUR)
Personnel costs 29.1 14.6
Marketing and sponsorship 27.0 23.4
IT expenses 6.1 5.4
Debt collection costs 4.1 3.2
Legal and consulting 5.1 1.9
Application inspection costs 2.3 1.6
Rent and utilities 1.9 1.2
Depreciation and amortization 1.7 0.5
Other 6.7 5.0
Total 84.0 56.8
For the second quarter of 2016 and 2015, marketing and sponsorship costs
accounted for 32% and 41% respectively, and personnel costs accounted for 35%
and 26%, respectively, of general administrative expenses.
Variable costs (i.e., all marketing and sponsorship costs, personnel costs,
application inspection costs, IT expenses, debt collection costs, communication
expenses and bank services) accounted for 83% of total administrative costs in
the six months ending 30 June 2016, down from 88% in the six months ending 30
June 2015. Such costs generally correlate to movements in loan sales over time.
Other income/(expense)
Other income for the Period amounted to EUR 2.5 million. For the six months
ending 30 June 2015, other expense was EUR 0.9 million. The increase in net
other income was mainly due to gains on loan portfolio sales and interest income
from other loans, mitigated by FX hedging impact.
Profit before tax
For the reasons stated above, the Group’s profit before tax for the Period was
EUR 39.1 million, a 4% increase compared with EUR 37.5 million for the six
months ending 30 June 2015. The profit before tax margin, i.e., profit before
tax as a percentage of interest income, was 21% for the Period and 26% for the
six months ending 30 June 2015.
Corporate income tax
The Group’s corporate income tax expense decreased by 9% to EUR 7.0 million for
the Period, compared with EUR 7.7 million for the six months ending 30 June
2015.
The table below sets out a breakdown of the Group’s corporate income tax.
6 months to 30 June
2016 2015
(in millions of EUR)
Current tax 16.1 10.4
Deferred tax (9.2) (2.7)
Total 7.0 7.7
Profit from continuing operations
For the reasons stated above, the Group’s profit from continuing operations for
the Period was EUR 32.1 million, a 8% increase compared with EUR 29.8 million
for the six months ending 30 June 2015.
Profit from discontinued operations, net of tax
There were no operations classified as discontinued in the Period. For the prior
year period, former operations in Estonia, Russia and United Kingdom were
reflected separately as discontinued operations which recorded a profit of EUR
5.6 million for the six months ending 30 June 2015.
Profit for the period
For the reasons stated above, profit for the Period was EUR 32.1 million, a 9%
decrease compared with EUR 35.4 million for the six months ending 30 June 2015.
Other financial data – EBITDA and Adjusted EBITDA
Six Six Year Year
Months Months Ended Ended
Ended 30 Ended 30 31 31
June 2016 June 2015 December December,
2015 2014
2016 2015 2015 2014
(in
millions
of EUR)
Profit for the 32.1 35.4 64.1 46.3
period
Provision for 7.0 7.7 15.7 11.6
corporate income
tax
Interest expense 15.4 13.4 28.7 23.8
Depreciation and 1.7 0.5 1.6 0.9
amortization
EBITDA 56.2 57.0 110.1 82.6
Adjustments 6.0 (2.7) 9.6 5.6
Adjusted EBITDA 62.2 54.3 119.7 88.2
Note:
(1) Adjusted EBITDA is a non-IFRS measure that represents EBITDA (profit for the
period plus tax, plus interest expense, plus depreciation and amortization) as
adjusted by income/loss from discontinued operations, non-cash gains and losses
attributable to movement in the mark-to-market valuation of hedging obligations
under IFRS, goodwill write-offs and certain other one-off or non-cash items.
Adjusted EBITDA, as presented in this report, may not be comparable to similarly
-titled measures that are reported by other companies due to differences in the
way these measures are calculated.
Balance Sheet
The table below sets out the Group’s condensed consolidated statement of its
financial position.
30 June 31 30 June
2016 December 2015
(unaudited) 2015 (unaudited)
(audited)
(in
millions of
EUR)
Cash and cash equivalents 116.4 56.9 51.1
Loans and advances due from 322.7 308.3 283.3
customers
Property and equipment 4.9 4.3 2.9
Intangible assets 26.1 17.4 8.6
Goodwill 25.4 0.6 0.6
Loans to related parties 28.8 13.7 —
Deferred tax asset 21.5 12.9 13.6
Current tax assets 9.1 5.5 4.6
Financial instruments at fair 7.7 10.6 10.2
value through profit or loss
Prepaid expenses 6.7 2.7 —
Other assets 21.2 5.2 15.6
Total assets 590.6 438.2 390.5
Loans and borrowings 328.7 229.5 214.7
Corporate income tax payable 15.0 7.4 6.6
Provisions 2.5 2.4 1.6
Other liabilities 41.8 25.7 22.2
Total liabilities 388.0 265.0 245.1
Share capital 35.8 35.8 35.8
Retained earnings 202.9 171.0 142.7
Reorganization reserve (31.1) (31.1) (32.6)
Currency translation reserve (7.3) (5.1) (1.4)
Share based payment reserve 2.4 1.4 0.1
Obligatory reserve 0.2 0.2 0.2
Other reserves (1.5) — —
Total equity attributable to 201.4 172.2 144.7
the Group’s equity holders
Non-controlling interests 1.2 1.1 0.8
Total equity 202.6 173.3 145.4
Total shareholders’ equity 590.6 438.2 390.5
and liabilities
Assets
The Group had total assets of EUR 590.6 million as of 30 June 2016, compared
with EUR 438.2 million as of 31 December 2015, representing an increase of EUR
152.4 million, or 35%. The increase was mainly due to the EUR 100 million bond
issue in May and correspondingly higher cash levels. The purchase of Friendly
Finance resulted in EUR 24.7 million of goodwill as of 30 June 2016, and the
reduction of most of the 'other assets' amounts that were allocations for
potential acquisitions in the first quarter results report. Increases in funding
for the UK joint venture, as well as for 4finance Group, were the main
additional related party loans.
As of 30 June 2016 and 31 December 2015, 74% and 83% respectively of the Group’s
assets were self-liquidating (i.e., loans and advances due from customers and
cash as a percentage of total assets).
Loan Portfolio
As of 30 June 2016, the Group’s net loan portfolio equaled EUR 322.7 million,
compared with EUR 308.3 million as of 31 December 2015, representing an increase
of EUR 14.4 million, or 4.7%. The increase resulted from the addition of EUR
19.3 million in net loans from the Friendly Finance acquisition.
Classification of the Group’s Loan Portfolio, excluding acquired portfolio
The following table sets out the classification of the Group’s loan portfolio in
terms of performing and non-performing loan portfolios, including accrued
interest. To facilitate comparison with prior periods, this excludes the
Friendly Finance loan portfolio.
Loan 30 June 2016 31
portfolio December
2015
Gross Amount Allowance Net % of Net Gross
Allowance Net % of Net
for Amount Portfolio Amount
for Amount Portfolio
doubtful
doubtful
debts
debts
(in millions
of EUR,
except
percentages)
Performing 253.1 (26.7) 226.4 74.6% 268.4
(24.3) 244.1 79.2%
Non 186.4 (109.5) 77.0 25.4% 157.1
(92.9) 64.2 20.8%
-performing
Total 439.5 (136.1) 303.4 100.0% 425.5
(117.2) 308.3 100.0%
Performing Loan Portfolio
The following table shows the Group’s performing loan portfolio by product as of
the dates indicated.
30 June 2016 31 December 2015
Amount % of Portfolio Amount % of Portfolio
Performing loan (in millions of EUR, except percentages)
portfolio by
product: (1)
Single Payment Loans 171.2 67.6% 177.3 66.1%
Instalment Loans 80.3 31.7% 90.6 33.8%
Line of Credit 1.6 0.6% 0.5 0.2%
Total performing 253.1 100.0% 268.4 100.0%
loan portfolio
Note:
(1) Loan amounts include accrued interest.
Non-performing Loan Portfolio
The Group has written off any loans which have been overdue for more than 730
days. As of 30 June 2016, the Group’s non-performing loan portfolio, excluding
Friendly Finance, was EUR 186.4 million, representing 9.5% of the value of loans
issued between 1 April 2014 and 31 March 2016. Given the mostly short-term
nature of the Group’s lending, the majority of loans issued during a reporting
period are repaid prior to the period end, while non-performing loans are
accumulated for 730 days. The Group’s non-performing loan (NPL) portfolio as of
30 June 2016 represented 42% of total gross loans outstanding as of that date.
EUR 17.7 million, or 9.5%, of this was non-performing interest. The Group’s
total gross non-performing loan portfolio increased by 29.3 million, or 19%,
during the Period. The trend in non-performing loans is in line with
expectations given the growth of the portfolio in higher return markets such as
Spain that also have higher NPL/gross portfolio ratios. The Instalment Loan
portfolio also had lower new originations in Finland (product discontinued) and
Lithuania (as noted earlier).
The following table sets out an analysis of the Group’s NPL portfolio (excluding
Friendly Finance) by product.
30 June 2016 31 30 June 2015
December
2015
(in millions
of EUR,
except
percentages)
Non-performing loan
portfolio by product:
Single Payment Loans 134.6 118.7 104.0
Instalment Loans 51.6 38.4 28.1
Line of Credit 0.3 0.0 0.0
Total non-performing loan 186.4 157.1 132.1
portfolio
Allowance for doubtful NPL 109.5 92.9 75.8
debts
Allowance for doubtful NPL 59% 59% 57%
debts / non-performing
loans
Overall allowance / NPL 73% 75% 74%
coverage ratio
Value of loans issued(1) 1,964 1,739 1,490.4
Ratio of NPLs to value of 9.5% 9.0% 8.9%
loans issued
Average Loss Given Default 52% 53% 47%
rate
Notes:
(1) The value of loans issued as of a particular date represent loans issued for
the two-year period before commencement of the 90 day past-due period. For
example, the applicable period for the 30 June 2016 reporting date is 1 April
2014 to 31 March 2016.
Liabilities
The Group had total liabilities of EUR 388.0 million as of 30 June 2016,
compared with EUR 265.0 million as of 31 December 2015, representing an increase
of EUR 123.0 million. Liabilities mainly consist of loans and borrowings, which
increased due to the EUR bond issuance in May 2016.
Loans and borrowings
As of 30 June 2016, the Group had loans and borrowings of EUR 328.7 million,
compared with EUR 229.5 million as of 31 December 2015. The Group’s loans and
borrowings accounted for 85% of total liabilities as of 30 June 2016 and 87% of
total liabilities as of 31 December 2015. The table below sets out the loans and
borrowings by type as of the dates indicated.
30 June 2016 31 December 2015
Long term (in millions of EUR)
AS Trasta Komercbanka — 4.7
4finance Notes 296.6 208.0
Friendly Finance Notes 2.8 —
Other(1) 5.5 0.7
Total long term 304.9 213.4
Short term(2)
AS Trasta Komercbanka 5.3 1.2
4finance Notes 9.8 9.0
Other(1) 8.6 5.8
Total short term 23.7 16.0
Total loans and borrowings 328.7 229.5
Note:
(1) ‘Other’ consists primarily of loans with related parties.
(2) Includes accrued but unpaid interest.
In May 2011, AS 4finance entered into a credit line agreement with AS Trasta
Komercbanka (‘TKB’), which allows borrowings of up to EUR 7.7 million (the ‘TKB
Credit Line’). As of 30 June 2016, the amount outstanding under the TKB Credit
Line was EUR 5.3 million at an interest rate of 7%.
In August 2014, 4finance S.A. issued USD 200.0 million of 11.75% notes (the
‘2019 Notes’) which are listed on the Irish Stock Exchange and are senior to all
of the Group’s future subordinated debt. As of 30 June 2016, the amount
outstanding and accumulated interest under the 2019 Notes was EUR 169.4 million.
The 2019 Notes will mature in August 2019.
In March 2015, 4finance S.A. issued SEK 225.0 million of 11.75% notes (the ‘2018
Notes’) which are senior to all of the Group’s future subordinated debt.
The 2018 Notes were listed on the corporate bond list of Nasdaq Stockholm in
August 2015. In September 2015, a further SEK 150.0 million of 2018 Notes were
issued at par, bringing the total amount outstanding to SEK 375.0 million out of
a total programme size of SEK 600.0 million. As of 30 June 2016, the amount
outstanding and accumulated interest under the 2018 Notes was EUR 39.9 million.
The 2018 Notes will mature in March 2018.
In May 2016, 4finance S.A. issued EUR 100.0 million of 11.25% notes (the '2021
Notes') which are senior to all of the Group's future subordinated debt. The
2021 Notes were listed on the Prime Standard regulated market segment of the
Frankfurt Stock Exchange in August 2016. As of 30 June 2016, the amount
outstanding and accumulated interest under the 2021 Notes was EUR 97.0 million.
The 2021 Notes will mature in May 2021.
In November 2015, Friendly Finance Poland issued PLN 15.0 million of 10% Notes
due in May 2018.
Equity
As of 30 June 2016, the Group’s total equity amounted to EUR 202.6 million,
compared with EUR 173.3 million as of 31 December 2015, representing an increase
of EUR 29.3 million, or 17%, which was mainly attributable to profits generated.
The Group has not paid any dividends to its shareholders within the Period and
its capital to assets ratio as of 30 June 2016 was 34%. The capital to net loan
portfolio ratio as of 30 June 2016 was 63%, reflecting the Group’s strong
capitalisation.
Off-Balance Sheet Arrangements
In connection with the Group’s line of credit product, it had contractual
obligations for undrawn credit facilities totalling EUR 0.2 million as of 30
June 2016. The Group has no other off-balance sheet commitments or obligations
outstanding.
Condensed Consolidated Statement of Cash Flows for the Period
The table below sets out the Group’s condensed consolidated statement of cash
flows.
6 months to 30 June
2016 2015
Cash flows from operating activities (in millions of EUR)
Profit before taxes 39.1 43.1
Adjustments for:
Depreciation and amortization 2.0 0.5
Net losses on foreign exchange from borrowings (5.6) 9.0
Increase in impairment allowance 50.6 37.6
Write-off and disposal of intangible and property and 0.1 0.1
equipment assets
Provisions 0.1 1.5
Interest income (3.4) (1.2)
Interest expenses 15.4 13.4
Gain on sale of discontinued operations, net of tax — (6.1)
Equity-settled share-based payment transactions 1.0 0.0
Profit or loss before adjustments for the effect of 99.3 97.7
changes to current assets and short term liabilities
Adjustments for:
Increase in loans due from customers (45.7) (78.3)
Change in financial instruments measured at fair 1.1 8.4
value through profit or loss
Increase in other assets (12.3) 1.0
Gains from sale of portfolio 1.4 0.1
Increase in accounts payable to suppliers, 11.1 3.7
contractors and other creditors
Gross cash flows from operating activities 54.9 32.6
Corporate income tax paid (11.9) (10.1)
Net cash flows from operating activities 43.0 22.5
Cash flows used in investing activities
Purchase of property and equipment and intangible (10.9) (7.1)
assets
Loans issued to related parties (21.2) (1.8)
Loans repaid from related parties — 5.7
Interest received 1.1 1.3
Allocation for potential acquisition (6.6) —
Acquisition of subsidiaries, net of cash acquired (32.1) (1.4)
Net cash flows used in investing activities (69.8) (3.4)
Cash flows from financing activities
Loans received and notes issued 110.2 37.5
Repayment and repurchase of loans and notes (7.1) (26.2)
Interest payments (16.2) (12.9)
Dividend payments (0.7) (0.6)
Net cash flows from financing activities 86.2 (2.2)
Net (decrease) / increase in cash and cash 59.4 16.8
equivalents
Cash and cash equivalents at the beginning of the 56.9 34.4
period
Effect of exchange rate fluctuations on cash 0.1 (0.2)
Cash and cash equivalents at the end of the period 116.4 51.1
Net cash flows used in operating activities are calculated as profit before
taxes, adjusted for non-cash and other items and the effect of changes to
current assets and short-term liabilities, less corporate income tax paid. Net
cash flows generated in operating activities in the Period increased to EUR 43.0
million from EUR 22.5 million in the same period last year.
The Group’s cash flows used in investing activities mainly include the purchase
and disposal of property, equipment and intangible assets, loans issued and
loans repaid. Net cash used in investing activities was EUR 69.8 million in the
Period. The largest component was consideration for the acquisitions made at the
end of June.
The Group’s cash flows from financing activities mainly reflect proceeds that
were received from borrowings (including the EUR bond issuance), the repayment
of principal and interest on indebtedness, and the payment of dividends.
Proforma Income Statement and Balance Sheet for combination of 4finance and TBI
Bank
The Group finalised the purchase of TBI Bank EAD (the "Bank"), via the
acquisition of TBIF Financial Services BV, in August 2016. Accordingly, the Bank
will only be consolidated within the Group's financial results from the next
quarter onwards, the results for the first nine months of 2016.
Presented here for illustration are the condensed proforma results for the six
months ending 30 June 2016 for the combination of 4finance and TBI Bank, as if
the Bank had been acquired on 1 January 2016.
Income statement
The table below sets out the condensed consolidated proforma statement of
financial position for the combination of 4finance and TBI Bank.
Six months ended 30 June 2016
(unaudited, in millions of EUR)
TBI Bank 4finance Proforma
Interest income 24.6 182.8 207.4
Interest expense (1.7) (15.4) (17.1 )
Net interest income 22.9 167.4 190.3
Net impairment losses (4.1) (46.8) (50.9 )
on loans and
receivables
General administrative (14.5) (84.0) (98.5 )
expenses
Other income/(expense) 3.3 2.5 5.8
Profit before tax 7.7 39.1 46.8
Corporate income tax (0.8) (7.0) (7.8 )
for the reporting
period
Profit for the period 6.9 32.1 39.0
Key Financial Ratios
The table below sets out the key financial ratios for TBI Bank, 4finance and the
combined business, based on this illustrative proforma. This highlights the
positive effect of the combination of TBI on most of these ratios, and that the
combined business remains well capitalised and within its financial covenants.
Six months ended 30 June 2016
TBI Bank 4finance Proforma
Capital/assets ratio(1) 24% 34% 26%
Capital/net loan portfolio(2) 37% 63% 42%
Adjusted interest coverage(3) 6.5x 4.0x 4.3x
Profit before tax margin(4) 31% 21% 23%
Return on average equity(5) 23% 34% 31%
Cost/revenue ratio(6) 59% 46% 47%
Net impairment to revenue ratio(7) 17% 26% 25%
Notes:
(1) Total equity/total assets.
(2) Total equity/net loan portfolio.
(3) Adjusted EBITDA/interest expense.
(4) Profit before tax/interest income.
(5) Profit from continuing operations/average equity (total equity as of the
start and end of each period divided by two).
(6) General administrative expenses/interest income.
(7) Net impairment losses on loans and receivables/interest income.
Balance Sheet
The table below sets out the condensed consolidated proforma statement of
financial position for the combination of 4finance and TBI Bank. The purchase
price and goodwill adjustments are illustrative as if the acquisition had closed
on 1 January 2016(1).
30 June
2016
(unaudited)
(in
millions of
EUR)
TBI Bank 4finance Adjustments Proforma
total
Cash and cash 45.1 116.4 (68.8 ) 92.7
equivalents
Loans and 175.1 322.7 497.8
advances due
from
customers
Property and 14.3 4.9 19.2
equipment
Intangible 0.7 26.1 26.8
assets and
goodwill
Goodwill 0.2 25.4 10.6 36.2
Loans to — 28.8 28.8
related
parties
Other assets 36.5 66.3 — 102.8
Total assets 272.0 590.6 (58.2 ) 804.3
—
Customer 185.9 10.9 196.8
deposits
Loans and 6.1 328.7 334.8
borrowings
Other 14.8 48.4 63.2
liabilities
Total 206.8 388.0 — 594.7
liabilities
Total equity 65.2 201.4 (58.2 ) 208.4
attributable
to the
Group’s
equity
holders
Non — 1.2 1.2
-controlling
interests
Total equity 65.2 202.6 (58.2 ) 209.6
Total 272.0 590.6 (58.2 ) 804.3
shareholders’
equity
and
liabilities
Notes:
(1) As of 1 January 2016, TBI Bank EAD had consolidated equity of EUR 56.7
million. During the first quarter of 2016, TBI Leasing SA (Romania) was
transferred from TBIF Financial Services BV to TBI Bank EAD. Therefore the net
book value of the Romanian leasing business of EUR 1.5 million has been added,
bringing the Bank's illustrative equity value on acquisition to EUR 58.2
million.
The adjustment to cash and cash equivalents represents the base purchase price
of approximately EUR 69 million, and the difference between book value of
acquired assets and purchase price is allocated to goodwill.
The final purchase price will have an additional payment of 1.25x the net profit
of TBI Bank from 1 January 2016 to the closing date (11 August 2016), so the
final acquisition details and goodwill amount will differ from the above.
RECENT DEVELOPMENTS
Recent developments include significant and material information about the
Group’s development and any changes since its last quarterly report that was
published on 31 May 2016.
New licenses and establishments
In June 2016 the Group established a subsidiary in Guatemala to facilitate pre
-opening activities in that market.
The Group expects to commence operations in the Dominican Republic by the end of
the quarter.
Acquisitions and disposals
The Group completed the purchase of Bulgarian bank TBI Bank EAD in August 2016
through the acquisition of 100% of TBIF Financial Services B.V. from its parent
company, Kardan Financial Services, following receipt of all regulatory
approvals. The total consideration comprised a sum of approximately EUR 69
million, which was paid on closing, plus an adjustment to be paid based on the
reviewed results of the acquired assets since 1 January 2016.
At the end of June 2016, the Group acquired 80% of Friendly Finance OU, an
online consumer lender active in the Czech Republic, Poland, Spain, Slovakia and
Georgia, from Tirona for a sum of EUR 28.8 million.
The Group also acquired 9.9% of Spotcap Global SARL, an online SME lender, at
the end of June 2016 from Tirona for the sum of EUR 4.9 million.
Litigations and contingent liabilities
No member of the Group is engaged in new legal or arbitration proceedings which
may have a material effect on the Group’s financial position or profitability.
Changes in management
In July 2016 a Supervisory Board was established at 4finance Group S.A. level.
The three members are Nicholas Jordan (chairman), William Horwitz and Dr
Cornelius Boersch, bringing a considerable range and depth of expertise to the
Group in this important oversight role. Mr Jordan has 20 years of experience in
senior positions with banks including Goldman Sachs and is CEO of private equity
firm Finstar Financial Group. Mr Horwitz is an independent FinTech advisor with
over 20 years of experience in financial services, including with Barclays and
Capital One, and is the former president of WDFC SA (Wonga). Dr Boersch is the
founder of venture capital firm Mountain Partners and has been a passionate
entrepreneur, investor and founder of numerous technology companies for the past
25 years.
Changes in the regulatory framework
Czech Republic: New regulations on consumer credit were published on 5 August
2016, including requirement for a minimum capital base and registration with
Czech National Bank for lenders, internal controls, treatment of sales
intermediaries, affordability criteria and delinquency fee caps. These
regulations will be valid from 1 December 2016, with the licensing process
running from February 2017 to June 2018.
Corporate
website:www.4finance.com (http://cts.businesswire.com/ct/CT?id=smartlink&
url=http%3A%2
F%2Fwww.4finance.com&esheet=51408699&newsitemid=0&lan=en
-US&anchor=www.4finance.com&index=3&md5=26c5c364ec298f948f8ec954ded5dea7)
4finance Holding S.A.
Address: 6, rue Guillaume Schneider, L-2522, Luxembourg
CONTACT:
4finance
James Etherington
investorrelations@4finance.com
+44 (0)7766 697 950
www.4finance.com (http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%
2
Fwww.4finance.com&esheet=51408699&lan=en
-US&anchor=www.4finance.com&index=4&md5=09cfe2aeb2de5a40560a512d498979b2)
4finance Reports Results for the Six Months Ending 30 June 2016
| Source: 4finance S.A.
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