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4finance Holding S.A. reports results for the three months ending 31 March 2019

28 May 2019. 4finance Holding S.A. (the ‘Group’ or ‘4finance’), one of Europe’s largest digital consumer lending groups, today announces unaudited consolidated results for the three months ending 31 March 2019 (the ‘Period’).


Operational Highlights
  • Online loan issuance volume of €259.7 million in the Period, compared with €337.3 million in Q1 2018, mainly reflecting the rationalisation of some products and markets during 2018.
  • Instalment Loan issuance volume of €46.1 million, in line with the prior three quarters, but reduced from €63.0 million in Q1 2018 due to discontinued products in Sweden, Georgia and Romania as well as tighter underwriting in Poland and Spain.
  • Single Payment Loan issuance volume down 24% year-on-year to €179.2 million, in line with expectations and reflecting greater focus on longer term products.
  • Line of Credit issuance volume down 7% year-on-year to €34.4 million from €37.0 million in Q1 2018.
  • The number of online lending active customers was 0.38 million as of 31 March 2019, compared with 0.54 million a year ago. Of this reduction, 0.13 million was due to discontinued products.
  • TBI Bank loan issuance volume during the Period grew by 13% year-on-year to €68.8 million from €60.8 million in Q1 2018.
  • TBI Bank active borrowing customers reached 0.40 million, down 5% from a year ago, with 0.32 million current accounts as of 31 March 2019, up 52% from a year ago.
Financial Highlights
  • Interest income down 14% year-on-year to €106.5 million in the Period, compared with €123.2 million in the prior year period. Interest income from largest markets (Poland, Spain, Denmark and TBI Bank) was stable year-on-year. The reduction was largely attributable to products and/or markets that were rationalised or exited during 2018.
  • Operating income (revenue) down 15% year-on-year to €95.7 million in the Period from €112.6 million last year.
  • Net receivables stable overall at €547.7 million as of 31 March 2019 (down 1% year to date). The equivalent decrease in net loan principal was also 1%.
  • Foreign exchange movements resulted in a €1.6 million gain in the Period, down from €2.4 million in Q1 2018.
  • Adjusted EBITDA was €29.4 million for the Period, down 8% year-on-year, with a quarterly interest coverage ratio of 2.0x. The full covenant calculation of interest coverage ratio is based on last 12 month figures, and is currently 2.5x.
  • Post-provision operating profit down 11% year-on-year to €13.5 million in the Period compared with €15.2 million in the prior year period. Debt sales in the Period did not contribute any net gains, however the prior year figure included €6.7m in net gains from debt sales, which was relatively high due to the IFRS 9 transition on 1 January 2018.
  • Profit before tax for the Period was €11.9 million, decreasing 22% year-on-year from €15.2 million in Q1 2018, reflecting a higher depreciation charge and lower FX income.
  • Cost to income ratio for the Period was 52.0%, vs. 54.2% for Q1 2018, with operating costs down 18% year-on-year, reflecting cost discipline across the business.
  • Relatively stable asset quality, with an overall gross NPL ratio of 20.4% as of 31 March 2019 (22.7% for online), compared with 19.4% as of 31 December 2018 (22.0% for online).
  • The annualised cost of risk for the online business was 28.9% for the Period, compared to 27.2% in Q1 2018, and in TBI Bank it was 4.5% for the Period, compared to 9.8% in Q1 2018. The improvement in the TBI Bank ratio reflects the ongoing normalisation of asset quality in the bank’s Romanian portfolio.
  • Operating cash flow before movements in portfolio and deposits was €52.9 million in the Period, compared with €61.5 million in the prior year period.
Strategic Highlights
  • Strong underlying customer demand for Instalment Loans, particularly in Poland, Spain, the Czech Republic and the Baltics. Continued conservative approach to instalment loan growth, with a focus on unit economics by market.
  • 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 22% of the Group’s net receivables, down from 30% as of 31 March 2018.
  • Continued pro-active management of NPL portfolio with forward flow debt sales agreements in place in additional markets (Latvia and Lithuania).
  • Year-on-year comparisons impacted by markets and products that were rationalised during 2018 (Friendly Finance integrated and exits of online business in Dominican Republic, Romania and Georgia).
  • Adapting to new regulation in the Nordics & Baltics region, with some impact on Q1 2019 results and further preparations underway for incoming regulation in Q3 in Latvia and Finland.
  • Creation of new ‘4finance Next’ unit to drive near-prime lending and partnership opportunities across the business.
  • IT strategy revised to allow more efficient support for core markets whilst approach to near-prime lending is being developed.
  • Strategic partnership with Fintonic in Spain accelerating and pilot ongoing in Mexico with a nationwide retailer to distribute loans in stores under a new brand.
  • Funding diversification projects ongoing, with pilot securitisation project commencing in June.
  • TBI Bank performing well, with seasonally lower loan issuance during Q1 as normal. Maiden dividend of €8 million paid in March. Bulgarian online lending operations consolidated under TBI Bank from April.

Oyvind Oanes, CEO of 4finance, commented:

“These results demonstrate the resilience of our core businesses. Our largest markets of Poland, Spain, Denmark and TBI Bank continue to perform well overall, and they delivered stable year-on-year interest income. The reductions we did see in interest income mainly relate to products we decided to discontinue as we refocus on priority markets and longer-term opportunities. Our continued focus on cost efficiency is also reflected in an improved cost/income ratio.

“Our businesses in the Nordic & Baltic markets continue to evolve, and we are pleased to welcome a new country manager in Sweden. He brings extensive industry experience and a fresh perspective to a market where we have a long history of serving customers with simple, convenient and transparent products.

“As we look to transition to the near-prime segment in selected markets, our new dedicated unit, 4finance Next, will provide additional resource and support. The opportunities for us in that segment are substantial, but they vary in nature by market. Our IT strategy has been revised to reflect this market specific approach, with more efficient support for larger markets in the meantime. We thank our outgoing CTO, Roland Schaar, for his contribution to our IT transition and development of our first near-prime product in Sweden.

“We continue to view 2019 as a challenging and transitional year for several of our markets. But we are also excited about the medium term growth opportunities available as we develop into a multi-segment, multi-product, consumer credit specialist.”

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