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4finance Holding S.A. Reports results for the year ending 31 December 2017

28 February 2018. 4finance Holding S.A. (the ‘Group’ or ‘4finance’), Europe’s largest mobile consumer lending group, today announces unaudited consolidated results for the twelve months ending 31 December 2017 (the ‘Period’).


Operational Highlights

  • 8.3 million online credit decisions made in 2017, resulting in over 6 million loans issued (16.6 thousand loans per day).
  • Online loan issuance volume during the Period grew by 10% year-on-year to €1.28 billion from €1.16 billion in 2016.
  • Single Payment Loan issuance volume up 6% year-on-year, with LatAm Single Payment Loan issuance volume up 34% quarter-on-quarter.
  • Instalment Loan issuance volume up 47% year-on-year, with double digit quarter-on-quarter growth throughout 2017.
  • Online lending active customers reached 1.03 million in the Period, up 5% from a year ago.
  • TBI Bank loan issuance volume during the Period grew by 31% year-on-year to €0.25 billion from €0.19 billion.
  • TBI Bank active borrowing customers reached 0.44 million, up 4% from a year ago, with 0.19 million current accounts as of 31 December 2017, up 23% from a year ago.

Financial Highlights

  • Interest income up 14% year-on-year to €448.0 million in the Period compared with €393.2 million in the prior year, delivered despite the €34 million reduction in markets impacted by regulation (Georgia and Lithuania).
  • Operating income up 11% year-on-year to €405.9 million in the Period, despite higher interest expense.
  • Net receivables reached €593.0 million as of 31 December 2017, up 20% from a year ago.
  • Adjusted EBITDA was €135.5 million for the Period, down 1% year-on-year, with adjusted interest coverage of 2.2x.
  • Normalised profit before tax for the Period was €57.0 million, decreasing 30% year-on-year from €81.0 million in 2016, driven by higher interest expense and faster growth in operating costs and impairment charges compared to interest income.
  • Following a thorough balance sheet review, a decision was taken to write down a number of intangible assets (goodwill, IT and tax) and bond deferred expenses in the fourth quarter. This resulted in one-off non-cash charges of €51.1 million.
  • Cost to income ratio for the Period was 57%, vs. 51% for 2016, reflecting staff cost growth and increased investment during 2016 and acquisitions in the latter half of 2016.
  • Financial strength remains solid, with equity to assets ratio of 19% (or 14% post IFRS 9 adoption) as of 31 December 2017 and equity / net receivables of 33% (26% post IFRS 9) following the one-off adjustments and ordinary dividend payment of €16 million in December 2017.
  • Continued improvement in asset quality, with an overall gross NPL ratio of 26.7% as of 31 December 2017 (33.4% for online) compared with 33.1% as of 31 December 2017 (42.0% for online).
  • The cost of risk for the online business was 20.6% for the Period, compared to 19.6% in 2016 and for TBI Bank 3.9% for the Period, compared to 3.1% in 2016.

Strategic Highlights

  • Continued momentum in instalment loans, which are now offered in 11 countries following the launch in Georgia in October. Driven by improvements in our scorecards, we were able to increase both tenor and ticket size offered in more established markets.
  • Our new IT platform, designed to better support business growth and facilitate IT cost reduction in the medium term, now nearing initial launch.
  • Further progress on the early-stage development of near-prime products, with pilot launch in Sweden in 1H 2018.
  • Continued strong performance of TBI Bank in standalone consumer business, and initial evidence of Group synergies in areas like payments processing.
  • Strategic partnerships initiated in Mexico and Poland to accelerate access to a new customer base
  • Write-off period for past due loans shortened to 360 days (from 730 days) as part of adoption of IFRS 9 accounting standard on 1 January 2018, with expected net receivables reduction of 10% in line with guidance.

Mark Ruddock, CEO of 4finance, commented:

“The last quarter of 2017 was an important one for 4finance. Having clarified our vision and strategy, we undertook a thorough review of our business. As a result of this review, we decided to write down IP we no longer consider to be core, and to reduce intangible assets, such as goodwill on prior acquisitions, that we believe need to be re-set given the performance of those business lines, and the role they will play going forward. These are reflected in one-off non-cash charges in Q4 that resulted in us posting an overall loss for the year. As a management team and Board, we believe this puts us in a more robust position for the future.

“The underlying operating performance of our business remains strong. Record quarterly interest income of over 120 million euros, up 6% from Q3, helped interest income growth reach 14% year-on-year. This is powered by our diversification – we saw quarterly growth in 12 different markets. The positive trends in key growth areas, such as instalment loans and Latin America continue. Quarterly instalment loan receivables growth of nearly 25 million euros is our strongest ever and provides a solid revenue base going forward. Latin America contributed more to our top line in Q4 2017 than in the whole of 2016.

“As well as optimising our existing business, we are also investing for the future. Our new IT platform, which will launch in Q2, will bring significant long-term business benefits in scalability, flexibility, competitiveness and IT cost efficiency. The pilot of next generation products in the Nordic region and the strategic partnerships we are developing will help us build a truly sustainable business.

“I would like to thank all of our staff across the globe for their hard work in 2017. Our human capital is a vital part of our ongoing success. We are especially excited, therefore, to welcome Daiga Ergle to the newly established ExCo role of Chief People Officer.”

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