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4finance Holding S.A. reports results for the year ending 31 December 2018

27 February 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 twelve months ending 31 December 2018 (the ‘Period’).


Operational Highlights
  • Online loan issuance volume reached €1.21 billion (down 5.3% year-on-year) in the Period, compared with €1.28 billion in 2017.
  • Instalment Loan issuance volume up 21% year-on-year to €196.6 million from €162.7 million in 2017.
  • Single Payment Loan issuance volume down 12% year-on-year to €860.8 million, in line with expectations and reflecting greater focus on longer term products.
  • Line of Credit issuance volume up 11% year-on-year to €151.8 million from €136.2 million in 2017.
  • The number of online lending active customers was 0.40 million as of 31 December 2018, compared with 0.54 million a year ago.
  • TBI Bank loan issuance volume during the Period grew by 14% year-on-year to €281.7 million from €246.9 million in 2017.
  • TBI Bank active borrowing customers reached 0.41 million, up 2% from a year ago, with 0.28 million current accounts as of 31 December 2018, up 42% from a year ago.
Financial Highlights
  • Interest income up 6% year-on-year to €475.6 million in 2018, compared with €448.0 million in the prior year.
  • Operating income (revenue) up 6% year-on-year to €432.0 million in the Period from €405.7 million in 2017.
  • Net receivables reached €552.9 million as of 31 December 2018, up 5% compared with 1 January 2018 opening balance. The equivalent increase in net loan principal was 4%.
  • Foreign exchange movements resulted in a €12.7 million negative impact on profit before tax in the Period, following a gain in Q4 2018 of €5.1 million.
  • Adjusted EBITDA was €147.6 million for the Period, up 9% year-on-year, following another solid quarterly contribution in Q4 2018.
  • Adjusted interest coverage ratio for the Period was 2.4x, compared with 2.2x in the prior year.
  • Strong growth in post-provision operating profit, up 30% year-on-year to €83.0 million in the Period compared with €63.8 million in the prior year.
  • Profit before tax for the Period was €51.4 million, compared to €10.7 million in 2017, reflecting strong cost control, management of the introduction of IFRS 9 accounting standard, and the significant one-off adjustments taken in 2017.
  • Cost to income ratio for the Period was 52%, vs. 58% for 2017, reflecting cost discipline and revenue growth.
  • Improvement in asset quality following move to a 360 DPD write-off policy for the online business, with an overall gross NPL ratio of 19.5% as of 31 December 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 24.0% for the Period, compared to 20.8% in 2017, and in TBI Bank it was 8.0% for the Period, compared to 3.9% in 2017. The increases largely reflect the impact of IFRS 9 and removal of 360-730 DPD online receivables.
  • Operating cash flow before movements in portfolio and deposits was €281.9 million in the Period up from €227.9 million in the prior year.
Strategic Highlights
  • Strong underlying customer demand for Instalment Loans, particularly in Poland, Spain 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 24% of the Group’s net receivables.
  • 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.
  • Markets and products rationalised during 2018, with Friendly Finance integration fully complete and exits of online business in Dominican Republic, Romania and Georgia.
  • Adapting to regulation in the Nordics & Baltics region, with product and market performance to be closely monitored in coming quarters.
  • Pilot launch of Friia near-prime loans on the new IT platform in Sweden in November 2018. However, overall progress on near-prime pilots and development of new IT platform slower than expected in 2018.
  • Funding diversification projects also need more time to implement, with pilot securitisation project now on track to commence early in the second quarter.
  • Strategic partnership with Fintonic in Spain progressing well and new partnership established in Mexico with a nationwide retailer to distribute loans in stores under a new brand.
  • Strong end to the year from TBI Bank, returning to volume growth and with launch of fully online POS loans part of the digital lending strategy.

Oyvind Oanes, CEO of 4finance, commented:

“These results show a solid overall financial performance in 2018, with revenue growth of 6% and Adjusted EBITDA up 9%. This was achieved despite challenging conditions in some markets that led us to rationalise our footprint.  This has meant a lower rate of revenue growth, but improved our cost efficiency and helped deliver growth of 31% in post-provision operating profit.

“We are proud of our performance in many areas in 2018. Our largest online markets of Poland, Spain and Denmark all delivered revenue growth and stable profitability, and TBI Bank showed strong loan issuance in the second half of the year. We have successfully managed the transition to IFRS9, with a full revision of our provisioning methodology, and the introduction of GDPR, with significant investments in data protection and AML across several markets. Our marketing spend is now much more targeted by channel and efficient, based on econometric models.

“We did not make as much progress as we would have liked on our new IT platform, near-prime products and funding diversification. This reflects both the complexity of these projects and our decision to prioritise resources on adapting to regulatory change within our operating business. However, these strategic initiatives remain core to our success. We have learnt from our experience so far, and have a clear delivery plan for each project in 2019.

“With two of our supervisory board members stepping down last month, I’d like to thank both Bill and Mark for their support and guidance. Bill for his insight and longstanding experience of the business and Mark for his leadership at 4finance and help in ensuring a smooth transition as I joined.

“We know this coming year will be challenging. But we are optimistic that – with focus and persistence – we can build a multi-segment, multi-product, consumer credit specialist.”

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