3 month 2016 results 2 June, 2016 0 Highlights of First Quarter - - PowerPoint PPT Presentation

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3 month 2016 results
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3 month 2016 results 2 June, 2016 0 Highlights of First Quarter - - PowerPoint PPT Presentation

Oct 25, 2022 350 likes •523 views

4finance investor presentation for 3 month 2016 results 2 June, 2016 0 Highlights of First Quarter 2016 Net Profit Revenue Solid results delivered continuing operations Revenue up 30% to EUR 90.3 million +30% 90

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4finance investor presentation for 3 month 2016 results

2 June, 2016

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  • Solid results delivered
  • Revenue up 30% to EUR 90.3 million
  • Regulatory changes implemented in 4 key markets
  • Record quarterly profit of EUR 16.7m
  • Seeing benefits of new platforms and technology
  • Mobile applications up to 32% of total (13% in Q1 ‘15)
  • Marketing expense/revenue down to 15.4% (16.8% in Q1 ‘15)
  • Diversification into new markets and products is on track
  • Preparations for Dominican Republic launch in June
  • Instalment loans launched in Spain in May
  • Capitalisation continues to build
  • 42% capital / assets ratio
  • 62% capital / net loans ratio
  • Cost/revenue and asset quality trends are in line with

expectations

Highlights of First Quarter 2016

69 90

Q1'2015 Q1'2016

Revenue

+30%

15.6 16.7 Q1'2015 Q1'2016

+7%

Net Profit

continuing

  • perations

mEUR mEUR

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Diversification by geography and product

13% 9% 25% 8% 6% 9% 14% 11% 4% 1% Latvia Lithuania Poland Sweden Finland Denmark Spain Georgia Czech Rep. Other

Q1’2016 Revenue: EUR 90.3m

98 135

Q1 2015 Q1 2016 m EUR

Instalment Loan Portfolio (Gross)

+37%

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11.6 11.8 12.1 14.6 13.8 6.3 8.3 11.9 12.9 13.9 2.4 2.9 0.6 5.2 3.2 6.3 7.3 7.9 11.8 11.5 38% 39% 39% 50% 47%

0% 10% 20% 30% 40% 50% 60% 10 20 30 40 50 60 Q1 Q2 Q3 Q4 Q1

EUR million

Marketing Staff IT Other Cost/revenue ratio, %

Quarterly expenses breakdown

Note: Other includes debt collection, legal and consulting, application inspection costs, communications, bank expenses, travel, rent and utilities, depreciation & amortisation and other expenses Q1-3 figures reflect reported unaudited results and Q4 figures reflect balance to FY 2015 audited results 2015 2016

  • Marketing efficiency improving: marketing expense / revenue decreased to 15.4% (1Q16) from 16.8% (1Q15)
  • Staff expenses account for 6 percentage points of cost / revenue ratio increase
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Country March 31, 2015 March 31, 2016

HQ (Latvia, UK) 199 304 Latvia 114 145 Lithuania 85 108 Finland 37 36 Sweden 34 40 Poland 243 350 Denmark 24 35 Spain 84 135 Czech Republic 75 135 Georgia 128 165 Bulgaria 19 52 Romania 10 37 Armenia 26 Argentina 32 Mexico 36 Miami 7 Dominican Republic 3 Total 1,052 1,646

Investing in staff to support future growth

Functions March 31, 2015 March 31, 2016

Management 33 58 Administration 23 36 Finance 74 117 Risk management 38 72 Customer care 396 676 Debt collection 234 256 IT and Product development 145 260 HR 32 42 Internal audit 6 7 Legal & Compliance 14 43 Marketing 52 73 Lean Management 5 6 Total 1,052 1,646

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Non-performing loans and provisioning

Conservative provision coverage Non-performing loans (NPLs) as % of total loans issued(1)

9.4% of total loans issued

Stable NPLs to issued loans ratio(1) 9.2% 8.8% 9.0% 9.4%

2013 2014 2015 Q1 2016

  • Loans that are overdue more than 90 days are considered as non-

performing (NPLs)

  • At the end of Q1 2016 NPLs represented 9.4% of total issued loans
  • ver the last 730 days
  • Actual loss experienced on NPLs is approximately 50% (51% as of

31/03/2016)

  • Provisions for default are typically 5-10 p.p. higher

(1) Total issued loans include the amount of loans issued during 730 days ending 90 days prior to the end of period

EUR 1,867m EUR 1,691m EUR 176m

Loans issued 01/2014- 12/2015 (730 days) NPLs as of 31/03/2016 Repaid and performing loans 31/03/2016

51% 59% 74%

8%

Loss given default Provision for default portfolio Provision coverage buffer Overall provision coverage

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Asset quality trends for single payment loans

0% 5% 10% 15% 20% 2013 2014 2015 Q1 2016

NPL / 2 year loan issuance

Spain Georgia Denmark Czech Poland Finland Latvia Lithuania Sweden

  • Non-performing loans to loan issuance ratio

tends to improve over time in each market

  • More data: better scorecards
  • More experience: better debt collection
  • More returning customers
  • Different characteristics for each market
  • Portfolio mix shift drives overall Group

NPL/sales ratio (eg growth in Spain)

  • Current trend is in line with expectations
  • Higher NPL ratio countries also have higher

interest rates and revenue

  • Impairment / revenue ratio stable
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Google policy changes

30% 4% 16% 5% 12% 19% 14% Direct Paid Search (SPL, non branded) Paid Search (SPL, branded) Paid Search (Instalments) Affiliates Organic Search Other (email, phone, etc)

Lending volume by marketing channel, 2015

  • Applies to entire industry
  • Global policy update from Google
  • Final restrictions not yet clear, expected in July

…but does not reduce the underlying customer demand

  • 4finance is well positioned
  • Diversified multi-channel marketing strategy
  • Reduced emphasis on Google (drives <20% of lending

volumes vs c.40% 18 months ago)

  • Significant scale and resources to deploy
  • Strong brand recognition is critical
  • Searches using our brand names make up c.80% of paid

search

  • Organic search rankings will drive traffic
  • Challenges we are addressing
  • Reviewing possible changes to product profile
  • Marketing approach for early phase of new markets

20% of volume from paid search for Single Payment Loans

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Intended acquisition of TBI Bank

  • Potential to offer consumer loans in all European

markets – Certain EU countries require a banking license for consumer lending – Gives greater flexibility in responding to changes in licensing / regulatory regimes for non-bank lenders

  • Potential to develop deposit funding

– Lower funding costs – Diversify funding beyond capital markets

  • Potential to enhance credit card offering

– New product development already underway – Ability to control more of credit card value chain – Attractive market volume

  • Small, profitable, consumer-focused bank in

existing markets (Bulgaria and Romania)

  • Track record of profitability

− EUR 4 million net profit in Q1 2016 − RoA of 6%, RoE of 27%

  • Strong capitalization

− 26% Tier 1 ratio (8.5% minimum)

  • Simple, deposit funded balance sheet

− EUR 168 million net customer loans − EUR 58 million cash − EUR 279 million total assets − EUR 178 million customer deposits

  • Purchase price approx. EUR 75 million (c.1.25x

price/book)

  • Closing expected in July 2016, subject to conditions

TBI acquisition at a glance Rationale for acquiring a European bank

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Financial Review

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Financial highlights

36 46 64 17

24%

21% 20% 18%

2013 2014 2015 Q1'2016

Revenue, m EUR Net profit (m EUR) and net margin

149 220 318 90 2013 2014 2015 Q1'2016 112 198 173 189 66 113 173 191 2013 2014 2015 Q1'2016

Net debt Total equity

Net debt(1) and total equity, m EUR

29% 31% 40% 42% 2013 2014 2015 Q1'2016

Capital to assets ratio, % (1)

4.6x 3.7x 4.2x 4.0x 2013 2014 2015 Q1'2016

Adjusted interest coverage ratio

(1) Assets and debt figures for 2014 adjusted for the effect of 2015 Notes’ defeasance

37% 47% 56% 62% 2013 2014 2015 Q1'2016

Capital/net loans, %

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INCOME STATEMENT, M EUR Q1’2015 Q1’2016 % Change Interest income 69.2 90.3 30% Interest expense (7.1) (7.5) 6% Net interest income 62.1 82.8 33% Net impairment losses on loans and receivables (17.2) (22.3) 30% General administrative expenses (26.6) (42.4) 59% Other (expense)/income 1.3 1.8 38% Profit before tax 19.6 20.0 2% Tax (4.0) (3.2) (20)% Profit from continuing operations 15.6 16.7 7% Discontinued operations, net of tax 5.1

  • Net profit

20.7 16.7 (19)% Net impairment to revenue ratio % 25% 25% Cost to income ratio % 38% 47% Net profit margin, % 30% 18%

Income statement

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Balance sheet

KEY RATIOS Q1’2015 Q1’2016 Capital/assets ratio 35% 42% Capital/net loan portfolio 49% 62% Adjusted interest coverage ratio 3.4x 4.0x Return on average equity(1) 51% 37% Return on average assets(1) 16.7% 15.0% BALANCE SHEET, M EUR Q1’2015 Q1’2016 % Change Loans and advances 271.2 309.1 14% Cash and cash equivalents 46.3 30.5 (34)% Intangible assets (IT platform) 4.6 21.6 370% All other assets 57.2 92.4 62% Total assets 379.3 453.6 20% Loans and borrowings 227.8 219.7 (4)% All other liabilities 19.6 42.7 118% Total liabilities 247.4 262.4 6% Total equity 131.9 191.2 45% Total equity and liabilities 379.3 453.6 20%

(1) RoAE and RoAA based on net profit from continuing operations

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144 153 167 198 201 224 249 258 276 282 268 160 177 184 218 234 261 272 301 320 351 334 50 100 150 200 250 300 350 400 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

m EUR Total outgoing Total incoming

Last 12 months net incoming cash* EUR 223m

Loan portfolio cash flow

* From continuing operations 2013 2014 2015 2016

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Summary

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  • Solid first quarter results
  • Strong revenue growth and record quarterly profitability
  • Delivered alongside regulatory changes
  • Trends in expenses and risk in line with expectations
  • Laying the foundations for future growth
  • Investment in people & technology
  • Diversification: new markets on track, Instalment Loans on track
  • Funding: 5 year EUR 100 million bond
  • Strategic & corporate governance progress
  • Attractive bank acquisition with multiple potential business benefits
  • Separation of Chairman and CEO roles
  • Strengthening management team: George Georgakopoulos joins as CEO

Summary