Investor Presentation April 2017 0 Disclaimer NEITHER THIS - - PowerPoint PPT Presentation
Investor Presentation April 2017 0 Disclaimer NEITHER THIS - - PowerPoint PPT Presentation
Investor Presentation April 2017 0 Disclaimer NEITHER THIS DOCUMENT NOR ANY COPY HEREOF MAY BE SENT OR TAKEN OR TRANSMITTED INTO THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA OR JAPAN OR DISTRIBUTED, DIRECTLY OR INDIRECTLY, IN THE UNITED
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NEITHER THIS DOCUMENT NOR ANY COPY HEREOF MAY BE SENT OR TAKEN OR TRANSMITTED INTO THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA OR JAPAN OR DISTRIBUTED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA OR JAPAN OR TO ANY U.S. PERSON. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S., CANADIAN, AUSTRALIAN OR JAPANESE SECURITIES LAWS. THIS DOCUMENT IS BEING FURNISHED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED OR REDISTRIBUTED TO ANY OTHER PERSON. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES. By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations: The information in this document has been prepared by 4finance Holding (“4finance") for use as an investor presentation and does not constitute a recommendation regarding securities of 4finance. While all reasonable care has been taken to ensure that the facts stated herein are accurate and that the forecasts, opinions and expectations contained herein, are fair and reasonable, no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information, or opinions contained herein. Neither 4finance nor any of 4finance`s advisors or representatives shall have any responsibility or liability whatsoever (for negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or
- therwise arising in connection with this document. The information set out herein may be subject to updating, completion, revision, verification and amendment and such information may change materially.
This presentation is based on the economic, regulatory, market and other conditions as in effect on the date hereof. It should be understood that subsequent developments may affect the information contained in this document, which neither 4finance nor its advisors are under an obligation to update, revise or affirm. The distribution of this presentation in certain jurisdictions may be restricted by law. Persons into whose possession this presentation comes are required to inform themselves about and to observe any such
- restrictions. In particular, this presentation may not be distributed into the United States, Australia, Japan or Canada.
The following information contains, or may be deemed to contain, “forward-looking statements”. These statements relate to future events or our future financial performance, including, but not limited to, strategic plans, potential growth, planned operational changes, expected capital expenditures, future cash sources and requirements, liquidity and cost savings that involve known and unknown risks, uncertainties and other factors that may cause 4finance’s or its businesses’ actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. In some cases, such forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of those terms or other comparable terminology. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Future results may vary from the results expressed in, or implied by, the following forward-looking statements, possibly to a material degree. All forward-looking statements made in this presentation are based on information presently available to management and 4finance assumes no obligation to update any forward-looking statements. This presentation constitutes neither an offer to sell nor a solicitation to buy any securities in the United States, Germany, Canada, Australia, Japan or any other jurisdiction. Neither this presentation nor anything contained herein shall form the basis of, or be relied on in connection with, any offer or commitment whatsoever. In particular, this presentation does not constitute an offer to sell or a solicitation of an offer to buy any securities of 4finance in the United States. Securities of 4finance may not be offered or sold in the United States of America absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended. 4finance does not intend to conduct a public offering or any placement of securities in the United States.
Disclaimer
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1. Introduction to 4finance 2. Lending Process 3. Loan Portfolio 4. Financial Review 5. Strategy and Outlook 6. Appendices
Table of contents
3
Introduction to 4finance
4
Notes: (1) Includes Friendly Finance (2) Including Friendly Finance and TBI Bank (3) Issuance volumes to online customers who have returned, ie taken out and repaid at least one prior loan
Putting our customers first, providing a convenient and transparent service using cutting edge data-driven technology
2016 return on average equity 2016 revenue growth 2016 Adjusted EBITDA growth 2016 profit before tax margin
31 31% 24% 15% 15% 21%
2016 full time employees(2)
16 16
>3,50 3,500
Leading market
positions
9
Countries of
- peration (1)
2016 returning customer business(3)
83%
149 394 2013 2016
Revenue Growth (in millions of EUR)
2.6x 71 137 2013 2016
Adjusted EBITDA (in millions of EUR)
2.0x
4finance: a leader in responsible online/mobile consumer lending
5
Latvia 11% Lithuania 5% Finland 6% Sweden 6% Poland 24% Georgia 9% Denmark 9% Spain 14% Czech Republic 4% Other 3% FF 4% TBI 5%
Geographic diversification
LatAm: 3 countries c.175m people Europe: 13 countries c.120m people 2016 Revenue: EUR 393m
6
Most common customer characteristics:
- Has a bank account
- Expenditure matches
monthly income
- Underserved by
traditional banks
- Uses financing for
lifestyle choices or necessities
- 83% of loans are issued
to returning customers (2016)
Issuance by customer type (2016) Client split by age (2016) Applications by source (2016)
55% 37% 8%
Desktop Mobile Other
4% 18% 17% 25% 18% 12% 6% 18-20 21-24 25-29 30-39 40-49 50-59 60+ 83% to returning customers
1 loan 2 loans 3 loans 4 and more loans
Online/mobile customer profile
17% to new customers
7
Term
- Up to 35 days
- Up to 24 months
Pricing
- Single fee payable at maturity
- Nominal annual interest rate: 58%–96%(3)
- EUR 5–2,120
- EUR 50–3,182
Extension
- Option to extend up to 30 days
- Extension fee payable before extension
- Option to reset scheduled repayment by a
month
- Extension fee payable before extension
Markets
- Latvia, Lithuania, Finland, Sweden,
Poland, Denmark, Georgia, Spain, the Czech Republic, Bulgaria, Romania, Argentina, Mexico, Dominican Republic, Slovakia
- Latvia, Lithuania, Sweden, Poland,
Denmark, Armenia, Spain, Romania, the Czech Republic
Single payment loan Instalment loan
Fee amount
- Monthly interest rate:
6%–28% in Europe; 30%-40% in LatAm(3)
- Monthly interest payments
- Repayment in multiple instalments
Loan amount
(1) Performing online loan portfolio as of 31/12/2016 (2) Average size of loan issued (for Single Payment loan and Instalment loan) and average outstanding balance for Line of credit, data on 31/12/2016 (3) Max term and max loan amount pricing
Distribution channels
- Websites (mobile/tablet/web)
- Apple & Android native apps
- Phone call and SMS
- Offline: agents, loan shops and other partners
- Open-ended revolving credit line
- Monthly interest rate:
8.5%-10.0%
- Limit up to EUR 2,100
- Flexible payment options as long as MRP
is met
- Customers can change their repayment
date
- Finland, Latvia
Line of credit
- Minimum monthly repayment (MRP)
- First withdrawal for free
- Further withdrawals: 11% of amount
% in portfolio(1)
29.2% 69.8%
- Websites (mobile/tablet/web)
- Apple & Android native apps (servicing
- nly)
- Call centre, e-mail, webchat and SMS
(servicing only) Average loan size(2)
- 318 EUR
- 772 EUR
- 1,804 EUR
1.0%
Clear and simple online product structure
8
- What does responsible lending mean to 4finance?
– Marketing: clear, simple and transparent products and terms – Pricing: position rates at lower end of market to ‘self select’ responsible borrowers who ‘shop around’ – Underwriting: credit check and underwriting for ALL loans, including returning, with 30% average new customer acceptance – Customer care: local language, well staffed and responsive teams – Extensions: limited use (only a quarter of customers), no ballooning interest (interest paid for prior month) or ‘cycle of debt’ – Collections: “push” payments from customer to 4finance, no automatic withdrawal from bank accounts … these are practices common to mainstream bank lending … only common characteristic with “payday” lending is 30 day term
- As a responsible lender, we welcome appropriate regulation
– Active in regulatory / legislative consultations through industry associations and at top Group level including Group CEO – Supportive of clear regulatory frameworks – Clear, transparent products and pricing with IT/development resources to adapt products where needed – Launch of ‘responsible borrowing’ global website (www.responsibleborrowing.com) with local sites in 9 markets – Secured Consumer Credit company license from Finansinspektionen in Sweden in September, Microfinance organisation registration from National Bank in Georgia in December, Czech license application underway – Active preparation / monitoring of upcoming regulatory changes and proposals
Responsible lending is fundamental to our business
9
Lending Process
10
Marketing Apply Underwrite Accept and Fund Service
- A diversified
multi-channel and data-driven marketing and acquisition strategy
- Sophisticated
in-house marketing agency and Digital Hub with best-in-class technology
- Prospective
customer applies online
- r through a
smartphone application
- Simple,
convenient, transparent pricing and application process (‘UX’
- ptimized)
- Within a few
seconds, proprietary systems pull data, determine creditworthiness and accept or reject
- Customer
executes legally binding loan agreement online and funds are advanced within a few minutes
- Entire
disbursement process built around the customer experience to ensure satisfaction
- More than 700 in-
house specialists provide support in local language across all markets of
- peration
- Key performance
indicators are constantly monitored to improve customer service and enhance customer retention
Collection
- Well staffed local
in-house debt collection team
- Strong recovery
rates
- Full regulatory
compliance with no controversial debt collection practices
- External agencies
used for 90+ DPD collections
Our lending process: online, efficient, data-driven
11
2016 main loan applications
4.1 million Applications
Proprietary database: >11.5 million loans issued >27 million applications reviewed Traditional, alternative & proprietary data sources
0.5 million Applications
2.5 million Returning Customers 1.6 million New Customers
88% Acceptance Rate 41% Acceptance Rate
EUR 737 million 0.4 million Returning Customers 0.1 million New Customers
54% Acceptance Rate 20% Acceptance Rate
EUR 75 million
SPL Instalment
Robust credit scoring
Notes: (1) Issuance volumes to online customers who have returned, ie taken out and repaid at least one prior loan
83% of loans are issued to returning customers(1)
12
- Local approach: more than 700 professional employees speaking
local language
- Focus on quality: employees incentivized according to their personal
and team performance; regular employee knowledge testing and training
- Accessible: access via multiple channels: phone, e-mail, chat; on
weekends and at night
- Customer centered: strict complaint escalation process, regular NPS
tracking to ensure customer satisfaction
- «Quality Service Star» award received in Poland in 2015 for 2nd
consecutive year
Competitive advantage through Customer Care TrustPilot score by countries Jan 2017 Debt collection principles
- Full regulatory compliance: no controversial collection practices
- Help customers find the best way to pay their loan
- Strong in-house collection teams for early, middle and late collections
- Robust and detailed procedures, based on efficiency and data driven
decisions
- Assuring quality through continuous improvement
High quality international partners
Customer care and debt collection
9.7 9.3 8.2 8.3 9.1 9.2 Vivus.pl Vivus.dk Vivus.fi Vivus.se Zaplo.pl Zaplo.dk
13
Loan Portfolio
14 Net loan portfolio(1), mEUR
Baltics 14% Scandinavia 15% Poland 17% Spain 6% Czech/ Slovakia 4% Georgia/ Armenia 6% Other 0.6% BG/RO (online) 1%
Bulgaria (TBI) 13%
Romania (TBI) 10% SME (TBI) 13%
Net loan portfolio, 31/12/2016
(1) Gross loan portfolio less provisions for bad debts. (2) Excludes finance leases. (3) Continuing operations only
Net portfolio c.EUR 500m following inclusion of TBI Bank
- 87% consumer loans
- 64% online loans / 36% banking
- Online loans issued in 2016: EUR 1,157m
- growth of 9% from 2015
538 805 1,062 1,157 2013 2014 2015 2016
Online loans issued(2), mEUR
Bank(2) Online TBI Bank: 36% (funded at c.2%) Online: 64% (funded at c.12%) 178 241 308 316 178 494 2013 2014 2015 2016
Diversified overall loan portfolio
15
EUR 2,106 m EUR 1,909m EUR 197m
Loans issued 10/2014-9/2016 (730 days) NPLs as of 31/12/2016 Repaid and performing loans 31/12/2016
Conservative online loan provision coverage Non-performing loans (NPLs) as % of total loans issued(1)
9.3% of total loans issued
Stable NPLs to issued loans ratio(1) 9.2% 8.8% 9.0% 9.3%
2013 2014 2015 2016
- Loans that are overdue more than 90 days are considered as non-
performing (NPLs)
- At the end of 2016, NPLs represented 9.3% of total issued loans over
the last 730 days (excluding acquisitions)
- Actual loss experienced on NPLs is approximately 50%-60% (57% as
- f 31/12/2016)
- Provisions for default are typically 5-10 p.p. higher
(1) Total issued loans include the amount of online loans issued, excluding TBI Bank, during 730 days ending 90 days prior to the end of period
57% 66% 80%
9%
Loss given default Provision for default portfolio Provision coverage buffer Overall provision coverage
Online: non-performing loans and provisioning stable
16
0% 5% 10% 15% 20% 2013 2014 2015 2016
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
- Increases in some markets with lower
new issuance (Finland, Lithuania, Sweden)
- Higher NPL ratio countries also have higher
interest rates and revenue
- Impairment / revenue ratio stable
NPL / 2 year loan issuance
Online: asset quality trends for single payment loans
17
Financial Review
18
45 49 58 63 30% 22% 18% 16% 2013 2014 2015 2016
Revenue, m EUR
Net profit from continuing operations (m EUR) and net margin
149 220 318 393 2013 2014 2015 2016 71 90 119 137 2013 2014 2015 2016
Adjusted EBITDA, m EUR Total equity (capital), m EUR
4.6x 3.8x 4.1x 3.6x 2013 2014 2015 2016
Adjusted interest coverage ratio
37% 47% 56% 47% 2013 2014 2015 2016
Capital/net loans, %
Financial highlights - profitable growth
66 113 173 230
2013 2014 2015 2016
19
119 137 2015 2016 318 393 2015 2016 Results show continued progress
- Revenue up 24% to EUR 393.2 million, Adjusted EBITDA up 15%
- Full year cost to income ratio of 48% primarily reflects impact of
acquisitions
- Profit from continuing operations EUR 63.2 million, an increase of 9%
Positive contribution from acquisitions
- TBI Bank: EUR 20m revenue, strong deposit growth in Q4
- Friendly Finance: EUR 14m revenue for H2 2016 (up 65% year-on-year)
- Sharing best practice, strengthening key control functions
Asset quality trends positive, within expectations
- Stable online NPL/sales ratio of 9.3% and impairment/revenue ratio 23%
- Pro-active portfolio management via debt sales (net proceeds demonstrate
prudent provisioning)
- TBI Bank asset quality stable (NPL/gross loans ratio 10.8% with 103%
provision coverage on consumer loans & strong SME collateral coverage)
Revenue
+24%
Net Profit
continuing operations
mEUR
Adjusted EBITDA
mEUR mEUR
58 63 2015 2016 +9% +15%
Highlights of FY 2016 results: EUR 63m profit
20
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 full year results
- Cost base pre-acquisitions only increased by 4% in H2 2016 compared to H1; TBI only includes two months in Q3
- Selective additional marketing investment in Q4 to support sales growth
- Overall cost/income ratio a focus: revenue increase from growth in non-mature products plus cost efficiency improvements
EUR million
11.6 11.8 12.1 14.6 13.8 13.2 11.2 15.1 6.3 8.3 11.9 12.9 13.9 15.2 16.3 13.3 2.4 2.9 0.6 5.2 3.2 2.9 2.9 2.3 6.3 7.3 7.9 11.8 11.5 10.3 11.8 12.7 5.2 10.1 3.2 2.3 38% 39% 39% 50% 47% 45% 48% 53% 0% 10% 20% 30% 40% 50% 60%
10 20 30 40 50 60 70 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Marketing Staff IT Other TBI FF Quarterly Cost/revenue, %
Limited cost growth ex- acquisitions Additional marketing investment
2015 2016
Quarterly expenses breakdown
21
Strategy and Outlook
22
Rationale Why a Bank? What TBI delivers
Offer new products
- Credit cards
- POS
- Secured approval to use
Romanian credit card licence in Poland Access more markets
- EU Passport licence
- New market access over time
Lower cost of funds for online loans
- Access to deposit funding
- EUR 224m of deposits at c.2%
- Capacity to grow
TBI Bank: A strategic acquisition
23
Strengthening foundation Leveraging on technology
- Maintain market leadership in
established core markets
- Marketing Technology for better
targeting and product offering
- Continuous development of scoring
systems
- Electronic wallet, card payment
- Big data: leverage existing
proprietary database for product development
Product roll-out Geographical expansion & diversification
- Developing operations in recently
entered markets: Romania, Argentina, Mexico, Dom. Rep.
- Continue to pursue selective
expansion opportunities
- Continue instalment loan roll-out
- Line of credit launched in Finland &
Latvia, planned in other markets
- Expansion in Latin America,
potentially Asia
- Continuous operational
improvements, including adaptation to new regulation Sustainable growth
- Pilots of additional products
(eg point of sale, credit cards)
Strategy for sustainable growth
24
- 4finance has established a leading business
- Solid full year results, driven by online business, delivering EUR 63 million net profit and EUR 137
million Adjusted EBITDA
- TBI Bank contributing to overall results, with multiple initiatives underway
- New market and product investments not yet mature: 15 of our 33 product instances launched H2
2015 onwards
- Large scale, market leading operator with capabilities in place to deliver future growth
4finance continues to deliver
Conclusion
25
Appendices
26
INCOME STATEMENT, M EUR FY’2015
audited
FY’2016
audited
% Change Interest income 318.3 393.2 24% Interest expense (28.7) (38.7) 35% Net interest income 289.6 354.5 22% Net fee and commission income
- 2.1
n/a Net impairment losses on loans and receivables (77.0) (89.7) 17% General administrative expenses (133.9) (190.4) 42% Other income/(expense) (4.9) 4.5 n/a Profit before tax 73.8 81.0 10% Tax (15.7) (17.8) 14% Profit from continuing operations 58.2 63.2 9% Discontinued operations, net of tax 5.9
- (100)%
Net profit 64.1 63.2 (1)% Net impairment to revenue ratio % 24% 23% Cost to income ratio % 42% 48% Net profit margin (continuing operations), % 18% 16%
Income statement
27
KEY RATIOS FY’2015 FY’2016 Capital/assets ratio 40% 25% Capital/net loan portfolio 56% 47% Adjusted interest coverage ratio 4.2x 3.6x Return on average equity(1) 41% 31% Return on average assets(1) 16% 9% BALANCE SHEET, M EUR FY’2015
audited
FY’2016
audited
% Change Loans and advances 308.3 493.9 60% Cash and cash equivalents 56.9 157.6 177% Assets held for sale
- 16.0
n.m. Property and equipment 4.3 12.3 186% Intangible assets (IT platform) 17.4 39.8 129% Goodwill 0.6 43.4 n.m. All other assets 50.7 168.4 221% Total assets 438.2 931.4 113% Loans and borrowings 229.5 397.2 73% Deposits from customers 9.1 237.1 n.m. All other liabilities 26.3 67.3 156% Total liabilities 264.9 701.2 165% Total equity 173.3 229.4 33% Total equity and liabilities 438.2 931.4 113%
(1) RoAE and RoAA based on net profit from continuing operations
Balance sheet
28 Uldis Arnicāns
Shareholder of 25.5%
Loucas Andreou
Shareholder of 49%, holding shares in trust on behalf of Vera Boiko
Edgars Dupats
Shareholder of 25.5%
Vera Boiko
Beneficial owner Control over shares through Trust Deed
4finance Group S.A.
(Luxembourg), 100%
Tirona Limited
(Cyprus)
Ownership structure
29
Summary corporate structure
For footnote references, please refer to the summary corporate structure in the preliminary Offering Memorandum
30
− Over 20 years of banking experience − CEO of Bancpost, the retail focused Romanian bank − Group Country CEO and Executive VP at Eurobank − 13 years at Barclays Bank and Barclaycard with senior roles including head of strategy for new business opportunities in IT/tech. − From 1997-2000 was seconded to EBA Clearing to establish the pan- European clearing system, working extensively with major banks across Europe and the European Central Bank. − Over 20 years of experience in establishing successful internet enterprises throughout Europe − Managing major web projects for high street banks − Launching SAAS startups in the CEE region − CTO at CashPlay.Co − IT Manager at IFlow Solutions − CEO and Founder at C2D − Part of 4finance management team since 2011 − Over 16 years of experience in the financial sector and audit − Head of Finance Division / Finance Planning and Control Department at Citadele (ex. Parex), a leading local bank in Latvia − Auditing and due diligence projects in PriceWaterhouseCoopers − Member of ACCA − Over 27 years in the Consumer Finance industry, covering major markets such as the UK, Russia, the Middle East and Africa − CEO at RenCredit Africa − Senior Vice President at Renaissance Credit − EMEA Business Development Manager at The Collinson Group
George Georgakopoulos
Chief Executive Officer
Mārtiņš Baumanis
Executive Vice President, Loans
Stuart Watkins
Chief Information Officer
George James Taylor
Executive Vice president, Strategy & Development
Nick Philpott
Group Head of HR and Tax − Over 25 years of experience in the financial sector and the accounting profession, working in London, Moscow and Paris. − Managing Director at Credit Suisse, Renaissance Capital − Partner at Ernst&Young.
Sanda Laicēna
Group Head, Legal and Compliance − Over 20 years of experience in the legal sector − Lawyer at Central Bank of Latvia − Head of Customer Service Legal Department and Deputy Head of Legal Division at Citadele (ex. Parex)
Manu Panda
Chief Risk Officer − Over 23 years of experience in consumer lending & credit card industries, risk experience spans various leadership positons at blue- chip companies, including Barclays, Citibank and GE Capital − Regional Vice president, leading Information Services at MasterCard Asia Pacific − Managing director, Decision Analytics for Experian covering 12 markets across Asia Pacific
Paul Goldfinch
Chief Financial Officer − 25 years of experience in financial sector − CFO of the Corporate and Investment Bank Division of Sberbank (Russia) − Senior roles at UBS, including EMEA Regional Head of Accounting and Controlling − COO/CEO of UBS Bank Russia
Management team
31 4finance aims to operate as a “quasi-public” company in terms of board structures, investor transparency and public reporting
Nicholas Jordan
Chairman 4finance Group SA Supervisory Board
William Horwitz
Member of the Board
- Dr. Cornelius Boersch
Member of the Board
- Mr. Jordan has over 30 years of financial services experience, including 20 years in senior
positions with banks including Goldman Sachs (Co-CEO of Russia and CIS), UBS (Co-CEO of Russia and CIS), Nomura (Chairman & CEO of Russia and CIS) and Deutsche Bank (Vice Chairman). He is currently 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 Barclays (as Director of Collections & Recoveries for Europe Retail & Business Bank) and Capital One (14 years, including as VP of US card recoveries and MD of Capital One Spain). He was formerly president of WDFC SA, guiding the restructuring of the company for FCA licensing and suitability.
- 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. He founded his first company whilst studying, developing it into the smart card broker and RFID- producer ACG AG and successfully floating it on the Frankfurt Stock Exchange in 1999.
Mark Ruddock
Member of the Board
- Mr. Ruddock is CEO of FinstarLabs and has over 15 years of leadership experience in venture-
backed startups, spanning enterprise software, mobile applications and online financial services.
High quality supervisory board
32
{acquisition}
Evolution of 4finance
2008 2009 2010 2011 2012 2014 2013 2015
Number of countries:
2016 2 3 4 4 7 10 10 14 16
LATVIA LITHUANIA FINLAND SWEDEN DENMARK POLAND SPAIN GEORGIA CZECH REPUBLIC BULGARIA ROMANIA ARMENIA ARGENTINA MEXICO DOMINICAN REPUBLIC SLOVAKIA
33
97 105 132 55 65 62 153 169 194 50 100 150 200 2014 2015 2016 SME Retail
Net loan portfolio(1), mEUR Consumer gross portfolio by type, 31/12/2016
(1) Gross loan portfolio less provisions for bad debts, based on management reporting, book value. Includes finance leases
50% 43% 6% 1%
Cash loans (EUR598 av. size, 121k active, 47% av. Rate) POS (EUR269 av. size, 233k active, 35% av. Rate) Cards (EUR259 av. size, 33k active, 28% av. Rate)
- Solid and consistent profitability
− EUR 16.6m net profit in 2016 (vs EUR 16.6m in 2015) − Return on equity of 25% in 2016 − EUR 7.5 million post-acquisition contribution to Group net profit in 2016
- Strong retail business growth
− EUR 42 m additional consumer deposits in Q4 at sub 2% blended cost − EUR 14 m growth in consumer loans in Q4
- Stable asset quality and robust capital ratios
− 10.8% gross NPL ratio with low impairment to revenue ratio − Capital Adequacy Ratio of 22.3% remains robust with substantial headroom
TBI results: solid year end performance
TBI Bank update: solid results
34
- Market entry strategy is based on slow start to minimize cost and maximize option value:
- Extensive market research and diligence, in-house and with external consultants
- Low initial capital injections: <EUR 3m in 6 months
- Low roll-out risk
- Market efficiency tested and scorecards fully ready in 6 months
- Target month-on-month profitability within 18 months
- Denmark case: month 13
Research Soft Launch Prepare
Understand:
- Market
- Pricing
- Competition
- Regulation
- Payments
Ramp-up
- 400
- 200
200 400 600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Net profit (loss) Marketing expenditure
Marketing expenses vs. net profit (loss)
Breakeven First 18 months 2,000 4,000 6,000 8,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Net loan portfolio Capital injected (cumulative) kEUR
Capital injected vs. net loan portfolio
First 18 months kEUR Establish:
- Licenses
- Office
- Key team
- Develop ‘minimum
viable’ product
- Start lending
- Limited marketing
- Rapid feedback to
develop product and risk scorecard
- Full marketing
- Brand awareness
- Consumer
education
- Economies of scale
- Understand repeat
customer behaviour
Market entry strategy: example of Vivus in Denmark (2012)
New market entry: case of Denmark
35
- Highly flexible and well-structured business model of 4finance
allows the Group to smoothly withdraw from markets where
- perations do not prove to be viable, as demonstrated by the exit
from the Estonian market:
- In March, 2015, Management of 4finance decided to exit the
Estonian market after less than 2 years of operation
- Market exit executed in 4.5 months
- Marketing expenses reduced by 97% in the first month following the
decision
- # of staff reduced by 45% in the first two months following the
decision
- 77% of net loan portfolio value collected in the first 3 months
- At the final exit date, 21% more cash recovered compared to the
net loan portfolio at the decision date
- Overall, an efficient exit with minimum impact on the total
performance of the Group
- 60
60 120 180 240 300 360
Month 1 Month 2 Month 3 Month 4 Month 5
Cash inflows Administrative costs Net inflows
Cash flows during the exit
kEUR
Net loan portfolio vs. recovered cash
4.5 months to complete exit (since March 11, 2015)
835 kEUR 1,013 kEUR
350 180 112 90 40 242
Net portfolio Cash flow 1 Cash flow 2 Cash flow 3 Cash flow 4 Cash flow 5 Total cash
Net loan portfolio as of 11/03/2015 Total cash recovered: Sale of portfolio Sale of portfolio Office closure
(1)
(1) Excluding charges from the Group’s HQ (IT and management)
Market exit: case of Estonia
36
4finance - Investor Relations
Email: investorrelations@4finance.com Contact: James Etherington Phone: +44 7766 697 950 Registered office: Lielirbes iela 17a-8, Riga, LV-1046, Latvia