DGAP-News: 4finance S.A.: 4FINANCE HOLDING S.A. REPORTS RESULTS FOR THE YEAR ENDING 31 DECEMBER 2021

 

4FINANCE HOLDING S.A. REPORTS RESULTS FOR THE YEAR ENDING 31 DECEMBER 2021

Solid FY 2021 performance with net profit of €33.0 million and Adjusted EBITDA of €108.2 million

Growth in net receivables in H2 in both online and banking businesses, driven by strong loan issuance

Medium-term capital structure in place following successful 5-year EUR bond issue

25 February 2022. 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 2021 (the 'Period').

Operational Highlights

- Customer repayment dynamics continue to be good, with fundamental asset quality metrics stable across the business.

- Online loan issuance volume of €221.4 million in Q4 2021, up 16% year-on-year, and closely tracking Q3 levels despite the reintroduction of Covid-related restrictions in most markets in the winter. Demand for credit remained good, with issuance driven by continued strong performance in Poland and further growth in Spain.

- In November, the Group's loan issuance since inception surpassed the €9 billion milestone.

- Near-prime portfolio development aligned with ability to fund those loans via TBI Bank. During 2021, over €20 million of Lithuanian near-prime loans were sold to TBI Bank.

- TBI Bank loan issuance volume during the Period grew by 50% year-on-year to €523.4 million from €349.8 million in the prior year period, with increased issuance in all products.

Financial Highlights

- Interest income of €296.0 million in the Period, down 4% from €307.9 million in the prior year period. Interest income of €80.1 million for the fourth quarter is 4% up QoQ and 13% year-on-year. Interest income from continuing products has grown every quarter since Covid impact in Q2 2020.

- The cost to income ratio for 2021 improved to 55.4% vs 56.9% in the prior year. Cost discipline and operational efficiency remain in focus both in online business as well as at TBI, where the income growth outpaces the increase in costs.

- Good fundamental asset quality indicators, disciplined lending and an active NPL debt sales market resulted in a significant reduction in net impairment charges (down 36% YoY) and cost of risk (9.0% for the Period vs 14.2% in the prior year period).

- Adjusted EBITDA was €108.2 million for the Period, up 44% year-on-year, delivering 37% annual adjusted EBITDA margin vs 24% in the prior year period. The full interest coverage ratio as of the date of this report is 2.6x.

- Post-provision operating profit for the Period was €61.2 million, benefiting from the 36% year-on-year reduction in net impairment charges, with a profit before tax of €52.3 million.

- Net receivables totaled €658.1 million as of 31 December 2021, up 25.0% during the year. During the quarter, TBI Bank grew net receivables another 7% and the online business portfolio increased 1% QoQ.

- Improved overall gross NPL ratio at 11.3% as of 31 December 2021 (12.7% for online), compared with 17.0% as of 31 December 2020 (19.2% for online). TBI NPL ratio has improved significantly at 10.7% as of 31 December 2021, compared with 15.7% as of 31 December 2020.

Liquidity and funding

- Strong liquidity position, with €80.1 million of cash in the online business at the end of the Period.

- Strong capital position at TBI Bank (22.9% capital adequacy ratio) despite continued growth in risk weighted assets. Tier 2 debt is now registered with BNB and is included in capital and liquidity ratios. Use of an updated approach (ASA) to calculating operational risk in Q4 has also improved capital ratios.

- Completion of bond refinancing process in October, with new issue of 5-year EUR bonds raising €175.0 million to redeem the remaining USD 200.0 million bonds. Balanced medium-term capital structure in place, with two bond issues of similar sizes, in euros, maturing in February 2025 and October 2026.

Kieran Donnelly, CEO of 4finance, commented:

"Customer demand for credit accelerated in the second half of the year, taking us past the €9bn loan issuance milestone and helping to deliver our highest EBITDA margin in years. We are emerging from the pandemic with a leaner business, a continued focus on cost efficiency, a robust cash position and secure funding. TBI Bank continues to grow the reach of its business organically, and as a Group we have successfully scaled up sales of near prime loans to the bank.

"I want to thank all our staff for their hard work in delivering these strong operational and financial results. We have good foundations for growth in 2022 as people continue to value a safe, regulated option for convenient credit."

Contacts

Contact:		James Etherington, Group Chief Financial Officer
Email:		[email protected] / [email protected]
Website:		www.4finance.com

 

Conference call

A conference call with management to discuss these results is scheduled for Wednesday, 2 March at 15:00 UK time. To register, please visit www.4finance.com.

The conference call will be recorded for transcription and reference purposes. For those participating in the Q&A session, please note that name and institution details provided in the call registration process may appear in the transcript of the conference call that will be made available at www.4finance.com.

About 4finance

Established in 2008, 4finance is one of Europe's largest digital consumer lending groups with operations in 9 countries.

Leveraging a high degree of automation and data-driven insights across all aspects of the business, 4finance has grown rapidly, issuing over €9 billion since inception in single payment loans, instalment loans and lines of credit.

4finance operates a portfolio of market leading brands, through which, as a responsible lender, the firm offers simple, convenient and transparent products to millions of customers who are typically underserved by conventional providers.

4finance has group offices in Riga (Latvia), London and Luxembourg, and currently operates in 9 countries in Europe. The Group also offers deposits, in addition to consumer and SME loans through its TBI Bank subsidiary, an EU licensed institution with operations primarily in Bulgaria and Romania.

Forward looking statements

Certain statements in this document are "forward-looking statements". These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements.

Rounding

Some numerical figures included in this report have been subject to rounding adjustments. Accordingly, numerical figures shown for the same category presented in different tables may vary slightly, and numerical figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Inside information

This announcement contains inside information as stipulated under the Market Abuse Regulation.
Key Financial Ratios

	Year Ended 31 December 2021		Year Ended 31 December 2020		Year Ended 31 December 2019
Capitalisation
Net receivables (€m) (1)	658.1		526.4		578.9
Total assets (€m)	1,057.5		949.7		973.1
Total equity (€m)	177.9		150.0		165.8
Equity / assets	16.8 %		15.8 %		17.0 %
Tangible common equity / tangible assets (2)	13.6 %		11.6 %		10.9 %
Equity / net receivables (3)	27.0 %		28.5 %		28.6 %
Adjusted interest coverage (4)	2.6x		1.8x		2.4x
TBI Bank consolidated capital adequacy (5)	22.9 %		19.4 %		18.9 %
Profitability
Net interest margin: (6)
- Online	65.7 %		60.3 %		81.3 %
- TBI Bank	22.9 %		24.0 %		24.8 %
- Overall group	37.1 %		39.7 %		54.5 %
Cost / income ratio (7)	55.4 %		56.9 %		51.3 %
Post-provision operating profit margin (8)	20.7 %		7.0 %		15.2 %
Normalised Profit before tax margin (9)	18.2 %		2.2 %		11.4 %
Normalised Return on average equity (10)	21.1 %		(10.1) %		16.1 %
Normalised Return on average assets (11)	3.5 %		(1.7) %		2.6 %
Asset quality
Cost of risk: (12)
- Online	15.4 %		24.2 %		27.5 %
- TBI Bank	5.7 %		6.1 %		4.6 %
- Overall group	9.0 %		14.2 %		17.1 %
Net impairment / interest income (13)	21.2 %		31.7 %		29.0 %
Gross NPL ratio: (14)
- Online	12.7 %		19.2 %		24.9 %
- TBI Bank	10.7 %		15.7 %		16.2 %
- Overall group	11.3 %		17.0 %		20.7 %
Overall group NPL coverage ratio(15)	108.9 %		106.0 %		102.0 %
Loan loss reserve / gross receivables, %	12.3 %		18.1 %		21.1 %

 

 

Definitions and Notes below. For further definitions please see the appendix. For quarterly asset quality ratios please see page 18.

Normalised ratios are adjusted to remove the effect of non-recurring items, net FX and one-off adjustments to intangible assets.

(1) Gross receivables (including accrued interest) less impairment provisions

(2) Tangible equity is Total Equity less Intangible Assets. Tangible Assets are Total Assets less Intangible Assets

(3) Total equity / net customer receivables (including accrued interest)

(4) Adjusted EBITDA / interest expense for the relevant period (n.b. not equal to the full covenant coverage ratio calculation)

(5) TBI Bank (Tier One Capital + Tier Two Capital) / Risk weighted assets (calculated according to the prevailing regulations of the BNB)

(6) Annualised net interest income / average gross loan principal

(7) Operating costs / operating income (revenue)

(8) Post-provision operating profit (which does not include non-recurring items, net FX and D&A) / interest income

(9) Profit before tax / interest income

(10) Annualised profit from continuing operations / average equity (total equity as of the start and end of each period divided by two)

(11) Annualised profit from continuing operations / average assets (total assets as of the start and end of each period divided by two)

(12) Annualised net impairment charges / average gross receivables (total gross receivables as of the start and end of each period divided by two)

(13) Net impairment charges on loans and receivables / interest income

(14) Non-performing receivables (including accrued interest) with a delay of over 90 days / gross receivables (including accrued interest)

(15) Overall receivables allowance account / non-performing receivables