Q2 report 2018, Avida Holding AB

Transcription

1 Q2 report 2018, Avida Holding AB Second quarter highlights Group results The strong volume growth continues with an increase in net loans of SEK1,902m (92%) YoY and SEK561m (16%) from previous quarter, ending at SEK3,968m. Net revenues increase ending at SEK105m, an increase of SEK30m (39%) YoY and SEK9m (10%) in the quarter. Earnings before tax at SEK20.5m, an increase of SEK4m (23%). The CET1 ratio is 14.9% at the end of second quarter 2018, compared to Avida s target of 13%. Consumer Finance Strong growth with YoY increase in net loans of SEK1,148m (65%). Positive development also during the second quarter with an increase of SEK321m (12%), ending at SEK 3,012m. The net interest margin was 10.9% (11.0% in Q1) driven by interest yields decreasing from 12.1% in Q to 12.0% in Q due to stronger growth in lower risk and higher ticket segments. Loan loss ratio (rolling 4 quarters) of 2.0% (1.5% in Q1). The increase is due to transition to IFRS9.

2 Business Finance Significant growth during the quarter with increased net lending of SEK174m (22%) and SEK658m (221%) YoY, ending at a total loan book of SEK957m. Business Finance operations continue to grow rapidly and winning significant clients. In Q2 Avida have signed its first customer in Belgium. This is in line with Avida s strategy to grow in Europe together with strategic partners. Net interest margin of 20.8% (23.0% in Q1). The decrease in net interest margin is due to a change in strategy and continuous shift towards more credit worthy clients to enable faster and more stable growth. Loan loss ratio (rolling 4 quarters) of 2.1% (4.6% in Q1). This deduction is almost entirely related to the sale of old B2C NPLs. In B2B, where the growth is occurring, there are close to no losses. Key developments in Consumer Finance operations Consumer Finance operations continue to show growth during the quarter and YoY with an increase of SEK321m (12%) and SEK1,148m (65%) respectively, ending at SEK3,012m. During the quarter Non Performing Loans (NPLs) have been sold on a monthly basis, and additionally a stock of older NPLs was sold in Sweden. All markets are showing strong growth, where Sweden and Finland had the most positive development. Norway is showing a slower development, but the team has implemented new strategies to strengthen the development which should result in increased growth over the next few quarters. The Consumer Finance business is highly scalable, and Avida has implemented several initiatives that will greatly improve the long term cost efficiency and risk management. The change of the consumer ledger in all countries during 2018 has started in Q2 with expected first part launch during the second half This change will improve Avida s speed and flexibility particularly when adding new products and features to existing products going forward. Key developments in Business Finance operations Business Finance increased its volumes by SEK174m (22%) during the quarter and by SEK658m YoY, ending at SEK957m. A key driver for the growth is the factoring agreement with Norsk Gjenvinning that went live in Q1 and grew through Q2. The agreement is a significant mileston for Avida, and shows that the company can also handle larger customers with complex needs. The significant investments made in the Business Finance segment keeps paying off, resulting in positive development for the quarter. The business set up is very scalable and the marginal profitability of new agreements is expected to be highly accretive.

3 Significant events after the end of the quarter Issue of new shares In the beginning of July, the Board of directors decided to issue 4,000,000 shares, in total NOK 150m (SEK 160m). Both new and existing investors participated. With increased CET1 capital Avida is well capitalized for the lending growth going forward. Outlook Avida expects continued strong growth in lending volumes going forward and maintains our expectation for growth in net loans to customers through 2018, ending at SEK5,000m. We will continue our focus on improving the cost efficiency. Both Business Finance and Consumer Finance have grown according to plan in Q2 and we expect the growth to continue in the second half and margins to improve as we get scale advantages. Within Business Finance the operation continues to grow rapidly and winning significant clients in the Nordic and European market. We will constantly evolve our product offering to support our ambitious growth targets. Consumer Finance had a good development in the quarter in Finland and Sweden. The development in Norway however is weaker than expected. The focus is on optimizing our score models to better identfiy proftiable segments to fuel our growth. The cost level during the quarter is within plan but have been higher than in the first quarter due to investments in IT and organisation. Actions have been implemented to better control the cost development, and the Board remains confident in reaching the targets set out for 2018 with SEK 5bn in credit volume and continued improvements in the C/I ratio. Avida sees good growth prospects in all of the three geographic markets, and our strategy of focusing on both Consumer and Business Finance gives us ample room to allocate capital to the most profitable opportunities. We continue to see record volume growth in both Consumer Finance and Business Finance which will impact positively on income and profit for coming quarters. About Avida Avida Holding AB owns Avida Finans AB (regulated by Finansinspektionen and offers consumer loans and business focused financing in Sweden, Norway and Finland) and Avida Inkasso AS (conducting collection services in Norway). Avida Finans AB is also conducting collection services in Sweden. Avida was acquired by new owners in second half Avida has ambitious growth plans for building a high growth and high quality Business Finance and Consumer Finance operation. Stockholm, August 31, 2018 Board of Directors, Avida Holding AB

4 General accounting principles The interim report is prepared with the same accounting principles as in the annual report except for financial instruments, which are subject to accounting standard IFRS 9 that took effect as of 1 January IFRS 9 introduces new approaches to the classification, measurement and impairment of financial instruments. The only significant change of accounting principle that the IFRS 9 has on this interim report, is in relation to impairments. A transition from IFRS 9 to IAS 39 is, for the parts related to impariments, a change from incurred loss model to an expected loss model. The measurement of expected loan losses shall reflect an unbiased and probability-weighted amount that is determined by evaluating the range of possible outcomes as well as incorporating the time value of money. Also, the entity should consider reasonable and supportable information about past events, current conditions and reasonable and supportable forecasts of future economic conditions when measuring expected credit losses. The Standard defines expected credit losses as the weighted average of credit losses with the weightings being the respective risks of a default occurring. Not every possible scenario must be considered but, at a minimum, the risk or probability that a credit loss occurs must be considered, even if the probability of a credit loss occurring is low. All accounts are classified into one of three stages, Stage 1 (no significant change in risk since initial recognition), Stage 2 (significant change in risk since initial recognition) or Stage 3 (more than 90 days past due). For accounts in Stage 1, the expected loss is calculated the next 12 months. For accounts in Stage 2 and Stage 3, expected lifetime loss are calculated. To define a significant change, we compare the probability of default based on the application score (initial recognition) and behaviour score (today). In Consumer finance, loss is calculated from a forecast model which estimates monthly invoices and payments, default and closing of accounts, balances, recoveries and losses for each customer. The loss is calculated by discounting expected loss using the effective interest rate for the individual loan. Various scenarios are calculated for each customer, and the weighted average scenario is applied. In Business finance, loss is calculated from an PD and expected LGD model based on each customers credit score. Avida has decided to adopt the transitional rules published by the EU that allow a gradual phasing-in of the effects of IFRS 9 on the capital adequacy.

5 Profit and Loss Statement - Avida Holding AB

6 Balance Sheet Avida Holding AB SEKm Cash and balance to central bank Certificates and bonds Loans to credit institutions Net loans to customers Shares and shares in ass. Companies Intangible assets Machines and inventories Other assets Prepaid expenses and accrued income Total assets Deposits from customers Other liabilities Accrued expenses and prepaid income Deferred tax liabilities Total liabilities Share capital Retained earnings Earnings in year Total equity Total equity and liabilities Net loans increased by SEK1,902m YoY and SEK561m during Q leading to a total net loans of SEK3,968m. The funding is mainly comprised of deposits and equity with deposits increasing by SEK2,122m YoY and SEK652m QoQ leading to a liquidity portfolio of SEK762m. The equity base increased by SEK157m YoY and increased by SEK15m Q mainly due to audited profit for Q1, implying a capital ratio of 14.9% - well above the capital targets and requirements.