TIDMMCRB
RNS Number : 2918O
MCB Finance Group PLC
05 August 2014
MCB FINANCE GROUP PLC
Unaudited Results for the Period Ending 30 June 2014
MCB Finance Group plc (AIM: MCRB.L) ("MCB", the "Group" or the
"Company"), which provides consumer finance solutions to retail
customers in Finland, Estonia, Latvia, Lithuania and Australia,
today announces its unaudited results for the three month and six
month periods ending 30 June 2014.
Financial Highlights
-- Consolidated Loan Principal Issued increased by 3.5% to
EUR23.8m in Q2 2014 compared to the previous quarter (Q1 2014:
EUR23.0m), and decreased by 3.3% compared to the prior year period
(Q2 2013: EUR24.6m), primarily on account of the Finnish business
transition;
-- Consolidated Revenue grew by 9.0% to EUR9.1m in Q2 2014 (Q1
2014: EUR8.4m), an increase of 3.6% over the prior year period (Q2
2013: EUR8.8m);
-- Consolidated Impairment Costs were 20.0% of Revenue for Q2
2014 (Q1 2014: 19.0%; Q2 2013: 29.3%), reflecting strong overall
credit and collection performance in both the first and second
quarters;
-- Operating Profit for the Established Markets Business was
EUR2.5m for Q2 2014, up 13.8% on the previous quarter (Q1 2014:
EUR2.2m) and up 11.5% on the prior year period (Q2 2013:
EUR2.2m);
-- Pro Forma Profit Before Tax for the Established Markets
Business was EUR0.7m for Q2 2014 (Q1 2014: EUR0.4m; Q2 2013:
EUR0.8m), after deducting Financing Costs of EUR1.8m (Q1 2014:
EUR1.8m; Q2 2013: EUR1.4m);
-- Group Pro Forma Profit After Tax for Q2 2014 was EUR0.2m (Q1
2014: Loss of EUR0.2m; Q2 2013: Loss of EUR0.5m), after EUR0.4m
operating losses from New Businesses (Q2 2013: EUR1.1m loss) and
before unrealised foreign exchange gains on borrowings, translation
differences and other non-cash items;
-- Group Net Income for Q2 2014 was EUR1.2m (Q1 2014: EUR0.1m; Q2 2013: EUR0.1m).
Further information:
MCB Finance Group Plc
Paul Aylieff, Chief Financial
Officer +372 501 4064
paul.aylieff@mcbfinance.com +44 7599 000007
Nominated adviser and broker:
Sanlam Securities UK Limited
Lindsay Mair +44 20 7628 2200
Media enquiries:
Allerton Communications
Peter Curtain
peter.curtain@allertoncomms.co.uk +44 20 3137 2500
BUSINESS ACTIVITIES
MCB Finance Group is a leading consumer finance company
providing fast, convenient and flexible credit solutions under the
Credit24 brand to retail customers in Finland, Estonia, Latvia and
Lithuania (together the "Established Markets"), as well as in
Australia. In the Established Markets, the Company is a leading
provider of unsecured credit, providing loans and credit lines up
to EUR3,000 to qualifying customers with maturities of up to two
years. Loan products are designed to suit customers' needs, with
simple and transparent terms and flexible repayment schedules. The
Company operates in a segment of the market that is typically
under-served by larger financial institutions, and is focused on
servicing high quality customers with strong credit histories.
Loans are currently offered online through the Company's Credit24
branded websites in each market, as well as through certain
distribution partners. In addition, the Group offers credit lines
and online sales financing solutions to retail customers under the
Sving brand.
LOAN VOLUMES & REVENUE
On a consolidated basis, the Group issued EUR23.8m in Loan
Principal during Q2 2014, up 3.5% from the previous quarter (Q1
2014: EUR23.0m) and down 3.3% from the prior year period (Q2 2013:
EUR24.6m), primarily reflecting the Finnish business transition.
Consolidated Revenue for Q1 2014 was EUR9.1m, up 9.0% on the
previous quarter (Q1 2014: EUR8.4m) and 3.6% on the prior year
period (Q2 2013: EUR8.8m).
Established Markets Business
Loan volumes in the Group's Established Markets Business
(consumer lending under the Credit24 brand in Finland, Estonia,
Latvia and Lithuania) increased in every market in Q2 2014 compared
to the previous quarter. As measured by loan principal issued,
volume growth in Q2 2014 for the Established Markets Business
increased by 3.1% compared to the previous quarter, with quarterly
growth recorded in all countries (Finland +1.1%; Estonia +2.3%;
Latvia +4.8%; Lithuania +4.5%). Primarily as a result of the
Finnish business transition, Loan Principal Issued to customers in
the Established Markets Business decreased by 3.3% to EUR23.1m in
Q2 2014 over the prior year period (Q2 2013: EUR23.9m), but
increased by 3.1% over the previous quarter, up from the 1.0%
quarterly increase recorded in Q1 2014 (Q1 2014: EUR22.4m; Q4 2013:
EUR22.2m).
Loan Principal Issued
(EUR000s) Q2 Q1 Q2 2014 Q4 Q3 Q2 Q1 Q2 2014 2013
2014 2014 vs Q1 2013 2013 2013 2013 vs Q2
2014 2013
---------------- ------- ------- -------- ------- ------- ------- ------- -------- -------
Finland 7,435 7,351 1.1% 7,050 6,906 8,708 8,450 -14.6% 31,113
Estonia 3,437 3,360 2.3% 3,437 3,552 3,472 3,291 -1.0% 13,751
Latvia 3,336 3,182 4.8% 2,992 3,191 3,384 3,342 -1.4% 12,910
Lithuania 8,871 8,487 4.5% 8,678 8,614 8,352 8,869 6.2% 34,513
Established
Markets 23,079 22,380 3.1% 22,157 22,262 23,916 23,952 -3.5% 92,287
New Businesses 692 577 19.9% 517 906 670 541 3.3% 2,634
Consolidated
Group 23,771 22,957 3.5% 22,674 23,168 24,586 24,492 -3.3% 94,921
---------------- ------- ------- -------- ------- ------- ------- ------- -------- -------
Fees and interest generated from loans issued in Q2 2014 in the
Established Markets Business were EUR9.1m, up 5.3% from the
previous quarter (Q1 2014: EUR8.6m) and down 4.4% from the prior
year period (Q2 2013: EUR9.5m), primarily reflecting the Finnish
business transition. The average maturity of loans granted during
Q2 2014 was 9.1 months (Q2 2013: 8.5 months). The increase in loan
maturities during 2014 is expected to support continued revenue
growth, as income is recognised over the maturity of the issued
loans.
Total Revenue for the Established Markets Business for Q2 2014
increased by 8.1% to EUR8.8m over the previous quarter (Q1 2014:
EUR8.2m) and by 2.4% over the prior year period (Q2 2013: EUR8.6m).
Lithuania recorded revenue growth of 27.7% and Estonia 6.9% for Q2
2014 compared to the prior year period. The lower revenue recorded
in Finland and Latvia in Q2 2014 compared to the prior year period
reflects, respectively, the transition of the Finnish business and
the increased competitive pressure and tightening of credit
settings made at the end of Q2 2013 in Latvia.
Business Revenue
(EUR000s) Q2 2014 Q1 2014 Q2 2014 Q2 2013 Q2 2014 Year
vs Q1 vs Q2 2013
2014 2013
--------------------- -------- -------- -------- -------- -------- -------
Finland 1,743 1,431 21.8% 2,297 -24.1% 7,298
Estonia 1,832 1,774 3.3% 1,714 6.9% 6,806
Latvia 1,179 1,173 0.5% 1,426 -17.3% 5,466
Lithuania 4,086 3,796 7.6% 3,199 27.7% 13,023
Established Markets 8,840 8,174 8.1% 8,636 2.4% 32,593
New Business 261 179 45.8% 148 76.4% 564
Group Consolidated 9,101 8,353 9.0% 8,784 3.6% 33,157
--------------------- -------- -------- -------- -------- -------- -------
OPERATIONAL REVIEW
Finnish Business Transition
The credit line product launched in Finland on 1 June 2013
continued to experience strong customer demand in Q2 2014, with new
contract issuance volume continuing to run ahead of expectations.
As anticipated prior to launch, during the transition to credit
line products from the historical instalment loan product offering
(which the Company ceased issuing in June 2013), Loan Principal
Issued and Revenue generated in the Finnish business declined from
pre-June 2013 levels. For Q2 2014, Finnish Revenue was EUR1.7m, a
decrease of 24.1% over the prior year period (Q2 2013: EUR2.3m),
but an increase of 21.8% over Q1 2014 Revenues of EUR1.4m, showing
the strong momentum in new credit line contract issuance starting
to drive revenue growth at a rate which outweighs the impact of
declining revenues from pre-June instalment loan issuance. As a
result, Revenue and profits growth for the Finnish business are
expected to increase in line with the growth of issued credit
lines, as customers make additional draws on new and existing
lines, and as credit settings are optimised and principal issued
increases following the initial months' experience in issuing the
new credit line products.
The successful launch of the Group's credit line products in
Finland points to the potential for the business to secure strong
incremental volume growth and resulting market share gains in the
Finnish market. In addition, the platform and product development
undertaken in connection with the re-positioning of the Group's
Finnish business offers the opportunity to roll out an attractive
range of credit line products in other markets during H2 2014.
Credit Quality
Overall credit quality remained strong during Q2 2014 with
expected loss rates for loan cohorts granted during the period of
5.1% for the Established Markets Business, below the low end of the
Group's 6%-7% target range. Established Markets Business Impairment
Costs for Q2 2014 were 19.7% of Revenues, compared to 29.0% in the
prior year period and 18.3% in the previous quarter.
The 9.3 percentage point improvement in Established Markets
Business Impairment Costs as a percentage of Revenues in Q2 2014
compared to Q2 2013 was underpinned primarily by the selected
tightening of credit settings in Latvia and Finland undertaken at
the end of Q2 2013, as well as by improving collection performance
in Latvia following changes made to collection partner arrangements
in that country in mid-2013.
New Businesses
During 2012, 2013 and H1 2014, the Company undertook a series of
investments with a view to developing various new businesses and
new products (namely, credit line products, consumer lending in
Australia and online sales financing in Lithuania), together with
related technology platform developments, identified by management
and the Board as being attractive areas of future growth. In
addition, the investments made in new businesses, new products and
transaction platforms are considered important to diversify the
Company's sources of future revenue, further enhance operating
efficiency and to help mitigate risks arising from potential future
regulatory changes or credit cycles.
For Q2 2014, costs relating to investments applicable to New
Businesses recognised in the Consolidated Statement of
Comprehensive Income totalled EUR0.4m (Q1 2014: EUR0.5m; Q2 2013:
EUR1.1m).
Australia
From the end of July 2013, the Australian business, which was
launched in July 2012, has been run with a greater focus on
near-term profitability, rather than building national market
awareness at this stage of its development. The resulting reduction
in operating costs in the business resulted in a significant
reduction in the operating losses previously being incurred to grow
the business nationally. Operating costs have now been reduced by
approximately 75% from July 2013 levels, significantly reducing
operating losses incurred in the Australian business. Any
acceleration in Australian lending volumes remains subject to a
stronger track record of profitability and a strengthened Group
capital structure.
Sving / Online Sales Finance
The Company's online sales financing platform and business,
which was launched in December 2012, offers a payment and credit
line product to customers purchasing goods online from internet
retailers, as well as flexible cash loans under the same credit
lines. The service is marketed and operated under the Sving
brand.
In the period since the launch of Sving, the business has signed
contracts with the majority of leading online retailers in
Lithuania, and has already established a leading presence for
online sales financing in the market. Sving has currently over
8,200 registered customers with customer acquisition growing and
user receptivity to Sving's flexible and convenient product
features continuing to be favourable.
Management believes that the Sving business offers an attractive
opportunity for the Company to grow a sizeable and profitable
business under a new brand, addressing a new socio-demographic
segment of the market, and will seek to roll out the Sving business
in a number of other Established Markets, subject to a strengthened
Group capital structure.
More information on the Group's Online Sales Finance business
can be found at www.sving.com.
Economic Environment
The economic environment and outlook for the Group's Established
Markets Business remained generally stable in the second quarter
ending 30 June 2014. Based on current Eurostat estimates, expected
year-on-year GDP growth rates for 2014 range between 0.2% (Finland)
and 3.8% (Latvia), with all the Baltic markets expected to
experience GDP growth rates in 2014 ahead of the EU average.
Unemployment in 2014 is expected to be flat to declining in
Estonia, Latvia and Lithuania and to increase slightly in
Finland.
GDP Growth Rates
(% p.a.) 2012 2013F 2014F 2015F
------------------------ -------- -------- -------- --------
Finland -1.0% -1.4% 0.2% 1.0%
Estonia 3.9% 0.8% 1.9% 3.0%
Latvia 5.2% 4.1% 3.8% 4.1%
Lithuania 3.7% 3.3% 3.3% 3.7%
EU average -0.4% 0.1% 1.6% 2.0%
Australia 3.1% 2.4% 3.0% 2.8%
Source: Eurostat 05/05/2014, Reserve Bank of Australia
05/2014 (mid-point of range)
Regulatory Environment
The Estonian, Latvian and Lithuanian governments are currently
considering changes to the regulatory environment, which will
likely come into force during 2015, including certain annual
percentage rate and fee limitations, as well as enhanced customer
diligence and operational requirements for consumer lenders. The
Company remains confident of its ability to comply fully with, as
well as operate successfully under, the new regulations.
FINANCIAL REVIEW
To facilitate comparison and provide greater transparency
regarding underlying profitability, details are provided on the
performance of the Established Markets Business and New Businesses
separately, as well as on the proportion of central costs dedicated
to supporting each area of activity. Details of the performance of
the Established Markets Business and New Businesses are provided
below.
Established Markets Business
Revenues for Q2 2014 for the Established Markets Business were
EUR8.8m, an increase of 2.4% over the prior year period (Q2 2013:
EUR8.6m), underpinned by a 15.7% increase in Net Customer Loan
Receivables to EUR44.9m in Q2 2014 compared to EUR38.8m in Q2 2013.
Principal Issued decreased by 3.5% to EUR23.1m in Q2 2014 over the
prior year period (Q2 2013: EUR23.9m), primarily reflecting the
Finnish business transition, but increased by 3.1% over the
previous quarter (Q1 2014: EUR22.4m).
Impairment Costs for the Established Markets Business were
EUR1.7m for Q2 2014, equivalent to 19.7% of Revenue, down from
EUR2.5m or 29.0% of Revenue in Q2 2013. Impairment cost levels for
the Established Markets Business are currently just below the
Company's targeted range, with overall credit quality remaining
strong during the period with expected loan loss rates for loans
granted during the second quarter of 2014 of 5.1%, below the lower
end of the Group's 6%-7% target range. The selective tightening of
credit settings in Latvia and Finland, as well as changes made to
collection partners in Latvia, contributed to the decrease of
Impairment Costs in Q2 2014.
Direct and Administrative Costs related to the Established
Markets Business for Q2 2014 were EUR3.4m, equivalent to 38.2% of
Revenue up from EUR3.3m (or 40.4% of Revenue) in Q1 2014 and
EUR2.8m or 32.3% of Revenue in Q2 2013.
As a result, the Contribution Margin (profit from operations
before central overhead and financing costs) from the Established
Market Business for Q2 2014 was EUR3.7m, or 42.1% of Revenue, an
increase of 9.9% over the previous quarter (Q1 2014: EUR3.4m or
41.4% of Revenue) and an increase of 11.2% over the prior year
period (Q2 2013: EUR3.3m or 38.7% of Revenue).
Allocating Central Costs between the Established Markets
Business and New Businesses, based on activity and function, showed
an Operating Profit for Q2 2014 for the Established Markets
Business of EUR2.5m, or 27.8% of Revenue, up 13.8% from the
previous quarter (Q1 2014: EUR2.2m or 26.5% of Revenue) and up
11.5% over the prior year period (Q2 2013: EUR2.2m or 25.6% of
Revenue).
Established Markets Business Financial Performance
Q2 2014 H1 2014
vs Q2 vs H1
(EUR000s) Q2 2014 Q2 2013 2013 H1 2014 H1 2013 2013 2013
-------------------------------- -------- -------- -------- ---------- ---------- -------- ---------
Principal Issued 23,079 23,916 -3.5% 45,459 47,868 -5.0% 92,287
Net Customer Loan Receivables 44,935 38,834 15.7% 44,935 38,834 15.7% 40,306
Fees and interest due
from loans issued in period 9,054 9,472 -4.4% 17,652 19,108 -7.6% 35,632
Revenue 8,840 8,636 2.4% 17,014 16,360 4.0% 32,593
Impairment Costs (1,744) (2,501) -30.3% (3,236) (4,405) -26.5% (7,868)
as % Revenue 19.7% 29.0% 19.0% 26.9% 24.1%
Direct and Administrative
Costs (3,378) (2,791) 21.0% (6,677) (5,636) 18.5% (11,698)
as % Revenue 38.2% 32.3% 39.2% 34.4% 35.9%
Contribution Margin -
Established Markets 3,718 3,344 11.2% 7,101 6,319 12.4% 13,027
as % Revenue 42,1% 38.7% 41.7% 38.6% 40.0%
Central Costs related
to Established Markets (1,257) (1,137) 10.6% (2,477) (2,078) 19.2% (4,256)
Operating Profit - Established
Markets 2,461 2,207 11.5% 4,624 4,241 9.0% 8,771
as % Revenue 27.8% 25.6% 27.2% 25.9% 26.9%
New Businesses & Consolidated Financial Performance
During 2012 and 2013, the Company undertook a series of
investments with a view to strengthening certain central functions
and launching various new businesses identified by management and
the Board as being attractive areas of future growth. Costs related
to these New Businesses recognised in the Consolidated Statement of
Comprehensive Income, including amortised platform development
costs and operating losses relating to new business launches,
totalled EUR0.4m in Q2 2014 (Q2 2013: EUR1.1m), the reduction being
primarily due to the reduction in losses in the Company's
Australian business following the change in strategy made in the
business at the end of July 2013.
New Business Costs & Consolidated Financial Performance
Q2 2014 H1 2014
vs Q2 vs H1
(EUR000s) Q2 2014 Q2 2013 2013 H1 2014 H1 2013 2013 2013
-------------------------------- -------- -------- --------- -------- -------- -------- --------
Operating Profit - Established
Markets 2,461 2,207 11.5% 4,624 4,241 9.0% 8,771
Operating Loss - New
Business (351) (1,133) -69.0% (809) (2,008) -59.7% (3,462)
Consolidated Operating
Profit 2,111 1,074 96.6% 3,815 2,233 70.8% 5,309
Net Financing Costs (1,753) (1,434) 22.2% (3,513) (2,609) 34.6% (6,170)
Pro Forma Profit/(Loss)
Before Tax 358 (359) 199.7% 302 (376) 180.3% (861)
Income Tax Expense (168) (189) -11.1% (307) (435) -29.4% (721)
Pro Forma Profit/(Loss)
After Tax 190 (548) 134.7% (5) (811) 99.4% (1,582)
======== ======== ========= ======== ======== ======== ========
Unrealised FX Gains
/ (Losses) on Borrowings 1,085 1,831 1,525 836 1,335
Gains / (Losses) Arising
on Derivatives (201) (775) (455) (547) (937)
Translation Differences 172 (415) 342 (411) (986)
Cost of Employee Share
Options (23) (18) (45) (34) (92)
Pro Forma Audit Adjustments - - - - (235)
Increase in Deferred
Tax Assets - - - - 1,195
Group Net Income 1,223 75 1,530.7% 1,362 (968) 240.7% (1,302)
======== ======== ========= ======== ======== ======== ========
As a result, after New Business losses, Consolidated Operating
Profit for Q2 2014 was EUR2.1m, an increase of 96.6% over the prior
year period (Q2 2013: EUR1.1m), comprising EUR2.5m Operating Profit
from the Established Markets Business and a EUR0.4m Operating Loss
from New Businesses. Compared to the previous quarter, Consolidated
Operating Profit increased 23.9% (Q1 2014: EUR1.7m).
Net Financing Costs for the three month period ending 30 June
2014 were EUR1.8m, an increase of 22.2% over the prior year period
(Q2 2013: EUR1.4m), but flat on the previous quarter (Q1 2014:
EUR1.8m).
Unrealised Foreign Exchange Gains / Losses on Borrowings
comprise unrealised gains or losses incurred in relation to the
Group's SEK-denominated bonds. Foreign currency options limit the
Group's exposure on its senior and subordinated bonds to a weighted
average 7.9% weakening in the value of the Euro from the exchange
rate prevailing at 30 June 2014 over the remaining maturity of the
issued bonds. During Q2 2014, Euro/SEK exchange rate movements
resulted in an unrealised foreign exchange gain on borrowings of
EUR1.1m. The fair value of currency options put in place to
mitigate the foreign exchange rate risk on the issued bonds
resulted in a EUR0.2m unrealised loss in Q2 2014.
Foreign Exchange Translation Differences arising from the
Group's Australian business resulted in a EUR0.2m translation gain
for Q2 2014, partly offset by a negative foreign currency reserve
adjustment of EUR0.1m for Q2 2014 booked in accordance with IFRS
accounting rules as Other Comprehensive Income in the Consolidated
Statement of Comprehensive Income.
The Group's Pro Forma Profit Before Tax was EUR0.4m for Q2 2014,
compared to a loss of EUR0.1m in Q1 2014 and a loss of EUR0.4m in
Q2 2013. The Group's Pro Forma Profit After Tax for Q2 2014 was
EUR0.2m, compared to a loss of EUR0.2m in Q1 2014 and a loss of
EUR0.5m for Q2 2013. Including the net impact of foreign exchange
movements and employee option costs, the Group's Net Profit After
Tax for Q2 2014 was EUR1.2m, compared to a profit of EUR0.1m in Q1
2014 and a profit of EUR0.1m in Q2 2013.
Balance Sheet
As of 30 June 2014, Net Customer Loan Receivables totalled
EUR46.3m (net of loan loss provisions), an increase of 16.9% over
the prior year period (30 June 2013: EUR39.6) and 5.5% over the
previous quarter (Q1 2014: EUR43.9m). As of 30 June 2014, Gross
Borrowings totalled EUR43.7m, comprising EUR38.8m of senior secured
and EUR4.9m of subordinated bond principal outstanding, net of
costs relating to the bond offerings in accordance with IAS 39 (30
June 2013: EUR43.5m). Net Debt as of 30 June 2014 totalled EUR37.5m
(30 June 2013: EUR32.0m). Cash as of 30 June 2014 was EUR6.2m (30
June 2013: EUR11.5m).
The Group's Equity Ratio as defined for debt covenant purposes
was 28.3% as of 30 June 2014, compared to 26.8% as of 31 March
2014, 27.3% as of 30 June 2013 and 27.0% at the end of FY 2013. The
Group's Net Debt to Net Receivables Ratio was 80.9% as of 30 June
2014, compared to 80.7% as of 30 June 2013 and 83.8% at the end of
2013.
Summary Balance Sheet
Q2 2014 vs
(EUR000s) Q2 2014 Q2 2013 2013 Q2 2013 Change
------------------------------- -------- -------- ------- ----------------
Net Customer Loan Receivables 46,324 39,627 41,446 16.9%
Cash 6,176 11,547 8,675 -46.5%
Other Assets 5,835 5,924 7,629 -1.5%
Total Assets 58,335 57,098 57,750 2.2%
Senior Asset-Backed Bonds 38,788 38,560 38,307 0.6%
Subordinated Bonds 4,867 4,977 5,107 -2.2%
Gross Borrowings 43,655 43,537 43,414 0.3%
Net Debt 37,479 31,990 34,739 17.2%
Equity 11,655 10,438 10,489 11.7%
Equity Ratio (1) 28.3% 27.3% 27.0%
Equity / Net Receivables 25.2% 26.3% 25.3%
Net Debt / Assets 64.2% 56.0% 60.2%
Net Debt / Net Receivables 80.9% 80.7% 83.8%
------------------------------- -------- -------- ------- ----------------
(1) Equity plus Subordinated Debt / Total Assets in accordance
with the terms of the Group's bond covenants
FUTURE DEVELOPMENTS
The Company continues to experience underlying customer demand
growth in its core markets and expects sustained underlying lending
volume and revenue growth in its Established Markets Business in
future periods. The credit line product and Sving have been well
received by customers in Finland and Lithuania respectively, and
are expected to provide the Group with significant opportunities
for growth in existing and new markets as these businesses are
rolled out in other Established Markets in H2 2014 and 2015.
The Group has invested to strengthen various central functions,
upgrade its technology platforms, develop a number of new product
lines in existing markets, as well as enter additional new markets
and businesses - in line with the Company's on-going strategy to
expand its range of products and geographical reach. The majority
of this investment is now complete and, over time, we expect the
Group's new products and markets to contribute significantly to the
Group's overall growth and profitability.
As the Company continues to grow, management expect to realise
significant operating leverage from the new platform, product and
geographical investments. Management also intends to seek
opportunities to diversify the Group's sources of funding, thereby
reducing the Group's cost of debt. Discussions on the refinancing
of the Company's senior and subordinated debt are underway and are
expected to be completed well in advance of the maturity of the
senior and subordinated bonds in March 2015, with a view to
recapitalising the Company's balance sheet to reduce financial
leverage and to improve the Company's effective cost of
funding.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the 3 and 6 months to 30 June 2014
3 months 3 months 6 months 6 months
to June to June to June to June
30 2014 30 2013 30 2014 30 2013
(unaudited) (unaudited) (unaudited) (unaudited)
Note EUR EUR EUR EUR
Revenue 9,101,185 8,783,706 17,454,551 16,606,032
Impairment (1,821,419) (2,574,433) (3,410,218) (4,608,297)
Administrative and Direct
operating expenses (5,019,731) (5,905,633) (9,932,467) (10,483,776)
Operating profit 2,260,035 303,640 4,111,866 1,513,959
Interest income 690 74 1,183 139
Interest expenses 3 (1,754,119) (1,433,744) (3,514,955) (2,608,972)
Financing - foreign exchange
gains/(losses) on borrowings 4 1,085,220 1,830,820 1,525,178 835,654
Gains/(losses) arising
on derivatives (200,681) (774,790) (455,060) (546,520)
Profit before income
tax 1,391,145 (74,000) 1,668,212 (805,740)
Income tax credit/(expense) 5 (167,774) (188,949) (306,348) (434,729)
PROFIT/(LOSS) FOR THE
PERIOD 1,223,371 (262,949) 1,361,864 (1,240,469)
============ ============ ============ =============
Other comprehensive income (119,628) 338,067 (240,991) 273,119
TOTAL COMPREHENSIVE INCOME/(LOSS)
ATTRIBUTABLE TO THE EQUITY
HOLDERS OF THE PARENT 1,103,743 75,118 1,120,873 (967,350)
============ ============ ============ =============
Pro forma profit/(loss)
calculation
------------ -------------
Profit/(loss) before
tax 1,391,145 (74,000) 1,668,212 (805,740)
Financing - foreign exchange
(gains)/losses on borrowings (1,085,220) (1,830,820) (1,525,178) (835,654)
(Gains)/losses arising
on derivatives 200,681 774,790 455,060 546,520
Translation differences (172,174) 414,890 (342,091) 411,317
Other comprehensive income - (338,067) - 273,119
Cost of employee share
options 22,500 17,898 45,000 34,497
------------ ------------ ------------ -------------
Pro forma profit/(loss)
before taxation 356,932 (359,175) 301,003 (375,941)
Taxation excluding pro
forma adjustments (167,774) (188,949) (306,348) (434,729)
------------ ------------ ------------ -------------
Pro forma profit/(loss)
after taxation 189,158 (548,124) (5,345) (810,670)
----------------------------------- ----- ------------ ------------ ------------ -------------
3 months 3 months 6 months 6 months
to June to June to June to June
30 2014 30 2013 30 2014 30 2013
EUR EUR EUR EUR
Basic earnings per share 6 0.0624 0.0043 0.0634 (0.0547)
------------ ------------ ------------ -------------
Diluted earnings per
share 6 0.0618 0.0042 0.0629 (0.0547)
------------ ------------ ------------ -------------
The accompanying notes form an integral part of these interim
financial statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2014
30 June 31 December
30 June 2014 2013 2013
(unaudited) (unaudited) (audited)
Note EUR EUR EUR
ASSETS
Non-current assets
Goodwill 1,109,840 1,109,840 1,109,840
Intangible assets 2,589,986 1,835,601 2,270,861
Property, plant and equipment 110,600 148,078 129,538
Deferred tax asset 1,636,376 120,600 1,597,841
Trade and other receivables 7 4,359,115 4,862,138 5,008,472
Total non-current assets 9,805,917 8,076,257 10,116,552
------------- ------------ ------------
Current assets
Trade and other receivables 7 42,273,760 36,549,665 38,424,133
Derivatives 79,192 925,109 534,251
Cash and cash equivalents 6,175,777 11,547,438 8,675,255
------------- ------------ ------------
Total current assets 48,528,729 49,022,212 47,633,639
Total assets 58,334,646 57,098,469 57,750,191
------------- ------------ ------------
EQUITY AND LIABILITIES
Equity
Issued share capital 8 2,561,330 2,561,330 2,561,330
Share premium account 5,015,903 5,015,903 5,015,903
Capital redemption reserve 102,317 102,317 102,317
Foreign exchange reserve 400,215 312,400 641,206
Share option reserve 501,522 498,434 472,078
Retained earnings 3,074,085 1,947,344 1,696,665
Total equity 11,655,372 10,437,728 10,489,499
------------- ------------ ------------
Current liabilities
Short-term borrowings 43,654,859 - -
Trade and other payables 1,749,750 1,636,730 2,286,920
Current income tax liabilities 82,600 363,466 420,243
Deferred revenue 9 1,192,065 1,123,552 1,139,428
------------- ------------ ------------
Total current liabilities 46,679,274 3,123,748 3,846,591
Non-current liabilities
Long-term borrowings 9 - 43,536,993 43,414,101
------------- ------------ ------------
Total non-current liabilities - 43,536,993 43,414,101
Total equity and liabilities 58,334,646 57,098,469 57,750,191
------------- ------------ ------------
The accompanying notes form an integral part of these interim
financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the 3 and 6 months to 30 June
2014
3 months 3 months 6 months 6 months
to June to June to June to June
30 2014 30 2013 2014 30 2013
(unaudited) (unaudited) (unaudited) (unaudited)
EUR EUR EUR EUR
Cash flows from operating
activities
Operating profit 2,260,035 303,640 4,111,866 1,513,959
Adjustments for:
Depreciation 17,372 14,653 35,294 30,753
Amortisation 224,620 62,413 421,446 96,308
Employee share options
reserve 22,500 17,898 45,000 34,497
------------ ------------ ------------ ------------
Adjusted Operating
profit 2,524,527 398,604 4,613,606 1,675,517
Decrease/(Increase)
in receivables (1,196,014) (946,751) (3,654,752) (6,802,145)
(Decrease)/Increase
in payables (1,197,124) (226,648) (484,533) 16,563
------------ ------------ ------------ ------------
Cash generated from
operating activities 131,389 (774,795) 474,321 (5,110,065)
Interest paid (241,225) (1,551,486) (1,750,484) (2,543,114)
Interest received 690 74 1,183 139
Income tax paid (355,699) (188,949) (467,573) (377,898)
------------ ------------ ------------ ------------
Net cash from operating
activities (464,845) (2,515,156) (1,742,553) (8,030,938)
Cash flow from investing
activities
Purchase of property,
plant and equipment (6,481) (37,784) (16,355) (79,326)
Purchase of intangible
assets (278,445) (279,708) (740,570) (631,663)
------------ ------------ ------------ ------------
Net cash used in investing
Activities (284,926) (317,492) (756,925) (710,989)
Cash flow from financing
activities
Issue of share capital - 11,715 - 11,715
Net increase in borrowing - 8,405,529 - 14,621,709
------------
Net cash from financing
activities - 8,417,244 - 14,633,424
(Decrease)/Increase
in cash and cash equivalents (749,771) 5,584,596 (2,499,478) 5,891,496
------------ ------------ ------------ ------------
Opening cash and cash
equivalents 6,925,548 5,962,842 8,675,255 5,655,941
------------ ------------ ------------ ------------
Closing cash and cash
equivalents 6,175,777 11,547,438 6,175,777 11,547,438
------------ ------------ ------------ ------------
The accompanying notes form an integral part of these interim
financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to the owners of the parent Company
Share Share Capital Foreign Share Retained Total
capital premium redemption exchange options earnings
reserves reserve reserve
EUR EUR EUR EUR EUR EUR EUR
------------------------ ---------- ---------- ------------ ---------- ---------- --------------- ------------
Balance at 31 December
2012 2,558,960 5,006,558 102,317 39,281 511,713 2,866,919 11,085,748
------------------------ ---------- ---------- ------------ ---------- ---------- --------------- ------------
Comprehensive income
Profit/(loss) for
the financial period - - - - - (1,301,496) (1,301,496)
Other comprehensive
income - - - 601,925 - - 601,925
Total comprehensive
income - - - 601,925 - (1,301,496) (699,571)
------------------------ ---------- ---------- ------------ ---------- ---------- --------------- ------------
Arising on employee
share options 2,370 9,345 - - (12,108) 12,108 11,715
Arising on employee
shares option lapsed
during the period - - - - (119,134) 119,134 -
Amount charged
to the employee
share option reserve - - - - 91,607 - 91,607
Total 2,370 9,345 - - (39,635) 131,242 103,322
------------------------ ---------- ---------- ------------ ---------- ---------- --------------- ------------
Balance at 31 December
2013 2,561,330 5,015,903 102,317 641,206 472,078 1,696,665 10,489,499
------------------------ ---------- ---------- ------------ ---------- ---------- --------------- ------------
Comprehensive income
Profit for the
financial period - - - - - 138,493 138,493
Other comprehensive
income - - - (121,363) - - (121,363)
------------------------ ---------- ---------- ------------ ---------- ---------- --------------- ------------
Total comprehensive
income - - - (121,363) - 138,493 17,130
------------------------ ---------- ---------- ------------ ---------- ---------- --------------- ------------
Arising on employee
shares option lapsed
during the period - - - - (6,199) 6,199 -
Amount charged
to the employee
share option reserve - - - - 22,500 - 22,500
------------------------ ---------- ---------- ------------ ---------- ---------- --------------- ------------
Total - - - - 16,301 6,199 22,500
------------------------ ---------- ---------- ------------ ---------- ---------- --------------- ------------
Balance at 31 March
2014 2,561,330 5,015,903 102,317 519,843 488,379 1,841,357 10,529,129
------------------------ ---------- ---------- ------------ ---------- ---------- --------------- ------------
Comprehensive income
Profit for the
financial period - - - - - 1,223,371 1,223,371
Other comprehensive
income - - - (119,628) - - (119,628)
Total comprehensive
income - - - (119,628) - 1,223,371 1,103,743
------------------------ ---------- ---------- ------------ ---------- ---------- --------------- ------------
Arising on employee
shares option lapsed
during the period - - - - (9,357) 9,357 -
Amount charged
to the employee
share option reserve - - - - 22,500 - 22,500
Total - - - - 13,143 9,357 22,500
------------------------ ---------- ---------- ------------ ---------- ---------- --------------- ------------
Balance at 30 June
2014 2,561,330 5,015,903 102,317 400,215 501,522 3,074,085 11,655,372
------------------------ ---------- ---------- ------------ ---------- ---------- --------------- ------------
The accompanying notes form an integral part of these interim
financial statements.
Notes to the Consolidated Financial Statements
1. STATUTORY ACCOUNTS
The interim results for the three and six month periods ending
30 June 2014 are unaudited. The financial information contained
within this report does not constitute statutory accounts as
defined by Section 396 of the Companies Act 2006. Statutory
accounts for the year to 31 December 2013, upon which the auditors
have given an unqualified report and made no statement under
Sections 498(2) or (3) of the Companies Act 2006, have been
delivered to the Registrar of Companies. Further copies of the
report are available from the Company Secretary at the registered
office, and on the Company's website at www.mcbfinance.com.
2. BASIS OF PREPARATION
MCB Finance Group Plc is registered and domiciled in England and
Wales.
The interim financial statements have been prepared in
accordance with International Financial Reporting Standards, as
adopted by the European Union. They do not include all of the
information required for full annual financial statements, and
should be read in conjunction with the consolidated financial
statements for the year ended 31 December 2013. The financial
information is presented in Euros and has been prepared under the
historical cost convention and on a going concern basis.
3. INTEREST EXPENSES
3 months 3 months 6 months 6 months
to June to June to June to June
30 2014 30 2013 30 2014 30 2013
EUR EUR EUR EUR
Interest on bonds (1,754,119) (1,433,670) (3,514,955) (2,608,833)
Interest on bonds is calculated using the effective interest
rate method as required by IAS 39 'Financial Instruments'. Issuance
costs of the bonds are recognised in the Statement of Comprehensive
Income over the period of the borrowings (24-36 months) using the
effective interest rate method. In the 3 months to 30 June 2014,
the impact of issue costs on the effective interest rate
calculation amounted to EUR0.2m (Q2 2014 EUR0.2m).
4. UNREALISED FOREIGN EXCHANGE DIFFERENCES
During Q1 and Q3 2012, the Group issued a total of SEK 260m 3
year maturity asset-backed bonds to investors in the Nordic region.
In March 2013, the Group issued a total of SEK 45m 2 year maturity
unsecured subordinated bonds to investors in the Nordic region. In
May 2013, the Group issued an additional combined SEK 90 million in
SEK- and Euro-denominated bonds under its asset-backed bond
facility to Nordic and Asian investors.
Fluctuations in the EUR/SEK foreign exchange rate resulted in a
EUR1.1m unrealised foreign exchange gain during Q2 2014 (Q2 2013:
gain of EUR1.8m). Including offsetting market value changes of
currency hedging options, the net impact on Shareholders' Equity of
foreign exchange movements relating to the Group's SEK bonds during
Q2 2014 was EUR0.9m (Q2 2013: gain of EUR1.1m).
Unrealised Foreign Exchange Gains / Losses on Borrowings
comprise unrealised gains or losses incurred in relation to the
Group's SEK-denominated bonds. Foreign currency options limit the
Group's exposure on its senior and subordinated bonds to a weighted
average 7.9% weakening in the value of the Euro from the exchange
rate prevailing at 30 June 2014 over the remaining maturity of the
issued bonds. The value of these currency options are recorded
under Derivatives in the Group's Balance Sheet.
5. TAXATION
Interim period income tax is accrued based on estimated average
annual effective income tax rates for each entity within the Group.
The Company accrued a tax liability for the year, primarily with
respect to its Latvian and Lithuanian operations. No corporation
tax arises in Estonia unless a distribution is made.
6. EARNING PER SHARE
3 months 3 months 6 months 6 months
to 30 June to 30 June to 30 June to 30 June
2014 2013 2014 2013
------------ ------------ ------------ ------------
Number Number Number Number
------------ ------------ ------------ ------------
a) Basic
The calculation of basic
earnings per share is
based on:
Weighted average number
of ordinary shares in
issue 17,690,007 17,690,007 17,690,007 17,680,173
Profit/(loss) attributable
to equity holders of
the company (EUR) 1,103,743 75,118 1,120,873 (967,350)
------------ ------------ ------------ ------------
b) Diluted
The calculation of diluted
earnings per share is
based on:
Profit/(loss) attributable
to equity holders of
the company (EUR) 1,103,743 75,118 1,120,873 (967,350)
Weighted average number
of ordinary shares in
issue 17,690,007 17,690,007 17,690,007 17,680,173
Adjustments for dilutive
effect of
- Employee share options 175,610 285,716 126,342 -
Weighted average number
of ordinary shares for
diluted earnings per
share 17,865,617 17,975,723 17,816,349 17,680,173
------------ ------------ ------------ ------------
Adjustment for the dilutive effect of share options is based on
an average price of 64.35p per ordinary share during the three
month period to 30 June 2014 (Q2 2013: 80.95p, FY 2013:
74.90p).
7. TRADE AND OTHER RECEIVABLES
Current receivables 30 June 30 June 31 December
2014 2013 2013
(unaudited) (unaudited) (audited)
EUR EUR EUR
Customer loan receivables 55,083,214 45,210,694 46,913,902
Less: provision for impairment
of trade receivables (13,118,667) (10,446,193) (10,461,744)
------------- ------------- -------------
Customer loan receivables
- net 41,964,547 34,764,501 36,452,158
Other receivables 309,213 1,785,164 1,971,975
Total current receivables 42,273,760 36,549,665 38,424,133
------------- ------------- -------------
Non-current receivables 30 June 30 June 31 December
2014 2013 2013
(unaudited) (unaudited) (audited)
EUR EUR EUR
Customer loan receivables 5,675,657 5,127,454 5,892,411
Less: provision for impairment
of trade receivables (1,316,542) (265,316) (898,224)
------------- ------------- -------------
Customer loan receivables
- net 4,359,115 4,862,138 4,994,187
------------- ------------- -------------
Other receivables - - 14,285
Total non-current receivables 4,359,115 4,862,138 5,008,472
------------- ------------- -------------
Bad Debt Provisions
Customer loan receivables are stated net of bad debt provisions.
The movement in the bad debt provision during the period is as
follows:
3 months 3 months Year to
to 30 June to 30 June 31 December
2014 2013 2013
(unaudited) (unaudited) (audited)
EUR EUR EUR
At the start of the period 13,533,337 9,193,984 8,205,826
Charge for the period 1,990,512 2,729,051 9,228,043
Amounts written off during
the period (1,104,532) (1,211,527) (6,073,901)
Other 15,892 - -
At the end of the period 14,435,209 10,711,508 11,359,968
------------ ------------ -------------
During Q2 2014, there was a Credit Write-Back of EUR170,426 (Q2
2013: Credit Write-Back of EUR359,773).
8. EQUITY & CALLED UP SHARE CAPITAL
30 June 30 June 31 December
2014 2013 2013
(unaudited) (unaudited) (audited)
Issued and fully paid
Number of ordinary shares
of 10p each 17,690,007 17,690,007 17,690,007
EUR 2,561,330 2,561,330 2,561,330
Issued share capital 2,561,330 2,561,330 2,561,330
------------ ------------ ------------
Share Capital relates to the nominal value of shares issued.
Share Premium relates to the amounts subscribed for share capital
in excess of the nominal value of the shares. The Capital
Redemption Reserve arises following the share buy-back by the
Company, which reduces the Company's Share Capital. Share option
reserves arise from the grant of share options to employees under
the employee share option plan. Retained Earnings relate to
cumulative profits and losses recognized in the Consolidated
Statement of Comprehensive Income.
The Group has one class of ordinary share which carries no right
to fixed income.
The Company operates a share incentive plan, under which share
options are granted to Directors and to selected employees. Options
are conditional on the employee completing three years' service
(the vesting period) for options granted prior to 2011, and four
years for options granted starting 2011. One-sixteenth of the
options granted in 2012 vest at the end of each calendar quarter,
subject to the holder remaining an employee of the Company.
All share options granted since June 2011 are exercisable only
if a trigger price of 150p is reached, defined as the average
closing price of the Company's ordinary shares for a minimum period
of twenty business days.
During the three month period to 30 June 2014, no options were
issued over the ordinary shares of the Company (Q2 2013: 0
options).
During the three month period to 30 June 2014 a total of 49,063
options issued in July 2011 (Q2 2013: 0 options) lapsed unexercised
and no options were exercised (Q2 2013: 20,000 options).
At 30 June 2014, the Company had 1,395,350 (31 December 2013:
1,493,475) options outstanding with a total of 610,000 (31 December
2013: 610,000) options exercisable at the end of the period. As of
30 June 2014, the outstanding options had a range of exercise
prices from 41p - 100p (2013: 41p - 100p).
9. SHORT-TERM AND LONG-TERM BORROWINGS
30 June 30 June 31 December
2014 2013 2013
(unaudited) (unaudited) (audited)
EUR EUR EUR
Bonds 43,654,859 - -
Total short-term borrowings 43,654,859 - -
------------- ------------ ------------
Bonds - 43,536,993 43,414,101
Total long-term borrowings - 43,536,993 43,414,101
------------- ------------ ------------
Bonds are stated in the Balance Sheet net of EUR544,628 (Q2
2013: EUR1,447,648) costs relating to the Company's bond offerings.
Borrowings are subsequently stated at amortised cost with any
difference between the proceeds (net of issue costs) and the
redemption value of the bonds recognised in the Statement of
Comprehensive Income over the period of the borrowings (24-36
months) using the Effective Interest Rate Method as required by IAS
39 'Financial instruments'.
SHAREHOLDER INFORMATION ADVISERS
Corporate website Nominated Adviser
www.mcbfinance.com Sanlam Securities UK Limited
10 King William Street
MCB Finance Group Plc London EC4N 7TW
Waverley House
7-12 Noel Street Auditors
London W1F 8GQ Mazars LLP
Tower Bridge House
Visiting address: St Katharine's Way
Lootsa 8A London E1W 1DD
Tallinn 11415
Estonia Legal
Pinsent Masons
Registrars 30 Crown Place
Capita Registrars London EC2A 4ES
The Registry
34 Beckenham Road Public Relations
Beckenham Allerton Communications
Kent BR3 4TU The Hop Exchange
24 Southwark Street
London SE1 1TY
This information is provided by RNS
The company news service from the London Stock Exchange
END
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