Latest Results
05 September 2008
Interim results for the six months ended 30 June 2008
MCB Finance Group Plc (AIM: MCRB.L) (the “Company” or “MCB”), the consumer finance company providing flexible credit solutions to retail customers in Finland, Estonia, Latvia and Lithuania, today announces its financial results for the six months ended 30 June 2008 and the intention to raise additional equity of up to €5 million in the coming months to make sure the Company can fully take advantage of opportunities for growth during late 2008 and 2009.
| Highlights Chairman's statement Consolidated Income Statement Consolidated Balance Sheet Consolidated Cash Flow Statement Notes |
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- Company profitable on monthly pre-tax basis after achieving break-even in period
- Pre-tax loss of €565k (€1.6m) on €5m turnover (€1.5m)
- Trading continues to be strong in all territories. 100,000 customers served to date
- Successful start of additional distribution channels in Estonia and Latvia
- Continued robust demand for Credit24 loan products
- MCB’s proprietary credit scoring models have led to strong repayment performance, despite the weakened macro-economic environment
- Successful launch of new corporate identity alongside established consumer brands
- Significant further growth expected, and on target for profitability during 2008
Bertil Rydevik, Chairman, said: “We have continued to develop the business in line with our growth strategy and are greatly encouraged by the performance in the first half of the year. Having made a number of important advances in the period and achieved profit on a monthly basis, we remain confident that our strategy will continue to deliver profitable growth and meet expectations for the full year.”
Business overview
MCB Finance Group is a consumer finance company providing fast, convenient, easily understood and flexible credit solutions under the Credit24 brand to retail customers in Finland and the Baltic countries of Estonia, Latvia and Lithuania (together, the Fenno-Baltic Region). The Company provides unsecured loans of between €100 and €2,000 to qualifying customers, with maturities ranging from one month to two years. Loan products are designed to suit customers’ needs with simple and transparent terms and flexible repayment schedules.
Loans are offered online through the Company’s Credit24-branded websites in Estonia, Finland, Lithuania and Latvia, as well as through certain distribution partners in the Baltic countries.
The company is a leading participant in the non-standard segment of the consumer credit market. This segment typically provides small denomination loans with maturities up to one year or more, and attracts customers who value the flexibility and simplicity of the products offered. The non-standard market is typically under-served by larger financial institutions.
Operational update
The Company achieved EBT break-even on a monthly basis starting in May this year and is now trading profitably on a monthly basis. The achievement of monthly break-even during the period, less than two years from the launch of the business, was a major milestone for the Company. All markets are currently contributing to group profitability.
Lending volumes:
MCB has continued to experience rapid growth in all markets. During the period the Company extended approximately €26.1 million of loan principal, up from €8.1 million during the same period last year. Out of this, €15.7m was extended during Q2 2008, up 51% from Q1 2008 (€10.4 million).
MCB has served 100,000 individual customers to date, a high and growing proportion of whom return on a regular basis as repeat customers.
Earlier this year MCB successfully extended the Credit24 product range to include larger loans with longer maturities to carefully selected customers. However, the bulk of MCB’s lending remains loans with maturities between one and six months, which gives the Company a high degree of visibility on repayment performance, and the flexibility to adjust as needed to any changes in credit performance.
The Company’s Credit24 brand is increasingly well established as a provider of flexible loan products, supported by MCB’s marketing activities, an attractive product offering and high levels of customer service.
Repayment performance:
Credit performance has continued in line with expectations. Despite ongoing concerns about the global economy in general, and the Baltics in particular, MCB is seeing no deterioration in repayment performance. The Company monitors credit performance rigorously and continues to refine its proprietary credit scoring models with the benefit of accumulated historical data. Changes in the Baltic macroeconomic environments have led to slightly higher rejection rates for loan applications, with overall positive impact on loan book performance.
Other developments:
MCB has continued to improve the user-friendliness, reach and accessibility of its Credit24 products and services. During the period the Company upgraded all local Credit24 sites to further improve the customer experience, including refined site functionality and visuals to streamline the customer application process. The partnerships earlier announced with R-Kioski in Estonia and with BTA in Latvia have begun successfully, and that with Spauda/R-Kioski in Lithuania is expected to follow shortly. These retail partnerships, in addition to that established earlier with the Latvian Post, enhance Credit24’s distribution reach and market visibility, and allow us to better serve those customers who prefer a face-to-face interaction when applying for credit.
MCB’s proprietary credit extension and CRM systems are proving increasingly valuable to the Company’s lending and collection operations in strengthening customer relationships while robustly addressing risk. Our low-cost model has been integral to performance to date, distinguishes us from several of our peers, and will be a key factor in equipping the Company to enter and grow in new markets as and when these opportunities become available.
In June the Company changed its name to MCB Finance Group Plc to better reflect its business focus and widening range of services. At the same time MCB renewed its corporate and investor website which can be found at www.mcbfinance.com.
Financials
Revenue for the six months ended 30 June 2008 totalled €4,973,251 (1H 2007: €1,453,406), which is in line with expectations. Direct operating costs, which include provisions and variable costs related to the Company’s lending operations, were €2,402.852 (1H 2007: €1,067,338). Administrative expenses were €2,798,354 (1H 2007: €1,940,650). Net finance costs were €336,691 (1H 2007: €7,497). The net loss for the period was €564,646 (1H 2007: €1,562,079), in line with expectations.
Administrative expenses include a €111,846 non-cash reserve arising on employee share options granted during 2007 and 2008 to date. Excluding these charges, the Company’s Pro-forma Net loss for the period was €452,800.
Credit loss provisions for the period totalled €1,496,561 (1H 2007: €735,903). The Company has continued to sell certain aged receivables which, together with extensive historical repayment performance data, allow us to confirm provisioning levels.
Performance has improved markedly on a quarterly basis. Q2 2008 was Net income break-even on revenues of €3.1 million, up from a Pro-forma Net loss of €0.5 million during Q1 2008 on revenues of €1.9 million.
A summary of MCB’s financial performance during the period is provided below.
| 1H 2008 | 1H 2007 | Q2 2008 | Q1 2008 | ||
| Revenue | € 4,973k | € 1,453k | € 3,075k | € 1,898k | |
| Pro-forma Net profit (loss) | -€ 453k | -€ 1,562k | € 49k | -€ 502k | |
MCB’s low-cost business model is a key factor driving its improved financial performance. The Company has a certain level of fixed costs which require only limited additions to support higher customer and lending volumes. The Board expects these economies of scale further to improve financial performance as MCB continues to grow in current and possibly additional markets.
Overall financial performance trends are positive and we expect the Company to reach expectations for full year profitability in 2008.
Funding
In February 2008 MCB raised €5.1 million from current and new shareholders to support the anticipated further growth in the business. The placing, completed despite very difficult equity market conditions, represented a strong endorsement of MCB’s underlying business and development plans.
In July the Company further increased its revolving credit facility with Rietumu Bank from €10 million to €15 million, and extended the term of the facility from August 2008 through March 2009. Only half of this facility was drawn at the end of the period.
The Company’s expected further growth will require an appropriate combination of debt and equity financing. Having made a number of significant advances in the first half, the Company will seek to raise additional equity of up to €5 million in the coming months to take advantage of opportunities for growth during late 2008 and 2009.
Current trading and outlook
We have continued to develop the business in line with our growth strategy and are greatly encouraged by the performance in the first half of the year. The changes to the product offering and Credit24 sites, together with the introduction of additional retail distribution points have proven popular with customers, and we are encouraged by the continued good repayment performance of the loan portfolio.
Lending volumes have continued in line with expectations in the current period, and the Board remains confident of the Group’s prospects and its ability to meet expectations for the full year.
Bertil Rydevik
Chairman
5 September 2008
CONSOLIDATED INCOME STATEMENT
For the 6 months ending 30 June 2008
| 6 months to 30 June 2008 (unaudited) |
6 months to 30 June 2007 (unaudited) |
Year to 31 December 2007 (audited) |
||
| Note | € | € | € | |
| Revenue | 4,973,251 | 1,453,406 | 3,950,724 | |
| Impairment charge relating to legacy systems | - | - | (117,980) | |
| Other direct operating expenses | (2,402,852) | (1,067,338) | (2,312,032) | |
| Direct operating expenses | (2,402,852) | (1,067,338) | (2,430,012) | |
| Cost of employee share options | (111,846) | - | (332,799) | |
| Other administrative expenses | (2,686,508) | (1,940,650) | (4,131,293) | |
| Administrative expenses | (2,798,354) | (1,940,650) | (4,464,092) | |
| Interest payable and similar charges | (348,493) | (16,461) | (146,713) | |
| Interest receivable | 11,802 | 8,964 | 14,039 | |
| Loss on ordinary activities before taxation | (564,646) | (1,562,079) | (3,076,054) | |
| Taxation | 3 | - | - | - |
| Loss on ordinary activities after taxation attributable to the equity shareholders of the parent company | (564,646) | (1,562,079) | (3,076,054) | |
| 2008 | 2007 | 2007 | ||
| € | € | € | ||
| Basic and diluted loss per Ordinary share | 4 | (0.033) | (0.112) | (0.220) |
All of the activities of the Group during the period are classed as continuous.
There are no recognised gains or losses except as included in the consolidated income statement, and therefore a statement of recognised income and expense has not been prepared.
CONSOLIDATED BALANCE SHEET
For the 6 months ending 30 June 2008
| 30 June | 30 June | 31 December | ||
| 2008 (unaudited) |
2007 (unaudited) |
2007 (audited) |
||
| Note | € | € | € | |
| ASSETS | ||||
| Non-current assets | ||||
| Goodwill | 737,723 | 737,723 | 737,723 | |
| Intangible assets | 39,595 | 180,952 | 24,736 | |
| Property, plant and equipment | 101,610 | 23,706 | 66,779 | |
| Total non-current assets | 878,928 | 942,381 | 829,238 | |
| Current assets | ||||
| Trade and other receivables | 5 | 15,230,969 | 3,603,265 | 8,187,738 |
| Cash and cash equivalents | 1,413,951 | 1,449,634 | 506,093 | |
| Total current assets | 16,644,920 | 5,052,899 | 8,693,831 | |
| Total assets | 17,523,848 | 5,995,280 | 9,523,069 | |
| EQUITY AND LIABILITIES | ||||
| Equity | ||||
| Issued share capital | 6 | 2,542,460 | 2,095,567 | 2,095,567 |
| Share premium account | 7 | 8,469,908 | 4,150,572 | 3,965,831 |
| Equity-settled employee benefit reserve | 7 | 444,645 | 194,697 | 332,799 |
| Retained earnings | 7 | (3,693,701) | (1,615,080) | (3,129,055) |
| Total equity | 7 | 7,763,312 | 4,825,756 | 3,265,142 |
| Current liabilities | ||||
| Trade and other payables | 8 | 2,310,536 | 911,129 | 1,707,927 |
| Short-term borrowings | 9 | 7,450,000 | 258,395 | 4,550,000 |
| Total current liabilities | 9,760,536 | 1,169,524 | 6,257,927 | |
| Total equity and liabilities | 17,523,848 | 5,995,280 | 9,523,069 | |
The interim financial statements were approved by the Board of Directors on 4th September 2008 and signed on its behalf by:
| B Rydevik | H Nilert |
| Chairman | Chief Financial Officer |
CONSOLIDATED CASH FLOW STATEMENT
For the 6 months ending 30 June 2008
| 6 months to 30 June 2008 (unaudited) |
6 months to 30 June 2007 (unaudited) |
Year to 31 December 2007 (audited) |
||
| Note | € | € | € | |
| Cash flow used in operating activities | 10 | (6,870,925) | (3,303,574) | (8,302,563) |
| Cash flow from investing activities | ||||
| Purchase of property, plant and equipment | (50,113) | (17,888) | (69,304) | |
| Purchase of intangible assets | (22,074) | (36,004) | (36,004) | |
| Cash flow from investing activities | (72,187) | (53,892) | (105,308) | |
| Cash flow from financing activities | ||||
| Issue of share capital | 5,139,265 | 5,744,359 | 5,744,361 | |
| Expenses relating to issue of shares | (188,295) | (1,210,830) | (1,395,573) | |
| Receipt of short-term borrowing | 2,900,000 | 100,022 | 4,550,000 | |
| Repayment of short-term borrowing | - | (100,000) | (258,373) | |
| Cash flow from financing activities | 7,850,970 | 4,533,551 | 8,640,415 | |
| Increase in cash and cash equivalents | 907,858 | 1,176,085 | 232,544 | |
| Opening cash and cash equivalents | 506,093 | 273,549 | 273,549 | |
| Closing cash and cash equivalents | 1,413,951 | 1,449,634 | 506,093 |
The full results including the notes to the financial statements are available in the PDF Download.