3 Mar 2014 07:00
TCS GROUP HOLDING PLC
ANNOUNCES IFRS RESULTS FOR FULL YEAR 2013
Moscow, Russia - 3 March 2014. TCS Group Holding PLC (TCS LI) (the "Group"), Russia's leading provider of online retail financial services, including "Tinkoff Credit Systems" Bank ("TCS Bank") and Tinkoff Online Insurance, today announces its audited IFRS results for the full year ended 31 December 2013.
FY 2013 KEY FINANCIAL HIGHLIGHTS
· Net interest income increased by 69% year-on-year to USD 843 mln (2012FY: USD 500 mln)
· Profit before tax up by 49% year-on-year to USD 236 mln (2012FY: USD 158 mln)
· Net profit increased by 48% year-on-year to USD 181 mln (2012FY: USD 122 mln)
· Net interest margin stood at 36% (2012FY: 37%)
· Cost of risk was at 14.3% (2012FY: 10.5%)
· Total assets increased by 39% to USD 3.0 bn (2012FY: USD 2.2 bn)
· Gross loans and advances to customers up by 49% to USD 2.5 bn (2012FY: USD 1.7 bn)
· Share of non-performing loans (NPLs) at 7% at the end of 2013 (2012FY: 4.7%)
· Total customer accounts increased by 50% to USD 1.3 bn (2012FY: USD 878 mln)
· Total equity up by 111% to USD 628 mln (2012FY: USD 298 mln)
KEY HIGHLIGHTS POST 2013
· As of March 2014, 4.1 mln cards issued
· Tinkoff Online Insurance launched its personal accident and property insurance service for the mass market (February 2014)
· TCS Bank signed a partnership agreement with Euroset, Russia's largest mobile phone retailer, to offer prepaid bonus cards "Kukuruza" in Euroset stores (February 2014)
· TCS Bank launch of OneTwoTrip Tinkoff co-brand credit card together with online travel agency OneTwoTrip (February 2014)
Oliver Hughes, CEO of TCS Bank, said: "We are very pleased with our financial results for the full year 2013. Despite a tougher operating environment in the second half of 2013, we delivered net income of USD 181 mln, consistent with our target. These results set us apart from other consumer lenders in the market and demonstrate TCS Bank's ability to grow profitability thanks to its unique distribution, risk management and analytical capabilities. TCS Bank also demonstrated robust asset growth with the gross loan portfolio increasing to USD 2.5 bn or by 49%, compared to 2012, and cash amounting to USD 575 mln. We have more than doubled our shareholders' equity to USD 628 mln following the IPO. At the same time we continue to maintain a strong N1 capital ratio of 15.8% at the end of 2013. With our strong capital and liquidity levels, as well as flexible business model, we are very well placed to take advantage of market opportunities in 2014."
Outlook
In 2014, the Group expects to experience a generally slower growth in the Russian retail lending and credit card market, owing to more difficult credit conditions and market-wide measures taken by the CBR to reduce the pace of retail lending growth. The Group will continue to leverage its unique branchless distribution system and to tap into profitable growth opportunities in new products, segments and underserved regions.
Going forward the Group will work to maintain cost of risk at current levels by maintaining low approval rates to ensure good quality of incoming customers and by focusing on collections efficiency. The Group looks forward to continued improvement in cost to income ratio as it further scales the business.
The Group expects to achieve net income for 2014 in the range of RUB 7.2 bn to RUB 7.8 bn. Given that the functional currency of the Group and its subsidiaries is the Russian rouble, the Group will adopt the rouble as the presentation currency for IFRS consolidated statements in 2014.
FINANCIAL AND OPERATIONAL REVIEW
USD mln | 2013 | 2012 | Change |
Credit cards issued ('000 pcs) | 1,216 | 1,125 | +8% |
Credit cards transactions | 2,958 | 2,071 | +43% |
USD mln | 2013 | 2012 | Change |
Net interest income | 843 | 500 | +69% |
Net interest income after loan impairment | 536 | 376 | +43% |
Profit before tax | 236 | 158 | +49% |
Net profit | 181 | 122 | +48% |
USD mln | 31 December 2013 | 31 December 2012 | Change |
Total Assets | 3,025 | 2,173 | +39% |
Net Loans and advances to customers | 2,260 | 1,573 | +44% |
Cash and cash equivalents | 575 | 457 | +26% |
Total Liabilities | 2,397 | 1,875 | +28% |
Customer accounts (deposits) | 1,320 | 878 | +50% |
Debt securities in issue | 800 | 762 | +5% |
Total Equity | 628 | 298 | +111% |
ROE | 44.8% | 59.7% | |
Tier 1 capital ratio | 19.85% | 14.0% | |
Total capital | 25.03% | 20.1% | |
CBR N1 (capital adequacy ratio) | 15.84% | 17.41% |
The Group delivered solid results in 2013 with growth in net interest income of 69% year-on-year. The strong growth in net interest income came through as a result of 49% year-on-year increase in the gross loans portfolio and the launch of new credit products. The Group maintained its net interest margin at 36% (2012FY: 37%) providing it with robust profitability and meaningful loss absorption capacity.
In 2013, the number of new credit cards issued for the period was up by 8% year-on-year to 1.2 mln (2012FY: 1.1 mln), while the volume of credit cards transactions increased by 43% year-on-year to USD 3 bn (2012FY: USD 2.1 bn).
The loan loss provisioning amounted to USD 308 mln, compared to USD 124 mln in 2012. The cost of risk increased to 14.3%, compared to 10.5% in 2012. TCS Bank continues to prioritise risk management in the more challenging environment by maintaining low approval rates and by regularly recalibrating its scoring models.
The Group met its guidance and reported net income of USD 181 mln which represented a 48% growth year-on-year. Other income included USD 4 mln of reimbursement accrued for IPO fees and a USD 5 mln gain from market stabilization operations post IPO.
Costs increased largely due to the growth of the customer base (customer deposits) and net loan portfolio by 50% year-on-year and 44% year-on-year, respectively. During 2013, the Group continued to invest in mass market customer acquisition through an extensive advertising campaign in the first half of the year. This resulted in overall spending of USD 116 mln, an increase of 36%, compared to 2012. The Group has significantly reduced its customer acquisition expense in the second half of 2013. Due to the economies of scale and strict control over costs, operating efficiency has improved with cost to income ratio decreasing from 42% in 2012 to 36% in 2013. Excluding customer acquisition costs this ratio reduced from 25% in 2012 to 22% in 2013. The average cost of borrowing decreased from 13% in 2012 to 12% in 2013.
In 2013, the Group's total assets grew significantly and were up by nearly 39% year-on-year to USD 3 bn largely as a result of growth in the loan portfolio which was up by 44% year-on-year on a net basis to USD 2.3 bn and by 49% year-on-year to USD 2.5 bn on a gross basis. At 31 December 2013, net loans accounted for 75% of total assets, compared to 72% at the end of 2012.
The Group maintained more than ample liquidity with cash and cash equivalents of USD 575 mln which accounted for 19% of total assets and 44% of customer deposits. The Group maintains a policy of keeping sufficient cash balances for upcoming financing needs with top-rated counterparties, while maintaining a minimum ring fenced cash cushion of 15% of retail deposits.
In 2013, cash and cash equivalents increased by 26% year-on-year due to the expansion of the balance sheet, which included IPO proceeds of USD 175 mln from newly issued shares in October 2013, subordinated bond issuance in February 2013 and funding from the growth of retail deposits.
The level of non-performing loans (including loans in courts) in total gross loans increased to 7% as at 31 December 2013 from 4.7% as at 31 December 2012. The increase in NPLs resulted from an increase in the share of distribution channels such as internet and mobile, which are inherently riskier than offline channels, from a general increase in risk across the market and from retaining a greater share of non-performing loans on TCS Bank's balance sheet instead of selling to third parties. As a result, the Group increased loan loss provisioning ratio from 8.1% at year-end 2012 to 11.3%. Balance sheet provisions for impairment of loans grew to USD 287 mln as at 31 December 2013, compared to USD 140 mln at 31 December 2012. The Group maintains robust provision coverage for non-performing loans at over 150%.
At 31 December 2013, debt securities increased to USD 800 mln, compared to USD 762 mln at the end of 2012, following a series of debt issues. The proceeds from this debt issuance were offset by the early redemption of the Group's SEK-denominated bonds in June 2013, and the full repayment of two early stage RUB-denominated bond issues in July and September, respectively.
At 31 December 2013, customer accounts stood at USD 1.3 bn, up by 50% from USD 878 mln as at the end of 2012. The share of customer accounts in total liabilities increased to 55% from 47% for the same period.
Total equity of the Group more than doubled to almost USD 628 mln as at 31 December 2013 from USD 298 mln at the end of 2012 due to issuance of USD 175 mln of new common equity and strong growth in retained earnings. The devaluation of the Ruble in 2013 had a negative impact on total equity as accumulated loss on translation increased to USD 38 mln from USD 8 mln.
The Group's statutory N1 capital adequacy ratio stood at 15.84% at the end of the reporting period (prior to the IPO proceeds registration), compared to 17.4% at the end of 2012 due to the strong growth of the loan portfolio, increased CBR-mandated risk-weights on unsecured consumer loans and higher operating risk coefficients. The return on average equity in 2013 was 45%, while return on assets stood at 7%.
***
The management team will host an investor and analyst conference call today at 14.00 UK time (18.00 Moscow time, 09.00 U.S. Eastern Daylight Time).
To participate in this conference call, please use the following access details:
Confirmation Code: | 85878530 |
NAME | TCS GROUP HOLDING PLC FY 2013 IFRS RESULTS |
Participant Toll Free Telephone Numbers: | |
UK Free Phone | 0800 694 0257 |
Russia Free Phone | 8108 002 097 2044 |
USA Free Phone | 1866 966 9439 |
Standard International Call | +44 (0) 1452 555 566 |
Financial results for the full year ended December 31, 2013 are available on the Group's website at https://www.tcsbank.ru/
A live webcast of the presentation will be available at
https://webconnect.webex.com/webconnect/onstage/g.php?t=a&d=669608051
For enquiries:
Tinkoff Credit Systems Bank Darya Ermolina, Head of PR + 7(495) 648 1000 (ext. 2009) d.ermolina@tcsbank.ru
| Tinkoff Credit Systems Bank Peter Russell, IR Director +44 20 3691 2049 ir@tcsbank.ru
|
FTI Consulting London Larisa Millings +44 (0)20 7269 7153 | FTI Consulting Moscow Maria Shiryaevskaya +7 495 795 06 23 |
About the Group
TCS Group Holding PLC is an innovative provider of online retail financial services operating in Russia through a high-tech branchless platform. In order to support its branchless platform, the Group has also developed a "smart courier" network covering almost 600 cities and towns in Russia which allows next day delivery to many customers.
Since its launch in 2007 by Mr. Oleg Tinkov, one of the best known Russian entrepreneurs with a long track record of creating successful businesses, the Group has grown into a leader in the Russian credit card market, with the third largest credit card loan portfolio and a market share of 7.5% based on non-delinquent receivables (according to Central Bank of Russia ("CBR") data, as of 1 January 2014). As of 1 January 2014, the Group has issued 3.9 mln credit cards.
In addition to a market-leading credit card offering, the Group has developed a successful online retail deposits programme. The Group's other innovative lines of business include Tinkoff Online Insurance, which enables the Group to underwrite and sell its own innovative online insurance products, and Tinkoff Mobile Wallet, mobile payment solutions and financial services for Russian consumers.
As of 31 December 2013, the Group's total assets amounted to USD 3 bn, net loans and advances to customers stood at USD 2.3 bn and customer accounts (deposits) amounted to USD 1.3 bn. In 2013, the Group generated a net profit of USD 181 mln and net interest income of USD 843 mln.
The Group is well capitalised with the CBR N1 capital adequacy ratio of 15.8% as of 1 January 2014, and its total capital ratio and Tier 1 capital ratio of 25.03% and 19.85%, respectively.
The Group's class A shares, in the form of Global Depositary Receipts, have been trading on the London Stock Exchange since October 2013. TCS Group Holding PLC's share capital consists of 89,044,396 Class A shares and 92,144,679 Class B shares.
Forward-looking statements
Some of the information in this announcement may contain projections or other forward-looking statements regarding future events or the future financial performance of the Group and TCS Bank. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might", the negative of such terms or other similar expressions. The Group and TCS Bank wish to caution you that these statements are only predictions and that actual events or results may differ materially. The Group and TCS Bank do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Group and TCS Bank, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries the Group operates in, as well as many other risks specifically related to the Group, TCS Bank and their respective operations.
Audited Consolidated Statement of Financial Position
AS AT 31 DECEMBER 2013
In mlns of USD | 31 December 2013 | 31 December 2012 |
ASSETS | ||
Cash and cash equivalents | 575.2 | 457.4 |
Mandatory cash balances with the CBRF | 28.4 | 22.6 |
Loans and advances to customers | 2,259.8 | 1,573.3 |
Financial derivatives | 17.9 | 0.8 |
Deferred income tax assets | 6.5 | 11.4 |
Guarantee deposits with payment systems | 50.6 | 33.6 |
Fixed assets | 19.0 | 18.0 |
Intangible assets | 15.7 | 13.5 |
Other financial assets | 35.5 | 39.0 |
Other non-financial assets | 16.0 | 4.1 |
TOTAL ASSETS | 3,024.6 | 2,173.5 |
LIABILITIES | ||
Due to banks | - | 16.9 |
Customer accounts | 1,320.1 | 878.1 |
Debt securities in issue | 800.2 | 762.4 |
Financial derivatives | - | 11.9 |
Current income tax liabilities | 1.6 | 2.8 |
Deferred tax liabilities | 0.2 | - |
Other financial liabilities | 49.6 | 70.6 |
Other non-financial liabilities | 25.5 | 8.5 |
Subordinated debt | 199.6 | 123.9 |
TOTAL LIABILITIES | 2,396.7 | 1,875.2 |
EQUITY | ||
Share capital | 7.2 | 6.8 |
Share premium | 288.3 | 118.7 |
Treasury shares | (0.1) | (0.1) |
Share-based payment | 14.6 | 11.0 |
Retained earnings | 355.9 | 169.9 |
Accumulated loss on translation | (38.0) | (8.0) |
TOTAL EQUITY | 627.9 | 298.3 |
TOTAL LIABILITIES AND EQUITY | 3,024.6 | 2,173.5 |
Audited Consolidated Statement of Profit or Loss and Other Comprehensive IncomeFOR THE YEAR ended 31 DECEMBER 2013
In mlns of USD | 2013 | 2012 |
Interest income | 1,100.2 | 657.8 |
Interest expense | (256.8) | (157.6) |
Net interest income | 843.4 | 500.2 |
Provision for loan impairment | (307.7) | (124.4) |
Net interest income after provision for loan impairment | 535.7 | 375.9 |
Customer acquisition expenses | (115.6) | (85.3) |
(Losses less gains) from operations with foreign currencies | (11.5) | (8.3) |
Income from insurance operations | 6.1 | 0.3 |
Gain from sale of bad debts | 9.3 | 5.1 |
Fee and commission expenses | (14.8) | (7.4) |
Fee and commission income | 2.3 | - |
Administrative and other operating expenses | (186.4) | (122.5) |
Other operating income | 11.3 | 0.3 |
Profit before tax | 236.1 | 158.1 |
Income tax expense | (55.4) | (36.2) |
Profit for the period | 180.7 | 121.9 |
Other comprehensive (loss)/income: | ||
Exchange differences on translation to presentation currency | (29.9) | 10.8 |
Other comprehensive loss for the period | (29.9) | 10.8 |
Total comprehensive income for the period | 150.8 | 132.7 |
Audited Consolidated Statement of Cash Flows FOR the YEAR ended 31 DECEMBER 2013
In mlns of USD | 2013
| 2012
|
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Interest received | 1011.2 | 578.4 |
Interest paid | (250.1) | (163.1) |
Customers acquisition expenses paid | (87.7) | (91.4) |
Cash (paid)/received from trading in foreign currencies | (15.9) | (0.4) |
Cash received from sale of bad debts | 14.0 | 5.1 |
Fees and commissions paid | (11.2) | (8.3) |
Fees and commissions received | 2.3 | - |
Other operating income received | 7.3 | 0.2 |
Administrative and other operating expenses paid | (101.1) | (35.2) |
Income tax paid | (51.7) | (48.2) |
Cash flows from operating activities before changes in operating assets and liabilities | 517.1 | 237.0 |
Changes in operating assets and liabilities | ||
Net increase in Central Bank mandatory reserves | (7.7) | (14.8) |
Net decrease in due from banks | - | 2.2 |
Net increase in loans and advances to customers | (1,072.7) | (896.4) |
Net increase in Guarantee deposits with payment systems | (20.0) | (9.6) |
Net decrease /(increase) in other financial assets | 0.8 | (14.7) |
Net decrease/(increase) in other non-financial assets | (11.3) | 0.2 |
Net (decrease)/ increase in due to banks | (16.1) | 16.9 |
Net increase in customer accounts | 501.6 | 521.2 |
Net increase/(decrease) in other financial liabilities | (16.3) | 6.0 |
Net increase in other non-financial liabilities | 9.6 | 5.4 |
Net cash used in operating activities | (115.1) | (146.5) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Acquisition of tangible fixed assets | (10.7) | (18.0) |
Acquisition of intangible assets | (6.7) | (8.5) |
Consideration paid for insurance company net of cash acquired | (1.3) | - |
Net cash used in investing activities | (18.7) | (26.5) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from debt securities in issue | 281.1 | 385.4 |
Repayment of debt securities in issue | (232.4) | (65.2) |
Proceeds from subordinated debt | 70.9 | 121.7 |
Proceeds from initial public offering | 175.0 | - |
Initial public offering costs paid | (4.2) | - |
Proceeds from issue of shares | - | 37.5 |
Net cash from financing activities | 290.5 | 479.3 |
Effect of exchange rate changes on cash and cash equivalents | (38.9) | (12.1) |
Net increase/(decrease) in cash and cash equivalents | 117.8 | 294.2 |
Cash and cash equivalents at the beginning of the year | 457.4 | 163.2 |
Cash and cash equivalents at the end of the year | 575.2 | 457.4 |