Q3_2013report

MCB Finance Group Plc

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18 November, 2013

MCB FINANCE GROUP PLC

Results for the Period Ending 30 September 2013

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 results for the three month and nine month periods ending 30 September

2013.

Operational & Financial Highlights

Consolidated Loan Principal Issued grew by 8.9% to €23.2 million in the year to Q3 2013,

but fell 5.7% from the previous quarter on account of the anticipated transition in the

Finnish business from instalment loans to credit lines (Q3 2012: €21.3m; Q2 2013:

€24.6m);

Fees and interest due from loans issued by the Group were €8.7m in Q3 2013, up 9.0%

from the same period in the prior year, but down 11.2% on the previous quarter (Q3 2012:

€7.9m; Q2 2013: €9.7m), primarily due to the anticipated Finnish business transition;

Consolidated Revenue growth of 17.6% to €8.3 million in the year to Q3 2013, down

5.8% on the previous quarter due to the Finnish business transition (Q3 2012: €7.0m);

Impairment costs of 26.4% of Revenue for Q3 2013, a 2.9 percentage point improvement

over the previous quarter and within the Group’s targeted range (Q2 2013: 29.3%; Q3

2012: 18.8%);

Operating Profit from the Established Markets Business of €2.0 million for Q3 2013 (Q3

2012: €2.2m);

Pro Forma Profit Before Tax from the Established Markets Business of €0.2m in Q3 2013

(Q3 2012: €1.1m), after deducting €1.8m Financing Costs;

Continued investment in Sving online sales financing, credit line products and related

technology platforms during the period. Expenditure expected to moderate towards the

end of 2013 as strategic investments near completion;

Group Pro Forma Loss After Tax of €0.9m for Q3 2013 (Q3 2012: Profit of €0.4m), after

€0.9m operating losses from New Businesses and before unrealised foreign exchange

gains on borrowings and other non-cash items;

While reporting a further loss in the year to end Q3 2013, the previously announced

programme of cost and revenue initiatives has had a positive impact on operating

margins in September and October and, together with stronger post-Summer trading in

Finland and Lithuania, has contributed to the group trading profitably at the Net Income

level in October.

Further information: MCB Finance Group Plc Paul Aylieff, Chief Financial Officer +372 501 4064


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[email protected] +44 7599 000007

Nominated adviser and broker:

Sanlam Securities UK Limited

Lindsay Mair / Catherine Miles +44 20 7628 2200

Media enquiries: Allerton Communications Peter Curtain [email protected]

+44 20 3137 2500

Business Overview

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 €3,000 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 on-line through the Company’s Credit24 branded websites

in each market, as well as through certain distribution partners. In addition, the Group offers

online sales financing solutions to retail customers and internet retailers under the Sving brand.

OPERATIONAL REVIEW

The Group’s Established Markets Business (consumer lending under the Credit24 brand in

Finland, Estonia, Latvia and Lithuania) showed continued underlying momentum, but with some

regional variation in quarterly growth. Strong year-over-year growth was recorded in Estonia and

Lithuania, moderate growth in Latvia and a decline in Finland, where the Company launched new

credit line products in response to consumer demand and regulatory changes, which came into

effect in June 2013. Primarily as a result of the Finnish business transition (see below), Loan

Principal Issued to customers during Q3 2013 totalled €22.3m for the Established Markets

Business, an increase of 4.5% compared to the prior year period (Q3 2012: €21.3m), but a

decrease of 6.9% on the previous quarter (Q2 2013: €24.0m).

Q3 2013 Revenue for the Established Markets Business grew year-over-year by 15.6%, with

growth recorded in all Established Markets except for Finland. The profit contribution from the

Established Markets Business remained positive in Q3 2013 with profitability expected to increase

in Q4 2013 over Q3 2013 levels. Losses from New Businesses have shown improving trends in

Q3 2013 and are expected to show further improvement in Q4 2013. Overall Group profitability is

expected to improve in Q4 2013 as the Australian and Online Sales Financing businesses move

towards break-even levels of profitability, as investments in new transaction platforms near

completion, and as the benefits of specific cost initiatives designed to optimise growth and

improve margins come fully into effect.

Finnish Business Transition

mailto:[email protected]

mailto:[email protected]


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The credit line product launched in Finland on June 1 has been well received, with new contract

issuance ahead of expectations. As anticipated, during the transition to credit line products from

the historical instalment loan product offering (which the Company ceased issuing in June), Loan

Principal Issued and Revenue generated in the Finnish business declined 20.7% and 32.4%

respectively in Q3 2013 from the previous quarter.

With strong momentum in new contract issuance, Revenue growth is now accelerating as the

benefits from the issued credit line contracts base begins to outweigh the impact of declining

revenues from pre-June instalment loan issuance. Revenue and profits growth from the Finnish

business is expected to accelerate 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 increased following the initial months’ experience in issuing the new credit line

products.

The successful launch of the Group’s credit line offering in Finland points to the potential for the

business to secure strong incremental volume growth and resulting market share gains. 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 products

into other Group markets.

Economic Environment

The economic environment for the Group’s Established Markets Business remained generally

stable in the three months period to 30 September 2013. Based on current Eurostat estimates,

expected year-on-year GDP growth rates for 2013 range between -0.6% (Finland) and 4.0%

(Latvia). Unemployment is expected to be flat to declining in Estonia, Latvia and Lithuania, while

slightly increasing in Finland.

Established Markets Business

Lending Volumes

Loan Principal Issued in the Established Markets Business in the third quarter ending 30

September 2013 was €22.3m, up 4.5% on Q3 2012, but 6.9% below Q2 2013 (Q2 2013: €23.9m).

Sequential quarterly volume growth was positive in Lithuania and Estonia, with Estonia recording

its highest ever quarterly volumes, and Lithuania returning to quarterly volume growth compared

to the previous quarter.

In Finland, new credit line products were introduced from 1 June 2013 in line with the regulatory

changes of implementing APR cap of 51%, which impacted the volumes adversely as discussed

above. Loan Principal Issued in Latvia in Q3 2013 fell 5.7% compared to the previous quarter as

higher credit quality settings were implemented to counter the increase in impairment costs in Q2

2013.

Loan Principal Issued


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(€ thousands) Q3

2013 Q2

2013 Q1

2013

Q3 2013 vs Q2 2013

Q4 2012

Q3 2012

Q2 2012

Q1 2012

Q3 2013 vs Q3 2012 2012

Finland 6,906 8,708 8,450 -20.7 % 7,820 7,791 7,374 8,143 -11.4 % 31,127

Estonia 3,552 3,472 3,291 2.3 % 3,388 3,049 3,404 2,856 16.5 % 12,697

Lithuania 8,614 8,352 8,869 3.1 % 8,309 7,397 7,766 7,246 16.4 % 30,718

Latvia 3,191 3,384 3,342 -5.7 % 3,275 3,066 3,268 2,530 4.1 % 12,139

Group Established Markets 22,262 23,916 23,952 -6.9 % 22,792 21,303 21,812 20,775 4.5 % 86,681

Fees & Revenue

Fees and interest due from loans issued in Q3 2013 in the Established Markets Business were

€8.3m, up 5.4% from the prior year period (Q3 2012: €7.9m), with the average maturity of loans

granted during Q3 2013 being 9.4 months (Q3 2012: 7.0 months). The increase in loan maturities

during the quarter is expected to support continued revenue growth, as income is recognised over

the maturity of the issued loans.

Total Revenue for the three months ending 30 September 2013 increased in all Established

Markets compared to the previous quarter, except for Finland, where revenues declined on

account of the transition of the business to new credit line products. Total Established Markets

Business Revenue grew 15.6% to €8.1m in Q3 2013 compared to the previous year (Q3 2012:

€7.0m). Group Consolidated Revenue was €8.3m for Q3 2013, up 17.6% compared to the prior

year (Q3 2012: €7.0m).

Revenue

(€ thousands) Q3 2013 Q2 2013 Q1 2013

Q3 2013 vs Q2 2013 Q3 2012

Q2 2013 vs Q2 2012 2012

Finland

1,552 2,297 1,991 -32.5 % 2,032

-23.6 % 8,354

Estonia

1,738 1,714 1,628 1.4 % 1,479

17.5 % 5,508

Lithuania

3,407 3,199 2,796 6.5 % 2,362

44.2 % 9,035

Latvia

1,427 1,426 1,309 0.1 % 1,157

23.3 % 4,349

Group Established

Markets

8,124 8,636 7,724 -5.9 % 7,031

15.6 % 27,246

Credit Quality

Overall credit quality remained strong during the period with expected loss rates for loan pools

granted during the third quarter of 2013 of 5.3%, below the low end of the Group’s 6%-7% target

range. Impairment Costs for the Established Markets Business for Q3 2013 were 25.5% of

Revenues (Q2 2013: 29.0%; Q3 2012: 18.8%), within the Group’s 20-30% target range.


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The 3.5 percentage point improvement in Established Markets Business Impairment Costs as a

percentage of Revenues in Q3 2013 was helped by the selected tightening of credit settings in

Latvia and Finland in Q2 2013, as well as by improving collection recovery performance in Latvia.

New Businesses

During 2012 and the first half of 2013, the Company undertook a series of investments with a

view to strengthening certain central functions and to develop various New Businesses and new

products (namely, consumer lending in Australia, online sales financing and credit line products),

together with related technology platform developments, identified by management and the Board

as being attractive areas of future growth. For the three months ending 30 September 2013,

costs relating to these investments applicable to New Businesses recognised in the Consolidated

Statement of Comprehensive Income totalled €0.9m (Q2 2012: €0.5m).

The investments made in New Businesses, new products and platforms are considered important

to grow and 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.

Australia

From the end of July 2013, the Australian business 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 and current investment in the business has resulted in a

significant reduction in the operating losses previously being incurred to grow the business

nationally. Operating costs have been reduced by approximately 70% from July 2013 levels,

resulting in the Australian business already delivering profitability close to break-even levels. Any

further acceleration in Australian lending volumes would be subject to a stronger track record of

profitability and a strengthened Group capital structure.

Between the July 2012 pilot launch and the end of Q3 2013, the Company made approximately

2,600 loans in Australia and Issued Loan Principal equivalent to approximately €2.4m. The

modest growth in loan volumes in Q3 2013 reflects the managed reduction in Australian growth

introduced in July 2013 pending additional funding, after which growth can be increased on the

new positioning determined for the business in May 2013

Sving / Online Sales Finance

The Company’s proprietary on-line sales financing platform offers a payment and credit line

product offering to customers purchasing goods on-line from internet retailers. The service is

marketed and operated under the Sving brand name.

In the period since the launch of Sving to date, the business had signed contracts, or is in

advanced stages of negotiation, with a majority of the leading online retailers in Lithuania, and

has already established a leading presence for online sales financing in that market. Sving now

has over 4,200 registered customers who have made one or more online purchases using the

service. Customer acquisition has been growing strongly and user receptivity to Sving’s flexible

and convenient product features continues to be strong. A number of additional online retailers

are due to come on-stream in Lithuania in the coming months.

The Sving business is expected to be rolled out in a number of other Established Markets in 2014.

Management believes that the Sving business offers an attractive opportunity for the Company to


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grow a sizeable and profitable business under a new brand, addressing a new socio-demographic

segment of the market.

In line with other new business launches, management expects the Sving business will reach

break-even levels of profitability within approximately 18 months from launch.

More information on the Group’s Online Sales Finance business can be found at www.sving.com.

Regulatory Environment

On June 1 2013, new regulatory measures, approved in March 2013 by the Finnish parliament,

came into effect, including a 51% annual percentage rate cap on consumer loans of €2,000 or

less, and fee limitations and enhanced customer diligence requirements for consumer lenders.

The new regulatory measures were a key factor for the Company instigating a material re-

positioning of its product offering in Finland earlier this year.

The Estonian, Latvian and Lithuanian governments are currently considering changes to the

regulatory environment, which will likely come into force during 2014, including certain annual

percentage rate and fee limitations, as well as enhanced customer diligence and operational

requirements for consumer lenders. The Company welcomes the regulatory changes and

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 Established Markets Business and the performance of the 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

Revenue for Q3 2013 was €8.1m, an increase of 15.5% over the prior year period (Q3 2012:

€7.0m), underpinned by a 4.5% increase in Principal Issued to €22.3m in Q3 2013 over the prior

year period (Q3 2012: €21.3m). Fees and interest due from loans issued in Q3 2013 from the

Established Markets Business were €8.3m, up 5.4% from the prior year period (Q3 2012: €7.9m).

Impairment Costs for the Established Markets Business totalled €2.1m for Q3 2013, equivalent to

25.5% of Revenue, up from €1.3m or 18.8% of Revenue in Q3 2012, but down €0.4m from Q2

2013 levels (Q2 2013: €2.5m or 29.0% of Revenue). Impairment levels for the Established

Markets Business are within the targeted range, with overall credit quality remaining strong during

the period with expected loan loss rates for loans granted during the third quarter of 2013 of 5.3%,

below the lower end of the Group’s 6%-7% target range.

The selective tightening of Credit settings in Latvia, Australia and Finland earlier in the year, along

with various changes made to collection partner relationships, have contributed to the decrease in

started to decrease Impairment Costs in Q3 2013 compared to Q2 2013, with further benefit

expected to result in Q4 2013.


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Direct and Administrative Costs related to the Established Markets Business for the quarter

ending 30 September 2013 were €2.8m, equivalent to 34.9% of Revenue (Q3 2012: €2.5m,

35.3% of Revenue).

As a result, the Contribution Margin (profit from operations before unallocated central overhead

and financial costs) from the Established Market Business for the quarter ending 30 September

2013 was €3.2m, a decrease of 0.2% over the prior year period (Q3 2012: €3.2m).

Allocating Central Costs between the Established Markets Business and New Businesses, based

on activity and function, showed an Operating Profit for Q3 2013 for the Established Markets

Business of €2.0m, down 8.7% from €2.2m in Q3 2012.

Established Markets Business Financial Performance

(€ thousands)

Q3 2013

Q3 2012

% Change 2012

Principal Lent

22,262 21,304 4.5 % 86,681

Net Customer Loan Receivables

40,540 29,633 36.8 % 33,074

Fees Generated

8,277 7,855 5.4 % 31,751

Revenue

8,124 7,031 15.5 % 27,246

Impairment Costs

-2,071 -1,325 56.3 % -5,113

as % Revenue

25.5% 18.8%

18.8%

Direct and Administrative Costs

-2,837 -2,482 14.3 % -10,463

as % Revenue

34.9% 35.3%

38.4%

Contribution Margin - Established Markets

3,217 3,224 -0.2 % 11,670

as % Revenue

39.6% 45.9%

42.8%

Central Costs related to Established Markets

-1,168 -980 19.2 % -3,786

Operating Profit - Established Markets

2,049 2,244 -8.7 % 7,884

as % Revenue

25.2% 31.9%

28.9%

New Businesses & Consolidated Financial Performance

Costs related to New Businesses recognised in the Consolidated Statement of Comprehensive

Income totalled €0.9m in the three month period to 30 September 2013 (Q3 2012: €0.5m).

Investment in New Businesses and products is expected to moderate towards the end of the year

from levels seen in recent quarters as development work relating to new lending and credit

platforms nears completion.


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New Business Costs & Consolidated Financial Performance

(€ thousands)

Q3 2013 Q3 2012 2012

Operating Profit - Established Markets

2,049 2,244 7,884

Operating Profit - New Business

-906 -505 -1,503

Consolidated Operating Profit

1,143 1,739 6,380

Financing Costs

-1,810 -1,153 -3,790

Pro Forma Profit Before Tax

-667 586 2,590

Income Tax Expense

-189 -209 -819

Pro Forma Profit After Tax

-856 377 1,771

Refinancing Costs

0 0 -80

Foreign Exchange gain/loss on borrowings

-444 -1,128 -904

Gains/losses arising on derivatives

-26 622 9

Translation differences

-139 -29 -65

Cost of Employee Share Options

-26 -18 -93

Group Net Income

-1,492 -176 637

Consolidated Operating Profit for the three months ending 30 September 2013 was €1.1m (Q3

2012: €1.7m), comprising €2.0m Operating Profit from the Established Markets Business and a

€0.9m Operating Loss from New Businesses.

Net Financing Costs for the three months ending 30 September 2013 were €1.8m, an increase of

€0.7m over the prior year period (Q3 2012: €1.2m), reflecting loan book growth and the issuance

of Senior and Subordinated bonds in 2012 and H1 2013.

Excluding Translation Differences, Unrealised Foreign Exchange Gains on Borrowings related to

the Group’s SEK bond, Employee Share Option costs and derivative value movements, the

Group’s Pro Forma Loss Before Tax was €0.7m for the three month period ending 30 September

2013 (Q3 2012: €0.6m profit). The Company’s Pro Forma Loss After Tax was €0.9m for the three

month period ending 30 September 2013 (Q3 2012: Profit of €0.4m).

The Company accrued a €0.19m tax provision expense for the three month period ending 30

September 2013 (Q3 2012: €0.21m), relating to its Finnish, Latvian and Lithuanian operations.

No corporation tax arises in Estonia unless a distribution is made.

Including Net Unrealised Foreign Exchange Losses on borrowings of €0.4m, gains/losses arising

on derivatives of €0.03m, Translation Differences of €0.1m and costs relating to employee share

options of €0.03m, the Group’s Net Loss After Tax for the three months to 30 September 2013

was €-1.5m (Q3 2012: €-0.2m).


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Foreign Exchange Gains / Losses on Borrowings comprise unrealised foreign exchange 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 3.9%

weakening in the value of the Euro over the three year maturity of the senior bonds and the two

year maturity of the subordinated bond. During the period, Euro/SEK exchange rate movements

resulted in an unrealised foreign exchange loss of €0.4m. The currency options put in place to

mitigate the foreign exchange rate risk on the issued bonds incurred a €0.03m unrealised value

loss in the Q3 2103 period.

Foreign Exchange Translation Differences arising from the Group’s non-Euro currency earnings

resulted in a €0.1m loss during the period, booked in accordance with IFRS accounting rules as

Other Comprehensive Income. Translation differences in the period resulted from the Group’s

Australian activities.

Balance Sheet

As of 30 September 2013, Net Customer Loan Receivables totalled €41.9m (net of loan loss

provisions), an increase of 41.1% over the prior year (30 September 2012: €29.7m). As of 30

September 2013, Gross Borrowings totalled €44.2m, comprising €40.4m senior secured bond and

€5.2m subordinated bond principal outstanding, net of costs relating to the bond offerings in

accordance with IAS 39 (30 September 2012: €29.2m). Net Debt as of 30 September 2013

totalled €34.9m (30 September 2012: €20.7m). Cash as of 30 September 2013 was €9.3m (30

September 2012: €8.5m).

The Group’s Equity Ratio was 25.3% as of 30 September 2013 compared to 25.7% as of 31

December 2012 and 24.6% as of 30 September 2012. The Group’s Net Debt to Net Receivables

Ratio was 83.4% as of 30 September 2013, compared to 69.8% as of 31 December 2012 and

69.6% as of 30 September 2012.

Summary Balance Sheet

(€ thousands) Q3 2013 Q3 2012 2012 Q313 - Q312

Change

Net customer loan receivables

41,872 29,670 33,310 41.1 %

Cash

9,307 8,543 5,656 9.0 %

Other assets

5,113 4,134 4,085 23.7 %

Total assets

56,293 42,347 43,051 32.9 %

Borrowings

44,208 29,196 28,915 51.4 %

Net Debt

34,900 20,654 23,259 69.0 %

Equity

9,046 10,405 11,086 -13.1 %

Equity ratio 1

25.3 % 24.6 % 25.7 %

Equity / net receivables

21.6 % 35.1 % 33.3 %

Net debt / assets

62.0 % 48.8 % 54.0 % Net debt / net receivables

83.4 % 69.6 % 69.8 %

(1) Equity plus Subordinated Debt / Total Assets in accordance with the terms of the Group’s bonds


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COST & REVENUE INITIATIVES

In Q2 and Q3 2013, the Company implemented a series of initiatives designed to reduce overall

costs, optimise mix and growth, improve operating margins and positively impact earnings in Q4

2013:

Operating costs for the Australian business have been reduced through a series of fixed

and variable cost initiatives to reduce near-term losses and achieve earlier break-even for

the business during H1 2014. Changes to marketing expenditure and mix, office

organisation and other direct costs were made in Q3 2013. The combined impact of these

initiatives has resulted in an approximately 70% reduction of underlying operating costs

from July 2013 levels, resulting in the Australian business already delivering profitability

close to break-even levels;

Operating costs for the Established Markets Business were also reviewed and various

initiatives implemented to reduce or optimise a number of direct fixed and variable costs;

and

The selective tightening of Credit settings in Q2 2013 in Latvia, Australia and Finland,

adjusting the risk positioning of certain new businesses in combination with new product

introductions, along with various changes made to collection partner relationships, have

contributed to a 2.9 percentage point reduction from 29.3% to 26.4% in Group Impairment

Costs as a percentage of Revenues in Q3 2013 compared to Q2 2013, with additional

improvement expected in Q4 2014.

CURRENT TRADING & OUTLOOK

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 the Sving online financing product have

been well received by customers in Finland and Lithuania respectively, and are expect to provide

the Group with significant opportunities for growth in existing and new markets.

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 market investments. Management also intends to seek

opportunities to diversify the Group’s sources of funding, thereby reducing the Group’s cost of

debt.

Management expects the Group’s Established Markets Business to continue to deliver strong

profitability in Q4 2013 with the previously announced program of cost and revenue initiatives

having had a positive impact on operating margins in September and October.


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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the 3 months to 30 September 2013

3 months to September

30 2013


30 2012

Year to 31 December

2012

(unaudited) (unaudited) (audited)

Note € € €

Revenue 8,271,525 7,033,098 27,273,652

Impairment (2,185,434) (1,324,570) (5,162,811)

Administrative and Direct operating expenses (5,108,417) (4,016,475) (15,970,062)

Operating profit 977,674 1,692,053 6,140,779

Finance costs - net 3 (1,810,266) (1,152,878) (3,790,063)

Financing: foreign exchange losses on borrowings 4 (444,398) (1,128,252) (904,178)

Gain / losses arising on derivatives (26,242) 622,228 9,436

Profit before income tax (1,303,232) 33,151 1,455,974

Income tax expense 5 (188,949) (208,953) (819,202)

PROFIT FOR THE PERIOD (1,492,181) (175,802) 636,772

Other comprehensive income 74,437 6,285 17,611

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT (1,417,744) (169,517) 654,383

Proforma Profit calculation

Profit before tax (1,303,232) 33,151 1,455,974

Foreign exchange losses on borrowings 444,398 1,128,252 904,178

Gain / losses arising on derivatives 26,242 (622,228) (9,436)

Translation differences 139,293 28,654 65,491

Refinancing costs - - 80,450

Cost of employee share options 26,111 17,843 93,438

Proforma profit before taxation (667,188) 585,672 2,590,095

Taxation (188,949) (208,953) (819,202)

Proforma profit after taxation (856,137) 376,720 1,770,893


30 2013


30 2012

Year to 31 December

2012

€ € €

Basic earnings per share 6 -0.0844 -0.0100 0.0367

Diluted earnings per share 6 -0.0844 -0.0100 0.0361


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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2013

30 September

2013 30 September

2012 31 December

2012 (unaudited) (unaudited) (audited) Note € € €

ASSETS

Non-current assets

Goodwill 1,109,840 1,109,840 1,109,840

Intangible assets 1,939,925 993,243 1,300,248

Property, plant and equipment 138,003 109,923 99,505

Deferred tax asset 120,600 161,031 120,600

Trade and other receivables 7 5,101,616 2,482,800 3,483,736

Total non-current assets 8,409,984 4,856,837 6,113,929

Current assets

Trade and other receivables 7 37,676,323 27,607,199 30,363,172

Derivatives 8 898,867 1,339,709 918,344

Cash and cash equivalents 9,307,496 8,542,836 5,655,941

Total current assets 47,882,686 37,489,744 36,937,457

Total assets 56,292,670 42,346,581 43,051,386

EQUITY AND LIABILITIES

Equity

Issued share capital 9 2,561,330 2,581,284 2,558,960

Share premium account 5,015,903 4,961,509 5,006,558

Capital redemption reserve 102,317 102,317 102,317

Other reserves 911,382 612,408 550,994

Retained earnings 455,163 2,147,271 2,866,919

Total equity 9,046,095 10,404,789 11,085,748

Current liabilities

Trade and other payables 1,317,886 1,676,680 1,900,260

Current income tax liabilities 363,466 380,399 306,635

Deferred revenue 1,357,557 688,369 843,459

Short-term borrowings 10 0 0 0

Total current liabilities 3,038,909 2,745,448 3,050,354

Non-current liabilities

Long-term borrowings 10 44,207,666 29,196,344 28,915,284

Total non-current liabilities 44,207,666 29,196,344 28,915,284

Total equity and liabilities 56,292,670 42,346,581 43,051,386

The accompanying notes form an integral part of these interim financial statements.


13

CONSOLIDATED STATEMENT OF CASH FLOWS

for the 3 months to 30 September 2013


30 2013


30 2012

Year to 31 December

2012


Note € € € Cash flow (used in) / generated from operating activities Cash (used in) / generated from operations 11 (2,463,108) (1,820,295) (9,385,275)

Income tax paid (188,949) (99,989) (746,167) Net cash (used in) / generated from operating activities (2,652,057) (1,920,284) (10,131,442)

Cash flow from investing activities Purchase of property, plant and equipment (9,172) (23,396) (99,910)

Purchase of intangible assets (249,386) (398,905) (1,251,474) Gain from disposal of property, plant and equipment - - -

Net cash used in investing activities (258,558) (422,301) (1,351,384)

Cash flow from financing activities

Issue of share capital - - 525,222

Net increase / (decrease) in borrowings 670,673 7,834,034 15,215,284

Dividend paid to shareholders - - (772,149)

Share buyback - - - Net cash from /(used in) financing activities 670,673 7,834,034 14,968,357 Increase/(decrease) in cash and cash equivalents (2,239,942) 5,491,449 3,485,531

Opening cash and cash equivalents 11,547,438 3,051,387 2,170,410

Closing cash and cash equivalents 9,307,496 8,542,836 5,655,941



14

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to the owners of the parent Company

Share capital

Share premium

Capital redemption reserves

Other reserves

Retained earnings

Total

€ € € € € €

Balance at 31 December 2012 2,558,960 5,006,558 102,317 550,994 2,866,919 11,085,748

Comprehensive income Profit for the financial period - - - - (1,042,468) (1,042,468) Other comprehensive income - - - (64,948)

(64,948)

Total comprehensive income - - - (64,948) (1,042,468) (1,107,416)

Arising on the exercise of employee share options - - - - - - Arising on employee shares option lapsed during the period - - - - - - Amount charged to the employee share option reserve - - - 16,599 - 16,599 Dividends - - - - - -

Total - - - 16,599 0 16,599

Balance at 31 March 2013 2,558,960 5,006,558 102,317 502,645 1,824,451 9,994,931

Comprehensive income Profit for the financial period - - - - 75,118 75,118 Other comprehensive income - - - 338,067 - 338,067

Total comprehensive income - - - 338,067 75,118 413,185

Arising on the exercise of employee share options 2,370 9,345 - - - 11,715 Arising on employee shares option lapsed during the period - - - (47,776) 47,776 - Amount charged to the employee share option reserve - - - 17,898 - 17,898 Dividends - - - - - -

Total 2,370 9,345 - (29,878) 47,776 29,613

Balance at 30 June 2013 2,561,330 5,015,903 102,317 810,834 1,947,344 10,437,728

Comprehensive income Profit for the financial period - - - - (1,492,181) (1,492,181) Other comprehensive income - - - 74,437 - 74,437

Total comprehensive income - - - 74,437 (1,492,181) (1,417,744)

Arising on the exercise of employee share options - - - - - - Arising on employee shares option lapsed during the period - - - - - - Amount charged to the employee share option reserve - - - 26,111 - 26,111 Dividends - - - - - -

Total - - - 26,111 - 26,111

Balance at 30 September 2013 2,561,330 5,015,903 102,317 911,382 455,163 9,046,095



15

Notes to the Consolidated Financial Statements

1. STATUTORY ACCOUNTS

The interim results for the three month period ending 30 September 2013 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

2012, upon which the auditors have given an unqualified report and made no statement under

Sections 498(2) or (3) of the Companies Act 2006, 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 2012. The financial

information is presented in Euros and has been prepared under the historical cost convention and

on a going concern basis.

3. FINANCE COSTS – NET

3 months to September 30

2013


2012

Year December 31

2012

€ € €

Interest on bonds and bank loans (1,810,266) (1,152,878) (3,790,063)

(1,810,266) (1,152,878) (3,790,063)

Interest on bonds is calculated using the effective interest rate method as required by IAS 39

‘Financial Instruments'. Issue costs on the bonds are recognised in the Statement of

Comprehensive Income over the period of the borrowings using the effective interest rate method.

In the 3 months to 30 September 2013, the impact of issue costs on the effective interest rate

calculation amounted to €0.2m.

4. UNREALISED FOREIGN EXCHANGE DIFFERENCES

During Q1 and Q3 2012, the Group issued a total of SEK 260 million 3 year maturity senior asset-

backed bonds to investors in the Nordic region. In May 2013, the Group issued an additional

equivalent of approximately SEK 90 million in SEK and Euro under its asset-backed bond facility

to Nordic and Asian investors.

http://www.mcbfinance.com/


16

In March 2013, the Group issued a total of SEK 45 million 2 year maturity unsecured

subordinated bonds to investors in the Nordic region.

Fluctuations in the Euro/SEK foreign exchange rate resulted in a €0.4m unrealised foreign

exchange loss during Q3 2013. 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 Q3 2013 was €-0.5m.

The Group’s SEK exposure related to its senior bonds has been hedged using EUR/SEK

currency options, which limit the Group’s exposure to a weighted average 3.9% weakening in the

value of the Euro over the three year maturity of the bond. The value of these currency options

are recorded in Current Assets as Other Receivables in the Group’s Balance Sheet (see note 7).

Foreign exchange translation differences in respect of the Company’s Australian business are

recorded as Other Comprehensive Income.

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 Finnish and Lithuanian operations, but also on account of its Latvian

operations. No corporation tax arises in Estonia unless a distribution is made.

6. EARNING PER SHARE

a) Basic

The calculation of basic earnings per share is based on:

3 months to

30 September

2013

3 months to 30

September 2012

Year to 31 December

2012

Number

Number

Number

Weighted average number of Ordinary shares in issue during the period

17,690,007

17,660,007

17,356,045

The profit for the period (€) -1,492,181 -175,802 636,772


17

b) Diluted

The calculation of diluted earnings per share is based on:

3 months to

30 September

2013

3 months to 30

September 2012

Year to 31 December

2012

Number

Number

Number

Earnings Profit/(loss) attributable to equity holders of the company

-1,492,181

-175,802

636,772

Weighted average number of ordinary shares in issue

17,690,007

17,660,007

17,356,045

Adjustments for dilutive effect of

- Employee share options 264,218 122,151 291,014

- Share options granted to lender - - -

Weighted average number of ordinary shares for diluted earnings per share

17,954,225

17,782,158

17,647,059

Adjustment for the dilutive effect of share options is based on an average price of 76.6077p per

ordinary share during the three month period to 30 September 2013 (Q3 2012: 66.703p, FY 2012:

65.91p).


18

7. TRADE AND OTHER RECEIVABLES Current receivables September

30 2013 September

30 2012 Year to 31

December 2012


€ € €

Customer loan receivables 48,740,514 34,953,852 37,855,954 Less: provision for impairment of trade receivables

(11,970,337)

(7,766,648) (8,029,402)

Customer loan receivables - net 36,770,177 27,187,204 29,826,552

Other receivables 906,146 419,995 536,620

37,676,323 27,607,199 30,363,172

Non-current receivables September

30 2013 September

30 2012 Year to 31

December 2012


€ € €

Customer loan receivables 5,375,543 2,625,860 3,660,161 Less: provision for impairment of trade receivables

(273,928)

(143,060) (176,425)

Customer loan receivables - net 5,101,616 2,482,800 3,483,736

Other receivables - - -

5,101,616 2,482,800 3,483,736

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:


2013


2012

Year to 31 December

2012

(unaudited) (unaudited) (audited) € € € At the start of the period 10,711,508 7,245,375 4,961,590 Charge for the period 2,358,280 1,501,658 5,998,130 Amounts written off during the period (825,523) (837,325) (2,753,894)

At the end of the period 12,244,264 7,909,708 8,205,826

The provisions charged to the Statement of Comprehensive Income during the period Q3 2013

were €2,358,280 (Q3 2012: €1,501,658; FY 2012: €5,998,130). During Q3 2013, there were

Impairment Provision Reversals of €172,846 (Q3 2012: €177,087; FY 2012: €835,319).


19

8. DERIVATIVES

Derivatives consist of the market value of currency options in place to hedge the Group’s SEK

exposure in relation to its outstanding SEK 350 million of senior bonds and SEK 45 million of

subordinated bonds. At 30 September 2013, the options had a fair value of €898,867. During the

period ending Q3 2013, there was a €26,242 loss recognised in the Consolidated Statement of

Comprehensive Income representing unrealised market value adjustments to the fair value of the

currency options.

9. EQUITY & CALLED UP SHARE CAPITAL

September 30 2013 September 30 2012 December 31 2012

Number of 10p shares €



Issued and fully paid

Ordinary shares of 10p each 17,690,007 2,561,330 17,660,007 2,581,284 17,670,007 2,558,960

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 share buy-backs undertaken by the Company,

which reduces the Company’s Share Capital.

Other Reserves relate mainly to the equity-settled employee option reserve, arising on the grant

of share options to employees under the employee share option plan, and the foreign currency

translation reserve.

Retained Earnings relate to cumulative profits and losses recognised in the Consolidated

Statement of Comprehensive Income.

The Group has one class of ordinary share, which carries no right to fixed income.

During the three month period to 30 September 2013, no options were issued over the ordinary

shares of the company (Q3 2012: 0; FY 2012: 975,760).

As of 30 September 2013, the Company had 1,946,600 options outstanding (31 December 2012:

2,233,562), of which 665,000 were exercisable. As of 30 September 2013, the outstanding

options had a range of exercise prices from 41p – 100p (2012: 41p – 100p) and a weighted

average remaining contractual life of 2.7 years (2012: 2.7 years). The expense charged to the

Consolidated Statement of Comprehensive Income relating to employee share options during Q3

2013 was €26,111 (Q3 2012: €17,843). All options granted since 13th June 2011 (or 1,311,600

options) 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 20 business days.

The Company had 17,690,007 Ordinary Shares in issue as at 30 September 2013.


20

10. SHORT-TERM AND LONG-TERM BORROWINGS

Long-Term Borrowings

September 30 2013 September 30 2012 Year December 31 2012

€ € €

Bonds 44,207,666 29,196,344 28,915,284

Bonds are stated in the Balance Sheet net of €1,371,647 costs relating to the bond offerings,

including the subordinated notes issued in March 2013 and the senior notes issued in May 2013.

Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net

of issue costs) and the redemption value of the bonds is recognised in the Statement of

Comprehensive Income over the period of the borrowings (36 months in the case of the Senior

Secured Bond and 24 months in the case of the Subordinated Bond) using the Effective Interest

Rate Method as required by IAS 39 'Financial instruments'. As of 30 September 2013, the

principal balance of the senior and subordinated bonds was €45.6 million.

11. RECONCILIATION OF PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION TO

OPERATING CASH FLOWS


30 2013


30 2012

Year to 31 December

2012

(unaudited) (unaudited) (audited) € € €

Operating profit 977,674 1,692,053 6,140,779 Finance costs - net (1,810,266) (1,152,878) (3,790,063) Financing - foreign exchange losses on borrowings (470,640) (506,024) (894,742) Depreciation 19,247 15,107 52,999 Amortisation 145,062 34,739 85,727 Employee share options reserve 26,111 17,843 93,438 Translation on foreign currencies 0 0 (1,454) (Increase)/decrease in derivatives 26,242 (622,228) (918,344) (Increase)/decrease in receivables (1,291,699) (1,338,924) (11,028,153) (Decrease)/Increase in payables (84,839) 40,016 874,538

Cash flow used in /(generated from) operating activities (2,463,108)

(1,820,295) (9,385,275)

MCB Finance Group plc

21

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

London Auditors

W1F 8GQ Mazars LLP

Tower Bridge House

Visiting address: St Katharine’s Way

Löötsa 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

http://www.mcbfinance.com/

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