REG - TCS Grp Hldg PLC - 1st Quarter Results <Origin Href="QuoteRef">TCSq.L</Origin>

TCS HoldingAnnouncement

06/09/2014 02:01

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RNS Number : 1313J
TCS Group Holding PLC
09 June 2014 
 
TCS GROUP HOLDING PLC 
 
ANNOUNCES IFRS RESULTS FOR Q1 2014 
 
Moscow, Russia - 9 June 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 interim condensed consolidated IFRS results for the three months
ended 31 March 2014.As previously stated, the Group has adopted the rouble as
the presentation currency for IFRS consolidated statements going forward. 
 
Q1 2014 KEY FINANCIAL HIGHLIGHTS 
 
·     Net interest income increased by 36% y-o-y to RUB 7.4 bn (Q1 2013: RUB
5.5 bn) 
 
·     Profit before tax amounted to RUB 481.3 mln (Q1 2013: RUB 1.3 bn) 
 
·     Net profit amounted to RUB 362.3 mln (Q1 2013: RUB 1.0 bn) 
 
·     Net interest margin stood at 33% (Q1 2013: 34%) 
 
·     Cost of risk was at 20.5% (Q1 2013: 16.2%) 
 
·     Total assets increased by 2.2% YTD to RUB 101.2 bn (2013YE: RUB 99 bn) 
 
·     Gross loans and advances to customers up by 4.9% YTD to RUB 87.5 bn
(2013YE: RUB 83.4 bn) 
 
·     Share of non-performing loans (NPLs) at 8.9% (2013YE: 7%) 
 
·     Customer accounts reached RUB 43.1 bn (2013YE: RUB 43.2 bn) 
 
·     Total equity up by 1.8% YTD to RUB 20.9 bn (2013YE: RUB 20.6 bn) 
 
KEY HIGHLIGHTS IN Q1 2014 AND POST THE END OF THE QUARTER 
 
·     In April 2014, Tinkoff Online Insurance launched online sales through
its website and started offering personal accident, property and travel
insurance services to the mass market 
 
·     As of 1 June 2014, over 4.3 mln credit cards issued 
 
·     In Q1 2014, over 270,000 new customers acquired 
 
·     In February 2014, TCS Bank signed a partnership agreement with Euroset,
Russia's largest mobile phone retailer, to offer credit lines to prepaid bonus
cards "Kukuruza" in Euroset stores 
 
·     In February 2014, TCS Bank launched a co-branded credit card for
frequent travelers together with OneTwoTrip, Russia's leading online travel
agency 
 
Oliver Hughes, CEO of TCS Bank, commented: "The Q1 results reflect our
conscious efforts to reduce the acquisition rate of new customers and as a
result our gross portfolio grew by 4.9% Q-o-Q. We have focused on maintaining
our operating efficiency and net interest margin which stood at 33%, while
significantly tightening our underwriting criteria. In the current challenging
economic and market environment our cost of risk has increased, however we
continue to diversify the business with the launch of new credit card products
and partnerships, as well as online insurance in the mass market. Although in
the quarter our profitability was reduced, we remained meaningfully
profitable. We believe that the flexibility and scalability of our business
model makes TCS Group more resilient to the downturn, while positioning us
favorably for return to growth in the market as soon as the cycle turns. 
 
We now see the cost of risk likely to remain in the 20-22% range for the
remainder of the year, even as we continue to tighten our underwriting,
monitoring and collection activities. Our net profit guidance for the full
year which we have previously stated at over RUB 7.0 bn is under review." 
 
FINANCIAL AND OPERATIONAL REVIEW 
 
 RUB bn                          Q1 2014  Q1 2013  Change  
 Credit cards issued ('000 pcs)  278      278      0%      
 Credit cards transactions       22.3     20.7     +8%     
 
 
 RUB bn                                     Q1 2014  Q1 2013  Change  
 Net interest income                        7.4      5.5      +36%    
 Net interest income after loan impairment  3.1      3.2      -4%     
 Profit before tax                          0.5      1.3      -63%    
 Net profit                                 0.4      1.0      -65%    
 
 
 RUB bn                               31 March 2014  31 December 2013  Change  
 Total Assets                         101.2          99.0              +2%     
 Net Loans and advances to customers  75.0           74.0              +1%     
 Cash and cash equivalents            17.5           18.8              -7%     
 Total Liabilities                    80.3           78.4              +2%     
 Customer accounts (deposits)         43.1           43.2              0%      
 Debt securities in issue             23.0           26.2              -12%    
 Total Equity                         20.9           20.6              +2%     
 ROE                                  7.0%           41.2%                     
 Tier 1 capital ratio                 17.3%          19.9%                     
 Total capital                        22.3%          25.0%                     
 CBR N1(capital adequacy ratio)       18.3%          15.8%                     
 
 
In Q1 2014, the number of new credit cards issued for the period was 278
thousand (Q1 2013: 278 thousand), while the volume of credit cards
transactions increased by 8% y-o-y to RUB 22.3 bn (Q1 2013: RUB 20.7 bn). 
 
The Group reported net interest income increase of 36% y-o-y to RUB 7.4 bn
compared to RUB 5.5 bn in Q1 2013. A modest growth in net interest income was
attributable to a reduction in interest expense while the slowdown in the
growth of the gross loans portfolio to 4.9% YTD led to a decrease in gross
yield. The Group's net interest margin stood at 33% compared to 34% in Q1 2013
providing it with substantial profitability and meaningful loss absorption
capacity. Whilst the cost of risk increased to 20.5% in Q1 2014 from 15.4% in
Q4 2013, the Group generated a solid 13.5% risk-adjusted net interest margin
after provisions for loan losses. 
 
In Q1 2014, operating expenses increased by 48% y-o-y to RUB 2.7 bn from RUB
1.8 bn in Q1 2013, driven mainly by an increase in marketing costs as the
Group executed a large advertising campaign during the quarter aimed at
building brand awareness among the mass-affluent audience. The Group has been
successful in making significant cost savings across the business.
Administrative staff costs decreased by 25% Q-o-Q to RUB 0.8 bn, and other
administrative costs were down by 6% to RUB 0.6 bn. As a result, the Group's
cost to income ratio excluding acquisition expenses declined to 18.9% in Q1
2014 compared to 22.2% in Q4 2013. 
 
The Group reported net income of RUB 362.3 mln compared to RUB 1.0 bn in Q1
2013. Net income was largely affected by additional loan loss provisions that
allowed to maintain the Group's 1.6x provisioning ratio. 
 
In Q1 2014, the Group maintained a strong balance sheet with total assets
growing by 2.2% to RUB 101 bn from RUB 99 bn at the year-end 2013. The Group
has maintained a high liquidity cushion with cash accounting for 17.3% of the
Group's total assets and 40.7% of customer accounts. 
 
The Group deployed some of its excess cash in a portfolio of Russian
government and high-rated corporate bonds with short maturities to make a
further positive contribution to its interest income. At the end of Q1 2014,
the Group accumulated a bond portfolio of RUB 1.4 bn, and continued to
increase it in the second quarter to slightly over RUB 3 bn. 
 
The Group's gross loan portfolio grew by 4.9% to RUB 87.5 bn from RUB 83.4 bn
at year-end 2013, which represents a deliberate effort to slow down the growth
of the loan portfolio and significantly tighten the approval rates. This was
done to address the current challenging credit risk environment following the
period of significant growth in recent quarters. 
 
In Q1 2014, net loans increased by 1.4% to RUB 75.0 bn from RUB 74.0 bn at
2013YE, with the share in total assets remaining stable at 74%. Given the
current environment of higher credit risk and tighter credit markets, TCS
Group has become more selective with offering new loans to customers and
growing its loan portfolio. 
 
Share of non-performing loans in total gross loans increased to 8.9% from 7%
at 2013YE due to more challenging environment and increased retention of
overdue loans and NPLs on the balance sheet. Loan loss provisioning ratio went
up commensurately with NPLs as the Group kept a robust LLP coverage ratio at
1.6x of NPLs. 
 
As of Q1 2014, balance sheet provisioning for impairment of loans was up to
RUB 12.5 bn compared to RUB 9.4 bn as of 2013YE. These loan portfolio quality
trends have been due to higher credit risks currently observed in the broader
Russian retail lending market with increased leverage in certain areas of the
Group's portfolio and increased social default of previously good standing
customers. 
 
The Group's liabilities grew largely in line with the assets by 2.3% to RUB
80.3 bn from RUB 78.4 bn at 2013YE. Customer deposits continued to account for
the majority of the Group's liabilities and stood at 54% with volumes
remaining largely flat at RUB 43.1 bn. Debt securities in issue were the
second most important source of funding, and declined by 12.3% to RUB 23.0 bn
from RUB 26.2 bn at the year-end, primarily due to the repayment of two of the
European Commercial Paper facilities that matured in Q1 2014. 
 
The Group's capital base remains strong with the statutory N1 capital adequacy
ratio at 18.3% as of 1 April 2014, substantially higher than the minimum CBRF
capital requirement of 10% and the minimum capital ratio requirement of 13%
set by debt covenants. N1 ratio increased from 15.8% at the year-end to 18.3%
as the USD 175 mln of primary IPO proceeds at the Group level was injected
into the equity at the Bank level. Total equity of the Group grew by 1.9% to
RUB 20.9 bn in Q1 2014 from RUB 20.6 at the year-end 2013 as the Group
reinvested its net earnings into the business. 
 
*** 
 
The management team will host an investor and analyst conference call at 14.00
UK time (17.00 Moscow time, 09.00 U.S. Eastern Daylight Time), on Monday, 9
June 2014. 
 
To participate in the conference call, please use the following access
details: 
 
 Confirmation Code:                        51495514              
                                                                 
 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  
 
 
Please register approximately 15 minutes prior to the start of the call. 
 
The Group's financial statements for Q1 2014 ended 31 March 2014 can be found
at the Group's website at https://www.tcsbank.ru/eng/about-bank/news/ 
 
A live webcast of the presentation will be available at:
https://webconnect.webex.com/webconnect/onstage/g.php?t=a&d=666268267 
 
*** 
 
For enquiries: 
 
 Tinkoff Credit Systems Bank Peter Russell, IR Director +44 20 3691 2049ir@tcsbank.ru  Tinkoff Credit Systems Bank Darya Ermolina, Head of PR + 7(495) 648 1000 (ext. 2009)d.ermolina@tcsbank.ru  
 FTI Consulting LondonLarisa Millings +44 (0)20 3727 1364                              FTI Consulting MoscowMaria 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 7.3% based on
non-delinquent receivables (according to Central Bank of Russia (CBR) data, as
of 1 April 2014). As of 1 June 2014, the Group has issued over 4.3 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 March 2014, the Group's total assets amounted to RUB 101.2 bn, net
loans and advances to customers stood at RUB 75 bn and customer accounts
(deposits) amounted to RUB 43.1 bn. In Q1 2014, the Group generated a net
profit of RUB 362.3 mln and net interest income of RUB 7.4 bn. 
 
The Group is well capitalised with its total capital ratio and Tier 1 capital
ratio of 22.3% and 17.3%, respectively, in accordance with Basel III
methodology. 
 
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. 
 
This information is provided by RNS
The company news service from the London Stock Exchange