Steady portfolio growth while maintaining excellent profitability
Operational and Strategic Highlights
- The Group closed the first half of 2023, recording steady financial performance. The six-month revenues remained relatively unchanged compared to the corresponding period last year, reaching EUR 90.6 mln. Meanwhile, the Group’s net portfolio achieved 1.7% growth QOQ and totaled EUR 295.1 mln.
- Diversified business operations and a balanced revenue stream from all three core business lines:
- Flexible lease and subscription-based products contributed EUR 25.2 mln to the 6M 2023 revenues—up by 7.2% compared to 6M 2022, driven by the solid performance in productive lending in the motorcycle-taxi segment in East Africa and a successful scale-up of rental products in the Baltics;
- Traditional lease and leaseback products contributed EUR 34.0 mln to the 6M 2023 revenues—up by 7.9% compared to 6M 2022. The respective revenue growth was mainly generated by portfolio growth in Romania; however, nearly all the other of the Group’s markets also experienced positive incremental growth;
- Revenues from the consumer loan segment contributed EUR 27.6 mln to the 6M 2023 revenues—down by 11.0% compared to 6M 2022. The negative revenue development exclusively stemmed from the run-down of the Ukrainian portfolio, as the revenues of all the other consumer finance markets have increased during the corresponding time span.
- In early July, Eleving Group announced that it had obtained1 EC Finance Group through the integration and combination of both companies’ equity amounts. EC Finance Group, better known by the product brand name ExpressCredit, is a consumer finance provider operating in four Southern African countries. As a result of the transaction, the Group will take over the company’s assets, subsidiaries, and client portfolio worth EUR 28 mln, and increase the Group’s equity.
- In early July, Renti Plus business operations in Latvia were sold2 to Transporent Ltd, a Latvian subsidiary of the international mobility services provider SIXT. The respective transaction included a sale of more than 100 vehicles from the Renti Plus fleet and its active customer portfolio. With closing of the deal, the Group will continue to develop its financing services in the retail and SME segments in Latvia, with a primary focus on streamlining existing products.
- The end of Q2 marked the first full year of the Group’s electric car-sharing product’s OX Drive operations in Latvia. Within the first year, the product generated more than half a million euros in revenues and the mobile app was downloaded more than 30k times. Also, the vehicle fleet has increased two-fold since the launch and surpasses the 100-vehicle threshold. Given the high demand for electric vehicle car-sharing services, the Group plans to double its existing electric vehicle fleet by the end of 2023.
- In the ESG space, the Group has continued to expand its electric motorcycle-taxi financing product in Kenya, with 80 units financed during 2023 and a goal of 500 vehicles financed by the end of the year. The same electric motorcycle-taxi financing product is also currently under development in Uganda, with an estimated time of launch towards the end of 2023. Lastly, the Group is proud to share that the 2 million kilometers traveled using OX Drive product has saved the same CO2 emissions that 10k trees could have captured within one year.
Financial Highlights and Progress
- Solid profitability as evidenced by:
- Adjusted EBITDA of EUR 36.1 mln (6M 2022: EUR 30.7 mln).
- Adjusted Net Profit before FX of EUR 13.6 mln (6M 2022: EUR 9.0 mln).
- Adjusted Net Profit after FX of EUR 12.4 mln (6M 2022: EUR 7.4 mln).
- Stable net portfolio of EUR 295.1 mln; Eleving Vehicle Finance and Eleving Consumer Finance accounted for EUR 223.9 mln and EUR 71.2 mln, respectively.
- In late Q2, the Group raised USD 7 mln3 from Verdant Capital Hybrid Fund in Kenya. The respective investment was structured as a dual-tranche investment comprising USD 5.5 mln senior secured facility and USD 1.5 mln subordinated facility. The purpose of the facility is to grow the existing vehicle financing portfolio as well as to support the introduction of sustainable mobility products in Kenya.
- The Group’s 3-year Latvian bond is maturing in early 2024; hence, the Group and its partners are actively working to frame a new instrument to enter the market during Q3 this year.
- Fitch Ratings has affirmed our long-term Issuer Default Rating (IDR) and senior secured debt rating at “B-.” The outlook on the long-term IDR is Stable.
- The first half of 2023 was closed with a healthy financial position, supported by the capitalization ratio of 27.2% (31 December 2022: 25.8%), ICR ratio of 2.4 (31 December 2022: 2.4), and net leverage of 3.4 (31 December 2022: 3.3), providing an adequate and stable headroom for Eurobond covenants.
Modestas Sudnius, CEO of Eleving Group, commented:
“The 6M 2023 results highlight that Eleving Group has delivered on its promises to its stakeholders and executed its strategy well, recording high efficiency and profitability ratios in the first 6 months of 2023. Over the last 12 months, the company took a more conservative approach and focused on underwriting, portfolio quality, and ensuring that the company is lean and efficient. As a result, the Group sustained a steady net loan portfolio while its key performance and efficiency indicators kept improving.
In the first half of 2023, we observed that customers faced inflation-related difficulties in our EU and African markets. That had an effect on the overall payment discipline. However, this trend did not significantly impact the portfolio quality since, in the previous 12 months, the company’s core focus was on a stricter underwriting policy, higher customer down payments, and further improvement of debt collection tools. That, despite economic turbulences, allowed the company to decrease impairment costs compared to the last year. We are committed to maintaining our strategic direction unchanged, which, together with slightly increased pricing to address the changes in the cost of borrowing, should deliver strong results in the following quarters, even in more challenging economic conditions.
One of the key goals which the company had for this year was to explore different growth opportunities outside our existing markets, which culminated with the integration of the ExpressCredit business into the Group’s portfolio. This is a solid and mature business operating in four emerging markets in the sub-Saharan region of Africa, offering consumer financing services to government and public administration employees. In the near future, we intend to complete the alignment and integration of the business and its systems, and to optimize the administrative processes, thus increasing the quality of the services offered and the efficiency of the business itself. In the longer term, we also plan to introduce new secured products in these markets.
Lastly, the sale of Renti plus, a new long-term car subscription business, is also worth mentioning. This has been a strategic and well-thought-out decision for us, the underlying motivation being portfolio efficiency. It will enable the company to focus more on developing our financial services in Latvia’s retail and SME segments.”
Maris Kreics, CFO of Eleving Group, commented:
“The first six months of 2023 show healthy growth in all key business figures. The Group generated revenues of EUR 90.6 mln, with a net portfolio of EUR 295.1 mln. The corresponding adjusted EBITDA for this period stood at EUR 36.1 mln, compared to EUR 30.7 mln from the previous year. Furthermore, the adjusted net profit before FX reached EUR 13.6 mln, which is an increase of EUR 4.6 mln compared to the first half of 2022. Eleving Group is currently enjoying a strong cash position, allowing us to consider new business integrations, as was the case with ExpressCredit.
During the 2Q, the execution of the Group’s fundraising strategy and the plans for the global capital markets in the coming months were also very much in focus. We are actively working with our partners to frame a new bond product aimed to be launched in the second half of the year. At the same time, we are continuing the work on country-level local bond issuances and other funding sources. For example, in 2Q, we raised USD 7 mln (approx. EUR 6.4 mln) from Verdant Capital Hybrid Fund. The attracted funds will be used to develop the Group’s sustainability-linked products and increase our Kenyan business portfolio. At the same time, the cooperation with Verdant Capital is in line with our African FX strategy. Furthermore, we plan to double our local bond program launched a year ago in Kenya. Today, the investments attracted through this instrument are reaching EUR 13 mln.
Furthermore, Fitch has rated our business at B- with a stable outlook. We have managed to keep this rating stable for the third consecutive year despite the Covid-19 setbacks, the war in Ukraine, and the shifts in the global economy. Fitch appreciated that Eleving Group had delivered on its promises to stakeholders and successfully continued its de-leveraging with an even more improved gross debt-to-tangible equity ratio (end-1Q23: 5.1x; end-2021: 7.7x). Another aspect is continuously strong profitability, mainly thanks to high-yielding products and mostly fixed-rate funding in place. Additionally, Eleving Group successfully absorbed negative impacts from its portfolio write-down in Ukraine and scale-down in Belarus, which indicates the overall quality of the Group’s portfolio and its high cash generation capabilities. The third factor highlighted by Fitch was the robust funding structure, with the largest EUR 150 mln Eurobond maturing only in 2026 and the availability of flexible capital that can be raised through Mintos marketplace, a Latvian-licensed platform for retail investing in loan products. This rating is a crucial testimony to the soundness and quality of our adopted strategy.”
1Transaction was finalized in early Q3, hence excluded from the Group’s Q2 financials.
2Transaction was finalized in early Q3, hence excluded from the Group’s Q2 financials.
3Funds were received in early Q3, hence excluded from the Group’s Q2 financials.
Full unaudited consolidated report on 6M period ended on 30 June: https://eleving.com/investors/
A conference call in English with the Group’s management team to discuss the results is scheduled for 10 August 2023 at 16:00 CET.
Link to register for a conference call can be found here.
Arturs Cakars, Group’s Chief Corporate Affairs Officer