Eleving Group delivers EUR 71.8 million EBITDA at the end of 2022
Multi-brand fintech company Eleving Group has maintained steady growth and robust profitability figures despite the global economic slowdown. The Group increased its net portfolio by 17.8%, compared to the twelve-month period of 2021, while adjusted net profit before FX reached EUR 27.3 mln.
Steady growth accompanied by robust profitability
Operational and Strategic Highlights
- 2022 marked another successful year for the Group as the revenues hit an all-time twelve-month high, and the net portfolio achieved annual growth of 17.8%, totaling EUR 288.9 mln.
- Continued diversification of business operations and a balanced revenue stream from all three core business lines:
- Flexible lease and subscription-based products contributed EUR 50.8 mln to the 12M 2022 revenues—up by 91.1% compared to 12M 2021, but down by 4.8% QOQ. The key revenue driver was the productive lending segment in East Africa, which performed exceptionally well during the first three quarters of the year; during Q4, however, the Group tightened its underwriting policy, and some local jurisdictions saw indications of an economic slowdown, causing a slight slowdown in the Q4 revenue.
- Traditional lease and leaseback products contributed EUR 68.0 mln to the 12M 2022 revenues—up by 32.5% compared to 12M 2021 and up by 13.2% QOQ. The respective revenue growth was mainly attributable to the successful portfolio growth in Romania. However, nearly all of the Group’s markets experienced positive incremental growth.
- Revenues from the consumer loan segment contributed EUR 57.1 mln to the 12M 2022 revenues—down by 12.1% compared to 12M 2021, but up by 4.0% QOQ. The negative trend observed in the annual consumer loan revenue mainly stemmed from the run-down of the Ukrainian portfolio.
- Midst Q4, the Group partnered with STIMA, a battery-swapping technology provider, and the Estonian ride-hailing unicorn Bolt to promote climate-neutral mobility in Kenya by offering electric motorcycle financing services to the local customers. The initiative is still in its early stages of development, yet the first electric motorcycle customers have already been financed.
- Impairment coverage ratio for the vehicle finance segment at the end of the year stood at 95.0%, representing a 2p.p. improvement YOY. Meanwhile, the impairment coverage ratio for the consumer finance segment in the same period declined by 12p.p., driven by portfolio development in North Macedonia and portfolio run-down in Ukraine, and at the end of the year, it equaled 131.9%.
- During Q4, Eleving Group continued its course towards a more sustainable future and achieved several milestones aligned with its ESG strategic objectives. The most prominent highlight in the ESG landscape was the launch of a financial literacy platform, where anyone can assess the health of their existing loan commitments, evaluate whether new financial commitments would be feasible, and find advice on budgeting, debt management, making savings, financial hygiene, and the like. Currently, the platform is available in Latvia, but the Group is committed to extending the platform to all the other of the Group’s markets by the end of Q2 2023.
Financial Highlights and Progress
- Solid profitability as evidenced by:
- Adjusted EBITDA of EUR 71.8 mln (12M 2021: EUR 55.6 mln);
- Adjusted Net Profit before FX of EUR 27.3 mln (12M 2021: EUR 18.5 mln);
- Adjusted Net Profit after FX of EUR 21.1 mln (12M 2021: EUR 19.6 mln).
- Record-high net portfolio of EUR 288.9 mln; Eleving Vehicle Finance and Eleving Consumer Finance accounted for EUR 221.8 mln and EUR 67.1 mln, respectively.
- During Q4, the Group continued its local bond issuance program in Kenya, and by year-end had nearly doubled the amount raised in Q3, with the total funds raised reaching EUR 7.3 mln. Moving forward, the Group will seek to leverage similar opportunities, as they both bolster the Group’s capital structure and mitigate the FX gap on the Group’s balance sheet, originating from the asset and liability currency mismatch.
- The Group has successfully managed to decrease its operational cost base, as evidenced by the 1.7 p.p. drop in the cost-to-income ratio* of 12M 2022 compared to 12M 2021. Moreover, facing an inflationary environment, the Group will seek to become even more cost-efficient in 2023.
- The financial year of 2022 was closed with a healthy financial position, supported by the capitalization ratio of 26.2% (31 December 2021: 20.7%), ICR ratio of 2.5 (31 December 2021: 2.5), and net leverage of 3.4 (31 December 2021: 3.8), providing adequate and stable headroom for Eurobond covenants.
Modestas Sudnius, CEO of Eleving Group, commented:
“We started 2022 with a dosed optimism. The turbulence caused by the Covid-19 pandemic had subsided, and it appeared that we might plan for moderate and predictable growth of the global economy. However, the changing geopolitical situation in Eastern Europe and the war in Ukraine shifted the market and, consequently, the macroeconomic outlook. Despite these external factors, we experienced a strong quarter and twelve-month period, with the best financial and operational results in the Group’s history.
The near-perfect results were driven by the adjusted strategy approved right after Q1. The main emphasis was put on portfolio quality and efficiency, as well as reducing the portfolio exposure in the affected markets while maintaining steady growth as a Group. This translated into a focus placed on managerial efficiency, cost optimization, careful capital management, and a slightly more conservative business approach.
In Q4, we saw that consumption in some markets decreased because consumers postponed larger purchases, including buying new vehicles. Admittedly, these fluctuations were already predictable in Q2, so our timely decisions—focusing on key strategic partnerships and roll-out a fully automated “dealers’ module”—helped us maintain stable issuance volumes without sacrificing portfolio quality at a time when the overall market was shrinking.
In November, we decided to simplify and optimize our hub structure and merge our Eastern Europe hub with our Caucasus hub, creating a new and larger—Eleving Europe hub. We are confident this will result in smoother management processes and reduced administrative costs throughout 2023.
Also, in the ESG-related sphere, the Group achieved some significant milestones. In the past quarter, we launched the financial literacy platform for the Latvian market to educate consumers about personal budget planning and making informed financial decisions. We aim to launch it in other markets in Q1 and Q2 of 2023. Additionally, we are also proud of launching e-boda financing in Kenya. For the Group, this project contributes to fulfilling our strategic goals, where we have committed to increasing the number of emission-free vehicles in our portfolio and reducing the carbon footprint arising from it. For our clients, this project will save money on fuel and maintenance costs. For society, in the long run, it will improve the ecological aspects of the cities, such as air quality and reduced noise levels.”
Maris Kreics, CFO of Eleving Group, commented:
“Last quarter ended the best year for Eleving Group in terms of EBITDA, revenue, net profit, and other fundamental business indicators. In 2022, the Group managed to increase the adjusted EBITDA by 29.2% compared to 2021, while the adjusted revenue reached EUR 183.8 mln, an increase of 19.5% compared to a year ago. Also, the adjusted net profit before FX increased by 47.6% in 2022, while the net portfolio ascended to EUR 288.9 mln.
All things considered, we saw a slightly slower portfolio growth QOQ, but this resulted from our choice to mitigate the potential risks in times of uncertainty. We managed to diversify our portfolio across the markets and have absorbed the negative effect of war by decreasing exposure in the affected markets accordingly. Also, the diversification of the Group’s funding structure is still strong, with more opportunities for us to tap into the private debt at a local market level, especially in the African region.
As seen by the figures mentioned previously, we have entered the phase that is daunting for many companies in the financial industry—the elevated interest rates period—on a solid footing due to a conservative and measured approach toward the quality of our balance sheet.
In the coming quarters, we plan to continue focusing on controlled growth, improving our existing products and ensuring the quality of our portfolio. Additionally, we will be closely monitoring the developments in the financial markets, especially since our local three-year bond in Latvia is maturing during the next year.”
Cost-to-income ratio footnote:
*Ratio calculated as the sum of selling and administrative expense divided by the sum of interest revenue calculated using the effective interest method, fees, and commission income, and revenue from rent.
Full unaudited consolidated report on the 12M ended 31 December: https://eleving.com/investors/
A conference call in English with the Group’s management team to discuss the results is scheduled for 16 February 2023 at 15:00 CET.
Link to register for a conference call: https://bit.ly/3K3H94F
Toms Vecvagars, Investor Relations Manager