Kreditech will reach breakeven point in 2020
Hamburg, germany, Nov. 7, 2019 / PRNewswire / – Kreditech financial report for the 2018 financial year shows that the company is on track to achieve profitability in the near future. The performance of HamburgTechnology-based fintech has improved significantly thanks to a new strategy implemented in 2018. Net financial income improved 76% compared to 2017 – thanks to a strong focus on profitability, evolution product portfolio, investment in innovations and effective cost management measures. A recent injection of capital from existing and new investors has provided the company with the funds needed to continue its transformation and focus on growth.
Kreditech combines cutting-edge technological capabilities and data science, with in-depth knowledge of consumer borrowing needs and extensive experience in point-of-sale (POS) and e-commerce partnerships. The company lends through its consumer brands Monedo Now and Kredito24, as well as through partners in four markets: India, Poland, Russia and Spain. In 2018, the company focused on orienting its operations towards the near prime rate loan market, with installment loans being a key product. A new management team was put in place at the start of 2018 and since then has focused efforts on improving Kreditech’s operational efficiency, risk and cost management capabilities and towards profitability. Throughout 2019, the company successfully returned to growth in its core installment loan product and achieved its highest levels of monthly installment loan issuance.
“Our results for 2018 clearly indicate that we have made excellent progress towards achieving our strategic objectives. We have been successful in growing into the near-prime segment in most of our major markets, and we have continued – and will continue – in this strategic direction throughout all of 2019. Our growth is supported by investments in the basic infrastructure and the successful opening of new and exciting possibilities, such as obtaining an NBFC license in India, which allows us to develop in this high potential market, “ said David Chan, CEO of the company.
The CEO of Kreditech believes that the changes implemented in 2018 resulted in further growth of Kreditech’s business in all key areas in 2019. “2019 has turned out to be a period of further stabilization and we look forward to a path of sustainable and profitable growth in all of our strategic markets”, comments David Chan.
Kreditech’s income statement (P&L) for 2018 shows a significant improvement and change in the performance of the company. Net losses in fintech decreased by 76%, € 58.4 million in 2017 at € 13.9 million for 2018. The result was driven by improved profitability of commercial operations, combined with effective risk and cost management. Although income fell by 21.4% (from 71.4 million euros in 2017 at 56.1 million euros in 2018), this was more than offset by a reduction in impairments. The net result is an increase in the gross margin (+ 32.3%) and a markedly improved gross rate of return (38.7% in 2018, compared to 23.0% in 2017).
In 2018, Kreditech issued 107.3 million euros credit in all markets in which it provides lending services. The company generated revenues of 56.1 million euros. This represents a decrease of around 21% from the previous year, reflecting Kreditech’s shift in strategic focus from higher-risk, high-yield, short-term microloans to longer-term loans. , whose demand is growing at a disproportionately higher rate. “Our focus on longer term, lower risk products allows us to grow our business profitably at a healthy pace and create a sustainable and reliable cash flow,” remarked Mariusz Dąbrowski, CFO of Kreditech.
With the main focus on profitability, issuance volume in 2018 (nominal value of total newly issued consumer loans) decreased by around 42% from 185.2 million euros in 2017 at 107.3 million euros. “We have consciously kept our issuance dynamics under tight control, in order to allow a smooth transition to a new technical infrastructure,” said David Chan, CEO. With the aim of being a premier global platform for technology-based lending, Kreditech has invested in the infrastructure that underpins its services. This investment will allow Kreditech to benefit from improved scalability and resiliency, and the ability to add functionality and capacity quickly and affordably. Kreditech’s new core system – a cloud-based banking platform called Mambu – was successfully deployed in Poland in Q1 2019 and Spain in the third quarter of 2019.
As Kreditech’s priority is to improve the quality of its portfolio, the level of impairment has been considerably reduced. Net impairments for bad debts were reduced by 13 percentage points (pp), compared to 69% of revenue (49 million euros) in 2017 to 56% of turnover (€ 31.4 million) in 2018. “This change was driven by an increase in the proportion of much lower risk installment loans. We are happy to report that the write-downs are considerably lower, which contributes to improving our results. This reduction in impairments demonstrates our ability to effectively manage this area of our operations, “ says Mariusz Dąbrowski.
Kreditech reported a 55% reduction in operating expenses (up to 32.3 million euros) in 2018, which reduced operating losses by 81% (from 53 million euros in 2017, at € 10.3 million in 2018). The focus on deeper business engagement resulted in streamlined processes, which allowed the company to benefit from lower customer acquisition costs while increasing conversion rates. For the full year 2018, Kreditech’s customer acquisition costs (CAC) were only 3.7 million euros, which represents only 7% of gross turnover (compared to 30% of gross turnover in 2017).
Kreditech generated positive cash flow from credit activities in 2018 (26 million euros compared to € 15.1 million in 2017) and the negative operating cash flow was significantly reduced (by 89.2 million euros in 2017 to 13.8 million in 2018), thanks to lower refinancing costs, better interest rates on new credit facilities and an overall reduction in expenses. “We are proud to report that the positive cash flow trends continued in 2019 and will result in an expected breakeven point in 2020. This is a clear indication that our strategic decisions are making Kreditech a healthy, profitable and growing company. growth”. said David Chan.
Kreditech’s mission is to be the global leader in technology-driven consumer lending and the platform of choice in the near-prime market. Based at Hamburg, germany, Kreditech currently employs more than 300 people in seven countries. With well established and growing operations in Poland, Spain and Russia, Kreditech’s short-term objective will be to rapidly develop its activities by India. The company also plans to expand further into other major consumer credit markets in the coming years.
Learn more about: www.kreditech.com.
 All data covers the year from January 1, 2018 at December 31, 2018