Annual review 2015

Transcription

Annual review 2015

2015
Euroloan Group Plc
Annual Review
WE ARE
FAST,
FAIR &
FRESH
The annual report, financial statements and related material presented in this annual review are translations
based on originals in Finnish.
Please refer to the originals in Finnish for audited figures and information. Euroloan Group Plc reserves the right
to correct or amend information presented in this annual review without notice.
CONTENTS
14
BOARD OF DIRECTORS
ANNUAL REPORT
28
CONSOLIDATED
FINANCIAL
STATEMENTS
EUROLOAN IN 2015
FROM THE CEO
BOARD OF DIRECTORS
EXECUTIVE STEERING COMMITTEE
CUSTOMER EXPERIENCE
BOARD OF DIRECTORS’ ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
37
ACCOUNTING PRINCIPLES OF FINANCIAL
STATEMENTS
40
CORPORATE
GOVERNANCE
4
6
8
10
12
14
28
33
40
43
52
54
CORPORATE GOVERNANCE
RISK MANAGEMENT
PARENT COMPANY’S FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY’S
FINANCIAL STATEMENTS
58
59
61
EUROLOAN GROUP PLC
SIGNATURES TO THE FINANCIAL STATEMENTS
AUDITOR’S REPORT
AUDITOR’S REPORT (TRANSLATION)
• ANNUAL REVIEW 2015 • www.euroloan.com
3
EUROLOAN IN 2015
Euroloan Group Plc is a rapidly growing international
group, specialized in highly automated financial services and financial technology (FinTech). The Group
has offices in Helsinki (HQ), Luxembourg, Stockholm
and Warsaw and the team includes around 50 professionals of 10 different nationalities.
The Group operates in a mobile online environment
offering credit limits, loans, money transfers, webshop
payment services, invoice payments and collection
services as a real-time e-business to retail customers.
For webshops and sales points, Euroloan offers payper-invoice and sales finance solutions that are easy,
free of charge, and work under the merchants’ own
brand. Euroloan originates high-quality structured
consumer receivables portfolios with guaranteed performance and continuous monitoring and servicing.
All services are truly instant and automated and include origination and debt servicing functions that
traditionally have been manual, such as identification,
scoring, underwriting, payments, back-office, credit
monitoring and debt collection. This is made possible
by Euroloan’s proprietary cloud-based banking software and secured by its ISO27001:2013-certified information security management system. KEY EVENTS OF THE YEAR:
• The Group sets new daily, weekly, monthly, quar-
terly and annual (+18%) origination records in
2015, with total income growing to EUR 13,4 (9,9)
million (+35%). Turnover excluding other income
grew by 22% to EUR 12,1 (9,9) million
• The business grows in all markets during 2015.
• Operating profit grows by 160% to a record 6.6
million EUR (55% of turnover.), while net profit
increases by 32 845% to 2,2 million EUR. EBITDA
grew by 134% and amounted to EUR 7,6 (3,2)
million (63% of turnover).
• The Group’s solidity increases significantly during
2015 as equity grows by 38% to EUR 24,5 million
(EUR 17,7 million) and total liabilities decrease by
EUR 2,5 million or 9% to EUR 25,0 (27,4) million.
The equity ratio increases from 39% to 50%.
• Euroloan Group joins the Inc. 5000 list of
Europe’s fastest-growing companies
• The Group signs a EUR 15 million financing facility
with Finstar Financial Group
• Mrs. Riitta Salonen, Mr. Heikki Palosuo, Mr. Kari
Kukka, Mr. Jonas Lindholm and Mr. Tommi
Lindfors are appointed as Board members by
the Annual Shareholder’s meeting
• Founding partner Mr. Tommi Lindfors is appointed Chairman of the Board and the former CEO
of Euroloan Consumer Finance Plc, Samuli
Korpinen, is appointed CEO of Euroloan Group.
• Business operations are concentrated on strategic
• The Group secures the largest structured
financing deal in the Company’s history with an
international investment company. The contract
enables the sale of up to of up to 300 million
euro in consumer receivables during the following 2 years utilizing efficiently a EUR 60 million
credit facility structure.
• Finstar Financial Group acquires a stake in
Euroloan and establishes a strategic partnership.
Along with the acquisition, Finstar provides a
EUR 15 million funding facility.
• Euroloan’s lending licence is approved. The
Swedish Financial Supervisory Authority (SFSA)
authorises Euroloan (ELCF Sweden AB), a
subsidiary of Euroloan Group Plc, to conduct
consumer lending in Sweden
• Euroloan receives ISO 27001:2013 Information
Security Certification for the information security management system of the Group and all its
subsidiaries in Finland, Poland and Sweden
• The Group signs a deal with Verifone for an
omnichannel payment solution for multichannel
shopping
• The Group signs a deal with Ab Compass Card
Oy Ltd. to provide MasterCard credit cards to
consumers.
• The group founds two new subsidiaries in
Luxembourg
• At the end of 2015 Euroloan Group had 286
(188) shareholders.
core areas, such as FinTech solutions for consumers. Non-core assets are divested profitably.
4
EUROLOAN GROUP PLC
WE ARE A RAPIDLY GROWING
INTERNATIONAL GROUP
Financial indicators
Total income, million €
Total assets, million €
16
60
14
50
12
10
40
08
30
06
20
04
10
02
00
2011
2012
2013
2014
2015
00
2011
2012
2013
2014
2015
2012
2013
2014
2015
2012
2013
2014
2015
EBIT, million €
Equity, million €
07
30
06
20
05
04
15
03
10
02
05
01
00
2011
2012
2013
2014
2015
00
2011
EBIT / Sales
Equity ratio %
60 %
60 %
50 %
50 %
40 %
40 %
30 %
30 %
20 %
20 %
10 %
10 %
0%
2011
2012
2013
2014
EUROLOAN GROUP PLC
2015
0%
2011
5
FROM THE CEO
The Financial Services sector was once been said to
be boring and stagnant – very little happening and
any news around the sector typically announcing yet
another layoff and downsizing of branch networks.
Are Financial Technology (FinTech) companies the opposite? We claim that “The era of traditional banking
is coming to an end” and “the future is online”. I have
found myself using these phrases when talking about
FinTech in various parts of the world. Interestingly, the
buzz around FinTech often makes a stark distinction
between regulated entities and FinTech. Wikipedia
describes FinTech companies as “Generally startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less
on software”. Are the incumbent banks not going to
utilise the potential of software? Of course they are –
they even have virtually unlimited financial resources
compared to the startups in the definition. How is this
disruption then possible?
As early as 2014, we found ourselves with the positive
problem that demand was exceeding our capacity to
supply. Growing volumes required more working capital, and to solve the problem the Group mandated a
consortium of several international institutions to raise
debt and equity. First, in February, the Group signed a
deal with the Finstar Financial Group for a convertible
debt facility of EUR 15 million to bridge the growth
until a larger debt facility was successfully negotiated and put in place in October. The latter enables
Euroloan to sell consumer receivables up to EUR 300
million in the two years following the signing, efficiently utilising a EUR 60 million credit facility structure.
Consequently, Finstar acquired a stake in Euroloan
and the companies established a strategic partnership. Along with the acquisition, Finstar provided an
additional EUR 15 million short-term
debt facility. Euroloan intends
to use the funds for growth
and to strengthen and
speed up the development
To put it simply, the bigger the ship, the longer it takes
to turn it. The traditional banks have huge legacies in
their software. Multiple systems, different development platforms, obsolete code and slow development
and release schedules are just a few problems we
can mention. Have you ever wondered why a money
transfer takes two banking days to complete? If you
can only make a software release once a year, you
can hardly keep up with the ever-changing needs of
the consumer. These are the magic words that reveal
why we are here! Our proprietary software utilises fully scalable cloud-based Web services and enables us
to make a new release every two weeks, so we can
meet the needs of our customers. I also claim that
one can be disruptive while being regulated. We see
that banking could be done completely online without
a physical branch network. Not many of us visit the
physical premises of a bank any more – yet, apart from
a few exceptions, all banks have networks which they
are busy downsizing. As we have publicly stated, we
are evaluating the opportunities of combining the regulated environment with a disruptive business model.
A completely online bank!
2015 – DUE DILIGENCE
AND NEW FUNDING STRUCTURE
Much of 2015 was spent combining the Fin and the
Tech. Our software development further advanced
features of our products while other part of the organisation spent time finalising several due diligence
processes brought on by the financing arrangements
completed in 2015.
6
EUROLOAN GROUP PLC
of Fintech products and services. Finstar also has the
option to further increase its equity share. Euroloan
was involved in a total of six different due diligence
processes in 2015, but we are more than happy with
the outcome. The company is stronger and better
capitalised than ever for future challenges.
Once we had the ability to meet the demand, Euroloan
was able to set several new records in lending volumes
in one day, week, month, quarter, and finally in a year.
At the same time, the Group’s equity grew considerably raising the equity ratio to a very healthy level.
THE ERA OF
TRADITIONAL
BANKING IS
COMING TO
AN END
– Samuli Korpinen, CEO
ISO 27001 INFORMATION
SECURITY CERTIFICATE
Finally, almost 18 months’ efforts paid off when the
Group was awarded the ISO 27001:2013 certification
for Information Security Management System (ISMS)
by British Standards (BSI). This is essential in many
ways; first, the certification confirms that Euroloan’s
processes and security controls provide an effective
framework for protecting our customers’ data. We are
among the first in the world to achieve this certification
for cloud-based production systems. Furthermore, the
certification not only covers the Group’s operations in
all countries but also future planned services such as
accepting deposits from the public. Finally, we see official certification as a way to prove that we have the
competence, capability and commitment for continuous improvement.
CHANGING MARKETS
As fast as the Financial Services sector is moving online, the rules of the game are changing. Personally, I
believe that operators who solely rely on the Internet
or search engine marketing for customer acquisition
will face increasing prices and tougher markets by the
day. On the other hand, operators that are only now
considering going online should take a long look in
the mirror. In the end, success is the result of an exEUROLOAN GROUP PLC
cellent customer-orientated product, a multitude of
acquisition channels, outstanding customer care and
retention – and an exceptional organisation to thrive
towards that.
We are constantly introducing new products, such as
the direct invoicing service. The Group signed a deal
with Verifone Finland Ltd which enables Verifone’s
merchant partners to offer Euroloan’s automated payment solutions to their customers in online and traditional stores. In addition, our products are being taken
closer to the consumer in online stores – where financing solutions are most wanted. Furthermore, the Group
signed a deal with Ab Compass Card Oy Ltd to provide
physical Euroloan MasterCards for our customers. The
Group also achieved a new record in customer satisfaction: 79% of our customers would recommend the
service to their friends or colleagues. The Group also
measured a new high of 47 in the Net Promoter Score
(NPS). It was heart-warming to hear the comment
from SN4 International, who conducts the surveys: “It
is noted that many banks no longer release this data
due to persistently low performance results”.
THE STAFF
Regardless of how fancy your product is or how polished your factory – software in our case – is, it makes
no odds if there are no motivated experts behind it.
The single most important asset the Group has is our
exceptional staff. In particular, we are constantly moving into new territories, and that in turn requires our
people to step out of their comfort zones. I believe
that is one reason why we are very agile in what we
do. Hats off and a big hand for our staff! Looking forward, our growing business requires more experts on
our team. That will also be one of the challenges in
the near future – finding the right people, keeping the
business growing and adding some structure while
maintaining the entrepreneurial spirit!
MOVING INTO 2016
We have a vision of the Group being the most recommended online bank for customers, for employees
and investors. Our customers will always get the best
possible deal through our easy, effortless and automatically optimised service. I believe that the vision
crystallizes what I claimed earlier – a regulated entity
can add some disruption to the traditional way of operating. In addition, all of this puts the customer in the
driver’s seat. We will be working hard towards these
goals in 2016. Lastly, I want to thank our clients, staff
and the almost 300 shareholders and other investors
who will all help us to get there.
Samuli Korpinen
CEO of Euroloan Group Plc
7
BOARD OF DIRECTORS
The Board of Directors of Euroloan Group Plc on December 31st 2015:
Tommi is a co-founder and Chairman of the Board of Euroloan
Group Plc, formerly the CEO
of of Euroloan Group Plc and
Euroloan Consumer Finance Plc.
He has experience in international financial services, real estate
investment and entrepreneurship.
Previously he worked at ABB;
within ABB Group, ABB Credit,
and ABB Financial Services; and
in OP-bank Group. Tommi is the
Chairman of the Board of Group
companies Euroloan Consumer
Finance Plc and Crédito Cobro
Ltd and is a leading expert in business development and investment.
Kari has extensive knowledge
in international banking and investor relations for almost 40
years. He has worked in several
Finnish banks, Postipankki, Bank
of Helsinki Ltd and OKOBANK.
He worked also several years
at Chase Manhattan Bank in
Helsinki and London. In Chase
Helsinki office Kari was also
Member of the Board. His latest post was Head of Funding
and Investor Relations at Nordic
Investment Bank for about 10
years. After this he founded
Finacon Oy, where he has consulted some of the major Finnish
borrowers in their funding and
investor relations issues as well
as advised some major foreign
companies in their Nordic business. As a sign of his career he
received Euroweek Bond Award
2009, given for Recognition
of the services to the capital
markets, first time ever in this
category. Kari has held several
positions of trust, to mention a
few, Finnish Export Credit Ltd,
Member of the Supervisory
Board, Arbuthnot Latham Bank
in London, Member of the Board,
OKOBANK Sweden, Member of
the Board.
Mr. Tommi Lindfors
M.Sc. (Econ.), born in 1975
Chairman of the Board
Mr. Kari Kukka
M.A. (Soc. Sc./Econ.)
born in 1948
8
EUROLOAN GROUP PLC
Heikki has over 30 years of experience in banking and finance.
He has managed or taken part
in the establishment of different
banking entities in Scandinavia
and the U.S. Heikki held various
positions at Skopbank during the
years 1980–1996, including inhouse lawyer, head of letters of
credit, SVP in corporate finance,
New York branch manager and
Executive VP. During the years
1996–2001, Heikki worked for
Danske Bank, Finland, holding
the positions of Helsinki branch
manager, country manager and
head of corporate finance. Since
2001, Heikki has worked on versatile financial advisory assignments, M&A and debt and equity capital market transactions
as Senior Advisor at Corporate
Advisor Group Oy, and as chairman and owner of Northeast
Investments and Capital Ltd. He
has served as a board member in
various companies.
Mrs. Riitta Salonen
M.Sc. (Econ.), born in 1947
Riitta has a remarkable career at
what is now Danske Bank. She
started her career as a partner
in Inter Consulting Ky (in 1971–
1980) and has since worked at
Postipankki (Deputy General
Manager, Capital Markets), Leonia
Corporate Bank and Sampo
Bank (Senior Vice President
and Head of Capital Markets)
and Danske Bank (Senior Vice
President and Head of Debt
Capital Markets Finland). Today
Riitta is a Board Member of Gaia
Network Association as well as
Euroloan Group. She is a leading
professional with an exceptionally broad knowledge of capital
market and corporate finance
products, such as the origination and syndication of domestic and euro bonds, syndicated
loans, equity issues, swaps, asset
securitization, corporate finance
advisory, privatization, and IPO’s
and bank’s own funding. She also
has an excellent contact network
with clients in the Nordic area
and investment banks.
Mr. Jonas Lindholm
M.Sc. (Tech.), born in 1971
Jonas has over 25 years of experience from working with
strategy and finance for large
international companies. He has
been a board member leading
the strategic development of the
group, Executive Vice President,
Chief Financial Officer and later
CEO of Euroloan Group. Before
joining Euroloan Group in 2010,
he worked as Vice President at
Pöyry, leading high-profile projects for the strategic and financial management of international
energy, industrial, infrastructure
and financial sector clients, and
in public sector projects. Earlier
he worked for KPMG as Director
and Head of Business Area Risk
Advisory Services, at Oxford IPC
Worldwide and Oxford Leadership
as Partner and Vice President,
Europe, and in several leading
positions within ABB Financial
Services and ABB Group. Jonas
has a number of Board positions,
and he is chairman of Oxford
IPC Ltd Oy and several Euroloan
Group companies.
Mr. Heikki Palosuo
LL.M., M.B.A, born in 1951
EUROLOAN GROUP PLC
9
EXECUTIVE STEERING COMMITTEE
The Group’s Executive Steering Committee:
10
Mr. Samuli Korpinen
M.Sc. (Econ.), MBA
Born 1977
CEO Euroloan Group
Mr. Risto Illukka
M.Sc. (Tech.)
Born 1975
CEO Consumer Finance
Mr. Seppo Sairanen
LL.M.
Born 1957
Head of Payment Services
Mr. Eric Sederholm
Born 1965
Country Head of Sweden
Mr. Adam Kusnierkiewicz
M.Sc. (Econ.)
Born 1972
Country Head of Poland
Mr. Joachim von Schantz
M.Sc. (Chem.)
Born 1970
Chief Operational Officer
Ms. Pia Ali-Tolppa
M.Sc. (Econ.)
Born 1961
Chief Financial Officer
Ms. Niina Uusimäki
M.Sc. (Tech.)
Born 1982
Marketing Director
EUROLOAN GROUP PLC
WE BELIEVE IN OUR
STORY,
STAFF &
SUCCESS
CUSTOMER EXPERIENCE
Customer service is experiencing a revolution as
digital contact – in the form of email, Web
chat, social media and traditional channels – continues its explosive growth as
an increasingly popular engagement
method.
24
7
The importance of the customer experience is a key strength for
Euroloan in the FinTech market,
where separating ourselves from the
competition is no longer about price
and product alone. Customer Service,
with over 80 000 contacts last year, is
faced with increasing challenges in providing a
world-class customer experience while experiencing
increasing demands from customers expecting faster and more personalised service that is frictionless,
easy, and immediate across all channels, at any time of
day, 24/7. Euroloan launched 24/7 customer service
to meet this demand and to enable our customers
to choose the perfect time and channel for handling
their errands.
WE WANT TO KNOW WHAT OUR
CUSTOMERS SAY ABOUT US
4
Leveraging human emotions is vital now
more than ever before. We must listen
to the customers and understand their
emotions: customer experience is a
people business. A satisfied customer is more likely to tell a friend about
their great experience at Euroloan, but
increasingly we operate in an environment in which customer trust and loyalty
is fickle. To retain satisfied customers, we
must understand the customer: not only their
words but what lies behind them. We cannot rely
solely on high-technology offerings, and in addition
to these must provide a world-class customer experience to compete at the highest level. This starts with
solid service, and the trick is not only training and
rewarding our existing employees, but using this to
keep existing customers happy.
12
EUROLOAN GROUP PLC
WE ARE
AVAILABLE
FOR OUR
CUSTOMERS
AROUND THE
CLOCK
5
CUSTOMERS
RECOMMEND
EUROLOAN
TOWARDS A SERVICE,
CUSTOMER-CENTRIC ORGANISATION
The collaboration of all departments for the entire
service cycle, beginning with the initial concept and
leading straight through development and design, on
to analysis and sales, to finally bringing the product
to market, has taught us that a high-tech product by
itself is not sufficient. We can offer the highest-tech
website and product, but if our service is sub-par, the
customer will have a poor experience.
Our customer experience strategy states clearly: “We
are a service-orientated, rather than product-orientated, customer-centric organisation”. The secret to
top-quality service is to meet the emotional needs of
our customers and thereby provide a high-quality experience throughout the entire journey.
79%
MAXIMISING VOICE OF CUSTOMER
(VOC) INITIATIVES
Our customer relationship is a key driver of our future
success. Therefore, it is essential to evaluate and assess customer expectations and preferences in order
to faithfully serve their needs. To do this, we listen to
customer feedback, interpret the data, react to improve the experience and continuously monitor the
results. We will outperform our competition by embracing and maintaining the human aspect of our service design.
During 2015 we improved our Net Promoter Score
(NPS) yet again. The NPS remains the benchmark
standard for assessing customer satisfaction, and our
results show that 79% of our customers gave Euroloan
a score of 8, 9 or 10 on a scale of 0-10. This is well
beyond the industry standard and sets Euroloan up
to compete among the best companies in the world.
EUROLOAN GROUP PLC
We achieve excellence and realise our full potential
when we strive for continuous, revolutionary change,
always pushing the boundaries and improving our offerings. We gain our in-depth knowledge about our
customers through insight gleaned from our customer contacts across all channels and throughout our
organisation. We come to know our customers intimately and use this knowledge to deliver a personalised experience that leads to increased loyalty to the
Euroloan brand, and a willingness to share our brand
with others. Knowing our customer separates us from
the competition.
OF OUR
CUSTOMERS
GAVE EUROLOAN
A SCORE OF
8, 9 OR 10 ON
A SCALE OF 0-10
13
BOARD OF DIRECTORS’
ANNUAL REPORT
The year 2015 was very successful for Euroloan in
most areas of operations.
The Finnish and Swedish operating environments
were relatively stable for Euroloan and the Polish market experienced some minor changes. As the Board
anticipated at the beginning of the year, the turnover,
income and total balance sheet all grew considerably
compared to the previous year.
lending and deposits. Information security is a top priority for the Group, so it was natural to go for the most
stringent information security certification. Euroloan
has always emphasised the importance of information
security and the privacy of customer data when developing our proprietary high-end systems to ensure
proper data protection.
3. Group restructuring
The agreement enables Verifone’s merchant partners
using Verifone’s payment routing services to offer
Euroloan’s automated payment solutions to their customers in webshops (online) and traditional stores.
Euroloan Group restructured, optimised and streamlined its operations during 2015 and this was reflected in the corporate structure. Euroloan Consumer
Finance APS, an inactive Danish subsidiary of
Euroloan Consumer Finance Plc, was liquidated.
Crédito Cobro Capital Oy, an inactive Finnish subsidiary of Crédito Cobro Oy, was merged into its parent
company. New direct subsidiaries for Euroloan Group
Plc, Euroloan S.A. and NoTie S.à r.l. were incorporated
in Luxembourg. Euroloan made a strategic decision to
concentrate on its high-growth core FinTech business
and the latest proprietary cloud-based systems. A direct result of this was seen when the Group’s subsidiary Digna IT Oy divested the Perintäkarhu collection
business. Digna IT continues to develop and operate
its next-generation cloud-based collection systems.
Compass Card
4. Debt and equity contracts
The agreement with Ab Compass Card Oy Ltd enables Euroloan to provide credit cards to its customers
in 2016. The card is a MasterCard, which can be used
globally in all stores, ATMs and webshops, which accept MasterCard.
At the end of 2014, Euroloan mandated a consortium
of four international financial services providers to
raise capital to meet Euroloan’s rapid growth targets
and to strengthen the Group’s capital structure in anticipation of the Basel III and CRD IV capital requirements. The total planned structure included a combination of equity and senior debt exceeding a total of
EUR 100 million during the next 2-3 year period.
MAIN EVENTS IN 2015
1. New contracts
- e-commerce and credit cards
Important new contracts were signed, which will give
substantial growth potential for the coming years. The
most important new contracts are with Verifone and
Compass Card.
Verifone
2. New licences and certificates
Euroloan obtained an important licence when the
Swedish Financial Supervisory Authority (SFSA) authorised ELCF Sweden AB, a subsidiary of Euroloan
Group Plc, to conduct consumer lending in Sweden.
The licence makes it possible for Euroloan Group to
grow rapidly in the Swedish market, and signals that
the SFSA has found the company’s key procedures
and lending criteria to be sound and in good order.
Euroloan managed to secure a EUR 15 million finance
facility in February. In October, this was followed by the
signing of the biggest deal in the Group history with
a global investment management firm: this gave the
possibility of selling up to EUR 300 million in consumer receivables during the following two years, utilising
efficiently a EUR 60 million credit facility structure.
Euroloan was awarded ISO 27001:2013 Information
Security Certification for the information security
management system of the Group and all its subsidiaries in Finland, Poland and Sweden, covering both
Euroloan also raised EUR 5 million in October in an
equity issue directed to Finstar Financial Group. In
addition to the share subscription, Finstar provided
Euroloan with an additional EUR 15 million funding fa-
14
EUROLOAN GROUP PLC
cility. The new debt and equity agreements fulfil the
EUR 100 million target set at the end of 2014 and enable further growth.
5. CEO
Mr. Samuli Korpinen, previously CEO of Euroloan
Consumer Finance Plc, was appointed as CEO of
Euroloan Group Plc in spring 2015. Under Mr. Korpinen,
the Group has handled structured funding processes
and complex due diligence processes in addition to
daily business operations.
Most of the Group’s resources were focused on its
largest business area, Consumer Finance. The work
done included strengthening the proprietary cloudbased banking systems, further building international
operations in Sweden and Poland and reducing credit
loss levels through improved customer selection and
scoring. The execution of setting up new operations in
Luxembourg also progressed according to plan. All of
the areas mentioned above were developed considerably during 2015.
6. FinTech
Euroloan continued to build and perfect its proprietary
FinTech banking software during the year. The company was acknowledged when The FinTech50 panel in
London, UK selected Euroloan as one of the potential
companies to make their top 50 FinTech companies
on the European list in 2016.
ance sheet grew by EUR 4,3 million during the year,
or 9%, to EUR 49,5 (45,2) million. Total liabilities decreased by EUR 2,5 million or 9% to EUR 25,0 (27,4)
million.
8. Markets
Euroloan operated in Finland, Sweden, Poland and
Luxembourg in 2015. After extensive testing, the markets in Sweden and Poland showed that volumes can
be increased profitably both in terms of customer acquisition and payment behaviour.
In contrast with earlier years, in 2015 both legislation
and the operating environment remained relatively stable in the Group’s largest market: Finland. This
allowed the Group to concentrate on growing sales
and building capacity for future growth. Changes in
the Swedish legislation required lending companies to
obtain a licence under the Swedish Financial Services
Authority (SFSA). The Group’s Swedish subsidiary,
ELCF Sweden AB, was during Q3 2015 one of the
first companies in the country to receive the lending
licence. In Poland, the operating environment was relatively stable during the year. Two subsidiaries were
founded in Luxembourg in December 2015.
9. Business areas
In 2015, Euroloan Group concentrated immaterial
property rights within the Group into a wholly owned
subsidiary NoTie S.à r.l., incorporated in Luxembourg.
Euroloan’s services are based on proprietary cloudbased financial technology. Through state-of-the-art
technology, the Group can provide instant credit decisions, payment, credit monitoring and collection
services, combined with strong scalability on an international level. The Group operations include the following business areas and Group services:
7. Financials
Consumer finance
Financially, the Group grew especially in terms of operating profit (+160%), turnover (+22%), total income
(+35%), lending volume (+18%). The Group’s equity
grew by 38%, with a corresponding increase in the equity ratio, which strengthened from 39% to 50%. Net
profit increased to EUR 2,2 million (+32 845%). The
financials have improved as a result of the long-term
development efforts in the Group over several years.
Consumer Finance was the Group’s largest business
area in 2015, contributing significantly to the financial
performance of the entire Group. The main product
within the consumer finance business segment is a virtual credit card, operating with a revolving credit limit
mechanism.
During the financial year, total income grew to EUR
13,4 (9,9) million, an increase of 35% compared to the
previous year. Other income was EUR 1,4 (0,0) million,
which was mainly due to profits from the sale of Group
current assets. Turnover excluding other income grew
by 22% to EUR 12,1 (9,9) million. Operating profit grew
by 160% and amounted to EUR 6,6 (2,5) million, that
is, 55% (26%) of turnover. EBITDA grew by 134% and
amounted to EUR 7,6 (3,2) million, that is, 63% (33%)
of turnover. Operating profit excluding non-recurring
income items was EUR 5,3 (2,5) million. The total balEUROLOAN GROUP PLC
A revolving credit limit is a line of credit available to
the limit agreed between Euroloan and a customer.
The limit can be used repeatedly even after partial repayment of the credit drawn, and the limit is always
available when needed. The typical customer only
pays interest on the amount which has been drawn.
The Group offers credit limits of up to EUR 7 000,
with immediate credit availability through the fully automated, Web-based service, which is also accessible
via mobile devices. The service is offered to different
customer segments in order to collect as much information as possible about each segment. This information includes payment behaviour and bad payment
15
history, price/demand elasticity and price/payment
rate effects. Such information is an important part of
credit risk management and helps to reduce credit
losses and benefit customers through lower costs.
Euroloan has developed an efficient and scalable solution for online payment processing, online lending and
back-office functions such as automated credit scoring,
debtor analysis and payment monitoring. Euroloan’s
consumer customers have real-time access to their
credit account and Web payment services through the
Web interface of Euroloan’s fast and lean front-end
systems and services. These offer instant payment of
the credit withdrawal to the customer’s or third party’s bank account. The cloud-based systems are fully
scalable and designed to handle very high transaction
volumes instantly, including automated identification,
scoring, customer assessment, credit limit setting, individual pricing and instant payment processes.
Incoming payment processing, interest calculation
and service charges are all also fully automated. The
system is designed to allow for frequent process optimisation, and the core processes can be quickly and
securely modified using a visual design process to
optimise performance and improve profitability while
retaining strict quality control and security at all times.
The revolving credit line is offered to customers by the
Group’s subsidiary, Euroloan Consumer Finance Plc,
and its subsidiaries in the Finnish, Swedish and Polish
markets.
Corporate customers
The Group decided to discontinue offering financing
to corporate customers in order to focus on its core
FinTech-based consumer lending business.
Payment services
Euroloan offers flexible, innovative and secure payment services for consumers and merchants in a multichannel purchasing environment. Merchants selling
their products in online and in traditional retail stores
require omnichannel payment solutions. Euroloan’s
payment services give the merchants the tools to
serve their customers better and more diversely in the
changing shopping environment. Merchants can offer
their customers a uniform, effortless and instant way
to pay through all sales channels. Euroloan’s payment
services increase the number of completed transactions and help with the reporting and monitoring of
deliveries, reclaims and charge-backs. Euroloan carries the consumers’ credit risk and invoices consumers
according to the merchants’ preferences.
Euroloan offers consumers three alternative payment
methods: invoice, instalment and credit account.
Consumers can choose to pay the invoice in instal16
EUROLOAN GROUP PLC
ments over 3, 6, 12 or 24 months or make the payment
from their credit account.
Flexible and fast paying methods increase merchants’
conversion rates. Consumers are likely to complete
their purchases when paying is made easy. In addition,
paying by flexible instalments at their chosen pace
increases consumers’ perceived ability to pay, which
leads to higher average order amounts. Euroloan’s
sales team sells payment services to merchants and
acquires partners to sell and promote Euroloan payment services. The most important partners are
Payment Service Providers (PSPs) and E-commerce
Platform Developers.
Euroloan MasterCard
Euroloan is prepared to offer its customers an alternative way to manage their personal finances and
payments, the MasterCard credit card. Euroloan
Consumer Finance Plc has made an agreement with
Ab Compass Card Oy Ltd to provide credit cards to
Euroloan’s customers.
With the Euroloan MasterCard, customers can pay for
purchases and withdraw cash globally and also use the
card securely in e-commerce payments. Customers
can also pay using contactless at payment terminals,
which means paying small amounts by just touching
the payment terminal with the credit card. The card
has a geoblocking feature that allows the customer to define the geographical area within which the
card can be used. The card also has a 3D SecureCode
which gives customers an additional layer of online
shopping security.
The Euroloan MasterCard can be offered to existing
and potential customers through all marketing, sales
and distribution channels. Customers having a physical credit card in their wallets is expected to increase
the use of Euroloan’s services and increase customer
loyalty and brand recognition.
Compass Card also provides credit card services in
Finland for S-Pankki, Ålandsbanken and HypoPankki.
Collection
The collection business is conducted via a subsidiary, Crédito Cobro Oy, with the trademark Cobro24.
Cobro24 provides notification and collection services
for consumer and business customers.
Thanks to modern and automated systems, the operation is very efficient and ties up less capital than
traditional debt collection services, as cash flows
are paid directly to the creditor. The efficiency of
the business model is based on intelligent information systems, methodical operational processes and
a new kind of approach to the business, one that is
changing traditional practices in the debt collection
industry. Cobro24’s solutions are flexible and can be
scaled in accordance with the volume of customers’
business operations.
Digna IT Oy, the wholly owned subsidiary of Euroloan
Group Plc, has developed the next generation of
cloud-based collection systems, called Digna. Digna
offers efficiency through automation for corporate
and public sector clients with high-volume collection
transactions. Digna has a flexible collection flow that
can be easily changed by the client.
Digna IT Oy sold part of its collection system portfolio, the legacy Perintäkarhu collection software,
to Q2 Consulting Oy in May 2015. The divestment is
part of Euroloan Group’s strategy of focusing on cutting-edge financial technology and cloud-based systems. Digna IT Oy continues to develop and operate
next-generation cloud-based collection systems. The
sale was profitable, and has a positive one-off effect
on Euroloan’s consolidated profit for 2015.
Savings and deposits
In line with the Group’s long-term strategy to fund its
operations through deposits from the public, different
types of licences in multiple markets were evaluated.
These licences varied from deposit licences without
a deposit guarantee all the way up to a full banking
licence, and the requirements varied between these
considerably. Euroloan’s ability to meet the requirements for all such licences was considerably strengthened during 2015.
of the team resources were focused on the Group’s
largest business area of consumer finance. The work
done included strengthening the proprietary cloudbased banking systems, securing the funding base,
building international operations in Sweden, Poland
and Luxembourg and reducing credit loss levels
through improved customer selection and scoring. All
of these areas improved considerably during 2015.
MARKET DEVELOPMENT
Euroloan Group’s main markets in 2015 were Finland,
Sweden and Poland. In Finland, the Group operates in
the unsecured lending market, the collection market
and the financial systems market. In Sweden, Euroloan
operates in the unsecured lending market and plans to
operate in the savings and deposits market. In Poland,
the Group operates in the unsecured lending market.
Market entry and volume allocation is prioritised
based on estimated profitability, risk, market entry
cost and growth potential. The market with the best
parameters will be given higher priority in systems development and allocation of resources as well as financing. The long-term strategic target is expansion
into the major European markets, as permitted by the
organic growth rate, market potential and availability of capital. Euroloan is targeting the EEA market,
seeking to capture a reasonable share of the market in
each country at a limited cost. An initial, small-volume
test phase will be conducted in each market and, if the
results are satisfactory, more resources will be allocated to the market.
The Group has developed the savings and deposits
business to a high level of readiness in preparation for
conducting a licensed business, including management, systems, capital adequacy and supporting functions such as compliance, risk management, internal
audit and risk control. The Group’s experience in the
efficient management of high-volume transactions
will benefit depositors through competitive deposit
interest rates and user-friendly services. In addition to
the opportunity to offer savings and deposit solutions
to customers, the Group can effectively decrease its
funding costs and refinance other funding sources.
The business area is preparing to apply for a full EU
banking licence during 2016. The licence would allow
Euroloan to accept deposits under the guarantee protection scheme up to EUR 100 000, and enable a wider offering of financial services to the public.
Group services
The Group’s parent company provides strategic, administrative, financial administration and personnel
services as well as funding to Group companies. Most
EUROLOAN GROUP PLC
17
Macroeconomic overview
As the Group is primarily focused on consumer finance, the bulk of this section will focus on unsecured lending.
FINLAND
GDP growth in Finland
The GDP growth in Finland was weak in 2015 and
ended up at +0,2% in comparison to –0,4% in 2014.
Although growth was weak, 2015 was the first year
since 2011 that the GDP grew.
Regardless of the weak GDP growth, Finnish consumers’ confidence in Finland’s economy strengthened in
the beginning of 2016. According to Statistics Finland,
24% of consumers believed in January that their own
economy would improve and 13% feared it would
worsen over the year. Also in January, 67% of consumers regarded the time to be good for taking out a loan,
with 14% of households considering taking out a loan
within the next year.
Households’ consumer credit 1
14 500
5,0 %
14 000
4,0 %
13 500
3,0 %
13 000
2,0 %
12 500
1,0 %
12 000
0,0 %
11 500
-1,0 %
11 000
Consumer credit in Finland
-2,0 %
2009
According to the Bank of Finland, the household consumer credit has grown steadily in the last few years.
In August 2015, the growth rate of consumer credit
stock was 4%, and the stock rose to EUR 14 billion.
Consumer credit is considered to include loans granted
to households for the acquisition of consumer goods
and services, and purchases by credit card. Overdrafts
and credit card credit usage account for about a third,
i.e. EUR 4,6 billion, of total consumer credit. As a rule,
no collateral is required for these types of credit. The
bulk of consumer credit (EUR 7,9 billion) is unsecured
consumer credit.1
2010
2011
2012
2013
Consumer credit
2014
2015
Growth %
Credit granted by other financial
corporations to households EUR millions 2
2 300
2 250
2 200
2 150
2 100
Consumer credit trends in Finland
2 050
The Finnish consumer credit market continues to
grow. This is driven by several factors:
2 000
1. Loan brokers are developing their activities.
This is expected to increase consumer credit
volumes.
2. The Consumer Protection Act that became
effective on 1 June 2013 causes movement
toward larger consumer credit amounts.
3. E-commerce is growing rapidly. Different
payment solutions, including consumer credit,
are well represented in e-commerce.
4. Finnish consumers are increasingly using
consumer credit when purchasing goods and
services.
18
EUROLOAN GROUP PLC
1 950
1 900
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Consumer credit granted by banks represents approximately
90% of households’ total consumer credit. Other financial
institutions also grant consumer credit to households.
According to Statistics Finland, the stock of credit granted
to households by other financial institutions (excl. insurance
companies) was EUR 2 billion at the end of September 2015
and had grown 7% from Q3/2014 to Q3/2015.
1 Source: Statistics Finland
2 Source: Statistics Finland
THIS WAS THE FOURTH
YEAR IN A ROW
WITH A CONTINUOUS
GROWTH IN GDP
SWEDEN
GDP growth in Sweden
GDP growth in Sweden1 was strong in 2015 and ended
up at +3,6% in comparison to +2,6% in 2014. This was
the fourth year in a row with a continuous growth in
GDP. It has had positive effects on consumption and
historical household consumption growth in Sweden
has been marked in recent years. Even though the
global financial crisis of 2008 had an effect on the
country’s consumption level in 2009 (and to some
extent in 2008), recovery has since been strong.
Consumer lending in Sweden2
Development of total consumer lending in MSEK
106,8 %
3 500 000
3 264 138
3 000 000
2 500 000
2 000 000
1 500 000
1 000 000
500 000
182 488
28 449
0
2005-12-31 2006-12-31 2007-12-31 2008-12-31 2009-12-31 2010-12-31 2011-12-31 2012-12-31 2013-12-31 2014-12-31 2015-11-30
Total lending Sweden households
Total lending Sweden consumption
Lending finance companies Sweden consumption
Total lending to households in Sweden increased by 7,8% from SEK 3 058 billion in 2014 to SEK 3 264 billion in November
2015. A major part of the increase was driven by mortgage loans.
1 Source: SCB – Statistiska Centralbyrån, Nationalräkenskaper
2 Source: SCB - Statistiska Centralbyrån, Finansmarknadsstatistik
EUROLOAN GROUP PLC
19
Development of lending for consumer consumption in MSEK
102,3 %
200 000
182 488
180 000
160 000
140 000
120 000
100 000
80 000
60 000
98,9 %
40 000
28 449
20 000
0
2005-12-31 2006-12-31 2007-12-31 2008-12-31 2009-12-31 2010-12-31 2011-12-31 2012-12-31 2013-12-31 2014-12-31 2015-11-30
Lending finance companies Sweden consumption
Total lending Sweden consumption
Growth of total lending for consumption continued and increased by 2,3% from SEK 178 billion in 2014
to SEK 182 billion in November.
Unsecured loans from finance companies to consumers remained at the same level as 2014 and ended
up at SEK 29 billion.
The market for unsecured loans
The Swedish consumer loan market continues to expand, especially the market for unsecured consumer
loans. This has been driven by several factors:
1. The market is moving towards automated
services, which enable the processing of
customer identification and credit decisions
at a fraction of the cost and time incurred by
traditional banks.
2. Another trend is the growth of e-commerce.
The purchase of consumer goods through the
Web, with the huge availability of goods and the
speed of making purchasing decisions, has been
working in favour of consumer financing.
3. The Swedish housing market is overheated,
driving a trend towards larger loan amounts
without collateral to meet deposit requirements
upon the purchase of an apartment or house.
4. There is a continuous good supply of
capital for financing consumers, which makes it
easier for consumers to decide to finance their
purchases rather than investing savings.
The Swedish Financial Supervisory Authority and the
Consumer Agency have increased regulation of the
consumer financing market. The new regulations were
implemented in August 2014. The goal has been to remove rogue operators from the market by imposing
requirements on finance companies and the quality
of their processes, credit decisions, management and
owners. Pricing is not currently regulated.
A number of finance companies have terminated
their operations due to not fulfilling the new regulatory requirements. At year-end 2015, a total of 103
companies had applied for a lending licence from the
Financial Supervisory Authority, of which 28 were loan
brokers. At the same time, only 23 finance companies
have received authorisation, of which Euroloan is one.
This is expected to have a positive effect for the authorized companies.
The Swedish government has appointed a committee
to consider how to further regulate the market. The
committee is expected to present its report on 30
September 2016.
5. Swedish consumers in general are moving
toward paying goods and services in monthly
instalments.
20
EUROLOAN GROUP PLC
THIS WAS THE SECOND
YEAR IN A ROW
WHERE THE GDP
GROWTH IN POLAND
EXCEEDED 3%
POLAND
GDP growth in Poland
GDP growth in Poland was at a very good level in
2015, +3,6% compared to +3,3% in 2014. This was the
second year in a row where the growth exceeded 3%
(in 2012 and 2013 it was 1,6% and 1,3% respectively).
Consumption has also grown at a similar pace (3,2% in
2015, 3,1% in 2014).1
Consumer lending in Poland
The number in consumer loans is
decreasing in Poland 2 (thousands of pieces)
But at the same time, the volume of loans
being given out is increasing 3 (millions of PLN)
4 000
40 000
-3,4 %
3 500
3 000
30 000
2 500
20 500
-5,8 %
2 000
10 500
1 000
10 000
500
5 000
2011
2012
2013
Firts half of the year
2014
+5,4 %
20 000
1 500
0
+6,6 %
30 500
2015
Firts quarter of the year
0
2011
2012
2013
Firts half of the year
2014
2015
Firts quarter of the year
In the half of 2015 all consumer loans totalled 123 billion PLN.
1 Source: Polish Statistical Institute
2 Source: Credit Trends – report of Biuro Informacji Kredytowej SA (Polish Credit Bureau)
3 Source: Credit Trends – report of Biuro Informacji Kredytowej SA (Polish Credit Bureau)
EUROLOAN GROUP PLC
21
Private loans market in Poland
Legal changes regarding short-term loans
The value of the short-term loans market in Poland
was about 4 billion PLN in the end of 2014.4
There is a new regulation regarding short-term loans
in Poland. Major changes are expected to take place
in March 2016.
There are two main sales channels for short-term loans
sales: physical (own networks, brokers, agents visiting
customers personally at their homes) and online.5
Currently the online channel represents 10–15% of the
market: 45% of the market share is in the possession
of companies like Provident and Bocian that have their
own sales network and 40–45% for broker companies
that cooperate with almost 4 000 independent sales
points across the country.
1. Extending the control function of Polish FSA
(KNF) to private loan companies
2. Equity minimum – 200 000 PLN
3. Maximum collection cost – 6 times Lombard rate
4. Maximum cost of loan not greater than 25% +
(number of days of the loan/365)*30%
5. Customer cannot prolong the due date more
than three times (for single payment loans)
6. Total cost of a loan not greater than 100%
7. Obligation for private loans companies to
provide their customers’ data to Credit Bureau
Average loan size in PLN
Total loan portfolio in millions PLN
2 000
5 000
1 500
4 000
3 000
1 000
2 000
500
1 000
0
2008
2009
2010
2011
2012
2013
2014
0
2008
2009
2010
2012
2013
Above 3 000 PLN
1 500
Up to 1 000 PLN
1 001–1 500 PLN
5%
1 200
12 %
900
38 %
600
20 %
300
2008
2009
2010
2011
2012
2013
2014
1 501–2 000 PLN
25 %
2 001–3 000 PLN
4 Source: Forbes 09/15 Report on Private Lending Market
5 Source: Forbes 09/15 Report on Private Lending Market
22
2014
Share of loan amounts
Number of customers in thousands
0
2011
EUROLOAN GROUP PLC
DEVELOPMENT
OF PROFIT AND COSTS
Operating profit increased by 160% from EUR 2,5 to
6,6 million, mainly due to business volume growth and
other income. The consolidated net profit after tax for
2015 was EUR 2,2 million, compared to the EUR 0,0
million for the previous year. Funding availability has
improved radically during 2015. Personnel costs decreased from EUR 1,4 million in 2014 to EUR 1,3 million
in 2015. Other costs decreased from EUR 5,2 million in
2014 to EUR 3,6 million in 2015. Total costs decreased
from EUR 6,7 million in 2014 to EUR 5,9 million in 2015.
The Board will actively follow the development of the
banking and financial sector in terms of taxation and
legislation changes in Finland, Sweden, Poland and
Luxembourg. Increasing costs and tightening regulations are a challenge, particularly for banks with an
extensive physical branch network, limiting their ability to operate profitably. As outlined in the Group’s
FinTech (Financial Technology) strategy, the Board
of Directors strongly believe that the demand among
private individuals for flexible consumer credit solutions will increase significantly over the next several
years, especially due to increasing e-commerce. There
is great potential in Euroloan’s proprietary banking
software and the service model, which is based on online services and developing leading technology with
readiness for rapid international scalability.
As future challenges and business potential are increasing, the Board has developed a five-year strategic plan combined with twelve-month rolling budgeting to enable the Group to adapt to the changing
environment more efficiently.
PARENT COMPANY’S TREND
IN EARNINGS
The turnover of the Group’s parent company Euroloan
Group Plc for the financial year was EUR 6,6 million
(EUR 4,9 million). Most of the turnover originates from
selling services to other Group companies. The parent
company’s profit was EUR 0,5 million (EUR 0,3 million).
BALANCE SHEET AND FINANCING
The Group’s equity ratio increased to 50% from 39%
the previous year, increasing by 26%. The Group’s
equity at the end of the period was EUR 24,5 million
(EUR 17,7 million). The total balance sheet grew by
EUR 4,3 million during the year, or 9%, to EUR 49,5
(45,2) million. The Group’s solidity has increased significantly during 2015, due to the growth of equity and
decrease of liabilities. The availability of funding has
improved radically during 2015.
Financial indicators
2011
2012
2013
2014
2015
Turnover, m€
6,2
9,6
7,4
9,9
12,1
Other operating income, m€
0,0
0,0
2,6
0,0
1,4
Earnings before interest and tax (EBIT), m€
2,8
2,1
1,8
2,5
6,6
Return of equity (ROE), %
60 %
16 %
3%
0%
9%
Equity ratio, %
14 %
11 %
32 %
39 %
50 %
Calculations of key indicators
Turnover
Other operating income
Earnings before interest and tax
Return of equity (ROE), %
=
Equity ratio, %
=
Calculated directly from the income statement
Profit for the financial year
Equity + minority interest
Equity
Total balance sheet
EUROLOAN GROUP PLC
23
CAPITALIZATION OF EXPENSES
WITH LONG-TERM EFFECTS
The Group regards as investments the expenses related to new customer acquisition for revolving credit
limits, such as expenses related to sales, marketing,
service deployment and other initial customer-related
costs. These costs have been capitalized as expenses
with long-term effects and they are depreciated according to a five-year depreciation schedule. Should
the expected income related to these expenses end
within the scheduled depreciation period, the remaining book value will be written off in full at once.
Expenses related to geographical expansion are also
regarded as long-term investments. As the Group establishes a new web service or office, the initial expenses related to that establishment, such as facilities
and personnel expenses, are capitalized. These costs
are capitalized as expenses with long-term effects and
they are depreciated according to a five-year depreciation schedule. If the established service or office is
closed within the scheduled depreciation period, the
remaining book value will be written off in full at once.
The above depreciation method is not applied for tangible assets, which have separate accounting principles for capitalization and depreciation.
The Group considers expenses related to geographical
expansion and service contracts with new customers
as equivalent to the cost of a corporate acquisition or
merger, which is why these expenses are capitalized
in the same way as the goodwill from the acquisition
of a company. Another basis for the capitalization of
these expenses is that the Group sees the expenses
as investments in new, long-term customer relationships, which are expected to generate income in the
long term, rather than as expenses related to the daily
running of the business.
Development costs related to software and business
processes are also capitalized in addition to other usual
capitalized expenses. Due to the capitalized expenses,
the net profit is bigger than it would be without capitalization. Intangible assets and expenses with longterm effects are capitalized with particular prudence.
PERSONNEL AND ORGANISATION
The number of employees at the end of 2015 was 44
(39). Compared to the previous year, the personnel
increased by 13%. Of the personnel, 44 (39), 100%
(100%) were full-time employees. Of the employees,
84% worked in Finland and 16% in other countries.
One of the main tasks for human resources management was to prepare for rapid international growth.
In managerial appointments, special attention was
paid to international and leadership skills as well as
24
EUROLOAN GROUP PLC
IN THE FINANCIAL
YEAR 2016,
WE WILL KEEP
ON GROWING
general competence development. Human resources
management also participated closely in developing
operations in the Group’s current and new markets.
During the year, several training events were organised, with the focus on competence development, in
order to ensure a good operating base for the company’s key personnel. The aim is to share best practices
and support project planning and management.
BOARD AND AUDITORS
The Shareholders’ Annual General Meeting held on 12
March 2015 re-elected Tommi Lindfors, Riitta Salonen,
Heikki Palosuo and Jonas Lindholm as members of the
Board of the Group’s parent company. Kari Kukka was
elected as a new member of the Board. The Chairman
of the Board is Tommi Lindfors. The Shareholders’
Meeting appointed PricewaterhouseCoopers Oy
as the Authorised Public Accountant, with Martin
Grandell having the principal responsibility. The Board
of Directors would like to thank Mr. Timo Saini for his
valuable work as Chairman of the Board of Euroloan
Group from 2013 to 2014 and as a Board Member from
2014 to 2015. Prior to joining the Board of Euroloan
Group, Mr. Saini was a Board Member for several years
for Euroloan Consumer Finance Plc.
RESPONSIBILITIES
Euroloan Group Plc is a reliable and responsible partner. Our operations adhere to the Finnish, Swedish,
Polish and Luxembourgish legislation and regulations
by the local regional administration, consumer and
financial supervisory authorities. The Group requires
compliance with the company’s ethical guidelines
from all personnel and contractors.
thorities. Corporate governance and decision-making
comply with the Finnish Limited Liability Companies
Act (public limited companies), other similar legislation and the company’s Articles of Association. We
follow the principles of openness, fairness and good
service, and we are committed to this aim in all of our
activities. Our financers and investors are actively involved in business development and we strive to provide all necessary information for them to make sound
investment decisions. The company follows the more
stringent reporting requirements of a public limited
company.
Summary of Euroloan’s ethical guidelines:
• We follow existing laws and regulations, and
actively help to enforce them.
• We strive to implement the recommendations
of the authorities.
• We welcome improved oversight of the finance
sector.
Since 2009, we have agreed to reduce emissions and
plant trees in deforested areas of the world. In environmental issues, we partner with Carbonfund.org
Foundation. Reduction in carbon dioxide emissions
reduces the amount of fossil fuel sources, like coal and
oil, used to produce energy. Deforestation accounts
for 20% of climate change, so reforestation is essential
in solving the problem.
Reforestation
• Our reports are accurate and truthful.
• Binds carbon dioxide and prevents climate
• We are fair in our dealings and follow our
policies, treating all our customers in the same
manner.
• We do not associate ourselves with corruption
or underhanded dealings.
• We honour our agreements and expect others
to do the same.
• We do not take unreasonable risks, but
conduct business in a prudent and reliable
manner.
• We treat our personnel fairly and equally.
• We lead by example.
Our values are something we live by – they should shine
through what we do. We bring our personal values,
which include responsibility for people and the environment, into our everyday work. We want to provide
a safe, friendly and familiar environment for our staff.
In all interactions with our customers and investors,
fast service, fairness and a fresh approach to financial
services are our leading values. Euroloan Group Plc is
a Finnish public limited company. The responsibilities
and obligations of its governing bodies are provided
by Finnish law. The Board of Directors of Euroloan
Group have determined the company’s principles of
corporate governance. The whole Group follows consumer protection laws and regulations, and the recommendations issued by consumer protection auEUROLOAN GROUP PLC
change
• Improves air quality (by binding air impurities
and producing oxygen)
• Preserves biodiversity
• Decreases floods and erosion
• Provides habitats and sustenance for fauna
• Creates jobs in nursery gardens, planting and
forest management.
CHANGES IN SHAREHOLDING,
OWNERSHIP AND GROUP
STRUCTURE
At the end of the financial year, Euroloan Group Plc had
three outstanding share series: A-, B- and C-shares.
The number of outstanding shares were: A-shares
16 165 654, B-shares 30 and C-shares 73. During the
financial year, 657 895 new A-shares were subscribed
in share issues. 225 833 A-shares subscribed in 2014
were registered during the second quarter of 2015.
Euroloan Group PLC acquired 123 B-shares from the
shareholders during 2015.
Crédito Cobro Ltd has a subordinated loan of EUR
0,66 million from Euroloan Consumer Finance Plc.
Please refer to the notes to the financial statements
for more detailed information.
25
Major shareholders as of 31 December 2015
Shareholders
Shares (pcs) Share of ownership (%)
Bonares Oy (in which Tommi Lindfors exercises controlling power)
5 397 330
33,39 %
Eficaz Capital Oy
971 549
6,01 %
Zandora Oy (in which Risto Illukka exercises controlling power)
761 965
4,71 %
Optiopaja Oy
676 585
4,19 %
Nysna Holdings Limited
657 895
4,07 %
Keskinarkaus Arto
590 078
3,65 %
RoMa M.I.E. Oy
422 531
2,61 %
Mergus Oy
396 095
2,45 %
Oxford IPC Ltd Oy (in which Jonas Lindholm exercises
controlling power)
364 946
2,26 %
Scorchio Invest Oy (in which Samuli Korpinen exercises
controlling power)
362 872
2,24 %
5 563 808
34,42 %
16 165 654
100,00 %
Other shareholders, total
Shares, total
The number of shareholders was 286 on 31 December 2015.
Total shares owned by Board Members and CEOs of Group companies was 7 335 562 shares (45,38 % of ownership).
GROUP STRUCTURE
Euroloan Group includes a total of nine companies
including the parent company. Euroloan Group Plc
owns the entire share capital of all eight subsidiaries either directly or indirectly as described in the
figure below. Euroloan is headquartered in Helsinki,
Finland and has offices in Stockholm, Warsaw and
Luxembourg.
SHARE CAPITAL DEVELOPMENT AND
AUTHORISATIONS OF THE BOARD
OF DIRECTORS
Share capital remained at the same level as in 2014, at
EUR 80 000. In the Shareholders’ Meeting, the Board
was authorised to decide on issuing shares and share
options in one or several batches, up to a maximum
of 5 000 000 A-shares. The authorisation is valid for
a period of five years. On the basis of the authorisation, the Board of Directors issued conditional share
options, with a typical maturity of five years, to the
personnel. A total number of 2 168 300 A-shares
have been directed towards employee and partner
option contracts as of 31 December 2015. The Board
also decided upon a directed share issue of 2 631 579
A-shares. Of these 657 894 new A-series shares were
26
EUROLOAN GROUP PLC
Euroloan Group Plc
Crédito
Cobro Oy
NoTie
S.à r.l.
Euroloan S.A.
Euroloan
Consumer
Finance Plc
Digna IT Oy
Euroloan
Finance AB
ELCF
Sweden AB
Euroloan
Consumer
Finance
Sp.z o.o.
subscribed on 16.10.2015. The subscription price has
been disbursed to the company’s account and has
been registered and booked as equity.
225 833 A-series shares that were subscribed in 2014
and had not been paid in full by the year end 2014
were registered in 2015 and booked as equity.
RISK MANAGEMENT
The Board of Directors of Euroloan Group Plc has
formed from its members a Risk Committee responsible for overseeing the Group’s risk management.
The committee approves risk limits, guidelines and
proposals concerning risk-taking. The Group’s most
significant strategic and business risks include operative, financial, liquidity, credit, market, currency
and interest risks. A separate, more elaborate risk
description can be found on the Group’s website
www.euroloan.com and in this Annual Review of 2015.
BUSINESS ENVIRONMENT
Arranging funding for the operations stretched the organisation during the financial year, as the relatively
small but expert team went through six international
due diligence processes. This was a joint effort by the
whole staff, including the Board of Directors, as every
area of the operations was scrutinised and evaluated
by external due diligence professionals. The price of
securing the largest finance contract in the Group’s
history was that only a limited number of staff were
able to give their full attention to business operations.
Despite of this, Q3 2015 was the best quarter in the
Group’s history in terms of total lending volume.
DIVIDEND PROPOSAL
BY THE BOARD OF DIRECTORS
The terms of the credit facility structure (sale of consumer receivables) does not allow dividend distribution for the financial year of 2015. Furthermore, the
agreement has covenants which require the Group
to maintain profitability and strong solidity during
2016-2019. The Board notes that the agreement does
not restrict the rights of the shareholders to decide
on paying dividends, however deciding to pay dividends would have a significant negative impact on
the liquidity of the Group, as the terms of the contract
would be breached.
Furthermore, as the Board of Directors believe that
obtaining a banking licence is a cornerstone of adding
shareholder value, the Board of Directors proposes
that there will be no dividend paid for the financial
year of 2015. The proposal is based on the need for
EUROLOAN GROUP PLC
Q3 2015 WAS
THE BEST
QUARTER IN
THE GROUP’S
HISTORY
Common Equity Tier I capital compliance with the
Basel III and CRD IV regulations, brought about by
the banking licence application process. As equity requires further strengthening during 2016, any dividend
distribution would have a negative impact on the capital base and hinder the growth rate considerably.
EVENTS AFTER THE END OF
THE FINANCIAL PERIOD
Euroloan Group Plc and its Finnish subsidiaries were
subject to a tax audit concerning the fiscal periods
2012–2014. The audit began in October 2014 and ended at the end of 2015.
The taxation decisions by the Finnish tax authority
based on the audit were received in January 2016, and
they were equal to what was proposed by Euroloan
for 2013 and 2014. The same principles had been applied differently for 2012 by the tax authority. The taxation decision for 2012 has therefore been appealed
by Euroloan. The expectation is that the taxation for
2012 will be amended to conform with the following
years and that the impact on net profits will be relatively small.
Euroloan’s subsidiary in Luxembourg, Euroloan S.A., is
in the process of applying for a full EU bank license.
OUTLOOK FOR 2016
The Board of Directors estimates that the operating
environment will remain relatively stable in Finland,
Sweden and Luxembourg and that there will be regulatory changes in the Polish market during 2016. The
outlook regarding earnings for the financial year 2016
is that there will be growth compared to the previous
year.
Helsinki, 15 March 2016
Board of Directors of Euroloan Group Plc
27
28
EUROLOAN GROUP PLC
CONSOLIDATED
INCOME STATEMENT
1.1.–31.12.2015
1.1.–31.12.2014
12 063 627,09
9 900 552,63
1 352 568,04
4 510,59
External services
-918 119,71
-91 137,34
Total
-918 119,71
-91 137,34
-1 049 007,62
-1 157 767,86
Pension costs
-161 561,29
-161 140,20
Other social security costs
-112 275,39
-114 488,08
-1 322 844,30
-1 433 396,14
-587 417,17
-330 132,26
-349 908,08
-349 908,08
-937 325,25
-680 040,34
Other operating costs
-3 614 434,83
-5 152 751,39
OPERATING PROFIT (LOSS)
6 623 471,04
2 547 738,01
From others
206 245,14
358 110,35
Total
206 245,14
358 110,35
-4 594,05
0,00
To others
-3 984 308,37
-2 981 298,11
Total
-3 984 308,37
-2 981 298,11
-3 782 657,28
-2 623 187,76
2 840 813,76
-75 449,75
-602 652,85
82 243,38
2 238 160,91
6 793,63
TURNOVER
Materials and supplies
Personnel costs
Salaries and benefits
Social security costs
Total
Depreciation and impairment
Planned depreciation
Depreciation of goodwill on consolidation and
decrease in Group reserve
Total
Financial income and expenses
Other interest and financial income
Interest and other financial expenses
Impairment of non-current assets
Total
PROFIT BEFORE APPROPRIATIONS AND TAXES
Income taxes
PROFIT (LOSS) FOR THE FINANCIAL YEAR
EUROLOAN GROUP PLC
29
BALANCE SHEET
31.12.2015
31.12.2014
6 093 134,15
4 132 407,33
16 666,66
136 183,37
Consolidated goodwill
6 439 183,83
6 803 702,91
Other longterm expenditure
1 650 751,25
0,0
14 199 735,89
11 072 293,61
11 445,64
15 260,85
2 500,00
2 500,00
13 945,64
17 760,85
Holdings in Group companies
0,00
10 765,35
Total
0,00
10 765,35
14 213 681,53
11 100 819,81
Other current assets
3 478,86
4 421,80
Total
3 478,86
4 421,80
Sales receivables
725 502,46
90 684,05
Loan receivables
28 947 435,25
28 703 870,53
80 100,34
385 368,52
0,00
213 998,00
2 770 427,29
474 189,39
32 523 465,34
29 868 110,49
2 716 185,34
4 192 692,81
35 243 129,54
34 065 225,10
49 456 811,07
45 166 044,91
ASSETS
NON-CURRENT ASSETS
Intangible assets
Development expenditure
Intangible rights
Total
Tangible assets
Machinery and equipment
Other tangible assets
Total
Investments
NON-CURRENT ASSETS, TOTAL
CURRENT ASSETS
Receivables
Short-term
Other receivables
Unpaid shares
Accrued income
Total
Cash in hand and at bank
CURRENT ASSETS, TOTAL
ASSETS, TOTAL
30
EUROLOAN GROUP PLC
31.12.2015
31.12.2014
80 000,00
80 000,00
0,00
1 354 998,00
-116 266,99
-30 503,71
21 463 288,66
15 108 290,66
826 857,78
1 210 578,95
2 238 160,91
6 793,63
24 492 040,36
17 730 157,53
13 393,63
28 004,63
Bonds
300 000,00
18 676 000,00
Loans from financial institutions
104 250,00
139 000,00
Total
404 250,00
18 815 000,00
20 112 000,00
5 589 061,00
594 756,32
409 405,96
Other liabilities
2 641 561,54
2 044 200,22
Prepayments and accrued income
1 198 809,22
550 215,57
Total
24 547 127,08
8 592 882,75
LIABILITIES, TOTAL
24 951 377,08
27 407 882,75
49 456 811,07
45 166 044,91
EQUITY AND LIABILITIES
EQUITY
Share capital
Share issue
Translation difference
Invested unrestricted equity reserve
Retained profit (loss)
Profit (loss) for the financial year
EQUITY, TOTAL
GROUP RESERVE
LIABILITIES
Long-term
Short-term
Bonds
Accounts payable
EQUITY AND LIABILITIES, TOTAL
EUROLOAN GROUP PLC
31
CASH FLOW STATEMENT
1.1.–31.12.2015
1.1.–31.12.2014
14 756 938,39
9 831 122,54
2 150,47
4 510,59
Cash receipts from operating expenses
-8 605 494,71
-6 653 443,22
Operating cash flow before financial items and taxes
6 153 594,15
3 182 189,91
Interest and fees paid for other operating financial costs
-3 951 663,42
-3 000 945,16
132 272,52
358 110,35
-118 097,04
46 801,31
2 216 106,21
586 156,41
-1 802 470,29
-1 528 695,10
-43 770 144,29
-37 039 882,81
40 121 157,22
23 658 432,74
0,00
-5 113,01
Proceeds from other investments
630 171,30
0,00
Acquisitions of subsidiaries
-26 032,39
0,00
-4 847 318,45
-14 915 258,18
5 000 000,00
1 039 000,00
-725 272,00
6 113 230,98
1 122 247,33
0,00
Withdrawal of short-term loans
13 460 000,00
3 015 000,00
Repayment of short-term loans
-19 095 000,00
-10 437 750,00
Withdrawal of long-term loans
4 292 000,00
13 630 000,00
Repayment of long-term loans
-2 827 750,00
-592 000,00
-71 520,56
-57 736,00
Financial cash flow
1 154 704,77
12 709 744,98
Change in cash
-1 476 507,47
-1 619 356,79
Cash at beginning of financial year
4 192 692,81
5 812 049,60
Cash at end of financial year
2 716 185,34
4 192 692,81
OPERATING CASH FLOW:
Cash receipts from sales
Cash receipts from other business income
Interest received from business operations
Direct taxes paid
Operating cash flow
INVESTMENT CASH FLOW:
Investments in tangible and intangible assets
Loans granted
Repayment of loan receivables
Other investments
Investment cash flow
FINANCIAL CASH FLOW:
Share issue
Stock repurchase
Stock sale
Dividends paid and other distribution of profit
Loans granted and repayments of loan receivables are included in the investment cash flow. In the financial
statements of 2014, those were included in the operating cash flow.
32
EUROLOAN GROUP PLC
NOTES TO THE CONSOLIDATED
CONSOLIDATED FINACIAL
STATEMENTS 31.12.2015
PREPARATION OF
THE FINANCIAL STATEMENTS
The same valuation and periodization principles have
been followed in the consolidated financial statements
as in the parent company’s financial statements.
Valuation principles and methods
Subsidiaries NoTie S.à r.l. and Euroloan S.A. as well as
Crédito Cobro Ltd and Euroloan Consumer Finance Plc
and their wholly-owned subsidiaries Digna IT Oy, ELCF
Sweden AB, Euroloan Consumer Finance Sp.z o.o. and
Euroloan Finance AB are consolidated in the Euroloan
Group Plc’s consolidated financial statements.
Periodization principles and methods
Euroloan Consumer Finance APS, an subsidiary of
Euroloan Consumer Finance Plc, was liquidated in 2015.
Crédito Cobro Capital Oy, an subsidiary of Crédito Cobro
Oy, was merged into its parent company on 31.10.2015.
The consolidation has been made in accordance with
the valid Accounting Act.
The consolidated financial statements have been prepared by using the acquisition cost method. The difference between the subsidiaries’ acquisition cost and the
equity corresponding to the acquired share is presented
as consolidated goodwill. Intra-group transactions, mutual receivables, and receivables and liabilities as well as
internal profit distribution have been eliminated.
The consolidated financial statements are available at
Euroloan Group Plc’s office at Energiakuja 3, 00180
Helsinki, Finland.
The company’s non-current assets are valued at their
variable acquisition cost.
The acquisition cost of the fixed assets subject to
wear and tear owned by the company is written off
according to a prepared plan.
Asset type
Depreciation method/
percentage
Machinery and
equipment
outlay residue
write-off 25%
Development
expenditure
15-year straight-line
Copyright
The depreciation period for goodwill is 20 years. The
long period is justified because of the particularly
long-term added value expected from the acquired
companies, for example due to the receivable cash
flows for years to come. The customer base of the
companies is also expected to generate long-term
income.
INCOME STATEMENT
2015
2014
206 245,14
358 110,35
206 245,14
358 110,35
-4 594,05
0,00
0,00
-10 714,12
-3 984 308,37
-2 970 583,99
Total
-3 984 308,37
-2 981 298,11
Total
-3 782 657,28
-2 623 187,76
From others
Total
Impairment of non-current assets
Interest expenses on shareholder loans
To others
The profit of EUR 1 342 379,90 emerging from the sale of current assets
has been booked to the other operating income.
33
ASSETS
Development expenditure
2015
2014
Book value at the beginning of the financial year
4 132 407,33
2 897 504,20
Additions
2 448 370,14
1 528 695,10
-74 112,29
0,00
-413 531,03
-293 791,97
6 093 134,15
4 132 407,33
2015
2014
136 183,37
166 745,50
-117 850,04
0,00
-1 666,67
-30 562,13
16 666,66
136 183,37
0,00
0,00
1 818 132,90
0,00
-167 381,65
0,00
Book value at the end of the financial year
1 650 751,25
0,00
6 439 183,83
6 803 702,91
2015
2014
15 260,85
20 347,80
-3 815,21
-5 086,95
11 445,64
15 260,85
2015
2014
2 500,00
2 500,00
2 500,00
2 500,00
Reductions
Copyright
Reductions
Additions
34
EUROLOAN GROUP PLC
LIABILITIES
Specification of equity
2015
2014
At the beginning of the financial year
80 000,00
80 000,00
At the end of the financial year
80 000,00
80 000,00
1 354 998,00
0,00
0,00
7 536 450,00
-1 354 998,00
-6 181 452,00
0,00
1 354 998,00
-30 503,71
59 381,30
Additions
-85 763,28
-89 885,01
-116 266,99
-30 503,71
-36 266,99
1 404 494,29
15 108 290,66
8 926 838,66
6 354 998,00
6 181 452,00
21 463 288,66
15 108 290,66
1 217 372,58
1 268 314,95
2 238 160,91
6 793,63
-71 520,56
-57 736,00
-717 336,00
0,00
398 341,76
0,00
3 065 018,69
1 217 372,58
Unrestricted equity, total
24 528 307,35
16 325 663,24
Distributable funds
24 528 307,35
16 325 663,24
Restricted equity
Share capital
Share issue
Additions
Registered
Translation difference
Restricted equity, total
Unrestricted equity
Additions
Dividends paid
Stock repurchase
Corrections of previous accounting years’ result
Accrued profits
EUROLOAN GROUP PLC
35
COLLATERAL AND CONTINGENT LIABILITIES
Liabilities and collateral, by balance sheet item and type of collateral
Amount
Collateral
20 412 000,00
-
Liabilities to financial institutions
104 250,00
-
Liabilities to shareholders
100 000,00
-
1 983 612,54
Some with collateral
Specification of liabilities
Bonds
Other liabilities
Changes in intangible rights
A group company sold intangible rights during the
financial year and received shares of the group´s parent company as a payment. The acquisition price of
the shares was eliminated from the current assets in
the consolidated balance sheet by booking the contra
entry to the retained profit (loss) account.
36
EUROLOAN GROUP PLC
ACCOUNTING PRINCIPLES
OF FINANCIAL STATEMENTS
The consolidated financial statements have been
prepared in compliance with the Finnish Accounting
Standards (FAS).
The consolidated financial statements are based on
actual costs, with the exception of financial assets, liabilities and derivative contracts booked at fair value.
PRINCIPLES OF CONSOLIDATION
Subsidiaries
The consolidated financial statements include the
parent company Euroloan Group Plc. Subsidiaries
are companies controlled by the Group. All subsidiaries are wholly owned. Control exists when the Group
holds over half of the voting rights or otherwise has
control over the company’s financial management and
operating policy decisions.
Intra-group holdings are eliminated using the acquisition cost method. The acquired subsidiaries are included in the consolidated financial statements from
the date that the Group obtained control.
Intra-group transactions, receivables, liabilities, unrealized gains and profit distribution are eliminated
in preparing the consolidated financial statements.
Unrealized losses are not eliminated if they are due
to impairment. The profit distribution for the financial
year between owners of the parent company and minority shareholders is included in the income statement, and the minority share of equity is presented in
the balance sheet as a separate item.
The consolidated subsidiaries included in the consolidated financial statements are ELCF Sweden AB,
Euroloan Finance AB, Euroloan Consumer Finance
Sp.z o.o, Euroloan Consumer Finance Plc, Crédito
Cobro Ltd, Crédito Cobro Capital Oy, Digna IT Oy,
NoTie S.à r.l. and Euroloan S.A..
TANGIBLE ASSETS
Property, plant and equipment are valued at actual cost
minus accumulated depreciation and impairment losses. Other subsequent expenses are included in the carrying value of the property, plant and equipment only if
it is probable that the future economic benefits that are
attributable to the asset will benefit the Group and the
cost of the asset can be measured reliably. Other repair
and maintenance costs are expensed as incurred.
Assets are depreciated as follows:
• Machinery and equipment: outlay residue
write-off
• Art objects: no write-off
The residual value of these assets and their useful lives
are reassessed when the financial statements are prepared and, if necessary, adjusted accordingly to reflect
any changes in the future economic benefits expected.
Gains or losses on disposal or sale of property, plant
and equipment are included under other business income or expenses.
INTANGIBLE ASSETS
TRANSLATION OF FOREIGN
CURRENCY ITEMS
The profit and financial position of the Group entities are measured using the currency of the primary
economic environment in which each entity operates
(“functional currency”). The consolidated financial
statements are presented in euro, which is the functional and reporting currency of the parent company.
EUROLOAN GROUP PLC
The income statements of foreign Group companies
are translated into euro using the average exchange
rate for the period, and balance sheets are translated at the exchange rate on the balance sheet date.
Translation differences arising from different rates in
the income statement and balance sheet are reported
in equity. Translation differences arising from eliminating the acquisition cost of foreign subsidiaries and the
translation of the foreign subsidiaries’ accumulated
equity subsequent to acquisition are reported in equity. When a subsidiary is divested entirely or partially,
the cumulative exchange differences are included in
the income statement under sales gains or losses.
The Group’s main intangible assets are intellectual
property rights related to information systems and
goodwill.
Intangible assets are recognized in the balance sheet
only if it is probable that the expected future economic benefits that are attributable to the assets will flow
to the Group and the cost of the assets can be meas-
37
ured reliably. Intangible assets with finite useful lives
are recorded in the balance sheet at historical cost,
and amortization is recognized in the income statement on a straight-line basis over their known or estimated useful lives. Intangible assets include personnel
costs from information system development projects
and consultancy fees of external service providers.
The depreciation period for intellectual property
rights is fifteen years.
ceeds the Group’s share of the net fair value of the
acquired company on the date of acquisition.
Goodwill is measured at historical cost less straight-line
depreciation. The depreciation period is 20 years. The
long period is justified because of the particularly longterm added value expected from the acquired companies, for example due to the receivable cash flows for
years to come. The customer base of the companies is
also expected to generate long-term income.
Capitalization of expenses with long-term effects
The Group regards as investments the expenses related to new customer acquisition for revolving credit
limits, such as expenses related to sales, marketing,
service deployment and other initial customer-related
costs. These costs have been capitalized as expenses
with long-term effects and they are depreciated according to a five-year depreciation schedule. Should
the expected income related to these expenses end
within the scheduled depreciation period, the remaining book value will be written off in full at once.
Expenses related to geographical expansion are also
regarded as long-term investments. As the Group establishes a new web service or office, the initial expenses related to that establishment, such as facilities
and personnel expenses, are capitalized. These costs
are capitalized as expenses with long-term effects and
they are depreciated according to a five-year depreciation schedule. If the established service or office is
closed within the scheduled depreciation period, the
remaining book value will be written off in full at once.
The above depreciation method is not applied for tangible assets, which have separate accounting principles for capitalization and depreciation.
The Group considers expenses related to geographical
expansion and service contracts with new customers
as equivalent to the cost of a corporate acquisition or
merger, which is why these expenses are capitalized
in the same way as the goodwill from the acquisition
of a company. Another basis for the capitalization of
these expenses is that the Group sees the expenses
as investments in new, long-term customer relationships, which are expected to generate income in the
long term, rather than as expenses related to the daily
running of the business.
Development costs related to software and business
processes are also capitalized in addition to other usual
capitalized expenses. Due to the capitalized expenses,
the net profit is bigger than it would be without capitalization. Intangible assets and expenses with longterm effects are capitalized with particular prudence.
Goodwill
Goodwill represents the amount of the cost that ex38
EUROLOAN GROUP PLC
FINANCING COSTS
Financing costs are recorded as expenses in the period
in which they are incurred. Transaction costs directly related to the borrowing of funds and clearly attributable
to a specific loan are amortized over the loan period.
IMPAIRMENT OF TANGIBLE AND
INTANGIBLE ASSETS
At each balance sheet date the Group assesses
whether there is any indication that an asset may
be impaired. If any such indication exists, the asset’s
recoverable amount is estimated. The recoverable
amount of goodwill and intangible assets not yet
available for use is also annually estimated, independent of any indication of impairment. The need
for impairment is assessed at the level of cash-generating units, which in the case of Euroloan Group Plc
is the subsidiary level.
The recoverable amount is the higher of an asset´s
fair value less divestment cost and its value in use.
The value in use is calculated by estimating future
net cash flows expected to be derived from the asset
or cash-generating unit, and by discounting them to
their present value using a pre-tax discount rate which
reflects the market’s view on the time value of money
and special risks related to the asset item.
An impairment loss is recognized when the book value
of the asset item exceeds the recoverable amount. In
conjunction with this, the impaired asset´s useful life
will be reassessed. The impairment loss is reversed if
conditions have changed and the recoverable amount
has changed after the impairment loss was recognized. Impairment losses recognized for goodwill are
not reversed.
EMPLOYEE BENEFITS
Pension obligations
Euroloan Group Plc has defined contribution plans.
Contribution plan payments are recognized in the income statement in the financial year they are made.
All Euroloan Group Plc pension arrangements are
financed through contributions to pension insurance
companies. Contributions are made taking into account local country-specific provisions and practices.
probable that the debtor is unable to repay the debt
(based on insolvency and debt amount), are also written off at the end of the year.
Current assets include periodized bond transaction fees.
Remuneration
In 2013, Euroloan Group Plc implemented an option-based incentive system for the entire personnel.
The objective is to support the implementation of
the Group’s strategy and to ensure profitable growth
through personnel commitment.
Cash and cash equivalents comprise cash in the Group’s
bank accounts.
LIABILITIES
Bonds and debt securities are recognized at nominal
value. Variable bond revenue shares are recognized at
balance sheet date value.
INCOME TAXES
The income tax expense in the income statement consists of current tax based on the taxable profit for the
period and deferred tax. Current tax is calculated on
the taxable profit using the tax rate in force in each
country. The resulting tax is adjusted by any tax relating to previous years.
Deferred tax is calculated on all temporary differences
between the carrying amount of an asset or liability in
the balance sheet and its tax base. A deferred tax asset is recognized to the extent that it is probable that
future taxable income will be available, against which
a temporary difference can be utilized. Deferred tax is
calculated by using the enacted tax rates prior to the
balance sheet date.
CURRENT ASSETS
Derecognition of current assets occurs when the
Group has lost the contractual right to cash flows or
when it has substantially transferred the risks and rewards outside the Group.
Current assets’ accounts receivables comprise fees accounted for the year which are not paid at the balance
sheet date. Accounts receivables are written down if it
is probable that the fee booked as accounts receivables will not be received.
Loan receivables include lending receivables, including loan period fees. Of the receivables transferred to
collection, only the capitalized amount transferred to
collection is recognized. The amount includes the loan
capital and the loan period fees and interest but not
the falling due fee or reminder costs. Unpaid loan receivables are typically transferred to collection about
45 days after due date.
Written-off receivables include loan receivables borrowed under criminal pretenses, and receivables
where the debtor has died or entered debt restructuring. Overdue loan receivables, where it is deemed
EUROLOAN GROUP PLC
DESCRIPTION OF EUROLOAN GROUP
PLC’S FINANCIAL REPORTING
PROCESS
The Board of Directors oversees the financial reporting process. The CEO and the CFO are responsible for
controlling and ensuring the quality of the Group’s financial reporting.
The Group prepares quarterly financial statements
published via press release. The Board receives
monthly financial reports for each business area.
Accounting compiles financial reports per company
partly based on business area financial data from operative systems. The veracity of the financial information from independent companies and the Group is
ensured using various daily, weekly and monthly control procedures as well as matching and verification
procedures.
From the operative systems, information is regularly
transferred to the financial administration systems.
Financial administration ensures that all material is
delivered and transferred to accounting. The accounts
of all Finnish Group companies are included in the
same accounting system, and the companies follow
the same accounting principles. The accounts of the
foreign subsidiaries are prepared by local accounting
firms providing monthly accounting reports.
Accounting is responsible for monitoring the Group’s
financial development continuously, at both the
Group and business unit level. The objective is to
identify and highlight both success factors and development targets in time to allow for time to react
on them. Accounting provides monthly reports of
Group level development and future prospects to
the Steering Committee and the Board of Directors.
Development is assessed by comparing realized figures to the budget and a quarterly updated forecast
for the rolling year.
39
CORPORATE GOVERNANCE
Euroloan Group Plc is a Finnish public limited company regulated by Finnish law and the company’s Articles
of Association in its operations and obligations. The
company’s Board of Directors is responsible for organizing the administration and business activities of
the company according to the law and determines the
company’s principles of corporate governance.
We are committed to our values and strive to work
in accordance with them every day. The company follows consumer protection laws and regulations, and
the recommendations issued by consumer protection
authorities.
The Group’s foreign subsidiaries follow the laws and
regulations of their respective countries and business
40
EUROLOAN GROUP PLC
sectors, instructions of the supervisory authority for
the respective company and the company’s Articles
of Association.
We follow the principles of openness, fairness and
good service, and we are committed to this aim in all
our activities. Our financers and investors are actively involved in business development, and we strive to
provide all necessary information for them to make
sound investment decisions.
The company follows the reporting requirements
of a public limited company, and is audited by
PriceWaterhouseCoopers Oy (APA-community),
responsible auditor Martin Grandell.
DECISION-MAKING
The responsibility for administration and operations of
Euroloan Group Plc is vested in the following governing bodies:
• General Meeting of Shareholders
company’s everyday business. The Board’s main
duties include:
• Setting long-term targets
• Approving strategies
• Board of Directors
• Approving financial targets
• CEO
• Approving the organizational structure
• Executive Steering Committee
• Confirming the principles of incentive plans
• Appointing the CEO
General meeting of shareholders
Ultimate decision-making is vested in the company’s
General Meeting of Shareholders. The Shareholders’
Meeting is held once a year at a time determined
by the company’s Board of Directors. The meeting
must be held by the end of June each year, with an
agenda assigned to it by law and the company’s
Articles of Association. Proposals by shareholders
are also decided upon in the meeting. The company’s Board of Directors call the General Meeting no
earlier than two months and no later than one week
in advance.
• Deciding on the remuneration of the CEO
• Overseeing the proper arrangements for
accounting and financial management
• Deciding on overall capital expenditure and
significant individual investments
• Approving operating principles for
management and supervision
• Overseeing the financial reporting process, and
the quality and consistency of the information
to be published
Board of directors
The Board of Directors (the “Board”) is responsible
for the company’s administration and for the proper
organization of the company’s operations. The Board
supervises the operative management of the company, appoints and dismisses the CEO, and decides
on the company’s strategy, investments, organization
and finances. The Board ensures that the operations
of the company are conducted appropriately, and
that the company identifies, measures and manages
the risks associated with its business.
In accordance with good corporate governance, the
Board also ensures that the company applies stated corporate values in its operations. The Board
shall work in the best interest of the company and
its shareholders. A board director does not represent
the interests of the parties who have proposed his or
her election as director.
The Shareholders’ Meeting elects the members of the
Board of Directors. The Board comprises between one
and ten members and at least one deputy if there are
fewer than three board members. Members of the operative management also attend the Board meetings
when necessary.
The Board has adopted its own working procedure and evaluates its own performance and actions
each year. Board members take an active role in the
EUROLOAN GROUP PLC
• Evaluating the competence, independence and
work of the auditor
• Evaluating internal control and risk
management processes
• Evaluating compliance with relevant legislation
and regulations
The Board also monitors the financial situation and
development of the company. Additionally, the Board
is responsible for evaluating and developing the competitiveness of the company’s incentive plans, preparation of remuneration and appointment matters relating to the CEO, charting successors to the CEO and
members of Executive Steering Committee, and deciding on the salaries and other benefits of the members of corporate management.
CEO
The Board of Directors appoints the company’s CEO,
who is responsible for managing the company’s business in accordance with the Finnish Limited Liability
Companies Act, the Articles of Association and the instructions issued by the Board of Directors. The CEO
leads the company’s Executive Steering Committee.
41
Company’s steering committee
Euroloan Group Plc has a Executive Steering
Committee, the main task of which is to assist the
CEO in corporate operative management and business planning. The Steering Committee’s other duties
include the preparation, follow-up and monitoring of
financial and business decisions, as well as business
development. The Executive Steering Committee
meets regularly. Members of the Executive Steering
Committee are appointed by the Board of Directors
at the proposal of the CEO.
The company’s Executive Steering Committee comprises four to eight members, and the areas of responsibility of members of the Executive Steering
Committee correspond to their respective positions in
the company.
The Group has a set of internal instructions and policies, including the following examples:
Compliance
• Compliance Manual and Guidelines
• Consumer Protection Policy
• Ethical Rules and Guidelines
• Information Security Policy
• Outsourcing Business Policy
• Instruction for Measures Against Money
Laundering and Financing of Terrorism
Audit
Under its Articles of Association, the company has one
auditor, which is usually an Authorized Public Accountant
(APA) audit firm. The Shareholders’ Meeting elects the
auditor for one year at a time. In the statutory audit, the
auditor audits the accounting records, financial statements and administration of the company.
The responsible auditor also audits the Group. From
2013, Euroloan is audited by PricewaterhouseCoopers
Oy, responsible auditor Martin Grandell (APA). The
previous auditor was Authorized Public Accountant
(APA) audit firm Nexia Tilintarkastus Oy, responsible
auditor Juhani Loukusa (APA).
INTERNAL OPERATING PRINCIPLES
AND CONTROL SYSTEMS
The objective of the Group’s operating principles is
to strengthen the commitment to financial and other
goals and to minimize internal business risks.
• Instruction for Handling Conflicts of Interests
Risk management
• Business Continuity and Contingency Planning
• Risk Policy
• Liquidity Risk Management Guidelines
• Credit Risk Management Guidelines
• Disaster Recovery Plan
• Internal audit guidelines
Remuneration principles
The remuneration of the company’s management is
made up of a fixed salary, an annual bonus and longterm incentive plans such as pension benefits and
share bonuses. The Board of Directors decides on the
remuneration of the CEO.
The Board is responsible for executive remuneration
plans and for approving the salaries and other benefits. The Board of Directors approves the terms and
conditions of long-term incentive plans and the principles of profit sharing.
Appointments within the Group comply with the
grandfather principle, whereby the superior of the
person proposing the appointment approves all appointments, as well as the salary and other terms related to such appointments. Euroloan Group Plc has a
long-term bonus system for key personnel.
42
EUROLOAN GROUP PLC
RISK MANAGEMENT
GENERAL
Anyone considering investing in Euroloan Group Plc
is recommended to review all of the risk factors described below. The description contains estimates
of the current state and future development of the
Group which carry risks and uncertainties. Investors
should be aware of these when making their investment decisions. Estimates, risk descriptions and listed uncertainties are prepared by the Group’s Board
and management and are based on the information
available to the Board and management at the time
of preparation.
The Group’s management and Board strive to update
relevant changes to the Group’s risks without delay in
order to keep the risk description current. If realised,
the risks may have a negative impact on the Group’s
business operations and financial position and the
value of the business operations, decreasing the value of the Group’s issued shares and securities. The
Group aims to prevent risk where possible and to min-
STRATEGY
BUSINESS PROCESSES
imise the impact of any risks realised within its risk
management.
Euroloan applies state-of-the-art corporate risk management models and methodologies as part of its
strategic planning, business development and daily
operations.
The aim of Euroloan’s risk management process is to
limit the total risk exposure of the company to an acceptable level while optimising the risk/return ratio.
Due to the nature of Euroloan’s business, particular
emphasis is placed on analysing and managing credit
risk and on managing total risk exposure. Advanced
risk metrics are used in analysis to form an accurate
company risk profile.
The company management and the Board of Directors
monitor risk exposure.
RESOURCES &
ORGANISATION
RISK MANAGEMENT
Risk Management Development
Risk
Strategy
Risk Policy
& Manual
Organisation &
Responsibility
Risk
Management
Activities
Shareholder Value
Expectations
Financial Risk Appetite
and Limits
Corporate Governance
Principles
Strategy Policy Limits
Organisation
Responsibility
Approved processes
and tools
Decision-making
structure
Alternates and Security
Supervision and Risk
Control
Risk Management Tools
and Systems
Risk Management and
Control Procedures
Business and Hedging
procedures
Figure 1: Group risk management framework
EUROLOAN GROUP PLC
43
RISK MANAGEMENT STRUCTURE
Proper risk management is a working combination
of identification, analysis, management, control and
supervision of risk, along with the continuous documentation of activities for audit and quality control
purposes. The principles for the identification, analysis
and management of the main risk areas are linked to
the properties of each risk, whereas the control and
supervision of each risk is linked to the organisation,
authorisation, supervision and responsibilities.
Risk Management is an integral part of the strategic
and operational management framework of Euroloan
Group.
The risk management is structured based on the separation of responsibilities and duties as described in the
“Three lines of defence” table below.
Euroloan Group – Three lines of Defence in Risk Management
1st LINE OF DEFENCE
2nd LINE OF DEFENCE
3rd LINE OF DEFENCE
Risk Ownership
Risk Control
Risk Assurance
Owners
Owners
Owners
CEO
Risk Control
Internal Audit
Business Management
Compliance
External Audit
Risk Management Team
Risk Committee
Board of Directors
Responsibilities
Responsibilities
Responsibilities
Day-to-day decisions regarding
risk management of business
risks*
Oversight and challenge to the
internal control framework used
in 1st line
Independent periodic checking
that the internal controls are
effective and appropriate
Ultimate ownership,
responsibility and accountability
for identified risks
Continuous monitoring of the
consequences of business
decisions in relation to
predetermined risk appetite
Ensuring that risks have been
identified, monitored and
mitigated in 1st and 2nd line
Mitigation of risk for the whole
organisation and business units
Monitoring of adherence to
limits
Checking that laws and
regulations are followed
Monitoring of risks within
decided limits
Advice to the Board (Risk
Committee), Managing Director,
business management
Ensuring that policies have been
effectively implemented
Control breakdown or noncompliant activities are
reported upwards
Challenge 1st line risk reporting
(* risk limits are set by
the Risk Committee or
Board of Directors)
Produce risk reports to 1st line
Table 1: Three lines of defence: the main principles of risk management
44
EUROLOAN GROUP PLC
The following risk management decision-making
structure illustrates the Group’s risk management
organisation:
Risk Management Structure
3rd Line
of Defence
Shareholders’s meeting
External
Audit
2nd Line of Defence
Board of
Directors
Risk
Committee
1st Line of Defence
Business
Management
Risk
Management
Internal
Audit
2nd Line of Defence
Risk Control
Compliance
Figure 2: Risk management organisation
Board of directors
The Board of Directors of the company is responsible
towards the company’s owners (the annual shareholders’ meeting) and regulatory authorities for the entire business of the company. Risk management falls
under the responsibility of the Board. The Board has
the principal responsibility to ensure that regulations,
good corporate governance and sound business practices are followed in all of the Group’s business operations. The Board also sets guidelines and limits for risk
management.
CEO
The CEO is responsible for daily operations being carried out in accordance with the instructions and directives issued by the Board of Directors. The Board
appoints and discharges the CEO and oversees the
CEO’s actions.
The CEO may only take actions which are unusual or
sizable considering the size and nature of the company’s business with the permission of the Board. The
CEO is responsible for making sure that the accounting methods employed by the company are legal and
that financial matters are managed in a reliable way.
In the company’s risk management, the operational
management led by the CEO is responsible for the
daily operations and activities in the company, without
EUROLOAN GROUP PLC
the right to make decisions about risk levels. The operational management has the right to view but not decide upon internal controls and documentation, and is
responsible for implementing daily risk management.
Risk management
Risk management is operated by the Risk Management
Team, led by the company’s Risk Manager. Decisions
regarding risk management and changes to it are
prepared by the Risk Management Team, which puts
them forward to the Risk Committee appointed by the
Board. The Risk Management Team regularly monitors
and assesses whether the company’s risk guidelines
and instructions are suitable and effective, and assesses what measures need to be taken to address potential deficiencies. Any decisions are made by the Risk
Committee or the company’s Board of Directors.
Risk control
The Risk Control function shall analyse and report without delay to the Risk Committee, the Risk
Management Team and the company’s operative management and internal audit any significant deviations
from set guidelines or limits which may lead to significant changes in the company’s internal risk level.
Reporting is done according to an agreed process and
is documented in a way that facilitates the control and
audit of analysis results.
45
Internal audit
An internal auditor, who is independent of the operational functions in the company, regularly assesses
internal processes, decisions and controls, and reports
any findings, along with improvement suggestions,
directly to the company’s Board of Directors. Internal
audit services may also be provided by a third-party
provider (audit company), which is independent of
the company’s external auditors.
Audit
The company’s external auditors audit the entire business, with complete insight into reporting, decisions
made and documentation. The auditors are responsible to the company’s shareholders and regulatory authorities. The external audit is carried out on a continuous basis (i.e. process audit) and for the company’s
annual review.
operations, please refer to the company’s website or
this document. The company’s trade secrets are not
available, neither are any e.g. third-party ratings or
recommendations concerning the company’s share or
creditworthiness.
The Group’s risk exposure mainly consists of the
following risks:
• Strategic risk and business risks
• Operational risk
• Financial risk
• Liquidity risk
• Credit risk
• Market risk
RISKS ASSOCIATED
WITH THE COMPANY
General
- Exchange rate risk
- Interest rate risk
The company is the parent company of a wholly
owned Group with the same name. For more information about the Group’s and the companies’
Euroloan Group Risk Structure
Total Risk
Operational Risk
Financial Risk
Business and External Risks
Credit Risk
Market Risk
Liquidity Risk
Exchange rate Risk
Interest rate Risk
Figure 3: Group risk structure
46
EUROLOAN GROUP PLC
The identified risks and the principles for their management within Euroloan Group are described below.
Strategic risk and business risk
Strategic risk and business risk comprise the cost risk
associated with a company choosing the wrong business strategy or failing to adapt the business to a new
operating environment, such as changes in the regulatory environment affecting the company.
Internationalisation
The company is expanding its international operations,
and there are risks involved in foreign operations. The
company has decided to proceed cautiously in other markets and to minimise its foreign obligations so
that they have no immediate significant impact on the
volatility of the business operating profit. Due to the
small size of the Finnish market, the relative volume
of domestic business operations may decrease significantly in the long run. In the long term, this should
mitigate concentration risks related to a single market.
The following risks relate to the operating environment:
• Regulatory and legislative risk (the effect on
future profitability and/or cash flows)
• Competition
• Cyclical risk (business cycle)
• Access to the investment and lending market
• Market liquidity
Operational risk
Operational risk is defined as the risk of financial or
reputational loss due to insufficient or deficient internal processes, systems, human error, external incidents or compliance issues.
Legal risk is defined as the risk of financial loss or
sanction due to insufficient knowledge about laws
and regulations or insufficient documentation or control of contractual issues.
Operational risks include the following main areas:
If realised, strategic risks may lead to losses, competitive disadvantage or a reduction in capital adequacy,
for example. These risks may also lead to reputation
risk, i.e. the risk that the company’s reputation and
trademark are adversely affected.
Strategic risks are managed mainly through normal
business planning and updating the company’s strategic market positioning. Capital and pricing buffers
reduce the business sensitivity to temporary disturbances such as market function disturbances (market
liquidity).
The company’s CEO and Board of Directors are responsible for the company strategic development and
adaptation to regulatory changes in the market, and
for the proper monitoring of the company’s market
position. The Board and the CEO are also responsible
for the company’s communication strategy and oversight of business activities.
• Personnel risk
• System risk
• Process risk
• External risk (crime, other events)
Other operational risks can usually be traced back to
these main risk drivers, as operational risks depend
mostly on decisions made by people or on structural
risks in systems and business processes.
Operational risks are managed and mitigated in the
company through the following measures:
• Proper governance based on documentation
stating mandate, responsibility and reporting lines
• Clear and comprehensive risk reporting
Regulatory environment
Regulation concerning the Group’s business areas
has increased in Finland and Sweden. The company
aims to predict forthcoming regulatory changes that
can have a significant effect on business operations
and profitability. Changes are typically known about
well in advance. The company has assessed the regulatory environment of other countries and is adjusting its activities to comply with the changing regulations in countries where business operations will be
conducted.
• Follow-up and quality control of systems and
processes
• Oversight, including incident reporting and
incident follow-up routines
• A functioning decision-making structure and
appropriate incentives
• Competence development for company
employees
EUROLOAN GROUP PLC
47
Intra-Group transactions
Significant business transactions between the Group
companies are possible. These include the sale of receivables and lending within the Group. The transactions are conducted in the same way as with external
parties. Therefore, the interest rate used in lending
within the Group is the same as that used in external
financing. For sales of receivables portfolios, the market price is used.
Corporate governance and reputational risk
The company’s dependency on key personnel has
been actively mitigated through the recruitment of
experts and operational and administrative management, and through appointing professionals to the
company’s Board of Directors. The aim is to bring the
company’s administration to the level of best in class,
thus reducing administrative risk.
The consumer credit and collection business have received a great deal of publicity. The company takes
consumer protection and customer interests seriously.
The principles and values of sustainable development
are applied as strict, publicly declared policy guidelines. The company’s guidelines and policies regarding
ethics, the environment, risk management, consumer protection and information on how to avoid debt
problems are available on the company’s website in
accordance with the principles of good corporate
governance.
The Group companies apply reasonable pricing that
may limit the company’s profit but is in line with the
company’s strategy emphasising sustainable business
operations. As stated in the open pricing principles
for consumer services, Euroloan publishes its current
price lists online for each service and market area.
The Group companies have assets in three main forms:
cash, the receivables portfolio and business-critical information systems.
For impairment of the receivables portfolio, see
“Credit risk” on page 49.
The Group or its wholly owned subsidiaries own all
intellectual property rights to its core business systems. The development costs of these systems have
been capitalised in the consolidated balance sheet
as intellectual property rights in non-current assets.
Investments are depreciated according to plan and
generally accepted accounting principles. Due to
changes in business operations, regulation and the
business environment, continuous investments are
required to maintain the systems’ operational capacity. Major changes in the business environment may
48
EUROLOAN GROUP PLC
increase the need for investments and funding for
investments.
Financial risk
Liquidity risk
The Group operates in capital-intensive business sectors. Loans, for example, are paid out in cash. This requires liquidity management and the company having
the cash available prior to the loan being granted.
Liquidity risk is the risk that the company cannot at
some point generate sufficient cash flows to meet
outgoing cash flows to customers or to meet other
obligations that demand liquidity. Liquidity risk normally arises when the cash flows from operations are
not balanced.
A sufficient payment readiness can be achieved and
maintained, for example, by keeping a sufficient
amount of cash or equivalent means or liquid resources immediately available, or by matching payments
and maintaining a stable and well-diversified funding
base.
The Group companies’ external capital is mainly in the
form of bonds, credit lines and partly in the form of
mainly fixed-term private or corporate loans. Funding
is also derived from the sale of receivables. Should an
issue of new bonds fail, the Group may have additional
funding sources and backup facilities available. Should
these also fail, the company could potentially experience liquidity problems.
Of the risk factors, availability of capital is the most important with regard to business growth potential. Since
most of the business costs are fixed costs, greater business volume increases profitability. Correspondingly,
costs must be cut if sufficient capital is not available.
There is a refinancing risk associated with the company’s business operations; that is, a risk that the company is unable to acquire sufficient capital at reasonable
terms to be able to continue business activities.
The company’s liquidity risk is managed through set
limits that are continuously monitored and reported to the company’s operational management. The
company’s Board of Directors has also set out what
should be done at certain threshold amounts regarding liquidity.
There are several ways of managing the company’s
liquidity and related risks:
• A varied and sufficient base of external funding
and additional backup facilities
• Selling receivables to release funds for operations
• Liquidity buffer – the last resort for hedging
against unexpected fluctuations in cash flows
is to keep an adequate buffer in the company’s
bank accounts
• Limitation of lending operations
• Including clauses in lending contracts on partial
or full recall of loans in case liquidity falls below
permitted limits
• Increasing cost of financing
• Steering contract clauses
• Other financing sources
Liquidity risks can be prevented through planning
and control. Proper planning of future cash flows and
funding needs is the best way to avoid liquidity risks.
Cash needs are planned long term (on a monthly and
yearly basis) through the budgeting process, forecasting and customer analysis. In the short term, adequate
liquidity is reserved on a daily and weekly basis in the
correct accounts.
Credit risk
Credit risk is a core risk in the Group’s business sector.
For unsecured consumer loans, for instance, it is likely
that some debtors will not be able to repay the credit
in full and on time.
EUROLOAN GROUP PLC
Credit risk arises in lending operations, investments
and other business operations where future incoming cash flows are expected from counterparties.
The company manages credit risk through careful
counterparty screening (secure identification, control of repayment ability), spreading the counterparty
risk across many counterparties, and continuous extensive analysis of the credit portfolio and payment
performance. Reliable valuation of receivables and
credit pricing are important factors in managing credit risks. An adequate margin is required to cover operative cost, financing cost and credit risk as well as
other risks. This helps in managing potential variation
in counterparties’ payment behaviour. Spreading the
credit risk across tens of thousands of counterparties
(consumer receivables) gives a stable level with little
variance in total credit risk levels.
Risks related to creditworthiness and payment behaviour have been taken into account in pricing (cf. insurance operations where the amount of claims paid affects the price of premiums). Therefore, the credit risk
is mainly due to unexpected variation in customers’
ability to meet their payment obligations. Independent
of general economic trends, the payment behaviour of
the customer base as a whole has not changed in an
unanticipated way during the company’s existence.
To assess the credit risk and set credit limits, a risk
assessment is made before lending, including the customer’s credit rating and financial situation, cross-referenced with earlier behaviour statistics and other factors. The thresholds are set by the company’s Board of
Directors or the Risk Committee upon authorisation
by the Board of Directors. The utilisation rate for credit
limits is continuously followed up.
Credit risks are continuously analysed, and the
Company’s Credit Committee has defined credit limits
and principles for lending. Due to the automatic loan
system in use, extremely few exceptions from the set
limits and rules are made. Through analysis and continuous improvements in customer selection, the probability and effects of credit risks have been decreased
significantly from the beginning of operations.
Before the purchase or sale of receivables, the receivables portfolio in question is analysed in detail.
The transaction price is calculated based on expected portfolio cash flows. If a debtor in collection is
found to be permanently insolvent in court proceedings, the debt receivable is booked as a credit loss.
Receivables that the company deems unrecoverable
can also be booked as credit losses. For receivables
booked as credit losses, the collection process can
be continued or the receivables can be sold to another company (typically at a price less than the nominal
value).
49
Interest rate risk
Euroloan’s funding is secured at a fixed or variable interest rate, as are the company’s loan receivables. This
means that through balancing both sides correctly,
the interest rate risk is minimal. Major changes in the
general interest rate may affect the company’s profitability. The changes must be very large to have an
impact on operations, meaning that the operational
interest rate sensitivity is rather small.
Interest rate risk arises mainly from depositing surplus
cash in banks which have a lower interest rate than
other investment options (such as lending operations).
At the same time, this is the cost of limiting liquidity
risks in the company, so the risks have to partly be
weighed against each other to achieve a sustainable
level for both.
Exchange rate risk
The Group has assets in several countries with different currencies.
Currency exposure mainly comes from
• capitalisation and liquidity management in
foreign currencies (mainly EUR, SEK and PLN).
• accepting and repaying deposits in different
currencies.
• procurement of receivables in different
ly in the same direction over a long period of time.
Capitalisation should be made in the currency that
has the largest expected exposure (i.e. if assets are
denominated mainly in euro, equity input will also be
made in euro).
SPECIFIC RISKS ASSOCIATED
WITH OTHER GROUP COMPANIES
Euroloan Consumer Finance Plc
Euroloan Consumer Finance Plc is the Group’s largest subsidiary by operating volume, having a significant impact on the risks and performance of the entire Group. A separate risk description for Euroloan
Consumer Finance Plc is available on the company’s
website. The description also includes the risks for
Euroloan Consumer Finance Plc’s subsidiaries.
Crédito Cobro Ltd
Compliance
The collection business of the company is regulated
and subject to licence. Regulatory risk in this business
is significant and has been partly realised through a
decrease in the maximum allowed debt collection expenses. Future regulatory changes may have a significant effect on business operations and profitability.
The company actively monitors regulatory changes
with the aim of predicting and preparing for future
changes affecting the operations well in advance.
Changes are typically known about well in advance.
currencies.
• corporate loans in different currencies.
Using different currencies does not automatically
mean exposure to exchange rate risk. Exposure arises when assets and liabilities in different currencies
do not match, leading to an open currency position
for the company. A nominal exchange rate risk also
arises in accounting when assets in a foreign currency
are calculated in the accounting currency, and when
future business transactions are stated in a foreign
currency which is not the accounting currency.
Euroloan does not actively seek exchange rate risk exposure to make a profit, but seeks to limit the risk.
The company manages exchange rate risks mainly
through balancing funding in different currencies with
the business operation volumes. To limit the exchange
rate risk exposure, derivatives can also be used to fix
exchange rates.
As a last resort, currency risk can also be managed
through additional capital injection. This can be done
if exchange rates change significantly and continuous50
EUROLOAN GROUP PLC
As part of the mitigation of regulatory risk, operations
have been adapted to comply with regulations and
costs have been cut to minimise profitability impact.
The company has assessed the regulatory environment of other countries and will make any changes
necessary to comply with regulations in countries
where it intends to do business.
Systems
Modern debt collection requires functional information systems. Automation reduces relative cost as
volumes increase. The company has invested significantly in modern collection systems and related services. There is an investment risk associated with a
low usage volume. The risk is mitigated by the fact
that some of the collection systems developed can be
utilised in other Group business areas. Risks associated with system usability have been mitigated through
good quality control, testing and a sensible choice of
platforms.
Customers
The typical delay between the collection service sales
efforts and the customer agreement causes a volume
RISKS ASSOCIATED
WITH INVESTING IN THE COMPANY
Credit risk
Bonds and other investment products issued by the
company do not include security of capital or separate collateral. Therefore, the investment products are
associated with issuer credit risk. This means that the
investor may lose the invested capital entirely or partly in the event of a company credit transaction such as
a serious payment default, debt restructuring or bankruptcy, for example.
Issuer risk
The repayment of invested capital and profit carry a
risk relating to the issuer’s repayment ability.
risk. Another risk associated with customers is upfront costs. On the other hand, customers typically
have long-term agreements that last several years.
Efforts to improve customer satisfaction also reduce
the risk of losing customers.
The company’s goal is to offer its customers agreements that comply with industry standards, protect
both parties and follow fair business practice.
NoTie S.à r.l.
A subsidiary incorporated in Luxembourg of Euroloan
Group Oyj, NoTie S.à r.l. develops finance and collection systems and sells system licences. Operational
risks are associated with the above systems. NoTie’s
operations are very long-term and capital-intensive,
causing investment profitability risks.
NoTie invests in high-quality systems. System-related
risk management is partly built on in-house system
development expertise and capacity.
Euroloan S.A.
A subsidiary incorporated in Luxembourg of Euroloan
Group Oyj, Euroloan S.A. is applying for a banking license in Luxembourg. The company’s risks are limited to the application costs until launching operations
after a possible approval. The risk section related to
Euroloan S.A. will be updated at that time.
With the company being the issuer, the issuer risk is
comparable to the issuer credit risk associated with
bonds (see “Credit risk”).
Issuer risk refers to the risk of the issuer becoming
insolvent and unable to meet its obligations. The investor may risk entirely or partly losing the invested
capital and potential profit.
Secondary market and liquidity risk
Secondary market risk refers to the risk that when the
investor sells the investment before the agreed maturity date, the price may be higher or lower than the nominal value. In this case, the investor may not get back
the entire capital invested. Bonds or other investment
products issued by the company are primarily intended
to be held until their respective maturity date. However,
bonds may be sold before their maturity dates. The issuer will have no obligation to repurchase, but a third
party can do so. In this case, the value of the investment
loan may be lower or higher than its subscription price.
The market price is affected by changes in market rates
of interest, among other matters.
Selling the loan before its agreed maturity date also
carries a liquidity risk, meaning that it may be difficult
to find a buyer for the loan or that the price offered is
lower than the actual value. Major market fluctuations,
the closing of trading venues or technical problems
may affect the secondary market.
Taxation
Digna It Oy
A subsidiary of Crédito Cobro Oy, Digna IT has insignificant operations and therefore small related risks.
Digna IT Oy holds some Euroloan Group Oyj A-shares
and changes in their market value could affect the financial situation of the company.
EUROLOAN GROUP PLC
Any taxes related to investments in Euroloan are paid
by the investor. Tax legislation and local taxation may
change, which may have adverse effects for the investor. In isolated cases, investors would be well advised to seek advice from their tax consultant or tax
authority.
51
PARENT COMPANY’S
INCOME STATEMENT
1.1.–31.12.2015
1.1.–31.12.2014
6 610 208,68
4 911 565,27
1 953,88
660,50
External services
-256 572,31
-67 051,85
Total
-256 572,31
-67 051,85
-2 138 034,59
-1 871 102,48
-399 082,72
-331 399,76
-67 842,71
-62 484,12
-2 604 960,02
-2 264 986,36
-2 394,59
-3 192,79
Total
-2 394,59
-3 192,79
Other operating costs
-1 151 950,30
-1 066 709,48
OPERATING PROFIT (LOSS)
2 596 285,34
1 510 285,29
1 114 427,93
178 686,65
187 274,48
313 856,61
1 301 702,41
492 543,26
TURNOVER
Materials and supplies
Personnel costs
Salaries and benefits
Social security costs
Pension costs
Other social security costs
Total
From Group companies
From others
Total
To Group companies
0,00
-5 547,84
To others
-3 384 441,86
-1 667 761,06
Total
-3 384 441,86
-1 673 308,90
-2 082 739,45
-1 180 765,64
513 545,89
329 519,65
-30 421,18
4 606,14
483 124,71
334 125,79
Total
PROFIT BEFORE APPROPRIATIONS AND TAXES
Income taxes
PROFIT (LOSS) FOR THE FINANCIAL YEAR
52
EUROLOAN GROUP PLC
BALANCE SHEET
31.12.2015
31.12.2014
144 316,41
0,00
Total
144 316,41
0,00
7 183,78
9 578,37
2 500,00
2 500,00
Total
9 683,78
12 078,37
Holdings in Group companies
37 949 287,92
26 032 291,09
Total
37 949 287,92
26 032 291,09
38 103 288,11
26 044 369,46
Other current assets
0,00
624 000,00
Total
0,00
624 000,00
26 528,00
39 976,48
10 686 939,51
5 566 827,86
Loan receivables
2 191,54
549 780,15
Other receivables
71 305,66
167 994,58
0,00
213 998,00
324 383,69
486 600,21
11 111 348,40
7 025 177,28
3 042,65
2 000 861,09
11 114 391,05
9 650 038,37
49 217 679,16
35 694 407,83
ASSETS
NON-CURRENT ASSETS
Intangible assets
Tangible assets
Investments
NON-CURRENT ASSETS, TOTAL
CURRENT ASSETS
Receivables
Short-term
Sales receivables
Receivables from Group companies
Unpaid shares
Accrued income
Total
Cash in hand and at bank
CURRENT ASSETS, TOTAL
ASSETS, TOTAL
EUROLOAN GROUP PLC
53
31.12.2015
31.12.2014
80 000,00
80 000,00
0,00
1 354 998,00
20 806 677,65
14 451 679,65
-532 170,96
-43 443,36
483 124,71
334 125,79
20 837 631,40
16 177 360,08
Bonds
0,00
18 376 000,00
Total
0,00
18 376 000,00
20 112 000,00
0,00
554 801,95
264 953,21
6 435 996,83
10 968,56
Other liabilities
740 677,28
431 367,19
EQUITY AND LIABILITIES
EQUITY
Share capital
Share issue
EQUITY, TOTAL
LIABILITIES
Long-term
Short-term
Bonds
Accounts payable
Liabilities to Group companies
536 571,70
433 758,79
Total
28 380 047,76
1 141 047,75
LIABILITIES, TOTAL
28 380 047,76
19 517 047,75
49 217 679,16
35 694 407,83
EQUITY AND LIABILITIES, TOTAL
NOTES TO THE PARENT COMPANY’S
PREPARATION OF THE FINANCIAL STATEMENTS
Valuation principles and methods
The company’s non-current assets are valued
at their variable acquisition cost.
Asset type
Depreciation method/
percentage
Machinery and
equipment
outlay residue
write-off 25%
Periodization principles and methods
The acquisition cost of fixed assets subject to wear
and tear owned by the company is written off according to a prepared plan.
54
EUROLOAN GROUP PLC
INCOME STATEMENT
2015
2014
1 114 427,93
178 686,65
187 274,48
313 856,61
1 301 702,41
492 543,26
0,00
-5 547,84
To others
-3 384 441,86
-1 667 761,06
Total
-3 384 441,86
-1 673 308,90
-2 082 739,45
-1 180 765,64
2015
2014
0,00
0,00
Additions
144 316,41
0,00
144 316,41
0,00
2015
2014
9 578,37
12 771,16
Additions
0,00
0,00
Reductions
0,00
0,00
-2 394,59
-3 192,79
7 183,78
9 578,37
2015
2014
80 000,00
80 000,00
80 000,00
80 000,00
1 354 998,00
0,00
Additions
5 000 000,00
7 536 450,00
-6 354 998,00
-6 181 452,00
0,00
1 354 998,00
80 000,00
1 434 998,00
From Group companies
From others
Total
To Group companies
Financial income and expenses, total
ASSETS
Other long term expenses
LIABILITIES
Specification of equity
Restricted equity
Share capital
Share issue
Transfered to Invested unrestricted equity
Restricted equity, total
EUROLOAN GROUP PLC
55
UNRESTRICTED EQUITY
14 451 679,65
8 270 227,65
6 354 998,00
6 181 452,00
20 806 677,65
14 451 679,65
290 682,43
14 292,64
483 124,71
334 125,79
Dividends paid
-71 520,56
-57 736,00
-717 336,00
0,00
Corrections of previous accounting years’ result
-33 996,83
0,00
Accrued profits
-49 046,25
290 682,43
Unrestricted equity, total
20 757 631,40
14 742 362,08
Distributable funds
20 757 631,40
14 742 362,08
Additions
Stock repurchase
VAT corrections for years 2012-2014, total of EUR 33 996,83, are included in the Corrections of previous
accounting years’ result.
Information on a reporting entity that is part of the Group
Subsidiaries
Euroloan Consumer Finance Plc, domicile Helsinki, is wholly owned by Euroloan Group Plc.
Crédito Cobro Ltd, domicile Helsinki, is wholly owned by Euroloan Group Plc.
NoTie S.à r.l., domicile Luxembourg, is wholly owned by Euroloan Group Plc.
Euroloan S.A., domicile Luxembourg, is wholly owned by Euroloan Group Plc.
Group financial statements have been consolidated in accordance with the current Accounting Act and prepared by the acquisition cost method. The consolidated financial statements are available at Euroloan Group
Plc at Energiakuja 3, 00180 Helsinki, Finland.
Receivables from Group companies
31.12.2015
31.12.2014
Sales receivables
7 109 921,93
3 017 911,28
Accrued income
134 235,10
1 305,68
Loan receivables
3 203 649,34
2 544 000,00
239 133,14
3 610,90
10 686 939,51
5 566 827,86
31.12.2015
31.12.2014
6 435 996,83
8 967,01
0,00
2 001,55
6 435 996,83
10 968,56
Other receivables
Total
Liabilities to Group companies
Other liabilities
Total
56
EUROLOAN GROUP PLC
GUARANTEES AND COMMITMENTS
Leasing agreement commitments
2015
2014
Due next financial year
84 983,51
13 941,94
Due at a later date
75 076,44
129 369,43
160 059,95
143 311,37
2015
2014
87 049,86
87 049,86
2015
2014
45 051,36
45 051,36
2015
2014
43
38
213 038,62
199 473,10
Total
Rental commitments
Next financial year
Other commitments
Rent security deposits paid
INFORMATION ON PERSONNEL
AND MEMBERS OF GOVERNING BODIES
Average number of employees
Management’s salaries and benefits
COMPANY SHARES
Share capital by types of share and Articles of
Association’s main provisions regarding the types of share
Series
No. of shares
Euro
Votes/pcs
A-series
16 165 654
19 550 249,65
1
B-series
153
892 296,00
0
C-series
73
444 132,00
0
Owners of B- and C-series shares are paid fixed monthly
dividend but no other dividend.
Board’s proposal on measures concerning
the profit for the financial year
SHARE ISSUES
225 833 A-series shares that were subscribed in 2014
and had not been paid in full by the year end 2014
were registered in 2015 and booked as equity.
On 16.10.2015 657 894 new A-series shares were subscribed. The subscription price has been dis-bursed to
the company’s account and has been registered and
booked as equity.
EUROLOAN GROUP PLC
Distributable funds in the financial statements amount
to EUR 20 757 631,40 of which the profit for the financial year is EUR 483 124,71. No material changes have
occurred in the company’s financial position following
the end of the financial year, based on section 13(2) of
the Limited Liability Companies Act.
During the financial year the company has paid dividends to B- and C-series shares total amount of EUR
71 520,56. The Board proposes that no dividend is
paid to A-shares.
57
SIGNATURES TO THE FINANCIAL STATEMENTS
58
EUROLOAN GROUP PLC
AUDITOR’S REPORT
59
60
EUROLOAN GROUP PLC
AUDITOR’S REPORT (TRANSLATION)
Auditor’s Report (Translation)
To the Annual General Meeting of Euroloan Group Oyj
We have audited the accounting records, the financial statements, the report of the Board of Directors and the
administration of Euroloan Group Oyj for the year ended 31 December, 2015. The financial statements comprise the
consolidated balance sheet, income statement and cash flow statement and notes to the consolidated financial
statements, as well as the parent company’s balance sheet, income statement, cash flow statement and notes to the
financial statements.
Responsibility of the Board of Directors and the Managing Director
The Board of Directors and the Managing Director are responsible for the preparation of financial statements and report
of the Board of Directors that give a true and fair view in accordance with the laws and regulations governing the
preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is
responsible for the appropriate arrangement of the control of the company’s accounts and finances, and the Managing
Director shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have
been arranged in a reliable manner.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial statements, on the consolidated financial statements and on
the report of the Board of Directors based on our audit. The Auditing Act requires that we comply with the requirements
of professional ethics. We conducted our audit in accordance with good auditing practice in Finland. Good auditing
practice requires that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements and the report of the Board of Directors are free from material misstatement, and whether the members of
the Board of Directors of the parent company or the Managing Director are guilty of an act or negligence which may
result in liability in damages towards the company or whether they have violated the Limited Liability Companies Act or
the articles of association of the company.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements and the report of the Board of Directors. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements and report
of the Board of Directors that give a true and fair view in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements and the report of the Board of Directors.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Basis for Qualified Opinion
As stated in the Note ”Other operating income” the profit from the sales of own shares is presented as Other
operating income in the income statement. According to our understanding this is not in accordance with good
accounting practice. If the profit would have been presented in the Reserve for invested unrestricted equity as
required, the profit for the period would have decreased by 1.073.903,27 euros and the Reserve for invested
unrestricted equity would have increased by 1.073.903,27 euros.
Qualified Opinion
In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion section of our
report, the financial statements and the report of the Board of Directors give a true and fair view of both the
consolidated and the parent company’s financial performance and financial position in accordance with the laws
and regulations governing the preparation of the financial statements and the report of the Board of Directors in
Finland. The information in the report of the Board of Directors is consistent with the information in the financial
statements.
PricewaterhouseCoopers Oy, Authorised Public Accountants, P.O. Box 1015 (Itämerentori 2), FI-00101 HELSINKI
Phone +358 20 787 7000, fax +358 20 787 8000, www.pwc.fi
Reg. Domicile Helsinki, Business ID 0486406-8
61
Remark
We would like to remark that to the extent presented in the Basis for Qualified Opinion above, the financial
statements and the report of the Board of Directors have not been prepared in accordance with the laws and
regulations governing the preparation of the financial statements and the report of the Board of Directors in
Finland.
Helsinki April 14, 2016
Remark
PricewaterhouseCoopers Oy
We
would like
to remark
that to the extent presented in the Basis for Qualified Opinion above, the financial
Authorised
Public
Accountants
statements and the report of the Board of Directors have not been prepared in accordance with the laws and
regulations governing the preparation of the financial statements and the report of the Board of Directors in
Finland.
Martin Grandell
Authorised Public Accountant
Helsinki April 14, 2016
PricewaterhouseCoopers Oy
Authorised Public Accountants
Martin Grandell
Authorised Public Accountant
2 of 2
62
EUROLOAN GROUP PLC
2 of 2
Euroloan Group
is a rapidly growing
international group,
specialized in highly
automated financial
services and financial
technology
(FinTech).
Euroloan Group Plc
Energiakuja 3, 00180 Helsinki
Tel. +358 10 217 1000
info@euroloan.com
www.euroloan.com
95%
RECYCLED MATERIAL

Annual review 2015

Transcription

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