Cost discipline and ability to pivot deliver strong results
The second quarter of 2020 has proven to be a challenging period for most economies and businesses globally, with Sun Finance not being an exception. However, while challenging, this period offered the group an opportunity to further review its operations in detail and streamline processes as well as improve profitability, setting it up to capitalize on future growth opportunities.
In Q2’20, reacting to the Global situation, the Group maintained tightened issuance policy across most markets, resulting in €51 million issued during the quarter, a decrease from €74 million in Q2’19 (-30%). As a consequence, the Group’s net portfolio was €54 million at the end of period, a decrease of €5.7 million (-9%) vs Q1’19. On the other hand, this resulted in a record level cash balance for the Group, as well as a significantly increased capitalization ratio of 48.0%1.
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) increased by 33%, reaching €8.0 million in Q2’20 vs €6.0 million in Q2’19. This translates into a very healthy EBITDA margin of 33.9%, highlighting the Group’s cost discipline and the strength of its business model.
The Group recorded a cost/income ratio of 27.4%, an improvement vs Q2’19 (28.2%). The Group sees this as a positive result, given the decreased income level during the period of uncertainty, and a clear sign that the cost base review during these months was effective and translated to direct savings for the Group.
Sun Finance Group founder and CEO Toms Jurjevs comments:
“While some of our markets were harder hit by the COVID-19 situation than others, we maintained strong collection and issuance discipline across the board, resulting in one of the strongest periods ever in terms of profitability.
Having gone through July and half of August, we see that our issuances have bounced back, being very close to pre-COVID levels, as expected, at the same time without compromising our strict underwriting policies.
In the financial results of Q2’20, we can see our cost-saving initiatives come to fruition, delivering strong profitability for the periods amidst market uncertainty. While we expect that some of the costs will return to pre-COVID levels (such as short-term pay decreases as well as direct operating costs), we are coming out of this challenging period as a leaner and more cost-efficient organization, confident in our ability to resume on the path that we started early in 2020.
While challenging, we believe that this period showcased the strength of our business model and ability to weather extremely rare force majeure headwinds across almost all markets, giving us further confidence that we are on the right track.
We are very pleased with the results delivered to our stakeholders and investors during this period of uncertainty and expect to continue on this path over the coming periods.
As I already said in the presentation of our Q1’20 results – The terrible thing about crises is they always happen. The wonderful thing is they always end.”,
Note 1: Capitalisation ratio calculated as Adjusted Equity (Equity plus Subordinated Debt) to Net Loan portfolio