FIMBank plc - Interim Results

On 5 August, FIMBank plc published its interim results covering the first six months of 2015. The comparative figures for the first half of 2014 have been restated to reflect the reclassification of FactorRus as a discontinued operation. Furthermore, the figures for India Factoring are being consolidated for the full six months in 2015.

The Directors noted that during the period under review, FIMBank initiated a process of strengthening its governance and risk structures across the Group whilst also streamlining its international factoring strategy in order to prevent a repeat of the significant losses incurred in the 2014 financial year. The process of consolidation also created the opportunity for various actions to be taken in terms of cost rationalisation, including a review of certain staff positions, consultancies and better utilisation of office space. The Directors explained that although these actions resulted in higher expenses during the period under review, they are expected to lead to cost savings in future financial periods. In summary, the period under review is marked by a positive operating performance across the main component entities contrasted by some legacy, residual impairments and extraordinary costs in FIMBank arising primarily from restructuring and consolidation activities.

Performance Overview

During the first half of 2015, the FIMBank Group registered a 16.7% increase in net interest income to USD16.2 million largely due to the lower cost of funding and higher volumes of business. Meanwhile, non-interest income dropped by 55.8% to USD8.2 million largely due to the 38.7% contraction in net fee and commission income (in view of the more rigorous transaction selection policy and a strategic shift away from traditional fee-based trade finance products towards interest-based financial products) and a USD2.1 million loss from other instruments carried at fair value. These offset the improvements registered with respect to foreign currency operations and other income.

Overall, FIMBank’s total operating income for the period under review contracted by 24.8% to USD24.4 million.

Meanwhile, non-interest expenses grew by 24.9% to USD23.4 million largely reflecting the consolidation effect of the factoring ventures in India and Chile as well as increases in legal and professional fees and staff related costs. The half-year report noted the Group incurred USD1.45 million in connection with employment and consultancy contract terminations and reorganisation of various roles and positions. Additionally, FIMBank incurred USD1.59 million in expenses related to legal advice. Both these expenses are not expected to recur in future periods.

The interim performance of the FIMBank Group was also adversely impacted by the USD8.6 million (H1 2014: USD6 million) in impairments which largely relate to legacy residual impairments mainly in India. However, it is also noteworthy to highlight that the figure also include some new impairments at MENA Factors.

The Group’s performance was also negatively impacted by the USD0.25 million (H1 2014: USD0.7 million) net loss from associated undertakings which now mainly include Brazil and Egypt. The Group’s operation in Brazil remains profitable whilst Egypt registered yet another loss and thus the  Board is currently evaluating its operation in this country with a decision expected to be taken in the second half of 2015.

Overall, the FIMBank Group registered a pre-tax loss of USD7.7 million compared to a pre-tax profit of USD5.1 million in the first six months of 2014. After accounting for minority interests of USD0.6 million, a tax credit of USD1.4 million and a loss of USD2.3 million from the discontinued operation in Russia, the Group’s net loss for the period under review amounted to just over USD8 million compared to a net profit of USD2.9 million during the first half of 2014. This translates into a loss per share of USD0.0287 compared to earnings per share of USD0.0138 in the previous comparable period.

The Statement of Financial Position as at 30 June 2015 shows a 5.3% drop in total assets to USD1.33 billion compared to 31 December 2014 mainly reflecting the reduction in trading assets as well as loans and advances to banks and customers in line with the consolidation of the Group’s business. For the same reason, liabilities dropped by 5.5% to USD1.16 billion. Overall, the Group’s shareholders’ funds contracted by 6.4% to USD0.15 billion in view of the loss incurred during the period under review. This translates into a net asset value per share of USD0.5031.

Dividend

The Directors did not declare an interim dividend.

Outlook

Looking ahead, the Directors expect the various measures taken in the first half of the year to start bearing fruit during the second half of the year whilst remaining supported by its principal shareholders to do more business and create future opportunities for profit.

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FIMBank plc – Half-Yearly Report covering the six months ended 30 June 2015.