ADUNO GROUP RECORDS AN IMPRESSIVE PERFORMANCE
The Aduno Group is reporting encouraging results again for the financial year 2017. The healthy economic environment and the ongoing substitution of cash by card payments increased turnover in the card business. The personal credit and leasing business showed impressive growth. The Aduno Group made use of the low level of interest rates to issue two bonds, thereby further optimising its capital structure.
In 2017 the Swiss economy continued on the growth trajectory of the previous year. Although, according to the Swiss State Secretariat for Economic Affairs (SECO), the growth in gross domestic product was only a moderate 1.0 per cent overall owing to a weak first half, the economy picked up considerably from the third quarter. In addition, the upturn became broader-based with most services sectors sharing in the growth in addition to industry. In these circumstances, the mood of Swiss consumers also brightened.
Swiss credit card issuers benefited from the positive consumer sentiment. According to statistics from the Swiss National Bank, the number of credit cards issued rose by 3.7 per cent in 2017 and the amount purchased with credit cards in Switzerland rose by as much as 11.4 per cent. This shows that credit cards are not only becoming ever more widespread, they are also being used more. The trend towards contactless payments continues. While the number of debit cards overall remained steady, the number of debit cards with the contactless function rose by 87.5 per cent year on year to 5.3 million. At the end of December 2017 there were 6.2 million credit cards with the contactless function in circulation. This corresponds to an increase of 7.9 per cent.
After contracting for several years, the market for personal credit grew in 2017. According to internal estimates, the rate of growth was 2.1 per cent. The market for leasing financing presented a similar picture: after deducting the volume for captive (producer-owned) leasing firms, the growth in the “free” part of the leasing market was 2.8 per cent. However, in view of the ongoing consolidation among small independent garages and the entry of new financing providers in the non-captives segment, the market remains challenging.
Card business drives turnover growth
In financial year 2017 the Aduno Group recorded turnover of CHF 459.6 million. Although this represents a decline of 3.9 per cent compared to the previous year, sales in 2016 included substantial extraordinary income from the sale of Visa Europe Ltd. in which the Aduno Group was a member institution. Excluding this special effect, sales in fiscal 2017 were CHF 32.6 million or 7.6 per cent higher than in the previous year. This was mainly attributable to the Payment division. The Consumer Finance segment generated sales of CHF 94.6 million, 1.7 per cent less than in the previous year. The central financing unit contributed the remaining sales of CHF 104.9 million.
Commission income accounted for 35 per cent of total revenue, annual fees, especially for cards, 25 per cent, interest income 21 per cent and other income 19 per cent. Commission income was significantly above the level in the previous year, which is a notable achievement in the context of another reduction in the interchange fee from 0.70 to 0.44 per cent from 1 August 2017. The increase is attributable in the main to higher transaction volumes and to a lesser extent to price adjustments, for example for ATM withdrawals. The income from annual fees also rose again thanks to a higher number of cards held. The fall in interest income reflects the reduction of the maximum permissible interest rate in personal credit business to 10 per cent, which in 2017 had a full year’s effect for the first time.
Net income significantly higher than last year
The operating result for the 2017 financial year was CHF 102.8 million. The significant year-on-year decline is also largely attributable to the non-recurring extraordinary income from the sale of Visa Europe in 2016. There was a further special effect in personnel expenses: In 2016 this was reduced by the expenses for the employees of the Aduno SA’s Acquiring business that was sold. However, those employees performing central services such as IT or call centre services were transferred back to the Aduno Group in the year under review. Accordingly, personnel expenses for 2017 are based on a different personnel basis and cannot be compared with the previous year. Excluding all non-recurring effects, there was a slight increase at the level of operating income.
The net profit from discontinued operations of CHF 116.3 million is mainly comprised of the proceeds from the sale of the Acquiring and Terminal business. Reported net profit amounted to CHF 191.6 million, compared with CHF 118.5 million in the previous year.
Equity base further strengthened
Total assets amounted to CHF 2,212 million as at 31 December 2017, compared with CHF 2,292 million at the end of 2016. Equity was CHF 807 million compared to CHF 643 million at the end of 2016. At 36.5 per cent, the equity ratio is again significantly higher than in the previous year (28.0 per cent). That provides a solid basis for the Group’s future growth.
The headcount of the Aduno Group decreased to 717 employees (full-time equivalents) at the end of 2017. This is due to the sale of the Acquiring and Terminal business.
Sharp growth in the Payment division
In the year under review the Payment division increased transaction turnover in Viseca’s issuing business by 8.9 per cent to CHF 9,027 million, exceeding the CHF 9 billion mark for the first time. The highest level of growth was recorded in the distance selling business at 14.7 per cent. Other growth drivers among the most important sectors were the sales business (+9.5 per cent), the hotel industry (+9.7 per cent) and transport companies (+10.1 per cent).
A 53 per cent share of transaction turnover was generated in Switzerland, and 47 per cent abroad. Growth outside Switzerland was somewhat higher, not least because the euro appreciated against the Swiss franc by around 5 per cent year-on-year. With ongoing substitution of cash by card payments, the average turnover per card increased significantly. There was also a significant rise in the proportion of the total transaction volume accounted for by contactless transactions, from 19 per cent in the previous year to 29 per cent. Card holdings also recorded further strong growth in 2017. This was due both to the continued success of the distribution work with partner banks and to a lower number of card cancellations compared to the previous year. As a result the total number of card holdings rose by 4.4 per cent to a total of 1.49 million cards.
In the rental deposit business of AdunoKaution and SmartCaution the total number of deposit guarantee agreements increased by 5.5 per cent compared to the previous year. SmartCaution registered a very good level of new business thanks to a special offer campaign in spring.
Consumer Finance sees growth in new business
The Consumer Finance division picked up speed in 2017: New business increased by 14.8 per cent to CHF 943 million and the total loan portfolio increased by 7.0 per cent to CHF 1,339 million.
In personal credit business, the growth in new volume was 6.5 per cent and the increase in the total credit volume was 5.1 per cent. This considerable level of growth was achieved both in indirect business and in direct and branch business.
New sales in leasing rose by 25.1 per cent after falling in the previous year. Overall volumes rose by 9.2 per cent compared to 2016. This was attributable among other things to the new leasing model with an attractive interest rate, to the stock vehicle financing for dealers introduced in the previous year and to collaboration with an innovative car manufacturer. Thanks to its significant growth cashgate extended its market share in the non-captive segment of the leasing market.
Financing: two bonds for CHF 200 million placed
The Aduno Group took advantage of the favourable environment on the capital market to issue a new floating-rate bond at the end of January 2017, with a floor of 0.00% and a cap of 0.05%. Despite a volume of CHF 100 million the issue was heavily oversubscribed and had to be cut short, which underlines the trust that the capital market places in the Aduno Group. Given this very positive level of demand, in April the Aduno Group brought another zero bond for CHF 100 million to the market. It was the first SME without an international rating to achieve a private placement of a bond with a negative yield.
Investigation of former executive bodies of the Aduno Group
On 14 November 2017, the Board of Directors of the Aduno Group commissioned Baumgartner Mächler, a law firm specialising in commercial criminal law, to clarify and provide a legal assessment of the facts surrounding individual acquisitions with regard to conflicts of interest of the executive bodies, employees and representatives of the Aduno Group.
On the basis of the results of the investigation, the Board of Directors commissioned Baumgartner Mächler on 4 December 2017 to draw up a criminal complaint against former executive bodies of the Aduno Group for suspected criminal mismanagement. The accused persons no longer work for the company. Criminal charges were submitted to the Public Prosecutor's Office of the Canton of Zurich on 20 December 2017. The Aduno Group is participating in the criminal proceedings as an aggrieved party in order to protect the rights of the company.
The Board of Directors has thus acted quickly and decisively. The criminal complaint led to a preliminary investigation by the Public Prosecutor's Office and then to the formal opening of criminal proceedings. The Public Prosecutor's Office officially announced the proceedings on 28 February 2018.
Among the accused are the former Chairman of the Board of Directors, Dr Pierin Vincenz, and the former CEO and Board member Beat Stocker. The presumption of innocence applies to all accused persons. The criminal investigation is neither directed toward the current members of the Board of Directors nor persons of the Aduno Group responsible for the operating business.
On 12 March, the Public Prosecutor's Office of the Canton of Zurich issued an order obliging the parties to maintain silence with regard to the contents of the proceedings. For this reason, the Aduno Group will not comment on the details of the criminal investigation.