(via Thenewswire.ca)
Red Deer, Alberta / TheNewswire / June 13, 2016;
Rifco Inc. (TSXV: RFC) is announcing results for its wholly owned subsidiary Rifco National Auto Finance for the fourth quarter and
the year ended March 31, 2016.
Annual Results
The Company is reporting Net Income of $4.55M, a decrease of $1.38M from the prior year’s $5.93M.
Rifco reported earnings per share (EPS) in the period of $0.213, a decrease from $0.281 from the prior year. Rifco is reporting its
10th consecutive profitable year in a challenging regional economic
environment. The retention of these profits has reduced the Company’s leverage ratios to record lows.
Reducing leverage normally implies improving Company safety and strength.
In spite of the challenges of the Alberta economy Rifco is pleased to report that $5.04M was added
to shareholders’ equity in the year to $29.97M, a 20% increase.
Since the first quarter of this year, the Company has been reporting its Net Fair Value (NFV).
This measure represents the estimated net worth of the Company by identifying value as reflected by the cash flow streams
over the full life of the assets. The NFV is calculated by subtracting the fair value of all liabilities from the fair value
of all assets. The NFV of the Company at year end is $79.65M, compared to $92.42M at the end of the prior year. When
divided by the ending number of common shares, the Net Fair Value Per Share (NFVPS) is calculated at $3.73, compared to $4.35 in
the prior year.
NFV is net of anticipated management and servicing expenses of Finance Receivables, Provision for
Impairment, prepayment expenses, borrowing expenses, and fees to securitize.
Subsequent to our year end, 80,000 people were evacuated from the city of Fort McMurray Alberta due
to a forest fire. Rifco has approximately 150 borrowers directly impacted by the evacuation. Rifco’s servicing team has
contacted each of our affected borrowers and has offered a grace period from required loan payments. This is a devastating time for
the families of Fort McMurray. Fortunately, it appears that families will begin returning to the city in the coming weeks.
Rifco will continue to be accommodative for our borrowers as is necessary.
The Delinquency Rate has reduced to 5.64% from 5.86% in the preceding quarter but increased from
5.11% in the prior year.
The current Delinquency Rate is higher than the Company’s typical seasonal ranges of between 3.00%
and 4.00% but management has observed improving trends in early stage Delinquency (11-30 days past due). A reduction in early
stage Delinquency may be a leading indicator of a future reduction in the
reported Delinquency (over 30 days past due) and the future Credit Loss Rate.
At year end, the Company saw a 27% reduction in loans reported as 11-30 days past due compared to
the prior year end. In Q4, the Company saw a 22% reduction over the prior quarter.
The Company posted Originations of $88.44M a reduction from $145.78M, a 39% decrease from the prior
year. Over the last year, the Company has originated an increasing percentage of Finance Receivables in
its best performing credit tiers as compared to the prior year. As a result, the Net Portfolio Yield has
decreased to 16.08% from 16.90% from the prior year. Over time, the results of this strategy may lead to reduced Delinquency Rates
and Operating Expense Ratios.
Currently 40% of Finance Receivables are located in Alberta which is a reduction from 46% one year
ago. The Company continues to focus on greater regional diversification of new Originations. The Delinquency on Alberta
Finance Receivables is currently higher than the national average. The national Delinquency Rate at 5.64%, is due in part to this
provincial weakness. Of the Alberta Finance Receivables, 50% were granted prior to Dec 31, 2014. The
Company expects that, over time, the impact of Alberta’s weak credit performance will diminish as the concentration of Alberta
Finance Receivables declines and the economy stabilizes.
Rifco is working actively to develop new initiatives that it expects to positively affect loan
Originations in the coming year while maintaining the Company’s focus on loan credit quality and preserving Net Portfolio
Yields.
Rifco is in regular contact with all of its funders and remains optimistic regarding the
availability of increasing amounts of Bank Borrowing and Securitized Facilities as needed. The Company currently has over $129M in
facility availability for deployment as the current lending environment improves.
The Finance Receivables decreased by 10% to $223.22M from $247.11M from the prior year which
resulted in total financial revenue decreasing by 4% to $37.39M from $39.00M in the prior year.
The Average (12 month rolling) Credit Loss Rate increased to 5.17% from 3.95% in the prior
year.
Credit Losses, including costs and net of recoveries, are $12.10M, an increase from $9.29M in the
prior year.
Unemployment rates in Alberta have increased during the year. As a result, in Q4 of the prior year,
the Company commenced providing an additional Collective Provisioning for Impairment on loans granted in Alberta before December
31, 2014. Management conducted detailed reviews of its credit underwriting processes and made adjustments to reflect the increased
employment risk in Alberta. Loans granted after December 31, 2014 were granted reflecting credit underwriting in the current
environment. Included in the total is a Collective Provisioning for Impairment which is applied against certain non-delinquent
Alberta loans where “there are observable changes to the external economic environment that can meaningfully change the likelihood
of scheduled repayment.” The Company has a Collective Provision for Impairment in the year of $1.10M, of which a portion is in
response to a perceived increased risk to a certain vintage of the Company’s Alberta borrowers.
In the year, the Company increased its Specific Provision for Impairment to $0.66M for modified
loans (loans for which the original terms of the contract have been changed) from $0.05M in the prior year. Loans that have been modified but are not in arrears, are deemed impaired until the borrowers’ ability to maintain the
modified contractual repayment has been re-established. The Company has modified loans that regularly meet a re-establishment
standard. Re-established modified loans may be subject to a Specific Provision for Impairment in the future if they become
Delinquent.
The Average Interest Expense decreased to 4.56% from 4.74% from the comparable year.
Operating Expenses increased to $10.19M from $8.93M from the comparable year. The Operating Expense
Ratio increased to 4.38% compared to 3.87% in the prior year. The increased number of Delinquent loans has increased the Company’s
collection and servicing requirements. The expense associated with additional internal and external servicing staff represents the
increased Operating Expenses. A reduction in Delinquency levels could have a positive effect on reducing the Operating Expense
Ratio in the future.
Since the first quarter of this year the Company has been reporting
Modified Funds Flow from Operations that provides details on cash generation for the period excluding activities relating to
Finance Receivables (principal) advanced and collected. This measure provides useful information as it is not directly impacted by
fluctuation in the level of loan Originations.
Modified Funds Flowing from Operations represents implicit cash value to shareholders on a periodic
basis. Modified Funds Flow from Operations decreased from $23.20M to $20.71M in the year. The Modified Funds Flow from Operations
of $0.97 in the current year a decrease from $1.10 in the comparable period. EPS considers Provisions for Impairment and
Losses which each affects the balance sheet, but not cash flow.
Management believes that ongoing infrastructure investments and benefits of increasing scale will
ultimately result in improving operating efficiency. This will be reflected in continued improvement in Operating and Efficiency
Ratios over time.
The Company’s management is focused on returning its credit performance to previous levels.
Predictable credit performance is imperative to achieving the Company’s long term vision of $500M in annual loan
Originations.
Rifco Annual Comparative Results
Statements of income
|
March 31, 2016
|
March 31, 2015
|
|
|
|
($, 000’s, except per share and share count)
|
|
|
|
|
|
Financial revenue
|
|
|
Interest and fee income
|
37,386
|
39,002
|
Financial expenses
|
|
|
Interest expenses
|
9,823
|
10,415
|
|
|
|
Net financial income before provision for impairment
|
27,563
|
28,587
|
|
|
|
Provision for impairment and credit losses
|
11,672
|
11,505
|
Net financial income before operating expenses
|
15,891
|
17,082
|
|
|
|
Operating expenses
|
10,191
|
8,925
|
|
|
|
Income before taxes
|
5,700
|
8,157
|
Income tax expense
|
1,155
|
2,229
|
Net income
|
4,545
|
5,928
|
Weighted average number of outstanding shares at period end
|
21,335,270
|
21,125,291
|
Fully Diluted Basis
|
21,477,730
|
21,651,691
|
Net earnings per common share basic
diluted
|
$0.213
$0.212
|
$0.281
$0.274
|
Key Period-to-Date Performance Measurement
Please note the Company results as reported against the specific
objectives press released on June 11, 2015.
-
1.Achieve Loan Originations between
$100M - $120M
Loan Originations for the year reached $88.44M. Achieved 88% of
the target. Target missed.
-
2.Achieve Finance Receivables
between $225M - $260M
Finance Receivables for the year ended at $223.22M. Target
missed.
-
3.Achieve revenue of
between $38M - $42M
Revenue for the year totalled $37.39M. Achieved 98% of the
target. Target missed.
-
4.Achieve Credit Loss Rate between
4.50% - 4.75%
Annualized Credit Loss Rate of 5.17%. Target
missed.
-
5.Achieve earnings per share of
$0.30 - $0.35.
Earnings per share for the year are $0.213. Target
missed.
Fourth Quarter Results
Net Income in the quarter decreased to $0.90M compared to $2.17M in the prior year, a 59% decrease.
EPS decreased to $0.042 from $0.103 in the prior year. Rifco is reporting its 28th
consecutive profitable quarter.
Rifco had Loan Originations in the quarter of $20.11M, compared to $21.76M in the prior year, an 8%
decrease. This is also a decrease of 8% from originations of $21.98M in the prior quarter.
The Finance Receivables decreased by 3% to $223.22M from $230.05M in the preceding
quarter.
Financial Revenue in the quarter was $8.73M, a 14% decrease over $10.10M in the comparable period.
Financial Revenue decreased by 5% compared to the prior quarter on a $6.83M reduction in Finance Receivables.
Interest Expense in the quarter was $2.35M compared to $2.69M in the prior year and $2.43M in the
prior quarter. The annual Interest Expense decreased to 4.22% from 4.51% as a percentage of average Finance Receivables in the
prior year.
The Average Interest Expense as a percentage of average debt is also continuing to decline. The
Average Interest Expense in the quarter decreased to 4.57% from 4.65% in the comparable period.
The Average (12 month rolling) Credit Loss Rate increased to 5.17% from 3.95% in the prior year.
The Annualized Credit Loss Rate for the quarter was 6.32% an increase from 4.02% in the comparable quarter.
Credit Losses, including costs and net of recoveries, are $3.55M in the quarter, an increase from
$2.50M over the comparable quarter. Credit Losses are currently higher than the Company’s target loss range and management believes
that in the upcoming quarters the Credit Loss Rate will be below the level reported in Q4.
The Delinquency Rate has reduced to 5.64% from 5.86% in the preceding quarter but management has
observed improving trends in early stage Delinquency (11-30 days past due). A reduction in early stage Delinquency may be a leading indicator of a future reduction in the reported Delinquency (over 30
days past due) and the future Credit Loss Rate. In Q4, the Company saw a 22% reduction over the prior quarter.
Operating Expenses decreased to $2.39M from $2.55M compared to the prior
year. The decrease is primarily related to reductions in training and recruitment costs and sales and
marketing expenses.
The Operating Expenses also reduced by 11% from the $2.69M in the prior quarter. The Company is working to reduce operating expenses in all areas while maintaining operating efficiency.
Rifco Fourth Quarter Comparative Results
Statements of income
|
March 31, 2016
|
March 31, 2015
|
|
|
|
|
($, 000’s, except per share and share count)
|
|
|
|
|
|
|
|
Financial revenue
|
|
|
|
Interest and fee income
|
8,730
|
|
10,098
|
Financial expenses
|
|
|
|
Interest expenses
|
2,347
|
|
2,692
|
|
|
|
|
Net financial income before provision for impairment
|
6,383
|
|
7,406
|
|
|
|
|
Provision for impairment and credit losses
|
2,656
|
|
2,078
|
Net financial income before operating expenses
|
3,727
|
|
5,328
|
|
|
|
|
Operating expenses
|
2,387
|
|
2,547
|
|
|
|
|
Income before taxes
|
1,340
|
|
2,781
|
Income tax expense
|
439
|
|
610
|
Net income
|
901
|
|
2,171
|
Net earnings per common share basic
diluted
|
$0.042
$0.042
|
|
$0.103
$0.101
|
Rifco today filed its annual financial statements and management discussion and analysis for the
year ended March 31, 2016. The previously released financial statements and the related management’s discussion and analysis can be
viewed at www.sedar.com or at www.rifco.net.
Rifco’s Annual Shareholders meeting will be held on September 7, 2016 at 3:00PM at the Radisson
Hotel, 6500 - 67th Street, Red Deer, Alberta. We look forward to meeting with our shareholders and interested parties to detail the
2016 results and share our vision for the future.
About Rifco
Rifco Inc. operates through its wholly owned subsidiary Rifco National Auto Finance Corporation in
order to provide automobile loans through its dealership network across Canada.
Rifco National Auto Finance provides consumers with financing options on new and used vehicles.
Rifco specializes in building long-term partnerships with dealers by investing time in personalized services through
dedicated account representatives. Rifco’s quick credit decisions, common sense lending, and expedited funding processes give
its dealers better financing options and more closed deals. Rifco’s most successful partnerships result in Fast Forward 500
Club status for its loyal dealerships.
Rifco is committed to continuing growth. Key strategies for achieving this growth include the
expansion of its automobile dealer base and excellence in credit and collections processes.
The common shares of Rifco Inc. are traded on the TSX Venture Exchange under the symbol “RFC”. There are 21.35 million shares (basic)
outstanding and 22.73 million (fully diluted) shares.
CONTACT:
Rifco Inc.
Lance A. Kadatz
Vice President and Chief Financial Officer
Telephone: 1-403-314-1288 Ext 7007
Fax: 1-403-314-1132
Email: kadatz@rifco.net
Website: www.rifco.net
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is
defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this
release.
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