(TheNewswire)
Red Deer, Alberta / TheNewswire / February 15, 2018 - Rifco
Inc. (TSX-V: RFC ) the largest publicly-traded alternative auto finance
company in Canada, is pleased to announce its consolidated third quarter results for the period ended December 31,
2017.
Third Quarter Highlights
Rifco is dedicated to building the best auto finance company in Canada. The Company is committed to
achieving this goal through improved data and analytics and industry-leading software and people.
-Shareholder value continues to grow as book value per share increases to $1.58 from $1.51 in the comparable
quarter
-Financial revenue increased 7.4% to $9.0M from $8.4M in the comparable quarter
-Financial revenue has increased in each of the last 3 quarters
-Net Portfolio Yield has increased by 52 basis points to 15.47% from 14.95% in the preceding quarter
-Finance Receivables increased by $10.9M to $236.0M from $225.1M in the comparable quarter
-Finance Receivables have increased in each of the last 5 quarters
-Rifco continued to invest in innovative products, such as “Splash Auto Finance by Rifco”, to increase its
volume of direct auto loans
-Rifco solidified its commitment to improve credit decisioning through the utilization of industry leading data
and analytics with the hire of its new Chief Credit Officer
-The Company’s recent agreement with defi SOLUTIONS for loan origination and analytics platforms will enable
improved credit modelling, consistent and efficient loan decisioning, and leading edge data analysis
-Rifco recently completed training with an industry-leading consultant designed to significantly improve
front-line collection results
Quarterly Results
Total financial revenue increased by 7.4% to $9.0M from $8.4M in the comparable quarter as a result of
increases in both Net Portfolio Yield and Loan Receivables. Total financial revenue increased 4.5% from $8.6M in the
preceding quarter. Total quarterly financial revenue is now at its highest level since the third quarter of fiscal year 2016 and
has now increased in each of the past three quarters.
Net Portfolio Yield has increased by 52 basis points to 15.47% from 14.95% in the preceding quarter. Net
Portfolio Yield increased 20 basis points from 15.27% in the comparable quarter. Net Portfolio Yield has increased in each of
the past three quarters.
The Company posted Originations of $24.9M, a 4.5% decrease from $26.1M in the comparable quarter and a 10.5%
decrease from $27.8M in the preceding quarter. Originations are impacted by management’s decision to give greater
consideration to the preservation and improvement of profit margins. Originations of Loan Receivables have been appreciably
higher in each of the seven quarters since the recent low of $20.1M originated in the fourth quarter of fiscal year 2016.
Originations were affected by growing new dealer enrollment and dealer graduations within Rifco’s FF500 club dealer loyalty
program.
Average Loan Receivables during the quarter increased 6.1% to $232.5M from $219.2M in the comparable quarter
partly as a result of the increased originations. Average Loan Receivables increased 0.9% from $230.4M in the preceding
quarter. Average Loan Receivables have now increased for the fifth quarter in row, from a recent low of $218.2M in the second
quarter of fiscal year 2017 to $232.5M in the current quarter.
The Company is reporting Adjusted Net Income of $0.1M, a decrease of $0.4M from the comparable quarter’s $0.5M
and an increase of $0.2M from a loss of $0.1M in the preceding quarter. Adjusted Net Income removes the effect of the
non-cash provisions on Net Income. Adjusted Net Income accounts for the actual Credit Losses incurred in the period and is
the measure that management uses to evaluate the performance of Loan Receivables in the period as it removes the volatility
associated with the effect of estimates and assumptions. Management believes that the usefulness of Adjusted Net Income will
increase with the introduction of IFRS 9 in the next fiscal year.
The Company is reporting Net Income of $0.37M, a decrease of 41.7% from the comparable quarter Net Income of
$0.63M and an increase of 54.6% from $0.24M in the preceding quarter.
The Delinquency Rate increased by 104 basis points to 6.01% from 4.97% in the comparable quarter and an
increase of 4 basis points from 5.97% in the preceding quarter. The Delinquency Rate remains higher than the Company’s typical
seasonal ranges of between 4.00% and 5.00%.
The annualized Credit Loss Rate increased by 63 basis points to 6.03% from 5.40% in the comparable quarter, and
decreased by 31 basis points from 6.34% in the prior quarter.
Operating Expenses increased by 15.3% to $2.7M from $2.4M in the comparable quarter and an increase of 5.2%
from $2.6M in the prior quarter. The Operating Expense Ratio increased by 38 basis points to 4.72% compared to 4.34% in the
comparable quarter. The Operating Expense Ratio increased 19 basis points from 4.53% in the preceding quarter. The Company
continued to invest in work aimed at reducing Credit Losses and the Delinquency Rate, including a recent project of intensive loss
prevention training, led by industry leading consultants. Also contributing to the increase in Operating Expenses were
additions to the sales force, nonrecurring work related to the management initiated and voluntary review of GST-HST remittances,
and startup promotional costs for “Splash Auto Finance by Rifco”.
Modified Funds Flow from Operations represents implicit cash value to shareholders on a periodic basis.
Modified Funds Flow from Operations decreased to $1.3M from $1.8M in the comparable quarter. Modified Funds Flow from
Operations of $0.06 per share in the current quarter, is a decrease from $0.08 per share in the comparable period. Modified Funds
Flow per share increased by $0.01 from $0.05 per share in the preceding quarter.
Net Fair Value Per Share (NFVS) represents the estimated net worth of the Company when the assets and
liabilities of the Company are measured at fair value and the cash flow streams over the full life of the assets. The NFVS
increased to $3.63 from $3.59 when compared to the same quarter in the prior year. The increase is attributable to fair value asset
increase of $6.6M offset by an increase in the fair value of liabilities of $5.9M in the comparable quarter. The difference between
the fair value assets and liabilities reflects value creation beyond just Book Value Per Share.
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 increasing Net Portfolio Yields.
For some time, the company has been experimenting with a deviation from its traditional dealer based indirect
loan origination process. The experimentation involved consumer focused originations (direct to consumer). In the
process, Rifco utilizes a variety of referral and advertising techniques to acquire consumer loan applications. The Company
interacts directly with the consumer in order to complete the credit application and credit adjudication processes. Once the
application is approved, the Company looks to one of its trusted dealers in order to fulfil the vehicle delivery process to the
consumer. In order to assist in the promotion of this loan application channel, the Company has branded the process “Splash
Auto Finance by Rifco”. The Company is optimistic enough to warrant measured expenditures in the Splash channel.
However, at this early stage, the quantity of loans originated through Splash is not yet material.
As part of the continual improvement of the Company, management has completed, or is in the process of
completing, several projects including the hiring of a new Chief Credit Officer, developing a dedicated data analytics team,
implementing a new loan origination system and rolling out intensive loss prevention training, led by industry leading consultants.
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 $500M in annual loan
Originations.
Rifco Quarterly Comparative Results
Statements of Income
|
Three months ended December 31
|
Nine months ended December 31
|
|
2017
|
2016
|
2017
|
2016
|
($,000’s, except per share)
|
|
|
|
|
|
|
|
|
|
Financial revenue
|
|
|
|
|
Interest and fee income
|
8,991
|
8,369
|
25,956
|
25,254
|
Financial expenses
|
|
|
|
|
Interest expenses
|
2,508
|
2,220
|
7,111
|
6,839
|
|
|
|
|
|
Net financial income before Impairment and Credit Losses
|
6,483
|
6,149
|
18,845
|
18,415
|
Total Credit Losses
|
3,505
|
2,958
|
10,134
|
8,374
|
Adjusted Net Financial Income Before Operating Expenses
|
2,978
|
3,191
|
8,711
|
10,041
|
|
|
|
|
|
Operating expenses
|
2,743
|
2,378
|
8,122
|
7,088
|
|
|
|
|
|
Adjusted Income Before Taxes
|
235
|
813
|
589
|
2,953
|
Income tax expense
|
166
|
277
|
232
|
943
|
Adjusted Total Comprehensive Income
|
69
|
536
|
357
|
2,010
|
Decrease in Provision for Impairment
|
(299)
|
(95)
|
(43)
|
(156)
|
Total comprehensive income
|
368
|
631
|
400
|
2,166
|
Weighted average number of shares outstanding
|
21,597
|
21,574
|
21,597
|
21,502
|
Weighted average number of shares outstanding for use in determining diluted income per share
|
21,601
|
21,587
|
21,603
|
21,536
|
Adjusted Net Income Per Common Share
Basic
Diluted
|
$0.003
$0.003
|
$0.025
$0.025
|
$0.017
$0.017
|
$0.093
$0.093
|
Net income per common share
Basic
Diluted
|
$0.017
$0.017
|
$0.029
$0.029
|
$0.019
$0.019
|
$0.101
$0.101
|
Key Period-to-Date Performance as Measured Against Annual
Targets
Please note the Company results as reported against the specific fiscal year 2018 objectives
released with the 2017 Annual Report:
-
1. Achieve Loan Originations between $110M - $130M
Loan Originations for the first nine months reached $82.1M. Progress to target
75%.
-
2. Achieve Finance Receivables between $240M - $260M
Finance Receivables at December 31, 2017 are $236.0M. 98% of
target.
-
3. Achieve financial revenue of between $35M -
$37M
Revenue for the first nine months reached $26.0M. Progress to target
74%.
-
4. Achieve Credit Loss Rate between 4.50% - 5.00%
Year to date annualized Credit Loss Rate of 5.89%. Behind target.
-
5. Achieve earnings per share of $0.10 - $0.15
Earnings per share for the first nine months are $0.02. $0.08 from
target.
Rifco, today, filed its quarterly financial statements and management discussion and analysis for the period
ended December 31, 2017. 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 .
Non-IFRS Measures
Throughout this Press Release, management uses terms and ratios which do not have a standardized meaning under
IFRS and are unlikely to be comparable to similar measures presented by other issuers. Management believes that some non-IFRS
measures are useful for investors to use to evaluate the performance of the Company without certain IFRS requirements that some
investors may consider to be unrelated to the underlying economic performance of the Company. Specifically, management presents an
Adjusted Net Income measure, along with related Adjusted sub-totals and ratios. These measures do not have any standardized
meaning under IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. A full description
of these measures can be found in the management discussion and analysis that accompany the financial statements for the period
ended December 31, 2017.
About Rifco
Rifco Inc. is focused on being the best alternative auto finance through its wholly owned subsidiary Rifco
National Auto Finance Corporation. Our mission is to help deserving Canadians own automobiles. Rifco is Canada’s
largest publicly traded alternative auto finance company.
Rifco seeks to create sustainable long-term competitive advantages through personalized partnerships with
dealers, innovative products, the use of industry-leading data and analytics, and leading collections practices. Rifco’s
corporate culture fosters employees that are highly engaged, innovative, and performance driven.
Rifco is committed to creating value for all stakeholders through profitable growth and predictable credit
performance, while pursuing its long-term vision of $500M in annual loan Originations.
The common shares of Rifco Inc. are traded on the
TSX Venture Exchange under the symbol “RFC”. There are 21.60 million shares (basic) outstanding and 23.23 million (fully diluted)
shares.
CONTACT:
Rifco Inc.
Warren Van Orman
Vice President and Chief Financial Officer
Telephone: 1-403-314-1288 Ext 7007
Fax: 1-403-314-1132
Email: vanorman@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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