CEO Tarmo Sild was interviewed by BondGuide Magazine:
BondGuide : The last two years 2020 and 2021 were certainly not ordinary years. How did IuteCredit experience these two Corona years?
Sild: Let me be selfish for a moment: I love that we make money. Big changes are taking place on the planet in how we live here and I think we are part of it. We managed to grow our business despite the pandemic and all the pressures. We create and, in return, have benefited from the increasing social acceptance of digitization in the credit and payments industry. We ended the 2020 financial year above the 2019 figures. At the end of 2020, we had more than 130,000 high-performing loan customers in four countries and achieved a net profit of over EUR 5 million. Most gratifying, however, was the vote of confidence from our investors, which enabled us to use a further EUR 10 million from the existing EUR 40 million bond for future growth.
BondGuide : And the look ahead?
Sild: In 2021 we will see the trend of irreversible and constantly accelerating digitization. In the second quarter of 2021, we achieved more than 6% of total sales with various services related to payments, cards and cash transactions via the ATMs developed by IuteCredit, which can be easily and quickly accessed with a smartphone. And all without the need for a debit or credit card. What's more, more than half of all customer signatures in the second quarter were smartphone-based, either with one-time passwords or biometric. The MyIute app has already been downloaded by more than 80,000 people, even though it started from scratch in the first quarter. And to top it off, our customers continued to take out and repay more loans. Thanks to digitization, we earn more money with economies of scale, which are reflected in an improved sales / OPEX ratio. Consolidated assets increased from 116 to 123 million euros as the net loan portfolio grew from 81 to 88 million euros. There was similar growth in the gross loan portfolio. In contrast, liabilities to investors only rose from EUR 94 to 98 million.
BondGuide : In order to finance the growth, IuteCredit had issued a bond with a four-year term in 2019, which is also listed and traded here in Germany. Why a 'short-term' bond with a term of just four years?
Sild: Four years is not short, but I agree that five years is longer. Back in 2019, four years were long enough to make about four full portfolio reallocations as the average life of our product was about one year. By 2021, we've shown that IuteBond is a good addition to any fixed income portfolio or mixed capital portfolio as it provides stability and predictability despite the storms everyone has seen in the markets. The next issue should therefore be longer, for example five years, especially since the average term of our customer loans has also been extended to over 20 months.
BondGuide : Is the planned new bond just about refinancing the existing bond, reducing borrowing costs or providing additional growth capital - or a mixture of both?
Sild: We do not refinance existing bonds. It's a good asset that doesn't need to be withdrawn prematurely as long as it still has a useful life. Let's let the investors benefit from it. Of course we are watching the evolution of the aftermarket returns, which are around 10% - but that's not the issue either. The point is that we want to expand our credit and product portfolio, the demand is there. This demand arises from the growing customer base and from extending loan terms, both of which lead to an increase in the loan portfolio. This has to be financed. An amount of EUR 50 million would mean around 50,000 additional customers for us. This is what we want to achieve as the next milestone.