Fintech Group AG (DE:FTKG) announced a solid set of H1 results and FY17 guidance was re-affirmed. While EBITDA slipped by 6% to €13.0m, this reflected a €1.8m provision reversal in H116, and hence the underlying growth was 9%. Brokerage customers grew by 11% over H116, and transactions rose by 10%, while three new B2B projects have been delivered that will contribute in H2. Additionally, the collateralised credit book jumped by 42% over the six months to €187m. Consequently, management anticipates a strong H2. Despite being the fastest growing major broking business in Europe, the shares continue to trade at a discount to the sector.
Investment case: Combining a bank with technology
A key differentiator is that FTG owns both a bank and a software technology business, which uniquely gives it exposure to the bulk of the value chain. Management’s goal is to grow the business both organically and through acquisitions so that it generates €150m of annual revenues in the mid-term along with EBITDA of €50m and net profit of €30m.
Additionally, FTG is a play on a strengthening economy and subsequent rising interest rate environment as the group stands to benefit from interest income on its extensive customer deposits. With the ECB deposit rate at minus 0.4%, we believe there is more scope for rises than further declines.
H117 results: Net profit nearly trebles to €7.0m
Group revenue grew by 2.5% to €49.6m while EBITDA fell by 5.6% to €13.0m. However, there was a €1.8m provision reversal in the prior period, which related to a legal case that FTG won, and hence underlying EBITDA rose by 8.5% to €13.0m. 23k B2C clients were added during the period, taking the total to 235k.
Three new B2B projects were delivered, including a project for a large multinational bank that is shifting its euro deposit collection business from London to Frankfurt, due to Brexit, and is adopting FTG’s technology platform. FTG is confident it will win further business as a result of Brexit. Net profit nearly trebled to €7.0m, which helped to boost the group’s equity ratio to 7.0% from 5.9% a year earlier.