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Wonga Group full year results for the 12 months to December 31, 2015

Transformation progressing to plan and UK regulatory authorisation secured

Published 4th May 2016

Wonga Group full year results for the 12 months to December 31, 2015

Financial highlights*

  • Revenues declined to £77.3m (2014: £217.2m), driven by a reduction in UK consumer lending volumes following the implementation of stricter lending criteria at the end of 2014 and the introduction of the regulatory price cap.
  • Operating costs fell to £125.5m (2014: £151.4m), in line with a major restructuring programme to reduce costs.  
  • Pre-tax loss of £80.2m (2014: £38.1m); post-tax loss of £76.5m (2014: £43.6m).
  • Principal default rate** down from 7.4% to 4.4% at Group level and from 6.6% to 2.8% in the UK, reflecting strengthened lending criteria and a focus on positive customer outcomes.
  • Post the year-end, secured €30m debt facility to fund working capital and loan book growth.

Operating highlights

  • Embedded good governance across the Group, including;
    • Strengthened Group and UK Boards with appointment of three Independent Directors.
    • Completed recruitment of Group leadership team, including appointment of General Counsel, Chief Technology Officer and Group HR Director.
    • Appointment of new leadership in South Africa and Spain.
    • Overhauled the Group’s approach to credit risk and further strengthened the risk decision engine and lending criteria, ensuring all lending is responsible and affordable.
    • Strong momentum in developing Wonga’s product offer across the Group:
      • Launched a new 3 month Flexi Loan in the UK, the result of extensive customer research and feedback.
      • Launched a longer term product in Poland with plans to roll out in South Africa this year.
      • Strong growth in BillPay driven by broader product offer.
      • Improved relationships with key stakeholders across the Group, including UK debt charities, and launched financial education programme in Poland.
      • Relaunched marketing with ‘Credit for the real world’ campaign, designed to ensure advertising accesses the right type of customer.
      • BillPay became the first payments business in Germany to receive an operating licence from the financial regulator, BaFin.
      • Post year-end, granted UK authorisation by the Financial Conduct Authority on 18 January 2016.

Andy Haste, Group Chairman of Wonga Group, said:

“We have made real progress towards creating a sustainable business with an accepted place in financial services. These results are in line with the plans we put together when joining Wonga. They reflect a full year’s impact of the stricter lending criteria we implemented in late 2014, the price cap introduced by the UK regulator in early 2015, and the necessary investment we have made to transform the business. We expect 2016 to mark a turning point in our financial performance.

“We continued to focus on changing our culture to ensure customers are at the heart of our business, while strengthening our financial position. We have embedded good governance and brought in a new, experienced leadership team, overhauled our approach to credit risk, continued to improve our relationships with key stakeholders and launched new products to meet customer demand. We’re pleased with the progress we have made and were delighted to be granted authorisation by the Financial Conduct Authority earlier this year.

“Moving into 2016, our plans included achieving UK authorisation, raising debt funding and starting to roll out new products. Having achieved these, and with further funding planned for later this year, we’re now in a position to move back into growth in 2016 and expect to return to profit in 2017.

“There is still a great deal to do but we are making real progress and I would like to thank all of my colleagues for their hard work and commitment and our investors for their continued support. We are looking forward to building on the solid foundations we have put in place.”

Paul Miles, Wonga Group CFO, said:

“We said last year that our 2015 results would reflect what would be another tough year in Wonga’s transformation and the numbers are in line with our plans. Group revenues declined by 64% to £77.3m, driven principally by a significant but expected reduction in lending volumes globally, down from £0.9bn in 2014 to £0.4bn in 2015.

“In the UK, the reduction reflects a full year’s impact of the stricter lending criteria we implemented in late 2014 and the price cap introduced by the UK regulator in early 2015. We have also seen a decline in lending volumes in South Africa following the introduction of new affordability criteria by the regulator, which impacted all credit providers. As an early adopter of these changes, our South African business is compliant.

“As a result of changes to our lending practices, and in line with our commitment to put customers at the heart of what we do, our Group principal default rate fell to 4.4% in 2015 from 7.4% a year earlier. In the UK, the rate fell from 6.6% to 2.8% over the same period.

“Supporting our drive towards a sustainable business model, we launched a major restructuring in February 2015 to remove £25m of costs over two years. We achieved that target ahead of schedule and will continue to look for opportunities to find efficiencies while investing to deliver good customer outcomes.

“2015 was a year of transition for Wonga. In 2016 we expect revenues to increase significantly, driven by continued growth in Poland and Germany and a return to growth in the UK and South Africa. While this year as a whole will again be loss-making, it will be considerably less so than in 2015.

“Following the end of the financial year we secured a €30m debt facility, a major vote of confidence in the business and an endorsement of our future plans. This will give us the resources to complete the transformation and we expect to raise further debt in 2016 to support the growth of our loan book.” 

Key financial results*

 20142015% Change
Revenues £217.2m £77.3m -64%
Operating costs £151.4m £125.5m -17%
Pre-tax profit/(loss) (£38.1m) (£80.2m) +52%
Post-tax profit/(loss) (£43.6m) (£76.5m) +43%
Group principal default rate 7.4% 4.4% -40%
UK principal default rate 6.6% 2.8% -58%

* Prior year numbers have been restated to reflect the reclassification of an administrative expense. Operating costs and profit (loss) figures from 2014 are therefore different to those stated at the time by £0.8m.

** Principal default rate is defined as the 180 days arrears rate of principal not repaid.

Notes to editors

Wonga Group is an international financial services business with a vision to pioneer and deliver smart financial products for under-served consumers and to put customers at the centre of everything it does.

The Group offers consumer finance products in the UK, Canada, Poland, South Africa, and Spain under the Wonga brand and payment and credit services to retailers and consumers in Germany, Austria, Switzerland and the Netherlands through BillPay, its Berlin-based ecommerce business.

In the UK, Wonga currently offers two products, a short term loan and a 3 month Flexi Loan. All applicants are credit checked and need to pass stringent lending and affordability criteria prior to approval, in line with Wonga’s commitment to being a responsible financial services provider. The UK business is regulated by the Financial Conduct Authority and is authorised under the Consumer Credit Act.

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