Coface reports €28.5m net income for the third quarter and launches
a share buyback programme for €15m
Paris, 26 October 2020 – 17:35
Coface reports €28.5m net income for the third quarter
and launches a share buyback programme for €15m*
- Turnover first nine months: €1,082m, down -0.9% at
constant FX and perimeter due to client activities, and down -2.2%
in Q3-2020
- Client retention and new business at record levels, with a
positive net production of €36.9m
- Positive pricing dynamics confirmed (+1%) in a continued
uncertain environment
- Slowdown in client activities – as anticipated
- 9M-2020 net loss ratio up by 10.1 ppts at 55.2%; Net
combined ratio increased by 8.5 points at 85.3%
- Q3-2020 net loss ratio at 50.0%, up 2.8 ppts vs Q3-19 but down
7.4 ppts vs H1-2020, reflecting low loss activity
- 9M 2020 net cost ratio improved by 1.6 ppt at 30.1%, reflecting
continued cost controls
- Net combined ratio at 77.4% for Q3-2020, benefitting by 6.8
ppts from the temporary impact of government plans
- In Q3-2020, government schemes improved net cost ratio by 1.1
ppt and the net loss ratio by 5.7 ppts. Nevertheless, the impact on
pre-tax profit before tax is negative by -€1m in Q3-2020, and a
positive €7m year to date
- Net income (group share) of €52.4m, of which €28.5m in
Q3-2020
- As expected, Q3-2020 profit benefited from a non-recurring
positive impact of €8.9m (badwill1) related to the acquisition of
Coface GK in Norway
- Annualised RoATE2 of 4.1%
- Strong balance sheet and positive operational KPIs
allow to launch share buyback programme for a maximum amount of €15
million
Unless otherwise stated, evolutions are expressed
by comparison with the results as at 30 September 2019.* Launching
a share buyback programme for a maximum amount of €15m or 2.4
million shares1 Badwill is based on preliminary estimates and could
vary pending final analysis2 RoATE = Average return on equity
Xavier Durand, Coface’s Chief Executive
Officer, commented:
“The coronavirus pandemic continues to create a
high level of uncertainty across the global economy. In this
context, Coface’s teams have continued to work closely with their
clients to help them navigate this uncertain environment. Coface
recorded very good operating results in the third quarter, again
demonstrating its resilience and the relevance of its Build to Lead
strategic plan.During the quarter, Coface signed its second
acquisition in recent years, and welcomed our new teams at Coface
GK in Norway. As previously announced, this integration has
resulted in a positive purchase gap of €8.9m.Strengthened by good
operating ratios and a solid balance sheet, Coface is launching a
share buyback programme, for a maximum amount of €15 million.”
Key figures at 30 September 2020
The Board of Directors
of COFACE SA examined the consolidated financial statements at 30
September 2020 (non-audited figures) at its meeting of 26 October
2020. The Audit Committee at its meeting on 23 October 2020 also
previously reviewed them.
Income statement items in
€m |
9M-2019 |
9M-2020 |
% |
% ex. FX* |
Gross earned premiums |
917.9 |
897.2 |
(2.3)% |
(1.1)% |
Services
revenue |
185.6 |
185.3 |
(0.2)% |
+0.0% |
REVENUE |
1,103.4 |
1,082.4 |
(1.9)% |
(0.9)% |
UNDERWRITING INCOME/LOSS AFTER REINSURANCE |
145.7 |
74.6 |
(48.8)% |
(49.8)% |
Investment
income, net of management expenses |
28.4 |
23.5 |
(17.4)% |
(10.3)% |
CURRENT OPERATING INCOME |
174.1 |
98.1 |
(43.7)% |
(43.2)% |
Other
operating income / expenses |
0.1 |
(2.4) |
N.A |
N.A |
OPERATING INCOME |
174.2 |
95.7 |
(45.1)% |
(44.6)% |
NET INCOME |
117.3 |
52.4 |
(55.3)% |
(55.2)% |
|
|
|
|
|
Key ratios |
9M-2019 |
9M-2020 |
% |
% ex. FX* |
Loss ratio net of reinsurance |
45.1% |
55.2% |
+10.1 |
ppts. |
Cost ratio net of reinsurance |
31.7% |
30.1% |
(1.6) |
ppt. |
COMBINED RATIO NET OF REINSURANCE |
76.8% |
85.3% |
+8.5 |
ppts. |
|
|
|
|
|
Balance sheet items in
€m |
2019 |
9M-2020 |
% |
% ex. FX* |
Total Equity (group share) |
1,924.5 |
1,945.9 |
+1.1% |
|
* Also excludes scope impact
- Turnover
Coface recorded consolidated sales of €1,082.4m
during the first nine months of the year, down by -0.9% at constant
FX and perimeter compared to September 2019. On a reported basis
(at current FX and perimeter), turnover was down by -1.9%.
Revenues from insurance activities (including
bonding and Single Risk) declined by -1.1% at constant FX and
perimeter compared to 9M-2019 (down by -2.3% at current FX and
perimeter).
Client retention rates are high in most regions
and reached a new record level of 92.7% for the Group. New business
stood at €114m, a rise of €18m compared to 9M-2019.
Growth in client activities had a negative
impact of -0.7% on the first nine months of the year. This
contribution became negative, in line with the expectations of an
economic slowdown due to the coronavirus epidemic. The rise in
pricing of 1%, confirms the upward reversal of the cycle that began
in the second quarter.
Turnover from other activities (factoring and
services) was stable compared to 9M-2019. The growth in services –
and notably in information services (up by 10%), compensated for
the fall in factoring revenues in Germany.
Total revenue - cumulated - in
€m |
9M-2019 |
9M-2020 |
% |
% ex. FX1 |
Northern Europe |
232.8 |
221.1 |
(5.0)% |
(6.0)% |
Western Europe |
219.4 |
219.8 |
+0.2% |
(0.0)% |
Central & Eastern Europe |
110.1 |
107.0 |
(2.9)% |
(3.6)% |
Mediterranean & Africa |
288.7 |
291.8 |
+1.1% |
+2.1% |
North America |
102.7 |
102.3 |
(0.4)% |
(0.1)% |
Latin America |
61.6 |
50.8 |
(17.5)% |
+2.0% |
Asia
Pacific |
88.2 |
89.5 |
+1.5% |
+1.3% |
Total Group |
1,103.4 |
1,082.3 |
(1.9)% |
(0.9)% |
In the Northern Europe region, revenues declined
by -5.0% and by -6.0% at constant FX. Credit insurance was down
-4.0%, affected by the contraction of client activities partially
offset by a good level of retention as well as an upturn in new
production.
In Western Europe, turnover grew by +0.2% and
was stable at constant FX, mainly due to record client retention
and growing new business in credit insurance.
In Central and Eastern Europe, turnover was down
by -2.9% and by -3.6% at constant FX, mainly due to changing trend
in credit insurance which declined as a result of lower customer
activity.
In the Mediterranean and Africa, a region driven
by Italy and Spain, turnover grew by 1.1% and by 2.1% at constant
FX, thanks to positive sales and a high level of client
retention.
In North America, turnover fell slightly by -0.4% on a reported
basis and by -0.1% at constant FX. Client retention improved and is
now close to the group average while new business is experiencing
further growth.
Emerging markets recorded light growth at
constant FX and perimeter. Turnover for the Asia-Pacific region was
up by +1.5% at current FX and by +1.3% at constant FX. Client
activity declined and the region is showing improved sales
performance.
In Latin America, turnover fell by -17.5% at
current FX, but rose by +2.0% at constant FX. These figures are
affected by the existence of local policies expressed in
international currencies.
- Result
-
Combined ratio
The combined ratio, net of reinsurance, stood at
85.3% for the first nine months of the year (a rise of
8.5 ppts over one year). The combined ratio, net of
reinsurance, for Q3-2020 was at 77.4%, an improvement of
0.7 ppt compared to the third quarter of 2019. Government
plans had a temporary positive impact of 6.8 ppts on the combined
ratio for the quarter.
(i) Loss ratio
The gross loss ratio was 57.6% for the first
nine months of 2020, representing a rise of 15.0 ppts compared to
the previous year. The gross loss ratio for Q3-2020 was 54.8%,
showing a good improvement compared to the previous quarter (62.8%
for Q2-2020), as was shown in all regions. This improvement
reflects the risk management measures taken by Coface at the
beginning of the crisis, the mechanical drop in exposure during the
confinement period and the significant support received by
companies from most governments.
The Group’s reserving policy remains unchanged.
Strict management of past claims has enabled the Group to record
33.5 ppts of recoveries during the previous 9 months – a level
above the historical average. Claims frequency was down and Q3-2020
was marked by an almost total absence of major claims.
9M-2020 net loss ratio was 55.2%, showing a
clear rise compared to 9M-2019 (45.1%).
(ii) Cost ratio
Coface has continued with its policy of strict
cost controls and investment over the long term. During Q3-2020,
costs fell by -5.4% at current FX and by -2.9% at constant FX and
perimeter. This reduction is due to continued efforts on all
variable costs (travel, communications, and consultants).
The cost ratio, net of reinsurance, was 30.1%
for the nine months, an improvement of 1.6 ppt over one year,
thanks to cost control and a high level of reinsurance commissions
in line with increased cession (government plans in
particular).
-
Financial result
Net financial income for the nine months was
€23.5m, of which €0.6m of net realised capital gains and a negative
FX effect of -€2.0m. This figure is clearly down from the previous
year, which benefited from a positive FX gain of €4m million
recorded in 9M-2019.
Despite an environment still marked by
historically low interest rates, the sharp reduction in the
proportion of risky assets resulted in a fall in the recurring
portfolio yield (i.e. excluding capital gains, depreciation and
currency effects) which recorded €25.8m (compared to €32.6m for 9M
2019). The accounting yield2, excluding capital gains was 0.9% in
2020, down from the previous year (1.2%).
During recent weeks, Coface has been gradually
reducing the liquidity portion of the portfolio, down by 7 ppts but
still above its long-term objective.
-
Operating income and net income
Operating income since the beginning of the year
was €98.1m, down by -43.7% compared to the previous year. It
benefitted by €7m from the positive impact of government schemes.
In Q3-2020, this impact was negative by -€1m.
The effective tax rate rose to 44%, compared to
28% for 9M-2019.
In total, net income (group share) was €52.4m,
of which €28.5m was in Q3-2020. Net income benefited from
non-recurring positive impact (badwill3) related to the acquisition
of Coface GK in Norway for an amount of €8.9m, in line with
expectations.
- Shareholders' equity
At 30 September 2020, total shareholders' equity
amounted to €1,946.2m, up €21.5m or +1.1% (vs €1,924.7m at
31 December 2019).
This change is mainly due to the positive net
income of €52.4m which is partially offset by negative currency
adjustments (-€24.2m).
The annualised return on average tangible equity
(RoATE) stood at 4.1% as of 30 September 2020.
- Outlook
The third quarter was marked by a resurgence of
the COVID-19 pandemic, as well as travel restriction measures
implemented by many countries aimed at containing the spread of the
coronavirus.
The rapid phase of economic recovery that
followed the end of lockdown is now over. Nevertheless, the
unprecedented level of support for the economy from numerous
central banks and governments has so far prevented an increase in
business insolvencies.
Coface’s teams are continuing to work closely
with clients to help them adapt their levels of risk. This focus on
customer service has made it possible to achieve positive net
production, despite the pricing adjustment made necessary by the
current circumstances.
To date, most of the governmental support
schemes implemented in 2020 will continue until the end of the
year.
Given its strong performance on the majority of
its operational indicators, and a solid balance sheet, Coface is
launching a share buyback programme for a maximum amount of €15m,
or 2.4 million shares. This, once again, demonstrates Coface
discipline in managing its capital.
The development of the economic situation will
depend on the pandemic, and the accompanying measures, which will
be implemented by governments and central banks. Coface is
confident that its agility and efficiency will allow us to navigate
in this challenging period successfully. The objectives of the
Build to Lead strategic plan remain unchanged.
Conference call for financial
analysts
Coface’s results for 9M-2020 will be discussed
with financial analysts during the conference call on 26 October at
18.00 (Paris time). Dial one of the following numbers:
- +33 1 72 72 74 03 (France)
- +44 207 1943 759 (United Kingdom)
- +1 646 722 4916 (United States)
The access code for participants
is: 44146189#
The presentation will be available (in English
only) at the following address:
http://www.coface.com/Investors/financial-results-and-reports
Appendix
Quarterly results
Income statement items in €m
– Quarterly figures |
Q1-19 |
Q2-19 |
Q3-19 |
Q4-19 |
Q1-20 |
Q2-20 |
Q3-20 |
|
% |
% ex. FX* |
Gross earned premiums |
299.0 |
306.3 |
312.6 |
317.7 |
301.2 |
297.9 |
298.1 |
|
(4.6)% |
(2.2)% |
Services revenue |
66.4 |
60.8 |
58.3 |
59.9 |
69.3 |
56.3 |
59.7 |
|
+2.5% |
+3.4% |
REVENUE |
365.5 |
367.1 |
370.9 |
377.6 |
370.5 |
354.2 |
357.8 |
|
(3.5)% |
(1.4)% |
UNDERWRITING INCOME(LOSS) AFTER
REINSURANCE |
52.0 |
47.4 |
46.3 |
42.2 |
28.2 |
12.1 |
34.2 |
|
(26.1)% |
(31.5)% |
Investment income, net of management
expenses |
5.1 |
11.5 |
11.8 |
8.5 |
2.7 |
14.0 |
6.7 |
|
(42.7)% |
(39.7)% |
CURRENT OPERATING INCOME |
57.2 |
58.9 |
58.0 |
50.7 |
30.9 |
26.2 |
40.9 |
|
(29.4)% |
(33.2)% |
Other operating income / expenses |
(0.2) |
1.3 |
(1.0) |
(6.1) |
(0.2) |
(1.6) |
(0.6) |
|
N.A |
N.A |
OPERATING INCOME |
56.9 |
60.3 |
57.0 |
44.6 |
30.7 |
24.6 |
40.3 |
|
(29.3)% |
(33.2)% |
NET INCOME |
36.4 |
42.2 |
38.8 |
29.4 |
12.7 |
11.3 |
28.5 |
|
(26.7)% |
(31.2)% |
Income tax rate |
29.4% |
28.9% |
25.0% |
29.1% |
50.5% |
39.9% |
42.4% |
|
+17.4
ppts |
|
Cumulated results
Income statement items in €m
–Cumulated figures |
Q1-19 |
H1-19 |
9M-19 |
FY-19 |
Q1-20 |
H1-20 |
9M-20 |
|
% |
% ex. FX* |
Gross earned premiums |
299.0 |
605.3 |
917.9 |
1,235.6 |
301.2 |
599.1 |
897.2 |
|
(2.3)% |
(1.1)% |
Services revenue |
66.4 |
127.3 |
185.6 |
245.5 |
69.3 |
125.5 |
185.3 |
|
(0.2)% |
+0.0% |
REVENUE |
365.5 |
732.6 |
1,103.4 |
1,481.1 |
370.5 |
724.6 |
1,082.4 |
|
(1.9)% |
(0.9)% |
UNDERWRITING INCOME(LOSS) AFTER
REINSURANCE |
52.0 |
99.5 |
145.7 |
187.9 |
28.2 |
40.4 |
74.6 |
|
(48.8)% |
(49.8)% |
Investment income, net of management
expenses |
5.1 |
16.6 |
28.4 |
36.9 |
2.7 |
16.7 |
23.5 |
|
(17.4)% |
(10.3)% |
CURRENT OPERATING INCOME |
57.2 |
116.1 |
174.1 |
224.9 |
30.9 |
57.1 |
98.1 |
|
(43.7)% |
(43.2)% |
Other operating income / expenses |
(0.2) |
1.1 |
0.1 |
(6.0) |
(0.2) |
(1.8) |
(2.4) |
|
N.A |
N.A |
OPERATING INCOME |
56.9 |
117.2 |
174.2 |
218.9 |
30.7 |
55.4 |
95.7 |
|
(45.1)% |
(44.6)% |
NET INCOME |
36.4 |
78.5 |
117.3 |
146.7 |
12.7 |
24.0 |
52.4 |
|
(55.3)% |
(55.2)% |
Income tax rate |
29.4% |
29.2% |
27.8% |
28.0% |
50.5% |
46.0% |
44.4% |
|
+16.6
ppts |
|
* Also excludes scope impact
CONTACTS |
|
MEDIA RELATIONS Saphia GAOUAOUIT. +33 (0)1
49 02 14 91saphia.gaouaoui@coface.com Amélie RIVENETT. +33
(0)7 64 44 65 83amelie.rivenet@coface.com |
ANALYSTS / INVESTORS Thomas JACQUETT. +33
(0)1 49 02 12 58thomas.jacquet@coface.com Benoit CHASTELT.
+33 (0)1 49 02 22 28benoit.chastel@coface.com |
FINANCIAL CALENDAR 2020/2021
(subject to change)FY-2020 results: 10 February
2021 (after market close)Q1-2021 results: 27 April 2021 (after
market close)Annual General Shareholders’ Meeting 2020: 12 May
2021H1-2021 results: 27 July 2021 (after market close)9M-2021
results: 28 October 2021 (after market close)
FINANCIAL INFORMATIONThis press
release, as well as COFACE SA’s integral regulatory information,
can be found on the Group’s
website:http://www.coface.com/Investors
For regulated information on Alternative
Performance Measures (APM),please refer to our Interim Financial
Report for S1-2020 and our 2019 Universal Registration
Document.
Coface: for trade With
over 70 years of experience and the most extensive international
network, Coface is a leader in trade credit insurance and adjacent
specialty services, including Factoring, Single Risk insurance,
Bonding and Information services. Coface’s experts work to the beat
of the global economy, helping ~50,000 clients build successful,
growing, and dynamic businesses across the world. Coface helps
companies in their credit decisions. The Group's services and
solutions strengthen their ability to sell by protecting them
against the risks of non-payment in their domestic and export
markets. In 2019, Coface employed ~4,250 people and registered a
turnover of €1.5 billion. www.coface.com COFACE SA is quoted
in Compartment A of Euronext ParisCode ISIN: FR0010667147 /
Mnémonique : COFA |
DISCLAIMER - Certain declarations featured in
this press release may contain forecasts that notably relate to
future events, trends, projects or targets. By nature, these
forecasts include identified or unidentified risks and
uncertainties, and may be affected by many factors likely to give
rise to a significant discrepancy between the real results and
those stated in these declarations. Please refer to chapter 5 “Main
risk factors and their management within the Group” of the Coface
Group's 2019 Universal Registration Document filed with AMF on
16 April 2020 under the number D.20-0302 in order to
obtain a description of certain major factors, risks and
uncertainties likely to influence the Coface Group's businesses.
The Coface Group disclaims any intention or obligation to publish
an update of these forecasts, or provide new information on future
events or any other circumstance.
1 Also excludes scope impact
2 Book yield calculated on the average of the investment
portfolio excluding non-consolidated subsidiaries
3 Badwill is based on preliminary estimates and could vary
pending final analysis
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