Aduno Group proves its qualities

The Aduno Group held up well in 2015 in a challenging environment. Despite the strong franc and significant investments, net profit was lifted above the prior-year level, mainly driven by the Issuing and personal credit business. The already substantial equity base was strengthened further.

The Swiss economy has had a difficult year. The decision by the Swiss National Bank on 15 January 2015 to scrap the euro/franc floor brought a deterioration in Switzerland’s competitive position. Export-oriented sectors, tourism, the hotel industry and cross-border retail trade were particularly affected. The domestic economy has cooled off noticeably compared with the previous year. While at the start of the year the State Secretariat for Economic Affairs (SECO) expected GDP growth of 2.1 per cent in 2015, the end result was a modest increase of 0.8 per cent.

However, the bleaker economic situation appears barely to have rubbed off on consumer sentiment. According to SNB statistics, the number of issued cards rose by 3.1 per cent in 2015 while the sales volume for these cards increased by 3.8 per cent. The number of debit cards rose by 1.7 per cent.

A different picture emerged in the personal credit business in 2015: in our estimation, as in the preceding years, there was a decline in new volumes of personal credits. The leasing business also suffered noticeably from the scrapping of the euro/franc floor as vehicle dealers had to grant massive euro discounts.

Continued good diversification of revenue streams

The Aduno Group reported revenue of CHF 484.1 million for the 2015 financial year, 4.2 per cent less than in the previous year. The Payment division posted turnover of CHF 353.7 million, and Consumer Finance contributed CHF 98.0 million. A further turnover of CHF 99.0 million can be attributed to the central financing unit.

Of the total turnover, 41.3 per cent came from commission income, 20.1 per cent from annual fees, in particular on cards, 21.5 per cent from interest income, and 17.1 per cent from other income. Within the income statement, the introduction of the new commission model for bank partners led to a significant shift between the income from annual fees, other income and selling expenses. In addition, the drop in commission income on the one hand reflects the reduction of the domestic interchange fee from 0.95 to 0.70 per cent as of 1 August. At the same time, the strengthening of the franc due to the SNB decision has meant that the value in Swiss francs of the foreign sales generated in euros was lower so that the commission charged for this was also down. These two influences resulted in a total negative effect amounting to CHF 12.0 million. The significant increase in income from annual fees is encouraging. In addition to the restructuring of the banking remuneration model mentioned, this is primarily attributable to the growing number of new cards issued as part of a bank package.

Profit up on the previous year, solid capital base

According to plan, the Aduno Group increased its operating result to CHF 84.1 million. This is an excellent performance, particularly in view of expenditure for innovation and strategic projects amounting to around CHF 30 million. Net profit amounts to CHF 74.6 million, slightly higher than in the previous year, allowing the Aduno Group to improve its profit margin of 14.7 per cent in the previous year to 15.4 per cent.

At the end of 2015, the Aduno Group had 756 employees (full-time equivalents), 61 more than at the end of 2014. The increase in staff numbers was significantly driven by the large number of projects in which the Aduno Group is currently involved. This led to higher personnel expenses in the reporting year.

The total assets as at 31 December 2015 amounted to CHF 2,207 million compared to CHF 2,246 million at the end of 2014. Equity amounted to CHF 543.2 million, compared to CHF 486.4 million at the end of 2014. At 24.6 per cent, the equity ratio has once again increased significantly on the previous year (21.7 per cent), thereby laying a solid foundation for further growth of the Group.

Issuing driving growth in the Payment business

The Payment division generated a transaction volume for the cards business of CHF 15.6 billion in the 2015 financial year, 1.2 per cent more than in the previous year. Around half of this volume was attributable to the Issuing business and the other half to the Acquiring business. The number of transactions grew substantially in 2015 by 11.3 per cent to 168 million, with the Issuing segment gaining more strongly than Acquiring.

At CHF 7.8 billion, Viseca’s Issuing volume in 2015 was up 1.9 per cent on 2014. Unlike in the preceding years, the transaction volume rose primarily in Switzerland while abroad it virtually stagnated. The reason for this is the scrapping of the euro/franc floor which reduced the value in Swiss francs of the foreign sales generated in euros. The increase in volume was only able to compensate for the collapse in euro prices, but could not contribute to an increase in foreign sales in CHF.

New card sales grew by 6.2 per cent year-on-year. This is primarily thanks to the successful distribution collaboration with partner banks. Above all the offers of banks at which credit cards are sold as a package together with savings accounts and other products contributed to the growth. As a result, the total number of cards issued increased by 3.9 per cent to around 1.4 million cards.

The Aduno Group was unable to continue the growth of the previous year in the Acquiring business. Volumes rose only slightly by 0.6 per cent after having grown by 11.4 per cent in the previous year. Within the range of products, above all debit card sales volumes increased in the reporting year. One reason for this encouraging volume growth lies with newly gained key accounts recognised in income in the financial year. However, credit card sales were down on the prior-year level, largely because foreign visitors to Switzerland consumed less due to the strong franc.

Consumer Finance at prior-year level

Consumer Finance reported volumes for the past year on a par with 2014. At CHF 828.5 million, new business was up 1.3 per cent, while the credit portfolio contracted by 0.3 per cent to CHF 1,265 million.

The personal credit segment did well in the reporting period. The dual-price model with enhanced transparency for customers led to new volume growth of 11.2 per cent in 2015. The portfolio grew by 10.4 per cent. cashgate accordingly gained market shares in a shrinking market while upholding its strict risk policy. Direct sales, the branch business and credit intermediaries made a decisive contribution to this result. Thanks to efficiency enhancements in processing, cashgate successfully coped with the volume growth with the same number of employees.

New sales in the leasing business are 8.0 per cent down on the prior-year level. The scrapping of the EUR/CHF minimum exchange rate caused the price level on the vehicle market to fall sharply. This was exacerbated by the strong competition from the manufacturers’ own leasing companies that are pursuing an aggressive price policy.

Financing: two bonds floated for CHF 200 million

Aduno Holding AG issued a floater for CHF 100 million and a fixed rate loan with a zero coupon for CHF 100 million in April 2015. Both bonds mature in 2017. With this dual issue, Aduno Holding AG is utilising the favourable environment on the capital market to reduce the financing costs. The fact that the two bonds were again placed successfully within a very short period of time underlines the confidence of the capital market in the Aduno Group. The ratings by the two lead banks, Credit Suisse and Zurich Cantonal Bank, are unchanged at “mid A with stable outlook”.