Ladies and gentlemen, welcome to DelfinGroup Investor Webinar. Today, our hosts are the CEO of DelfinGroup, Didzis Ādmīdiņš, and Member of the Management Board and CFO of the company, Aldis Umblejs. The gentleman will walk us through the recently announced financial results of six months, 2023. During the presentation, you're encouraged to ask your questions to the company by typing them in the Q&A window. We'll cover them in the second part of the call. The session is being recorded, and the recording will be available shortly after the call. Let me hand over to Didzis and Aldis.
Thank you. Hello, dear participants, our shareholders, investors, on- and the potential investors for joining our webinar. Today, today here is Didzis Ādmīdiņš, CEO of DelfinGroup, and Aldis Umblejs, CFO of the company, and we will present you an audited results for first half of this year. I, I, I will tell you about our company highlights, very briefly about business results. And after that, Aldis will present about business performance, financial results, and as always, after that will be question- and- answer session. So briefly about first half of this year. As you see, you see many double-digit numbers, and, and indeed, this first half of this year was quite successful for our company.
You see, + 27% for consumer loans and + 36% for upfront loan issuance, and I count it as very good success for our company. That, that's year-on-year increase for those segments. + 16% for credit portfolio combined growth, and that's not year-on-year, but that's since beginning of this year. If you look at revenue and EBITDA, you see + 46% for EBITDA growth, and I count it as very good result. If you look at profit before tax, + 11%, and as everyone understand, the + 46% for EBITDA, + 11% for profit before tax, the main driver for there is a financial costs.
That, that mean that very good business results, so credit portfolio growing, issuance levels are good, but also as, as, as a side, there is a financial costs. If we go more into details, you see that on the left side, there is combined issuance levels for quarters, and you see that there is a good improvement if you look at the year-over-year basis, especially first quarter and also our second quarter. But you see also that there is drop in the second quarter if we compare it to this year first quarter. I want to explain everybody also about this, and that is linked to that the credit portfolio. We have managed to increase credit portfolio quite good.
As you see, its credit portfolio is already EUR 78 million, and that's at the moment already better than in our guidance for the end of this year. At the end of the guidance for the end of this year was EUR 77 million, already now it's EUR 78 million. That was the reason why we consciously decreased the issuance levels. The other argument is that we have to fulfill our obligations against bond investors, because we have several financial covenants, for example, cap ratio, and we have to keep those covenants in a healthy level. That's the reason why we are also issuing the subordinated bonds to increase this credit portfolio for going further.
If you look at revenue and profit before tax, you see that as I already mentioned, very good improvement for revenue, +51% year-on-year basis, and for EBITDA, 46%. Yes, as I mentioned, main driver for profit before tax in this case is the financing cost, which is higher than previous year, but still +11% for cumulative profit before tax. Actually, also, it's like best quarter in company history of EUR 2 million, reaching EUR 2 million quarter of profit before tax. To continue with our highlights of our company, to foster circular economy, we in May, we launched a new solution for our company. We launched the solution, how clients can remotely sell their pre-owned items to us.
Before that, we did that in our branches, and we are still doing that, but we launched this digital solution so clients can very comfortably to sell their pre-owned, pre-owned goods. Client can fill application online, then get the evaluation, and then go to post box service, which are very many in Latvia, and just send this item to us, and we will pay client, and that could happen in just 1 or 2 days. Many of those items is which we have bought, is already in our, in our branches or in our internet shop, all already sold. We also see a very good interest for this service, so that we have received already about more than 1,500 applications till, till today.
We will continue to develop this solution. Yes, as I mentioned in the previous webinar, that our target was to open the largest branch of Banknote, and we have done that. We have opened largest Banknote branch so far, and this branch is located in Riga, Imanta. It's... I believe that it's also like largest pawn shop in Baltics, and also it's the largest circular economy shop in Riga. Clients can find there are more than 4,500 items for sale, and there are many categories for sale, like mobile phones, computers, power tools, sport tools, jewelry, and so on. Yes, everybody is welcome.
It's very interesting, and it's like a very new assortment, every day or every several days, and it's, like, changing all the time. Also, clients can get our other services also in this branch, and it's, it's consumer loans and pawn loans. Yes, we, we also start new initiative, how to promote our services, especially service of buying and selling pre-owned goods. We, we, we launched this, like, activity of open doors, and we did that during city festivals and in cities like Ventspils, Kuldīga, and Cēsis, and we will do that in also in Riga. Actually, we saw very good interest from our clients.
We get many new clients, which was excited to see what we are doing. And I hope that we will continue to do that in future, and we'll get more new clients through this, this solution. To continue with activities of capital market, I, I want to mention that we... That was quite many activities during that period. For example, in July, we listed our EUR 10 million bonds in Nasdaq First North Bond List, and, and in corporation with Signet Bank, we also issued 2 new bonds.
One is EUR 5 million subordinated bonds to support company's capital structure and to grow credit portfolio, and the other one is EUR 15 million unsecured bond, which we issued, which we launched this month, and it's with appealing 9% + 3 months of EURIBOR coupon rate. To continue with capital market highlights, yes, from May 22 until 2nd of June, the second shareholder public share public offering happened, and actually, it was quite successful because it was oversubscribed, and the company's free floating was increased to 27.1%. If you remember, just about a year ago, our free float was a bit less than 15%, so now it's 27%.
That mean that it's more easy to buy or sell our shares on the stock exchange. Also, I want to mention that on the right side, you see our shareholder account, and shareholder split, our shareholder account also increased significantly to almost 9,000 shareholders. If you look at our shareholder split by country, you see that at the end of June, about 74% of our shareholders is from Estonia and 22% from Latvia. It's like very good interest was also during that shareholder public offering from Estonia and also in actual shareholder split, there is like Estonia is dominating in our shareholder structure.
Yes, also, like, not only circular economy in business activities, but also it's very important to be sustainable in governance of the company. I want to mention two things there, and one is Sustainability Index. Our company was quite successful in this competition. That competition is quite prestige in Latvia, and many like mature and good governed companies are participating in Sustainability Index, and our company, and our company get gold level award for this. I was quite happy about that. The other initiative is Mission Zero. We joined this initiative, which is for that, that initiative is fighting for zero accidents in the workplace and to foster good work environment.
That also is the direction where, where we are looking how to develop our company. Yes, before we go further, and before I give screen to Aldis, I want to ask everyone a question. Where, where did you, what, what did you do with your previous mobile phone when you purchased a new one? That, that, that's actually the reason, the, the... Not the reason, the direction where we are working, because mobile phones are the largest category in our shop. That's about one, one, one quarter of our, of our, of our stock in our shops. It's very important also for me to understand what our shareholders, what our investors are doing with that thing to improve our services.
I ask everyone to, to, to vote about what you are doing, and maybe I will give some reflection about that. Okay, we already have some answers. Okay, I will wait some 5 seconds. Okay, I, I see that mainly, mainly participants today, about half is putting somewhere they don't see it. I suggest sell it, maybe sell it to Banknote or sell it or give it maybe to someone to like promote this circular economy, because I guess your used iPhone or used phone is still, still working, and someone can use it and prolong this life cycle of those items. Yes. Thank you. Thank you, participants, for voting. I, I think we can go further, and I will give screen to Aldis.
Okay, thanks, Didzis. Yes, in the coming slides, I will be covering our financials and business segments. To start with the consumer loans. As you saw already from the numbers that Didzis presented, the demand for the consumer loans continues to be strong also for the second quarter. The loan portfolio has grown by 46% compared to the last year, and has reached EUR 71.7 million. The inflation is contributing to the increase in the average loan amount, and it continues to increase quarter by quarter, while the average loan terms remains steady and is around 30-33 months.
The non-performing loan ratio also in this quarter continues to be low and was 1.8%. We continue to have a prudent underwriting process and use a range of tools to manage our delayed portfolio. The portfolio split by delay buckets has not changed compared to the year-end, and almost 90% of our consumer loans are not due. Although the demand continues to be strong, we have adjusted our risk policies to lower the overall risk for us and to continue to have a good quality of loan portfolio also going forward.
The second quarter of this year has been a new high for the pawn loan segment as the total portfolio has reached EUR 4.1 million and has increased by 21% on a year-on-year basis. The slight decrease in the redemption rate for the last two quarters is as a result of our change in our pricing policy, whereby we are providing a higher valuation of gold to our customers. As such, some of them have decided not to redeem their loans, and we have taken over the collateral. The result of the subsequent sales of these items are included in our retail segment.
Also, the retail of pre-owned goods continues to have another quarter as we have grown by 33% on a yearly basis. In fact, the decision that we made last year to prioritize this segment is reflected in the sales increase starting the 3rd quarter of last year. Retail of pre-owned goods will be our priority also in the coming period, as also reflected by this. Gross margin remains steady also in this year, and the slight decrease following the end of the last quarter is related to the pricing adjustment of the pawn loans I just mentioned in the last slide.
As the items that are sold in the retail segment also are coming from the pawn loans. In the split between the product categories that we are selling, there have not been any significant changes, and smartphones and jewelry are still leading the sales also for this year. As for the diversification, the revenues generated by our consumer lending segment still account for the largest portion, and between two our brands, they make in total up 68%. Compared to the year-end, the share of the consumer lending segments in our revenues has increased by 3%, resulting in the overall growth of our consumer lending portfolio.
The revenues for the second quarter of this year have grown by 52%, and by 51% for 6th month period. The credit loss expenses have increased in this year due to the increase in the loan portfolio, as well as of sales of the non-performing loan portfolios. Interest banks, interest expenses, and similar expenses have increased because of the total increase of interest-bearing debt and our balance sheet, and this is a function of the raising, rising interest rates in all of the markets. Nevertheless, we have managed to increase the profit, net profit by 61% in the second quarter, and by 36% for the first half of the year.
The balance sheet has grown by 80%, and the drivers for that are net loan portfolio and inventories. It in turn, again, increases our interest-bearing debt. The cost-to-income ratio continues a steady decrease, and that indicates that we are committed to manage our costs effectively. The increase in cost of interest-bearing liabilities has impacted the interest coverage ratio. That has decreased at the end of this quarter, however, it is well above the 1.5x as required by our financial covenants. The equity ratio has decreased following the increase of the total balance sheets of the company. However, we have managed to increase the return of our equity. That for end of this quarter was 37.2%.
When we come to the capital structure, then there have not been significant changes there. For now, Mintos continues to be our largest source of funding, followed by bonds. During 2023, 2 out of 3 bond emissions will mature, and we will refinance them. As already touched upon by this, we have started one private placement of EUR 50 million bonds that will be used to refinance the August maturity, as well as to attract new funds. In addition, we have started subscription for a new subordinate bonds. I will be covering them in more detail in the next slide.
The refinancing of the second bond that will mature on November will be carried out later in the year. Talking about our two new bond emissions, on this slide, you can see a summary of their terms. The first one is a EUR 5 million subordinated bond with a 5-year term, and the coupon rate for that is 11.5, + 3-month EURIBOR. The proceeds for this bond is used to strengthen our capital and to issue long-term loans.
a EUR 50 million, 2.5-year bond with a coupon rate of 9% + 3-month EURIBOR, and the aim of this bond is to refinance the August maturity, as well as to attract additional funds for loan issuance. Both of these bonds are private placement and have a minimum investment of EUR 100,000, and the emission agent of these bonds is Signet Bank. Also, during this year, we are continuing to make regular distributions to our shareholders. During the first half of the year, we made two dividend payments in total of EUR 1.64 million.
Also, following the publication of these results, there will be a shareholders' meeting for the approval of financial statements, and the approval of dividend distribution. As already mentioned by Didzis, this is in one of his slides, during the May and June of this year, two of our largest shareholders made a public offer of the company shares and sold them for EUR 1.35. That at that time was below the market price. This impacted also the share price that following the offer, adjusted around the 1.35. However, given the company's good financial performance and the results, we expect the share price to rebound and increase in the near future.
Yes, with this, I, I would like to conclude our presentation and remind you that in order to receive our latest information and news about DelfinGroup, we encourage you to subscribe to our newsletter, and that can be done through the link seen on the screen. Also, please feel free to visit our social media accounts.
Thank you, Didzis. Thank you, Aldis. I see many questions already submitted. If anyone would like to join the discussion and ask your question to the company, please use the Q&A window that you see beneath the presentation. We'll start with the first question that we have received prior the call. Why there is no public offer for DelfinGroup bond issues? I would be interested to invest with 11.5% + 3-month EURIBOR interest rate.
I think I can answer on that. Yes, in the short, the, the public, public offering is a more complex process, and that's the reason why, why it's not being done for now. However, we are still intended to, to have this option in the near future, and I believe that there will be a, a time where, where the investors will be able also to invest through our bonds in a public offering.
Thank you. Could you explain what drove the credit losses in second quarter, as these, as a % of your loan portfolio, are much higher than in the first quarter?
Yes. Regarding the loan loss provisions, the main reason for them is the increase in our loan portfolio. As you can see from the balance sheets, we are growing our portfolio quarter by quarter, and as a function of that, it increases also our loss loan provisions. Because first, under IFRS, we have to recognize loan loss provisions on day one, irregardless if the loan has been delayed or is it is not, it is not delayed. That's one. Second, it also depends on, let's say, the split of the loan portfolio between the delay buckets and by such a high... Sorry, by such a large, large portfolio.
Also, just the slightest changes in, in a percentage, or, or even below, can affect the amount of the loan loss provisions. However, if we would look, let's say, on a longer period, we, we could observe that, there isn't, let's say, a, a trend or any other indicator that, that would show that, the portfolio performance or, or, let's say, the quality has, has worsened.
Thank you. Do you observe any changes in customers' repayment behavior or increase in defaults?
I will cover this one. That question, as I understand, corresponds to only consumer loan segment because in loan segment it's not a problem because we are selling the collateral. If you look at the consumer loan segment, as you see from our reports, that non-performing loan level is in very good shape. Actually, it's well below our comfortable level of 7%. It's about 2% at the moment, and actually, also in long run, we see that our customers pay better, because we better know our customers, and also our credit scoring and risk policy is like in good shape. We very good understand how to explain client credit history.
We know how they pay their credits, in our company and in other companies. So yes, it's in good shape, and we don't see any significant problems or any problems, in this part of business.
Thank you. Is the subordinated bonds included in capitalization rate covenant, meaning your buffer to the minimum level now increases in second half of the year? Is that so?
Yes. The terms of the subordinate bonds foresee that they will be included in capitalization rate covenant, and it will be included in the second half of the year.
Mm-hmm. Thank you. One of the participants comments that she noticed that you have an additional management board member. Could you please explain the rationale behind that, and how the company will benefit of that?
Yes, yes, Nauris Bloks joining the, the Management Board this year. Nauris is, is Chief Innovation Officer in our company, and his main target is to like to foster innovations in our company and to promote it. Also now he's has a good experience of international business in the fintech field, and also in in in like information technology field. It's like good addition to our Management Board.
Thank you. Another participant thanks for the question about the old phones, and has a follow-up question: Can a damaged phone, for example, with a broken screen, be sold to Banknote?
Especially with a broken screen, we are, we are buying such items, but of course, we are looking if we can repair it, or if we can sell it to someone else. We will not buy a complete damaged phone, but if it's only, like, a damaged screen, most likely we will buy it.
How do you see reaching the targets set in your guidance for 2023?
Okay, I can cover this, and maybe Aldis can add something. As I mentioned, for example, for our credit portfolio, we already fulfilled that target, because our target was EUR 77 million, and it's already EUR 78 million in our credit portfolio, net, net loan portfolio. Of course, a larger net loan portfolio gives a larger revenue stream, and also a positive impact on EBITDA. At the moment, we see that our targets for profit before tax is in line with our guidance. If there will be any change, of course, we will give update on that, but at the moment, it's in line with our guidance.
Thank you. Will the income tax 20% on the coupon be automatically deducted by Latvian tax authorities? What if I am a resident of another country and pay my taxes in my home country, will it be possible to receive coupon payments without any deduction and cover my taxes in my country?
I, I can give just a general answer on this, because it depends on whi- which country of origin do- does this person belong. In general, we, we will... We withhold the tax, yes. There are some exceptions for some European countries, then again, it's, it's case by case. In the case that we are withholding tax, it is possible, let's say, to, to, to, to get a statement from the State Revenue Service here, that the tax had been withheld, withheld, then, then to go with, with that statement to, to your local tax authority and present them that, that you have already paid the tax.
Again, this will depend on, on which countries they are, and this question was probably should be raised to a certified tax advisor.
Our second question consists of two parts. First, what is the average loan tranche size in second quarter this year? Second, why is the average size of the loan per client growing all the time?
Yeah. Yes, I will cover this one. As I understand, it's also about consumer loans because consumer loan is like credit line type of credit, which consists of many tranches or consists of one. The average loan size is growing all the time because actually, in the long run, we have introduced a larger maximum loan amount. For example, like, five years ago, the maximum was about EUR 1,000, and now it's like EUR 10,000, and about three years ago, it was about maybe EUR 5,000. That's increased because of our supply, and the other part is because the economy is growing. There is the inflation, there is increase in salaries of our clients, and increase in pensions of our senior clients, and so on.
The economy is growing, and also, our clients are in better shape, and also our supply. About the tranche size and about average loan, I want to explain, it's not the same. Average loan size for consumer loan at the moment is about EUR 1,700 at the moment, the tranche is several times less, because the clients can take several tranches which corresponds to one loan. The average tranche size is approximately EUR 400-500 at the moment, that's not the same as the average loan.
Thank you.
That answered it.
Mm-hmm. What are the plans for further subordinated bonds issues, given that bonds returns are 2x that of equity returns? Is the current subordinated bond fully subscribed?
Mm-hmm. As for, for the subordinated bonds, we just actually started that, end of July, and there's just not even a month passed, that, the process of subscription, has started. No, it's not yet, fully subscribed, and, and that process is ongoing. As for, the next, bond issue, subordinated bond issues, we haven't thought of, of them yet, because as, as I said, it's just, just the beginning there. If we will see a need, to, to have them, in the future, we will consider. For now, there are no plans to have another bond, right now.
A follow-up question on, on the same topic: how long do you expect to keep refinancing the bonds, also the future bonds? Is there a predicted time when you will manage to refinance them at a lower interest rate, like from the bank?
Yeah, that's, that's a great, great question. If only I, I knew how the market rates would go. Because we are refinancing our interest-bearing debt based on the market rates. If, if they are rising, then so are rising our interest rates. If there comes at a time when the European Central Bank is, is, let's say, saying that it's enough for them to raise interest rates, and they are lowering them, then at that point, we will also be able to lower our financing costs again.
Thank you. All questions have been answered. I'll remind that we have recorded the session, and if any of you would like to listen to it once again, please follow DelfinGroup announcements to receive the recording link. Thank you for joining the call today, and see you at the next webinars. Thank you.
Thank you.