BEIJING and NEW YORK, Nov. 1, 2018 /PRNewswire/ -- Wins Finance Holdings Inc. ("Wins Finance" or the "Company") (NASDAQ: WINS), a diversified investment and asset management company that provides integrated financing solutions to small and medium enterprises ("SMEs") in China, today announced its audited financial results for the fiscal twelve months ended June 30, 2018.
Fiscal Twelve Months Financial and Operational Highlights
"Our gross revenue increased by 5% for fiscal 2018 as compared to fiscal 2017 as our financial advisory business increased by 375%, though this was partially offset by a 19% decrease in our financial guarantee business. However, our net income fell 48%, primarily due to non-cash impairments in our guarantee service and leasing businesses as well as an increase in our expenses," said Renhui Mu, Chairman and Chief Executive Officer of Wins Finance.
"The economic slowdown in Shanxi Province's economy, our main market for our financial guarantee business, significantly affected our financial results and the increased risk of potential loan defaults led us to take a $4.9 million provision on our income statement for such defaults. We also took a $3.1 million provision in our financing lease business primarily attributable to the economic slowdown in China, and the increase in default risk of our customers."
"Our net revenue decreased from $9.7 million for the year ended June 30, 2017 to $0.1 million for the year ended June 30, 2018, representing a decrease of 99%, mainly caused by provisions and impairments on our financial guarantee and leasing businesses that totaled $8.0 million. We note that the provision for the guarantee losses andimpairment allowance for the investment in financial leases that have affected our operating results are non-cash items and represent Management's assessment of the default risk of our guarantee and finance leasing customers."
"We continue to refine and upgrade our risk management systems and sophisticated client screening processes since SMEs have a relatively high risk profile as compared to larger, more established companies. We are also pursuing new growth opportunities and believe that our joint venture with Hui Yue Financial Leasing (Ningbo) Co., Ltd. has the opportunity to boost our equipment leasing in Ningbo, China," added Mr. Mu.
Twelve Months Ended June 30, 2018 Financial Results
Gross revenue
Gross revenue for Wins Finance for the twelve months ended June 30, 2018 was $9.7 million, which was comprised of $2.3 million of commissions and fees generated from our financial guarantee services, $5.7 million of direct financing lease interest income and $1.7 million of financial advisory and lease agency income.
Commissions and fees from financial guarantee services decreased $0.5 million, or 18.7%, to $2.3 million for the twelve months ended June 30, 2018, compared to $2.8 million for the twelve months ended June 30, 2017. The decrease was primarily attributable to reduced lending activities due to the economic slowdown in Shanxi Province, where most of our existing SME clients are located, and, as a result, fewer potential clients were able to pass our screening process. Concurrent with a slowdown of China's economy, competition in our lending business has intensified in the region. These factors are expected to negatively impact our guarantee business in the foreseeable future.
Direct financing lease interest income decreased by $0.3 million, or 5.8%, to $5.7 million for the twelve months ended June 30, 2018, compared to $6.0 million for the twelve months ended June 30, 2017.
Financial advisory and lease agency income increased by $1.3 million, or 374.6%, to $1.7 million for the twelve months ended June 30, 2018, compared to $0.4 million for the twelve months ended June 30, 2017. The increase was primarily attributable to new contracts secured under our financing advisory services.
Interest income on short-term investments
Interest income from short-term investments increased by $1.3 million to $15.1 million for the twelve months ended June 30, 2018, compared to $13.8 million for the twelve months ended June 30, 2017. The increase was primarily due to an increase in the average balance of our short-term investments.
Non-interest expenses
Non-interest expenses increased to $5.7 million for the twelve months ended June 30, 2018, as compared to $1.2 million for the twelve months ended June 30, 2017, primarily due to the increase in other operating expenses. This was due to (i) an increase of $1.8 million in legal and consulting fees due in part to our defending against certain legal proceedings initiated against us, (ii) an impairment loss of $1.3 million on a promissory note (included in short-term investments), and (iii) a negative amount of $1.5 million in share-based compensation expenses being recorded in the year ended June 30, 2017, and the reversal of this expense due to the termination of the options prior to vesting.
Income tax
Income tax expense decreased by $3.0 million, to a tax credit of $1.0 million for the twelve months ended June 30, 2018, compared to an income tax expense of $2.0 million for the twelve months ended June 30, 2017. The decrease was primarily attributable to the decrease in taxable income, which mainly consisted of income before taxes excluding the interest on short-term investments that was tax-exempt.
Net income
Net income decreased by $9.8 million, or 48.4%, to $10.5 million for the twelve months ended June 30, 2018, compared to $20.3 million for the twelve months ended June 30, 2017. The decrease was mainly caused by (i) provisions on our financial guarantee and leasing businesses that totaled $8.0 million and (ii) an increase in non-interest expense of $4.5 million, offset by (iii) an increase in interest income of $1.3 million and (iv) a decrease in income tax expense of $3.0 million.
Current Outlook
Management continues to be cautious as to its operating results in future periods in view of the slowdown of the Chinese economy in those regions where the Company operates and which directly effects China's financial sector. The Company believes that its financial guarantee services business could especially be adversely affected since its exposure to defaulted loans is expected to increase and counter guarantees or collateral provided may become insufficient to cover repayments. Management is undergoing a review of the risk controls for the Company's financial guarantee business and may reduce the operation of this business in order to minimize the risks of the Company's exposure.
Conversely, we are pleased with the growth in our financial advisory and lease agency business. We believe that our customized financial consultancy services are of high value-added for our clients and that it can help them to procure financing. This business can also provide good leads for our guarantee services business should clients pass our risk assessment criteria.
In addition, we continue to believe that the financial leasing business offers substantial growth opportunities as SMEs have become an indispensable driver of promoting economic and employment growth and continue to contribute to China's economic transformation. Many SMEs need to upgrade their equipment and adopt new technologies but are not able to access traditional bank financing. We continue to believe that our focus on SMEs results from strategic evaluation as many such entities are nimble actors in China's economy with strong growth potential. However, we note that the period-to-period financial results of this sector is affected by the complexity, uncertainties and changes in China's economic conditions as well the regulations governing the industry, and can cause fluctuations in our periodic operating and financial results.
Other Significant Events
On August 28, 2018, one of our subsidiaries entered into an agreement to acquire a 30% equity interest in Hui Yue Finance Leasing (Ningbo) Co., Ltd. ("Hui Yue"). Hui Yue will be a joint venture between us, Mercury International Financial Leasing (Tianjin) Co., Ltd. (formerly translated as Chenxing International (Tianjin) Financial Leasing Co., Ltd) and Zhongtou Jinchuang (China) Financial Holding Group Co., Limited (formerly translated as Sino Investment Jinchuang Financial Holding Co., Ltd). On October 26, 2018, the agreement was amended so that our subsidiary would acquire only a 15% interest in Hui Yue. The Company will pay RMB 150 million (or approximately $22.7 million) for its 15% interest in Hui Yue. Pursuant to the agreement, the Company was required to pay the capital within thirty years, from the date of change of Hui Yue's company registration. The first payment of RMB 20 million ($3.0 million) was made on October 30, 2018. Hui Yue will focus on the financial leasing of equipment relating to port logistics, construction machinery, energy conservation and medicine in Ningbo, China. We believe that participating in this investment has the opportunity to boost our growth in the leasing sector by leveraging the local financial, governmental and our client resources.
The Company's registration statement on Form F-3, which registers the issuance of ordinary shares, preferred shares, warrants, rights, debt securities and debentures by the Company, was declared effective by the SEC on March 30, 2018. The Company may sell such securities from time to time pursuant to the registration statement. As we have previously disclosed, we have advised NASDAQ that we will seek to increase the public float and potentially the liquidity of our ordinary shares in an attempt to limit the volatility in the trading price of our ordinary shares. If we undertake any offering under the registration statement, it will be, in part, an effort to increase the liquidity of our ordinary shares. However, we cannot guarantee that any actions we take will have the intended effect of reducing market volatility and improving liquidity, and such share issuances could result in significant dilution for current shareholders.
About Wins Finance
Wins Finance is a diversified investment and asset management company listed on NASDAQ. The Company is focused on identifying value accretive investment opportunities and assets in China and the United States that can be enhanced through the strategic involvement of its established management team and its familiarity with the Chinese investment community to help generate long-term value for shareholders. Wins Finance is well positioned to leverage its expertise and existing operations in China to build a comprehensive platform for the provision of lending and other financing solutions to the under-served small and medium enterprise segment. For more information, please visit www.winsholdings.com.
Forward Looking Statements
This news release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. All statements other than statements of historical fact in this press release are forward-looking statements and involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These forward-looking statements are based on management's current expectations, assumptions, estimates and projections about the Company and the industry in which the Company operates, but involve a number of unknown risks and uncertainties. Further information regarding these and other risks are described in the Company's Annual Report on Form 20-F for the year ended June 30, 2018 and in the Company's other filings with the U.S. Securities and Exchange Commission. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and actual results may differ materially from the anticipated results. You are urged to consider these factors carefully in evaluating the forward-looking statements contained herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements.
Company Contacts:
Wins Finance Holdings Inc.
1177 Avenue of the Americas
5th Floor
New York, NY 10036
Tel: 646-694-8538
E-mail: info@winsholdings.com
| WINS FINANCE HOLDINGS INC. CONSOLIDATED BALANCE SHEETS (In US dollars, except share data) |
|||
| As of |
|||
| June 30, 2018 |
June 30, 2017 |
||
| US$ |
US$ |
||
| ASSETS |
|||
| Cash |
18,497,092 |
17,002,282 |
|
| Restricted cash |
23,082,396 |
24,282,208 |
|
| Short-term investments |
178,273,317 |
187,944,184 |
|
| Guarantee paid on behalf of guarantee service customers |
107,473 |
1,560,615 |
|
| Commission receivable |
496,097 |
- |
|
| Net investment in direct financing leases |
71,645,717 |
76,723,457 |
|
| Interest receivable |
15,157,094 |
3,514,075 |
|
| Property and equipment, net |
221,200 |
594,148 |
|
| Deferred tax assets, net |
1,089,667 |
327,137 |
|
| Other assets |
654,579 |
815,984 |
|
| TOTAL ASSETS |
309,224,632 |
312,764,090 |
|
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|||
| Liabilities |
|||
| Bank loans for capital lease business |
13,696,574 |
28,281,541 |
|
| Other loans for capital lease business |
4,774,510 |
9,509,597 |
|
| Interest payable |
123,396 |
222,510 |
|
| Income tax payable |
2,435,118 |
2,772,631 |
|
| Unearned income from financial guarantee services |
88,824 |
538,215 |
|
| Allowance on guarantee |
2,637,236 |
673,147 |
|
| Deposit from direct financing leases |
9,164,554 |
10,854,121 |
|
| Other liabilities |
1,562,819 |
893,569 |
|
| Due to related party |
464,000 |
464,000 |
|
| Deferred tax liabilities |
- |
746,884 |
|
| Total Liabilities |
34,947,031 |
54,956,215 |
|
| Stockholders' Equity |
|||
| Common stock (par value $0.0001 per share, 100,000,000 shares authorized; 19,837,642 issued and outstanding at June 30, 2018 and June 30, 2017) |
1,984 |
1,984 |
|
| Additional paid-in capital |
211,934,432 |
211,934,432 |
|
| Statutory reserve |
4,730,036 |
3,530,458 |
|
| Retained earnings |
71,727,920 |
62,427,622 |
|
| Accumulated other comprehensive loss |
(14,116,771) |
(20,086,621) |
|
| Total Stockholders' Equity |
274,277,601 |
257,807,875 |
|
| TOTAL LIABILITIES AND EQUITY |
309,224,632 |
312,764,090 |
|
| Please see the notes to the consolidated financial statements on Form 20-F as filed with the SEC
|
|||
| WINS FINANCE HOLDINGS INC. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) (In US dollars, except share data)
|
||||
| For the years ended June 30, |
||||
| 2018 |
2017 |
|||
| Guarantee service income |
||||
| Commissions and fees on financial guarantee services |
2,308,567 |
2,839,194 |
||
| (Provision) reversal of provision on financial guarantee services |
(1,982,073) |
3,208,827 |
||
| Provision for guarantee paid on behalf of guarantee service customers |
(2,896,532) |
- |
||
| Commission and fees on guarantee services, net |
(2,570,038) |
6,048,021 |
||
| Direct financing lease income |
||||
| Direct financing lease interest income |
5,697,491 |
6,047,172 |
||
| Interest expense for direct financing lease |
(1,512,619) |
(2,094,587) |
||
| Business collaboration fee and commission expenses for leasing projects |
(99,320) |
(603,873) |
||
| Provision for lease payment receivable |
(3,108,520) |
(27,332) |
||
| Net direct financing lease interest income after provision for receivables |
977,032 |
3,321,380 |
||
| Financial advisory and lease agency income |
1,695,769 |
357,284 |
||
| Net revenue |
102,763 |
9,726,685 |
||
| Non-interest income |
||||
| Interest on short-term investment |
15,095,621 |
13,752,538 |
||
| Total non-interest income |
15,095,621 |
13,752,538 |
||
| Non-interest expense |
||||
| Business taxes and surcharge |
(13,059) |
(4,406) |
||
| Salaries and employees surcharge |
(704,007) |
(879,595) |
||
| Rental expenses |
(230,889) |
(247,684) |
||
| Other operating expenses |
(4,789,448) |
(46,258) |
||
| Total non-interest expense |
(5,737,403) |
(1,177,943) |
||
| Income before taxes |
9,460,981 |
22,301,280 |
||
| Income tax credit (expense) |
1,038,895 |
(1,951,489) |
||
| NET INCOME |
10,499,876 |
20,349,791 |
||
| Other comprehensive income |
||||
| Foreign currency translation adjustment |
5,969,850 |
(5,130,963) |
||
| COMPREHENSIVE INCOME (LOSS) |
16,469,726 |
15,218,828 |
||
| Weighted average ordinary shares outstanding: |
||||
| Basic |
19,837,642 |
19,926,510 |
||
| Diluted |
19,837,642 |
20,082,089 |
||
| Earnings per share: |
||||
| Basic |
0.53 |
1.02 |
||
| Diluted |
0.53 |
1.01 |
||
| Please see the notes to the consolidated financial statements on Form 20-F as filed with the SEC |
||||
| WINS FINANCE HOLDINGS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In US dollars)
|
||||
| For the years ended June 30, |
||||
| 2018 |
2017 |
|||
| CASH FLOWS FROM OPERATING ACTIVITIES |
10,499,876 |
20,349,791 |
||
| Net income |
||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||
| Depreciation |
395,814 |
320,842 |
||
| Impairment loss on short-term investments |
1,272,723 |
- |
||
| Share-based compensation |
- |
(1,465,680) |
||
| Provision for lease payment receivables |
3,108,520 |
27,332 |
||
| Deferred tax (benefit) expense |
(1,546,049) |
370,019 |
||
| Provision (reversal of provision) for guarantee |
1,982,073 |
(3,208,827) |
||
| Provision for guarantee paid on behalf of guarantee service customers |
2,896,532 |
- |
||
| Changes in assets and liabilities: |
||||
| Net investment in direct financing leases |
3,925,969 |
(3,638,296) |
||
| Commission receivable |
(504,779) |
- |
||
| Guarantee paid on behalf of guarantee service customers |
(1,379,966) |
1,313,577 |
||
| Unearned income from financial guarantee services |
(470,358) |
122,923 |
||
| Interest receivable |
(12,016,442) |
(2,443,076) |
||
| Other assets |
145,401 |
(546,486) |
||
| Interest payable |
(106,266) |
17,979 |
||
| Income tax payable |
(410,921) |
314,334 |
||
| Deposits from direct financing leases |
(1,983,386) |
1,719,175 |
||
| Other liabilities |
692,504 |
(52,009) |
||
| Net Cash Provided by Operating Activities |
6,501,245 |
13,201,598 |
||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||
| Purchase of short-term investments |
(50,728,580) |
(73,395,616) |
||
| Proceeds from maturities of short-term investments |
64,102,479 |
32,294,070 |
||
| Deposits paid to banks for financial guarantee services |
(18,874,650) |
(19,753,815) |
||
| Deposits released from banks for financial guarantee services |
20,686,625 |
22,815,354 |
||
| Placement of pledged bank deposits |
- |
(4,403,737) |
||
| Withdrawal of pledged bank deposits |
- |
4,403,737 |
||
| Purchase of property, plant and equipment |
(1,875) |
(79,955) |
||
| Consideration received on disposal of WHL |
- |
270,000 |
||
| Net Cash Provided by (Used in) Investing Activities |
15,183,999 |
(37,849,962) |
||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||
| Proceeds from loans |
- |
11,751,680 |
||
| Repayment of loans |
(20,578,208) |
(16,311,241) |
||
| Net Cash Used in Financing Activities |
(20,578,208) |
(4,559,561) |
||
| EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH |
387,774 |
(953,758) |
||
| NET INCREASE (DECREASE) IN CASH |
1,494,810 |
(30,161,683) |
||
| Cash and cash equivalents at beginning of year |
17,002,282 |
47,163,965 |
||
| Cash and cash equivalents at end of year |
18,497,092 |
17,002,282 |
||
| SUPPLEMENTAL CASH FLOW INFORMATION: |
||||
| Cash paid for income taxes |
918,075 |
1,267,135 |
||
| Cash paid for interest expense |
1,512,619 |
2,076,609 |
||
| Please see the notes to the consolidated financial statements on Form 20-F as filed with the SEC |
||||
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