International Personal Finance Plc Q3 2018 Trading Update (4450E)
18 October 2018 - 5:01PM
UK Regulatory
TIDMIPF
RNS Number : 4450E
International Personal Finance Plc
18 October 2018
International Personal Finance
Q3 2018 trading update
18 October 2018
International Personal Finance plc specialises in providing
unsecured consumer credit to more than two million customers across
11 markets. We operate the world's largest home credit business and
a leading fintech business, IPF Digital.
Highlights
-- Q3 credit issued growth of 6%
o IPF Digital growth of 39% - continued strong top-line growth
and good operational performance
o Mexico home credit growth of 13% - expansion strategy delivered
further growth
o European home credit contracted by 7% - operational performance
in-line with full-year expectations
-- Well managed credit quality and collections - Group
annualised impairment as a percentage of revenue of
25.2% (HY 2018: 25.5%)
-- Strong funding position - GBP226m of headroom on debt
facilities at 30 September 2018
-- Draft law proposing amendments to existing tax legislation
being debated in Poland
Group Q3 overview
We continued to perform well against our strategy and delivered
a good Group performance in Q3. Credit issued increased by 6%
driven by our growth-focused businesses, IPF Digital and Mexico
home credit, and offset partially by a contraction in our
returns-focused European home credit markets. Credit quality and
collections continued to be well managed and annualised impairment
as a percentage of revenue improved 0.3ppts to 25.2% since the
half-year driven by an improved performance in IPF Digital's new
markets.
European home credit
We continue to focus on improving the sustainability of our home
credit businesses in Europe by creating more modern, efficient and
better credit quality operations. Year-on-year, we saw a
contraction in credit issued of 7% which was in-line with our
expectations. The quality of the loan portfolio continues to be
excellent and together with a good collections performance by
agents and the benefit of continued higher post-field collection
activities, annualised impairment as a percentage of revenue at
17.8% was in line with the half-year.
Mexico home credit
Our home credit operation in Mexico continued to perform well
with growth flowing through from our branch expansion and
micro-business loans strategies. Year-on-year, we delivered a 13%
increase in credit issued and a 7% increase in customer numbers,
adding 32,000 customers since the half-year. While delivering
growth, we also maintained credit quality with annualised
impairment as a percentage of revenue at 35.9% in line with the
2018 half-year. Looking ahead, the stronger than expected growth in
new customers with lower average issue values means we expect
Mexico's credit issued growth for the full-year to be around the
lower end of the 12% to 15% range we previously indicated.
IPF Digital
IPF Digital achieved further strong growth and a good
operational performance during the third quarter of the year.
Strong customer demand for credit and good take-up of our credit
line facilities delivered a 39% increase in credit issued
year-on-year. The primary driver of this strong performance was our
new markets which grew credit issued by 76%, and continued good
growth in the established markets of 14%. All the new markets
delivered improving credit loss metrics while growing strongly. For
IPF Digital as a whole, we delivered a 4.4ppt improvement in
annualised impairment as a percentage of revenue to 35.4% since the
2018 half-year, driven principally by the new markets. We expect
IPF Digital to continue to deliver good credit issued growth for
the full-year as we move towards profitability in 2019.
Funding
We maintained our strong funding position and at 30 September
2018 we had total debt facilities of GBP899m and borrowings of
GBP673m, with headroom on undrawn bank facilities of GBP226m.
Regulation
As previously reported, we expected the National Bank of Romania
(NBR) to introduce debt-to-income limits prior to the end of this
year. Late yesterday afternoon, the new limits were formally
announced and we are currently studying the detail. We expect some
reduction in sales volumes as a result and will update the market
at our next scheduled announcement. The new rules will become
effective on 1 January 2019. Also, as previously noted, a
parliamentary debate to implement an APR cap at 18% for existing
and new consumer lending in Romania continues, and we are engaged
with key stakeholders to enable them to better understand the
impacts of the proposal. If enacted as currently proposed, it would
have a material adverse effect on our Romanian business. As a
result of more detailed discussions on the matter than expected,
the timing of the legislative process was delayed from Q3 2018, and
is now likely to take place in the coming months.
There has been no update from the Polish Ministry of Justice on
its proposal, published in December 2016, to reduce the existing
non-interest price cap in Poland.
A draft law proposing amendments to existing tax legislation in
Poland has been submitted to Parliament and is currently being
debated by the Parliamentary Finance Committee. Based on the usual
legislative process, if the bill is approved, it will become
effective on 1 January 2019. Our current view is that, if the bill
is enacted without further amendment, certain cross-border
transactions that our Polish subsidiary has entered into are likely
to become economically inefficient. This would most likely give
rise to an effective tax rate for the Group of around 42% for 2019,
compared to the expected rate of 34% for 2018. We, alongside many
other financial and non-financial businesses, are making the case
to key stakeholders for modification of the current draft
proposals.
Board changes
We are pleased to announce the appointment to our Board of
Deborah Davis and Bronwyn Syiek as independent non-executive
directors. Both Deborah and Bronwyn, whose appointments are
effective from today, bring a wealth of expertise and experience
gained in fintech, consumer and technology businesses, which will
help drive the Group's continuing evolution as a responsible lender
in the digital age.
Outlook
We have delivered a good performance both in Q3 and the year to
date, and continue to make strong progress against our strategic
objectives. We are focused on improving the sustainability of our
European home credit businesses to continue providing a good
service to our customers and deliver strong returns to reward
shareholders and fund growth opportunities in our Mexico home
credit and IPF Digital operations.
All impairment as a percentage of revenue figures within this
statement reflect a conversion from IAS39 to IFRS 9.
Investor and analyst conference call
International Personal Finance will host a conference call for
investors and analysts at 08.15hrs (BST) today,
Thursday 18 October. Please dial-in 5-10 minutes before the start of the call.
Dial-in (UK) +44 (0)330 336 Confirmation code: 3572752
9411
Replay: An audio recording of the conference call will be
available in the investors section of our website
at www.ipfin.co.uk
A copy of this statement can be found on our website -
www.ipfin.co.uk
Investor relations and media contacts:
International Personal Finance Rachel Moran
+44 7760 167637 / +44 113 285 6798
FTI Consulting Neil Doyle
+44 20 3727 1141 / +44 7771 978
220
Laura Ewart
+44 (0)20 3727 1160 / +44 (0)7711
387085
Legal Entity Identifier: 213800II1O44IRKUZB59
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END
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