TIDMIPF
RNS Number : 4065K
International Personal Finance Plc
30 July 2013
International Personal Finance plc
Half-year Financial Report for the six months ended 30 June
2013
Key highlights
Ø Record first half profit up 35%
o Profit before tax* of GBP42.3M reflects strong underlying
growth of GBP13.5M and the combined GBP2.6M adverse impact
of higher Early Settlement Rebate costs and the benefit of
stronger FX rates
o Revenue increased by 9%
o Stable credit quality with annualised impairment 26.8% of
revenue (Dec 2012: 27.0%)
o Continued tight cost control has reduced the cost-income
ratio to 39.5% (Dec 2012: 39.8%)
Ø Delivering against our strategy for growth
o Credit issued increased by 14% (Dec 2012: 13%) with growth
in all markets
o Longer-term, higher value loans being rolled out in Poland,
the Czech Republic and Slovakia
o First loans issued in Lithuania in July
o Market entry plans for Bulgaria on track for Q3
Ø Strong profit growth in Mexico
o Profit before tax doubled to GBP5M
o Annualised profit per customer increased to GBP17 (June 2012:
GBP12)
Ø Interim dividend increased by 17.5% to 3.8 pence per share
Ø GBP60M share buyback to reduce capital ratio to around 50%
YOY change
Key statistics H1 2013 H1 2012 at CER
------------------------- ---------- ---------- -----------
Customers (000s) 2,440 2,367 3.1%
Credit issued (GBPM) 486.5 409.3 13.9%
Revenue (GBPM) 360.3 316.0 9.2%
Annualised impairment %
revenue 26.8% 26.2% (0.6 ppts)
Annualised cost-income
ratio 39.5% 41.0% 1.5 ppts
PBT* (GBPM) 42.3 31.4
Statutory PBT** (GBPM) 54.7 25.8
EPS* (pence) 12.55 8.91
------------------------- ---------- ---------- -----------
* Before exceptional items and fair value adjustments
** See table below for details on exceptional items
Chief Executive Officer, Gerard Ryan, commented:
"Our strategy is delivering stronger growth and has resulted in
a record first half profit. Our expansion plans are on track and we
have made good progress on new product development which is helping
to strengthen our customer relationships. In addition, today's
announcement of the GBP60M share buyback is a further sign of our
commitment to operating with a more efficient balance sheet and
delivering increased shareholder returns. We believe there are
opportunities to deliver substantial medium to long-term growth and
we are confident of further progress."
Strategy delivering growth in all markets
One year since the launch of our strategy, we are delivering
good growth and higher underlying profit in all our markets. Our
plans to expand our geographic footprint are on track and we have
made good progress on new product development, improving systems
and implementing reward strategies throughout the business to
accelerate growth further in 2013.
Expand footprint
During the second half of 2013, we plan to expand into Mexico
City which has a population in excess of 20 million. As part of
this expansion we will test the delivery of loans on a pre-paid
card together with our existing products with agent home collection
service.
We were pleased to issue our first loans to customers in
Lithuania in July and now have around 40 employees and agents
developing the business from a branch in Vilnius and our head
office in Poland. This marks an important step in our strategy to
expand into new markets adjacent to our existing European markets
and we expect to open our second branch in Lithuania in September.
In Bulgaria, our launch plans are on track and we expect to begin
issuing loans to customers at the beginning of September.
We aim to reach a customer base of 2,000-3,000 in each market by
the end of 2013 and we are targeting 80,000 customers in Lithuania
and 100,000 customers in Bulgaria at maturity. New market
investment in the first half of the year was GBP0.7M and our
guidance remains that we anticipate these expansion costs will be
between GBP4M and GBP5M in 2013.
Customer engagement - new product development
We believe that expanding our product offering to customers is
key to improving customer engagement.
Our pilot for longer-term, higher value loans to existing
quality customers in Poland, the Czech Republic and Slovakia
generated strong demand and is proving to be revenue enhancing.
Around 6% of customers eligible for a new loan were given the
option of a longer-term loan. Of those who accepted a loan offer,
about 50% chose the longer term product. Average issue values on
these loans were approximately 30% higher, there has been no
material impact on impairment and the overall reduction in
underlying yield across the product portfolio is marginal. We have
rolled out a 100-week loan in the Czech Republic and Slovakia and
are rolling out a 90-week product in Poland. We have also begun
piloting loan terms of up to 78 weeks in Romania.
Rewarding loyal customers through preferential pricing has
proved positive for our customers and our business. Already in
place in Slovakia, it will be rolled out in Poland and Hungary by
the end of 2013. A test is underway in the Czech Republic and
pilots will be implemented in Mexico and Romania shortly.
Our pilot to sell home insurance to existing customers in
Hungary continues. The performance is in line with our expectations
and we intend to evaluate performance in Q3 2013. We are also
exploring opportunities to test insurance in our other markets.
Sales culture and execution
During the year we have piloted a series of changes to the
front-end of our business in Poland with the aim of creating a more
supportive business environment for our operational managers. These
included the introduction of tablet technology, the removal of
non-value added tasks to empower experienced and successful
managers, and updating our incentivisation structures to more
clearly focus on growth. This pilot was successful and, therefore,
we are rolling out the changes within our Polish business and will
introduce it in all our other markets.
We have also been performing tests on the predictive nature and
potential value of credit bureau data on our lending decisions to
new customers. We believe that credit bureau should be a positive
addition to our existing credit vetting techniques. It is already
in use in Hungary and is being rolled out in Mexico. Credit bureau
has been introduced in Lithuania from launch, we are running a test
in Poland and plan to trial it in all our other markets.
Our new technology strategy to modernise our systems is
progressing well. We are currently in the process of selecting our
long-term IT partner who will work with us to deliver a more
technology-enabled approach to serving our customers.
Market overview and regulation
The macroeconomic conditions in Europe continue to contrast with
those in Mexico. GDP growth in Europe remains low but stable with
2013 forecasts expected in the range of (0.8%) and 1.6% in our
established markets. In Mexico, GDP growth estimates have been
reduced but are still forecast at 2.7% for 2013. The outlook for
both regions is stronger for 2014. Consumer confidence in Europe is
improving, albeit at a lower level to Mexico.
Successive interest rate cuts aimed at stimulating economic
growth in a number of European markets have resulted in the
reduction of the rate caps in place in Poland and Hungary.
Consequently, we have repriced our loans to ensure compliance with
the new levels of regulatory rate caps.
The competitive landscape remains largely unchanged with the
exception of Poland and the Czech Republic. In Poland, the
environment continues to evolve with the increasing presence of
payday lenders. Their marketing, particularly TV advertising, has
reduced our share of voice in the media however our performance has
not been impacted. In the Czech Republic, a number of home credit
companies have expanded their operations, which is making new
customer growth more difficult in this market.
In recent years, there have been active discussions on rate caps
across Europe and we have seen the level of debate increase in most
of our European markets. As a business, we maintain constructive
relationships with regulators and continue to monitor the situation
closely.
Performance and financial review
Building on our strong 2012 performance and with the growth
strategy embedded into the business, we delivered record first half
profit before taxation and exceptional items of GBP42.3M.
This performance was achieved through delivering growth in all
our markets, maintaining credit quality with impairment as a
percentage of revenue in the middle of our target range, and
continuing our efficiency programme to improve the cost-income
ratio. This resulted in strong underlying profit growth of GBP13.5M
before the impact of higher Early Settlement Rebate costs (ESRs) of
GBP6.4M in Poland and a GBP3.8M benefit from stronger FX rates.
The Group results are shown in the table below:
2013 2012 Change Change Change
GBPM GBPM GBPM % at CER
%
----------------------------------- -------- -------- ------- ------- --------
Customer numbers (000s) 2,440 2,367 73 3.1 3.1
Credit issued 486.5 409.3 77.2 18.9 13.9
Average net receivables 677.6 568.9 108.7 19.1 14.4
----------------------------------- -------- -------- ------- ------- --------
Revenue (net of ESRs) 360.3 316.0 44.3 14.0 9.2
Impairment (108.4) (98.3) (10.1) (10.3) (5.7)
----------------------------------- -------- -------- ------- ------- --------
Net revenue 251.9 217.7 34.2 15.7 10.9
Finance costs (23.7) (20.4) (3.3) (16.2) (11.3)
Agents' commission (41.9) (35.9) (6.0) (16.7) (11.7)
Other costs (144.0) (130.0) (14.0) (10.8) (8.1)
----------------------------------- -------- -------- ------- ------- --------
Profit before taxation,
exceptional
items and fair value adjustments 42.3 31.4 10.9 34.7
Exceptional items 12.4 (4.8) 17.2
Fair value adjustments - (0.8) 0.8
----------------------------------- -------- -------- ------- ------- --------
Statutory profit before
taxation 54.7 25.8 28.9
----------------------------------- -------- -------- ------- ------- --------
We are focussed on delivering our plan for growth and have
worked hard to execute a range of strategic and operational
improvements to support this including improving engagement of our
teams, aligning reward with growth and introducing longer-term
loans.
As a result of our efforts, credit issued increased by 14%
(2012: 12%) in the first half, accelerating from 11% in Q1 to 17%
in Q2. We also achieved revenue growth of 9% and, again, we
reported faster growth over the period from 8% in Q1 to 10% in Q2.
This was despite the GBP6.4M impact of higher ESRs in Poland which
are charged against revenue.
Customer growth at 3% was below our expectation. We are taking
action to address this and in the second half we aim to increase
customer numbers by expanding our agent force and further
incentivising management and agents for growth. In the first half,
we opened two new branches in Mexico and ten offices within our
existing footprint in Romania. We plan to open another two branches
in Mexico including one in Mexico City, and a further ten offices
in Romania by the end of the year. We will also extend our reach to
potential new customers with the launch of our two new markets in
Lithuania and Bulgaria.
Credit quality remains good and resulted in annualised
impairment as a percentage of revenue improving to 26.8% (December
2012: 27.0%; June 2012: 26.2%). As a result of revenue growth and
good credit quality, net revenue increased by 11%.
While we invested an additional GBP4.2M in growth opportunities
which included marketing expenditure and incentivisation activity
for our field management teams, we also managed costs tightly and
delivered an improvement of 0.3 percentage points in the annualised
cost-income ratio to 39.5% since December 2012.
Segmental results
We delivered underlying profit growth of GBP13.5M with good
performances in all our markets.
The following table shows the performance of each of our
markets, highlighting the impact of the higher ESRs and stronger FX
rates against sterling to provide a better understanding of
underlying performance:
2013 Underlying 2012
Reported profit Additional Stronger Reported
profit growth ESR costs FX rates profit
GBPM GBPM GBPM GBPM GBPM
----------------------------- ---------- ----------- ------------- ----------- ----------
Poland 23.1 5.9 (6.4) 2.5 21.1
Czech Republic and Slovakia 13.6 2.4 - 0.3 10.9
Hungary 6.5 2.6 - 0.4 3.5
Romania 0.5 1.0 - 0.1 (0.6)
Mexico 5.0 2.0 - 0.5 2.5
UK costs (6.4) (0.4) - - (6.0)
----------------------------- ---------- ----------- ------------- ----------- ----------
Profit before taxation
and exceptional items 42.3 13.5 (6.4) 3.8 31.4
----------------------------- ---------- ----------- ------------- ----------- ----------
Poland incurred GBP6.4M of additional ESR costs in the first
half of 2013. We expect the full year impact of ESRs to be around
GBP10M and they will be fully embedded in the Group's income
statement by the end of the year.
As announced previously, we no longer hedge the rates at which
we translate local currency profits into sterling. In the first
half of 2013, our reported profit benefited from GBP3.8M as a
result of our operating currencies strengthening against
sterling.
Exceptional items
The income statement includes an exceptional gain of GBP12.4M.
This comprises a profit on the sale of impaired receivables
originating from loans issued in Poland of GBP15.9M and a write
down of IT assets of GBP3.5M. The impairment of IT assets arose
from a review of the future technology platforms that we need to
support our growth strategy, which identified assets that are no
longer compatible with this vision.
Taxation
The taxation charge for the first six months of 2013 has been
based on an expected effective tax rate for the full year of
27%.
Dividend
The Board is pleased to declare an increase in the interim
dividend of 17.5% to 3.8 pence per share (2012: 3.23 pence),
reflecting our strong trading performance and the cash generative
nature of the business model. The dividend is payable on 4 October
2013 to shareholders on the register at close of business on 6
September 2013. The shares will be marked ex-dividend on 4
September 2013.
Funding
The Group has a strong balance sheet and continues to be well
funded.
The business is highly cash generative and during the first half
of the year the Group generated operating cash flows of GBP99.2M
(2012: GBP75.4M) including the proceeds from the sale of impaired
Polish receivables, before funding a GBP38.2M increase in net
receivables (2012: GBP10.6M). Net debt reduced by GBP18.6M to
GBP270.9M as a result of this strong cash flow. Gearing, calculated
as borrowings divided by equity, remains at 0.8 times (2012: 0.8
times).
During the first half, we continued to make good progress on our
strategic debt funding objectives of extending the maturity profile
and further diversifying our sources of funding at a lower cost. In
January 2013, we issued GBP11.4M of five-year Hungarian forint
bonds. In April we issued our inaugural seven-year UK retail bond
which raised GBP70M at the materially lower fixed rate cost of
6.125% and resulted in the extension of our debt funding maturity
profile to 2020. The interest rate on the retail bond is over 500
basis points lower than the eurobond issued in 2010 which has a
fixed coupon of 11.5%.
The business is fully funded through to May 2015 with total
committed facilities at 30 June 2013 of GBP551.1M and headroom on
these facilities of GBP217.1M.
Share buyback
As a result of our strong trading performance the Group balance
sheet continued to strengthen in the first half of 2013 with equity
as a percentage of receivables increasing to 58.9% (December 2012:
57.8%; June 2012: 59.2%). At 30 June 2013, the Group had net assets
of GBP404.4M (June 2012: GBP333.9M) and receivables of GBP686.8M
(June 2012: GBP564.4M).
We have reviewed the Group's capital ratio against a backdrop of
our strong trading and funding position, and more stable economic
conditions. This review concluded that it is appropriate to reduce
the equity to receivables ratio to around 50% with immediate
effect. Consequently, the Group will undertake an on-market share
buyback programme of c.GBP60M which will reset the capital ratio to
around 50%.
We are committed to making the Group's balance sheet work harder
in order to optimise the amount of equity capital in the business
and enhance shareholder returns. The Board will continue to keep
the equity to receivables ratio under review and a key driver is
expected to be the anticipated reduction in funding costs when we
refinance our core eurobond funding, which matures in August
2015.
Outlook
We operate in an environment where there is increasing
competition and a more active level of regulatory debate. However,
our strategy is delivering stronger growth and has resulted in a
record first half profit. Our expansion plans are on track and we
have made good progress on new product development which is helping
to strengthen our customer relationships. In addition, today's
announcement of the GBP60M share buyback is a further sign of our
commitment to operating with a more efficient balance sheet and
delivering increased shareholder returns. We believe there are
opportunities to deliver substantial medium to long-term growth and
we are confident of further progress.
Review of operations
Poland
Poland continued to perform very well and we made a number of
significant advances against our growth strategy including the roll
out of three new products and a successful pilot of operational
initiatives to improve the way we serve customers and drive greater
efficiencies. We also received a Top Employer Award by the
Corporate Research Foundation in Poland recognising our commitment
to building an excellent company culture.
Our teams in Poland and Lithuania worked together to reach the
important milestone of serving our first customers in Lithuania. We
received registration of the business as a credit provider with the
National Bank of Lithuania, opened our first branch in Vilnius and
employees and agents began their training and inductions. Our aim
in the second half of the year is to build brand awareness in this
new market, open a second branch and increase our agent and
customer base.
We delivered year-on-year credit issued growth of 12% (2012: 9%)
and improved credit quality with annualised impairment as a
percentage of revenue at 28.4% (December 2012: 29.6%). These key
drivers contributed to strong growth in underlying profit growth of
GBP5.9M before an additional GBP6.4M of ESR costs and a GBP2.5M
benefit from stronger FX rates. Reported profit for the first half
of the year was GBP23.1M.
2013 2012 Change Change Change
GBPM GBPM GBPM % at CER
%
------------------------- ------- ------- ------- ------- --------
Customer numbers
(000s) 825 802 23 2.9 2.9
Credit issued 178.1 152.4 25.7 16.9 11.5
Average net receivables 272.3 227.4 44.9 19.7 14.1
------------------------- ------- ------- ------- ------- --------
Revenue 142.4 132.2 10.2 7.7 2.7
Impairment (45.0) (45.3) 0.3 0.7 5.5
------------------------- ------- ------- ------- ------- --------
Net revenue 97.4 86.9 10.5 12.1 7.0
Finance costs (9.8) (8.6) (1.2) (14.0) (8.9)
Agents' commission (15.3) (13.5) (1.8) (13.3) (8.5)
Other costs (49.2) (43.7) (5.5) (12.6) (11.1)
------------------------- ------- ------- ------- ------- --------
Profit before taxation 23.1 21.1 2.0 9.5
------------------------- ------- ------- ------- ------- --------
Revenue, which was impacted by higher ESR costs, increased by 3%
over the period and we saw an acceleration from 1% in Q1 to 5% in
Q2. We expect the year-on-year impact of ESRs to slow in the second
half of the year and estimate the full year impact for 2013 to be
around GBP10M.
The increase in credit issued and customer numbers was driven in
part by a GBP2.8M investment in growth initiatives which included
promotional activities and new product marketing. Customers
responded well to tests of our new longer-term 90-week loans and
preferential pricing offer and we are rolling out both products as
part of our standard loan portfolio. We have also launched a home
credit loan tailored specifically to customers who are
self-employed. Our investment in growth initiatives, together with
diluted revenue growth due to ESRs, resulted in the cost-income
ratio increasing by 1.2 percentage points since the 2012 year end
to 33.4%.
We were pleased to introduce a secondary listing of IPF shares
on the Warsaw Stock Exchange in March which will allow Polish
investors, particularly pension funds, to invest in the business
more easily. Our team was also instrumental in selling two
portfolios of impaired receivables originating from loans issued in
Poland which resulted in a GBP15.9M exceptional profit for the
Group in the first half of the year.
We continue to monitor the changing competitive landscape in
Poland where payday lenders are marketing their services on a
larger scale than previously. However we believe our clear growth
strategy supported by the roll out of our business improvement
programme will deliver further growth in the second half of the
year.
Czech Republic and Slovakia
Our business in the Czech Republic and Slovakia delivered a much
improved performance in the first half of the year with stronger
revenue growth of 5% driving a 25% increase in reported profit to
GBP13.6M. This reflected good underlying growth of GBP2.4M together
with a GBP0.3M benefit from stronger FX rates.
2013 2012 Change Change Change
GBPM GBPM GBPM % at CER
%
------------------------- ------- ------- ------- ------- --------
Customer numbers
(000s) 376 387 (11) (2.8) (2.8)
Credit issued 106.8 94.8 12.0 12.7 10.7
Average net receivables 157.2 146.1 11.1 7.6 5.8
------------------------- ------- ------- ------- ------- --------
Revenue 71.4 66.8 4.6 6.9 5.2
Impairment (19.3) (19.3) - - 1.5
------------------------- ------- ------- ------- ------- --------
Net revenue 52.1 47.5 4.6 9.7 7.9
Finance costs (4.6) (4.6) - - -
Agents' commission (7.6) (7.1) (0.5) (7.0) (5.6)
Other costs (26.3) (24.9) (1.4) (5.6) (4.0)
------------------------- ------- ------- ------- ------- --------
Profit before taxation 13.6 10.9 2.7 24.8
------------------------- ------- ------- ------- ------- --------
We have seen growing competitive pressure in the Czech Republic.
Bank and non-bank lenders have intensified media activity and we
experienced increased competition from other home credit operators
during the second quarter resulting in a disappointing 3%
contraction in customer numbers to 376,000.
However, our team's focus on accelerating growth through the
introduction of new products and credit relaxation has delivered a
year-on-year increase in credit issued of 11%. We also achieved
good growth in revenue of 5% (2012: a contraction of 3%) now that
the impact of ESRs is fully embedded in the income statement.
As we experienced in Poland, there was strong take-up of our
longer-term loans which are now being offered to quality customers
across both markets and will enhance customer retention.
Preferential pricing in Slovakia also contributed to growth with
average issue values for customers taking discounted loans
increasing by 9%. Our discounted loans are also being rolled out in
the Czech Republic.
Good collections performance resulted in annualised impairment
as a percentage of revenue at the lower end of our target range at
24.8% (December 2012: 25.6%). This level indicates there is scope
to capture further sales opportunities and grow the business faster
while managing impairment within the 25% to 30% range. Finance
costs are in line with 2012 and as a result of continued tight cost
control the annualised cost-income ratio has improved marginally
since December 2012 to 36.4%.
Looking ahead to the second half of the year, we will focus on
growing customer numbers and credit issued through improving agent
productivity, expanding our product range and engaging our teams
further with training and reward schemes aligned to our growth
objectives.
Hungary
Our Hungarian business delivered another excellent performance.
Strong growth in the first half of the year coupled with robust
collections and very tight cost control resulted in a GBP3.0M
increase in reported profit to GBP6.5M. Underlying profit growth
was also good at GBP2.6M after the impact of GBP0.4M of stronger FX
rates.
2013 2012 Change Change Change
GBPM GBPM GBPM % at CER
%
------------------------- ------- ------- ------- ------- --------
Customer numbers
(000s) 276 250 26 10.4 10.4
Credit issued 61.1 50.3 10.8 21.5 17.7
Average net receivables 92.0 72.0 20.0 27.8 23.8
------------------------- ------- ------- ------- ------- --------
Revenue 47.4 36.4 11.0 30.2 26.1
Impairment (11.9) (7.7) (4.2) (54.5) (48.8)
------------------------- ------- ------- ------- ------- --------
Net revenue 35.5 28.7 6.8 23.7 19.9
Finance costs (3.7) (2.8) (0.9) (32.1) (23.3)
Agents' commission (7.3) (6.1) (1.2) (19.7) (15.9)
Other costs (18.0) (16.3) (1.7) (10.4) (9.8)
------------------------- ------- ------- ------- ------- --------
Profit before taxation 6.5 3.5 3.0 85.7
------------------------- ------- ------- ------- ------- --------
We made further good progress against our objective to rebuild
customer numbers to the previous level of more than 300,000.
Despite some banks and other financial institutions increasing
their levels of advertising activity in Q2, we were successful in
growing year-on-year customer numbers by 10% to 276,000.
Increasing new customers, together with higher sales and loan
values to existing customers as a result of credit easing, helped
deliver strong growth in credit issued of 18%. Consequently,
average net receivables increased by 24%, which generated excellent
revenue growth of 26%.
In addition to achieving strong growth, we also maintained high
levels of credit quality and robust collections. As planned,
annualised impairment as a percentage of revenue increased to 18.0%
(December 2012: 15.2%). This highlights opportunities to seek
faster growth through staged credit relaxations while moving
towards our target range for impairment as a percentage of revenue
of 25% to 30%.
We continued to manage other costs tightly and as a result the
cost-income ratio improved by a further 3.0 percentage points to
39.3% since December 2012, falling below 40% for the first
time.
In the second half of the year we intend to evaluate our home
insurance pilot and expect to build on our strong trading
performance through continued easing of credit rules, intensive new
customer marketing and incentivising our teams for growth.
Romania
Our business in Romania reported an improved performance and
profit for the period increased by GBP1.1M to GBP0.5M. This is
after new market investment costs of GBP0.3M relating to Bulgaria
and a GBP0.1M positive impact from stronger FX rates.
Our plans for entering Bulgaria in Q3 are progressing and the
team in Romania is working with colleagues based in this new market
and the UK to prepare for the launch. We have branch premises in
Sofia, systems testing is underway and recruitment is progressing
well.
2013 2012 Change Change Change
GBPM GBPM GBPM % at CER
%
------------------------- ------- ------- ------- ------- --------
Customer numbers (000s) 269 256 13 5.1 5.1
Credit issued 46.8 40.9 5.9 14.4 10.6
Average net receivables 57.6 51.3 6.3 12.3 8.7
------------------------- ------- ------- ------- ------- --------
Revenue 31.7 27.8 3.9 14.0 10.5
Impairment (10.8) (10.8) - - 1.8
------------------------- ------- ------- ------- ------- --------
Net revenue 20.9 17.0 3.9 22.9 18.1
Finance costs (2.3) (2.1) (0.2) (9.5) -
Agents' commission (3.2) (2.6) (0.6) (23.1) (18.5)
Other costs (14.9) (12.9) (2.0) (15.5) (12.9)
------------------------- ------- ------- ------- ------- --------
Profit /(loss) before
taxation 0.5 (0.6) 1.1 183.3
------------------------- ------- ------- ------- ------- --------
The macroeconomic environment in Romania is stable but
low-growth and in this context we changed our focus from
collections to cautiously targeting faster growth during the second
quarter of the year. This strategy led to an 11% increase in credit
issued in the first half of the year with an acceleration from 6%
in Q1 to 15% in Q2. This increase generated revenue growth of
11%.
We are targeting 500,000 customers in Romania and currently have
geographic coverage of 80%. Customer numbers in the first half of
the year increased by 5% and we aim to build on this through
continued selective easing of credit settings and geographic
expansion. Since the beginning of the year, we have opened ten
offices within our existing regional footprint to increase our
reach to potential new customers and we plan a similar level of
geographic expansion in the second half of the year.
New product development has also begun with the commencement of
a test to serve quality customers with longer-term loans of up to
78 weeks.
Improved collections in the first half resulted in annualised
impairment as a percentage of revenue moving back into our target
range at 30.0% (December 2012: 32.0%). This, together with the
increase in revenue, resulted in strong growth in net revenue of
18%. Other costs increased by 13% due to investment in
infrastructure to target faster growth and so the cost-income ratio
increased by 0.3 percentage points to 44.0% since December
2012.
We plan to build on this improved level of growth in Romania
during the second half of the year and credit strategies, marketing
activity and incentive schemes have been realigned to support this
objective.
Mexico
Strong growth continued in Mexico in the first half of the year
and resulted in reported profit doubling to GBP5.0M including a
GBP0.5M benefit from stronger FX rates.
We remain focussed firmly on our objective of achieving GBP33
profit per customer by 2015 and plan to deliver this through
increasing revenue per customer, maintaining impairment as a
percentage of revenue in our target range of 25% to 30% and
reducing the cost-income ratio. As a result of our ongoing actions,
the business in Mexico delivered excellent growth in credit issued
and annualised profit per customer increased to GBP17 (June 2012:
GBP12).
2013 2012 Change Change Change
GBPM GBPM GBPM % at CER
%
------------------------- ------- ------- ------- ------- --------
Customer numbers
(000s) 694 672 22 3.3 3.3
Credit issued 93.7 70.9 22.8 32.2 22.5
Average net receivables 98.5 72.1 26.4 36.6 26.4
------------------------- ------- ------- ------- ------- --------
Revenue 67.4 52.8 14.6 27.7 18.2
Impairment (21.4) (15.2) (6.2) (40.8) (30.5)
------------------------- ------- ------- ------- ------- --------
Net revenue 46.0 37.6 8.4 22.3 13.3
Finance costs (3.3) (2.3) (1.0) (43.5) (37.5)
Agents' commission (8.5) (6.6) (1.9) (28.8) (18.1)
Other costs (29.2) (26.2) (3.0) (11.5) (4.3)
------------------------- ------- ------- ------- ------- --------
Profit before taxation 5.0 2.5 2.5 100.0
------------------------- ------- ------- ------- ------- --------
The key driver of our strategy to increase revenue per customer
is the issuance of higher value loans to existing customers though
controlled credit easing. During the first half of the year, we
rolled out more relaxed credit rules in a further 13 branches and
these are now in place in 31 of our 56 locations.
Supporting our credit easing strategy, we are also looking to
drive faster growth by increasing customer numbers and refreshing
operational targets. We expanded our geographic footprint with the
opening of two branches in the first half of the year and plan
another branch launch in Q3. We also intend to further increase our
agent force and launch a test of our home credit operation in
Mexico City during the second half of the year.
During the first quarter, we began to test the live use of
credit bureau data on new customer applications in six branches.
Early results indicate that it will enhance prediction of new
customer performance and we have therefore rolled out the test
across the market.
These actions are helping us to accelerate growth and make
progress against our primary profit objective of GBP33 per customer
in Mexico. Customer numbers increased by 3% and we expect faster
growth in the second half of the year. Credit issued growth in the
first half increased by 23%, accelerating from 12% in the first
quarter to the significantly faster rate of 33% in Q2. This
contributed to revenue growth of 18%.
Collections performance remained good and annualised impairment
as a percentage of revenue remains in our target range at 29.9%
(December 2012: 28.3%). Other costs were very tightly controlled
and increased at a much slower rate than revenue. As a consequence,
the annualised cost-income ratio reduced by 2.7 percentage points
since the 2012 year end to 43.7%.
We are pleased with the progress made in Mexico and believe the
extension of new credit rules, geographic expansion and our
refreshed incentive programme will support further strong growth in
2013.
This report has been prepared solely to provide additional
information to shareholders to assess the Group's strategies and
the potential for those strategies to succeed. The report should
not be relied on by any other party or for any other purpose. The
report contains certain forward-looking statements. These
statements are made by the directors in good faith based on the
information available to them up to the time of their approval of
this report but such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
Percentage change figures for all performance measures, other than
profit before taxation and earnings per share, unless otherwise
stated, are quoted after restating prior year figures at a constant
exchange rate (CER) for 2013 in order to present the underlying
performance variance.
Investor relations and media contacts:
For further information contact:
RLM Finsbury Matthew Newton / Anastasia Gorokhova
+44 (0) 20 7251 3801
International Personal Finance Rachel Moran - Investor Relations
plc +44 (0)113 285 6798 / +44 (0)7760
167637
John Mitra - Media
+44 (0)113 285 6784 / +44 (0)7739
702230
International Personal Finance will host a conference call for
analysts and investors at 17.30hrs (BST) today. Dial-in details for
this call can be obtained from Matthew Newton at RLM Finsbury on
+44 (0) 20 7251 3801 or at IPF@RLMFinsbury.com.
A copy of this statement can be found on the Company's website -
www.ipfin.co.uk.
International Personal Finance plc
Condensed consolidated interim financial information for the six
months ended 30 June 2013
Consolidated income statement
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Notes GBPM GBPM GBPM
------------------------------------ ------ ----------- ----------- ------------
Revenue 4 360.3 316.0 651.7
Impairment 4 (108.4) (98.3) (176.2)
------------------------------------ ------ ----------- ----------- ------------
Revenue less impairment 251.9 217.7 475.5
----------- ----------- ------------
Finance costs (23.7) (20.4) (41.6)
Other operating costs (55.1) (48.6) (100.3)
Administrative expenses (130.8) (117.3) (238.5)
------------------------------------ ------ ----------- ----------- ------------
Total costs (209.6) (186.3) (380.4)
----------- ----------- ------------
Profit before taxation,
exceptional items and fair
value adjustments 4 42.3 31.4 95.1
Exceptional items 4, 8 12.4 (4.8) (4.8)
Fair value adjustments 4 - (0.8) -
----------- ----------- ------------
Profit before taxation 4 54.7 25.8 90.3
Tax (expense)/income - UK - - 4.4
- overseas (14.8) (7.2) (20.6)
------------------------------------ ------ ----------- ----------- ------------
Total tax expense 5 (14.8) (7.2) (16.2)
----------- ----------- ------------
Profit after taxation attributable
to owners of the Company 39.9 18.6 74.1
------------------------------------ ------ ----------- ----------- ------------
Earnings per share - total
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Notes pence pence pence
--------- ------ ----------- ----------- ------------
Basic 6 16.20 7.33 29.42
Diluted 6 15.73 7.17 28.63
--------- ------ ----------- ----------- ------------
Earnings per share before exceptional items and fair value
adjustments
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Notes pence pence pence*
--------- ------ ----------- ----------- ------------
Basic 6 12.55 8.91 27.55
Diluted 6 12.08 8.75 26.76
--------- ------ ----------- ----------- ------------
* Before exceptional items and adjusted to an underlying tax
rate of 27%
Dividend per share
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Notes pence pence pence
------------------ ------ ----------- ----------- ------------
Interim dividend 7 3.80 3.23 3.23
Final dividend 7 - - 4.51
------------------ ------ ----------- ----------- ------------
Total dividend 3.80 3.23 7.74
------------------ ------ ----------- ----------- ------------
Dividends paid
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Notes GBPM GBPM GBPM
----------------------------- ------ ----------- ----------- ------------
Interim dividend of 3.80
pence
(2012: interim dividend
of 3.23 pence) per share 7 - - 8.2
Final 2012 dividend of 4.51
pence
(2012: final 2011 dividend
of 4.10 pence) per share 7 11.0 10.4 10.4
----------------------------- ------ ----------- ----------- ------------
Total dividends paid 11.0 10.4 18.6
----------------------------- ------ ----------- ----------- ------------
Consolidated statement of comprehensive income
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
GBPM GBPM GBPM
--------------------------------------- ----------- ----------- ------------
Profit after taxation attributable
to owners of the Company 39.9 18.6 74.1
----------- ----------- ------------
Other comprehensive (expense)/income:
Items that may subsequently be
reclassified to income statement:
Exchange (losses)/gains on foreign
currency translations (see note
15) (0.4) (3.6) 11.7
Net fair value (losses)/gains
- cash flow hedges (3.6) (1.0) 2.1
Tax credit/(charge) on items that
may be reclassified 0.1 0.1 (0.6)
Items that will not subsequently
be reclassified to income statement:
Actuarial gains on retirement
benefit obligation 1.5 1.8 0.6
Tax charge on items that will
not be reclassified (0.3) (0.5) (0.1)
----------- ----------- ------------
Other comprehensive (expense)/income
net of taxation (2.7) (3.2) 13.7
--------------------------------------- ----------- ----------- ------------
Total comprehensive income for
the period attributable to owners
of the Company 37.2 15.4 87.8
--------------------------------------- ----------- ----------- ------------
Consolidated balance sheet
Unaudited Unaudited Audited
30 June 30 June 31 December
2013 2012 2012
Notes GBPM GBPM GBPM
---------------------------------- ------ ---------- ---------- ------------
Assets
Non-current assets
Intangible assets 2.6 3.1 3.2
Property, plant and equipment 9 25.4 29.0 28.3
Deferred tax assets 57.3 47.7 57.1
---------------------------------- ------ ---------- ---------- ------------
85.3 79.8 88.6
---------- ---------- ------------
Current assets
Amounts receivable from customers
- due within one year 640.6 552.1 627.2
- due in more than one
year 46.2 12.3 23.1
---------- ---------- ------------
10 686.8 564.4 650.3
Derivative financial instruments 1.9 - -
Cash and cash equivalents 63.1 19.5 24.2
Other receivables 22.8 19.4 15.4
Current tax assets - - 2.0
---------------------------------- ------ ---------- ---------- ------------
774.6 603.3 691.9
---------- ---------- ------------
Total assets 4 859.9 683.1 780.5
---------- ---------- ------------
Liabilities
Current liabilities
Borrowings 11 (10.6) (0.6) (16.4)
Derivative financial instruments (1.5) (3.4) (1.4)
Trade and other payables (104.1) (77.9) (68.2)
Current tax liabilities (14.7) (19.7) (21.1)
---------------------------------- ------ ---------- ---------- ------------
(130.9) (101.6) (107.1)
---------- ---------- ------------
Non-current liabilities
Retirement benefit obligation 12 (1.2) (1.9) (3.2)
Borrowings 11 (323.4) (245.7) (294.4)
---------------------------------- ------ ---------- ---------- ------------
(324.6) (247.6) (297.6)
---------- ---------- ------------
Total liabilities (455.5) (349.2) (404.7)
---------------------------------- ------ ---------- ---------- ------------
Net assets 404.4 333.9 375.8
---------------------------------- ------ ---------- ---------- ------------
Equity attributable to owners
of the Company
Called-up share capital 24.9 25.7 24.9
Other reserve (22.5) (22.5) (22.5)
Foreign exchange reserve 13.3 (1.6) 13.7
Hedging reserve (3.8) (2.7) (0.3)
Shares held by employee
trust (4.2) (5.7) (4.5)
Capital redemption reserve 0.8 - 0.8
Retained earnings 395.9 340.7 363.7
---------------------------------- ------ ---------- ---------- ------------
Total equity 404.4 333.9 375.8
---------------------------------- ------ ---------- ---------- ------------
Consolidated statement of changes in equity
Unaudited
----------------------------------------------------------
Called-up Other Other Retained Total
share reserve reserves* earnings
capital GBPM
GBPM GBPM GBPM GBPM
--------------------------------------- ---------- --------- ----------- ---------- ----------
At 1 January 2012 25.7 (22.5) (5.5) 330.0 327.7
Comprehensive income:
Profit after taxation for
the period - - - 18.6 18.6
Other comprehensive (expense)/income:
Exchange losses on foreign
currency translations - - (3.6) - (3.6)
Net fair value losses - cash
flow hedges - - (1.0) - (1.0)
Actuarial gains on retirement
benefit obligation - - - 1.8 1.8
Tax credit/(charge) on other
comprehensive (expense)/income - - 0.1 (0.5) (0.4)
---------- --------- ----------- ---------- ----------
Total other comprehensive
(expense)/income - - (4.5) 1.3 (3.2)
Total comprehensive (expense)/income
for the period - - (4.5) 19.9 15.4
---------- --------- ----------- ---------- ----------
Transactions with owners:
Share-based payment adjustment
to reserves - - - 1.2 1.2
Dividends paid to Company
shareholders - - - (10.4) (10.4)
--------------------------------------- ---------- --------- ----------- ---------- ----------
At 30 June 2012 25.7 (22.5) (10.0) 340.7 333.9
---------- --------- ----------- ---------- ----------
At 1 July 2012 25.7 (22.5) (10.0) 340.7 333.9
Comprehensive income:
Profit after taxation for
the period - - - 55.5 55.5
Other comprehensive income/(expense):
Exchange gains on foreign
currency translation - - 15.3 - 15.3
Net fair value gains - cash
flow hedges - - 3.1 - 3.1
Actuarial losses on retirement
benefit obligation - - - (1.2) (1.2)
Tax (charge)/credit on other
comprehensive income/(expense) - - (0.7) 0.4 (0.3)
---------- --------- ----------- ---------- ----------
Total other comprehensive
income/(expense) - - 17.7 (0.8) 16.9
Total comprehensive income
for the period - - 17.7 54.7 72.4
---------- --------- ----------- ---------- ----------
Transactions with owners:
Share-based payment adjustment
to reserves - - - 1.9 1.9
Deferred tax on share-based
payment transactions - - - 0.8 0.8
Own shares acquired (0.8) - 0.8 (25.0) (25.0)
Shares granted from employee
trust - - 1.2 (1.2) -
Dividends paid to Company
shareholders - - - (8.2) (8.2)
--------------------------------------- ---------- --------- ----------- ---------- ----------
At 31 December 2012 24.9 (22.5) 9.7 363.7 375.8
--------------------------------------- ---------- --------- ----------- ---------- ----------
Consolidated statement of changes in equity (continued)
Unaudited
Called-up Other Other Retained Total
share reserve reserves* earnings
capital GBPM
GBPM GBPM GBPM GBPM
--------------------------------------- ---------- --------- ----------- ---------- --------
At 1 January 2013 24.9 (22.5) 9.7 363.7 375.8
Comprehensive income:
Profit after taxation for
the period - - - 39.9 39.9
Other comprehensive (expense)/income:
Exchange losses on foreign
currency translation (see
note 15) - - (0.4) - (0.4)
Net fair value losses - cash
flow hedges - - (3.6) - (3.6)
Actuarial gains on retirement
benefit obligation - - - 1.5 1.5
Tax credit/(charge) on other
comprehensive (expense)/income - - 0.1 (0.3) (0.2)
---------- --------- ----------- ---------- --------
Total other comprehensive
(expense)/income - - (3.9) 1.2 (2.7)
Total comprehensive (expense)/income
for the period - - (3.9) 41.1 37.2
---------- --------- ----------- ---------- --------
Transactions with owners:
Share-based payment adjustment
to reserves - - - 2.4 2.4
Shares granted from employee
trust - - 0.3 (0.3) -
Dividends paid to Company
shareholders - - - (11.0) (11.0)
--------------------------------------- ---------- --------- ----------- ---------- --------
At 30 June 2013 24.9 (22.5) 6.1 395.9 404.4
--------------------------------------- ---------- --------- ----------- ---------- --------
* Includes foreign exchange reserve, hedging reserve, shares
held by employee trust and capital redemption reserve.
Consolidated cash flow statement
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Notes GBPM GBPM GBPM
---------------------------------- ------ ----------- ----------- ------------
Cash flows from operating
activities
Cash generated from operating
activities 14 61.0 64.8 98.2
---------------------------------- ------ ----------- ----------- ------------
Established businesses 74.9 62.3 89.6
Developing businesses (13.9) 2.5 8.6
----------- ----------- ------------
14 61.0 64.8 98.2
---------------------------------- ------ ----------- ----------- ------------
Finance costs paid (11.4) (10.8) (40.9)
Income tax paid (19.4) (11.7) (28.1)
----------- ----------- ------------
Net cash generated from
operating activities 30.2 42.3 29.2
----------- ----------- ------------
Cash flows from investing
activities
Purchases of property,
plant and equipment 9 (5.9) (4.4) (9.4)
Proceeds from sale of
property, plant and equipment 0.6 1.6 2.5
Purchases of intangible
assets - (0.5) (1.5)
----------- ----------- ------------
Net cash used in investing
activities (5.3) (3.3) (8.4)
---------------------------------- ------ ----------- ----------- ------------
Net cash from operating
and investing activities
Established businesses 47.5 43.9 30.9
Developing businesses (22.6) (4.9) (10.1)
----------- ----------- ------------
24.9 39.0 20.8
---------------------------------- ------ ----------- ----------- ------------
Cash flows from financing
activities
Proceeds from borrowings 89.8 17.9 54.6
Repayment of borrowings (65.0) (44.7) (25.9)
Dividends paid to Company
shareholders 7 (11.0) (10.4) (18.6)
Acquisition of own shares - - (25.0)
----------- ----------- ------------
Net cash generated from/(used
in) financing activities 13.8 (37.2) (14.9)
----------- ----------- ------------
Net increase in cash and
cash equivalents 38.7 1.8 5.9
Cash and cash equivalents
at beginning of period 24.2 17.9 17.9
Exchange gains/(losses)
on cash and cash equivalents 0.2 (0.2) 0.4
---------------------------------- ------ ----------- ----------- ------------
Cash and cash equivalents
at end of period 63.1 19.5 24.2
---------------------------------- ------ ----------- ----------- ------------
Established businesses: Poland, Czech-Slovakia, Hungary and UK
costs.
Developing businesses: Mexico and Romania.
Notes to the condensed consolidated interim financial
information for the six months ended 30 June 2013
1. Basis of preparation
This unaudited condensed consolidated interim financial
information for the six months ended 30 June 2013 has been prepared
in accordance with the Disclosure and Transparency Rules ('DTR') of
the Financial Conduct Authority and with IAS 34 'Interim Financial
Reporting' as adopted by the European Union. This condensed
consolidated interim financial information should be read in
conjunction with the Annual Report and Financial Statements ('the
Financial Statements') for the year ended 31 December 2012, which
have been prepared in accordance with International Financial
Reporting Standards ('IFRSs') as adopted by the European Union.
This condensed consolidated interim financial information was
approved for release on 30 July 2013.
This condensed consolidated interim financial information does
not comprise statutory accounts within the meaning of Section 434
of the Companies Act 2006. The Financial Statements for the year
ended 31 December 2012 were approved by the Board on 6 March 2013
and delivered to the Registrar of Companies. The Financial
Statements contained an unqualified audit report and did not
include an emphasis of matter paragraph or any statement under
Section 498 of the Companies Act 2006. The Financial Statements are
available on the Group's website (www.ipfin.co.uk).
The directors are satisfied that the Group has adequate
resources to continue in operational existence for the foreseeable
future, a period of not less than 12 months from the date of this
report. Accordingly they continue to adopt the going concern basis
in preparing the condensed consolidated interim financial
information.
The accounting policies adopted in this condensed consolidated
interim financial information are consistent with those adopted in
the Financial Statements for the year ended 31 December 2012 and
are detailed in those Financial Statements. The presentation of the
2012 interim exceptional item has been amended in the income
statement to enable comparison with subsequent periods, and the
segmental split of profit before taxation for 2012 has been
restated to reflect the change in finance cost allocation announced
in the 2012 Financial Statements.
The following new standards, amendments to standards and
interpretations are mandatory for the first time for the financial
year beginning 1 January 2013, but do not have any impact on the
Group, except as noted below:
* Annual improvement to IFRSs: 2009-2011 cycle;
* IFRS 1 (amendment) 'Severe hyperinflation and removal of
fixed dates for first-time adopters';
* IFRS 1 (amendment) 'Government loans';
* IFRS 7 (amendment) 'Disclosures - offsetting financial assets
and financial liabilities';
* IFRS 13 'Fair value measurement'. This standard has not
materially impacted the measurement of assets and liabilities
of the Group that are held at fair value, however it has
introduced new disclosures;
* IAS 1 (amendment) 'Presentation of items of other comprehensive
income';
* IAS 12 (amendment) 'Deferred tax: recovery of underlying
assets'; and
Notes to the condensed consolidated interim financial
information for the six months ended 30 June 2013 (continued)
1. Basis of preparation (continued)
* IAS 19 (revised) 'Employee benefits'. This standard has
impacted the accounting for the Group's defined benefit
scheme by replacing the interest cost and expected return
on plan assets with a net interest charge on the net defined
benefit liability. There has been no significant change
in profit or other comprehensive income as a result of this
change.
The following standards, interpretations and amendments to
existing standards are not yet effective and have not been early
adopted by the Group:
* Amendments to IFRS 10, IFRS 12 and IAS 27 'Investment entities';
* IFRS 9 'Financial instruments'. This standard is the first
step in the process to replace IAS 39, 'Financial instruments:
recognition and measurement'. IFRS 9 introduces new requirements
for classifying and measuring financial assets and is likely
to affect the Group's accounting for its financial assets.
The standard is not applicable until 1 January 2015 and
has not yet been endorsed by the European Union. The Group
is in the process of assessing IFRS 9's full impact;
* IFRS 10 'Consolidated Financial Statements';
* IFRS 11 'Joint arrangements';
* IFRS 12 'Disclosure of interests in other entities';
* IAS 27 (revised) 'Separate Financial Statements';
* IAS 28 (revised) 'Investments in associates and joint ventures';
and
* IAS 32 (amendment) 'Offsetting financial assets and financial
liabilities'.
2. Principal risks and uncertainties
We operate a formal risk management process, the details of
which are set out on page 32 of the Financial Statements for the
year ended 31 December 2012. Details of our principal risks can be
found on pages 32 to 35 of the Financial Statements and are
summarised below:
* the risk that we do not comply with the legal and regulatory
regimes in which we operate or that those regimes change;
* the risk that our business does not recognise or respond
to changes in the economic environment within our markets;
* the risk that we do not recognise or respond to competitive
conditions in our markets which impacts on our performance;
* the risk that our agents and people suffer personal accident
or assault as they complete their daily activities;
* the risk that we are unable to deliver our strategy due to
the unavailability of quality people;
* the risk that we lose business or customer data which impacts
our performance and customer relationships;
* the risk of failure to realise the intended benefits from
system and process change; and
* the risk of our business suffering reputational damage due
to operational failure, ill-informed comment or malpractice.
The directors consider that there have been a number of changes
to the environment in which the Group operates that have led to the
reappraisal of the significance of certain risks. The directors now
believe there are two additional principal risks and uncertainties,
which as well as those identified at the 2012 year-end, above, have
the potential to impact our results or financial position during
the remaining six months of 2013:
Notes to the condensed consolidated interim financial
information for the six months ended 30 June 2013 (continued)
2. Principal risks and uncertainties (continued)
* as a result of the changing competitive environment and in
particular the quantity of digital loan propositions entering
the market, the risk that the business operates a product
strategy which does not meet our customer requirements; and
* as a result of the increasing concern about threats to cyber
security, particularly in the financial services sector,
the risk that such a threat may lead to a disruption to systems
and processes from which the Group is unable to recover in
a reasonable time frame.
3. Related parties
The Group has not entered into any material transactions with
related parties in the first six months of the year.
4. Segment analysis
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
GBPM GBPM GBPM
-------------------------------------- ----------- ----------- -------------
Revenue
Poland 142.4 132.2 268.8
Czech-Slovakia 71.4 66.8 133.4
Hungary 47.4 36.4 78.2
Mexico 67.4 52.8 114.1
Romania 31.7 27.8 57.2
-------------------------------------- ----------- ----------- -------------
360.3 316.0 651.7
----------- ----------- -------------
Impairment
Poland 45.0 45.3 79.5
Czech-Slovakia 19.3 19.3 34.2
Hungary 11.9 7.7 11.9
Mexico 21.4 15.2 32.3
Romania 10.8 10.8 18.3
-------------------------------------- ----------- ----------- -------------
108.4 98.3 176.2
----------- ----------- -------------
Profit before taxation
Poland 23.1 21.1 54.9
Czech-Slovakia 13.6 10.9 27.1
Hungary 6.5 3.5 12.5
UK costs(1) (6.4) (6.0) (13.1)
Mexico 5.0 2.5 9.2
Romania 0.5 (0.6) 4.5
-------------------------------------- ----------- ----------- -------------
Profit before taxation, exceptional
items and fair value adjustments 42.3 31.4 95.1
Exceptional items(1) (see note
8) 12.4 (4.8) (4.8)
Fair value adjustments(1) - (0.8) -
-------------------------------------- ----------- ----------- -------------
Profit before taxation 54.7 25.8 90.3
-------------------------------------- ----------- ----------- -------------
(1) Although UK costs, exceptional items and the fair value adjustments
are not classified as a separate segment in accordance with IFRS
8 'Operating Segments', they are shown separately above in order
to provide a reconciliation to profit before taxation.
Notes to the condensed consolidated interim financial information
for the six months ended 30 June 2013 (continued)
4. Segment analysis (continued)
Segment assets Unaudited Unaudited Audited
30 June 30 June 31 December
2013 2012 2012
GBPM GBPM GBPM
-------------------------------------- ----------- ----------- -------------
Poland 296.4 247.3 291.1
Czech-Slovakia 181.5 163.4 172.8
Hungary 112.2 87.9 104.8
UK(2) 67.5 31.3 34.5
Mexico 139.9 97.3 116.9
Romania 62.4 55.9 60.4
-------------------------------------- ----------- ----------- -------------
Total 859.9 683.1 780.5
-------------------------------------- ----------- ----------- -------------
(2) Although the UK is not classified as a separate segment in
accordance with IFRS 8 'Operating Segments', it is shown separately
above in order to provide a reconciliation to consolidated total
assets.
The segments shown above are the segments for which management
information is presented to the Board which is deemed to be the
Group's chief operating decision maker. The Board considers the
business from a geographic perspective. IFRS key statistics
information analysed by market is available on the Group's website
(http://www.ipfin.co.uk/investors/financials/key-performance-statistics.aspx).
5. Tax expense
The tax expense for the period has been calculated by applying
the directors' best estimate of the effective tax rate for the
year, which is 27% (30 June 2012: 28%, 31 December 2012: 18%), to
the profit for the period.
6. Earnings per share
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
pence pence pence
--------------------------- ----------- ----------- ------------
Basic EPS 16.20 7.33 29.42
Dilutive effect of awards (0.47) (0.16) (0.79)
--------------------------- ----------- ----------- ------------
Diluted EPS 15.73 7.17 28.63
--------------------------- ----------- ----------- ------------
Basic earnings per share (EPS) is calculated by dividing the
earnings attributable to shareholders of GBP39.9M (30 June 2012:
GBP18.6M, 31 December 2012: GBP74.1M) by the weighted average
number of shares in issue during the period of 246.3M which has
been adjusted to exclude the weighted average number of shares held
by the employee trust (30 June 2012: 253.7M, 31 December 2012:
251.9M).
Notes to the condensed consolidated interim financial
information for the six months ended 30 June 2013 (continued)
6. Earnings per share (continued)
For diluted EPS the weighted average number of shares has been
adjusted to 253.7M (30 June 2012: 259.4M, 31 December 2012: 258.8M)
to assume conversion of all dilutive potential ordinary share
options relating to employees of the Group.
Earnings per share before exceptional items and fair value
adjustments
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
pence pence pence*
--------- ----------- ----------- ------------
Basic 12.55 8.91 27.55
Diluted 12.08 8.75 26.76
--------- ----------- ----------- ------------
* Before exceptional items and adjusted to an underlying tax
rate of 27%
Earnings per share before exceptional items and fair value
adjustments is calculated by dividing the earnings attributable to
shareholders excluding exceptional items of GBP30.9M (30 June 2012:
GBP22.6M, 31 December 2012: GBP69.4M) by the weighted average
number of shares in issue during the period.
7. Dividends
The final dividend for 2012 of 4.51 pence per share was paid to
shareholders on 3 May 2013 at a total cost to the Group of
GBP11.0M. The directors propose an interim dividend in respect of
the financial year ended 31 December 2013 of 3.80 pence per share
payable to shareholders who are on the register at close of
business on 6 September 2013. This will amount to a total dividend
payment of GBP9.4M based upon the number of shares in issue as at
30 June 2013. This dividend is not reflected as a liability in the
balance sheet as at 30 June 2013.
8. Exceptional items
Profit before taxation includes a GBP15.9M profit on the sale of
impaired receivables originating from loans issued in Poland and a
write down in the carrying value of IT assets of GBP3.5M. The
impairment of IT assets arose from a review of the future
technology platforms that we need to support our growth strategy,
which identified assets that are no longer compatible with this
vision.
The exceptional charge in 2012 related to the cost of a
management restructuring exercise designed to strengthen UK
functional support teams and refresh the country management
teams.
Notes to the condensed consolidated interim financial
information for the six months ended 30 June 2013 (continued)
9. Property, plant and equipment
Unaudited Unaudited Audited
30 June 30 June 31 December
2013 2012 2012
GBPM GBPM GBPM
----------------------------------- ---------- ---------- ------------
Net book value at start of period 28.3 30.6 30.6
Exchange adjustments 0.2 - 0.4
Additions 5.9 4.4 9.4
Disposals (4.1) (1.5) (2.3)
Charge to the income statement (4.9) (4.5) (9.8)
----------------------------------- ---------- ---------- ------------
Net book value at end of period 25.4 29.0 28.3
----------------------------------- ---------- ---------- ------------
Included within disposals is a write down in the carrying value
of GBP3.5M in relation to IT assets, which has been included as an
exceptional item (see note 8).
As at 30 June 2013 the Group had GBP6.2M of capital expenditure
commitments with third parties that were not provided for (30 June
2012: GBP2.2M, 31 December 2012: GBP3.3M).
10. Amounts receivable from customers
Unaudited Unaudited Audited
30 June 30 June 31 December
2013 2012 2012
GBPM GBPM GBPM
------------------- ---------- ---------- ------------
Poland 270.4 225.4 264.0
Czech-Slovakia 159.5 141.9 154.6
Hungary 95.2 73.2 89.1
Mexico 103.7 73.1 87.1
Romania 58.0 50.8 55.5
------------------- ---------- ---------- ------------
Total receivables 686.8 564.4 650.3
------------------- ---------- ---------- ------------
All lending is in the local currency of the country in which the
loan is issued.
Amounts receivable from customers are held at amortised cost and
are equal to the expected future cash flows receivable discounted
at the average effective interest rate ('EIR') of 129% (30 June
2012: 132%, 31 December 2012: 131%). All amounts receivable from
customers are at fixed interest rates. The average period to
maturity of the amounts receivable from customers is 5.5 months (30
June 2012: 5.1 months, 31 December 2012: 5.4 months).
The Group has one class of loan receivable and no collateral is
held in respect of any customer receivables. The Group does not use
an impairment provision account for recording impairment losses
and, therefore, no analysis of gross customer receivables less
provision for impairment is presented.
Revenue recognised on amounts receivable from customers which
have been impaired was GBP208.6M (6 months ended 30 June 2012:
GBP178.8M, 12 months ended 31 December 2012: GBP370.1M).
Notes to the condensed consolidated interim financial
information for the six months ended 30 June 2013 (continued)
11. Borrowings
The maturity of the Group's external bond and external bank
borrowings is as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2013 2012 2012
GBPM GBPM GBPM
------------------------------- ---------- ---------- ------------
Repayable:
- in less than one year 10.6 0.6 16.4
---------- ---------- ------------
- between one and two years 41.8 8.5 14.3
- between two and seven years 281.6 237.2 280.1
---------- ---------- ------------
323.4 245.7 294.4
---------- ---------- ------------
Total borrowings 334.0 246.3 310.8
------------------------------- ---------- ---------- ------------
The maturity of the Group's external bond and external bank
facilities is as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2013 2012 2012
GBPM GBPM GBPM
------------------------------- ---------- ---------- ------------
Repayable:
- on demand 11.7 10.9 11.4
- in less than one year 86.1 6.2 64.8
- between one and two years 179.5 70.3 26.8
- between two and seven years 285.5 359.5 367.3
---------- ---------- ------------
Total facilities 562.8 446.9 470.3
------------------------------- ---------- ---------- ------------
12. Retirement benefit obligation
The amounts recognised in the balance sheet in respect of the
retirement benefit obligation are as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2013 2012 2012
GBPM GBPM GBPM
----------------------------------- ---------- ---------- ------------
Equities 17.8 16.0 16.2
Bonds 7.6 6.2 6.9
Index-linked gilts 6.2 6.2 4.5
Other - - 2.4
---------- ---------- ------------
Total fair value of scheme assets 31.6 28.4 30.0
Present value of funded defined
benefit obligation (32.8) (30.3) (33.2)
----------------------------------- ---------- ---------- ------------
Net obligation recognised in the
balance sheet (1.2) (1.9) (3.2)
----------------------------------- ---------- ---------- ------------
The charge recognised in the income statement in respect of
defined benefit pension costs is GBPnil (6 months ended 30 June
2012: GBPnil, 12 months ended 31 December 2012: GBPnil).
Notes to the condensed consolidated interim financial
information for the six months ended 30 June 2013 (continued)
13. Fair values of financial assets and liabilities
IFRS 7 requires disclosure of fair value measurements of
derivative financial instruments by level of the following fair
value measurement hierarchy:
* quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1);
* inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from
prices) (level 2); and
* inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs) (level 3).
All of the Group's financial instruments held at fair value fall
into hierarchy level 2 (30 June 2012 and 31 December 2012: all of
the Group's financial instruments held at fair value fell into
hierarchy level 2). The fair value of derivative financial
instruments has been calculated by discounting expected future cash
flows using interest rate yield curves and forward foreign exchange
rates prevailing at the relevant period end.
Except as detailed in the following table, the carrying value of
financial assets and liabilities recorded at amortised cost, which
are all short-term in nature, are a reasonable approximation of
their fair value:
Carrying value Fair value
---------------------------------- ----------------------------------
Unaudited Unaudited Audited Unaudited Unaudited Audited
30 30 31 30 30 31
June June December June June December
2013 2012 2012 2013 2012 2012
GBPM GBPM GBPM GBPM GBPM GBPM
-------------------- ---------- ---------- ---------- ---------- ---------- ----------
Financial assets
Amounts receivable
from customers 686.8 564.4 650.3 924.2 788.3 919.4
686.8 564.4 650.3 924.2 788.3 919.4
---------- ---------- ---------- ---------- ---------- ----------
Financial liabilities
Bonds 326.8 222.0 241.6 356.0 232.3 272.8
Bank borrowings 7.2 24.3 69.2 7.2 24.3 69.2
334.0 246.3 310.8 363.2 256.6 342.0
-------------------- ---------- ---------- ---------- ---------- ---------- ----------
The fair value of amounts receivable from customers has been
derived by discounting expected future cash flows (net of
collection costs) at the Group's weighted average cost of
capital.
The fair value of the bonds has been calculated by reference to
their market value.
The carrying value of bank borrowings is deemed to be a good
approximation of their fair value. Bank borrowings can be repaid
within six months if the Group decides not to roll over for further
periods up to the contractual repayment date. The impact of
discounting would therefore be negligible.
Notes to the condensed consolidated interim financial
information for the six months ended 30 June 2013 (continued)
14. Reconciliation of profit after taxation to cash generated
from operating activities
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
GBPM GBPM GBPM
---------------------------------------- ----------- ----------- ------------
Profit after taxation 39.9 18.6 74.1
Adjusted for:
Tax charge 14.8 7.2 16.2
Finance costs 23.7 20.4 41.6
Share-based payment charge 1.6 1.2 2.0
Depreciation of property, plant
and equipment (see note 9) 4.9 4.5 9.8
Loss/(profit) on disposal of
property, plant and equipment 3.5 (0.1) (0.2)
Amortisation of intangible assets 0.6 1.0 1.9
Changes in operating assets and
liabilities:
Amounts receivable from customers (38.2) (10.6) (74.4)
Other receivables (9.4) (0.5) 4.1
Trade and other payables 26.4 11.3 10.0
Retirement benefit obligation (0.5) (0.3) (0.2)
Derivative financial instruments (6.3) 12.1 13.3
---------------------------------------- ----------- ----------- ------------
Cash generated from operating
activities 61.0 64.8 98.2
---------------------------------------- ----------- ----------- ------------
Included within disposals is a write down in the carrying value
of GBP3.5M in relation to IT assets, which has been included as an
exceptional item (see note 8).
Notes to the condensed consolidated interim financial
information for the six months ended 30 June 2013 (continued)
15. Average and closing foreign exchange rates
The table below shows the average exchange rates, including the
impact of hedging in 2012, for the relevant reporting periods and
closing exchange rates at the relevant period ends. From 2013 the
Group no longer hedges the rates at which currency profits are
translated into sterling. This change reflects the fact that
underlying currency cash flows are the main driver of shareholder
value and the fact that currency hedges as previously executed do
not protect the business against long-term exchange rate
movements.
Average Closing Average Closing Average Closing
Year
H1 June H1 June 2012 December
2012
2013 2013 2012 2012
---------------- -------- -------- -------- -------- -------- ----------
Poland 4.9 5.1 5.3 5.3 5.4 5.0
Czech Republic 30.1 30.4 31.0 31.6 30.9 30.8
Slovakia 1.2 1.2 1.2 1.2 1.2 1.2
Hungary 349.1 351.4 381.3 363.5 378.3 357.5
Mexico 19.4 20.5 21.1 21.9 21.5 20.9
Romania 5.2 5.3 5.2 5.5 5.2 5.5
---------------- -------- -------- -------- -------- -------- ----------
The GBP0.4M exchange loss on foreign currency translations shown
within the consolidated statement of comprehensive income arises on
retranslation of net assets denominated in currencies other than
sterling, due to the change in foreign exchange rates against
sterling between December 2012 and June 2013 shown in the table
above.
Responsibility statement
The following statement is given by each of the directors:
namely; Gerard Ryan, Chief Executive Officer; David Broadbent,
Finance Director; Christopher Rodrigues, Chairman; Tony Hales,
Non-executive director; Edyta Kurek, Non-executive director;
Richard Moat, Non-executive director; and Nicholas Page,
Non-executive director.
The directors confirm that to the best of their knowledge:
* the condensed consolidated interim financial information
has been prepared in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the European Union;
* the Half-year Financial Report includes a fair review of
the information required by DTR 4.2.7 (indication of important
events during the first six months and description of principal
risks and uncertainties for the remaining six months of the
year); and
* the Half-year Financial Report includes a fair view of the
information required by DTR 4.2.8 (disclosure of related
parties' transactions and changes therein).
The directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Independent review report to the members of International
Personal Finance plc
We have been engaged by International Personal Finance plc ("the
Company") to review the condensed consolidated interim financial
information in the Half-year Financial Report for the six months
ended 30 June 2013 which comprises the consolidated income
statement, consolidated statement of comprehensive income,
consolidated balance sheet, consolidated statement of changes in
equity, consolidated cash flow statement and related notes 1 to 15.
We have read the other information contained in the Half-year
Financial Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed consolidated interim financial information.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The Half-year Financial Report is the responsibility of, and has
been approved by, the directors. The directors are responsible for
preparing the Half-year Financial Report in accordance with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 1, the Annual Report and Financial
Statements of the Group are prepared in accordance with IFRSs as
adopted by the European Union. The condensed consolidated interim
financial information included in this Half-year Financial Report
has been prepared in accordance with International Accounting
Standard 34, "Interim Financial Reporting," as adopted by the
European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed consolidated interim financial information in the
Half-year Financial Report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Independent review report to the members of International
Personal Finance plc
(continued)
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated interim
financial information in the Half-year Financial Report for the six
months ended 30 June 2013 is not prepared, in all material
respects, in accordance with International Accounting Standard 34
as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
Leeds, United Kingdom
30 July 2013
This information is provided by RNS
The company news service from the London Stock Exchange
END
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