International Personal Finance Plc Q3 2017 Trading Update (4237U)
October 24 2017 - 1:00AM
UK Regulatory
TIDMIPF
RNS Number : 4237U
International Personal Finance Plc
24 October 2017
International Personal Finance
Q3 2017 trading update
24 October 2017
Highlights
-- Group Q3 credit issued growth of 5%
o Mexico home credit growth of 6%
o European home credit contracted by 3%
o IPF Digital growth of 40%
-- Good credit quality - group annualised impairment as a
percentage of revenue in target range at 26.2%
-- European home credit - trading in line with expectations
-- Mexico home credit - good underlying performance in Q3
but operational disruption caused by earthquakes in September
-- IPF Digital - strong top-line growth continues in established
and new markets
-- No legislative development on the Polish total cost of
credit proposals. Legislative process continues on proposed
changes to Polish Corporate Income Tax law
-- GBP163M of headroom on debt facilities at 30 September
2017
In order to show the underlying performance of the Group all
trading metrics in this update exclude our Slovakian and Lithuanian
home credit businesses which, as previously announced, are being
wound down.
Group Q3 overview
We delivered credit issued growth of 5% driven by strong
performances across IPF Digital and Mexico home credit. Credit
quality is good with annualised impairment as a percentage of
revenue at 26.2% and within our target range of 25% to 30%.
Home credit
Credit issued in home credit was flat compared to Q3 2016,
reflecting growth in Mexico offset by a contraction in our European
businesses. Annualised impairment as a percentage of revenue was
24.3% compared to 25.4% at the 2017 half year.
Home credit - Europe
In Northern Europe, credit issued contracted by 2% driven by
continued shrinkage in the Czech Republic where competition remains
intense. Poland reported credit issued growth of 2% supported by
our Provident-branded digital offering. Our collections performance
overall was good and annualised impairment as a percentage of
revenue was 23.3% compared to 22.7% at the 2017 half year.
Credit issued in our Southern Europe business reduced by 3%
which reflected continued good growth in Hungary of 10% offset by a
contraction of 17% in Romania due to revised creditworthiness
assessments introduced in January. A good underlying collections
performance and significant debt sales in Romania resulted in
annualised impairment as a percentage of revenue improving to 13.6%
compared to 20.5% at the 2017 half year.
Home credit - Mexico
We continued to deliver a good operational performance during
July and August. September's performance, however, was adversely
impacted by the earthquakes in Mexico which caused widespread
disruption for many of our field-based operations. We reported
credit issued growth of 6% for the quarter, reflecting growth of
16% in July and August and a contraction of 7% in September. The
earthquakes impacted our collections performance and, consequently,
annualised impairment as a percentage of revenue was 34.8% compared
to 34.0% at the 2017 half year.
We have seen improvements in operating performance in October,
but expect these events to impact our full-year performance. We now
expect credit issued growth for the year as a whole to be in the
region of 12% compared to our previous guidance of around 15%. We
expect impairment as a percentage of revenue to be at a similar
level to that reported at our 2017 half-year results against our
original target of around 32%.
IPF Digital
Our IPF Digital business continues to grow strongly. For the
division as a whole, we increased credit issued by 40%. This was
driven by strong growth in the new digital markets of 83% and
continued good growth in the established markets of 21% as a result
of strong CRM activities. Annualised impairment as a percentage of
revenue is 41.1% - 5.4ppts higher than at the 2017 half year
reflecting good credit performance in our established markets and
the increased weighting of our new markets in the portfolio.
However, we continue to expect to see improving impairment trends
as the new markets mature.
Regulation
There is no update from the Polish Ministry of Justice on its
proposed reduction to the existing non-interest pricing cap in
Poland and we continue to engage with various Government ministries
and interested parties to encourage a more positive solution that
is good for consumers and business.
As indicated in our statement of 4 October 2017, a comprehensive
set of proposed changes to Polish Corporate Income Tax was approved
by the Polish Government's Council of Ministers. The main impact
for our business would be an increase in tax payable arising from
disallowance of tax deductions for expenses linked to certain
intra-group transactions. We continue to make the case for
appropriate modification and are evaluating potential changes to
our business operations in order to mitigate the impact of this
proposed legislation.
As part of our 2017 half-year results statement, we indicated
that we expected price cap proposals to be tabled in Romania in the
second half of the year. Recent regulatory changes mean that our
business in Romania will, in future, be regulated directly by the
National Bank. This is likely to lead to a further tightening of
credit criteria and a significant reduction in the volume of loans
provided to customers. We expect it to take a number of months to
clarify these regulatory changes and the resultant impact on our
operating model and profitability.
Funding
We continue to have a robust funding position and at the quarter
end we had headroom on undrawn bank facilities of GBP163M.
Outlook
Our growth guidance for the year remains unchanged for European
home credit and IPF Digital. In Mexico, we expect to see slightly
slower rates of credit issued growth as a result of the disruption
caused by the earthquakes. For the Group as a whole, our impairment
expectations for 2017 remain unchanged notwithstanding the negative
impact of the earthquakes in Mexico.
Investor and analyst conference call
International Personal Finance will host a conference call for
investors and analysts at 08:00 (BST) today. Please dial-in 5-10
minutes before the start of the call.
+44 (0)330 336
Dial-in (UK): 9411 Dial-in (USA): +1 719-325-4746
Confirmation code: 8793295
Replay: An audio recording of the investor and analyst
conference call will be available at www.ipfin.co.uk/investors
later in the day
A copy of this statement can be found on the Company's website -
www.ipfin.co.uk
Future event - IFRS 9 briefing
IPF will host a briefing for investors, analysts and debt
providers on the new accounting standard IFRS 9 and how it will
impact IPF. The event will take place on Friday 17 November at
Numis Securities, The London Stock Exchange Building, 10
Paternoster Square, London EC4M 7LT. The briefing will commence at
09:30hrs (registration from 09.00hrs). If you would like to attend,
please contact Rachel Moran at rachel.moran@ipfin.co.uk.
Investor relations and media contacts:
International Personal Rachel Moran - Investor Relations
Finance +44 (0)7760 167637 / +44 (0)113 285
6798
Gergely Mikola - Media
+36 20 339 02 25
FTI Consulting Neil Doyle
+44 (0)20 3727 1141 / +44 (0)7771 978
220
Antonia Powell
+44 (0)20 3727 1485 / +44 (0)7970 662
429
Legal Entity Identifier: 213800II1O44IRKUZB59
This information is provided by RNS
The company news service from the London Stock Exchange
END
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