International Personal Finance Plc Q1 2019 Trading Update (8661X)
May 02 2019 - 1:00AM
UK Regulatory
TIDMIPF
RNS Number : 8661X
International Personal Finance Plc
02 May 2019
International Personal Finance
Q1 2019 trading update
2 May 2019
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
-- Q1 credit issued growth of 9% year-on-year
o European home credit growth of 2%
o Mexico home credit growth of 3%
o IPF Digital growth of 33%
-- Good credit quality and collections - Group annualised
impairment as a percentage of revenue at 26.6% (Q1 2018:
26.4%)
-- Strong funding position - GBP183 million of headroom
on debt facilities at 31 March 2019
-- Credit rating position improved - Fitch BB, outlook
revised to stable from negative; new rating from Moody's
Ba3 stable
Group Q1 overview
IPF made a solid start to 2019 and traded in-line with our
expectations at Group level with a strong operational performance
in European home credit and a more challenging performance in
Mexico. Year-on-year, we delivered credit issued growth of 9% with
continued strong top-line growth delivered by IPF Digital alongside
modest growth in European and Mexico home credit. At Group level,
credit quality and collections were stable and annualised
impairment as a percentage of revenue at 26.6% was in-line with Q1
2018 (2018 year-end: 26.2%).
European home credit
During Q1 we made good progress against our strategy of
improving the sustainability of our European home credit businesses
by creating more modern, efficient and better credit quality
operations. While customer numbers contracted, we delivered credit
issued growth of 2% year-on-year, which was ahead of our
expectations and reflected good performances in all our markets.
Credit quality remains very strong, reflecting a good agent
collection performance together with further improved post-field
collections. Taken together, these factors resulted in an
improvement in annualised impairment as a percentage of revenue of
16.3% compared to 19.0% in Q1 2018 (2018 year-end: 17.9%).
Mexico home credit
As noted at the time of our 2018 full-year results, we took a
more cautious stance on credit settings reflecting the slight
softening of the macroeconomic outlook in Mexico for 2019. This
stance, combined with weaker than expected collections during Q1
resulted in credit issued growth being restricted to 3%. We have
taken a series of actions to improve collections, including some
branch consolidation in Mexico City. We now expect credit issued
growth for the year as a whole to be weaker than originally
anticipated. Annualised impairment as a percentage of revenue for
Q1 was 38.4% (36.1% for Q1 2018, 2018 year-end 36.7%), reflecting
the impact of the first quarter collections performance and the
actions taken to improve future performance. Mexico is a key driver
of future growth and we remain confident in the longer-term
development of the business.
IPF Digital
IPF Digital delivered another strong top-line performance with
credit issued growth of 33% based on good customer demand for
digital credit within our target customer segment. There was
continued strong growth in the new markets where we increased
credit issued by 77% and, as expected, growth moderated in our
established markets to 2%. Annualised impairment as a percentage of
revenue was 40.4% compared to 41.1% in Q1 2018 (2018 year-end:
37.8%) which reflects stable impairment in the established markets
and a small increase in the new markets where we are serving a
larger proportion of new customers who have a higher risk profile.
We remain on track to deliver a maiden profit in 2019 for the
division as a whole.
Funding and credit ratings
We maintained our strong funding position and at 31 March 2019
had total debt facilities of GBP853 million and borrowings of
GBP670 million, with headroom on undrawn bank facilities of GBP183
million. The credit rating position improved in April 2019
following the affirmation of a BB rating by Fitch alongside the
revision of the outlook from negative to stable together with a new
rating from Moody's of Ba3, stable outlook.
Regulation
At the time of our 2018 full year results announcement,
legislation to implement an APR cap of 50% for loans under EUR3,000
and 18% for loans over EUR3,000 had been passed by the Romanian
Parliament but was subject to a constitutional court challenge. The
outcome of the challenge resulted in the legislation being declared
unconstitutional and therefore not in effect. Consequently, there
is currently no APR cap in Romania. We will continue to monitor any
future developments.
There has been no material update from the Polish Ministry of
Justice on its modified set of proposals, published in February
2019, to reduce the existing cap on non-interest costs that may be
charged by lenders in connection with consumer loan agreements -
details of which were provided in our 2018 full-year results
statement. A public consultation was undertaken but the responses
have not yet been published in full and, at this stage, there is no
formal timeline to progress or finalise the draft proposal. We will
update the market with our assessment of the likely financial
impact on the Group when and if the proposal is finalised and
approved.
Taxation
As highlighted in our 2018 Full-year Financial Report, in late
2017 the European Commission opened a state aid investigation into
the Group Financing Exemption contained in the UK controlled
foreign company rules, which were introduced in 2013. On 2 April
2019 the European Union announced its finding that the Group
Financing Exemption is partially incompatible with EU State Aid
rules. In common with other UK-based international companies, whose
intra-group finance arrangements are in line with current
controlled foreign company rules, the Group is likely to be
affected by this decision. The total tax benefit obtained by the
Group in all years since 2013 is estimated at up to GBP13.5
million. It is expected that there are valid grounds, which the
Group is currently exploring, for part of the benefit to be
retained. HMRC will be contacting taxpayers, including IPF, in the
coming weeks to set out how they intend to calculate and recover
the alleged aid. HMRC has stated that it does not consider that the
timing and form of the UK's exit from the EU will have any
practical impact on this matter.
There is no substantive update in respect of the on-going Polish
tax audit matter.
Outlook
We continue to improve the service and choices provided to the
customers of our European home credit businesses and deliver robust
returns to reward shareholders and fund growth opportunities in our
Mexico home credit and IPF Digital operations. The Group made a
solid start to 2019 and our outlook for the Group in 2019 remains
unchanged.
Investor and analyst conference call
International Personal Finance will host a conference call for
investors and analysts at 08.30hrs (BST) today,
Thursday 2 May. Please dial-in 10 minutes before the start of the call.
Dial-in (UK) +44 (0)330 336 Confirmation code: 1875942
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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