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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| International Personal Finance Plc | LSE:IPF | London | Ordinary Share | GB00B1YKG049 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.50 | 0.49% | 102.50 | 100.50 | 102.00 | 102.50 | 101.00 | 101.00 | 139,382 | 08:46:25 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Personal Credit Institutions | 690.8M | 48M | 0.2155 | 4.73 | 227.2M |
From Apr 2019 to Apr 2024
TIDMIPF
RNS Number : 0649M
International Personal Finance Plc
26 July 2017
International Personal Finance plc
Half-year Financial Report for the six months ended 30 June 2017
This announcement contains inside information
Key highlights
Hot Features
Premium
Ø Group - good financial and operational performance
o Group profit before tax of GBP43.0M, an
increase of GBP10.0M including a positive
FX benefit of GBP6.7M
o Credit issued growth of 10%
o Consistent credit quality management - group
impairment to revenue ratio in target range
at 26.4%
Ø Home credit
o Credit issued growth of 3%
o Strong credit issued growth and improved
impairment in Mexico
o Good operational performance in European
home credit
Ø IPF Digital
o Excellent top-line growth - credit issued
increased 61% to GBP106.0M
o Established markets delivered improved profitability
o New markets growing strongly - credit issued
grew by 213%
Ø Robust funding and balance sheet position;
dividend maintained
o GBP140M of headroom on debt facilities
o Equity to receivables of 47.2%
o Proposed interim dividend maintained at
4.6 pence per share
Group key statistics H1 2016 H1 2017 YOY change
at CER
Customers (000s) (**) 2,477 2,395 (3.3%)
Credit issued (GBPM) 506.8 616.0 9.9%
Revenue (GBPM) 353.3 400.8 2.6%
Annualised impairment
% revenue 25.3% 26.4% (1.1 ppts)
Annualised cost-income
ratio 41.6% 43.3% (1.7 ppts)
PBT* (GBPM) 33.0 43.0
EPS* (pence) 10.9 13.6
-------------------------------- ----------------- ---------------- --------------------
Excluding Slovakia, Lithuania and Bulgaria. * From continuing operations. ** Adjusted following change to treatment of very slow paying customers in our home credit businesses
Chief Executive Officer, Gerard Ryan, commented:
"I am pleased to report a good financial and operational performance in the first half with 10% growth in credit issued and an increase in profit to GBP43.0M. Our ongoing European home credit businesses performed in line with expectations, Mexico continued to deliver positive business momentum and IPF Digital reported excellent top-line growth together with improved profitability in its established markets. We continue to engage with the Polish Ministry of Justice concerning proposed changes to the total cost of credit regulations. While we expect the regulatory landscape in Europe to remain challenging, we continue to believe our Mexico home credit business and IPF Digital offer significant growth opportunities for the Group."
Group performance overview
We delivered a good financial and operational performance in the first half of 2017 and profit before tax increased to GBP43.0M. This performance was driven mainly by an increase in underlying profit of GBP12.0M, the largest share of which came from the stronger-than-expected outcome from the wind down of our businesses in Slovakia and Lithuania together with a solid contribution from IPF Digital's established markets. Stronger FX rates resulted in a GBP6.7M positive impact which was offset by additional new business investment in IPF Digital of GBP8.7M.
H1 2016 Underlying New H1 2017
reported profit business Stronger reported
profit movement costs FX rates profit
GBPM GBPM GBPM GBPM GBPM
------------------------ ---------- ----------- ---------- ----------- ----------
Home credit 45.0 6.0 - 7.3 58.3
Digital (4.4) 5.5 (8.7) (0.6) (8.2)
Central costs (7.6) 0.5 - - (7.1)
------------------------ ---------- ----------- ---------- ----------- ----------
Profit before taxation
from
continuing operations 33.0 12.0 (8.7) 6.7 43.0
------------------------ ---------- ----------- ---------- ----------- ----------
We delivered a 10% increase in credit issued as a result of strong growth in our Mexico home credit and IPF Digital businesses. Credit quality was managed effectively and impairment as a percentage of revenue at 26.4% remains within our target range of 25% to 30%.
Market overview
Demand for consumer credit continues to be strong in most of our markets, the competitive landscape remains intense and there is continued development of digital loan capabilities with some payday lenders extending their offerings to include instalment loans. In addition, major banks are developing online capabilities that will appeal to a younger and more technology focused audience.
Whilst lending via digital platforms continues to increase the overall scale of the market, the involvement of an agent at the customer's home allows us to gain a unique and greater understanding of their financial circumstances and propensity to repay so we are able to lend with more confidence where a remote lending business cannot.
Regulatory update
There have been no material changes to the regulatory framework since our Q1 trading update.
There is currently no significant update on the Polish Ministry of Justice's proposal to further reduce the existing cap on non-interest charges on consumer loans in Poland. We continue to engage with various Government ministries and interested parties in Poland to encourage a more positive outcome that is good for consumers and business. We will update the market with any material developments.
In Romania, as previously reported, we have seen our ability to service customer demand decrease as a result of significantly more restrictive creditworthiness assessment requirements which became effective at the start of this year. We operate within price cap environments in all our European markets, with the current exceptions of the Czech Republic and Romania. Whilst no formal proposals have been made to date, we continue to believe that caps on loan costs in some form are likely to be implemented in these markets at some point in the future and that proposals will be presented in Romania in the second half of the year.
Strategy update
Growth businesses - IPF Digital and Mexico home credit
Demand for digital loans is increasing within our target segment of consumers and our digital business delivered strong growth in the first half of the year. Our strategy is to drive increased profitability in our established digital markets of Finland and the Baltics, build on the significant digital opportunity in our new markets of Poland, Australia, Spain and Mexico, and invest in our technology platform and head office functional capabilities to support a much larger business. We achieved these objectives in the first half of 2017; we grew profit in the established digital markets by GBP5.6M year-on-year and our focus on brand building and customer relationship management activities supported the delivery of very strong customer and credit issued growth in our new markets. We continue to expect IPF Digital to deliver its maiden profit in 2018 as it benefits from increased scale as a result of the investments we are making.
The strategic focus of our Mexico home credit business is to leverage the growth potential in this market by expanding our geographic footprint and developing 'Negocio', our micro business channel. As previously guided we opened six branches during the first half of 2017 and this completes our expansion plan for the year. Our micro business channel is now available in around two thirds of our branches in Mexico and is growing well.
Returns businesses - European home credit
Our strategy in our European home credit businesses is to focus on offering our customers more choice in terms of product and channel whilst improving our efficiency through technology in order to optimise returns from these markets. To accelerate the execution of this strategy, we took the decision to simplify our business structure, consolidating the management of our Polish and Czech businesses into the Northern Europe region in order to focus on operational performance, cost efficiency and sharing of best practice. We also completed the sale of our home credit business in Bulgaria, thus enabling us to focus our resources on our larger home credit and rapidly-growing digital businesses. This disposal resulted in a one-off accounting charge of GBP5.0M which together with the operating loss of GBP2.7M generated in 2017 has been accounted for as a discontinued operation in accordance with IFRS 5.
Our continued emphasis on generating efficiencies in our cost base delivered a GBP4.9M reduction in overheads at CER (Actual: GBP0.9M) during the first half of the year. Modernising the business through investment in technology forms a key element of this programme and we continued to roll out our agent mobile technology which will facilitate further cost reductions from the second half of 2018.
We are leveraging the value of our well-recognised Provident brand name with a Provident digital offering in Poland where around 14,000 customers are being served through this on-line channel, an increase of over 70% since the year end. We plan to introduce this offering in the Czech Republic before the end of the year.
Performance review
Home credit
Our home credit businesses delivered profit before tax of GBP58.3M in the first half of 2017 which comprised GBP52.9M from our ongoing businesses and GBP5.4M from Slovakia and Lithuania which are being wound down. The increase delivered by our ongoing home credit businesses reflects a reduction in underlying profit of GBP4.0M before a GBP7.7M benefit from stronger FX rates. The underlying profit growth in Slovakia and Lithuania was GBP10.0M driven by a strong collections performance in these operations.
H1 2016 Underlying H1 2017
reported profit FX rates reported
profit movement profit
GBPM GBPM GBPM GBPM
----------------------------- ---------- ----------- ----------- ----------
Northern Europe 31.2 (7.4) 4.8 28.6
Southern Europe 15.7 1.2 2.1 19.0
Mexico 2.3 2.2 0.8 5.3
----------------------------- ---------- ----------- ----------- ----------
Ongoing home credit 49.2 (4.0) 7.7 52.9
Slovakia (2.5) 6.6 (0.2) 3.9
Lithuania (1.7) 3.4 (0.2) 1.5
Profit before taxation
from continuing operations 45.0 6.0 7.3 58.3
----------------------------- ---------- ----------- ----------- ----------
Excluding Slovakia and Lithuania, the results for our ongoing home credit businesses are shown in the table below:
2016 2017 Change Change Change
GBPM GBPM GBPM % at CER
%
------------------------- -------- -------- ------- ------- --------
Customer numbers (000s) 2,320 2,174 (146) (6.3)
Credit issued 447.5 510.0 62.5 14.0 3.1
Average net receivables 715.5 813.9 98.4 13.8 2.6
------------------------- -------- -------- ------- ------- --------
Revenue 330.3 356.7 26.4 8.0 (2.3)
Impairment (97.3) (99.3) (2.0) (2.1) 7.5
------------------------- -------- -------- ------- ------- --------
Net revenue 233.0 257.4 24.4 10.5 (0.1)
Finance costs (19.3) (23.7) (4.4) (22.8) (11.3)
Agents' commission (39.4) (42.2) (2.8) (7.1) 3.0
Other costs (125.1) (138.6) (13.5) (10.8) (1.9)
------------------------- -------- -------- ------- ------- --------
Profit before taxation 49.2 52.9 3.7 7.5
------------------------- -------- -------- ------- ------- --------
Northern Europe
Our Northern Europe region, which comprises our home credit businesses in Poland and the Czech Republic, delivered profit before tax of GBP28.6M which reflects a reduction in underlying profit of GBP7.4M offset by a GBP4.8M benefit from stronger FX rates.
2016 2017 Change Change Change
GBPM GBPM GBPM % at CER
%
------------------------- ------- ------- ------- ------- --------
Customer numbers
(000s) 920 798 (122) (13.3)
Credit issued 220.4 248.4 28.0 12.7 0.1
Average net receivables 388.8 415.4 26.6 6.8 (5.1)
------------------------- ------- ------- ------- ------- --------
Revenue 162.8 161.5 (1.3) (0.8) (11.9)
Impairment (42.7) (41.4) 1.3 3.0 14.6
------------------------- ------- ------- ------- ------- --------
Net revenue 120.1 120.1 - - (11.0)
Finance costs (10.3) (12.1) (1.8) (17.5) (5.2)
Agents' commission (17.7) (16.2) 1.5 8.5 18.6
Other costs (60.9) (63.2) (2.3) (3.8) 6.4
------------------------- ------- ------- ------- ------- --------
Profit before taxation 31.2 28.6 (2.6) (8.3)
------------------------- ------- ------- ------- ------- --------
Poland 23.0 22.3 (0.7) (3.0)
Czech Republic 8.2 6.3 (1.9) (23.2)
------------------------- ------- ------- ------- ------- --------
Profit before taxation 31.2 28.6 (2.6) (8.3)
------------------------- ------- ------- ------- ------- --------
Credit issued growth in the first half of 2017 was flat with 4% growth in Poland and a 16% contraction in the Czech Republic. Customer numbers for the region as a whole reduced by 13% and revenue decreased by 12%. In Poland, the reduction in revenue resulted from a compression in revenue yield due to lower pricing necessitated by the introduction of the total cost of credit cap in March 2016. In the Czech Republic, the key factors impacting revenue were the contraction in the receivables book and a reduction in revenue yield as a result of our strategy of serving customers with longer-term loans.
We continued to deliver a good collections performance which together with higher profit generated by debt sales in the Czech Republic resulted in a 0.3ppt improvement in annualised impairment as a percentage of revenue to 22.7% since the 2016 year end.
Our focus on cost optimisation and efficiencies supported the delivery of a GBP4.3M reduction in other costs at CER (Actual: increase of GBP2.3M). The cost-income ratio increased by 1.3ppts year-on-year to 37.6% due to the contraction in revenue.
In the absence of any further regulatory change, we expect credit issued in the second half of 2017 to be broadly similar to the prior year and importantly, we continue to believe we can mitigate up to half of the estimated GBP30M gross financial impact resulting from the implementation in March 2016 of the total cost of credit legislation in Poland.
Southern Europe
Our Southern Europe region, comprising Hungary and Romania, increased profit before tax in the first half of the year to GBP19.0M driven by a strong performance in Hungary. This reflects underlying profit growth of GBP1.2M and a GBP2.1M positive impact of FX rates.
2016 2017 Change Change Change
GBPM GBPM GBPM % at CER
%
-------------------- ------- ------- ------- ------- --------
Customer numbers
(000s) 586 535 (51) (8.7)
Credit issued 124.5 130.4 5.9 4.7 (5.0)
Average net
receivables 185.9 229.6 43.7 23.5 11.7
-------------------- ------- ------- ------- ------- --------
Revenue 80.0 89.2 9.2 11.5 0.8
Impairment (20.4) (22.1) (1.7) (8.3) 3.5
-------------------- ------- ------- ------- ------- --------
Net revenue 59.6 67.1 7.5 12.6 2.3
Finance costs (4.8) (5.7) (0.9) (18.8) (7.5)
Agents' commission (10.3) (11.9) (1.6) (15.5) (4.4)
Other costs (28.8) (30.5) (1.7) (5.9) 1.9
-------------------- ------- ------- ------- ------- --------
Profit before
taxation 15.7 19.0 3.3 21.0
-------------------- ------- ------- ------- ------- --------
As previously reported, new creditworthiness assessments for non-banking financial institutions were introduced in Romania in January 2017 and, as expected, this legislative change negatively impacted rates of growth in Southern Europe. Credit issued for the region reduced by 5% reflecting good growth in Hungary offset by a 23% contraction in Romania.
Average net receivables increased by 12%, driven largely by the growth in credit issued in the second half of 2016. However, revenue growth was significantly lower at 1% due to the impact of our strategy to offer lower yielding longer-term loans in response to customer demand. Credit quality and our collections performance in Hungary were very good and this was offset partially by some weakness in Romania, particularly in the first quarter of the year as the new regulations were bedded in. Annualised impairment as a percentage of revenue remains at a very comfortable level of 20.5%, largely unchanged since the year end.
Our cost optimisation programme delivered a GBP0.6M reduction in other costs at CER (Actual: increase of GBP1.7M) and, as a result, the cost-income ratio improved by 2.0 ppts to 35.2% year-on-year.
Overall we expect credit issued trends for Southern Europe to be similar to the first half of 2017. We also believe it is likely that a rate cap in some form will be implemented in Romania in the near future.
Mexico
We continued to build on the business momentum achieved in Mexico in the second half of 2016 and this resulted in strong growth, improving impairment and an increase in profit to GBP5.3M. This reflects underlying profit growth of GBP2.2M and a GBP0.8M benefit from stronger FX rates.
2016 2017 Change Change Change
GBPM GBPM GBPM % at CER
%
-------------------- ------- ------- ------- ------- --------
Customer numbers
(000s) 814 841 27 3.3
Credit issued 102.6 131.2 28.6 27.9 20.1
Average net
receivables 140.8 168.9 28.1 20.0 13.1
-------------------- ------- ------- ------- ------- --------
Revenue 87.5 106.0 18.5 21.1 13.9
Impairment (34.2) (35.8) (1.6) (4.7) 0.3
-------------------- ------- ------- ------- ------- --------
Net revenue 53.3 70.2 16.9 31.7 22.7
Finance costs (4.2) (5.9) (1.7) (40.5) (31.1)
Agents' commission (11.4) (14.1) (2.7) (23.7) (15.6)
Other costs (35.4) (44.9) (9.5) (26.8) (20.1)
-------------------- ------- ------- ------- ------- --------
Profit before
taxation 2.3 5.3 3.0 130.4
-------------------- ------- ------- ------- ------- --------
The operational improvements implemented in 2016 together with growth flowing through from our expansion programme resulted in a 20% increase in credit issued. Average net receivables increased by 13% and revenue increased at a similar rate. We expect credit issued growth to moderate in the second half of the year as comparatives become more challenging.
In addition to delivering strong growth, we improved our collections performance and, as a result, annualised impairment as a percentage of revenue improved by 2.5 ppts from the 2016 year end to 34.0%. Our investment in business growth led to an increase in other costs of GBP7.5M at CER (Actual: GBP9.5M) and, consequently, the cost-income ratio for Mexico increased 2.7ppts year-on-year to 40.7%.
We continue to see significant growth potential in Mexico which is underpinned by our investment in new branches and continued expansion of our micro business channel. For 2017 as a whole, we expect to deliver credit issued growth of around 15% together with well-managed collections to further reduce annualised impairment as a percentage of revenue towards 32% in line with previous guidance.
Slovakia
The successful execution of the wind down of our Slovakia operation, following the introduction of new rate cap legislation in December 2015, resulted in a profit contribution of GBP3.9M in the first half of 2017 compared to a loss of GBP2.5M in the same period of 2016. Field collection activities were concluded in March and the majority of the outstanding loan portfolio has since been sold at higher-than-expected prices.
The positive performance in the first half of 2017 has improved our outlook for the full year and we now expect to report a profit of around GBP4M which would result in total profit during the wind-down period of around GBP2.4M. Of the GBP41.1M December 2015 receivables balance, our final net cash collections are expected to be GBP36M, which is GBP11.3M higher than the 60% portion of the portfolio funded by debt.
Lithuania
In Q4 2016 we decided to move to a fully digital business model in Lithuania and booked a provision for home credit exit costs of GBP3.2M. The collect out of the portfolio has been more effective than our original expectations and, as a result, we have reported a profit of GBP1.5M in the first half of 2017.
IPF Digital
IPF Digital represents a significant growth opportunity for the Group and is continuing to develop in line with our plans. We delivered excellent top-line growth and improved profitability in our established markets in the first half of 2017. This was offset by the expected increase in investment in our new markets and head office capabilities, and as a result we incurred a loss before tax of GBP8.2M.
2016 2017 Change Change Change
GBPM GBPM GBPM % at CER
%
------------------ ------- ------- ------- -------- --------
Customer numbers
(000s) 157 221 64 40.8
Credit issued 59.3 106.0 46.7 78.8 61.1
Average net
receivables 69.0 138.6 69.6 100.9 81.2
------------------ ------- ------- ------- -------- --------
Revenue 23.0 44.1 21.1 91.7 72.3
Impairment (8.0) (18.8) (10.8) (135.0) (108.9)
------------------ ------- ------- ------- -------- --------
Net revenue 15.0 25.3 10.3 68.7 52.4
Finance costs (1.8) (3.4) (1.6) (88.9) (70.0)
Other costs (17.6) (30.1) (12.5) (71.0) (53.6)
------------------ ------- ------- ------- -------- --------
Loss before
taxation (4.4) (8.2) (3.8) (86.4)
------------------ ------- ------- ------- -------- --------
Demand for our digital loans and credit line offering is growing and credit issued increased faster-than expected in the first half, up 61% to GBP106.0M. This growth resulted in an increase in average net receivables of 81% which, in turn, drove a 72% increase in revenue. Annualised impairment as a percentage of revenue increased year-on-year by 3.1 ppts to 35.7% and reflects the increased weighting of new markets in our portfolio.
We invested an additional GBP8.7M in building our new markets of Poland, Spain, Australia and Mexico and strengthening our head office capabilities to deliver future growth. Nevertheless, the increase in revenue offset this investment and resulted in a modest reduction in the cost-income ratio to 73.7%.
The profitability of IPF Digital is segmented as follows:
2016 2017 Change Change
GBPM GBPM GBPM %
--------------------------- -------- --------- -------- ----------
Established markets:
Finland and the Baltics 2.4 8.0 5.6 233.3
New markets:
Poland, Spain, Australia
and Mexico (4.1) (12.0) (7.9) (192.7)
Head office costs (2.7) (4.2) (1.5) (55.6)
--------------------------- -------- --------- -------- ----------
IPF Digital (4.4) (8.2) (3.8) (86.4)
--------------------------- -------- --------- -------- ----------
In the second half of 2016, we performed a review to better allocate head office costs between the individual businesses which has resulted in more of these costs being borne in the established and new market numbers with a lower residual cost in the IPF Digital head office. We have restated the comparatives to allow a comparison of trends.
Established markets
2016 2017 Change Change Change
GBPM GBPM GBPM % at CER
%
------------------------- ------ ------- ------- ------- --------
Customer numbers (000s) 130 141 11 8.5
Credit issued 47.4 63.7 16.3 34.4 21.8
Average net receivables 60.8 97.8 37.0 60.9 45.8
------------------------- ------ ------- ------- ------- --------
Revenue 19.4 27.9 8.5 43.8 29.8
Impairment (5.9) (5.5) 0.4 6.8 16.7
------------------------- ------ ------- ------- ------- --------
Net revenue 13.5 22.4 8.9 65.9 50.3
Finance costs (1.6) (2.4) (0.8) (50.0) (33.3)
Other costs (9.5) (12.0) (2.5) (26.3) (13.2)
------------------------- ------ ------- ------- ------- --------
Profit before taxation 2.4 8.0 5.6 233.3
------------------------- ------ ------- ------- ------- --------
Our established markets of Finland and the Baltics delivered further good growth and a strong financial performance in the first half of the year, reporting a GBP5.6M increase in profit before tax year-on-year to GBP8.0M through enhanced pricing strategies and increased penetration of our credit line product.
In these markets, we increased credit issued by 22%. Average net receivables grew by 46% which delivered a 30% increase in revenue. Credit quality is good and annualised impairment as a percentage of revenue reduced 3.4 ppts to 13.3% since the year-end. The annualised number includes the benefit of a sale of non-performing receivables in the second half of 2016 and we expect impairment as a percentage of revenue to increase to around 20% by the end of the year. The cost-income ratio improved by 6.3 ppts to 45.6% demonstrating the strong economies of scale in the digital business despite continuing to invest in generating growth and our digital capabilities.
New markets
2016 2017 Change Change Change
GBPM GBPM GBPM % at CER
%
------------------------- ------ ------- ------- -------- --------
Customer numbers (000s) 27 80 53 196.3
Credit issued 11.9 42.3 30.4 255.5 213.3
Average net receivables 8.2 40.8 32.6 397.6 334.0
------------------------- ------ ------- ------- -------- --------
Revenue 3.6 16.2 12.6 350.0 295.1
Impairment (2.1) (13.3) (11.2) (533.3) (454.2)
------------------------- ------ ------- ------- -------- --------
Net revenue 1.5 2.9 1.4 93.3 70.6
Finance costs (0.2) (1.0) (0.8) (400.0) (400.0)
Other costs (5.4) (13.9) (8.5) (157.4) (127.9)
------------------------- ------ ------- ------- -------- --------
Loss before taxation (4.1) (12.0) (7.9) (192.7)
------------------------- ------ ------- ------- -------- --------
The strong growth delivered by IPF Digital was also driven by our new markets, particularly Poland and Spain. The new markets as a whole delivered credit issued growth of 213% to GBP42.3M, average net receivables growth of over 300% and revenue up by a similar rate to GBP16.2M.
As we would expect in these rapidly growing markets, annualised impairment as a percentage of revenue is elevated at 83.7%. We expect to see improving impairment trends in the second half of the year as these markets grow and mature. Other costs increased by 128% to GBP13.9M reflecting increased expenditure on brand building.
Looking ahead for IPF Digital as a whole, we expect to deliver further good progress in the second half of the year and are targeting full-year credit issued growth of around 40%. Given the growth opportunity, we have chosen to invest at a faster rate than originally targeted, particularly in Poland and Spain, and therefore we now expect our full year P&L investment to be in the range of GBP10M to GBP12M rather than the GBP8M to GBP10M previously guided. We expect to deliver a maiden profit in 2018.
Taxation
The taxation charge on profit for the first six months of 2017 has been based on an expected effective tax rate for the full year of 30%. This excludes a GBP0.5M tax charge relating to the disposal of our operation in Bulgaria, which is reported as a loss on discontinued operations.
As previously reported, our home credit business in Poland appealed decisions received in January 2017 from the Polish Tax Chamber (the upper tier of the Polish tax authority) with respect to its 2008 and 2009 financial years. The decisions for both years involve a transfer pricing challenge relating to an intra-group arrangement with a UK entity together with a challenge to the timing of taxation of home collection fee revenues. We strongly disagree with the interpretation of the tax authority and will defend our position robustly in court. In order to make the appeals, we paid the amounts assessed. The payment is not a reflection of our view on the merits of the case and accordingly it has been recognised as a non-current financial asset of GBP36M (comprising tax and associated interest) in our Group accounts. As we believe our case to be very strong, no provision has been recognised against this asset and there is no charge to the income statement as a result of this decision. The 2010 financial year is currently being audited by the tax authorities in Poland and a decision is expected in the coming months. In the event that the decision follows the same reasoning as the decisions for 2008 and 2009, which appears likely, we would pay c.GBP20M in order to appeal the case. All subsequent financial years remain open to future audit.
Funding and balance sheet
We have a strong funding position with a balanced debt portfolio including a range of bonds at competitive cost across a number of currencies, wholesale and retail, with varying maturities; and a range of bank facilities from a core group of banks. We have added GBP21.6M of new bank funding in 2017, including increased commitments in Poland and Hungary, and our first Asian funding bank. In addition the funding position has benefitted from the strong cash collection in Slovakia and Lithuania together with the sale of our Bulgarian operation. At 30 June 2017 we had total debt facilities of GBP824.1M (GBP583.3M bonds and GBP240.8M bank facilities) and borrowings of GBP684.3M with headroom on undrawn debt facilities of GBP139.8M. We have significant long-term funding in place, with GBP494.0M of bonds maturing in 2020/21. There are no bond maturities in 2017 and in 2018 GBP46.4M and GBP27.6M mature in the first and second half of the year, respectively.
Our balance sheet remains robust, with an equity to receivables capital ratio at 30 June 2017 of 47.2% against our target of around 40%.
Dividend
The Board is pleased to declare an unchanged interim dividend of 4.6 pence per share. The dividend will be paid on 6 October 2017 to shareholders on the register at the close of business on 8 September 2017. The shares will be marked ex-dividend on 7 September 2017.
Outlook
The competitive and regulatory landscape for the Group is expected to remain challenging. We await an update from the Polish Ministry of Justice on its proposed reduction to the existing non-interest pricing cap in Poland and will continue to engage with various Government ministries and interested parties to encourage a more positive solution that is good for consumers and business.
We continue to focus on delivering our strategy to optimise our European home credit operations and to invest in growing Mexico home credit and IPF Digital. In Mexico home credit, we expect to achieve further growth and well-managed collections, and we also expect to deliver further strong growth in IPF Digital together with reduced levels of impairment in our new markets.
Note
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 2017 in order to present the underlying performance variance.
Investor relations and media contacts
International Personal Rachel Moran - Investor
Finance plc Relations
+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
Laura Ewart
+44 (0)20 3727 1160 / +44
(0)7711 387085
International Personal Finance will host a live webcast of its half-year results presentation at 09:00hrs (BST) today - Wednesday 26 July 2017, which can be accessed www.ipfin.co.uk.
The team will also host a conference call for analysts and investors at 16:15hrs (BST) today - Wednesday 26 July 2017. An audio recording will be available at www.ipfin.co.uk from 27 July 2017.
Dial-in (UK): +44 (0)330 336 9411 Dial-in (US): +1 719-457-2086 Passcode: 7128162
A copy of this statement can be found on the Company's website - www.ipfin.co.uk.
Legal Entity Identifier: 213800II1O44IRKUZB59
International Personal Finance plc
Condensed consolidated interim financial information for the six months ended 30 June 2017
Consolidated income statement
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Notes GBPM GBPM GBPM
----------------------------- ------ ----------- ----------- --------------
Revenue 4 400.8 361.5 756.8
Impairment 4 (109.9) (101.1) (184.9)
Revenue less impairment 290.9 260.4 571.9
----------- ----------- --------------
Finance costs (27.1) (21.6) (46.8)
Other operating costs (66.7) (58.6) (129.1)
Administrative expenses (154.1) (147.2) (300.0)
Total costs (247.9) (227.4) (475.9)
----------- ----------- --------------
Profit before taxation
- continuing operations 4 43.0 33.0 96.0
Tax expense - UK - - (3.1)
- Overseas (12.9) (8.9) (21.7)
---------------------------- ------ ----------- ----------- ------------
Total tax expense 5 (12.9) (8.9) (24.8) ----------------------------- ------ ----------- -------------- Profit after taxation - continuing operations 30.1 24.1 71.2 ----------------------------- ------ ----------- ----------- -------------- Loss after taxation - discontinued operations 8 (7.7) (2.5) (4.3) ----------------------------- ------ ----------- ----------- -------------- Profit after taxation attributable to owners of the Company 22.4 21.6 66.9 ----------------------------- ------ ----------- ----------- --------------
Earnings per share - continuing operations
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Notes pence pence pence
--------- ------ ----------- ----------- ------------
Basic 6 13.6 10.9 32.2
Diluted 6 13.0 10.6 31.3
--------- ------ ----------- ----------- ------------
The notes to the financial information are an integral part of this consolidated financial information.
Earnings per share - including discontinued operations
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Notes pence pence pence
--------- ------ ----------- ----------- ------------
Basic 6 10.1 9.8 30.2
Diluted 6 9.7 9.5 29.4
--------- ------ ----------- ----------- ------------
Dividend per share
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Notes pence pence pence
------------------ ------ ----------- ----------- ------------
Interim dividend 7 4.6 4.6 4.6
Final dividend 7 - - 7.8
------------------ ------ ----------- ----------- ------------
Total dividend 4.6 4.6 12.4
------------------ ------ ----------- ----------- ------------
Dividends paid
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
Notes GBPM GBPM GBPM
-------------------------- ------ ----------- ----------- ------------
Interim dividend of
4.6 pence
(2016: interim dividend
of 4.6 pence) per
share 7 - - 10.2
Final 2016 dividend
of 7.8 pence
(2016: final 2015
dividend of 7.8 pence)
per share 7 17.3 17.2 17.2
-------------------------- ------ ----------- ----------- ------------
Total dividends paid 17.3 17.2 27.4
-------------------------- ------ ----------- ----------- ------------
Consolidated statement of comprehensive income
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBPM GBPM GBPM
-------------------------------------- ----------- ----------- -------------
Profit after taxation attributable
to owners of the Company 22.4 21.6 66.9
----------- ----------- -------------
Other comprehensive income
Items that may subsequently
be reclassified to income statement
Exchange gains on foreign currency
translations 37.8 52.1 65.1
Net fair value gains/(losses)
- cash flow hedges 1.8 (0.7) 1.5
Tax charge on items that may
be reclassified (0.4) (0.2) (0.1)
Items that will not subsequently
be reclassified to income statement
Actuarial gains/(losses) on
retirement benefit obligation 2.2 (5.6) (10.0)
Tax (charge)/credit on items
that will not be reclassified (0.4) 1.2 1.9
----------- ----------- -------------
Other comprehensive income
net of taxation 41.0 46.8 58.4
-------------------------------------- ----------- ----------- -------------
Total comprehensive income
for the period attributable
to owners of the Company 63.4 68.4 125.3
-------------------------------------- ----------- ----------- -------------
The notes to the financial information are an integral part of this consolidated financial information.
Consolidated balance sheet
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
Notes GBPM GBPM GBPM
--------------------------- ------ ---------- ---------- ------------
Assets
Non-current assets
Goodwill 9 23.9 22.9 23.3
Intangible assets 10 34.9 31.2 32.6
Property, plant and
equipment 11 24.3 22.9 23.4
Deferred tax assets 118.9 87.3 112.0
Non-current tax asset 12 36.0 - -
238.0 164.3 191.3
---------- ---------- ------------
Current assets
Amounts receivable from
customers
- due within one
year 863.1 752.3 808.3
- due in more than
one year 147.1 122.4 131.6
---------- ---------- ------------
13 1,010.2 874.7 939.9
Derivative financial
instruments 3.0 19.9 15.4
Cash and cash equivalents 32.3 42.1 43.4
Other receivables 30.2 32.4 20.8
Current tax assets 11.5 3.9 3.1
--------------------------- ------ ---------- ---------- ------------
1,087.2 973.0 1,022.6
---------- ---------- ------------
Total assets 4 1,325.2 1,137.3 1,213.9
---------- ---------- ------------
Liabilities
Current liabilities
Borrowings 14 (73.9) (17.8) (22.4)
Derivative financial
instruments (12.6) (6.1) (4.7)
Trade and other payables (133.0) (120.1) (123.2)
Current tax liabilities (5.0) (16.7) (16.5)
--------------------------- ------ ---------- ---------- ------------
(224.5) (160.7) (166.8)
---------- ---------- ------------
Non-current liabilities
Retirement benefit
obligation 15 (6.0) (4.7) (9.1)
Deferred tax liabilities (7.3) (6.1) (8.1)
Borrowings 14 (610.4) (584.6) (600.4)
--------------------------- ------ ---------- ---------- ------------
(623.7) (595.4) (617.6)
---------- ---------- ------------
Total liabilities 4 (848.2) (756.1) (784.4)
--------------------------- ------ ---------- ---------- ------------
Net assets 477.0 381.2 429.5
--------------------------- ------ ---------- ---------- ------------
Equity attributable
to owners of the Company
Called-up share capital 23.4 23.4 23.4
Other reserve (22.5) (22.5) (22.5)
Foreign exchange reserve 46.5 (4.3) 8.7
Hedging reserve 2.5 (1.2) 1.1
Own shares (48.8) (55.2) (50.8)
Capital redemption
reserve 2.3 2.3 2.3
Retained earnings 473.6 438.7 467.3
--------------------------- ------ ---------- ---------- ------------
Total equity 477.0 381.2 429.5
--------------------------- ------ ---------- ---------- ------------
The notes to the financial information are an integral part of this consolidated financial information.
Consolidated statement of changes in equity
Unaudited
--------------------------------------------------------
Called-up Other Other Retained Total
share reserve reserves* earnings equity
capital
GBPM GBPM GBPM GBPM GBPM
--------------------------- ---------- --------- ----------- ---------- --------
At 1 January 2016 23.4 (22.5) (113.3) 439.6 327.2
Comprehensive income
Profit after taxation
for the period - - - 21.6 21.6
Other comprehensive
income/(expense)
Exchange gains on foreign
currency translation
(note 18) - - 52.1 - 52.1
Net fair value losses
- cash flow hedges - - (0.7) - (0.7)
Actuarial losses on
retirement benefit
obligation - - - (5.6) (5.6)
Tax (charge)/credit
on other comprehensive
income - - (0.2) 1.2 1.0
---------- --------- ----------- ---------- --------
Total other comprehensive
income/(expense) - - 51.2 (4.4) 46.8
Total comprehensive
income for the period - - 51.2 17.2 68.4
---------- --------- ----------- ---------- --------
Transactions with owners
Share-based payment
adjustment to reserves - - - 2.8 2.8
Shares granted from
treasury and employee
trust - - 3.7 (3.7) -
Dividends paid to Company
shareholders - - - (17.2) (17.2)
---------- --------- ----------- ---------- --------
At 30 June 2016 23.4 (22.5) (58.4) 438.7 381.2
At 1 July 2016 23.4 (22.5) (58.4) 438.7 381.2
Comprehensive income
Profit after taxation
for the period - - - 45.3 45.3
Other comprehensive
income/(expense)
Exchange gains on foreign
currency translation
(note 18) - - 13.0 - 13.0
Net fair value gains
- cash flow hedges - - 2.2 - 2.2
Actuarial losses on
retirement benefit
obligation - - - (4.4) (4.4)
Tax credit on other
comprehensive income - - 0.1 0.7 0.8
---------- --------- ----------- ---------- --------
Total other comprehensive
income/(expense) - - 15.3 (3.7) 11.6
Total comprehensive
income for the period - - 15.3 41.6 56.9
---------- --------- ----------- ---------- --------
Transactions with owners
Share-based payment
adjustment to reserves - - - 1.6 1.6
Shares granted from
treasury and employee
trust - - 4.4 (4.4) -
Dividends paid to Company
shareholders - - - (10.2) (10.2)
--------------------------- ---------- --------- ----------- ---------- --------
At 31 December 2016 23.4 (22.5) (38.7) 467.3 429.5
--------------------------- ---------- --------- ----------- ---------- --------
Unaudited
Called-up Other Other Retained Total
share reserve reserves* earnings equity
capital
GBPM GBPM GBPM GBPM GBPM
--------------------------- ---------- --------- ----------- ---------- --------
At 1 January 2017 23.4 (22.5) (38.7) 467.3 429.5
Comprehensive income
Profit after taxation
for the period - - - 22.4 22.4
Other comprehensive
income/(expense)
Exchange gains on foreign
currency translation
(note 18) - - 37.8 - 37.8
Net fair value gains
- cash flow hedges - - 1.8 - 1.8
Actuarial gains on
retirement benefit
obligation - - - 2.2 2.2
Tax charge on other
comprehensive income - - (0.4) (0.4) (0.8)
---------- --------- ----------- ---------- --------
Total other comprehensive
income - - 39.2 1.8 41.0
Total comprehensive
income for the period - - 39.2 24.2 63.4
---------- --------- ----------- ---------- --------
Transactions with owners
Share-based payment
adjustment to reserves - - - 1.4 1.4
Shares granted from
treasury and employee
trust - - 2.0 (2.0) -
Dividends paid to Company
shareholders - - - (17.3) (17.3)
--------------------------- ---------- --------- ----------- ---------- --------
At 30 June 2017 23.4 (22.5) 2.5 473.6 477.0
--------------------------- ---------- --------- ----------- ---------- --------
* Includes foreign exchange reserve, hedging reserve, own shares 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
2017 2016 2016
Notes GBPM GBPM GBPM
------------------------------ ------ ----------- ----------- ------------
Cash flows from operating
activities
Continuing operations
Cash generated from
operating activities 17 92.8 60.5 136.2
Finance costs paid (36.3) (29.0) (44.3)
Income tax paid (68.4) (30.7) (68.4)
Discontinued operations (2.7) - (1.7)
----------- ----------- ------------
Net cash (used in)/generated
from operating activities (14.6) 0.8 21.8
----------- ----------- ------------
Cash flows used in investing
activities
Continuing operations
Purchases of intangible
assets 10 (7.4) (7.7) (15.8)
Purchases of property,
plant and equipment 11 (4.7) (2.6) (8.2)
Proceeds from sale
of property, plant and - 0.1 -
equipment
Discontinued operations
Purchases of property,
plant and equipment - - (0.1)
Disposal of subsidiary,
net of cash and cash
equivalents 8 3.0 - -
Net cash used in investing
activities (9.1) (10.2) (24.1)
Net cash used in operating
and investing activities (23.7) (9.4) (2.3)
----------- ----------- ------------
Cash flows from financing
activities
Continuing operations
Proceeds from borrowings 34.6 56.1 69.9
Repayment of borrowings (6.3) (30.8) (41.7)
Dividends paid to Company
shareholders 7 (17.3) (17.2) (27.4)
Net cash generated from
financing activities 11.0 8.1 0.8
----------- ----------- ------------
Net decrease in cash
and cash equivalents (12.7) (1.3) (1.5)
Cash and cash equivalents
at beginning of period 43.4 39.9 39.9
Exchange gains on cash
and cash equivalents 1.6 3.5 5.0
------------------------------ ------ ----------- ----------- ------------
Cash and cash equivalents
at end of period 32.3 42.1 43.4
------------------------------ ------ ----------- ----------- ------------
Notes to the condensed consolidated interim financial information for the six months ended 30 June 2017
1. Basis of preparation
This unaudited condensed consolidated interim financial information for the six months ended 30 June 2017 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 2016, 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 26 July 2017.
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 2016 were approved by the Board on 1 March 2017 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 Board has reviewed the budget for the year to 31 December 2017 and the forecasts for the two years to 31 December 2019 which include projected profits, cash flows, borrowings and headroom against facilities. The Group's committed funding through a combination of bonds and committed bank facilities, combined with a successful track record of accessing debt funding markets, is sufficient to fund the planned growth of our existing operations and new markets for the foreseeable future. Taking these factors into account the Board has a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future. For this reason the Board has adopted the going concern basis in preparing this Half-year Financial Report.
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 2016 and are detailed in those Financial Statements.
The following amendments to standards are mandatory for the first time for the financial year beginning 1 January 2017 but do not have any impact on the Group:
-- Amendments to IAS 7 - Disclosure Initiative;
-- Amendments to IAS 12 - Recognition of Deferred
Tax Assets for Unrealised Losses; and
-- Annual Improvements to IFRSs: 2014-16 cycle
- IFRS 12 Amendments.
The following standards, interpretations and amendments to existing standards are not yet effective and have not been early adopted by the Group:
-- IFRS 9 'Financial instruments'. This standard
replaces IAS 39, 'Financial instruments: recognition
and measurement'. IFRS 9 introduces new requirements
for classifying and measuring financial assets
and will affect the Group's accounting for
its financial assets. The mandatory implementation
date for this standard is 1 January 2018 however
it has not yet been endorsed by the European
Union. The Group is in the process of assessing
IFRS 9's full impact;
-- IFRS 15 - Revenue from Contracts with Customers;
-- Clarifications to IFRS 15 - Revenue from Contracts
with Customers;
-- IFRIC 22 - Foreign Currency Transactions and
Advance Consideration;
-- Amendments to IFRS 2 - Classification and Measurement
of Share-based Payment Transactions;
-- Amendments to IFRS 4 - Applying IFRS 9 Financial
Instruments with IFRS 4 Insurance Contracts;
-- Amendments to IAS 40 - Transfers of Investment
Property;
-- Annual Improvements to IFRSs: 2014-16 Cycle
- IFRS 1 and IAS 28 Amendments;
-- IFRS 16 - Leases;
-- IFRIC 23 - Uncertainty over Income Tax Treatments;
and
-- IFRS 17 - Insurance Contracts.
2. Principal risks and uncertainties
We operate a formal risk management process, the details of which are set out on page 53 of the Financial Statements for the year ended 31 December 2016. Details of our principal risks can be found on pages 36 to 43 of the Financial Statements and are summarised below:
-- the risk that we suffer losses or fail to optimise
profitable growth due to a failure to operate
in compliance with, or effectively anticipate
changes in, all applicable laws and regulations,
or a regulator interpreting these in a different
way;
-- the risk that we suffer losses or fail to optimise
profitable growth due to a failure to manage
change in an effective manner;
-- the risk that our strategy is impacted by not
having sufficient depth and quality of people
or being unable to retain key people and treat
them in accordance with our values and ethical
standards;
-- the risk that we suffer losses or fail to optimise
profitable growth through not responding to
the competitive environment or failing to ensure
our proposition meets customer needs;
-- the risk that we suffer losses or fail to optimise
profitable growth due to a failure of our systems,
suppliers or processes, or due to the loss
or theft of sensitive information;
-- the risk that we suffer financial or reputational
damage due to our methods of operation, ill-informed
comment or malpractice;
-- the risk that we suffer financial loss as a
result of a failure to identify and adapt to
changing economic conditions adequately;
-- the risk of personal accident to, or assault
of, our agents or employees;
-- the risk that we suffer additional taxation
or financial penalties associated with failure
to comply with tax legislation or adopting
an interpretation of the law that cannot be
sustained;
-- the risk that we suffer financial loss if our
customers fail to meet their contracted obligations;
and
-- the risk of insufficient availability of funding,
unfavourable pricing, a breach of debt facility
covenants; or that performance is significantly
impacted by interest rate or currency movements,
or failure of a banking counterparty.
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
2017 2016 2016
GBPM GBPM GBPM
----------------------------------- ------------- ------------- -------------
Revenue
Home credit
Northern Europe 161.5 162.8 330.6
Southern Europe 89.2 80.0 170.8
Mexico 106.0 87.5 186.5
Slovakia - 6.1 7.5
Lithuania - 2.1 3.3
------------- ------------- -------------
356.7 338.5 698.7
Digital 44.1 23.0 58.1
----------------------------------- ------------- ------------- -------------
Revenue - continuing operations 400.8 361.5 756.8
Discontinued operations 3.7 2.9 6.6
----------------------------------- ------------- ------------- -------------
Revenue 404.5 364.4 763.4
----------------------------------- ------------- ------------- -------------
Impairment
Home credit
Northern Europe 41.4 42.7 76.2
Southern Europe 22.1 20.4 35.2
Mexico 35.8 34.2 68.0
Slovakia (6.2) (5.8) (15.1)
Lithuania (2.0) 1.6 3.1
------------- ------------- -------------
91.1 93.1 167.4
Digital 18.8 8.0 17.5
----------------------------------- ------------- ------------- -------------
Impairment - continuing
operations 109.9 101.1 184.9
Discontinued operations 2.6 1.7 2.6
----------------------------------- ------------- ------------- -------------
Impairment 112.5 102.8 187.5
----------------------------------- ------------- ------------- -------------
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
GBPM GBPM GBPM
-------------------------- ------------ ------------ --------------
Profit before taxation
Home credit
Northern Europe 28.6 31.2 75.6
Southern Europe 19.0 15.7 40.3
Mexico 5.3 2.3 11.7
Slovakia 3.9 (2.5) (1.6)
Lithuania 1.5 (1.7) (5.8)
58.3 45.0 120.2
Digital (8.2) (4.4) (9.3)
UK costs(1) (7.1) (7.6) (14.9)
-------------------------- ------------ ------------ ------------
Profit before taxation
- continuing operations 43.0 33.0 96.0
Discontinued operations (7.2) (2.3) (3.4)
-------------------------- ------------ ------------ ------------
Profit before taxation 35.8 30.7 92.6
-------------------------- ------------ ------------ ------------
(1) Although UK costs and exceptional items
are not classified as a separate segment in
accordance with IFRS 8 'Operating Segments',
they are shown separately in order to provide
a reconciliation to profit before taxation.
Segment assets Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
GBPM GBPM GBPM
----------------------------------- ------------- ------------- -------------
Home credit
Northern Europe 563.9 496.4 494.6
Southern Europe 254.6 219.4 255.0
Mexico 244.6 212.6 223.1
Slovakia 1.1 22.3 7.9
Lithuania 0.3 5.1 1.7
1,064.5 955.8 982.3
Digital 189.0 97.3 148.7
UK(2) 71.7 74.9 72.7
----------------------------------- ------------- ------------- -------------
Total - continuing operations 1,325.2 1,128.0 1,203.7
Discontinued operations - 9.3 10.2
----------------------------------- ------------- ------------- -------------
Total 1,325.2 1,137.3 1,213.9
----------------------------------- ------------- ------------- -------------
Segment liabilities Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
GBPM GBPM GBPM
------------------------------- ---------- ---------- -------------
Home credit
Northern Europe 255.4 239.9 196.8
Southern Europe 133.2 125.4 138.9
Mexico 193.9 163.9 170.0
Slovakia 8.0 37.4 23.9
Lithuania 0.5 13.4 13.9
591.0 580.0 543.5
Digital 163.1 84.3 120.7
UK(2) 94.1 82.9 111.6
------------------------------- ---------- ---------- -------------
Total - continuing operations 848.2 747.2 775.8
Discontinued operations - 8.9 8.6
------------------------------- ---------- ---------- -------------
Total 848.2 756.1 784.4
------------------------------- ---------- ---------- -------------
(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 and liabilities.
5. Tax expense
The underlying taxation charge on profit for the first six months of 2017 has been based on an expected effective tax rate for the full year of 30%. This excludes a GBP0.5M tax charge relating to the disposal of our operation in Bulgaria, which is reported as a loss on discontinued operations.
6. Earnings per share
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
pence pence pence
-------------------------- ----------- ----------- ------------
Basic EPS - continuing
operations 13.6 10.9 32.2
Dilutive effect of
awards (0.6) (0.3) (0.9)
-------------------------- ----------- ----------- ------------
Diluted EPS - continuing
operations 13.0 10.6 31.3
-------------------------- ----------- ----------- ------------
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2017 2016 2016
pence pence pence
-------------------------- ----------- ----------- ------------
Basic EPS - including
discontinued operations 10.1 9.8 30.2
Dilutive effect of
awards (0.4) (0.3) (0.8)
-------------------------- ----------- ----------- ------------
Diluted EPS - including
discontinued operations 9.7 9.5 29.4
-------------------------- ----------- ----------- ------------
Basic earnings per share ('EPS') from continuing operations is calculated by dividing the earnings attributable to shareholders of GBP30.1M (30 June 2016: GBP24.1M, 31 December 2016: GBP71.2M) by the weighted average number of shares in issue during the period of 222.2M which has been adjusted to exclude the weighted average number of shares held in treasury and by the employee trust (30 June 2016: 220.7M, 31 December 2016: 221.2M).
Basic earnings per share ('EPS') including discontinued operations is calculated by dividing the earnings attributable to shareholders of GBP22.4M (30 June 2016: GBP21.6M, 31 December 2016: GBP66.9M) by the weighted average number of shares in issue during the period of 222.2M which has been adjusted to exclude the weighted average number of shares held in treasury and by the employee trust (30 June 2016: 220.7M, 31 December 2016: 221.2M).
For diluted EPS the weighted average number of shares has been adjusted to 231.5M (30 June 2016: 228.3M, 31 December 2016: 227.5M) to assume conversion of all dilutive potential ordinary share options relating to employees of the Group.
7. Dividends
The final dividend for 2016 of 7.8 pence per share was paid to shareholders on 12 May 2017 at a total cost to the Group of GBP17.3M. The directors propose an interim dividend in respect of the financial year ended 31 December 2017 of 4.6 pence per share payable to shareholders who are on the register at close of business on 8 September 2017. This will amount to a total dividend payment of GBP10.2M based upon the number of shares in issue and ranking for dividends as at 30 June 2017. This dividend is not reflected as a liability in the balance sheet as at 30 June 2017.
8. Discontinued operations
On 28 June 2017, we announced completion of the sale of the home credit business in Bulgaria in order to focus our resources on our larger home credit and rapidly-growing digital businesses. Losses of GBP7.7M are included in the income statement in respect of Bulgaria for the half-year ended 30 June 2017. These costs can be analysed as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
GBPM GBPM GBPM
------------------------- ---------- ---------- ------------
Trading losses 2.7 2.3 3.4
Write-off of assets 4.2 - -
Other costs of disposal 0.3 - -
------------------------- ---------- ---------- ------------
Loss before taxation 7.2 2.3 3.4
Taxation charge 0.5 0.2 0.9
Loss - discontinued
operations 7.7 2.5 4.3
------------------------- ---------- ---------- ------------
9. Goodwill
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
GBPM GBPM GBPM
------------------------- ---------- ---------- ------------
Net book value at start
of period 23.3 20.1 20.1
Exchange adjustments 0.6 2.8 3.2
Net book value at end
of period 23.9 22.9 23.3
------------------------- ---------- ---------- ------------
10. Intangible assets
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
GBPM GBPM GBPM
------------------------- ---------- ---------- ------------
Net book value at start
of period 32.6 25.6 25.6
Additions 7.4 7.7 15.8
Impairment - - (0.7)
Amortisation (5.1) (3.1) (9.0)
Exchange adjustments 0.2 1.0 0.9
Disposal of subsidiary (0.2) - -
------------------------- ---------- ---------- ------------
Net book value at end
of period 34.9 31.2 32.6
------------------------- ---------- ---------- ------------
11. Property, plant and equipment
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
GBPM GBPM GBPM
------------------------- ---------- ---------- ------------
Net book value at start
of period 23.4 24.3 24.3
Exchange adjustments 1.3 1.6 1.7
Additions 4.7 2.6 8.3
Disposals (0.1) (0.1) (0.8)
Depreciation (4.8) (5.5) (10.1)
Disposal of subsidiary (0.2) - -
------------------------- ---------- ---------- ------------
Net book value at end
of period 24.3 22.9 23.4
------------------------- ---------- ---------- ------------
As at 30 June 2017 the Group had GBP5.7M of capital expenditure commitments with third parties that were not provided for (30 June 2016: GBP6.1M, 31 December 2016: GBP6.1M).
12. Non-current tax asset
Non-current tax asset includes an amount of GBP36.0M in respect of the tax paid to the Polish Tax Authority, see note 19 for further details.
13. Amounts receivable from customers
All lending is in the local currency of the country in which the loan is issued. The currency profile of amounts receivable from customers is as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
GBPM GBPM GBPM
------------------- ---------- ---------- ------------
Polish zloty 378.9 331.0 345.7
Czech crown 82.1 87.5 84.2
Euro* 120.3 89.9 96.3
Hungarian forint 149.8 122.7 139.6
Romanian leu 87.1 80.8 98.6
Bulgarian lev - 6.6 7.8
Mexican peso 183.8 151.2 161.2
Australian dollar 8.2 5.0 6.5
Total receivables 1,010.2 874.7 939.9
------------------- ---------- ---------- ------------
*Includes receivables in Slovakia, Lithuania, Latvia, Finland, Estonia and Spain.
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 101% (30 June 2016: 110%, 31 December 2016: 105%). All amounts receivable from customers are at fixed interest rates. The average period to maturity of the amounts receivable from customers is 8.5 months (30 June 2016: 7.1 months, 31 December 2016: 7.8 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 GBP220.8M (6 months ended 30 June 2016: GBP215.8M, 12 months ended 31 December 2016: GBP437.0M).
14. Borrowings
The maturity of the Group's bond and bank borrowings is as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
GBPM GBPM GBPM
------------------------ ---------- ---------- ------------
Repayable
- in less than one
year 73.9 17.8 22.4
---------- ---------- ------------
- between one and two
years 29.5 60.4 73.2
- between two and five
years 580.9 524.2 527.2
610.4 584.6 600.4
---------- ---------- ------------
Total borrowings 684.3 602.4 622.8
------------------------ ---------- ---------- ------------
The maturity of the Group's bond and bank facilities is as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
GBPM GBPM GBPM
------------------------- ---------- ---------- ------------
Repayable
- on demand 15.1 14.5 -
- in less than one year 83.5 31.9 56.8
- between one and two
years 49.8 115.9 85.3
- between two and five
years 675.7 602.5 633.1
Total facilities 824.1 764.8 775.2
------------------------- ---------- ---------- ------------
As outlined previously, the Group's home credit company in Poland, Provident Polska, has been subject to tax audits in respect of the Company's 2008 and 2009 financial years. The 2010 financial year is currently being audited by the tax authorities in Poland, and all subsequent years until 2016 remain open to future audit. Since the year end Provident Polska has appealed the decisions made by the Polish Tax Chamber, to the District Administrative Court, for the 2008 and 2009 financial years and has paid the amounts assessed of approximately GBP34M (comprising tax and associated payments, net of repayments) which was necessary in order to make the appeals. In order to appeal any potential future decisions for 2010 and subsequent years, further payments may be required. There are significant uncertainties in relation to the amount and timing of such cash outflows. However, in the event that audits are opened, and similar decisions are reached for each of these subsequent financial years, further amounts of up to cGBP105M (GBP95M reported at 2016 year end, updated for latest FX rates) may be required to be funded. In relation to these matters, the directors have stated in note 19 that they do not consider that there will be any probable loss.
15. Retirement benefit obligation
The amounts recognised in the balance sheet in respect of the retirement benefit (obligation)/asset are as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2017 2016 2016
GBPM GBPM GBPM
------------------------------ ---------- ---------- ------------
Equities 23.6 20.9 22.1
Bonds 10.1 9.4 9.6
Index-linked gilts 8.3 8.3 8.3
Other 1.0 1.0 0.2
---------- ---------- ------------
Total fair value of
scheme assets 43.0 39.6 40.2
Present value of funded
defined benefit obligations (49.0) (44.3) (49.3)
------------------------------ ---------- ---------- ------------
Net obligation recognised
in the balance sheet (6.0) (4.7) (9.1)
------------------------------ ---------- ---------- ------------
The charge recognised in the income statement in respect of defined benefit pension costs is GBP0.1M (6 months ended 30 June 2016: GBPnil, 12 months ended 31 December 2016: GBPnil).
16. 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 derivative financial instruments held at fair value fall into hierarchy level 2 (30 June 2016 and 31 December 2016: all of the Group's derivative 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 June 30 June 31 December 30 June 30 June 31 December
2017 2016 2016 2017 2016 2016
GBPM GBPM GBPM GBPM GBPM GBPM
----------------- ---------- ---------- ------------- ---------- ---------- -------------
Financial
assets
Amounts
receivable
from customers 1,010.2 874.7 939.9 1,405.0 1,222.3 1,335.5
1,010.2 874.7 939.9 1,405.0 1,222.3 1,335.5
---------- ---------- ------------- ---------- ---------- -------------
Financial
Liabilities
---------- ---------- ------------- ---------- ---------- -------------
Bonds 580.1 553.4 565.0 528.3 511.5 480.8
Bank borrowings 104.2 49.0 57.8 104.2 49.0 57.8
684.3 602.4 622.8 632.5 560.5 538.6
----------------- ---------- ---------- ------------- ---------- ---------- -------------
The fair value of amounts receivable from customers has been derived by discounting expected future cash flows (as used to calculate the carrying value of amounts due from customers), net of agent collection costs, at the Group's weighted average cost of capital of 5.8% (30 June 2016: 5.9%, 31 December 2016: 6.1%).
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.
17. 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
2017 2016 2016
GBPM GBPM GBPM
-------------------------------------- ----------- ----------- ------------
Profit after taxation
from continuing operations 30.1 24.1 71.2
Adjusted for
Tax charge 12.9 8.9 24.8
Finance costs 27.1 21.6 46.8
Share-based payment
charge 1.4 2.8 3.5
Amortisation of intangible
assets (note 10) 5.1 3.1 9.0
Loss on disposal of
property, plant and equipment 0.1 - 0.8
Impairment of intangible
assets (note 10) - - 0.7
Depreciation of property,
plant and equipment (note
11) 4.8 5.4 9.9
Changes in operating
assets and liabilities
Amounts receivable from
customers (16.7) (5.4) (41.5)
Other receivables (5.2) (19.4) (6.6)
Trade and other payables 12.0 26.1 18.9
Retirement benefit obligation (0.9) (1.1) (1.1)
Derivative financial
instruments 22.1 (5.6) (0.2)
-------------------------------------- ----------- ----------- ------------
Cash generated from continuing
operating activities 92.8 60.5 136.2
-------------------------------------- ----------- ----------- ------------
18. Foreign exchange rates
The table below shows the average exchange rates for the relevant reporting periods and closing exchange rates at the relevant period ends.
Average Closing Average Closing Average Closing
Year
H1 June H1 June 2016 December
2016
2017 2017 2016 2016
------------- -------- -------- -------- -------- -------- ----------
Polish
zloty 4.9 4.8 5.6 5.2 5.3 5.2
Czech crown 31.0 29.8 34.5 32.4 33.3 31.6
Euro 1.2 1.1 1.3 1.2 1.2 1.2
Hungarian
forint 358.8 350.8 397.2 382.0 377.7 362.1
Romanian
leu 5.3 5.2 5.7 5.4 5.4 5.3
Bulgarian
lev 2.3 2.2 2.5 2.3 2.4 2.3
Mexican
peso 24.1 22.9 26.1 24.3 25.6 25.6
Australian
dollar 1.7 1.7 2.0 1.8 1.8 1.7
------------- -------- -------- -------- -------- -------- ----------
The GBP37.8M exchange gain 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 2016 and June 2017 shown in the table above.
19. Contingent Liability Note
As previously reported, our home credit business in Poland appealed decisions received in January 2017 from the Polish Tax Chamber (the upper tier of the Polish tax authority) with respect to its 2008 and 2009 financial years. The decisions for both years are identical and involve a transfer pricing challenge relating to an intra-group arrangement with a UK entity together with a challenge to the timing of taxation of home collection fee revenues. We strongly disagree with the interpretation of the tax authority and will defend our position robustly in court. In order to make the appeals, we paid the amounts assessed. The payment is not a reflection of our view on the merits of the case and accordingly it has been recognised as a non-current financial asset of GBP36.0M (comprising tax and associated interest) in our Group accounts. As we believe our case to be very strong, having received supporting legal opinions from leading advisors, no provision has been recognised against this asset and there is no charge to the income statement as a result of this decision.
The 2010 financial year is currently being audited by the tax authorities in Poland and a decision is expected in the coming months. In the event that the decision follows the same reasoning as for 2008 and 2009 a further c. GBP20M would become payable in order to appeal the case. Although all subsequent financial years remain open to future audit, currently we do not expect new audits to commence until the first instance court has ruled on 2008/2009 (expected to be no earlier than Q4 2017).
In relation to these matters, no expense or provision has been made in this financial information in relation to either the cash paid to the Polish tax authorities for the 2008 and 2009 financial years, or in relation to future decisions that may be received for later financial periods, as the directors do not consider that there will be any probable loss. This is on the basis of both the legal advice received, and the fact that during a previous tax audit by the same tax authority, the company's treatment of these matters was accepted as correct.
Therefore the payments of the sums outlined above are not a reflection of the directors' view on the merits of the case, and accordingly the payments made in January 2017 are recognised as a non-current financial asset in the 2017 financial information given the uncertainties in relation to the timing of any repayment of such amounts. See note 12 for more details.
Responsibility statement
The following statement is given by each of the directors: namely; Dan O'Connor, Chairman; Gerard Ryan, Chief Executive Officer; Justin Lockwood, Chief Financial Officer; Tony Hales, senior independent non-executive director; Jayne Almond, non-executive director; John Mangelaars, non-executive director; Richard Moat, non-executive director and Cathryn Riley, 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
review 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 the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the consolidated income statement, the consolidated statement of other comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 19. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
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-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly 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 financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly 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 set of financial statements in the half-yearly 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.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 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
Statutory Auditor
Leeds, United Kingdom
26 July 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFLEDAIEFID
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