REG - Intnl Personal Fin - Half-year Report
31/07/2024 07:00
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RNS Number : 4704Y International Personal Finance Plc 31 July 2024
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION WITHIN THE MEANING OF THE UK
MARKET ABUSE REGULATION.
31 July 2024
International Personal Finance plc
Half-year financial report for the six months ended 30 June 2024
Principal activity
International Personal Finance is helping to build a better world through
financial inclusion by providing affordable credit products and insurance
services to underserved consumers across nine markets.
STRONG OPERATIONAL AND FINANCIAL PERFORMANCE
Key highlights
Strong first-half financial performance enabling increased returns to
shareholders
· Pre-exceptional profit before tax of £47.3m(1) (H1-23: £37.8m), up
25% on H1-23 and ahead of our 2024 internal plans.
· Interim dividend of 3.4p (H1-23: 3.1p), an increase of 9.7%, in
line with our policy of paying 33% of the prior year full dividend per share
at the interim.
· Excess capital to be returned to shareholders in the form of a share
buyback programme of up to £15m.
Strong demand for credit and an excellent operational performance builds
growth momentum
· Good demand for our broad range of financial products resulted in
customer lending, excluding Poland, growing 7%(2) year-on-year, with improving
momentum in the second quarter.
· Receivables, excluding Poland, showed strong year-on-year growth of
12%(2), with all divisions performing well.
· Customer lending and receivables in Poland reduced by 7%(2) and
28%(2) respectively, in line with our plans and total Poland receivables of
£187m are now stabilising.
· Exceptional customer repayment performance and excellent credit
quality, delivering an impairment rate of 10.5% (H1-23: 11.4%).
Major refinancing strengthens funding position to support future growth
· Successfully refinanced our €341m Eurobond in June, extending the
debt maturity profile to 2029, as well as leading to a rating upgrade from
Fitch Ratings to BB.
· Significant headroom on undrawn funding facilities and
non-operational cash balances of £179m to fund the Group's plans through to
the end of 2025.
· Equity to receivables ratio of 56% (H1-23: 52%) underpins the Group's
growth plans, progressive dividend policy and the share buyback programme.
Excellent progress against our Next Gen strategy to take advantage of
substantial long-term growth opportunities
· Over 180,000 credit cards now issued in Poland, with the product
demonstrating valuable utility for customers.
· Continued growth in our geographic footprint in Mexico with a new
branch opening in Mexicali.
· Retail partnership credit now available in 450 stores in Romania.
· Mobile wallet customers in IPF Digital increased by over 50% to
85,000 in the first half.
Outlook
· Confidence in delivering an acceleration in growth through the
remainder of the year.
· Expect full year pre-exceptional profit before tax of between £78m
and £82m for 2024, ahead of current market expectations(3).
Group key statistics H1-24 H1-23 YOY change
Customer numbers (000s) 1,656 1,718 (3.6%)
Customer lending (£m) 597.4 578.8 3.2%(2)
Average gross receivables (£m) 1,369.9 1,343.2 (0.1%)(2)
Closing net receivables (£m) 864.4 893.1 (0.4%)(2)
Pre-exceptional PBT (£m)(1) 47.3 37.8 25.1%
Statutory PBT (£m) 36.5 37.8 (3.4%)
Pre-exceptional EPS (pence)(1,4) 12.6p 10.2p 23.5%
Interim dividend per share (pence) 3.4p 3.1p 9.7%
1 Prior to an exceptional charge of £10.8m in 2024 (see note 8 for
details).
2 At constant exchange rates (CER).
3 Market expectations based on consensus pre-exceptional profit before
tax for 2024 of £71.4m at 30 July 2024.
4 Prior to an exceptional tax charge of £4.0m in 2023 (see note 8 for
details).
Gerard Ryan, Chief Executive Officer at IPF commented:
"I am delighted to announce very strong financial and operational progress for
IPF in the first half of the year. Executing on our Next Gen strategy has
delivered good growth momentum, exceptional customer repayment performance and
pre-exceptional profit before tax of £47.3m, ahead of our 2024 internal
financial plan. The successful refinancing of our €341m Eurobond, which
attracted very good demand and over 150 investors, ensures that we have a
strong funding position to support our ambitious growth plans.
As a result of the excellent first half results, our strong balance sheet and
positive growth prospects, we have announced an increase in the interim
dividend of 9.7% to 3.4 pence per share, in line with our progressive dividend
policy, together with a share buyback programme of £15m, improving the
efficiency of our balance sheet.
We continue to see substantial demand for our broadening portfolio of credit
and insurance services from underserved consumers and we are confident that
there are further attractive growth opportunities as we continue to execute on
our strategy. I would like to say thank you to all my hard-working colleagues
whose commitment ensures we continue to increase financial inclusion for our
customers in all our markets."
Alternative performance measures
This half-year financial report provides alternative performance measures
(APMs) which are not defined or specified under the requirements of
International Financial Reporting Standards. We believe these APMs provide
stakeholders with important additional information on our business. To support
this, we have included an accounting policy note on APMs in the notes to this
financial report, a glossary indicating the APMs that we use, an explanation
of how they are calculated and how we use them, and a reconciliation of the
APMs we use to a statutory measure, where relevant.
Investor relations and media contact:
Rachel Moran - Investor Relations +44 (0)7760 167637
Georgia Dunn - Deputy Company Secretary +44 (0)7584 615230
Investor and analyst webcast
International Personal Finance will host a webcast of its 2024 half-year
results presentation at 09.00hrs (BST) today - Wednesday 31 July, which can be
accessed here (https://flyonthewall.videosync.fi/half-year-results-2024) .
A copy of this statement can be found on our website at www.ipfin.co.uk
(http://www.ipfin.co.uk) .
Legal Entity Identifier: 213800II1O44IRKUZB59
Chief Executive Officer's review
Group performance
I am very pleased to report another strong financial and operational
performance in the first half of the year, with all our divisions performing
well. Our relentless focus on delivering for our customers through executing
our Next Gen strategy, together with strong operational discipline, has
delivered pre-exceptional profit before tax of £47.3m, up 25% (£9.5m) on the
2023 half-year result, and ahead of our 2024 internal financial plan.
Consumer appetite for our broadening range of credit products and insurance
services remains good despite cost-of-living pressures and a challenging
economic landscape. Serving our customers with affordable products that suit
their needs resulted in customer lending growth, excluding Poland, of 7% (at
CER) year-on-year, with improving momentum as the first half progressed.
Closing net receivables ended the first half at £864m, broadly in line with
June last year (at CER). However, excluding Poland, the rest of the business
delivered strong receivables growth of 12% with good performances by each
division. In line with our expectations, receivables in our home credit and
digital businesses in Poland saw a year-on-year reduction of 28% to £187m as
we adapt to tighter regulatory rate caps and affordability rules. In Poland,
the reduction in receivables in our home credit business is now beginning to
stabilise and we saw receivables growth in our digital business in June.
Customer numbers across the Group increased by 2% to 1.7 million, excluding
the impact of the transition in Poland where, as expected, customer numbers
declined by 21%.
We continue to make very good progress towards our medium-term key performance
targets for revenue yield and impairment. The Group's annualised revenue yield
strengthened by 1.2ppts to 55.4% year on year and is now very close to our
target range of 56% to 58%. Customer repayment performance was excellent in
the first half of the year and the annualised impairment rate of 10.5% (H1-23:
11.4%) was better than expected and some way better than our target of 14% to
16%. With excellent credit quality across all our divisions, we are well
positioned to accelerate growth through the second half of the year.
We continue to maintain a strict focus on cost optimisation and efficiencies
while investing in growth. The Group's annualised cost-income ratio at the
half year was 59.0%, 1.6ppts higher than last year, wholly due to the decrease
in receivables in Poland as well as the introduction of the lower rate cap
earlier this year. Excluding the Poland home credit business, the Group's
cost-income ratio has reduced from 57.3% in June last year to 54.7% at the end
of the first half. We expect the Group's ratio to continue to improve as we
deliver increased growth and continue to execute on our cost-efficiency
programme.
Our financial model underpins our purpose to build a better world through
financial inclusion and at the half year, the annualised pre-exceptional
return on required equity (RoRE) improved to 16.2% (H1-23: 14.7%), within our
target range for the Group of 15% to 20%. The improvement was accomplished as
a result of strong performances by Mexico and a 5.3ppt improvement in the
returns delivered by IPF Digital as we rebuild scale. We expect the Group's
rate of return to moderate to below the Group's target range in the second
half of the year as we increase the rate of receivables growth and the full
impact of the credit card re-pricing in Poland flows through the business.
The Group continues to have a very well-capitalised balance sheet and our
funding position was further strengthened with the very successful refinancing
of our €341m Eurobond in June which, together with further bank funding
secured during the period, resulted in significant headroom of £179m on our
debt facilities at the end of June. The successful refinancing led to an
upgrade in our credit rating from Fitch ratings to BB and has also allowed us
to repay the £35m Nordic bonds in July, three months ahead of maturity. Our
funding position and headroom supports our growth plans through to the end of
2025.
The strong first-half performance fully supports a 9.7% increase in the
interim dividend to 3.4p (H1-23: 3.1p) per share, in line with our stated
dividend policy of paying 33% of the prior year full dividend in the first
half.
The Group has a very strong capital position with an equity to receivables
ratio of 56% at June, compared with our target of 40%. After assessing the
Group's current trading performance, cash generation and future growth plans,
the Board has determined that a buyback of shares of up to £15m will increase
capital efficiency whilst ensuring that the balance sheet remains strong to
enable the Group to pursue its growth strategy and progressive dividend
policy.
The half-year financial result includes two exceptional items relating to a
£5.0m restructuring of the field force in our Polish business in March and
£5.8m of costs associated with refinancing the Group's Eurobond. Statutory
profit before tax in the first half was therefore £36.5m (H1-23: £37.8m).
Full details of the Group financial performance are detailed in the financial
review section.
Purpose and strategy
We play a vital role in society by providing access to affordable credit
products and insurance services to people who are often excluded from
day-to-day financial services by banks and other lenders. We currently serve
1.7 million customers in nine countries, and we have a clear ambition to grow
our business to 2.5 million customers as we deliver on our purpose of building
a better world through financial inclusion.
In March 2024, we outlined our refreshed Next Gen strategy to underpin the
Group's future growth and success. The three strategic priorities of our Next
Gen strategy are as follows:
1. Next Gen financial inclusion
We aim to increase our reach to appeal to more consumers by expanding our
geographic footprint, increasing our product range and growing the number of
channels through which customers can access our offers:
· Credit cards - We have now issued 180,000 credit cards in Poland, up
from 130,000 at December, and at the end of June 145,000 of these customers
remain active. We continue to be very encouraged by the increasing use of the
cards in retail outlets and on-line, demonstrating the value customers see in
the product. Supported by a requirement for all drawdowns on the card to be
repaid over the following twelve months, the credit performance of the card
portfolio remains consistent with instalment loans. Importantly, repaying
balances over twelve months prevents persistent debt which can be a feature of
credit cards. Based on our experience to date, we see good potential to take
our credit card offering to other markets in the future.
· Expansion in Mexico - We continued to expand our geographical
footprint in Mexico with a new branch opening in June in Mexicali, northern
Mexico. Our two branches in Tijuana and Tampico, which we opened at the end of
2022 and early 2023 respectively, are performing well and in line with our
plan.
· Building distribution channels through strategic partnerships - We
continued to expand our retail partnership credit offering which provides
finance for consumers at the point of purchase. This is now available at 450
stores in Romania with further expansion planned in the second half of the
year. Our tests of this distribution channel in Mexico are also gaining
traction.
· Growing mobile wallet in IPF Digital - We have recently enhanced the
mobile wallet through the introduction of a digital credit health monitor
which uses a combination of internal and external factors to help customers
better manage their credit profiles and behaviours. We now have 85,000
customers using mobile wallet, up from 53,000 at the end of 2023, which
represents nearly 40% of the customers we serve through our digital division.
We expect this proportion to continue to increase at pace as we continue the
roll-out in Mexico and look to introduce the product in other markets.
2. Next Gen organisation
We are becoming a smarter, more efficient organisation that makes a positive
impact on society:
· Process efficiency - We have continued to refine our organisation
structure to deliver greater process standardisation across European home
credit which in turn will make us more effective and efficient.
· Improving ESG ratings - MSCI upgraded IPF's ESG rating to AA and we
maintained our inclusion in the FTSE4Good Index with improved scores in the
social and governance categories.
· Volunteering success - Around 2,500 colleagues took part in our annual
Volunteer and Financial inclusion month in May, supporting 250,000
beneficiaries and raising c.£85,000 in donations.
· Awards - We have been recognised in Hungary with an Outstanding
Customer Service award, received the Fair to Women Best of 2024 award in
Poland and, for the fifth year in a row, ranked in the Index of Responsible
Companies in Mexico which showcases organisations with the best environmental,
social and governance (ESG) strategies.
3. Next Gen technology and data
We are investing in the capabilities required to become a data-driven and
technology-enabled partner for our customers:
· Mexico app rollout - During the first half of the year, we tested a
new mobile app in Mexico home credit to enable customers to better manage
their accounts on a mobile device. The app has proved very popular in the
regions where it was piloted, and we have quickly moved to nationwide rollout.
· Integration of AI into customer service - We have successfully
deployed a pilot of AI in some of our home credit businesses to improve
customer experience across several touchpoints including on-boarding,
complaints and staff training, and we expect to explore further opportunities
to improve our customer experience using AI in the coming months.
Regulatory update
There have been no material changes to the regulatory framework since our
first quarter trading update issued in early May.
(i) Poland
From 1 January 2024, the, KNF began supervising all non-bank financial
institutions in Poland, including our home credit and digital businesses in
this market, and we continue to actively engage with the KNF as they assess
our application for a full payment institution licence which will enable our
Polish home credit business to issue a greater volume of credit cards. To
remain within the limits of our current licence, during the second quarter we
moderated the volumes of new credit cards being issued and focused more on
instalment loan lending.
We are very pleased with the progress made by our Polish business in
transitioning to the new regulatory requirements for consumer lending. The
receivables book in our home credit business is beginning to stabilise whilst
growth returned to our digital business in June. We will continue to adapt our
product set, focus on returning the business to scale whilst maintaining a
strong focus on cost efficiency to ensure the business delivers the Group's
target returns of between 15% and 20%. We expect this to take two years to
complete.
(ii) Romania
As reported in our 2023 full-year results statement, new regulation for a
price cap on consumer lending has long been discussed in Romania which caps
the amount charged at 100% for loans below €5,000 and at 25% APR for loans
greater than €5,000. All of our lending in Romania is below €5,000. The
draft law is now with the President of Romania to sign. We expect the law to
come into force in November 2024. As previously reported, we do not expect the
impact on the Group to be material.
Dividend
Reflecting the continued strong performance of the Group and our strategy to
realise the long-term growth potential of the business, the Board is pleased
to declare a 9.7% increase in the interim dividend to 3.4p per share (H1-23:
3.1p). This is in line with our progressive dividend policy which sets the
interim dividend at 33% of the prior year's full dividend payment. The
interim dividend will be paid on 27 September 2024 to shareholders on the
register at the close of business on 30 August 2024. The shares will be marked
ex-dividend on 29 August 2024.
Share buyback
The Group's financial model is to deliver a target RoRE of between 15% and
20%, which supports a minimum dividend payout ratio of 40%, funds receivable
growth of up to 10% per annum, whilst maintaining an equity to receivables
ratio at 40%. This financial framework ensures that capital is only allocated
where it can deliver appropriate returns to shareholders whilst also balancing
the needs of all our stakeholders.
As a result of the Group's strong trading and financial performance over the
last two years together with favourable foreign exchange movements over that
period, the Group balance sheet has continued to strengthen and the equity to
receivables ratio stands at 56% at the end of June compared with our target of
40%.
After assessing the Group's current trading performance, cash generation and
future growth plans, the Board believes that a share buyback of up to £15m
will increase capital efficiency whilst ensuring that the balance sheet
remains strong, enabling the Group to pursue its growth strategy and
progressive dividend policy.
Further details of the share buyback programme are set out in a separate
announcement.
Outlook
Our aim is to provide underserved consumers with access to simple, personal
and affordable credit and insurance services to help support and protect them
and their families. There is strong demand for affordable credit within our
target demographic, and looking forward we will continue to implement our Next
Gen strategy to extend financial inclusion by offering more product choices to
consumers within our existing markets as well as expanding our geographic
reach in Mexico.
We delivered a strong financial performance in the first half of 2024,
building on the solid foundation built through 2022 and 2023. Customer
satisfaction is high, lending growth continues to gain momentum and credit
quality is excellent, all of which provide us with confidence for delivering
an acceleration in growth through the remainder of the year.
We expect our Polish business to continue to stabilise in the second half
before regrowing towards the end of the year. The impact from the recent
repricing of credit cards is expected to reduce profit delivered by our Polish
business in the second half which, together with accelerated receivables
growth in the remainder of the Group, is expected to result in second half
profit for the Group being lower than first half profit. Notwithstanding this
dynamic, we expect full year pre-exceptional profit before tax of between
£78m and £82m for 2024, which is ahead of current market expectations(*).
We have a very robust funding position, significantly enhanced by our
successful refinancing of the Group's Eurobond, and our well capitalised
balance sheet supports our ambitious growth plans, our progressive dividend
policy and the share buyback programme announced today.
(*) Market expectations based on consensus pre-exceptional profit before tax
for 2024 of £71.4m at 30 July 2024.
Financial review
Group
Building on the strong momentum in 2023 and, with our Next Gen strategy
embedded across the business, we have delivered a very strong financial
performance in the first six months of 2024. Profit before tax and exceptional
costs of £47.3m increased by 25.1% year-on-year and is ahead of our internal
plans. The outperformance was primarily driven by consistently strong customer
repayment behaviour in all markets which resulted in a favourable impairment
performance, including a reduction in the cost-of-living provision of £5m in
the first half.
The half-year financial result includes two exceptional items relating to a
£5.0m restructuring of the field force in our Polish business in March and
£5.8m of costs associated with the successful refinancing the Group's €341m
Eurobond in June. As a result, the Group's statutory profit before tax was
£36.5m in the first six months of the year (H1-23: £37.8m).
Consistent with the change in management responsibility from the end of 2023,
the nascent digital lending business in the Czech Republic, which was
previously reported as part of European home credit, is now included in the
results of IPF Digital. All comparatives have been amended accordingly and are
presented on a like-for-like basis. The Czech Republic digital business
contributed a loss of £1.5m in the first half of 2023 and a loss of £2.6m
for 2023 as a whole. An analysis of the first half divisional results is shown
below (H1-23 restated):
H1-24 H1-23 Change Change
£m £m £m %
European home credit 29.8 31.8 (2.0) (6.3%)
Mexico home credit 17.7 11.4 6.3 55.3%
IPF Digital 7.2 2.6 4.6 176.9%
Central costs (7.4) (8.0) 0.6 7.5%
Pre-exceptional profit before taxation 47.3 37.8 9.5 25.1%
Exceptional items (10.8) - (10.8) n/a
Profit before taxation 36.5 37.8 (1.3) (3.4%)
The detailed income statement of the Group, together with associated KPIs, is
set out below:
Change at CER
H1-24 H1-23 Change Change %
£m £m £m %
Customer numbers (000s) 1,656 1,718 (62) (3.6%) (3.6%)
Customer lending 597.4 578.8 18.6 3.2% 3.2%
Average gross receivables 1,369.9 1,343.2 26.7 2.0% (0.1%)
Closing net receivables 864.4 893.1 (28.7) (3.2%) (0.4%)
Revenue 371.7 380.0 (8.3) (2.2%) (2.7%)
Impairment (64.3) (89.2) 24.9 27.9% 29.1%
Revenue less impairment 307.4 290.8 16.6 5.7% 5.5%
Costs (225.4) (215.1) (10.3) (4.8%) (4.3%)
Interest expense (34.7) (37.9) 3.2 8.4% 8.4%
Pre-exceptional profit before taxation 47.3 37.8 9.5 25.1%
Exceptional items (10.8) - (10.8) n/a
Profit before taxation 36.5 37.8 (1.3) (3.4%)
Annualised revenue yield 55.4% 54.2% 1.2ppts
Annualised impairment rate 10.5% 11.4% 0.9ppts
Annualised cost-income ratio 59.0% 57.4% (1.6)ppts
Pre-exceptional EPS-(1) 12.6p 10.2p 2.4p
Annualised pre-exceptional RoE-(1) 12.1% 11.3% 0.8ppts
Annualised pre-exceptional RoRE(1,2) 16.2% 14.7% 1.5ppts
(1 ) Prior to an exceptional charge of £10.8m (see note 8) in 2024, and an
exceptional tax charge of £4.0m in 2023 (see note 8).
(2 ) Based on required equity to receivables of 40%.
Reported Group lending grew by 3% (at CER) in the first half. Excluding
Poland, customer lending increased by 7% with momentum continuing to build
through the period as demonstrated by the 9% increase in second quarter
lending. Lending in Poland reduced by 7% in the first half but, after a
reduction of 21% in first quarter lending, delivered 10% growth in the second
quarter.
Group closing net receivables were broadly flat year-on-year at £864m.
Excluding Poland, year on year closing net receivables growth was strong at
12% (at CER), driven by particularly good lending performances in Mexico home
credit, IPF Digital, and our home credit operations in Hungary and Romania.
Poland receivables reduced 28% year-on-year to £187m, but we expect to show
only a modest year-on-year reduction by the end of the year as the transition
of the business progresses.
Customer numbers increased by 2%, excluding the impact of the transition in
Poland where customer numbers declined by 21%. As a result of the increased
momentum in Group lending activities, and the stabilisation of our Polish
businesses during the second half, we expect the rate of customer number
growth to improve by the end of 2024.
Delivery of our financial model is underpinned by a stringent focus on revenue
yield, impairment rate and the cost-income ratio, and we continued to make
very good progress towards our medium-term targets.
Notwithstanding the impact of a lower revenue yield in Poland, the Group's
annualised revenue yield strengthened by 1.2ppts to 55.4% year on year
reflecting an increase in the mix of receivables in Mexico, Romania, Hungary
and the Czech Republic which carry a higher yield. We expect the Group revenue
yield to continue to increase into our target range of between 56% and 58% in
the medium term as these countries continue to grow and represent a higher
proportion of the Group's receivables portfolio.
Despite the increased costs of living being experienced by our customers, our
responsible approach to granting credit together with strong operational
discipline delivered an excellent customer repayment performance in all our
markets during the first half of the year. As a result, we reduced our
cost-of-living provision by £5m in the period, and the Group's annualised
impairment rate for the first half of 10.5% (H1-23: 11.4%) was better than our
internal plans. This improved credit quality led to a modest reduction in the
Group's impairment coverage ratio from 36.3% at December 2023 to 34.7% at June
2024, albeit this is still higher than the pre-Covid-19 level of 33.5% at the
end of 2019. With excellent credit quality across all our divisions, we are
well positioned to accelerate growth through the second half of the year.
We continue to maintain a strict focus on efficiency and cost control. The
Group's cost-income ratio at 59.0% is 1.6ppts higher year on year due wholly
to the reduction in revenue in Poland. Excluding the Poland home credit
business, the Group's cost-income ratio has reduced from 57.3% in June last
year to 54.7% at the end of the first half. We expect the Group's ratio to
continue to improve as we deliver increased growth, build scale and continue
to execute on our cost efficiency programme, moving to our target range of 49%
to 51% in the medium term.
The annualised pre-exceptional RoRE improved to 16.2% (H1-23: 14.7%) in the
first half of the year, reflecting growth in returns in Mexico home credit and
IPF Digital as we build scale. We expect returns to moderate in the second
half of the year as the impact of re-pricing the credit card portfolio in
Poland has a larger impact on European home credit returns compared with the
first half of the year. The Group's annualised pre-exceptional RoE, based on
actual equity, was 12.1% at the end of the first half (H1-23: 11.3%).
Pre-exceptional EPS of 12.6p per share showed strong growth of 23.5% (H1-23:
10.2p). Reported EPS of 8.8p per share (H1-23: 8.4p) showed an increase of
4.8% after taking account of the post-tax impact of exceptional items.
Divisional performance
European home credit
Change at
H1-24 H1-23 Change Change CER
£m £m £m % %
Customer numbers (000s) 717 779 (62) (8.0%) (8.0%)
Customer lending 315.4 310.9 4.5 1.4% 2.6%
Average gross receivables 744.8 784.7 (39.9) (5.1%) (6.5%)
Closing net receivables 444.0 499.1 (55.1) (11.0%) (8.5%)
Revenue 166.0 190.4 (24.4) (12.8%) (12.1%)
Impairment (5.7) (25.0) 19.3 77.2% 77.4%
Revenue less impairment 160.3 165.4 (5.1) (3.1%) (2.1%)
Costs (112.1) (109.9) (2.2) (2.0%) (2.8%)
Interest expense (18.4) (23.7) 5.3 22.4% 22.0%
Pre-exceptional profit before taxation 29.8 31.8 (2.0) (6.3%)
Annualised revenue yield 47.2% 45.6% 1.6ppts
Annualised impairment rate 2.2% 3.4% 1.2ppts
Annualised cost-income ratio 64.7% 59.8% (4.9)ppts
Annualised pre-exceptional RoRE(1) 21.3% 22.6% (1.3)ppts
(1 ) Prior to an exceptional charge of £5.0m (see note 8) in
2024, and an exceptional tax charge of £4.0m in 2023 (see note 8).
Our European home credit division delivered another good operational and
financial performance in the first half of the year, reporting pre-exceptional
profit before tax of £29.8m (H1-23: £31.8m), a modest reduction on last year
due wholly to the impact of implementing the reduced credit card cap in
Poland. The first half result was better than our original plans, due in the
main to very strong customer repayment behaviour.
There remains good consumer demand for our broad range of products in Europe
and lending growth continued to improve as the first half progressed.
Excluding Poland, the combined lending growth in Romania, Hungary and the
Czech Republic in the first half was 8% (at CER), with first quarter growth of
6% increasing to 9% in the second quarter.
Lending in Poland reduced by 5% (at CER) in the period, recovering from a
year-on-year contraction of 20% in the first quarter to growth of 13% in
quarter two. The growth in the second quarter reflected a much higher
proportion of instalment loans as we balance our lending to remain within the
parameters of our current small payment institution licence.
Closing net receivables at £444m represent a year-on-year reduction of 8.5%,
with Hungary, Romania and the Czech Republic delivering combined growth of
9.1% (at CER) whilst Poland reduced by 30% (at CER) to £150m. The contraction
in Poland's home credit receivables is now slowing and we expect the business
to begin to regrow towards the end of the year.
Hungary, Romania and the Czech Republic delivered customer growth of 2% in the
first half whilst Poland reduced by 20%, leading to an overall reduction of 8%
in the period. There is now good momentum in building customer numbers in
European home credit as a whole.
The annualised revenue yield strengthened by 1.6ppts year-on-year to 47.2%
reflecting the impact of management actions taken to strengthen returns,
including reduced promotional activity and modest price increases. However,
the yield has seen a modest reduction of 0.2 ppts since December 2023 due to
the re-pricing of credit cards in Poland.
Customer repayment performance was very strong in all our European home credit
markets and credit quality is excellent. There has been no discernible impact
from the higher costs of living arising from increased inflation rates through
2022 and 2023 and, therefore, the cost-of-living provision has been reduced by
£3m. Overall, the annualised impairment rate improved by 1.2ppts year on year
to 2.2%, well ahead of our original plans. We continue to expect the
medium-term impairment rate to rise to between 8% and 10%.
Despite ongoing wage pressures, the cost base of European home credit
increased by only 2.8% in the first half of the year, reflecting the ongoing
cost efficiency programme within the Group. The annualised cost-income ratio
increased from 59.8% at June 2023 to 64.7% as a result of the reduction in
revenue in Poland. As part of the transition of our Polish business, we
undertook a restructuring of the field force in the first half and an
exceptional cost of £5m has been reflected in the first half results as a
result.
The annualised pre-exceptional RoRE for European home credit decreased
modestly by 1.3ppts to 21.3% (H1-23: 22.6%), notwithstanding the financial
impacts of the transition in Poland, and this was a lower reduction than
originally expected due to the strong impairment performance in the first
half. We anticipate full year returns for the division will moderate to below
20% as the impact of the credit card re-pricing in Poland will be greater in
the second half of the year. We anticipate a growth in returns in 2025,
supported by receivables growth and ongoing cost efficiency.
Our European home credit business remains the bedrock of our Group returns
with more than 700,000 customers and, importantly, continues to offer good
growth opportunities. We are making good progress with the transition in
Poland, growing our new digital and retail partnership offerings in Romania
and working to attract new customers in all four markets across the division.
We will also continue to drive more efficient processes and deliver greater
synergies across our four countries, including through the deployment of
technology and sharing of best practice and resource.
Mexico home credit
Change at
H1-24 H1-23 Change Change CER
£m £m £m % %
Customer numbers (000s) 710 700 10 1.4% 1.4%
Customer lending 156.0 142.9 13.1 9.2% 5.8%
Average gross receivables 319.1 274.8 44.3 16.1% 10.0%
Closing net receivables 183.0 176.1 6.9 3.9% 9.0%
Revenue 139.9 125.4 14.5 11.6% 8.2%
Impairment (44.7) (44.0) (0.7) (1.6%) 1.5%
Revenue less impairment 95.2 81.4 13.8 17.0% 13.5%
Costs (70.1) (64.1) (6.0) (9.4%) (6.1%)
Interest expense (7.4) (5.9) (1.5) (25.4%) (23.3%)
Reported profit before taxation 17.7 11.4 6.3 55.3%
Annualised revenue yield 86.5% 88.5% (2.0)ppts
Annualised impairment rate 30.5% 32.2% 1.7ppts
Annualised cost-income ratio 49.1% 50.0% 0.9ppts
Annualised RoRE 24.9% 20.5% 4.4ppts
( )
Mexico home credit delivered a very strong financial performance in the first
half of the year, reporting a 55.3% (£6.3m) increase in profit before tax to
£17.7m.
The continued impact of our geographic expansion strategy, together with good
consumer demand, supported a 5.8% (at CER) increase in customer lending in the
first half of the year, up from 4% delivered in the first quarter. The ongoing
actions to improve performance in the two underperforming regions of Mexico
City and Sureste (c.20% of the business) continue to gain traction, and we
expect lending growth for the year as a whole to increase to our target range
of between 8% and 10%. Customer numbers grew by 1.4% to 710,000.
Closing net receivables grew by 9.0% (at CER) to £183m delivering an 8.2% (at
CER) increase in revenue in the first half. The annualised revenue yield
reduced marginally from 88.5% to 86.5% driven by a modest increase in the mix
of slightly longer, lower yielding products for existing customers.
A key focus for our team in Mexico has been to improve the impairment rate
towards our target level of 30% following the increase to 32.3% reported at
December 2023. As a result of focused management action, write-off volumes
have reduced, and repayment performance has been robust. Together with a
reduction in the cost-of-living provision from £3m to £2m, this has resulted
in the annualised impairment rate improving by 1.8ppts since the year end to
30.5% which is a very pleasing result and a key driver of improved returns.
Despite the continued investment in geographic expansion, costs have been
tightly controlled and together with the increase in revenue, the annualised
cost-income ratio improved by 0.9 ppts to 49.1% and is at the lower end of our
target range of 49% to 51%.
Interest costs increased by 23.3% (at CER), driven by a 10% (at CER) increase
in average gross receivables reflecting the increasing costs of funding the
Mexican business.
Notwithstanding the increase in interest costs, the improvement in impairment
rate together with continued cost efficiency resulted in Mexico home credit
delivering an annualised RoRE of 24.9% (H1-23: 20.5%).
Mexico home credit represents a significant growth market for the Group,
forming a key part of our Next Gen strategy, and we are very pleased with its
continuing strong financial performance and growth momentum. We will continue
our expansion strategy to reach more new customers and focus on delivering
sustainable, quality growth to ensure consistent returns.
IPF Digital
Change at
H1-24 H1-23 Change Change CER
£m £m £m % %
Customer numbers (000s) 229 239 (10) (4.2%) (4.2%)
Customer lending 126.0 125.0 1.0 0.8% 1.5%
Average gross receivables 306.0 283.7 22.3 7.9% 7.5%
Closing net receivables 237.4 217.9 19.5 8.9% 10.4%
Revenue 65.8 64.2 1.6 2.5% 2.8%
Impairment (13.9) (20.2) 6.3 31.2% 30.8%
Revenue less impairment 51.9 44.0 7.9 18.0% 18.2%
Costs (35.9) (33.1) (2.8) (8.5%) (8.8%)
Interest expense (8.8) (8.3) (0.5) (6.0%) (6.0%)
Reported profit before taxation 7.2 2.6 4.6 176.9%
Annualised revenue yield 42.9% 44.8% (1.9)ppts
Annualised impairment rate 10.0% 13.2% 3.2ppts
Annualised cost-income ratio 53.4% 53.3% (0.1)ppts
Annualised RoRE 8.5% 3.1% 5.4ppts
IPF Digital delivered an improved financial performance as we build scale
across the business. Profit before tax increased by £4.6m to £7.2m (H1-23:
£2.6m), with all countries delivering an improved performance, particularly
Poland which is now returning to growth.
There is growing customer demand for fully remote credit offerings and as a
result, customer lending saw year-on-year growth of 7% (at CER), excluding
Poland. Growth in the first quarter was around 4% (at CER) against a strong
comparative last year, and we saw the expected acceleration in growth to 10%
(at CER) in the second quarter, with all markets delivering improved momentum.
Lending in Poland reduced by 18% (at CER) in the period, improving from a
contraction of 28% (CER) in the first quarter. For the division as a whole,
customer lending in the first half increased year on year by 2% and, based on
the strong momentum in all our markets, we expect this rate to increase to
between 10% and 15% for the year as a whole.
Customer numbers reduced by 4.2% to 229,000 due wholly to a 23% contraction in
Poland. Customer numbers in Poland have now stabilised at just under 50,000
and we expect to see growth through the second half of the year. Excluding
Poland, customer numbers increased by 5%.
We continued to execute our growth strategy to rebuild receivables to gain
scale and deliver our target returns, which resulted in closing net
receivables growth of 10% to £237m (at CER). Mexico and Australia were the
stand-out performers with growth of 20% whilst our Baltic markets also
performed well delivering 14% growth. Our nascent digital business in the
Czech Republic, which was transferred from the management of European home
credit to IPF Digital at the end of 2023, grew its receivables by 50% from
£6m to £9m. Closing net receivables in Poland reduced by 17% to £37m, but
delivered modest growth in the second quarter.
The annualised revenue yield in IPF Digital reduced by 1.9 ppts to 42.9%
reflecting the impact of a combination of factors including the flow-through
of reduced rate caps in Latvia and Poland, both of which were lowered at the
end of 2022, as well as in Estonia which is recalculated biannually. These
adverse variances have been offset partly by the growth in Mexico which has a
higher revenue yield.
Customers continue to repay very well in all our digital operations and
portfolio quality is very good. Together with a reduction in the
cost-of-living provision from £3m to £2m in the first half, this has
resulted in the annualised impairment rate showing a year-on-year reduction of
3.2ppts to 10.0%.
Whilst we remain highly focused on managing costs tightly, we also continue to
invest in marketing and technology to attract new customers and build scale
which is delivering increased lending momentum as demonstrated in the second
quarter. As a result, costs increased by 8.8% (at CER) in the first half of
the year. The increased investment together with the reduction in the revenue
yield has meant that the annualised cost-income ratio remained broadly
unchanged year on year at 53.4%. We expect the cost-income ratio to improve as
we continue to grow and benefit from economies of scale. As a fully digital
business, we are targeting a cost-income ratio of around 45% once the business
reaches full scale.
The actions we are taking to build scale together with the strong impairment
performance resulted in IPF Digital's annualised RoRE strengthening by 5.4
ppts to 8.5% year on year. Whilst IPF Digital has lower scale than we would
wish following Covid-19 and the closure of Finland and Spain, there are strong
organic growth opportunities in our existing markets, particularly Mexico,
Australia, the Czech Republic and Poland. We will also continue to consider
inorganic opportunities to deliver scale and increase returns. Our aim is for
IPF Digital to deliver an RoRE at the lower end of the Group's target returns
in 2026.
IPF Digital represents a significant long-term growth opportunity for the
Group. We will continue to extend our mobile wallet offerings in Mexico and
the Baltic countries as well as expand the test of providing point-of-sale
revolving credit facilities through our new Pay Later product in Mexico. We
are pleased with the progress of our newest business in the Czech Republic,
and the growth and product economics now being delivered in Australia. We have
strong foundations in place to deliver faster growth in the second half of the
year and beyond.
Taxation
The pre-exceptional tax charge on the profit for the first half has been based
on an expected tax rate for the full year of approximately 40% (H1-23: 40%).
An exceptional tax credit of £2.1m has been reflected in the first half in
respect of the total exceptional costs of £10.8m in connection with the
refinancing of the Group's Eurobond (£5.8m) and the reorganisation of the
field infrastructure in the Polish home credit business (£5.0m).
In 2022 and 2023, exceptional tax charges of £5.1m and £4.0m respectively
were reflected in relation to a two-year temporary "extra profit special tax"
in Hungary. We noted in the 2023 annual report that the temporary tax had been
extended for an additional year and, therefore, a further £2m exceptional tax
charge was expected to arise in 2024. We now understand that the tax is to be
extended further and, consequently, the "extra profit special tax" now forms
part of our normal tax charge.
Funding and balance sheet
We continue to have a very strong balance sheet and have extended our debt
maturity profile materially in the first half of the year.
In June, we successfully refinanced the Group's Eurobond well ahead of its
maturity in November 2025. The transaction was structured as a tender offer of
the old bond at a price of €1,015 per €1,000 of bonds held and a new
issuance of €341m of five and a half year bonds at an issue price of 99.493%
and a coupon of 10.75%. There was very strong demand for the new notes,
resulting in them being oversubscribed multiple times during marketing and
over 150 investors participating in the final transaction. This allowed us to
tighten the margin over the benchmark German bund from 1,070bps on the old
bonds to 830bps on the new bonds. We redeemed €274m of the old bonds (80.5%)
and €67m remain outstanding and will mature in November 2025. Tender costs
of £4.1m together with a £1.7m write-off of unamortised fees in respect of
the old bonds, resulted in an exceptional cost of £5.8m.
We also secured £23m of bank facilities in the first half of the year and a
further £28m in July of which £15m was new or increased facilities. We
continue to have very strong and supportive relationships with eighteen
lending banks across our businesses.
The successful refinancing of the Eurobond and bank extension process resulted
in the Group having total debt facilities of £679m at the end of June,
consisting of £483m of bonds and £196m of bank facilities. Total borrowings
amounted to £553m and headroom, consisting of undrawn facilities and
non-operational cash balances, amounted to £179m. As a result, the Group
redeemed the SEK 450m (c.£35m) of Nordic bonds in July, some three months in
advance of their original maturity date. The average maturity profile of the
Group's debt facilities now stands at 3.3 years, up from 2.0 years at December
2023. Approximately £470m of the Group's debt funding now matures beyond
2025. The Group's current funding and cash generation supports the Group's
growth plans through to the end of 2025.
Our blended cost of funding in the first half was 13.7%, modestly lower than
14.0% in the first half of last year. This was due to a reduction in interest
rates across our markets as well as a lower cost of hedging as interest
differentials narrowed. Approximately 30% of our debt facilities are at
variable rates compared with 20% of our revenues, which are subject to
interest-linked rate caps. We expect the funding rate for the year as a whole
to increase modestly, reflecting the refinancing of the Eurobond at a headline
rate 100bps higher than the old bond.
Following the Eurobond refinancing, Fitch Ratings upgraded our long-term
credit rating to BB from BB- Outlook Stable. Our credit rating from Moody's
Investment Services remained unchanged at Ba3 (Outlook Stable).
At the end of June, the Group's equity to receivables ratio was 56% (H1-23:
52%), compared with our target of 40%. After experiencing two years of foreign
exchange gains which resulted in the ratio increasing progressively to 59%
through to the end of the first quarter, we saw a 300bps reduction in the
second quarter reflecting accelerated receivables growth, the payment of the
2023 final dividend and foreign exchange losses of £23m in June 2024,
primarily due to the weakening of the Mexican Peso. Our strong capital
position supports the £15m share buyback announced today as well as the
Group's ambitious growth plans and progressive dividend policy through to the
point at which we are delivering our target returns and operating in line with
our financial model. We expect this to be in 2026.
The Group's gearing ratio was 1.2 times (H1-23: 1.2 times) at the end of the
first half, comfortably within our covenant limit of 3.75 times, and our
interest cover covenant was 2.7 times (H1-23: 2.2 times), compared with our
covenant limit of 2.0 times.
Financial statements
Consolidated income statement
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December 2023
2024 2023
Notes £m £m £m
Revenue 3 371.7 380.0 767.8
Impairment 3 (64.3) (89.2) (169.4)
Revenue less impairment 307.4 290.8 598.4
Interest expense 4 (34.7) (37.9) (76.9)
Other operating costs (68.5) (62.2) (128.7)
Administrative expenses (156.9) (152.9) (308.9)
(260.1) (253.0) (514.5)
Pre-exceptional profit before taxation 3 47.3 37.8 83.9
Exceptional items 8 (10.8) - -
Profit before taxation 36.5 37.8 83.9
Pre-exceptional tax (expense)/income
- UK - - 0.7
- Overseas (18.9) (15.1) (32.6)
Pre-exceptional tax expense 5 (18.9) (15.1) (31.9)
Exceptional tax income/(expense) 8 2.1 (4.0) (4.0)
Total tax expense (16.8) (19.1) (35.9)
Profit after taxation attributable to equity shareholders
19.7 18.7 48.0
The notes to the financial information are an integral part of these condensed
consolidated interim financial statements.
Earnings per share - statutory
Unaudited Unaudited Audited
Six months ended Six months ended Year
ended
30 June 30 June 31 December 2023
2024 2023
Notes pence pence pence
Basic 6 8.8 8.4 21.5
Diluted 6 8.3 8.0 20.2
Earnings per share - pre-exceptional items
Unaudited Unaudited Audited
Six months ended Six months ended Year
ended
30 June 30 June 31 December 2023
2024 2023
pence pence pence
Basic 12.6 10.2 23.2
Diluted 11.9 9.7 21.9
Dividend per share
Unaudited Unaudited Audited
Six months ended Six months ended Year
ended
30 June 30 June 31 December 2023
2023 2023
Notes pence pence pence
Interim dividend 7 3.4 3.1 3.1
Final dividend 7 - - 7.2
Total dividend 3.4 3.1 10.3
Dividends paid
Unaudited Unaudited Audited
Six months ended Six months ended Year
ended
30 June 30 June 31 December 2023
2024 2023
Notes £m £m £m
Interim dividend of 3.4 pence - - 6.9
(2023: interim dividend of 3.1 pence) per share 7
Final 2023 dividend of 7.2 pence 16.2 14.6 14.6
(2023: final 2022 dividend of 6.5 pence) per share 7
Total dividends paid 16.2 14.6 21.5
Consolidated statement of comprehensive income
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 June 2024 30 June 2023 ended
31 December 2023
£m £m £m
Profit after taxation attributable to equity shareholders 19.7 18.7 48.0
Other comprehensive (expense)/income
Items that may subsequently be reclassified to income statement
Exchange (losses)/gains on foreign currency translations (25.6) 12.7 22.8
Net fair value gains/(losses) - cash flow hedges 0.9 (0.8) 0.1
Items that will not subsequently be reclassified to income statement
Actuarial (losses)/gains on retirement benefit asset (1.3) (1.2) 3.9
Tax credit/(charge) on items that will not be reclassified 0.3 0.3 (1.0)
Other comprehensive (expense)/income net of taxation (25.7) 11.0 25.8
Total comprehensive (expense)/income for the period attributable to equity (6.0) 29.7 73.8
shareholders
Consolidated balance sheet
Unaudited Unaudited Audited
30 June 30 June 31 December 2023
2024 2023
Notes £m £m £m
Assets
Non-current assets
Goodwill 9 23.1 23.4 23.6
Intangible assets 10 33.4 28.7 32.3
Property, plant and equipment 11 13.8 16.1 16.0
Right-of-use assets 12 19.9 19.4 21.7
Amounts receivable from customers 14 239.2 201.5 203.3
Deferred tax assets 13 125.9 144.9 131.7
Retirement benefit asset 17 4.9 0.9 6.1
460.2 434.9 434.7
Current assets
Amounts receivable from customers 14 625.2 691.6 689.6
Derivative financial instruments 5.1 1.0 2.9
Cash and cash equivalents 86.5 28.2 42.5
Other receivables 16.5 16.2 16.0
Current tax assets 3.3 1.6 3.3
736.6 738.6 754.3
Total assets 3 1,196.8 1,173.5 1,189.0
Liabilities
Current liabilities
Borrowings 16 (54.1) (59.5) (52.2)
Derivative financial instruments (2.7) (12.9) (4.4)
Trade and other payables (123.3) (129.5) (132.9)
Provisions for liabilities and charges 15 (3.9) (3.4) -
Lease liabilities 12 (8.9) (8.1) (8.3)
Current tax liabilities (12.9) (14.5) (7.3)
(205.8) (227.9) (205.1)
Non-current liabilities
Deferred tax liabilities (7.1) (5.9) (7.1)
Lease liabilities 12 (13.1) (13.3) (15.3)
Borrowings 16 (490.4) (463.5) (459.6)
(510.6) (482.7) (482.0)
Total liabilities 3 (716.4) (710.6) (687.1)
Net assets 480.4 462.9 501.9
Equity attributable to owners of the Parent
Called-up share capital 23.4 23.4 23.4
Other reserve (22.5) (22.5) (22.5)
Foreign exchange reserve 6.4 21.9 32.0
Hedging reserve 1.1 (0.7) 0.2
Own shares (26.0) (36.9) (36.7)
Capital redemption reserve 2.3 2.3 2.3
Retained earnings 495.7 475.4 503.2
Total equity 480.4 462.9 501.9
Consolidated statement of changes in equity
Unaudited
Called-up share capital
£m Other reserve *Other reserves Retained Total
£m £m earnings equity
£m £m
At 1 January 2023 23.4 (22.5) (31.7) 476.0 445.2
Comprehensive income
Profit after taxation for the period - - - 18.7 18.7
Other comprehensive income/(expense)
Exchange gains on foreign currency translation (note 20)
- - 12.7 - 12.7
Net fair value losses - cash flow hedges - - (0.8) - (0.8)
Actuarial loss on retirement benefit asset - - - (1.2) (1.2)
Tax credit on other comprehensive income - - - 0.3 0.3
Total other comprehensive income/(expense) - - 11.9 (0.9) 11.0
Total comprehensive income for the period - - 11.9 17.8 29.7
Transactions with owners
Share-based payment adjustment to reserves - - - 2.9 2.9
Purchase of own shares - - (0.3) - (0.3)
Shares granted from treasury and employee trust - - 6.7 (6.7) -
Dividends paid to Company shareholders - - - (14.6) (14.6)
At 30 June 2023 23.4 (22.5) (13.4) 475.4 462.9
Audited
At 1 January 2023 23.4 (22.5) (31.7) 476.0 445.2
Comprehensive income:
Profit after taxation for the year - - - 48.0 48.0
Other comprehensive income/(expense):
Exchange gains on foreign currency translation (note 20) - - 22.8 - 22.8
Net fair value gains - cash flow hedges - - 0.1 - 0.1
Actuarial gain on retirement benefit obligation - - - 3.9 3.9
Tax charge on other comprehensive expense - - - (1.0) (1.0)
Total other comprehensive income - - 22.9 2.9 25.8
Total comprehensive income for the year - - 22.9 50.9 73.8
Transactions with owners:
Deferred tax on share-based payment transactions - - - 0.5 0.5
Share-based payment adjustment to reserves - - - 4.3 4.3
Shares acquired by employee trust - - (0.4) - (0.4)
Shares granted from treasury and employee trust
- - 7.0 (7.0) -
Dividends paid to Company shareholders - - - (21.5) (21.5)
At 31 December 2023 23.4 (22.5) (2.2) 503.2 501.9
Consolidated statement of changes in equity (continued)
Unaudited
Called-up share capital
£m Other reserve *Other reserves Retained Total
£m £m earnings equity
£m £m
At 1 January 2024 23.4 (22.5) (2.2) 503.2 501.9
Comprehensive income
Profit after taxation for the period - - - 19.7 19.7
Other comprehensive (expense)/income
Exchange losses on foreign currency translation (note 20)
- - (25.6) - (25.6)
Net fair value gains - cash flow hedges - - 0.9 - 0.9
Actuarial loss on retirement benefit asset - - - (1.3) (1.3)
Tax credit on other comprehensive income - - - 0.3 0.3
Total other comprehensive expense - - (24.7) (1.0) (25.7)
Total comprehensive (expense)/income for the period
- - (24.7) 18.7 (6.0)
Transactions with owners
Share-based payment adjustment to reserves - - - 2.1 2.1
Purchase of own shares - - (1.4) - (1.4)
Shares granted from treasury and employee trust - - 12.1 (12.1) -
Dividends paid to Company shareholders - - - (16.2) (16.2)
At 30 June 2024 23.4 (22.5) (16.2) 495.7 480.4
* Includes foreign exchange reserve, hedging reserve, own shares and capital
redemption reserve.
Consolidated cash flow statement
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 June 30 June ended
2024 2023 31 December
2023
Notes £m £m £m
Cash flows from operating activities
Cash generated from operating activities 19 71.6 85.1 193.4
Finance costs paid (33.2) (23.3) (74.5)
Finance income received 0.7 - -
Income tax paid (11.5) (22.6) (33.1)
Net cash generated from operating activities 27.6 39.2 85.8
Cash flows used in investing activities
Purchases of intangible assets 10 (7.4) (7.5) (17.9)
Purchases of property, plant and equipment 11 (1.7) (1.6) (4.7)
Net cash used in investing activities (9.1) (9.1) (22.6)
Net cash generated from operating and investing activities
18.5 30.1 63.2
Cash flows from financing activities
Proceeds from borrowings 295.0 11.9 48.1
Repayment of borrowings (244.6) (44.9) (87.3)
Principal elements of lease payments 12 (5.9) (5.7) (12.0)
Shares acquired by employee trust (1.4) (0.3) (0.4)
Dividends paid to equity shareholders (16.2) (14.6) (21.5)
Cash received on share options exercised - 0.3 0.4
Net cash generated from/(used in) financing activities
26.9 (53.3) (72.7)
Net increase/(decrease) in cash and cash equivalents
45.4 (23.2) (9.5)
Cash and cash equivalents at beginning of period 42.5 50.7 50.7
Exchange (losses)/gains on cash and cash equivalents (1.4) 0.7 1.3
Cash and cash equivalents at end of period 86.5 28.2 42.5
Notes to the condensed consolidated interim financial statements
1. Basis of preparation
These unaudited condensed consolidated interim financial statements for the
six months ended 30 June 2024 have 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 United Kingdom.
These condensed consolidated interim financial statements should be read in
conjunction with the Annual Report and Financial Statements ('the Financial
Statements') for the year ended 31 December 2023, which have been prepared in
accordance with International Financial Reporting Standards (IFRSs) and those
parts of the Companies Act 2006 applicable to companies reporting under IFRS.
These condensed consolidated interim financial statements were approved for
release on 31 July 2024.
These condensed consolidated interim financial statements do not comprise
statutory accounts within the meaning of Section 434 of the Companies Act
2006. The Financial Statements for the year ended 31 December 2023 were
approved by the Board on 14 March 2024 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 (http://www.ipfin.co.uk) ).
The accounting policies applied to prepare these condensed consolidated
interim financial statements are consistent with those applied to the most
recent full year Financial Statements for the year ended 31 December 2023.
We operate a formal risk management process, the details of which are set out
on page 78 of the Financial Statements for the year ended 31 December 2023.
Details of our principal risks can be found on pages 80 to 83 of the Financial
Statements.
The risks assessed in preparing these condensed consolidated interim financial
statements are consistent with those assessed in the most recent full year
Financial Statements for the year ended 31 December 2023.
Board members
As at 30 June 2024, the Group's Board members were as follows:
Stuart Sinclair Chairman
Gerard Ryan Executive Director and Chief Executive Officer
Gary Thompson Executive Director and Chief Financial Officer
Katrina Cliffe Senior independent non-executive director
Deborah Davis Independent non-executive director
Richard Holmes Independent non-executive director
Aileen Wallace Independent non-executive director
( )
Going concern
In considering whether the Group is a going concern, the Board has taken into
account the Group's financial forecasts and its principal risks (with
particular reference to funding, liquidity and regulatory risks). The
forecasts have been prepared for the two years to 31 December 2025 and include
projected profit and loss, balance sheet, cashflows, borrowings, headroom
against debt facilities and funding requirements. These forecasts represent
the best estimate of the businesses performance, and in particular the
evolution of customer lending and repayments cash flows as well as
management's best assumption regarding the renewal/extension of maturing
financing facilities.
The financial forecasts have been stress tested in a range of downside
scenarios to assess the impact on future profitability, funding requirements
and covenant compliance. The scenarios reflect the crystallisation of the
Group's principal risks (with particular reference to funding, liquidity and
regulatory risks). Consideration has also been given to multiple risks
crystallising concurrently and the availability of mitigating actions that
could be taken to reduce the impact of the identified risks. In addition, we
examined a reverse stress test on the financial forecasts to assess the extent
to which a recession would need to impact our operational performance in order
to breach a covenant. This showed that net revenue would need to deteriorate
significantly from the financial forecast and the Directors have a reasonable
expectation that it is unlikely to deteriorate to this extent.
At 30 June 2024, the Group had £179m of non-operational cash and headroom
against its debt facilities (comprising a range of bonds and bank facilities),
which have a weighted average maturity of 3.3 years. Total debt facilities as
at 30 June 2024 amounted to £679m of which £72m (excluding £34m of
uncommitted loans, which do not require extension) is due for renewal over the
following 12 months. A combination of these debt facilities, the embedded
business flexibility in respect of cash generation and a successful track
record of accessing funding from debt capital markets over a long period
(including periods with challenging macroeconomic conditions and a changing
regulatory environment), are expected to meet the Group's funding requirements
for the foreseeable future (12 months from the date of approval of this
report). Taking these factors into account, together with regulatory risks set
out on page 80 of the 2023 Annual Report and Financial Statements, 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 the Report.
The following amendments to standards are mandatory for the first time for
the financial year beginning 1 January 2024 but do not have any material
impact on the Group:
· Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial
Instruments: 'Disclosures: Supplier Finance Arrangements'
· Amendments to IFRS 16 Leases: 'Lease Liability in a Sale and
Leaseback'
· Amendments to IAS 1 Presentation of Financial Statements:
Non-current Liabilities with Covenants
The following standards, interpretations and amendments to existing standards
are not yet effective and have not been early adopted by the Group:
· IFRS S1 'General Requirements for Disclosure of
Sustainability-related Financial Information'
· IFRS S2 'Climate-related Disclosures'
· Amendments to IAS 21 'The Effects of Changes in Foreign Exchange
Rate: Lack of Exchangeability'
· IFRS 18 'Presentation and Disclosure in Financial Statements'
· IFRS 19 'Subsidiaries without Public Accountability: Disclosures'
· Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial
Instruments: 'Disclosures: Classification and Measurement of Financial
Instruments'
Exceptional items
Exceptional items are items that are unusual because of their size, nature or
incidence and which the directors consider should be disclosed separately to
enable a full understanding of the Group's underlying results.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of condensed consolidated interim financial statements
requires the Group to make estimates and judgements that affect the
application of policies and reported accounts.
Critical judgements represent key decisions made by management in the
application of the Group accounting policies. Where a significant risk of
materially different outcomes exists due to management assumptions or sources
of estimation uncertainty, this will represent a critical accounting estimate.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Actual results may differ
from these estimates.
The estimates and judgements which have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities are
discussed below.
Key sources of estimation uncertainty
In the application of the Group's accounting policies, the directors are
required to make estimations that have a significant impact on the amounts
recognised and to make estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
The following are the critical estimations, that the directors have made in
the process of applying the Group's accounting policies and that have the most
significant effect on the amounts recognised in these condensed consolidated
interim financial statements.
Revenue recognition
The estimate used in respect of revenue recognition is the methodology used to
calculate the effective interest rate (EIR). In order to determine the EIR
applicable to loans an estimate must be made of the expected life of each loan
and hence the cash flows relating thereto. These estimates are based on
historical data and are reviewed regularly.
Amounts receivable from customers
The Group reviews its portfolio of customer loans and receivables for
impairment on a weekly or monthly basis. The Group reviews the most recent
customer repayment performance to determine whether there is objective
evidence which indicates that there has been an adverse effect on expected
future cash flows. For the purposes of assessing the impairment of customer
loans and receivables, customers are categorised into stages based on days
past due as this is considered to be the most reliable predictor of future
payment performance. The level of impairment is calculated using historical
payment performance to generate both the estimated expected loss and also the
timing of future cash flows for each agreement. The expected loss is
calculated using probability of default (PD) and loss given default (LGD)
parameters.
Impairment models are monitored regularly to test their continued capability
to predict the timing and quantum of customer repayments in the context of the
recent customer payment performance. The models used typically have a strong
predictive capability reflecting the relatively stable nature of the business
and therefore the actual performance does not usually vary significantly from
the estimated performance. The models are ordinarily updated at least twice
per year. Where we expect the models to show an increase in the expected loss
or a slowing of the future cashflows in the following 12 months, we apply an
adjustment to the models. At 30 June 2024, this adjustment was a reduction in
receivables of £15.7m (30 June 2023: reduction of £12.5m; 31 December 2023:
reduction of £9.0m).
Post model overlays (PMOs) on amounts receivable from customers
Unaudited Unaudited Audited
30 June 30 June 31 December 2023
2024 2023 £m
£m £m
Home credit 9.3 20.6 20.0
IPF Digital 2.1 3.1 3.2
Total 11.4 23.7 23.2
To date there has been no discernible impact on customer repayments as a
result of the cost-of-living crisis. Inflation rates have continued to
decrease however, prices remain significantly higher than pre-crisis. There is
also an additional risk that governments could increase taxes following an
increase in government debt driven by the support packages that were provided
prior to elections in some markets. As a result, there remains a risk that the
cost-of-living crisis will have a significant adverse impact on our customers'
disposable income and therefore their ability to make repayments. Due to the
resilience of our customers to date, the impact is expected to be lower than
previously anticipated. The PMO related to the cost-of-living at 30 June 2024
is £10.0m (30 June 2023: £20.8m; 31 December 2023: £15.1m). In order to
calculate this PMO, country-specific expert knowledge, informed by economic
forecast data to estimate the increase in losses, has been used. This
represents management's current assessment of a reasonable outcome from the
cost-of-living crisis.
The Hungarian debt moratorium, which initially began in March 2020, ended in
December 2022. There remains a small proportion of the portfolio that has at
some point been in the moratorium. Given the age of these loans, PMOs have
been applied to the impairment models in order to calculate the continued
risks that are not fully reflected in the standard impairment models. Based on
management's current expectations, the impact of these PMOs was to increase
impairment provisions at 30 June 2024 to £1.4m (30 June 2023: £2.9m; 31
December 2023: £2.1m). In order to calculate the PMO, the portfolio was
segmented by analysis of the most recent payment performance and, using this
information, assumptions were made around expected credit losses. This
represents management's current assessment of a reasonable outcome from the
actual repayment performance on the debt moratorium impacted portfolio.
Tax
Estimations must be exercised in the calculation of the Group's tax provision,
in particular with regard to the existence and extent of tax risks.
Deferred tax assets arise from timing differences between the accounting and
tax treatment of revenue and impairment transactions and tax losses.
Estimations must be made regarding the extent to which timing differences
reverse and an assessment must be made of the extent to which future profits
will be generated to absorb tax losses. A shortfall in profitability compared
to current expectations may result in future adjustments to deferred tax asset
balances.
Alternative performance measures
In reporting financial information, the Group presents alternative performance
measures, 'APMs' which are not defined or specified under the requirements of
IFRS.
The Group believes that these APMs, which are not considered to be a
substitute for or superior to IFRS measures, provide stakeholders with
additional helpful information on the performance of the business. The APMs
are consistent with how the business performance is planned and reported
within the internal management reporting to the Board.
Each of the APMs used by the Group is set out in the APM section of this
report including explanations of how they are calculated and how they can be
reconciled to a statutory measure where relevant.
The Group reports percentage change figures for all performance measures,
other than profit or loss before taxation and earnings per share, after
restating prior year figures at a constant exchange rate. The constant
exchange rate, which is an APM, retranslates the previous year measures at the
average actual periodic exchange rates used in the current financial year.
These measures are presented as a means of eliminating the effects of exchange
rate fluctuations on the year-on-year reported results.
The Group makes certain adjustments to the statutory measures in order to
derive APMs where relevant. The Group's policy is to exclude items that are
considered to be significant in both nature and/or quantum and where treatment
as an adjusted item provides stakeholders with additional useful information
to assess the year-on-year trading performance of the Group.
2. Related parties
The Group has not entered into any material transactions with related parties
in the first six months of the year.
3. Segment analysis
Consistent with the change in management responsibility from the end of 2023,
the nascent digital lending business in the Czech Republic, which was
previously reported as part of European home credit, is now included in the
results of IPF Digital. All comparatives have been amended accordingly and are
presented on a like-for-like basis.
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December 2023
2024 2023 (Restated)
(Restated)
£m £m £m
Revenue
European home credit 166.0 190.4 375.9
Mexico home credit 139.9 125.4 261.6
IPF Digital 65.8 64.2 130.3
Revenue 371.7 380.0 767.8
Impairment
European home credit 5.7 25.0 35.6
Mexico home credit 44.7 44.0 96.7
IPF Digital 13.9 20.2 37.1
Impairment 64.3 89.2 169.4
Pre-exceptional profit before taxation
European home credit 29.8 31.8 67.7
Mexico home credit 17.7 11.4 23.1
IPF Digital 7.2 2.6 8.1
UK costs(1) (7.4) (8.0) (15.0)
Pre-exceptional profit before taxation 47.3 37.8 83.9
Segment assets
European home credit 522.8 585.2 558.7
Mexico home credit 287.2 276.4 291.2
IPF Digital 270.3 255.1 260.3
UK(2) 116.5 56.8 78.8
Total 1,196.8 1,173.5 1,189.0
Segment liabilities
European home credit 251.9 321.0 289.6
Mexico home credit 113.9 126.4 134.3
IPF Digital 145.3 128.8 132.2
UK(2) 205.3 134.4 131.0
Total 716.4 710.6 687.1
(1) Although UK costs 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 other operating costs; administrative expenses and
profit before taxation.
(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.
4. Interest expense
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Interest payable on borrowings 34.2 36.9 74.8
Interest payable on lease liabilities 1.2 1.0 2.1
Interest income (0.7) - -
Interest expense 34.7 37.9 76.9
5. Tax expense
The pre-exceptional taxation charge on the profit for the first six months of
the year of £18.9m (30 June 2023: £15.1m), has been based on an expected
effective tax rate for 2024 of 40% (30 June 2023: 40%).
Post-exceptional tax credits of £2.1m (30 June 2023: £4.0m tax charge) have
been recognised on the exceptional items of £10.8m (see note 8 for further
details).
The Group is subject to tax audits in respect of the Mexican home credit
business (regarding 2017) and the Mexican digital business (regarding 2019).
6. Earnings per share
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
pence pence pence
Basic EPS 8.8 8.4 21.5
Dilutive effect of awards (0.5) (0.4) (1.3)
Diluted EPS 8.3 8.0 20.2
Basic earnings per share (EPS) for 30 June 2024 is calculated by dividing the
profit attributable to shareholders of £19.7m (30 June 2023: £18.7m; 31
December 2023: £48.0m) by the weighted average number of shares in issue
during the period of 224.9m which has been adjusted to exclude the weighted
average number of shares held in treasury and by the employee trust (30 June
2023: 223.4m; 31 December 2023: 223.7m).
For diluted EPS for 30 June 2024, the weighted average number of shares has
been adjusted to 238.1m (six months ended 30 June 2023: 235.2m; 31 December
2023: 237.5m) to assume conversion of all dilutive potential ordinary share
options relating to employees of the Group.
7. Dividends
Reflecting the continued strong performance of the Group and our strategy to
realise the long-term growth potential of the business, the Board is pleased
to declare a 9.7% increase in the interim dividend to 3.4 pence per share (30
June 2023: 3.1 pence). This is in line with our progressive dividend policy
which sets the interim dividend payment at 33% of the prior year's full
dividend payment. The interim dividend will be paid on 27 September 2024 to
shareholders on the register at the close of business on 30 August 2024. The
shares will be marked ex-dividend on 29 August 2024.
8. Exceptional items
Unaudited Unaudited Audited
Six months ended Six months ended Year
30 June 30 June ended
2024 2023 31 December
2023
£m £m £m
Eurobond refinance costs (5.8) - -
Poland restructuring costs (5.0) - -
Exceptional items pre-tax (10.8) - -
Tax credit on Eurobond refinance costs 1.1 - -
Tax credit on Poland restructuring costs 1.0 - -
Temporary Hungarian extra profit special tax - (4.0) (4.0)
Exceptional items tax credit/(charge) 2.1 (4.0) (4.0)
Exceptional items post-tax (8.7) (4.0) (4.0)
A pre-tax exceptional cost of £5.0m has been recognised, reflecting the costs
associated with the removal of c.200 roles from the Polish field force as part
of the implementation of the Improved Business Model (IBM). As at 30 June
2024, £1.1m of the cost had been paid to colleagues who have now left the
business with £3.9m remaining outstanding for those where settlements have
not yet been reached, this has been reflected as a provision at 30 June 2024,
see note 15 for further details. A tax credit of £1.0m has been recognized on
this restructuring cost.
An exceptional cost of £5.8m has been recognized, associated with the
successful refinancing of the Eurobond. The costs comprise £4.1m of tender
costs, and £1.7m of unamortised arrangement fees on the old Eurobond. A tax
credit of £1.1m has been recognised on these costs.
9. Goodwill
Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Net book value at start of period 23.6 24.2 24.2
Exchange adjustments (0.5) (0.8) (0.6)
Net book value at end of period 23.1 23.4 23.6
Goodwill is tested annually for impairment or more frequently if there are
indications that goodwill might be impaired. The recoverable amount is
determined from a value in use calculation, based on the expected cash flows
resulting from the legacy MCB business' outstanding customer receivables and
taking into account the collect out of the Finnish business. The key
assumptions used in the value in use calculation relate to the discount rates
and cash flows used. The rate used to discount the forecast cash flows is 13%
(30 June 2023: 13%; 31 December 2023: 13%) and would need to increase to 15%
for the goodwill balance to be impaired; the cashflow forecasts arise over a
1-4 year period and would need to be 17% lower than currently estimated for
the goodwill balance to be impaired.
10. Intangible assets
Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Net book value at start of period 32.3 27.9 27.9
Additions 7.4 7.5 17.9
Impairment - - (0.2)
Amortisation (6.0) (6.3) (13.1)
Exchange adjustments (0.3) (0.4) (0.2)
Net book value at end of period 33.4 28.7 32.3
Intangible assets comprise computer software and are a mixture of
self-developed and purchased assets. All purchased assets have had further
capitalised development on them, meaning it is not possible to disaggregate
fully between the relevant intangible categories.
11. Property, plant and equipment
Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Net book value at start of period 16.0 17.3 17.3
Exchange adjustments (0.7) 0.4 0.6
Additions 1.7 1.6 4.7
Disposals - - (0.1)
Depreciation (3.2) (3.2) (6.5)
Net book value at end of period 13.8 16.1 16.0
As at 30 June 2024, the Group had £7.0m of capital expenditure commitments
with third parties that were not provided for (30 June 2023: £4.7m; 31
December 2023: £6.7m).
12. Right-of-use assets and lease liabilities
The recognised right-of-use assets relate to the following types of assets:
Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Properties 9.7 12.4 11.0
Motor vehicles 10.2 7.0 10.7
Total right-of-use assets 19.9 19.4 21.7
The movement in the right-of-use assets in the period is as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Net book value at start of period 21.7 19.3 19.3
Exchange adjustments (0.9) 0.8 0.9
Additions 4.0 3.9 9.8
Modifications - - 1.4
Depreciation (4.9) (4.6) (9.7)
Net book value at end of period 19.9 19.4 21.7
The movement in lease liabilities in the period is as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Lease liabilities at start of period 23.6 21.4 21.4
Exchange adjustments (0.9) 0.8 0.9
Additions 4.0 3.9 11.2
Interest 1.2 1.0 2.1
Lease payments (5.9) (5.7) (12.0)
Lease liabilities at end of period 22.0 21.4 23.6
Analysed as:
Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Current 8.9 8.1 8.3
Non-current:
- between one and five years 11.9 11.8 13.7
- greater than five years 1.2 1.5 1.6
13.1 13.3 15.3
Lease liabilities at end of period 22.0 21.4 23.6
13. Deferred tax assets
Deferred tax assets have been recognised in respect of tax losses and other
temporary timing differences (principally relating to recognition of revenue
and impairment) to the extent that it is probable that these assets will be
utilised against future taxable profits.
On 20 June 2023, the United Kingdom government's legislation applying the
Pillar Two income tax rules became substantively enacted, effective from 1
January 2024. Under the legislation the parent company will be required to
pay in the United Kingdom top-up tax on profits of subsidiaries that are taxed
at an effective tax rate of less than 15% (as calculated under the rules). A
system of simplified safe harbours will apply for a transitional period of up
to three years.
The Group has performed an impact assessment using a combination of historic
and forecast financial data and concludes that no material Pillar Two top-up
tax liabilities are expected to arise. However, given the uncertainty
regarding forecast financial data and the potential for changes in the tax
environment in the markets in which the Group operates, the actual impact that
the Pillar Two legislation will have in the future may differ. The Group is
continuing to assess the impact of the Pillar Two income taxes legislation on
its future financial performance.
14. Amounts receivable from customers
Amounts receivable from customers comprise:
Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Amounts due within one year 625.2 691.6 689.6
Amounts due in more than one year 239.2 201.5 203.3
Total receivables 864.4 893.1 892.9
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
2024 2023 2023
£m £m £m
Polish zloty 187.2 257.4 219.7
Czech crown 53.0 55.0 53.3
Euro* 100.7 90.1 98.1
Hungarian forint 140.8 143.2 141.2
Romanian leu 108.8 93.9 107.0
Mexican peso 226.6 213.5 229.0
Australian dollar 47.3 40.0 44.6
Total receivables 864.4 893.1 892.9
*Includes receivables in Estonia, Latvia, Lithuania (Spain and Finland in 30
June 2023 only).
Amounts receivable from customers are held at amortised cost and are equal to
the expected future cash flows receivable discounted at the average effective
EIR of 101.6% (30 June 2023: 100.1%; 31 December 2023: 101.0%). All amounts
receivable from customers are at fixed interest rates. The average period to
maturity of the amounts receivable from customers is 13.1 months (30 June
2023: 12.7 months; 31 December 2023: 13.2 months).
Determining an increase in credit risk since initial recognition
IFRS 9 has the following recognition criteria:
· Stage 1 : requires the recognition of 12 month expected credit losses
(the expected credit losses from default events that are expected within 12
months of the reporting date) if credit risk has not significantly increased
since initial recognition.
· Stage 2 : lifetime expected credit losses for financial instruments for
which the credit risk has increased significantly since initial recognition.
· Stage 3 : credit impaired.
When determining whether the risk of default has increased significantly since
initial recognition the Group considers both quantitative and qualitative
information based on the Group's historical experience.
The approach to identifying significant increases in credit risk is consistent
across the Group's products. In addition, as a backstop, the Group considers
that a significant increase in credit risk occurs when an asset is more than
30 days past due.
Financial instruments are moved back to stage 1 once they no longer meet the
criteria for a significant increase in credit risk.
Definition of default and credit impaired assets
The Group defines a financial instrument as in default, which is fully-aligned
with the definition of credit-impaired, when it meets one or more of the
following criteria:
· Quantitative criteria: the customer is more than 90 days past due on
their contractual payments in home credit and 60 days past due on their
contractual payments in IPF Digital.
· Qualitative criteria: indication that there is a measurable movement
in the estimated future cash flows from a group of financial assets. For
example, if prospective legislative changes are considered to impact the
collections performance of customers.
The default definition has been applied consistently to model the PD, exposure
at default (EAD) and LGD throughout the Group's expected credit loss
calculations.
An instrument is considered to no longer be in default (i.e. to have cured)
when it no longer meets any of the default criteria.
The breakdown of receivables by stage is as follows:
Total net receivables
Stage 1 Stage 2 Stage 3 £m
30 June 2024 £m £m £m
Home credit 432.3 59.8 134.9 627.0
IPF Digital 221.7 9.9 5.8 237.4
Group 654.0 69.7 140.7 864.4
Total net receivables
Stage 1 Stage 2 Stage 3 £m
30 June 2023 £m £m £m
Home credit 440.8 81.1 153.3 675.2
IPF Digital 202.3 9.0 6.6 217.9
Group 643.1 90.1 159.9 893.1
Total net receivables
Stage 1 Stage 2 Stage 3 £m
31 December 2023 £m £m £m
Home credit 436.8 74.4 151.3 662.5
IPF Digital 213.6 10.3 6.5 230.4
Group 650.4 84.7 157.8 892.9
The Group has one class of loan receivable and no collateral is held in
respect of any customer receivables.
Gross carrying amount and loss allowance
The amounts receivable from customers includes a provision for the loss
allowance, which relates to the expected credit losses on each agreement. The
gross carrying amount is the present value of the portfolio before the loss
allowance provision is deducted. The gross carrying amount less the loss
allowance is equal to the net receivables.
Total net receivables
Stage 1 Stage 2 Stage 3 £m
30 June 2024 £m £m £m
Gross carrying amount 788.0 134.9 400.5 1,323.4
Loss allowance (134.0) (65.2) (259.8) (459.0)
Group 654.0 69.7 140.7 864.4
Stage allocation 60% 10% 30% 100%
Coverage ratio 17% 48% 65% 35%
Total net receivables
Stage 1 Stage 2 Stage 3 £m
30 June 2023 £m £m £m
Gross carrying amount 795.8 169.0 442.6 1,407.4
Loss allowance (152.7) (78.9) (282.7) (514.3)
Group 643.1 90.1 159.9 893.1
Stage allocation 57% 12% 31% 100%
Coverage ratio 19% 47% 64% 37%
Total net receivables
Stage 1 Stage 2 Stage 3 £m
31 December 2023 £m £m £m
Gross carrying amount 799.7 159.5 441.9 1,401.1
Loss allowance (149.3) (74.8) (284.1) (508.2)
Group 650.4 84.7 157.8 892.9
Stage allocation 57% 11% 32% 100%
Coverage ratio 19% 47% 64% 36%
15. Provisions for liabilities and charges
The Group had £3.9m payable to employees outstanding at 30 June 2024 relating
to the exceptional item (see note 8) following the restructure exercise in
Poland during the first half of the year.
Customer redress provisions of £3.4m were held at 30 June 2023 representing
the Group's best estimate of the costs that were expected to be incurred in
relation to early settlement rebates in Poland and claims management charges
incurred in Spain.
16. Borrowing facilities and borrowings
The maturity of the Group's bond and bank borrowings is as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Repayable
- in less than one year 54.1 59.5 52.2
- between one and two years 75.8 65.0 330.5
- between two and five years 414.6 398.5 129.1
490.4 463.5 459.6
Total borrowings 544.5 523.0 511.8
Borrowings are stated net of deferred debt issuance costs of £8.7m (30 June
2023: £4.8m; 31 December 2023: £4.7m).
The maturity of the Group's bond and bank facilities is as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Repayable
- on demand 34.0 32.5 32.6
- in less than one year 71.8 87.5 65.4
- between one and two years 115.9 70.6 364.6
- between two and five years 168.5 418.8 166.1
- greater than five years 288.5 - -
Total facilities 678.7 609.4 628.7
The undrawn external bank facilities are as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Expiring within one year 51.7 60.3 45.8
Expiring between one and two years 39.7 4.5 31.1
Expiring in more than two years 34.1 16.8 35.3
Total 125.5 81.6 112.2
Undrawn external facilities above do not include unamortised arrangement fees.
The average period to maturity of the Group's external bonds and committed
external borrowings is 3.3 years (30 June 2023: 2.1 years; 31 December 2023:
2.0 years).
The Group complied with its covenants at 30 June 2024. Each covenant
calculation has been made in accordance with the terms of the relevant funding
documentation.
17. Retirement benefit asset
The amounts recognised in the balance sheet in respect of the retirement
benefit asset are as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Diversified growth funds 0.9 4.7 1.6
Corporate bonds 8.3 11.0 7.6
Equities 0.7 - 0.9
Liability driven investments 18.0 12.5 19.7
Other 0.4 0.7 0.6
Total fair value of scheme assets 28.3 28.9 30.4
Present value of funded defined benefit obligations (23.4) (28.0)
(24.3)
Net asset recognised in the balance sheet 4.9 0.9 6.1
The credit recognised in the income statement in respect of defined benefit
pension costs is £0.1m (June 2023: £nil: 31 December 2023: £0.1m).
18. Fair values of financial assets and liabilities
IFRS 13 requires disclosure of fair value measurements of 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).
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.
In 2023 and 2024, there has been no change in classification of financial
assets as a result of a change in purpose or use of these assets.
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
2024 2023 2023 2024 2023 2023
£m £m £m £m £m £m
Financial assets
Amounts receivable from customers 864.4 893.1 1,129.9 1,122.8
892.9 1,139.3
864.4 893.1 892.9 1,129.9 1,122.8 1,139.3
Financial liabilities
Bonds 474.0 408.7 428.2 490.2 373.1 420.8
Bank borrowings
70.5 114.3 83.6 70.5 114.3 83.6
544.5 523.0 511.8 560.7 487.4 504.4
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 customer representative repayment
costs, at the Group's weighted average cost of capital which we estimate to be
13% (30 June 2023: 13%; 31 December 2023: 13%) which is assumed to be a proxy
for the discount rate that a market participant would use to price the asset.
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. This
methodology has been used consistently for all periods.
19. Reconciliation of profit after taxation to cash generated from operating
activities
Unaudited Unaudited Audited
Six months ended Six months ended Year
ended
30 June 30 June 31 December 2023
2024 2023
£m £m £m
Profit after taxation from operations 19.7 18.7 48.0
Adjusted for
Tax charge 16.8 19.1 35.9
Finance costs 35.4 37.9 76.9
Finance income (0.7) - -
Share-based payment charge 1.1 1.4 2.7
Amortisation of intangible assets (note 10) 6.0 6.3 13.1
Impairment of intangible assets (note 10) - - 0.2
Loss on disposal of property, plant and equipment
- - 0.1
Depreciation of property, plant and equipment (note 11)
3.2 3.2 6.5
Depreciation of right-of-use assets (note 12) 4.9 4.6 9.7
Short term and low value lease costs 0.4 0.9 1.7
Changes in operating assets and liabilities
Amounts receivable from customers (5.7) (8.3) (3.8)
Other receivables (5.2) 1.0 0.9
Trade and other payables (5.1) (9.5) 4.8
Provision for liabilities and charges 3.9 (1.2) (4.7)
Retirement benefit asset (0.1) - (0.1)
Derivative financial instruments (3.0) 11.0 1.5
Cash generated from operating activities 71.6 85.1 193.4
20. 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 Year Closing
H1 June H1 June 2023 December 2023
2024 2024 2023 2023
Polish zloty 5.1 5.1 5.3 5.2 5.2 5.0
Czech crown 29.2 29.4 27.1 27.5 27.9 28.5
Euro 1.2 1.2 1.1 1.2 1.1 1.2
Hungarian forint 457.0 468.0 433.2 430.0 437.3 441.3
Romanian leu 5.8 5.9 5.7 5.8 5.7 5.7
Mexican peso 21.7 22.8 22.2 21.8 21.9 21.5
Australian dollar 1.9 1.9 1.8 1.9 1.9 1.9
The £25.6m exchange loss on foreign currency translations shown within the
consolidated statement of comprehensive income arises on retranslation of net
assets denominated in currencies other than sterling, due to the change in
foreign exchange rates against sterling between December 2023 and June 2024
shown in the table above.
21. Post balance sheet events
Following the successful refinancing of the Group's Eurobond, SEK 450m
(c.£35m) of Nordic bonds were redeemed in July, some three months in advance
of their original maturity date.
22. Contingent Liabilities
In the course of its business the Group is subject to complaints and
threatened or actual legal proceedings (including class or group action
claims) brought by or on behalf of current or former employees, customer
representatives, customers, investors or other third parties. This extends to
legal and regulatory challenges and investigations (including relevant
consumer bodies) combined with tax authorities taking a view that is different
to the view the Group has taken on the tax treatment in its tax returns. Where
material, such matters are periodically reassessed, with the assistance of
external professional advisers where appropriate, to determine the likelihood
of the Group incurring a liability. In those instances where it is concluded
that it is more likely than not that a payment will be made, a provision is
established based on management's best estimate of the amount required at the
relevant balance sheet date. In some cases, it may not be possible to form a
view, for example because the facts are unclear or because further time is
needed to assess properly the merits of the case, and no provisions are held
in relation to such matters. In these circumstances, specific disclosure in
relation to a contingent liability will be made where material. However, the
Group does not currently expect the final outcome of any such case to have a
material adverse effect on its financial position, operations or cash flows.
Responsibility statement
The following statement is given by each of the directors: namely; Stuart
Sinclair, Chairman; Gerard Ryan, Chief Executive Officer; Gary Thompson, Chief
Financial Officer; Katrina Cliffe, Senior independent non-executive director;
Deborah Davis, non-executive director; Richard Holmes, non-executive director;
and Aileen Wallace, non-executive director.
The directors confirm that to the best of their knowledge:
· the condensed consolidated interim financial statements, which have been
prepared in accordance with the applicable set of accounting standards, give a
true and fair view of the assets, liabilities, financial position and profit
or loss of the issuer, or the undertakings included in the consolidation as a
whole as required by DTR 4.2.4R;
· 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).
Alternative performance measures (APMs)
This half-year financial report provides APMs which are not defined or
specified under the requirements of International Financial Reporting
Standards. We believe these APMs provide readers with important additional
information on our business. To support this we have included a reconciliation
of the APMs we use, where relevant, and a glossary indicating the APMs that we
use, an explanation of how they are calculated and why we use them.
APM Closest equivalent Reconciling items to Definition and purpose
statutory measure statutory measure
Income statement measures
Customer lending growth at constant exchange rates (%) None Not applicable Customer lending is the principal value of loans advanced to customers and is
an important measure of the level of lending in the business. Customer lending
growth is the period-on-period change in this metric which is calculated by
retranslating the previous half-year's customer lending at the average actual
exchange rates used in the current financial year. This ensures that the
measure is presented having eliminated the effects of exchange rate
fluctuations on the period-on-period reported results.
Revenue growth at None Not applicable The period-on-period change in revenue which is calculated by retranslating
the previous half-year's revenue at the average actual exchange rates used in
constant exchange the current financial year. This measure is presented as a means of
eliminating the effects of exchange rate fluctuations on the period-on-period
rates (%) reported results.
Revenue yield (%) None Not applicable Revenue yield is reported revenue divided by average gross receivables (before
impairment provision) and is an indicator of the return being generated from
average gross receivables. This is reported on a rolling annual basis
(annualised).
Impairment rate (%) None Not applicable Impairment as a percentage of average gross receivables (before impairment
provision). This is reported on a rolling annual basis (annualised).
Cost-income ratio (%) None Not applicable The cost-income ratio is costs, including customer representatives'
commission, excluding interest expense, divided by reported revenue. This
measure is reported on a rolling annual basis (annualised). This is useful for
comparing performance across markets.
APM Closest equivalent Reconciling items to Definition and purpose
statutory measure statutory measure
Balance sheet and returns measures
Equity to receivables ratio (%) None Not applicable Total equity divided by amounts receivable from customers, this is a measure
of balance sheet strength and the Group targets a ratio of around 40%.
Headroom (£m) Undrawn None Calculated as the sum of undrawn external bank facilities and non-operational
cash.
external bank
facilities
Net debt (£m) None Not applicable Borrowings less cash.
Gross receivables (£m) None Not applicable Gross receivables is the same definition as gross carrying amount.
Impairment coverage ratio (%) None Not applicable Expected loss allowance divided by gross receivables (before impairment
provision).
Pre-exceptional RoE (%) None Not applicable Return on equity (RoE) calculated as rolling annual pre-exceptional profit
after tax divided by average net assets over the same period.
Pre-exceptional RoRE (%) None Not applicable Return on required equity (RoRE) is calculated as rolling annual
pre-exceptional profit after tax divided by required equity of 40% of average
net receivables.
Other measures
Customers None Not applicable Customers that are being served by our customer representatives or through our
money transfer product in the home credit business and customers that are not
in default in our digital business.
Constant exchange rate reconciliations
The period-on-period change in pre-exceptional profit and loss accounts is
calculated by retranslating the 2023 half-year's profit and loss account at
the average actual exchange rates used in the current year.
H1 2024
£m European home credit Mexico home credit IPF Digital Central costs Group
Customer numbers (000s) 717 710 229 - 1,656
Customer lending 315.4 156.0 126.0 - 597.4
Average gross receivables 744.8 319.1 306.0 - 1,369.9
Closing net receivables 444.0 183.0 237.4 - 864.4
Revenue 166.0 139.9 65.8 - 371.7
Impairment (5.7) (44.7) (13.9) - (64.3)
Revenue less impairment 160.3 95.2 51.9 - 307.4
Costs (112.1) (70.1) (35.9) (7.3) (225.4)
Interest expense (18.4) (7.4) (8.8) (0.1) (34.7)
Profit before tax 29.8 17.7 7.2 (7.4) 47.3
H1 2023 performance, at average H1 2023 foreign exchange rates
£m European home credit Mexico home credit IPF Digital Central Group
costs
Customer numbers (000s) 779 700 239 - 1,718
Customer lending 310.9 142.9 125.0 - 578.8
Average gross receivables 784.7 274.8 283.7 - 1,343.2
Closing net receivables 499.1 176.1 217.9 - 893.1
Revenue 190.4 125.4 64.2 - 380.0
Impairment (25.0) (44.0) (20.2) - (89.2)
Revenue less impairment 165.4 81.4 44.0 - 290.8
Costs (109.9) (64.1) (33.1) (8.0) (215.1)
Interest expense (23.7) (5.9) (8.3) - (37.9)
Profit before tax 31.8 11.4 2.6 (8.0) 37.8
Foreign exchange movements
£m European home credit Mexico home credit IPF Digital Central Group
costs
Customer numbers (000s) - - - - -
Customer lending (3.6) 4.5 (0.9) - -
Average gross receivables 11.7 15.4 0.9 - 28.0
Closing net receivables (14.0) (8.2) (2.9) - (25.1)
Revenue (1.5) 3.9 (0.2) - 2.2
Impairment (0.2) (1.4) 0.1 - (1.5)
Revenue less impairment (1.7) 2.5 (0.1) - 0.7
Costs 0.9 (2.0) 0.1 - (1.0)
Interest expense 0.1 (0.1) - - -
Profit before tax (0.7) 0.4 - - (0.3)
H1 2023 performance, at average H1 2024 foreign exchange rates
£m European home credit Mexico home credit IPF Digital Central Group
costs
Customer numbers (000s) 779 700 239 - 1,718
Customer lending 307.3 147.4 124.1 - 578.8
Average gross receivables 796.4 290.2 284.6 - 1,371.2
Closing net receivables 485.1 167.9 215.0 - 868.0
Revenue 188.9 129.3 64.0 - 382.2
Impairment (25.2) (45.4) (20.1) - (90.7)
Revenue less impairment 163.7 83.9 43.9 - 291.5
Costs (109.0) (66.1) (33.0) (8.0) (216.1)
Interest expense (23.6) (6.0) (8.3) - (37.9)
Year-on-year movement at constant exchange rates
% European home credit Mexico home credit IPF Digital Central Group
costs
Customer numbers (000s) (8.0%) 1.4% (4.2%) - (3.6%)
Customer lending 2.6% 5.8% 1.5% - 3.2%
Average gross receivables (6.5%) 10.0% 7.5% - (0.1%)
Closing net receivables (8.5%) 9.0% 10.4% - (0.4%)
Revenue (12.1%) 8.2% 2.8% - (2.7%)
Impairment 77.4% 1.5% 30.8% - 29.1%
Revenue less impairment (2.1%) 13.5% 18.2% - 5.5%
Costs (2.8%) (6.1%) (8.8%) 8.8% (4.3%)
Interest expense 22.0% (23.3%) (6.0%) - 8.4%
Balance sheet and returns measures
Average gross receivables (before impairment provisions) are used in the
revenue yield and impairment rate calculations.
Average Gross Receivables Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
European home credit 744.8 784.7 791.1
Mexico home credit 319.1 274.8 299.4
IPF Digital 306.0 283.7 298.4
Group 1,369.9 1,343.2 1,388.9
The impairment coverage ratio is calculated as loss allowance divided by gross
carrying amount.
Impairment coverage ratio Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Closing gross carrying amount 1,323.4 1,407.4 1,401.1
Loss allowance (459.0) (514.3) (508.2)
Closing net receivables 864.4 893.1 892.9
Impairment coverage ratio 34.7% 36.5% 36.3%
Pre-exceptional return on equity (RoE) is calculated as rolling annual
pre-exceptional profit divided by pre-exceptional equity.
Pre-exceptional RoE 30 June 2024 Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Equity (net assets) 480.4 462.9 501.9
Exceptional items 8.7 4.0 4.0
Pre-exceptional equity 489.1 466.9 505.9
Average pre-exceptional equity 478.0 430.1 470.3
Profit after tax 19.7 18.7 48.0
Exceptional items 8.7 4.0 4.0
Pre-exceptional profit 28.4 22.7 52.0
Pre-exceptional profit 12 months to 30 June 2024 57.7 -
Pre-exceptional RoE 12.1% 11.1%
Pre-exceptional RoE 30 June 2023 Unaudited Unaudited Audited
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Equity (net assets) 462.9 403.8 445.2
Exceptional items 4.0 (10.5) (10.5)
Pre-exceptional equity 466.9 393.3 434.7
Average pre-exceptional equity 430.1 378.2 400.9
Profit after tax 18.7 30.8 56.8
Exceptional items 4.0 (10.5) (10.5)
Pre-exceptional profit 22.7 20.3 46.3
Pre-exceptional profit 12 months to 30 June 2023 48.7 -
Pre-exceptional RoE 11.3% 11.5%
Pre-exceptional return on required equity (RoRE) is calculated as rolling
annual pre-exceptional profit divided by required equity of 40% of average net
receivables.
Pre-exceptional RoRE 30 June 2024 European home credit Mexico IPF Digital Group
home credit
£m £m £m £m
Closing net receivables H1 2023 499.1 176.1 217.9 893.1
Closing net receivables H1 2024 444.0 183.0 237.4 864.4
Average net receivables 471.5 179.6 227.7 878.8
Equity (net assets) at 40% 188.6 71.8 91.1 351.5
Pre-exceptional profit before tax:
FY 2023 67.7 23.1 8.1 83.9
Exclude H1 2023 (31.8) (11.4) (2.6) (37.8)
H2 2023 35.9 11.7 5.5 46.1
H1 2024 29.8 17.7 7.2 47.3
12 MO to H1 2024 65.7 29.4 12.7 93.4
Tax at 40% H1 2024 (38% H2 2023) (25.5) (11.5) (5.0) (36.4)
Pre-exceptional profit after tax 40.2 17.9 7.7 57.0
Pre-exceptional RoRE 21.3% 24.9% 8.5% 16.2%
Pre-exceptional RoRE 30 June 2023 European home credit Mexico IPF Digital Group
home credit
£m £m £m £m
Closing net receivables H1 2022 438.6 140.8 190.5 769.9
Closing net receivables H1 2023 499.1 176.1 217.9 893.1
Average net receivables 468.8 158.5 204.2 831.5
Equity (net assets) at 40% 187.5 63.4 81.7 332.6
Pre-exceptional profit before tax:
FY 2022 69.9 17.7 4.5 77.4
Exclude H1 2022 (31.1) (7.4) (3.0) (33.8)
H2 2022 38.8 10.3 1.5 43.6
H1 2023 31.8 11.4 2.6 37.8
12 MO to H1 2023 70.6 21.7 4.1 81.4
Tax at 40% (28.2) (8.7) (1.6) (32.6)
Pre-exceptional profit after tax 42.4 13.0 2.5 48.8
Pre-exceptional RoRE 22.6% 20.5% 3.1% 14.7%
Pre-exceptional RoRE 2023 European home credit Mexico IPF Digital Group
home credit
£m £m £m £m
Closing net receivables 2023 475.4 187.1 230.4 892.9
Closing net receivables 2022 496.3 158.5 214.0 868.8
Average net receivables 485.8 172.8 222.2 880.8
Equity (net assets) at 40% 194.3 69.1 88.9 352.3
Pre-exceptional profit before tax 67.7 23.1 8.1 83.9
Tax at 38% (25.7) (8.8) (3.1) (31.9)
Pre-exceptional profit after tax 42.0 14.3 5.0 52.0
Pre-exceptional RoRE 21.6% 20.7% 5.6% 14.8%
INDEPENDENT REVIEW REPORT TO INTERNATIONAL PERSONAL FINANCE PLC
Conclusion
We have been engaged by the group to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2024 which comprise the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated balance sheet, the
consolidated statement of changes in equity, the consolidated cash flow
statement and related notes. 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.
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 2024 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity", issued for use in the United Kingdom.
A review of interim financial information consists of making enquiries,
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 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.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with UK adopted IASs. The condensed set of financial
statements included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34, "Interim
Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the group to
cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the group
or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of financial information
In reviewing the half-yearly report, we are responsible for expressing to the
group a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
relating to going concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for conclusion paragraph of
this report.
Use of our report
This report is made solely to the company's directors, as a body, in
accordance with the terms of our engagement letter dated 8 May 2024. Our
review has been undertaken so that we might state to the company's directors
those matters we have agreed to state to them in a reviewer's 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 and the company's
directors as a body, for our work, for this report, or for the conclusions we
have formed.
PKF Littlejohn LLP
Statutory Auditor
31 July 2024
15 Westferry Circus
Canary Wharf
London E14 4HD
Notes
This report has been prepared 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, as well as
any 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 the period to present the performance variance.
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