14 March
2024
International Personal Finance plc
Full-year financial report for the year ended
31 December 2023
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.
GOOD GROWTH AND STRONG FINANCIAL
PERFORMANCE
Key
highlights
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Strong full-year
financial performance and increased final dividend
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Reported profit before tax up 8.4% to £83.9m (2022:
£77.4m), ahead of our internal
plans.
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·
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Proposed final dividend of 7.2p per share (2022:
6.5p) results in full-year dividend growth of 12.0% to 10.3p per
share (2022: 9.2p), consistent with our progressive dividend
policy.
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Ø
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Excellent
operational execution delivered further growth and continued good
credit quality
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Strong demand for our broad range
of financial products resulted in customer lending, excluding
Poland, showing year-on-year growth of 8%.
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Closing net receivables of £893m
(2022: £869m), demonstrating strong year-on-year growth of 12%,
excluding Poland.
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·
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Lending and receivables in Poland
reduced by 29% and 25% respectively, in line with guidance provided
in Q4 2022, as we adapt to new regulation and rollout our new
credit card product.
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·
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Actions to improve the Group's
returns delivering very positive results:
-
Revenue yield strengthened to 55.3% (2022:
51.9%).
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- Customer repayment
performance remained robust, delivering an impairment rate of 12.2%
(2022: 8.6%), in line with expectations.
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- Rigorous focus on cost control and efficiency delivered a
further reduction in the cost-income ratio to 57.0% (2022:
60.9%).
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Ø
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Diversified funding
sources and significant headroom to fund growth
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|
·
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Successfully raised and extended £146m of debt
facilities in 2023, with over £170m of debt funding now maturing
beyond 2025.
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Substantial headroom on funding facilities of
£126m.
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We note the improvement in debt market conditions
and, together with advisors, are actively exploring options to
refinance the Eurobond maturing in November 2025.
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Ø
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Significant
progress executing strategy
to take advantage of substantial
and sustainable long-term growth
opportunities
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Over 130,000 credit cards now issued in Poland.
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Continued
traction in capturing the significant
growth potential in Mexico through both our home credit and digital
divisions.
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Further new product launches including digital and
retail partnership products in Romania and a pay later product in
Mexico.
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The Group's evolution to a more modern,
multi-product, multi-channel and digitally-enabled business is now
captured through the rearticulation of the Group's strategy as
"Next Gen".
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Ø
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Poland
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·
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Lenders in Poland, including the Group,
recently received a regulatory communication from the Komisja
Nadzoru Finansowego (KNF), the Polish Financial Supervision
Authority.
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·
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The
communication sets out the KNF's views on how non-interest fees
should be interpreted by credit card issuers.
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Further
detail is provided in the regulatory update section.
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Group key
statistics
|
2023
|
2022
|
YOY change at CER
|
|
Customer numbers (000s)
|
1,700
|
1,733
|
(1.9%)
|
|
Customer lending (£m)
|
1,150.6
|
1,126.4
|
(3.5%)
|
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Closing net receivables (£m)
|
892.9
|
868.8
|
(0.2%)
|
|
Reported PBT (£m)
|
83.9
|
77.4
|
|
|
Pre-exceptional EPS (pence)1
|
23.2p
|
20.8p
|
11.5%
|
|
Full-year dividend per share (pence)
|
10.3p
|
9.2p
|
12.0%
|
|
|
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1 Prior to an exceptional tax
charge of £4.0m in 2023, and an exceptional tax credit of £10.5m in
2022, see section on taxation for details.
Gerard Ryan, Chief Executive Officer at IPF
commented:
"I am pleased to
report our relentless focus on meeting our customers' needs
combined with strong cost control and good capital management has
driven a very positive financial and operational performance in
2023. Our strategy to grow the business is being well executed
which, together with excellent operational execution, delivered
profit before tax of £83.9m, well ahead of our original
plans.
All of our
businesses delivered good growth, with the exception of Poland
where we anticipated a shrinkage as we adapt to new regulation and
the rollout of our credit card product. We are now serving more
than 130,000 customers with this exciting new offering and we
continue to adapt and change our Polish business to customer needs
and ongoing changes in regulation.
As a result of our
strong performance and confidence in our growth outlook, the Board
is proposing a final dividend of 7.2 pence per share, resulting in
full-year dividend growth of 12.0%, in line with our commitment to
deliver a progressive dividend policy.
Our strong
performance in 2023, together with our robust capital and funding
position, provides a great foundation for delivering further good
quality growth and continuing to successfully execute against our
Next Gen strategy in 2024. I would like to say a huge thank you to
all my colleagues whose hard work and dedication is the key to
increasing financial inclusion for our customers and delivering
strong returns for our shareholders."
Alternative
performance measures
This full-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.
For further information contact:
Rachel Moran - Investor Relations
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+44 (0)7760 167637
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Georgia Dunn - Deputy Company Secretary
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+44 (0)7584 615230
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Investor
webcast
International
Personal Finance will host a webcast of its 2023 full-year results
presentation at 09.00hrs (GMT) today - Thursday 14 March 2024,
which can be accessed here.
A copy of this statement can be found on our website
at www.ipfin.co.uk.
Legal Entity Identifier: 213800II1O44IRKUZB59
Chief Executive
Officer's review
Group
performance
I am delighted with the excellent progress we have
made against our strategic objectives in 2023 which has resulted in
a very strong operational and financial performance for the year as
a whole. We delivered profit before tax of £83.9m, up 8% on last
year and surpassing our original plans, with good contributions
from all our divisions.
Demand for affordable credit from
consumers in our target segment remained strong and, despite
continued tight credit standards against the backdrop of rising
inflation, we delivered an 8% increase in customer lending,
excluding Poland. In line with our expectations, lending in Poland
declined by 29% as we move to being a credit card-focused business
and adapt both our home credit and digital divisions to operating
under new affordability regulations in this market. Closing net
receivables of £893m (2022: £869m) showed good year-on-year growth
of 12%, excluding Poland which saw an expected year-on-year
reduction of 25%.
The rollout of credit cards in
Poland has progressed well with the product showing strong customer
appeal. Along with all other lenders in Poland, we received
a regulatory
communication from the KNF in late February 2024, regarding its
expectations of the application of non-interest fees to credit
cards. We are in the process of reviewing the communication with
the assistance of external counsel as well as engaging with the KNF
to understand the potential impact on our business. If the
expectations set out in the KNF letter are implemented in their
current form, we estimate that this could reduce the Group's
profits by up to £10m per annum, after taking account of the strong
trading performance in 2023. We will continue to adapt and change
our Polish product offerings to meet both customer needs and the
evolving regulatory landscape in order to deliver our target
financial returns.
We continued to make very good
progress against our target KPIs in 2023. The revenue yield
strengthened to 55.3% (2022: 51.9%) and is now very close to our
target range of 56% to 58%, whilst the cost-income ratio reduced to
57.0% (2022: 60.9%) as we maintained our strict focus on cost
control and efficiency. We are continuing to identify areas where
we can improve efficiency and deploy technology, and we are making
good progress towards our target range of 49% to 51%. The
impairment rate increased to 12.2% (2022: 8.6%) and this was in
line with our plans and remains below our overall target rate of
between 14% to 16%, reflecting the good quality of our receivables
portfolios. Tight credit standards coupled with a strong
operational rhythm, meant that customer repayment performance
remained robust in 2023, despite the challenging macroeconomic
landscape for our customers.
Our financial model underpins our purpose to build a
better world through financial inclusion and targets a return on
required equity (RoRE) for the Group of 15% to 20%, which we
consider to be sustainable and balances the needs of all our
stakeholders. Our annualised pre-exceptional RoRE showed a modest
improvement to 14.8% (2022: 14.6%), which reflects a very good
performance from each of our businesses to mitigate the impact of
reduced returns in Poland as we transition the business through
2023 and 2024. The European and Mexico home credit divisions
both delivered our target returns of around 20% whilst returns in
IPF Digital improved as we continue to make good progress in
capturing the excellent growth opportunities which will deliver
both scale and our target returns.
Our Group continues to have a very
well-capitalised balance sheet and robust funding position.
Continued success in diversifying our funding base and refinancing
our existing facilities resulted in significant headroom of £126m
on our debt facilities at the end of 2023.
We have previously communicated our plans to deliver
a progressive dividend policy whilst absorbing the financial impact
of transitioning our business in Poland. Reflecting our confidence
in executing the Group's strategy and realising the long-term
growth potential of the business, we are proposing a final dividend
of 7.2 pence per share, bringing the full-year dividend to 10.3
pence per share, up 12.0% on 2023.
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 2023, we made strong progress executing our
strategy of broadening our products and distribution channels to
serve more customers at the same time as driving improved cost
efficiency and delivering increased digital capability across the
Group. Some of the key highlights were:
(i) Credit
cards
The rollout of our new credit card in Poland has
progressed very well and, at the end of the year, we had issued
more than 130,000 cards to customers, up from just over 50,000 at
the half year. The new offering is proving very popular with our
customers who value the utility provided by a credit card to
seamlessly shop online and in store as well as withdraw cash at an
ATM as their credit limit allows. The level of these transactions
has now grown to represent approximately half of all transactions
in December 2023, exceeding our own expectations. It is also very
encouraging that the impairment performance of credit card
customers is consistent with instalment loans, benefiting from the
ongoing discipline provided through cash repayments being collected
by our customer representatives.
See the Regulatory update for further information
regarding a regulatory communication from the KNF in February 2024
regarding the application of non-interest fees to credit cards.
(ii) Mexico
expansion
In our Mexico home credit
business, we continued our successful expansion strategy, launching
a new home credit region in Tampico in March 2023 and we will continue to grow our geographic footprint in 2024
with a new branch opening in Mexicali, located in northern Mexico.
Building on the success of our digital onboarding process, which
was delivered in 2022, we transformed our lead management process
in 2023 by integrating WhatsApp instant messaging technology with
our Facebook marketing channel, which increased leads by more than
165%. In the fourth quarter of the year, we also launched a new
mobile app for customers which is currently being tested in three
locations and has received positive feedback to
date.
We launched our mobile wallet to
our digital customers in Mexico in early 2023. We have been very
encouraged by the strong uptake in Mexico and, together with the
continued good traction in the Baltics, resulted in our IPF Digital
division ending the year with over 53,000 mobile wallet customers,
up from 14,000 at the start of the year.
As part of our focus on capturing
partnership opportunities, we very recently launched a test of an
interest-bearing Pay Later product with retailers in Mexico to
enable customers to finance their purchases at point of
sale.
(iii) Romania
Our Romanian business continues to
be at the forefront of innovation and a driver for growth within
the Group. Having launched a retail partnership with E-Mag in 2022,
we launched our second retail partnership in the
fourth quarter of 2023 with Flanco, one of the country's
largest electrical goods retailers, providing access to finance for
consumers at the point at which they make a purchase. In December,
we also launched what we term a digital "hybrid" loan product,
which offers end-to-end digital onboarding, disbursement and
repayment functionality with the opportunity for a customer
representative to work with the customer in the event of any
financial difficulty. We are pleased with how these new initiatives
have started and will look to expand them during 2024.
(iv) Value-added
services
We continue to see a very good opportunity to serve
our customers with value-added services such as healthcare, life
and job insurances as well as access to educational services at
great value prices they would not be able to obtain individually.
During 2023, we further expanded our value-added services in
Poland, and also launched our first insurance product in the
Baltics within our IPF Digital division. In total, around 800,000
of our customers are now enjoying the benefit of one of our
value-added services.
Our Next Gen strategy
The evolution of the Group over
the last five years has been dramatic, as we have navigated through
Covid-19, adapted to the changing regulatory landscape and
introduced an increasing number of new products and channels to
satisfy ever-changing customer needs. IPF is now
a more modern, multi-product, multi-channel and
digitally enabled business and we have therefore
taken the opportunity to rearticulate our
strategy to reflect the Group as it is today. Our aim is to be the leading provider of financial
services for underserved communities around the world; data driven,
technology-enabled and always with a human touch, and we are now
well positioned to deliver future growth.
We call our rearticulation "Next
Gen" and, whilst the fundamentals are unchanged, we now categorise
our strategy into three distinct pillars:
1. Next Gen financial
inclusion: building products,
channels and territories to ensure our propositions are attractive
to the next generation of customers.
2. Next Gen
organisation: becoming a smarter
and more efficient organisation that makes a positive impact on
society.
3. Next Gen technology and
data: investing in the capabilities
required to become a data-driven and technology-enabled partner for
our customers.
As we continue to build a better
world through financial inclusion and deliver against our ambition
to serve 2.5 million customers, we will talk about our strategy and
monitor our progress through these three pillars.
Marketplace
Our business offers significant long-term growth
opportunities, and our addressable market is very significant with
around 70 million adults who are underserved financially in our
nine countries alone. Increasingly, consumers are looking for
a convenient, fast and personal service enabled by technology
innovations, and adoption of digital technology is widespread among
our target consumers.
The global economic downturn
and cost-of-living crisis continued to be the largest
challenge facing our business throughout 2023, both in terms of its
impact on our customers as well as increased costs across the
Group. Inflation rates are reducing across our markets, but they
are expected to remain elevated in 2024. We continued to experience
good demand for affordable financial services in our target segment
of consumers, and whilst our customers' disposable incomes came
under pressure because of increased food, fuel and energy prices,
we did not see any discernible signs of deterioration in their
repayment performance. This is the result of their careful attitude
to credit, our prudent lending decisions to minimise credit risk to
the business and our consistent and fair collections practices. We
will continue to monitor lending and repayment performance
carefully and will adjust credit settings as appropriate.
The rise in inflation has inevitably had a knock-on
impact on interest rates around the globe, although it appears that
rates have now peaked. We have been heavily focused on managing our
revenue yield and cost efficiency to mitigate the rising cost of
funding, particularly as we think about our options for refinancing
our fixed rate, fixed term funding.
All our markets remain very competitive although we
have seen banks tighten their lending criteria in response to the
cost-of-living crisis. There have been no major new entrants
serving our segment of consumers, but some competitors have been
impacted by increased regulation and caution in capital markets. We
believe that non-bank financial institutions will remain a crucial
source of finance for lower income, underserved consumers, and we
will continue to focus on serving more customers in this
demographic while maintaining lending quality.
Environment, social
and governance (ESG)
As a global lending business, we
have the responsibility and opportunity to make a real difference
to our customers' financial futures and to contribute to the
creation of a lower-carbon, fairer and ethical society.
We are committed not only to supporting our
customers by providing affordable and
transparent credit in a responsible way,
but also striving to create long-term, sustainable value for all
our stakeholders as we invest in promoting financial inclusion,
develop the capabilities of our team who serve millions of
customers, and implementing our climate change strategy.
In 2023, the Board approved our Responsible Business
Framework, a vision for how we will contribute to a more
sustainable world and deliver our purpose of building a better
world through financial inclusion. Our journey to embed ESG
throughout our operations aims to drive real change across our
markets and the key initiatives undertaken in the year
included:
• Our Global
People Survey, which measures cultural alignment, had a 95%
participation rate and generated a 79% positive response rate - a
fantastic result by any measure.
• We delivered learning academies to 16,000 customer
representatives and more than 500 training programmes to
colleagues.
• We invested £893,000 in our communities, assisting 69,000
people through our global Invisibles community
programme, and providing 3,300
volunteering opportunities for our colleagues.
•
Agreeing our ambition and plan to become net zero
by 2050 and becoming a supporter of the Task Force on
Climate-related Financial Disclosures.
• Being recognised with Top Employer and Super Ethical Company awards in
Poland, and IPF Digital in Mexico was
named as the 'Best Place to Work for Women'.
Dividend
Reflecting our confidence in
executing the Group's strategy and realising the long-term growth
potential of the business, the Board is pleased to declare a 10.8%
increase in the final dividend to 7.2p per share (2022: 6.5p). This
is in line with our progressive dividend policy and brings the
full-year dividend to 10.3p per share (2022: 9.2p), an increase of
12.0% on 2022 and representing a pre-exceptional payout rate of 44%
(2022: 44%). As we previously communicated, the payout rate is
modestly above our target of 40% as we utilise our strong capital
base whilst rebuilding our RoRE to our target level of 15%.
Subject to shareholder approval, the final
dividend will be paid on 11 May 2024 to shareholders on the
register at the close of business on 12 April 2024. The shares will
be marked ex-dividend on 11 April 2024.
Regulatory
update
(i)
Consumer Credit Directive
The EU Commission's review of the
second Consumer Credit Directive (CCD II) was published formally in
November and entered into force in December. EU Member States have
24 months to comply with CCD II. The key areas of change relevant
to the Group include rules on pre-contractual information,
creditworthiness assessments and underwriting, documentation
training and consumer protection rules.
(ii) Poland
From 1 January 2024, the Polish
financial supervision authority, KNF, began supervising all
non-bank financial institutions in Poland, which includes our home
credit and digital businesses in this market. We continue to engage
with the KNF as they assess our application for a full payment
institution licence which will enable our Polish business to issue
a greater volume of credit cards in Poland. In the meantime, we
continue to operate under a small payment institution licence where
the value of monthly credit card transactions, based on a 12-month
rolling average, is limited to the maximum value achieved in any
one month in 2023 (in our case December 2023) until the full
payment institution licence is granted.
In late February 2024, we received
a letter from the KNF issued to all regulated lenders operating in
the Polish credit card market setting out its current expectations
on how charging practices for credit cards should be subject to
limits on non-interest costs, the need to differentiate between
different costs charged by credit card issuers which are subject to
caps and those fees which are not subject to a cap and lastly how
issuers should approach more broadly the question of calculating
and assessing fees which are not subject to specific legal
limits.
The key expectations set out in
the KNF's letter are as follows:
(i)
Credit cards should be subject to the limits on non-interest costs
as set out in the Law on Consumer Credit and the Civil Code. The
Consumer Credit cap operates in a way that allows lenders to charge
up to 10% of the total amount of credit issued up front, plus 10%
of the total amount of credit per annum, up to a maximum of 45% of
the total amount of credit issued (often referred to as "10+10").
The Group's Polish business issues its loan products based on this
cap. The Civil Code cap operates in a way allowing lenders to
charge up to 20% of the total amount of credit per annum, taking
into account the actual repayment period.
(ii) The KNF
differentiates between non-interest caps which are "credit-related"
and subject to a cap and "card-related" costs which are not subject
to a cap.
(iii) Card-related
costs (e.g. ATM usage fees), which are not covered by either of
these caps, should be proportionate, not excessive and should be
justifiable.
(iv)
The letter was not specific on when any changes would need to
be implemented and did not indicate any retrospective
application.
In addition to the above charges,
lenders in Poland can also charge interest on all credit products,
including credit cards, up to the limit on the interest rate cap
which is calculated as: 2 x (National Bank Reference Rate +
3.5%).
Following detailed legal advice,
the Group had previously determined that non-interest cost caps did
not apply to credit cards and is therefore reviewing, with the
assistance of external counsel, what the impact of this
communication might be. We are also engaging with the
KNF.
At present, the Polish business
charges interest on its credit cards in line with the current
interest rate cap in Poland plus an all-in 4.5% charge per month.
The all-in monthly charge is above the non-interest expectations
set out in the KNF's letter.
Our Polish credit card receivables
portfolio amounts to £49m at 31 December 2023. This is stated after
a £6m impairment charge in respect of a reduction in expected
future cashflows discounted at the original effective interest rate
as a result of the potential impact from the KNF letter. Polish
credit card receivables represent just over 5% of the Group's
receivables and approximately 25% of total receivables in Poland.
The Group's Polish business has an excellent track record of
adapting to the evolving regulatory environment and has developed a
broad range of products and distribution channels to meet the
financial needs of underbanked and underserved consumers in this
market. We will continue to evolve our
Polish business in order to ensure it delivers the Group's target
returns of between 15% and 20% whilst building financial inclusion
in this important market.
The Group estimates that if the
expectations set out in the KNF letter are implemented in full in
their current form, the non-interest fees generated by the Group's
Polish credit card business could be reduced by approximately 30% -
40%. On an ongoing basis, after taking account of the Group's
strong trading performance in 2023, this could reduce the Group's
profit before tax by up to £10m per annum.
Further information is also set out in note
22.
(iii) Romania
In the first quarter of 2024, the
Prime Minister of Romania announced plans to
prioritise implementing price caps on loans from Non-Banking
Financial Institutions (NBFIs) in the upcoming parliamentary
session. The proposed limits include an 8% cap on the APR for
NBFIs' mortgage loans and a 25% cap for consumer loans, both
compared to the National Bank of Romania's interest rates. An
exception is proposed for small-value consumer loans (up to 15,000
lei or approximately €3,000), where the total amount payable cannot
exceed twice the borrowed amount. We have been anticipating a
potential change in regulation for some time and do not expect the
impact to be material. However, we continue to actively monitor the
legislative process.
Board
changes
Our non-executive director,
Katrina Cliffe, succeeded Richard Holmes as Senior Independent
Director (SID) from 1 December 2023. Katrina joined the Board in
2022 and is also our Board workforce engagement lead. In making
this change, we are progressing our commitment to meeting the FCA's
targets on board diversity. Richard Holmes remains Chair of the
Audit and Risk Committee and a member of the Nominations and
Governance Committee, and Remuneration Committee.
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 we have a clear plan to
capture the substantial and sustainable long-term growth
opportunities for the Group.
We delivered a stronger-than-expected trading
performance in 2023 and this
momentum has continued in early 2024. Looking
ahead, we will continue to focus
on extending financial inclusion by offering more product choices
to consumers within our existing markets, including credit card,
digital, retail partnership opportunities, value-added services as
well as expanding our geographic reach in Mexico. We will also
continue to deploy more digital solutions to improve customer
experience and cost efficiency in all our markets, while retaining
the personal contact with customers that gives us a key competitive
advantage.
We will continue to adapt and
change our Polish business to both customer needs and the evolving
regulatory landscape. As we continue to make the changes necessary
to deliver our target financial returns in Poland, we expect the
Group's ongoing profit could be up to £10m lower per annum than
previously expected, after taking account of the Group's strong
performance in 2023.
Our actions over the last two
years to maintain tight credit standards, improve revenue yields
and drive cost efficiency have been very successful in improving
the Group's returns towards our target levels. Credit quality is
excellent, we have a robust balance sheet and strong funding
position, and we are progressing with plans to refinance the
Eurobond maturing in November 2025. As a result, we have a strong
foundation on which to build good quality customer and receivables
growth in 2024.
Financial
review
Group
We delivered a very strong
full-year financial performance in 2023 as we continued to execute
well against our strategy, despite the ongoing challenging
macroeconomic environment and the ongoing transition of our Polish
business. We delivered profit before tax of £83.9m, up by 8%
(£6.5m) year on year, which was well ahead of our original
plans, reflecting our strong operational
performance, consistent execution of our strategy and a £6m benefit
from favourable exchange rates. All three of our divisions
delivered a good financial performance:
|
|
|
|
|
2023
£m
|
2022
£m
|
Change
£m
|
Change
%
|
European home credit
|
65.1
|
65.6
|
(0.5)
|
(0.8)
|
Mexico home credit
|
23.1
|
17.7
|
5.4
|
30.5
|
IPF Digital
|
10.7
|
8.8
|
1.9
|
21.6
|
Central costs
|
(15.0)
|
(14.7)
|
(0.3)
|
(2.0)
|
Profit before
taxation
|
83.9
|
77.4
|
6.5
|
8.4
|
The detailed income statement of the Group, together
with associated KPIs is set out below:
|
2023
£m
|
2022
£m
|
Change
£m
|
Change
%
|
Change at CER
%
|
Customer numbers (000s)
|
1,700
|
1,733
|
(33)
|
(1.9)
|
(1.9)
|
Customer lending
|
1,150.6
|
1,126.4
|
24.2
|
2.1
|
(3.5)
|
Average gross receivables
|
1,388.9
|
1,244.5
|
144.4
|
11.6
|
5.9
|
Closing net receivables
|
892.9
|
868.8
|
24.1
|
2.8
|
(0.2)
|
|
|
|
|
|
|
Revenue
|
767.8
|
645.5
|
122.3
|
18.9
|
11.7
|
Impairment
|
(169.4)
|
(106.7)
|
(62.7)
|
(58.8)
|
(45.9)
|
Revenue less impairment
|
598.4
|
538.8
|
59.6
|
11.1
|
4.7
|
Costs
|
(437.6)
|
(393.3)
|
(44.3)
|
(11.3)
|
(5.2)
|
Interest expense
|
(76.9)
|
(68.1)
|
(8.8)
|
(12.9)
|
(7.6)
|
Reported profit
before taxation
|
83.9
|
77.4
|
6.5
|
8.4
|
|
|
|
|
|
|
|
Revenue yield
|
55.3%
|
51.9%
|
3.4 ppts
|
|
|
Impairment rate
|
12.2%
|
8.6%
|
(3.6) ppts
|
|
|
Cost-income ratio
|
57.0%
|
60.9%
|
3.9 ppts
|
|
|
Pre-exceptional EPS-1
|
23.2p
|
20.8p
|
2.4p
|
|
|
Pre-exceptional RoE-1
|
11.1%
|
11.5%
|
(0.4) ppts
|
|
|
Pre-exceptional RoRE1,2
|
14.8%
|
14.6%
|
0.2 ppts
|
|
|
1 Prior to an exceptional tax
charge of £4.0m in 2023, and an exceptional tax credit of £10.5m in
2022.
2 Based on required equity to
receivables of 40%.
We are committed to increasing financial inclusion
by offering affordable and accessible financial products to those
who are often underserved by banks and traditional credit
providers. The strong execution of our strategy to capture growth
opportunities and meet consumer demand with our broadening range of
financial products supported an 8% increase in customer lending
year on year and 12% growth (at CER) in closing net receivables,
excluding Poland. As expected, Poland's lending in both our home
credit and digital divisions declined year on year as we
transitioned the business through 2023 to a credit card-focused
business as well as adapting to new affordability regulations. As a
result, overall Group customer lending reduced by 3.5% year on year
and closing net receivables contracted by 0.2% (at CER) to £893m.
Customer numbers increased by 2% to 1.7 million, excluding the impact of the transition in Poland and the
collect-outs of our businesses in Spain and Finland which are now
complete.
Our financial model requires us to
deliver a RoRE of between 15% and 20%, which supports a minimum
payout ratio of 40% of earnings to shareholders and receivables
growth of up to 10% per annum whilst maintaining a target equity to
receivables ratio of 40%. Delivery of our financial model is
underpinned by a stringent focus on revenue yield, impairment rate
and cost-income ratio, and we continued to make very good progress
towards our medium-term targets in 2023.
The Group revenue yield continued
to strengthen, increasing by 3.4 ppts to 55.3% year on year,
reflecting the positive impacts of lower levels of promotional
activity introduced during the second half of 2022 and price
increases in some of our markets. It is now just below our target
range of 56% to 58%, and we expect it to increase further in the
medium term as: (i) Mexico home credit, which carries a higher
yield, grows and represents a larger proportion of the Group's
receivables portfolio; and (ii) continued lower promotional
activity in the receivables portfolio take greater effect.
The rate of inflation in our markets has remained
elevated, and whilst it is now reducing, there continues to be
pressure on our customers' disposable incomes. Our disciplined
approach to granting credit in a responsible, affordable way for
our customers continues to be reflected in our good portfolio
quality and robust customer repayments and, to date, we have not
seen any discernible impact from the cost-of-living crisis on
customer repayment performance. The Group delivered an impairment
rate of 12.2% in 2023 (2022: 8.6%), in line with our expectations
as impairment rates continue to normalise towards our target
levels. The Group impairment rate in 2023 includes a £6m downwards
valuation in respect of a reduction in expected
future cashflows discounted at the original effective interest rate
as a result of the potential impact from the recent KNF
letter on credit card receivables in Poland (see regulatory
update section). Reflecting continued caution in respect of
the pressure on customers' disposable incomes, our balance sheet
remains very robust with an impairment provision coverage ratio of
36.3% at the end of the year, which is in line with 2022 and
compares with a pre-Covid-19 ratio of 33.5% at the end of 2019. The
Group's cost-of-living provision has been reduced from £21m to
£15m, reflecting strong credit quality and operational execution as
well as a reduction in inflation.
A key focus of our strategy is to become a smarter
and more efficient organisation through process improvement and the
deployment of technology. Our very strong cost control, combined
with the excellent growth in revenue, delivered a significant 3.9
ppt improvement in the Group's cost-income ratio from 60.9% to
57.0% year on year. Based on achieving greater scale and the
efficiency initiatives already underway, we expect the ratio to
continue to show year-on-year improvement as we build towards our
target range of 49% to 51%.
Pre-exceptional EPS was 23.2p per share (2022:
20.8p), showing year-on-year growth of 11.5%, a higher rate than
the 8.4% growth in profit, due to a lower effective tax rate of 38%
compared with 40% last year.
The pre-exceptional RoRE for 2023
of 14.8% is broadly in line with last year (2022: 14.6%). We
continue to operate close to the lower end of our target range of
15% to 20% as we rebuild scale and transition the Polish business
to the new regulatory landscape. The
Group's pre-exceptional RoE, based on actual equity, reduced to
11.1% at the end of 2023 (2022: 11.5%), due to favourable exchange
rate movements which have increased equity.
Divisional
performance
European home
credit
|
2023
£m
|
2022
£m
|
Change
£m
|
Change
%
|
Change at
CER
%
|
Customer numbers (000s)
|
761
|
784
|
(23)
|
(2.9)
|
(2.9)
|
Customer lending
|
616.6
|
637.0
|
(20.4)
|
(3.2)
|
(7.1)
|
Average gross receivables
|
801.6
|
747.5
|
54.1
|
7.2
|
3.0
|
Closing net receivables
|
483.0
|
501.0
|
(18.0)
|
(3.6)
|
(5.5)
|
|
|
|
|
|
|
Revenue
|
379.7
|
317.5
|
62.2
|
19.6
|
15.0
|
Impairment
|
(39.4)
|
(5.2)
|
(34.2)
|
(657.7)
|
(720.8)
|
Revenue less impairment
|
340.3
|
312.3
|
28.0
|
9.0
|
4.5
|
Costs
|
(227.2)
|
(203.9)
|
(23.3)
|
(11.4)
|
(7.4)
|
Interest expense
|
(48.0)
|
(42.8)
|
(5.2)
|
(12.1)
|
(7.6)
|
Reported profit
before taxation
|
65.1
|
65.6
|
(0.5)
|
(0.8)
|
|
|
|
|
|
|
|
Revenue yield
|
47.4%
|
42.5%
|
4.9 ppts
|
|
|
Impairment rate
|
4.9%
|
0.7%
|
(4.2) ppts
|
|
|
Cost-income ratio
|
59.8%
|
64.3%
|
4.5 ppts
|
|
|
Pre-exceptional RoRE
|
20.5%
|
21.3%
|
(0.8) ppts
|
|
|
Our European home credit division
delivered a strong financial result in 2023, reporting profit
before tax of £65.1m, broadly in line with 2022, despite the
ongoing transition of our Polish business. The year-on-year profit
performance benefited by £4m from more favourable exchange
rates. Romania and Hungary both performed
very well, delivering good profit growth and exceeding our original
plans. As expected, Poland's profits reduced by around 40% in 2023
as we adapted to the new affordability and revised rate cap
regulations introduced in 2022 and transitioned to a more credit
card-focused business. The Czech Republic saw a reduction in profit
due to higher impairment levels during the first nine months of the
year, but it was pleasing to see the business gain improved
momentum towards the end of the year.
Despite the ongoing cost-of-living
pressures in Europe, demand for consumer credit remained robust in
all of our markets, and we continued our commitment to supporting
our customers through both difficult periods as well as good
times. Overall, European home credit
lending showed a 7% contraction year on year due to the expected
27% reduction in Poland. In contrast, Romania, Hungary and the
Czech Republic delivered a combined 10% increase in
lending.
Closing net receivables showed a
year-on-year reduction of 5% (at CER) to £483m, driven wholly by
the 25% reduction in Poland, which was in line with the guidance we
provided in the fourth quarter of 2022. Romania and Hungary
delivered strong receivables growth of 15% in 2023 whilst the Czech
Republic was broadly stable as we took action to improve field
processes and set the business up for growth in 2024.
The Polish credit card receivables portfolio
ended the year at £49m. This is stated after a £6m downwards
valuation in respect of a reduction in expected future cashflows
discounted at the original effective interest rate as a result of
the potential impact from the KNF letter (see Regulatory
update).
Customer numbers ended the year at
761,000 (2022: 784,000), due mainly to a 25,000 reduction in
customers in Poland.
The revenue yield significantly
strengthened year on year from 42.5% to 47.4%. This reflects the
management actions taken to bolster our returns, including reduced
promotional activity and modest price increases, some of which
relate to local rate caps which are linked to base rate
movements.
We maintained tight credit
standards in all markets during 2023 and customer repayment
performance remained robust in Romania, Hungary and Poland. We also
saw another strong performance on post charge-off recoveries,
including debt sales, similar to the levels achieved in 2022. As a
result, and despite a weaker performance in the Czech Republic,
European home credit delivered an impairment rate of 4.9%, up from
0.7% in 2022. The
cost-of-living provision has been reduced from £15m to £9m,
reflecting strong credit quality and operational execution as well
as a reduction in inflation.
The strong growth in revenue
combined with very effective cost control delivered a further
significant improvement in the cost-income ratio, which improved by
4.5 ppts year on year to 59.8% (2022: 64.3%). We 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. As part of this programme of
work, we have recently announced a restructuring of the field force
in our Polish business.
As expected, the pre-exceptional RoRE showed a
modest decrease to 20.5% (2022: 21.3%), as we rolled out credit
cards in Poland and continued the transition to the new regulatory
landscape in which we now operate.
2023 was a successful year in the
evolution of our European home credit business. The rollout of
credit cards in Poland has progressed well and we will continue to
adapt and change the business to meet both customer needs and the
evolving regulatory landscape. We now expect ongoing profit from
European home credit could be up to £10m lower per annum than our
original plans as we continue to make the changes necessary to
deliver our target financial returns in Poland. We will also
expand our new digital and partnership offerings in Romania in 2024
and grow our core home credit customers in this
market as well as in Hungary and the Czech Republic. Our European
home credit business remains the bedrock of our Group returns but
also, importantly, offers us continued good growth
opportunities.
Mexico home credit
|
2023
£m
|
2022
£m
|
Change
£m
|
Change
%
|
Change at
CER
%
|
Customer numbers (000s)
|
716
|
696
|
20
|
2.9
|
2.9
|
Customer lending
|
302.8
|
257.4
|
45.4
|
17.6
|
4.8
|
Average gross receivables
|
299.4
|
239.0
|
60.4
|
25.3
|
11.7
|
Closing net receivables
|
187.1
|
158.5
|
28.6
|
18.0
|
8.3
|
|
|
|
|
|
|
Revenue
|
261.6
|
210.9
|
50.7
|
24.0
|
10.8
|
Impairment
|
(96.7)
|
(75.5)
|
(21.2)
|
(28.1)
|
(15.1)
|
Revenue less impairment
|
164.9
|
135.4
|
29.5
|
21.8
|
8.3
|
Costs
|
(129.7)
|
(107.8)
|
(21.9)
|
(20.3)
|
(7.5)
|
Interest expense
|
(12.1)
|
(9.9)
|
(2.2)
|
(22.2)
|
(9.0)
|
Reported profit
before taxation
|
23.1
|
17.7
|
5.4
|
30.5
|
|
|
|
|
|
|
|
Revenue yield
|
87.4%
|
88.2%
|
(0.8) ppts
|
|
|
Impairment rate
|
32.3%
|
31.6%
|
(0.7) ppts
|
|
|
Cost-income ratio
|
49.6%
|
51.1%
|
1.5 ppts
|
|
|
RoRE
|
20.7%
|
19.2%
|
1.5 ppts
|
|
|
|
|
|
|
|
|
|
Mexico home credit continued to perform well in
2023, delivering good growth and a 30.5% (£5.4m) increase in profit
before tax to £23.1m (2022: £17.7m). The year-on-year profit
performance benefited by £2m from more favourable exchange
rates.
Our strong operational performance and successful
geographic expansion strategy coupled with good consumer demand
delivered a 5% increase in customer lending year on year, despite
the tighter credit settings introduced towards the end of 2022 in
the three regions of Mexico City, Norte and Sureste which represent
around 20% of the business. Following corrective actions in these
three regions, we expect customer lending growth to improve in
2024. Customer numbers grew by 3% in 2023 to 716,000.
Closing net receivables increased by 8% (at CER) to
£187m which supported strong revenue growth of 11% year on year.
The annualised revenue yield showed a modest reduction from 88.2%
at the end of December 2022 to 87.4% and we expect it to remain
close to this level going forward.
The annualised impairment rate in 2023 was 32.3%
(2022: 31.6%) higher than our target rate for Mexico of 30%. This
was as a result of the flow through of higher customer write offs
prior to the tightening of credit noted above. Credit quality has
now improved, and we expect the impairment rate to reduce in 2024
whilst also delivering good growth.
We continued to invest in our expansion strategy,
which is progressing well, and we are pleased with the performance
of our two new regions in Tijuana and Tampico, launched in 2022 and
March 2023 respectively. We will continue to grow
our geographic footprint in 2024 with a new branch opening in
Mexicali, located in northern Mexico. Despite the continued
investment in delivering geographic expansion, costs only showed a
year-on-year increase of 7% (at CER), broadly in line with
inflation levels, reflecting a strong cost and efficiency focus
within the business. As a result, the cost-income ratio showed a
1.5 ppt improvement to 49.6% (2022: 51.1%). Mexico home credit
continues to be the benchmark home credit operation for cost
efficiency.
Overall, Mexico home credit delivered a RoRE of
20.7% (2022: 19.2%), in line with our divisional target returns. As
we have indicated previously, investing in sustainable growth with
a relatively shallow "j-curve" is key to maintaining target returns
in this strong growth business.
The growth potential in our Mexico home credit
business is significant. Our expansion strategy to reach more
consumers both within our existing geographic footprint and new
regions is progressing well and we will continue to deliver
sustainable growth to ensure consistent returns. We plan to open a
further new branch in 2024, and we will continue to digitalise the
customer journey to ensure eligible, quality customers seeking
credit enjoy a speedy and convenient service. We also plan to
rollout our new customer app which is currently being tested in
three branches and which has had strong take-up by customers. We
will continue to build on the synergies developed with IPF Digital,
which is helping us to financially include more people in Mexico.
Together, Mexico home credit and IPF Digital in Mexico already
serve nearly 800,000 customers, and we remain confident of our
potential to grow to over one million customers in the medium
term.
IPF
Digital
|
2023
£m
|
2022
£m
|
Change
£m
|
Change
%
|
Change at
CER
%
|
Customer numbers (000s)
|
223
|
253
|
(30)
|
(11.9)
|
(11.9)
|
Customer lending
|
231.2
|
232.0
|
(0.8)
|
(0.3)
|
(3.4)
|
Average gross receivables
|
287.9
|
258.0
|
29.9
|
11.6
|
8.4
|
Closing net receivables
|
222.8
|
209.3
|
13.5
|
6.5
|
5.8
|
|
|
|
|
|
|
Revenue
|
126.5
|
117.1
|
9.4
|
8.0
|
4.5
|
Impairment
|
(33.3)
|
(26.0)
|
(7.3)
|
(28.1)
|
(22.0)
|
Revenue less impairment
|
93.2
|
91.1
|
2.1
|
2.3
|
(0.6)
|
Costs
|
(65.8)
|
(67.0)
|
1.2
|
1.8
|
4.5
|
Interest expense
|
(16.7)
|
(15.3)
|
(1.4)
|
(9.2)
|
(6.4)
|
Reported profit
before taxation
|
10.7
|
8.8
|
1.9
|
21.6
|
|
|
|
|
|
|
|
Revenue yield
|
43.9%
|
45.4%
|
(1.5) ppts
|
|
|
Impairment rate
|
11.6%
|
10.1%
|
(1.5) ppts
|
|
|
Cost-income ratio
|
52.0%
|
57.2%
|
5.2 ppts
|
|
|
RoRE
|
7.6%
|
6.9%
|
0.7 ppts
|
|
|
IPF Digital delivered another good performance in
2023 and reported a 21.6% increase in profit before tax to £10.7m
(2022: £8.8m). All eight of our countries, including the
collect-outs in Spain and Finland which have now been completed,
delivered profitable contributions in 2023.
We continued to see good demand for our digital
offering and, excluding Poland, year-on-year customer lending
showed strong growth of 9%, with the Baltics, Mexico and Australia
all performing well. Lending in Poland reduced by 34% as we
transition to the new lower total cost of credit cap and
affordability rules in this market. For the division as a whole,
IPF Digital's customer lending in 2023 was therefore down by 3%
year on year. We expect IPF Digital to return to good lending
growth in 2024.
We continued to execute our growth strategy to
rebuild receivables to gain scale and deliver our target returns,
and this resulted in a 6% year-on-year increase in closing net
receivables to £223m (at CER) at the end of 2023. Excluding Poland,
receivables growth was very strong in Mexico, Australia and the
Baltics at 18%, which contrasted with a contraction in Poland of
25%. Customer numbers ended the year at 223,000. Mexico, Australia
and the Baltics delivered good growth, which was offset by Poland
where, as expected, customer numbers reduced by 26%.
The revenue yield reduced by 1.5 ppts to 43.9%
(2022: 45.4%). This reflects the impact of a combination of factors
including: (i) the flow through of a tighter rate cap in Latvia in
2022; (ii) the reduction in higher yielding Finland and Spain
receivables during the collect-outs, which are now complete; (iii)
the impact of the lower total cost of credit cap in Poland; and
(iv) the growth in Australia, which is relatively lower yielding.
These adverse variances have been offset partly by the growth in
Mexico which has a higher revenue yield.
Customer repayment performance has remained robust
in all our digital operations and portfolio quality is very good.
The impairment rate showed an expected increase year on year from
10.1% to 11.6% due mainly to the growth in lending in Mexico which
carries a higher impairment rate, as well as the rundown of the
Finland and Spain receivables portfolios, which incurred minimal
impairment as it has already been accounted for up front under IFRS
9.
Although we continued to invest in developing our
product offering and marketing to attract new customers and build
scale, tight control on expenditure delivered a 4.5% (at CER)
reduction in costs year on year and this was reflected in the
cost-income ratio which decreased significantly by 5.2 ppts to
52.0% (2022: 57.2%). We expect the cost-income ratio to further
improve as we continue to rebuild the business and benefit from
economies of scale. As a fully digital business, we are targeting a
cost-income ratio of around 45% in the medium term.
IPF Digital's RoRE improved by 0.7 ppts year on year
to 7.6% (2022: 6.9%) reflecting good growth and strong operational
discipline notwithstanding the adverse impact of the reduction in
returns within Poland. Although 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 and in Poland as we rebuild
the business. We will also continue to consider inorganic
opportunities to deliver scale and increase returns to our target
levels.
Our focus in IPF Digital in 2023 has been on
increasing automation, expanding our mobile wallet proposition,
maintaining tight credit standards and concluding the collect-outs
and closures of Finland and Spain. Following strong execution, we
now have a very solid foundation for delivering significant growth
in 2024 as we extend the reach of our mobile wallet in the Baltics,
Mexico and, in due course, Australia. We also expect our Polish
digital business to stabilise in 2024 and we have recently
transferred a nascent digital business in the Czech Republic from
European home credit into IPF Digital which represents another
exciting growth opportunity. We plan to extend our range of
value-added services to IPF Digital customers, following the recent
launch of a new employment protection insurance product in the
Baltics, and continue our tests to provide point-of-sale revolving
credit facilities following the launch of a new Pay Later product
in Mexico in late 2023.
Taxation
The pre-exceptional taxation charge on the profit
for 2023 is £31.9m, which represents an effective rate for the year
of approximately 38% (2022: 40%). The lower tax rate in 2023
reflects a number of disparate elements, including a positive tax
ruling in Poland which secured an element of bad debt tax relief
arising on loans issued since our Polish business changed its
regulatory status at the start of 2022. We expect the effective tax
rate to return to around 40% in 2024.
Consistent with 2022, the 2023 results reflect an
exceptional tax charge of £4m (2022: exceptional tax credit of
£10.5m, which was stated net of a £5.1m tax charge in respect of
Hungary) relating to the "extra profit special tax" implemented by
the Hungarian government in 2022 and chargeable on the financial
sector including non-bank financial institutions. The tax has
been extended by one further year, and a further exceptional tax
charge of £2m is expected to arise in 2024.
Funding and balance
sheet
We continue to maintain a very conservatively
capitalised balance sheet and diversified funding position.
Despite the difficult macroeconomic backdrop, we
successfully extended around £146m of debt facilities in 2023,
including £84m of bank facilities and the issue of £62m of bonds,
including: (i) a PLN 72m (£15m) 3-year floating rate Polish bond
issued in October; (ii) an €11.6m (£10m) 3-year Hungarian bond at a
fixed coupon of 11.5%; (iii) a £25m 4-year UK retail bond at a
coupon of 12% issued in December; and (iv) the issue of £12m of
retail bonds held in treasury. The debt maturity profile of the
Group stands at 2.0 years, with over £170m of debt funding now
maturing beyond 2025.
At the end of December, the Group had total debt
facilities of £629m, comprising £433m of bonds and £196m of bank
facilities. Our borrowings stood at £516m and, together with
undrawn facilities and non-operational cash balances, the Group's
headroom on debt facilities amounted to £126m at the end of 2023.
The Group's current funding capacity together with strong business
cash generation, is expected to meet our funding requirements into
the first half of 2025. We note the improvement in market
conditions as we actively explore options to refinance the Eurobond
due in November 2025 together with our advisors. A range of debt
refinancing options are available to the Group, and we expect to
continue to engage with fixed income investors in 2024.
The Group's gearing ratio was 1.0 times (2022: 1.2
times) at the end of the year, comfortably within our covenant
limit of 3.75 times, and our interest cover was 2.5 times (2022:
2.3 times), compared with our covenant of 2.0 times.
Our blended cost of funding in 2023 was 14.0%, up
from 13.3% in 2022. This increase was due to a significant step-up
in interest rates across our markets which resulted in higher costs
of bank funding and the cost of hedging. Our hedging policy is
to match our local currency receivables with borrowings in the same
denomination to provide certainty of cashflows and avoid
significant volatility in the income statement from movements in
exchange rates. Accordingly, our borrowings denominated in sterling
and euros are swapped through forward contracts into local currency
when we onward lend to our markets. As a result, the margins on our
sterling and euro-denominated bonds are effectively added to the
local base rate for determining the cost of funding for that
market. We anticipate a further increase in the overall Group cost
of funding in 2024 as we refinance maturing fixed interest rate
funding.
Our credit ratings remained unchanged in 2023. We
have a long-term credit rating of BB- (Outlook Stable) from Fitch
Ratings and Ba3 (Outlook Stable) from Moody's Investors
Services.
At the end of 2023, the Group's equity to
receivables ratio was 56% (2022: 51%) and this compares with our
target of 40%. Notwithstanding the Group's returns being below the
lower target threshold of 15% and the dividend pay-out ratio in
excess of 40%, the ratio has increased during the year due to: (i)
foreign exchange gains of £23m (2022: £42m) being credited to
reserves in the year; and (ii) minimal receivables growth of 2.8%
compared with up to 10% in the financial model. Excluding the
benefit from exchange gains of £65m over the last two years, the
equity to receivables ratio would have been around 49% at the end
of 2023.
International
Personal Finance plc
Consolidated income
statement for the year ended 31 December
|
|
2023
|
2022
|
|
Notes
|
£m
|
£m
|
Revenue
|
4
|
767.8
|
645.5
|
Impairment
|
4
|
(169.4)
|
(106.7)
|
Revenue less
impairment
|
|
598.4
|
538.8
|
|
|
|
|
Interest expense
|
5
|
(76.9)
|
(68.1)
|
Other operating costs
|
|
(128.7)
|
(121.5)
|
Administrative expenses
|
|
(308.9)
|
(271.8)
|
Total
costs
|
|
(514.5)
|
(461.4)
|
|
|
|
|
Profit before
taxation
|
4
|
83.9
|
77.4
|
|
|
|
|
Pre-exceptional tax income/(expense)
- UK
|
|
0.7
|
0.1
|
- Overseas
|
|
(32.6)
|
(31.2)
|
Pre-exceptional tax expense
|
6
|
(31.9)
|
(31.1)
|
Profit after
pre-exceptional taxation
|
|
52.0
|
46.3
|
Exceptional tax (expense) / income
|
6, 9
|
(4.0)
|
10.5
|
Profit after taxation
attributable to owners of the Company
|
|
48.0
|
56.8
|
Earnings per share
- statutory
|
|
2023
|
2022
|
|
Notes
|
pence
|
pence
|
Basic
|
7
|
21.5
|
25.6
|
Diluted
|
7
|
20.2
|
24.3
|
Earnings per share
- pre-exceptional items
|
|
2023
|
2022
|
|
Notes
|
pence
|
pence
|
Basic
|
7
|
23.2
|
20.8
|
Diluted
|
7
|
21.9
|
19.8
|
The
notes to the financial information are an integral part of this
consolidated financial information.
Consolidated
statement of comprehensive income for the year ended 31 December
|
2023
|
2022
|
|
£m
|
£m
|
Profit after
taxation attributable to owners of the Company
|
48.0
|
56.8
|
Other comprehensive
income/(expense)
|
|
|
Items that may subsequently be reclassified to
income statement:
|
|
|
Exchange gains on foreign currency translations
|
22.8
|
41.8
|
Net fair value gains/(losses) - cash flow hedges
|
0.1
|
(2.3)
|
Tax credit on items that may be reclassified
|
-
|
0.8
|
Items that will not subsequently be reclassified to
income statement:
|
|
|
Actuarial gains/(losses) on retirement benefit
obligation
|
3.9
|
(3.8)
|
Tax (charge)/credit on items that will not be
reclassified
|
(1.0)
|
0.9
|
Other comprehensive
income net of taxation
|
25.8
|
37.4
|
Total comprehensive
income for the year attributable to owners of the
Company
|
73.8
|
94.2
|
The notes to the financial information are an
integral part of this consolidated financial information.
Balance sheet as at 31
December
|
|
2023
|
2022
|
Notes
|
£m
|
£m
|
Assets
|
|
|
|
Non-current assets
|
|
|
|
Goodwill
|
10
|
23.6
|
24.2
|
Intangible assets
|
11
|
32.3
|
27.9
|
Property, plant and equipment
|
12
|
16.0
|
17.3
|
Right-of-use assets
|
13
|
21.7
|
19.3
|
Amounts receivable from customers
|
15
|
203.3
|
212.2
|
Deferred tax assets
|
14
|
131.7
|
138.5
|
Retirement benefit asset
|
18
|
6.1
|
2.1
|
|
|
434.7
|
441.5
|
Current
assets
|
|
|
|
Amounts receivable from customers
|
15
|
689.6
|
656.6
|
Derivative financial instruments
|
17
|
2.9
|
4.5
|
Cash and cash equivalents
|
|
42.5
|
50.7
|
Other receivables
|
|
16.0
|
16.2
|
Current tax assets
|
|
3.3
|
1.6
|
|
|
754.3
|
729.6
|
Total
assets
|
|
1,189.0
|
1,171.1
|
|
|
|
|
Liabilities
|
|
|
|
Current
liabilities
|
|
|
|
Borrowings
|
16
|
(52.2)
|
(71.8)
|
Derivative financial instruments
|
17
|
(4.4)
|
(4.6)
|
Trade and other payables
|
|
(132.9)
|
(122.2)
|
Provisions for liabilities and charges
|
19
|
-
|
(4.7)
|
Lease liabilities
|
13
|
(8.3)
|
(7.2)
|
Current tax liabilities
|
|
(7.3)
|
(18.3)
|
|
|
(205.1)
|
(228.8)
|
Non-current liabilities
|
|
|
|
Deferred tax liabilities
|
14
|
(7.1)
|
(5.9)
|
Lease liabilities
|
13
|
(15.3)
|
(14.2)
|
Borrowings
|
16
|
(459.6)
|
(477.0)
|
|
|
(482.0)
|
(497.1)
|
Total
liabilities
|
|
(687.1)
|
(725.9)
|
Net
assets
|
|
501.9
|
445.2
|
Equity attributable
to owners of the Company
|
|
|
|
Called-up share capital
|
|
23.4
|
23.4
|
Other reserve
|
|
(22.5)
|
(22.5)
|
Foreign exchange reserve
|
|
32.0
|
9.2
|
Hedging reserve
|
|
0.2
|
0.1
|
Own shares
|
|
(36.7)
|
(43.3)
|
Capital redemption reserve
|
|
2.3
|
2.3
|
Retained earnings
|
|
503.2
|
476.0
|
Total
equity
|
|
501.9
|
445.2
|
The notes to the financial information are an
integral part of this consolidated financial information.
Statement of
changes in equity
|
Called-up share
capital
£m
|
Other reserve
£m
|
Other reserves*
£m
|
Retained
earnings
£m
|
Total equity
£m
|
At 1 January
2022
|
23.4
|
(22.5)
|
(75.3)
|
441.5
|
367.1
|
Comprehensive income:
|
|
|
|
|
|
Profit after taxation for the year
|
-
|
-
|
-
|
56.8
|
56.8
|
Other comprehensive income/(expense):
|
|
|
|
|
|
Exchange gains on foreign currency translation
|
-
|
-
|
41.8
|
-
|
41.8
|
Net fair value losses - cash flow hedges
|
-
|
-
|
(2.3)
|
-
|
(2.3)
|
Actuarial loss on retirement benefit obligation
|
-
|
-
|
-
|
(3.8)
|
(3.8)
|
Tax credit on other comprehensive income
|
-
|
-
|
0.8
|
0.9
|
1.7
|
Total other comprehensive income/(expense)
|
-
|
-
|
40.3
|
(2.9)
|
37.4
|
Total comprehensive income for the year
|
-
|
-
|
40.3
|
53.9
|
94.2
|
Transactions with owners:
|
|
|
|
|
|
Share-based payment adjustment to reserves
|
-
|
-
|
-
|
3.2
|
3.2
|
Shares acquired by employee trust
|
-
|
-
|
(0.4)
|
-
|
(0.4)
|
Shares granted from treasury and employee trust
|
-
|
-
|
3.7
|
(3.7)
|
-
|
Dividends paid to Company shareholders
|
-
|
-
|
-
|
(18.9)
|
(18.9)
|
At 31 December
2022
|
23.4
|
(22.5)
|
(31.7)
|
476.0
|
445.2
|
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
|
-
|
-
|
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 income
|
-
|
-
|
-
|
(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:
|
|
|
|
|
|
Share-based payment adjustment to reserves
|
-
|
-
|
-
|
4.3
|
4.3
|
Deferred tax on share-based payment transactions
|
-
|
-
|
-
|
0.5
|
0.5
|
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
|
* Includes foreign exchange reserve, hedging
reserve, capital redemption reserve and amounts paid to acquire
shares held in treasury and by employee trust.
Cash flow statement
for the year ended 31 December
|
2023
|
2022
|
|
£m
|
£m
|
Cash flows from
operating activities
|
|
|
|
|
|
Cash generated from operating activities
|
193.4
|
58.8
|
Finance costs paid
|
(74.5)
|
(65.2)
|
Income tax (paid)/received
|
(33.1)
|
5.5
|
Net cash generated
from/(used in) operating activities
|
85.8
|
(0.9)
|
|
|
|
Cash flows from
investing activities
|
|
|
|
|
|
Purchases of intangible
assets
|
(17.9)
|
(14.7)
|
Purchases of property, plant and
equipment
|
(4.7)
|
(9.1)
|
Proceeds from sale of property,
plant and equipment
|
-
|
0.3
|
Net cash used in
investing activities
|
(22.6)
|
(23.5)
|
Net cash generated
from/(used in) operating and investing activities
|
63.2
|
(24.4)
|
|
|
|
Cash flows from
financing activities
|
|
|
|
|
|
Proceeds from borrowings
|
48.1
|
99.3
|
Repayment of borrowings
|
(87.3)
|
(43.6)
|
Principal elements of lease payments
|
(12.0)
|
(9.2)
|
Shares acquired by employee trust
|
(0.4)
|
(0.4)
|
Cash received on share options exercised
|
0.4
|
-
|
Dividends paid to Company shareholders
|
(21.5)
|
(18.9)
|
Net cash (used
in)/generated from financing activities
|
(72.7)
|
27.2
|
|
|
|
Net
(decrease)/increase in cash and cash equivalents
|
(9.5)
|
2.8
|
Cash and cash equivalents at beginning of year
|
50.7
|
41.7
|
Exchange gains on cash and cash equivalents
|
1.3
|
6.2
|
Cash and cash
equivalents at end of year
|
42.5
|
50.7
|
1. Basis of
preparation
The financial information, which comprises the
consolidated income statement, statement of comprehensive income,
balance sheet, statement of changes in equity, cash flow statement
and related notes, is derived from the full Group 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. It does not
constitute full Financial Statements within the meaning of section
434 of the Companies Act 2006.
Statutory Financial Statements for the year ended 31
December 2022 have been delivered to the Registrar of Companies and
those for 2023 will be delivered following the Company's annual
general meeting. The auditor has reported on those Financial
Statements: its reports were unqualified, did not draw attention to
any matters by way of emphasis and did not contain statements under
s498 (2) or (3) of the Companies Act 2006.
The directors are satisfied that the Group has
sufficient resources to continue in operation for the foreseeable
future, a period of not less than 12 months from the date of this
report. Accordingly, they continue to adopt the going concern basis
in preparing this financial information (see note 24 for further
details).
The accounting policies used in completing this
financial information have been consistently applied in all periods
shown. These accounting policies are detailed in the Group's
Financial Statements for the year ended 31 December 2023 which can
be found on the Group's website (www.ipfin.co.uk).
The following amendments to standards are mandatory
for the first time for the financial year beginning 1 January 2023
but do not have any material impact on the Group:
·
IFRS 17 Insurance Contracts (including the June
2020 and December 2021 Amendments to IFRS 17);
·
Amendments to IAS 1
'Presentation of Financial Statements' and IFRS Practice Statement
2 'Making Materiality Judgements - Disclosure of Accounting
Policies';
· Amendments
to IAS 12 'Income Taxes - Deferred Tax related to Assets and
Liabilities arising from a Single Transaction';
·
Amendments to IAS 12 'Income Taxes -
International Tax Reform - Pillar Two Model Rules'*; and
· Amendments to IAS 8 'Accounting Policies, Changes in
Accounting Estimates and Errors - Definition of Accounting
Estimates'.
*The Group has adopted the amendments to IAS 12 for
the first time in the current year. The IASB amends the scope
of IAS 12 to clarify that the Standard applies to income taxes
arising from tax law enacted or substantively enacted to implement
the Pillar Two model rules published by the OECD, including tax law
that implements qualified domestic minimum top-up taxes described
in those rules. The amendments introduce a temporary exception to
the accounting requirements for deferred taxes in IAS 12, so that
an entity would neither recognise nor disclose information about
deferred tax assets and liabilities related to Pillar Two income
taxes. Following the amendments, the Group is required to disclose
that it has applied the exception and to disclose separately its
current tax expense (income) related to Pillar Two income
taxes.
The following standards, interpretations and
amendments to existing standards are not yet effective and have not
been early adopted by the Group:
· Amendments
to IFRS 10 and IAS 28 Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture';
·
Amendments to IAS 1 'Classification of
Liabilities as Current or Non-current';
·
Amendments to IAS 1 'Non-current Liabilities with
Covenants';
·
Amendments to IAS 1 and IFRS 7 'Supplier Finance
Agreements'; and
·
Amendments to IFRS 16 'Lease Liability in a Sale
and Leaseback'.
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 Consolidated 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 the 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. Based on a 3% variation
in the EIR (2022: 3%), it is estimated that the amounts receivable
from customers would be higher/lower by £9.7m (2022: £8.7m). This
sensitivity is based on historic fluctuations in EIRs.
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 repayments 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.
Recurring
post-model overlays on amounts receivable from customers
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 the models are
expected to show an increase in the expected loss or a slowing of
the future cashflows in the following 12 months, an adjustment is
applied to the models. At 31 December 2023, this adjustment was a
reduction in receivables of £9.0m (2022: reduction of £11.6m).
Post model overlays (PMOs) on
amounts receivable from customers
2023
|
Cost-of-living PMO
£m
|
Hungary
moratorium
PMO
£m
|
Poland
non-interest
PMO
£m
|
Total PMOs
£m
|
Home credit
|
11.9
|
2.1
|
6.0
|
20.0
|
IPF Digital
|
3.2
|
-
|
-
|
3.2
|
Group
|
15.1
|
2.1
|
6.0
|
23.2
|
2022
|
Cost-of-living PMO
£m
|
Hungary moratorium
PMO
£m
|
Poland
non-interest
PMO
£m
|
Total PMOs
£m
|
Home credit
|
17.5
|
4.3
|
-
|
21.8
|
IPF Digital
|
3.1
|
-
|
-
|
3.1
|
Group
|
20.6
|
4.3
|
-
|
24.9
|
High inflation rates associated with the global
cost-of-living crisis may reduce customers' disposable income,
which may impact their ability to make repayments. A full
assessment of the impact of the cost-of-living crisis and
associated reduction to the disposable income of customers has been
performed and concluded that it is likely to result in increased
risks across both the home credit and IPF Digital businesses.
PMOs have been established and based on management's current
expectations the impact of these PMOs was to increase impairment
provisions at 31 December 2023 by a further £15.1m (2022: £20.6m).
The reduction in the year reflects strong credit quality and
operational execution as well as an improvement in inflation rates
in the Group's markets. In order to calculate this PMO,
country-specific expert knowledge, informed by economic forecast
data to estimate the increase in losses, has been used and resulted
in a range of outcomes from £7.5m to £18.9m. This represents
management's current assessment of a reasonable range of impacts
that the cost-of-living crisis may have on the Group's customer
receivables, however given the levels of uncertainty in this area,
the impacts (if any) may be greater or lower than the range
determined.
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 31 December 2023 by
£2.1m (2022: £4.3m). 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.
In late February 2024, we received
a letter from the KNF issued to all regulated lenders operating in
the Polish credit card market setting out its current expectations
on how charging practices for credit cards should be subject to
limits on non-interest costs, the need to differentiate between
different costs charged by credit card issuers which are subject to
caps and those fees which are not subject to a cap and lastly how
issuers should approach more broadly the question of calculating
and assessing fees which are not subject to specific legal limits
(see Regulatory update). Based on the expectations set out in the
letter, management has performed an assessment of the expected
future cashflows from the Polish credit card receivables book at
the 31 December 2023 and determined that a PMO of £6.0m is
necessary. This represents management's best estimate of a
reasonable outcome after discounting the expected cashflows at the
original effective interest rate.
Accounting for
credit card receivables
As at December 2023, the company does not yet have
sufficient historical credit card data in order to calculate an
expected loss provision for the credit card receivables portfolio.
The credit card receivables portfolio is behaving similarly to the
instalment loan portfolio in Poland, and consequently parameters
from the instalment loan portfolio have been used to calculate an
expected loss provision and value the credit card receivables
portfolio. Based on a 10% variation in expected loss parameters, it
is estimated that the amounts receivable from customers would be
higher/lower by £1.1m.
Polish regulatory
communication
The Regulatory update section of this report refers
to a letter that the KNF (the Polish supervision authority) sent to
all regulated lenders operating in the Polish credit card market
setting out its current expectations on how charging practices for
credit cards should be subject to limits on non-interest costs. It
is currently not possible to predict the ultimate impacts of the
letter, including the scope or nature of any remediation
requirements. See note 22 for a contingent liability note on this
matter.
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. Some of these measures are also
used for the purpose of setting remuneration targets.
Each of the APMs, used by the Group are set out in
the APM section 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. Principal risks
and uncertainties
In accordance with the Companies Act 2006, a
description of the principal risks and uncertainties (and the
mitigating factors in place in respect of these) is included
below. Effective management of risks, uncertainties and
opportunities is critical to our business in order to deliver
long-term shareholder value and protect our people, assets and
reputation. We manage risk strategically using the enterprise risk
management (ERM) methodology. This enables us to identify,
evaluate, manage, monitor and report on a wide range of risks,
uncertainties and opportunities across the Group in an integrated
way. Risk appetite is a core consideration within our ERM approach
and plays an important role in addressing the Group's key risks
effectively. The way we implement risk management also supports our
understanding and ability to address our capacity to sustain risk
over time, ensure risks are considered in decision-making across
the Group and enable the Board to perform its supervisory role.
Risk environment
|
↑
Risk environment improving
|
↔ Risk
environment remains stable
|
↓ Risk environment
worsening
|
1. Credit risk ↔
The risk of the Group suffering
financial loss if our customers fail to meet their contracted
repayment obligations; or the Group fails to optimise profitable
business opportunities because of our credit, collection or fraud
strategies and processes.
|
Impact
Following a challenging start to
2023 due to high energy costs and double-digit inflation in the
majority of our markets, the economic environment stabilised during
the summer. We have seen no discernible impact of the
cost-of-living crisis on customer repayment performance, credit
losses are in line with our expectations, and the impairment rate
at the year-end of 12.2% is within our risk appetite.
Overall, the Group performed very
well in 2023 although there was increasing pressure on customer
affordability towards the end of the year.
The transformation of our business
in Poland to offer credit cards increased the inherent credit risk
but good execution has resulted in customer repayments being in
line with expectations and tracking similarly to instalment
loans.
We remain cautious about the
macroeconomic landscape and credit standards remain tight, and we
are ready to react if we become concerned that the environment is
deteriorating.
|
How it is managed
- Detailed, regular monitoring of customer repayments to
identify specific issues.
- Detailed analysis and enhancement of our credit scorecards
and Credit Policy to ensure they remain optimal.
- Further tightening of lending rules as necessary, to protect
customers and the quality of the portfolio.
- Careful regular assessment of the external
environment.
- Ensuring repayments and arrears management activities remain
a key part of customer representative and field management
incentive schemes.
|
2. Future
legal and regulatory development
risk (previously regulatory risk)
↓
The risk that the Group suffers
loss as a result of a new or a change in existing legislation or
regulation.
|
Impact
The second EU Consumer Credit
Directive came into effect in Q4 2023 and is expected to be
transposed in all our EU markets within two years. The key areas of
change relevant to the Group include rules on pre-contractual
information, creditworthiness assessments and underwriting,
training and consumer protection.
The Digital Operational Resilience
Act (DORA) and the Sustainability Reporting Directive also came
into force and plans are in place to deal with these impacts,
including strengthening the operational risk management framework
and sustainability reporting.
In response to new affordability
regulations that came into force in Poland in May 2023, we deployed
new processes and technology to assess customers in line with the
new rules. IPF Digital introduced systems to comply with the
Payment Services Directive 2 (PSD2) ensuring customer
authentication processes.
The implementation of credit
regulations in Poland resulted in the Group's businesses in this
market being regulated by the Polish financial supervision
authority, KNF, from 1 January 2024. We continue to engage with the
KNF, as they assess our application for a full payment institution
licence which will enable our Polish business to issue a greater
volume of credit cards in Poland.
In late
February 2024, we received a letter from the KNF issued to all
regulated lenders operating in the Polish credit card market
setting out its current expectations on how charging practices for
credit cards should be subject to limits on non-interest costs, the
need to differentiate between different costs charged by credit
card issuers which are subject to caps and those fees which are not
subject to a cap and lastly how issuers should approach more
broadly the question of calculating and assessing fees which are
not subject to specific legal limits.
In the
first quarter of 2024, the Prime Minister of Romania announced
plans to prioritise implementing price caps on loans from
Non-Banking Financial Institutions (NBFIs) in the upcoming
parliamentary session.
A more
regulated and unified financial system may develop across European
markets in future.
|
How it is managed
- Horizon-scanning, monitoring political, legislative and
regulatory developments and risks.
- Engagement with regulators, legislators, politicians and
other stakeholders.
- Active participation in relevant sector
associations.
- Contingency plans in place for significant regulatory
changes.
|
3. Funding, liquidity, market and
counterparty risk ↑
The risk of insufficient
availability of funding, unfavourable pricing, or that performance
is impacted significantly by interest rate or currency movements,
or failure of a banking counterparty.
|
Impact
The uncertain global macroeconomic
landscape, a banking crisis and the wars in Ukraine and the Middle
East impacted debt capital markets and investor confidence
negatively in 2023. However, the Group maintained a robust funding
and liquidity position throughout the year, extending bank
facilities of £84m and successfully securing £62m of new funding.
Our credit ratings remained unchanged in 2023. We have a long-term
credit rating of BB- (Outlook stable) from Fitch Ratings and
Ba3 (Outlook stable) from Moody's Investor
Services.
Although high inflation and
interest rates, supply chain disruptions and the wars continue to
impact market sentiment, the landscape has improved since Q4 2023
with headline inflation reducing in many of our territories and
interest rates expected to decrease going forward. For further
information on funding see the financial review.
|
How it is managed
Board-approved policies require us
to maintain a resilient funding position with a good level headroom
on undrawn bank facilities, appropriate hedging of market risk, and
appropriate limits to counterparty risk.
- Compliance with these policies is monitored on a monthly basis
by the Group's Treasury Committee which is chaired by the Chief
Financial Officer.
- The Board receives a comprehensive funding and liquidity
overview as part of the Chief Financial Officer's
report.
- The
Group's funding and liquidity is managed centrally by the Group
Treasurer and qualified treasury personnel.
- The Group sets cash management controls for operating markets
that are subject to independent annual testing.
|
|
4. Reputation risk
↔
Risk of reputational damage due to
our methods of operation, ill-informed comment, malpractice,
fines or activities of some of our competition.
|
Impact
High inflation, increasing energy
costs and lower GDP growth in our markets resulted in negative
sentiment towards the financial sector. In addition, the financial
sector is likely to remain under scrutiny and challenge in the
run-up to elections in a number of our markets in 2024.
We maintain strong relationships
with key stakeholders to develop their understanding of our
business model, our purpose and role in society, and how we deliver
services to our customers. We also maintain dialogue with customers
to enable continued access to credit and offer repayment support,
where appropriate. Our working practices are subject to tight
control and oversight to ensure our products and services are in
line with legislation and customer expectations. This helps protect
the business from unforeseen events that could damage our
reputation.
In 2023, we received awards
recognising our business as a top employer, our high standards of
customer experience and for being a socially responsible
business.
|
How it is managed
- Clearly
defined corporate values and ethical standards are communicated
throughout the organisation.
- Employees and customer representatives undertake annual
ethics e-learning training.
- Regular monitoring of key reputation drivers both internally
and externally.
- Strong oversight by the senior leadership team on reputation
challenges.
|
5. Taxation risk ↔
The risk of failure to comply with
tax legislation or adoption of an interpretation of the law which
cannot be sustained together with the risk of a higher future tax
burden.
|
Impact
We have seen a slight increase in
tax rates going forward across various markets, including an
extension to the Hungarian extra profits special tax to 2024 and
increases in the tax rates in the Czech Republic to 21% from 2024
and Estonia to 22% from 2025. We continued to monitor international
tax developments during the year, including the EU's DEBRA and
BEFIT proposals, and the implementation of the directive on public
country-by-country reporting. In addition, UK legislation applying
the Pillar Two income tax rules was enacted during 2023, effective
from 2024. An impact assessment has been performed and we do
not expect the Group to incur any material Pillar Two top-up tax
liabilities. However, given the uncertainty regarding
forecast financial data and the potential for future changes in the
tax environment in the markets in which the Group operates, the
actual impact of the Pillar Two legislation in the future may
differ.
As at the end of 2023, the Group
had ongoing tax audits in Mexico (home credit entity for 2017 and
digital entity for 2019).
For further information see the
financial review.
|
How it is managed
- Tax
strategy and policy in place.
- Qualified and experienced tax teams at Group level and in
market.
- External advice taken on material tax issues in line with Tax
Policy.
- Binding rulings or clearances are obtained from authorities
where appropriate.
- Appropriate oversight at Board level over taxation
matters.
|
|
6. Change management risk
↑
The risk that the Group suffers
losses or fails to optimise profitable growth resulting from change
initiatives failing to deliver to agreed scope, time, cost and
quality measures, or failing to realise desired
benefits.
|
Impact
Effectively managing change and
transformation risk is crucial for minimising negative financial
impacts, maintaining employee engagement, ensuring successful
adaptation to evolving business needs and maximising transformation
benefits.
We continue to run a large and
complex change agenda across the Group, driven by three
factors:
i. regulatory-driven change, which is unpredictable and might have
a significant business impact if not addressed and
prioritised;
ii. migration to 'Next Gen' platforms that mitigate technology
debt or end-of-life risk; and
iii. business-driven changes which reflect wider strategic
priorities across the Group, focused largely on improving business
performance.
Despite the challenging
macroeconomic environment and regulatory challenges, we have taken
significant positive actions to prioritise and control the change
portfolio, deliver the planned benefits, and run the change
delivery framework across the Group.
|
How it is managed
-
Change management framework and monitoring process
in place.
-
Appropriate methods and resources used in the
delivery of change programmes.
- Continuous review
of change programmes, with strong governance of all major delivery
activity including:
- alignment with Investment Appraisal Policy, owned by the
finance function; and
-
a Group change capability
being established in 2024, focused on synergy and consistency
across the Group, and agreeing a Group-wide approach for oversight
of change and transformation.
|
7. Product proposition risk
↑
The risk of failure to offer
appropriate products in response to market trends (e.g. customer
needs
or the macroeconomic, regulatory or competitive landscape) results
in a lack of profitable growth.
|
Impact
All our markets continue to be
competitive, but we saw banks tightening their underwriting as the
effects of high inflation impacted consumers' disposable income. We
also saw some competition being impacted by both caution in capital
markets and increasing regulation. We believe that non-bank
financial institutions will remain a crucial source of finance for
lower-income, underserved consumers, and we will continue to focus
on serving more customers in this demographic while maintaining
lending quality.
In response to the competitive
landscape and aligned with our strategy, we made significant
improvements to the control environment and strengthened our
Product Policy and Oversight Committee. In addition, we increased
our focus on delivering positive impacts on customers as well as
financial returns.
We continue to develop our
propositions to improve financial inclusion, enhance customer
value, improve the customer experience, and extend our digital and
mobile propositions to meet consumers' changing needs.
|
How it is managed
-
Product development committees and processes in
place to review the product development roadmap, manage product
risks and develop new products.
-
Regular monitoring of competitors and their
offerings, advertising and share of voice in our
markets.
- Strategic planning and tactical responses on competition
threats.
|
8. Technology risk
↔
The risk of failure to develop and
maintain effective technology solutions.
|
Impact
A proactive approach to technology
risk management is essential for maintaining the currency and
capabilities of the Group in an increasingly digital
landscape.
The focus in 2023 was on removing
some components which were nearing technological obsolescence.
Our replacement of telephony systems for our customer service
centres with a modern omni-channel solution is close to completion.
In addition, good progress was made to move away from a federated
set of physically-hosted data centres to a centralised cloud
environment.
|
How it is managed
-
Ongoing reviews of services and relationships with
partners to ensure effective service operations.
-
Annual review to prioritise investment in
technology and ensure appropriateness of the technology
estate.
- Appointment of a new Group Chief Information
Officer.
|
9. People risk ↔
The risk that achievement of the
long-term Group strategy, and operational results is impacted due
to not having sufficient capacity (number) and capability
(quality), or an inability to either recruit external talent or
retain and engage our people.
|
Impact
The challenging macroeconomic
environment has had some impact on the turnover of customer
representatives, and we are experiencing a return to more "normal"
turnover rates post-pandemic. We take actions constantly to retain,
develop and engage customer representatives to minimise impacts on
the customer experience or the Group's performance.
Throughout 2023, we continued our
global programme to re-engineer our customer representative
employee value proposition (EVP) and engaged with our colleagues
through dedicated forums and our Global People Survey, a culture
monitoring tool.
|
How it is managed
Our human resources control
environment identifies key people risks and controls to mitigate
them covering:
-
monitoring and action with regards to key people
risks and issues; and
-
appropriate distribution of strategy-aligned
objectives.
Our people, organisation and
planning processes ensure that we develop appropriate and
significant strength and depth of talent across the Group and we
have the ability to move people between countries, which reduces
our exposure to critical roles being under-resourced.
|
10. Information security and cyber
risk ↔
The risk that the Group suffers
loss, theft or corruption of information leading to breaches of
relevant regulation, loss of reputation, loss of commercial
advantage or other impacts on customers and colleagues. The risk
that Group infrastructure, platforms and applications are
compromised or damaged such that customers and colleagues cannot
use or access our products and services.
|
Impact
We continued to deliver our
three-year information security strategy that aims to detect and
respond to security breaches in a timely and reliable way, as well
as having appropriate recovery arrangements in place. However, the
risk is highly dependent on the behaviour of people and
advancements in technology.
Globally, the emerging threat of
AI, which can facilitate a range of cyber attacks, is significant
and we are addressing it through appropriate web and device
protection, controlling access to company networks and delivering
awareness training and education.
The number of attacks is
substantial; however, we have addressed them in alignment with
controls defined in our three-year information security strategy,
with no major information security incident leading to identified
loss and no reportable breach.
|
How it is managed
- Group-wide information security strategy in place and
information security awareness training conducted
regularly.
- European home credit information security committee oversees
our approach.
-
Working group and guidelines established to
oversee the safe and ethical use of AI.
-
A DORA programme is in place to comply with new
European regulations.
|
3. Related
parties
The Group has not entered into any material
transactions with related parties during the year ended 31 December
2023.
4. Segmental
analysis
Geographical segments
|
2023
|
2022
|
|
£m
|
£m
|
Revenue
|
|
|
European home credit
|
379.7
|
317.5
|
Mexico home credit
|
261.6
|
210.9
|
IPF Digital
|
126.5
|
117.1
|
Revenue
|
767.8
|
645.5
|
Impairment
|
|
|
European home credit
|
39.4
|
5.2
|
Mexico home credit
|
96.7
|
75.5
|
IPF Digital
|
33.3
|
26.0
|
Impairment
|
169.4
|
106.7
|
Profit before
taxation
|
|
|
European home credit
|
65.1
|
65.6
|
Mexico home credit
|
23.1
|
17.7
|
IPF Digital
|
10.7
|
8.8
|
Central costs*
|
(15.0)
|
(14.7)
|
Profit before
taxation
|
83.9
|
77.4
|
|
*Although central costs are not classified as a
separate segment in accordance with IFRS 8 'Operating segments',
they are shown separately above in order to provide reconciliation
to profit before taxation.
|
|
|
2023
|
2022
|
|
£m
|
£m
|
Segment
assets
|
|
|
European home credit
|
567.0
|
590.3
|
Mexico home credit
|
291.2
|
255.6
|
IPF Digital
|
252.0
|
248.4
|
UK
|
78.8
|
76.8
|
Total
|
1,189.0
|
1,171.1
|
Segment
liabilities
|
|
|
European home credit
|
(289.7)
|
(348.8)
|
Mexico home credit
|
(134.3)
|
(124.2)
|
IPF Digital
|
(132.1)
|
(123.4)
|
UK
|
(131.0)
|
(129.5)
|
Total
|
(687.1)
|
(725.9)
|
4. Segmental
analysis (continued)
|
2023
|
2022
|
|
£m
|
£m
|
Expenditure on
intangible assets (note 11)
|
|
|
European home credit
|
-
|
-
|
Mexico home credit
|
-
|
-
|
IPF Digital
|
5.4
|
5.0
|
UK
|
12.5
|
9.7
|
Total
|
17.9
|
14.7
|
|
2023
|
2022
|
|
£m
|
£m
|
Amortisation (note
11)
|
|
|
European home credit
|
-
|
-
|
Mexico home credit
|
-
|
-
|
IPF Digital
|
4.5
|
4.0
|
UK
|
8.6
|
8.6
|
Total
|
13.1
|
12.6
|
|
2023
|
2022
|
|
£m
|
£m
|
Capital expenditure
(note 12)
|
|
|
European home credit
|
1.3
|
7.0
|
Mexico home credit
|
3.1
|
1.8
|
IPF Digital
|
0.3
|
0.3
|
UK
|
-
|
-
|
Total
|
4.7
|
9.1
|
|
|
|
|
2023
|
2022
|
|
£m
|
£m
|
Depreciation
(note 12)
|
|
|
European home credit
|
3.8
|
4.2
|
Mexico home credit
|
2.0
|
1.5
|
IPF Digital
|
0.3
|
0.3
|
UK
|
0.4
|
0.2
|
Total
|
6.5
|
6.2
|
5. Interest
expense
|
2023
|
2022
|
|
£m
|
£m
|
Interest payable on borrowings
|
74.8
|
66.5
|
Interest payable on lease liabilities
|
2.1
|
1.6
|
Interest
expense
|
76.9
|
68.1
|
6. Tax
expense
The pre-exceptional taxation charge on the profit
for 2023 is £31.9 million, which represents an effective tax rate
for the year of approximately 38% (2022: 40%). The lower tax rate
in 2023 reflects a number of disparate elements, including a
positive tax ruling in Poland which secured an element of bad debt
tax relief arising on loans issued since our Polish business
changed its regulatory status at the start of 2022. We expect the
effective tax rate to return to around 40% in 2024.
Consistent with 2022, the 2023 results reflect an
exceptional tax charge of £4.0m (2022: exceptional tax credit of
£10.5m (see note 9), which was stated net of a £5.1m tax charge in
respect of Hungary) relating to the "extra profit special tax"
implemented by the Hungarian government in 2022 and chargeable on
the financial sector including non-bank financial institutions. The
tax has been extended by one further year, and a further
exceptional tax charge of £2m is expected to arise in 2024.
The Group is subject to tax audits
in respect of the Mexican home credit business (regarding 2017) and
the Mexican digital business (regarding 2019).
7. Earnings
per share
|
2023
|
2022
|
|
pence
|
pence
|
Basic EPS
|
21.5
|
25.6
|
Dilutive effect of
awards
|
(1.3)
|
(1.3)
|
Diluted EPS
|
20.2
|
24.3
|
Basic earnings per share (EPS) is calculated by
dividing the profit attributable to shareholders of £48.0m (2022:
£56.8m) by the weighted average number of shares in issue during
the period of 223.7m which has been adjusted to exclude the
weighted average number of shares held in treasury and by the
employee trust (2022: 222.2m).
|
2023
|
2022
|
|
pence
|
pence
|
Basic pre-exceptional
EPS
|
23.2
|
20.8
|
Dilutive effect of
awards
|
(1.3)
|
(1.0)
|
Diluted pre-exceptional EPS
|
21.9
|
19.8
|
Basic pre-exceptional EPS is calculated by dividing
the pre-exceptional profit attributable to shareholders of £52.0m
(2022: £46.3m) by the weighted average number of shares in issue
during the period of 223.7m which has been adjusted to exclude the
weighted average number of shares held in treasury and by the
employee trust (2022: 222.2m).
For diluted EPS the weighted average number of
shares has been adjusted to 237.5m (2022: 234.0m) to assume
conversion of all dilutive potential ordinary share options
relating to employees of the Group.
8.
Dividends
Dividend per
share
|
|
2023
|
2022
|
|
pence
|
pence
|
Interim dividend
|
|
3.1
|
2.7
|
Final proposed dividend
|
|
7.2
|
6.5
|
Total
dividend
|
|
10.3
|
9.2
|
Dividends paid
|
|
2023
|
2022
|
|
£m
|
£m
|
Interim dividend of 3.1 pence per share (2022:
interim dividend of 2.7 pence per share)
|
|
6.9
|
6.0
|
Final 2022 dividend of 6.5 pence per share (2022:
final 2021 dividend of 5.8 pence per share)
|
|
14.6
|
12.9
|
Total dividends
paid
|
|
21.5
|
18.9
|
Based on the leadership's
successful execution of our growth strategy, the Board is pleased
to declare a final dividend of 7.2 pence per share, bringing the
full-year dividend to 10.3 pence per share (2022: 9.2 pence).
Subject to shareholder approval, the final dividend will be paid on
11 May 2024 to shareholders on the register at the close of
business on 12 April 2024. The shares will be marked ex-dividend on
11 April 2024.
9. Exceptional
items
The 2023 income statement includes an exceptional
tax loss of £4.0m (2022: exceptional gain of £10.5m) which
comprises the following items:
|
|
|
|
2023
|
2022
|
|
£m
|
£m
|
Benefit of Polish Supreme Administrative Court
decision
|
-
|
30.9
|
Decision of the General Court of the EU on State
Aid
|
-
|
(15.3)
|
Temporary Hungarian extra profit special tax
|
(4.0)
|
(5.1)
|
Exceptional tax
items
|
(4.0)
|
10.5
|
Further information relating to the exceptional tax
items is shown in the taxation section.
10.
Goodwill
|
2023
|
2022
|
|
£m
|
£m
|
Net book value at 1 January
|
24.2
|
22.9
|
Exchange adjustments
|
(0.6)
|
1.3
|
Net book value at
31 December
|
23.6
|
24.2
|
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 applied in the value in use calculation relate to the
discount rates and the cash flow forecasts used. The rate used to
discount the forecast cash flows is 13% (2022: 12%) and would need
to increase to 15% for the goodwill balance to be impaired. The
cash flow forecasts arise over a 4 year period (being the expected
life of the legacy MCB business's outstanding customer receivables)
and would need to be 14% lower than currently estimated for the
goodwill balance to be impaired.
11.
Intangible assets
|
2023
|
2022
|
|
£m
|
£m
|
Net book value at 1 January
|
27.9
|
25.2
|
Additions
|
17.9
|
14.7
|
Impairment
|
(0.2)
|
-
|
Amortisation
|
(13.1)
|
(12.6)
|
Exchange adjustments
|
(0.2)
|
0.6
|
Net book value at
31 December
|
32.3
|
27.9
|
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.
12. Property,
plant and equipment
|
2023
|
2022
|
|
£m
|
£m
|
Net book value at 1 January
|
17.3
|
13.8
|
Exchange adjustments
|
0.6
|
0.8
|
Additions
|
4.7
|
9.1
|
Disposals
|
(0.1)
|
(0.2)
|
Depreciation
|
(6.5)
|
(6.2)
|
Net book value at
31 December
|
16.0
|
17.3
|
As at 31 December 2023, the Group had £6.7m of capital expenditure
commitments contracted with third parties that were not provided
for (2022: £4.5m).
13. Right-of-use
assets and lease liabilities
The movement in the right-of-use assets in the
period is as follows:
Right-of-use
assets
|
|
|
|
2023
|
2022
|
|
£m
|
£m
|
Net book value at 1 January
|
19.3
|
17.7
|
Exchange adjustments
|
0.9
|
1.4
|
Additions
|
9.8
|
8.8
|
Modifications
|
1.4
|
(0.1)
|
Depreciation
|
(9.7)
|
(8.5)
|
Net book value at 31
December
|
21.7
|
19.3
|
The recognised right-of-use assets relate to the
following types of assets:
|
|
|
|
2023
|
2022
|
|
£m
|
£m
|
Properties
|
11.0
|
13.6
|
Motor vehicles
|
10.7
|
5.7
|
Total right-of-use
assets
|
21.7
|
19.3
|
The movement in the lease liability in the period is
as follows:
Lease
liability
|
|
|
|
2023
|
2022
|
|
£m
|
£m
|
Lease liability at 1 January
|
21.4
|
18.7
|
Exchange adjustments
|
0.9
|
1.6
|
Additions
|
11.2
|
8.7
|
Interest
|
2.1
|
1.6
|
Lease payments
|
(12.0)
|
(9.2)
|
Lease liability at 31
December
|
23.6
|
21.4
|
Analysed as:
Current
|
8.3
|
7.2
|
Non-current:
-
between one and five years
-
greater than five years
|
13.7
15.3
|
14.2
|
Lease liability at 31
December
|
23.6
|
21.4
|
Lease liabilities are measured at the present value
of the remaining lease payments, discounted using the rate implicit
in the lease, or if that rate cannot be readily determined, at the
lessee's incremental borrowing rate. The weighted average lessee's
incremental borrowing rate applied to the lease liabilities at 31
December 2023 was 10.1% (2022: 8.9%).
The amounts recognised in profit and loss are as
follows:
|
|
|
|
2023
|
2022
|
|
£m
|
£m
|
Depreciation on right-of-use assets
|
9.7
|
8.5
|
Interest expense on lease liabilities
|
2.1
|
1.6
|
Expense relating to leases of short-term leases
|
1.7
|
1.2
|
Amounts recognised in
profit and loss
|
13.5
|
11.3
|
The total cash outflow in the year in respect of
lease contracts is £12.0m (2022: £9.4m).
14. 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.
15. Amounts
receivable from customers
All lending is in the local currency of the country
in which the loan is issued:
|
2023
|
2022
|
|
£m
|
£m
|
Polish zloty
|
219.7
|
278.9
|
Czech crown
|
53.3
|
56.1
|
Euro
|
98.1
|
90.5
|
Hungarian forint
|
141.2
|
125.4
|
Mexican peso
|
229.0
|
188.7
|
Romanian leu
|
107.0
|
89.1
|
Australian dollar
|
44.6
|
40.1
|
Total
receivables
|
892.9
|
868.8
|
Amounts receivable from customers are held at
amortised cost and are equal to the expected future cash flows
receivable discounted at the average annual effective interest rate
of 101% (2022: 99%). All amounts receivable from customers are at
fixed interest rates. The average period to maturity of the amounts
receivable from customers is 13.2 months (2022: 13.0 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 repayments 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 recovered) when it no longer meets any of the
default criteria.
The breakdown of receivables by stage is as
follows:
2023
|
Stage 1
£m
|
Stage 2
£m
|
Stage 3
£m
|
Total net receivables
£m
|
Home credit
|
443.7
|
74.9
|
151.5
|
670.1
|
IPF Digital
|
206.7
|
9.8
|
6.3
|
222.8
|
Group
|
650.4
|
84.7
|
157.8
|
892.9
|
2022
|
Stage 1
£m
|
Stage 2
£m
|
Stage 3
£m
|
Total net receivables
£m
|
Home credit
|
439.7
|
78.9
|
140.9
|
659.5
|
IPF Digital
|
193.7
|
9.4
|
6.2
|
209.3
|
Group
|
633.4
|
88.3
|
147.1
|
868.8
|
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.
2023
|
Stage 1
£m
|
Stage 2
£m
|
Stage 3
£m
|
Total net receivables
£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
|
2022
|
Stage 1
£m
|
Stage 2
£m
|
Stage 3
£m
|
Total net receivables
£m
|
Gross carrying amount
|
782.0
|
161.8
|
422.8
|
1,366.6
|
Loss allowance
|
(148.6)
|
(73.5)
|
(275.7)
|
(497.8)
|
Group
|
633.4
|
88.3
|
147.1
|
868.8
|
16. Borrowing
facilities and borrowings
The maturity of the Group's external bond and
external bank borrowings and facilities is as follows:
|
2023
|
2022
|
|
Borrowings
|
Facilities
|
Borrowings
|
Facilities
|
|
£m
|
£m
|
£m
|
£m
|
Repayable:
|
|
|
|
|
- in less than one year
|
52.2
|
98.0
|
71.8
|
116.3
|
|
|
|
|
|
- between one and two years
|
330.5
|
364.6
|
57.1
|
57.4
|
- between two and five years
|
129.1
|
166.1
|
419.9
|
437.3
|
|
459.6
|
530.7
|
477.0
|
494.7
|
|
|
|
|
|
Total
borrowings
|
511.8
|
628.7
|
548.8
|
611.0
|
Total undrawn facilities as at 31 December 2023 were
£112.2m (2022: £56.8m), excluding £4.7m unamortised arrangement
fees and issue discount (2022: £5.4m).
17.
Derivative financial instruments
At 31 December 2023 the Group had an asset of £2.9m
and a liability of £4.4m (2022: £4.5m asset and £4.6m liability) in
respect of foreign currency contracts. Foreign currency contracts
are in place to hedge foreign currency cash flows. Where these cash
flow hedges are effective, in accordance with IFRS, movements in
their fair value are taken directly to reserves.
18.
Retirement benefit asset
The amounts recognised in the balance sheet in
respect of the retirement benefit obligation are as follows:
|
2023
|
2022
|
|
£m
|
£m
|
Diversified growth funds
|
1.6
|
4.6
|
Corporate bonds
|
7.6
|
14.5
|
Equities
|
0.9
|
-
|
Liability driven investments
|
19.7
|
11.7
|
Other
|
0.6
|
0.1
|
Total fair value of scheme assets
|
30.4
|
30.9
|
Present value of funded defined benefit
obligations
|
(24.3)
|
(28.8)
|
Net asset
recognised in the balance sheet
|
6.1
|
2.1
|
The credit recognised in the income statement in respect of defined
benefit pension costs is £0.1m (2022: £0.1m).
19. Provisions for
liabilities and charges
The Group receives claims brought by or on behalf of
current and former customers in connection with its past conduct.
Where significant, provisions are held against the costs expected
to be incurred in relation to these matters. In 2022, customer
redress provisions of £4.7m represented the Group's best estimate
of the costs that are expected to be incurred in relation to early
settlement rebates in Poland (£0.6m) and claims management charges
incurred in Spain (£4.1m). All claims were expected to be settled
within 12 months of the balance sheet date. No such balances were
held in 2023.
20. Fair
values of financial assets and liabilities
IFRS 13 requires disclosure of fair value
measurements of derivative financial instruments by level of the
following fair value measurement hierarchy:
· Quoted
prices (unadjusted) in active markets for identical assets or
liabilities (level 1);
· Inputs
other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices) (level 2);
and
· Inputs
for the asset or liability that are not based on observable market
data (that is, unobservable inputs) (level 3).
With the exception of
derivatives, which are held at fair value, amounts receivable from
customers, and bonds, the carrying value of all other financial
assets and liabilities (which are short-term in nature) is
considered to be a reasonable approximation of their fair value.
Details of the significant assumptions made in determining the fair
value of amounts receivable from customers and bonds are included
below, along with the fair value of other Group assets and
liabilities.
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:
|
2023
|
2022
|
|
Fair value
|
Carrying value
|
Fair value
|
Carrying value
|
|
£m
|
£m
|
£m
|
£m
|
Financial
assets
|
|
|
|
|
Amounts receivable from customers
|
1,139.3
|
892.9
|
1,111.2
|
868.8
|
|
1,139.3
|
892.9
|
1,111.2
|
868.8
|
|
|
|
|
|
Financial
liabilities
|
|
|
|
|
Bonds
|
420.8
|
428.2
|
358.2
|
413.7
|
Bank borrowings
|
83.6
|
83.6
|
135.1
|
135.1
|
|
504.4
|
511.8
|
493.3
|
548.8
|
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 collection costs, at the Group's weighted average cost of
capital which we estimate to be 13% (2022: 12%) which is assumed to
be a proxy for the discount rate that a market participant would
use to price the asset.
Under IFRS 13 'Fair value measurement', receivables
are classed as level 3 as their fair value is calculated using
future cash flows that are unobservable inputs.
The fair value of the bonds has been calculated by
reference to their market value where market prices are
available.
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.
Derivative financial instruments are held at fair
value which is equal to the expected future cash flows arising as a
result of the derivative transaction.
For other financial assets and liabilities, which
are all short-term in nature, the carrying value is a reasonable
approximation of their fair value.
21. Reconciliation
of profit after taxation to cash generated from operating
activities
|
2023
|
2022
|
|
£m
|
£m
|
Profit after taxation from operations
|
48.0
|
56.8
|
Adjusted for:
|
|
|
Tax charge
|
35.9
|
20.6
|
Finance costs
|
76.9
|
68.1
|
Share-based payment charge
|
2.7
|
2.2
|
Depreciation of property, plant and equipment (note
12)
|
6.5
|
6.2
|
Loss/(profit) on disposal of property, plant and
equipment (note 12)
|
0.1
|
(0.1)
|
Depreciation of right-of-use assets (note 13)
|
9.7
|
8.5
|
Amortisation of intangible assets (note 11)
|
13.1
|
12.6
|
Impairment of intangible assets (note 11)
|
0.2
|
-
|
Short term and low value lease costs (note 13)
|
1.7
|
1.2
|
Changes in operating assets and liabilities:
|
|
|
Increase in amounts receivable from customers
|
(3.8)
|
(115.7)
|
Decrease in other receivables
|
0.9
|
13.2
|
Decrease/(increase) in trade and other payables
|
4.8
|
(3.8)
|
Change in provisions
|
(4.7)
|
(0.9)
|
Change in retirement benefit asset
|
(0.1)
|
(1.0)
|
Increase/(decrease) in derivative financial
instrument liabilities
|
1.5
|
(9.1)
|
Cash generated from
operating activities
|
193.4
|
58.8
|
22. Contingent
liabilities
Poland regulatory
communication
In February 2024, we received a letter from the KNF
issued to all regulated lenders operating in the Polish credit card
market setting out the KNF's views on how existing laws and
regulations relating to lending activities should be interpreted by
credit card issuers. The letter sets out the KNF's current
expectations on how charging practices for credit cards should be
subject to limits on non-interest costs, the need to differentiate
between different costs charged by credit card issuers which are
subject to caps and those fees which are not subject to a cap and
lastly how issuers should approach more broadly the question of
calculating and assessing fees which are not subject to specific
legal limits.
The Group, following legal advice, had previously
determined that non-interest cost caps did not apply to credit
cards and is therefore reviewing, with the assistance of external
counsel, what the impact of this communication might be and whether
it constitutes a significant change to the existing approach taken
by the Polish regulatory authorities.
It is currently not possible to predict the ultimate
impacts of the letter, including the scope or nature of remediation
requirements, if any, or any related challenges to the
interpretation or validity of the Polish business's application of
non-interest costs applied to its credit card portfolio since its
launch in the third quarter of 2022.
The KNF's letter was not specific on when any
changes would need to be implemented and did not indicate whether
any retrospective application would be required. Considering this,
alongside the legal advice obtained to date, the Group has not
recognised a provision for this matter as at 31 December 2023.
The Group's Polish business has been issuing credit
cards since late 2022. Polish credit card receivables of £49m at 31
December 2023 represent just over 5% of the Group's receivables and
approximately 25% of overall receivables in Poland.
Other legal actions
and regulatory matters
In addition, in the course of its business the Group
is subject to other 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 (e.g. the recent KNF communication - see above). 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.
23. Average
and closing 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
|
|
|
2023
|
2023
|
2022
|
2022
|
Polish zloty
|
|
5.2
|
5.0
|
5.5
|
5.3
|
Czech crown
|
|
27.9
|
28.5
|
28.5
|
27.2
|
Euro
|
|
1.1
|
1.2
|
1.2
|
1.1
|
Hungarian forint
|
|
437.3
|
441.3
|
452.3
|
450.8
|
Mexican peso
|
|
21.9
|
21.5
|
24.6
|
23.5
|
Romanian leu
|
|
5.7
|
5.7
|
5.8
|
5.6
|
Australian dollar
|
|
1.9
|
1.9
|
1.8
|
1.8
|
The £22.8m exchange gain (2022:
gain of £41.8m) on foreign currency translations shown within the
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
2022 and December 2023 shown in the table above.
24.
Going concern
In considering whether the Group
is a going concern, the Board has taken into account the Group's
2024 business plan and its principal risks (with particular
reference to macroeconomic and regulatory risks). The forecasts
have been prepared for the three years to 31 December 2026 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
Group's expected performance, and in particular the evolution of
customer lending and repayments cashflows.
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 macroeconomic
and regulatory risks, including crystallisation of the contingent
liabilities disclosed in note 22. 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
macroeconomic scenario 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 31 December 2023, the Group had
£126m 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 2.0 years. The total debt
facilities as at 31 December 2023 amounted to £629m of which £98m
(including £33m which is uncommitted) 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,
tested in both 2020 and 2022), 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 in note 2, the
Board has a reasonable expectation that the Group has adequate
resources to continue in operation for the foreseeable future. For
this reason, the Board has adopted the going concern basis in
preparing this full-year financial report.
Responsibility
statement
This statement is given pursuant to Rule 4 of the
Disclosure Guidance and Transparency Rules.
It is given by each of the directors as at the date
of this report, namely: Stuart Sinclair, Chair; 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.
To the best of each director's knowledge:
a) the financial
information, prepared in accordance with the IFRSs, give a true and
fair view of the assets, liabilities, financial position and profit
of the Company and the undertakings included in the consolidation
taken as a whole; and
b) the
management report contained in this report includes a fair review
of the development and performance of the business and the position
of the Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties that they face.
Alternative
performance measures
This 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 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
statutory measure
|
Reconciling items to
statutory measure
|
Definition and purpose
|
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 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.
|
Closing net receivables growth at
constant exchange rates (%)
|
None
|
Not applicable
|
Closing net receivables growth is
the period-on-period change in closing net receivables which is
calculated by retranslating the previous year's closing net
receivables at the closing actual exchange rate 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
constant exchange
rates (%)
|
None
|
Not applicable
|
The period-on-period change in
revenue which is calculated by retranslating the previous year's
revenue at the average actual exchange rates used in the current
financial year. This measure is presented as a means of eliminating
the effects of exchange rate fluctuations on the period-on-period
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.
|
Impairment rate (%)
|
None
|
Not applicable
|
Impairment as a percentage of
average gross receivables (before impairment provision) and
represents a measure of credit quality that is used across the
business.
|
Cost-income ratio (%)
|
None
|
Not applicable
|
The cost-income ratio is costs,
including customer representatives' commission, excluding interest
expense, divided by reported revenue. This is useful for comparing
performance across markets.
|
|
APM
|
Closest equivalent
statutory measure
|
Reconciling items to
statutory measure
|
Definition and purpose
|
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
external bank
facilities
|
Not applicable
|
Calculated as the sum of undrawn
external bank facilities and non-operational cash.
|
Net debt (£m)
|
None
|
Not applicable
|
Borrowings less cash.
|
Gross receivables (£m)
|
Net customer receivables
|
Not applicable
|
Gross receivables is the same
definition as gross carrying amount as per note 15.
|
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 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 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
2023
|
|
|
|
|
|
|
£m
|
European home credit
|
Mexico
home
credit
|
IPF
Digital
|
Central
costs
|
Group
|
|
Customers (000)
|
761
|
716
|
223
|
-
|
1,700
|
|
Average gross receivables
|
801.6
|
299.4
|
287.9
|
-
|
1,388.9
|
|
Closing net receivables
|
483.0
|
187.1
|
222.8
|
-
|
892.9
|
|
Customer lending
|
616.6
|
302.8
|
231.2
|
-
|
1,150.6
|
|
Revenue
|
379.7
|
261.6
|
126.5
|
-
|
767.8
|
|
Impairment
|
(39.4)
|
(96.7)
|
(33.3)
|
-
|
(169.4)
|
|
Net revenue
|
340.3
|
164.9
|
93.2
|
-
|
598.4
|
|
Interest expense
|
(48.0)
|
(12.1)
|
(16.7)
|
(0.1)
|
(76.9)
|
|
Costs
|
(227.2)
|
(129.7)
|
(65.8)
|
(14.9)
|
(437.6)
|
|
Profit/(loss) before tax
|
65.1
|
23.1
|
10.7
|
(15.0)
|
83.9
|
|
|
|
|
|
|
|
|
|
2022 performance, at 2022 average foreign exchange
rates
|
£m
|
European home credit
|
Mexico
home credit
|
IPF
Digital
|
Central
costs
|
Group
|
|
Customers (000)
|
784
|
696
|
253
|
-
|
1,733
|
|
Average gross receivables
|
747.5
|
239.0
|
258.0
|
-
|
1,244.5
|
|
Closing net receivables
|
501.0
|
158.5
|
209.3
|
-
|
868.8
|
|
Customer lending
|
637.0
|
257.4
|
232.0
|
-
|
1,126.4
|
|
Revenue
|
317.5
|
210.9
|
117.1
|
-
|
645.5
|
|
Impairment
|
(5.2)
|
(75.5)
|
(26.0)
|
-
|
(106.7)
|
|
Net revenue
|
312.3
|
135.4
|
91.1
|
-
|
538.8
|
|
Interest expense
|
(42.8)
|
(9.9)
|
(15.3)
|
(0.1)
|
(68.1)
|
|
Costs
|
(203.9)
|
(107.8)
|
(67.0)
|
(14.6)
|
(393.3)
|
|
Profit/(loss) before tax
|
65.6
|
17.7
|
8.8
|
(14.7)
|
77.4
|
|
Foreign exchange movements
|
£m
|
European home credit
|
Mexico
home credit
|
IPF
Digital
|
Central
costs
|
Group
|
|
Average gross receivables
|
30.7
|
29.1
|
7.5
|
-
|
67.3
|
|
Closing net receivables
|
10.2
|
14.2
|
1.2
|
-
|
25.6
|
|
Customer lending
|
26.7
|
31.5
|
7.4
|
-
|
65.6
|
|
Revenue
|
12.8
|
25.3
|
4.0
|
-
|
42.1
|
|
Impairment
|
0.4
|
(8.5)
|
(1.3)
|
-
|
(9.4)
|
|
Net revenue
|
13.2
|
16.8
|
2.7
|
-
|
32.7
|
|
Interest expense
|
(1.8)
|
(1.2)
|
(0.4)
|
-
|
(3.4)
|
|
Costs
|
(7.7)
|
(12.9)
|
(1.9)
|
-
|
(22.5)
|
|
|
3.7
|
2.7
|
0.4
|
-
|
6.8
|
|
2022 performance, restated at 2023 average foreign exchange
rates
|
£m
|
European home credit
|
Mexico
home
credit
|
IPF
Digital
|
Central
costs
|
Group
|
|
Average gross receivables
|
778.2
|
268.1
|
265.5
|
-
|
1,311.8
|
|
Closing net receivables
|
511.2
|
172.7
|
210.5
|
-
|
894.4
|
|
Customer lending
|
663.7
|
288.9
|
239.4
|
-
|
1,192.0
|
|
Revenue
|
330.3
|
236.2
|
121.1
|
-
|
687.6
|
|
Impairment
|
(4.8)
|
(84.0)
|
(27.3)
|
-
|
(116.1)
|
|
Net revenue
|
325.5
|
152.2
|
93.8
|
-
|
571.5
|
|
Interest expense
|
(44.6)
|
(11.1)
|
(15.7)
|
(0.1)
|
(71.5)
|
|
Costs
|
(211.6)
|
(120.7)
|
(68.9)
|
(14.6)
|
(415.8)
|
|
Year-on-year movement at constant exchange
rates
|
|
European home credit
|
Mexico
home
credit
|
IPF
Digital
|
Central
costs
|
Group
|
|
Average gross receivables
|
3.0%
|
11.7%
|
8.4%
|
-
|
5.9%
|
|
Closing net receivables
|
(5.5%)
|
8.3%
|
5.8%
|
-
|
(0.2%)
|
|
Customer lending
|
(7.1%)
|
4.8%
|
(3.4%)
|
-
|
(3.5%)
|
|
Revenue
|
15.0%
|
10.8%
|
4.5%
|
-
|
11.7%
|
|
Impairment
|
(720.8%)
|
(15.1%)
|
(22.0%)
|
-
|
(45.9%)
|
|
Net revenue
|
4.5%
|
8.3%
|
(0.6%)
|
-
|
4.7%
|
|
Interest expense
|
(7.6%)
|
(9.0%)
|
(6.4%)
|
-
|
(7.6%)
|
|
Costs
|
(7.4%)
|
(7.5%)
|
4.5%
|
(2.1%)
|
(5.2%)
|
|
Balance sheet and
returns measures
Average gross receivables (before impairment
provisions) are used in the revenue yield and impairment rate
calculations.
Average gross
receivables
|
|
|
|
|
|
|
2023
|
2022
|
|
£m
|
£m
|
European home credit
|
801.6
|
747.5
|
Mexico home credit
|
299.4
|
239.0
|
IPF Digital
|
287.9
|
258.0
|
Group
|
1,388.9
|
1,244.5
|
The impairment coverage ratio is calculated as loss
allowance divided by gross carrying amount.
Impairment coverage ratio
|
|
|
|
|
|
|
2023
|
2022
|
|
£m
|
£m
|
Closing gross carrying amount
|
1,401.1
|
1,366.6
|
Loss allowance
|
(508.2)
|
(497.8)
|
Closing net receivables
|
892.9
|
868.8
|
Impairment coverage
ratio
|
36.3%
|
36.4%
|
Pre-exceptional return on equity (RoE) is calculated
as annual pre-exceptional profit after tax divided by
pre-exceptional equity.
Pre-exceptional RoE
|
|
|
|
|
|
|
|
|
2023
|
2022
|
2021
|
|
£m
|
£m
|
£m
|
Equity (net assets)
|
501.9
|
445.2
|
367.1
|
Exceptional items
|
4.0
|
(10.5)
|
-
|
Pre-exceptional equity
|
505.9
|
434.7
|
367.1
|
Average pre-exceptional equity
|
470.3
|
400.9
|
368.8
|
Profit after tax
|
48.0
|
56.8
|
41.9
|
Exceptional items
|
4.0
|
(10.5)
|
-
|
Pre-exceptional profit after tax
|
52.0
|
46.3
|
41.9
|
Pre-exceptional
RoE
|
11.1%
|
11.5%
|
11.4%
|
Return on required equity (RoRE) is calculated as
annual pre-exceptional profit after tax divided by required equity
of 40% of average net receivables.
Pre-exceptional RoRE 2023
|
European home credit
|
Mexico
home credit
|
IPF Digital
|
Group
|
|
£m
|
£m
|
£m
|
£m
|
Closing net receivables 2023
|
483.0
|
187.1
|
222.8
|
892.9
|
Closing net receivables 2022
|
501.0
|
158.5
|
209.3
|
868.8
|
Average net receivables
|
492.0
|
172.8
|
216.0
|
880.8
|
Equity (net assets) at 40%
|
196.8
|
69.1
|
86.4
|
352.3
|
|
|
|
|
|
Pre-exceptional profit before tax
|
65.1
|
23.1
|
10.7
|
83.9
|
Tax at 38%
|
(24.7)
|
(8.8)
|
(4.1)
|
(31.9)
|
Pre-exceptional profit after tax
|
40.4
|
14.3
|
6.6
|
52.0
|
Pre-exceptional
RoRE
|
20.5%
|
20.7%
|
7.6%
|
14.8%
|
Pre-exceptional RoRE 2022
|
European home credit
|
Mexico
home credit
|
IPF Digital
|
Group
|
|
£m
|
£m
|
£m
|
£m
|
Closing net receivables 2022
|
501.0
|
158.5
|
209.3
|
868.8
|
Closing net receivables 2021
|
425.9
|
117.6
|
173.3
|
716.8
|
Average net receivables
|
463.4
|
138.1
|
191.3
|
792.8
|
Equity (net assets) at 40%
|
185.4
|
55.2
|
76.5
|
317.1
|
|
|
|
|
|
Pre-exceptional profit before tax
|
65.6
|
17.7
|
8.8
|
77.4
|
Tax at 40%
|
(26.2)
|
(7.1)
|
(3.5)
|
(31.1)
|
Pre-exceptional profit after tax
|
39.4
|
10.6
|
5.3
|
46.3
|
Pre-exceptional RoRE
|
21.3%
|
19.2%
|
6.9%
|
14.6%
|
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.
This
announcement contains inside information which is disclosed in
accordance with the Market Abuse Regime.