Consolidated Financial Report 30 September 2021

RNS Number : 7996T
International Personal Finance Plc
29 November 2021
 

29 November 2021

International Personal Finance plc 

Interim Condensed Consolidated Financial Report for the period 1 January to 30 September 2021

Management Board Report

Principal activity

International Personal Finance plc specialises in providing unsecured consumer credit to 1.7 million customers across 11 markets.  We operate the world's largest home credit business and a fintech operator, IPF Digital .

 

Financial and operational highlights

Ø

Continued strong and improving financial performance

 

Group profit before tax for the nine months to 30 September 2021 of £59.8 million driven by strong collections performance (YTD 2020: loss of £41.7 million)

 

In the quarter to 30 September 2021, Group profit before tax of £16.5 million (Q3 2020: £16.8 million)

 

 

 

Ø

Strong operational performance and well-positioned for further growth

 

Rebuild strategy proving highly effective and delivering sustained growth momentum

 

Improving consumer demand and selective relaxation of credit settings delivered 35% increase in credit issued year on year

 

Building sales momentum delivered 8% increase in closing receivables since the 2020 year end (at CER)


Strong collections and high-quality lending resulted in very low annualised impairment as a percentage of revenue at 12.0%

 

 

Ø

Strong funding position and well capitalised balance sheet


Successful issue of SEK 450 million bond at 7% coupon, maturing October 2024


Equity to receivables ratio 53.7% at 30 September 2021

 

Bond and bank facilities total £572 million to support future growth

 

Undrawn facilities and non-operational cash balances of £149 million

 

Fitch Ratings improved IPF outlook to Stable and reaffirmed long-term credit rating of BB-

 

Group key statistics

Nine months to 30 September 2020

Nine months to 30 September 2021

 

YOY change at CER

 

Customer numbers (000s)

1,715

1,715

-

 

Credit issued (£m)

547.6

714.3

35.0%

 

Closing receivables

683.6

695.0

6.9%

 

Revenue (£m)

517.0

399.5

(20.2%)

 

Annualised impairment % revenue

38.1%

12.0%

26.1 ppts

 

Annualised cost-income ratio

44.8%

55.1%

(10.3 ppts)

 

Statutory (LBT) / PBT (£m)

(41.7)

59.8

 

 

Statutory (LPS) / EPS (pence)

(29.8)

14.2

 

 

 

 

Gerard Ryan, Chief Executive Officer at IPF commented:

"I am delighted to announce that IPF delivered another strong operational and financial performance, reporting £59.8 million profit before tax in the year to date. Our business plays an essential role in society by providing credit to people who are underbanked or underserved, and we are successfully serving a growing number of customers in a responsible and sustainable way.  Despite the ongoing challenges posed by the pandemic, we see significant long-term demand for affordable credit in all our markets and will continue to execute our rebuild strategy by increasing credit issued and growing the receivables portfolio while maintaining a clear focus on portfolio quality and costs. My thanks go to all of our colleagues who are working diligently to serve our customers safely and rebuild the business at this important time."

 

 

Group performance  

The successful implementation of our rebuild strategy to return the business to full-year profitability and long-term growth delivered a further improvement in our financial performance.  Group profit before tax was £59.8 million, an increase of £101.5 million year on year, with all three business divisions contributing to the Group's step-up in performance.  For the quarter to 30 September 2021, Group profit before tax was £16.5 million (Q3 2020: £16.8 million).

 

The improved year-on-year profit performance was reflected across all our business divisions, each of which was profitable in the nine months to 30 September 2021. 

 

 

Nine months to 30 September 2020

£m

Nine months to 30 September 2021

£m

European home credit

(12.2)

50.1

Mexico home credit

(5.2)

11.7

IPF Digital

(2.8)

9.1

Central costs

(9.8)

(11.1)

Pre-exceptional (loss) / profit before tax

(30.0)

59.8

 

This strong result for the year to date was driven by excellent operational focus on the rebuild strategy.  Lower impairment charges generated by strong collections and higher quality lending, together with tight control of costs, more than offset a reduction in revenue resulting from the smaller average size of the portfolio year on year.  It is, however, pleasing to report a £54 million increase (8% at CER) in the closing receivables portfolio to £695 million in the year to date, which contributed to improving revenue trends in Q3.

 

 

 


Nine months to 30 September 2020

£m

Nine months to 30 September 2021

£m

Change

 

£m

Change

 

%

Change at CER

%

Customer numbers (000s)

1,715

1,715

-

-

-

Closing receivables

683.6

695.0

11.4

1.7

6.9

Credit issued

547.6

714.3

166.7

30.4

35.0

Average net receivables

811.0

668.2

(142.8)

(17.6)

(14.9)

 

 

 

 

 

 

Revenue

517.0

399.5

(117.5)

(22.7)

(20.2)

Impairment

(218.9)

(28.3)

190.6

87.1

86.8

Net revenue

298.1

371.2

73.1

24.5

30.0

Finance costs

(38.8)

(39.0)

(0.2)

(0.5)

(3.7)

Agents' commission

(54.1)

(48.4)

5.7

10.5

7.3

Other costs

(235.2)

(224.0)

11.2

4.8

2.2

Pre-exceptional (loss) / profit before taxation

 

(30.0)

 

59.8

 

89.8

 

299.3

 

Exceptional items

(11.7)

-

11.7

100.0

 

(Loss) / profit before taxation

(41.7)

59.8

101.5

243.4

 

 

The strong Group collections performance achieved in the first half of the year continued through the third quarter and we saw growing consumer appetite for credit.  This resulted in a strong increase in credit issued of 35% year on year, with Q3 credit issued improving by 4% compared with Q2.   It also supported our goal to rebuild customer numbers, the result of which has been steady growth over the past five months and at the end of Q3, customer numbers were in line year on year despite the significant impact of the pandemic and the collect-out of our operation in Finland.  We have returned to serving 1.7 million people, adding a further 36,000 new customers in Q3.  Year on year, average net receivables reduced by 15% due to the lower levels of credit issued in 2020.  This resulted in a 20% contraction in revenue year on year, but as we successfully rebuild our portfolio, revenue is growing once again with Q3 3% higher compared with Q2.  

 

With the company returning to growth mode we also delivered an 8% increase in closing receivables since the year end (at CER) to £695 million. We expect this growth trend to continue for both credit issued and receivables in the final quarter of the year which will, in turn, drive further revenue growth.

 

The strong collections performance resulted in an exceptionally low impairment charge of £28.3 million in the nine months to September 2021, which includes the benefit of Covid-19 discounting and expected credit loss provisions releases totalling £20.8 million.  The year-to-date charge comprised £11.7 million in H1 and £16.6 million in Q3, the increase being driven by reduced Covid-19 provision releases of £0.8 million compared with £20.0 million in H1, together with higher levels of up-front impairment resulting from the increased level of sales.

 

The performance of the receivables portfolio since June 2020, which was granted largely under tighter than normal credit settings, has also been better than predicted by our impairment models, and this has had a further positive impact on our impairment charge.  Taken together, these factors resulted in a 25.4 ppt improvement in annualised impairment as a percentage of revenue since the 2020 year end to 12.0%. As previously reported, we expect impairment as a percentage of revenue to remain below our target range of 25% to 30% in 2021 before increasing in 2022 as we continue to rebuild the business. 

 

Other costs reduced year on year by 2% (£5.1 million at CER) reflecting our continued approach of maintaining tight control of costs while continuing to invest to deliver higher volumes of credit.

 

 

Market overview and Covid-19 response strategy

We play a very important role in society, providing affordable finance responsibly to underbanked and underserved consumers.  Our strategy centres on delivering a positive customer experience and an expanded product range across all our businesses, recapturing growth as consumer demand increases in our markets. Our phased plan, implemented in response to the Covid-19 pandemic, is driving the return to full-year profitability and progressive returns to our shareholders. 

 

We saw a steady increase in levels of demand over the course of Q2 which continued throughout the third quarter of the year.  This pick up was driven by the easing of freedom of movement and social distancing rules in most of our markets, the opening up of retail and hospitality sectors and the progression of government vaccination programmes.  While there is uncertainty ahead, particularly as Covid-19 cases are increasing in some markets, we are confident that our customer segment will continue to seek credit to meet their needs as markets return to normal. The macroeconomic conditions in our markets remain on course to generate GDP growth in 2021 and 2022 of between 2% and 7%.  The more positive outlook and eased pandemic restrictions have resulted in consumer credit providers, including our businesses, choosing to market products more intensely in order to capture renewed consumer demand and rebuild receivables portfolios.  While the consumer finance sector continues to be highly competitive, we are in a very good position to serve our customers responsibly with products that suit their financial needs and circumstances, both now and into the future.

 

The way we have operated throughout the pandemic has allowed us to demonstrate the important role our business performs.  In addition to supporting our loyal, high-quality customers with credit, we have extended forbearance across the Group over and above our normal practices, ensuring that where customers face difficulty meeting their repayments, we provide revised schedules to suit their current circumstances with payment holidays and deferred payments. Protecting our people and customers remains our top priority, and PPE together with a range of remote alternative repayment options are available to customers if agents are unable to visit them.  We also have in place appropriate protocols to address any adverse impact from future lockdowns, should they occur.

 

Of the temporary Covid-19 related regulations introduced in 2020, only the temporary debt repayment moratorium in Hungary remains in place. This legislation was due to expire on 30 September 2021 but was further extended to 30 June 2022.  The terms of the moratorium have, however, changed to an opt-in scheme and new eligibility criteria have been introduced.  Customers who wished to remain in the moratorium had until the end of October to apply.

 

 

Business division performance review

As highlighted at the 2020 year-end, we merged our two digital businesses in Poland in order to deliver efficiencies of scale and, as a result, the digital lending arm previously reported as part of European home credit is now included in IPF Digital. All comparatives have been amended accordingly and are presented on a like-for-like basis.

 

 

European home credit

The strong operational performance delivered by our European home credit businesses resulted in a £62.3 million swing in profit before tax year on year to £50.1 million.  Profit before tax in Q3 was £15.2 million.  This significantly improved financial result was driven primarily by continued strong collections flowing through to lower impairment charges in each market.

 

 

Nine months to 30 September 2020

£m

Nine months to 30 September 2021

£m

Change

 

£m

Change

 

%

Change at CER

%

Customer numbers (000s)

833

810

(23)

(2.8)

(2.8)

Closing receivables

395.8

418.0

22.2

5.6

12.2

Credit issued

309.9

440.0

130.1

42.0

48.3

Average net receivables

459.5

397.3

(62.2)

(13.5)

(9.9)

 

 

 

 

 

 

Revenue

269.2

207.0

(62.2)

(23.1)

(19.8)

Impairment

(105.8)

12.2

118.0

111.5

111.9

Net revenue

163.4

219.2

55.8

34.1

41.1

Finance costs

(23.4)

(24.0)

(0.6)

(2.6)

(8.6)

Agents' commission

(38.0)

(32.0)

6.0

15.8

12.1

Other costs

(114.2)

(113.1)

1.1

1.0

(2.5)

Pre-exceptional (loss) / profit before taxation

 

(12.2)

 

50.1

62.3

510.7

 

 

Our business responded well to growing consumer demand, and we increased credit issued year on year by 48%, with Q3 in line with Q2 at £152 million.  Customer numbers contracted year on year by 3% to 810,000 but as we successfully executed our rebuild strategy, they increased by 2,000 in Q3.  Year on year, average net receivables reduced by 10% but credit issued growth momentum delivered a 12% (at CER) increase in closing receivables since December 2020 to £418 million, up 4% from £401 million at June.

 

Our collections performance together with the unwinding of Covid-19 impairment provisions booked in 2020 and higher-quality lending, resulted in annualised impairment as a percentage of revenue improving by 30.9 ppts since the 2020 year-end to 4.7%. Other costs increased by 3% (at CER) year on year as a result of a much lower 2020 comparative together with a modest increase in costs to fund higher credit issuance.

 

Mexico home credit

Mexico home credit reported another significantly improved financial performance with profit before tax increasing by £16.9 million year on year to £11.7 million, which included £2.3 million delivered in the third quarter.  This robust outcome, driven primarily by a reduction in impairment and a lower cost base, was delivered against a challenging third wave of the Covid-19 pandemic in Mexico during Q3 2021.

 

 

 

 

 

Nine months to 30 September 2020

£m

Nine months to 30 September 2021

£m

Change

 

£m

Change

 

%

Change at CER

%

Customer numbers (000s)

609

649

40

6.6

6.6

Closing receivables

81.4

110.4

29.0

35.6

31.3

Credit issued

101.8

139.6

37.8

37.1

42.4

Average net receivables

106.6

99.4

(7.2)

(6.8)

(4.4)

 

 

 

 

 

 

Revenue

123.0

102.8

(20.2)

(16.4)

(14.7)

Impairment

(51.4)

(20.4)

31.0

60.3

60.9

Net revenue

71.6

82.4

10.8

15.1

20.6

Finance costs

(5.6)

(4.8)

0.8

14.3

12.7

Agents' commission

(16.1)

(16.4)

(0.3)

(1.9)

(3.8)

Other costs

(55.1)

(49.5)

5.6

10.2

8.7

Pre-exceptional (loss) / profit before taxation

 

(5.2)

 

11.7

16.9

325.0

 

 

Consumer appetite for credit is recovering and despite a third wave of the Covid-19 pandemic in Q3  exacerbated by relatively low vaccination rates in Mexico, we delivered a 7% increase in customer numbers year on year to 649,000, adding a further 25,000 in Q3.  This, in turn, supported a 42% increase in credit issued year on year, with Q3 9% higher than Q2.  Average net receivables reduced by 4% year on year due to lower credit issued in 2020 and incremental impairment provisions. Revenue on the smaller receivables portfolio decreased by 15% year on year, but it is pleasing to report that Q3 revenue was 11% higher than Q2 as we focused on rebuilding the business.  This also supported the delivery of a 21% (at CER) increase in closing receivables since December 2020 to £110 million at the end of Q3.  Closing receivables growth in Q3 was 7% (at CER). 

 

Our operational rigour around collections and credit quality over the past two years, together with the unwinding of Covid-19 impairment provisions booked in 2020, resulted in annualised impairment as a percentage of revenue improving by 16.0 ppts since the 2020 year-end to 17.7% at 30 September 2021.  As we eased credit settings to serve more new customers and rebuild the receivables portfolio, annualised impairment as a percentage of revenue increased by 5.1 ppts in Q3.  We continued to manage costs tightly maintaining the benefits of savings achieved in 2020 and delivered a 9% reduction in Other costs year on year. 

 

IPF Digital

IPF Digital reported an £11.9 million improvement in profit before tax to £9.1 million driven by significantly improved impairment and a reduction in costs, offset partially by lower revenue. This improved performance included profit before tax of £3.0 million in Q3.

 

 

Nine months to 30 September 2020

£m

Nine months to 30 September 2021

£m

Change

 

£m

Change

 

%

Change at CER

%

 

Customer numbers (000s)

273

256

(17)

(6.2)

(6.2)

 

Closing receivables

206.4

166.6

(39.8)

(19.3)

(14.0)

 

Credit issued

135.9

134.7

(1.2)

(0.9)

0.3

 

Average net receivables

244.9

171.5

(73.4)

(30.0)

(28.5)


 

 

 

 

 

 


Revenue

124.8

89.7

(35.1)

(28.1)

(26.5)


Impairment

(61.7)

(20.1)

41.6

67.4

66.6


Net revenue

63.1

69.6

6.5

10.3

12.4


Finance costs

(9.8)

(10.2)

(0.4)

(4.1)

(2.0)


Other costs

(56.1)

(50.3)

5.8

10.3

8.2


Pre-exceptional (loss) / profit before taxation

 

(2.8)

 

9.1

11.9

425.0

 


 

 

The pre-exceptional profitability of IPF Digital is segmented as follows:

 

 

 

Nine months to 30 September 2020

£m

Nine months to 30 September 2021

£m

Change

£m

Change

%

Established markets

13.8

15.7

1.9

13.8

New markets

(5.6)

1.8

7.4

132.1

Head office costs

(11.0)

(8.4)

2.6

23.6

IPF Digital

(2.8)

9.1

11.9

425.0

 

 

Increasing demand for consumer credit is creating a good foundation on which to rebuild the digital business and deliver sustainable growth.  Year on year, customer numbers reduced by 6% to 256,000 driven by suppressed demand early in 2021 as a result of the pandemic, our continued cautious credit settings in Spain and the cessation of lending in Finland.  However, it is pleasing to note that we delivered an increase of 9,000 customers in Q3.  The rate of credit issued also improved as the year progressed and new lending was in line year on year, with Q3 credit issued 12% higher than Q2.  (Excluding Finland 19% increase year on year).  Average net receivables reduced by 28% year on year, with revenue contracting by 27% in the period and by 12% in Q3.  Closing receivables since December 2020 contracted by 7% to £167 million at the end of Q3, however, building momentum in the business resulted in closing receivables being broadly flat in Q3 (at CER) compared with H1 2021. 

 

Continued high-quality lending and improving collections performance resulted in a 21.7 ppt improvement in annualised impairment as a percentage of revenue to 23.7% since the 2020 year end.  Costs continued to be tightly managed and reduced by 8% year on year, driven mainly by the benefits of our rightsizing exercise in 2020, lower marketing expenditure and other volume-related costs.

 

 

Established markets

The established markets delivered a £1.9 million increase in profit before tax to £15.7 million, driven by lower impairment and a reduction in costs, partially offset by lower revenue arising from a contraction in our portfolio.  This improved performance included profit before tax of £4.5 million in Q3.

 

 

 

Nine months to 30 September 2020

£m

Nine months to 30 September 2021

£m

Change

 

£m

Change

 

%

Change at CER

%

Customer numbers (000s)

125

98

(27)

(21.6)

(21.6)

Closing receivables

109.3

79.5

(29.8)

(27.3)

(22.2)

Credit issued

70.0

49.1

(20.9)

(29.9)

(29.4)

Average net receivables

123.2

85.5

(37.7)

(30.6)

(29.2)

 

 

 

 

 

 

Revenue

55.3

37.3

(18.0)

(32.5)

(30.9)

Impairment

(19.6)

(2.1)

17.5

89.3

89.0

Net revenue

35.7

35.2

(0.5)

(1.4)

0.9

Finance costs

(5.2)

(5.1)

0.1

1.9

-

Other costs

(16.7)

(14.4)

2.3

13.8

11.1

Pre-exceptional profit before taxation

 

13.8

 

15.7

 

1.9

 

13.8

 

 

 

Customers and credit issued contracted year on year by 22% and 29% respectively, as a result of tighter credit settings introduced in response to Covid-19 together with our decision to cease lending in Finland and collect out the portfolio. As we eased credit settings in response to increasing demand as lockdown restrictions lifted, credit issued was 9% higher in Q3 compared with Q2. Average net receivables contracted year on year by 29% due to the lower credit issued and this resulted in a reduction in revenue of 31% in the same period (Q3: contraction of 30%). Excluding Finland, the contraction in average net receivables and revenue year on year was significantly lower at 15% and 19% respectively.

 

Good collections and lower levels of credit issued resulted in a lower impairment charge in the period and a 23.2 ppt improvement in annualised impairment as a percentage of revenue to 5.4% since the year end.  We continued to manage costs tightly and together with the benefit of the 2020 rightsizing programme, costs reduced by 11% year on year.

 

New markets

The new markets delivered further improved profit before tax of £1.8 million, an increase of £7.4 million compared to 2020, driven by a reduction in the cost base and improved credit quality.  This improved performance comprised profit before tax of £1.2 million in Q3.

 

 

 

Nine

months to

30 September 2020

£m

Nine months to 30 September

2021

£m

Change

 

£m

Change

 

%

Change at CER

%

Customer numbers (000s)

148

158

10.0

6.8

6.8

Closing receivables

97.1

87.1

(10.0)

(10.3)

(4.9)

Credit issued

65.9

85.6

19.7

29.9

32.1

Average net receivables

121.7

86.0

(35.7)

(29.3)

(27.8)

 

 

 

 

 

 

Revenue

69.5

52.4

(17.1)

(24.6)

(23.1)

Impairment

(42.1)

(18.0)

24.1

57.2

56.2

Net revenue

27.4

34.4

7.0

25.5

27.4

Finance costs

(4.6)

(5.1)

(0.5)

(10.9)

(4.1)

Other costs

(28.4)

(27.5)

0.9

3.2

1.1

Pre-exceptional (loss) / profit before taxation

 

(5.6)

 

1.8

 

7.4

 

132.1

 

 

As lockdown restrictions eased and consumer demand improved, we continued to relax credit settings in our new markets.  This resulted in further growth momentum in customer numbers delivering a 7% increase year on year to 158,000, and a faster growth rate in Q3 when customer numbers increased by 13,000 since the half year. This was also reflected in credit issued growth which increased by 32% year on year, with Q3 credit issued 14% higher than Q2.  Average net receivables and revenue reduced by 28% and 23% respectively year on year.  In Q3, revenue increased by 3%.

 

Credit quality continued to improve driven by tighter credit settings and good collections which, together with lower credit issued, resulted in a 21.1 ppt improvement in impairment as a percentage of revenue since the 2020 year end to 39.0%.  Other costs reduced by 1% year on year driven by the benefits of the rightsizing exercise in 2020. 

 

Taxation

The taxation charge on profit for the nine months to September 2021 (£28.2 million) is based on an expected effective tax rate for the full year of approximately 47%.

 

With regard to the European Commission's State Aid challenge to the UK's Group Financing Exemption regime, following the enactment of new legislation in December 2020, HMRC issued a Charging Notice seeking payment of £14.2 million in respect of the alleged State Aid for the affected years. The payment of this amount is a procedural matter, and the new law does not allow for postponement.  Accordingly, this amount was paid in February 2021 and we appealed the Charging Notice on the grounds of the quantum assessed. A further amount of interest of £1.1 million was subsequently paid during August 2021. Whether the UK's Group Financing Exemption regime constitutes State Aid is ultimately to be decided and we continue to await a decision of the General Court of the European Union on this matter.  The £15.3 million paid is held on the balance sheet as a non-current tax asset reflecting the Directors' judgement that it is more likely than not that the amount will ultimately be repaid.  This judgement is based on legal advice received on the strength of the technical position included in IPF's annulment application.  Further details are set out at note 20.

 

Funding and balance sheet

We continue to maintain a very conservatively capitalised balance sheet, a strong funding position and robust financial risk management. At 30 September 2021, the equity to receivables ratio was 53.7% (2020: 55.1%) and the gearing ratio was 1.3x (2020: 1.5x).

 

As at 30 September 2021, the Group had total debt facilities of £572 million (£407 million of bonds and £165 million of bank facilities) and borrowings of £475 million, with undrawn facilities and non-operational cash balances of £149 million. Total cash balances at 30 September 2021 were £92 million and include £52 million that was not required for operational purposes but is available to drive receivables growth that is anticipated in Q4 and beyond. 

 

In October, we successfully issued a new 3-year SEK 450 million bond priced at 7%, the proceeds of which were used to refinance the SEK bond maturing in 2022.  The new notes, due in October 2024, were issued under the Group's euro medium-term note programme and extend the maturity profile of IPF's sources of debt funding.

 

Fitch Ratings improved the outlook for IPF to Stable and reaffirmed its long-term credit rating of BB-.

 

 

Outlook

Our business plays an essential role in society, and we have a longstanding and successful record of providing affordable credit in a responsible way to those who are underbanked or underserved by banks.  There is significant long-term demand for affordable credit from this group of consumers in all our markets and we will continue to execute our rebuild strategy by continuing to serve our customers safely, progressively and responsibly, increasing credit issued and growing the receivables portfolio while maintaining a clear focus on portfolio quality and costs.   

 

Alternative performance measures

This Interim Condensed Consolidated 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 Interim Condensed Consolidated 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.

 

Financial Highlights - additional information in accordance with the Warsaw Stock Exchange listing


£'m

PLN'm

EUR'm


1 Jan-30 Sep 2021

1 Jan-30 Sep 2020

1 Jan-30 Sep 2021

1 Jan-30 Sep 2020

1 Jan-30 Sep 2021

1 Jan-30 Sep 2020


Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Revenue

399.5

507.4

2,109.2

2,539.8

462.7

571.9

Profit before tax

59.8

(41.7)

315.7

(208.7)

69.3

(47.0)

Profit after tax

31.6

(66.2)

166.8

(331.4)

36.6

(74.6)

Net cash generated from operating activities

15.2

278.2

80.2

1,392.5

17.6

313.6

Net cash used in investing activities

(8.1)

(11.4)

(42.8)

(57.1)

(9.4)

(12.9)

Net cash used in financing activities

(28.8)

(104.6)

(152.0)

(523.6)

(33.4)

(117.9)

Net change in cash and cash equivalents

(21.7)

162.2

(114.6)

811.9

(25.1)

182.8

Earnings per share (pence)

14.2

(25.0)

75.0

(125.1)

16.4

(28.2)

Average number of shares (million)

223.1

222.3

223.1

222.3

223.1

222.3









£'m

PLN'm

EUR'm

As at

30 September

2021

31 December 2020

30 September

2021

31 December 2020

30 September

2021

31 December 2020


Unaudited

Audited

Unaudited

Audited

Unaudited

Audited

Total assets

1,034.8

1,023.9

5,552.0

5,255.4

1,198.4

1,149.0

Current liabilities

(218.7)

(136.0)

(1,173.4)

(698.0)

(253.3)

(152.6)

Non-current liabilities

 

(442.6)

 

(517.4)

 

(2,374.7)

 

(2,655.7)

 

(512.6)

 

(580.6)

Total equity

373.5

370.5

2,003.9

1,901.7

432.6

415.8

Share capital

23.4

23.4

125.5

120.1

27.1

26.3

Net assets per share - £ / PLN / €

 

1.67

 

1.67

 

8.98

 

8.56

 

1.94

 

1.87

The financial highlights have been translated into PLN and EUR as follows:

 

Items relating to the income statement and cash flow statement have been translated using the mean of mid rates quoted by the National Bank of Poland for the last day of each month in the period; the exchange rates calculated are:

 

 

PLN

EUR

For 1 Jan-30 September 2021

 

5.2795

1.1581

For 1 Jan-30 September 2020

 

5.0055

1.1272

 

Items relating to the balance sheet have been translated using the mid rate quoted by the National Bank of Poland for the end of the reporting period; the exchange rates calculated are:

 

 

PLN

EUR

For 30 September 2021

 

5.3653

1.1581

For 31 December 2020

 

5.1327

1.1222

 

 

 

PLN

EUR

Highest rate 1 Jan-30 September 2021

5.4679

1.1738

Lowest rate 1 Jan-30 September 2021

5.1190

1.1279

Financial Statements

Consolidated income statement

 


Unaudited

Unaudited

Unaudited

Unaudited

Audited


Nine

months ended

Three months ended

Nine

 months ended

Three months ended

Year

ended



30 September

2021

30 September 2021

30 September

2020

30 September 2020

31

December 2020


Notes

£m

£m

£m

£m

£m

Revenue

3

399.5

136.6

507.4

145.2

661.3

Impairment

3

(28.3)

(16.6)

(209.3)

(27.1)

(247.6)

Revenue less impairment


371.2

120.0

298.1

118.1

413.7








Finance costs

4

(39.0)

(13.2)

(38.8)

(11.5)

(55.0)

Other operating costs


(80.5)

(27.6)

(79.7)

(25.0)

(108.7)

Administrative expenses


(191.9)

(62.7)

(209.6)

(64.8)

(278.8)

Total costs


(311.4)

(103.5)

(328.1)

(101.3)

(442.5)








Pre-exceptional profit/(loss) before taxation

 

3

 

59.8

 

16.5

 

(30.0)

 

16.8

 

(28.8)

Exceptional items:







-  Impairment


-

-

-

-

(2.5)

-  Finance costs


-

-

-

-

8.2

-  Administrative expenses


 

-

 

-

 

 -

 

(5.2)

 

(17.6)

Total exceptional items before taxation


 

-

 

-

 

(11.7)

 

(5.2)

 

(11.9)

Profit/(loss) before taxation


59.8

16.5

(41.7)

11.6

(40.7)

Pre-exceptional tax expense - UK


 

-

 

-

 

-

 

-

 

2.3

Pre-exceptional tax expense - Overseas


 

(28.2)

 

(7.8)

 

(25.5)

 

(17.5)

 

(26.8)

Pre-exceptional Tax expense

5

(28.2)

(7.8)

(25.5)

(17.5)

(24.5)

Exceptional tax (expense)/income


 

-

 

-

 

1.0

 

1.2

 

1.0

Total tax expense


(28.2)

(7.8)

(24.5)

(16.3)

(23.5)

Profit/(loss) after taxation attributable to owners of the Company


 

 

31.6

 

 

8.7

 

 

(66.2)

 

 

(4.7)

 

 

(64.2)

 

Earnings/(loss) per share - statutory

 

 

Unaudited

Unaudited

Unaudited

Unaudited

Audited

 

 

Nine

months ended

Three months ended

Nine

 months ended

Three months ended

Year

ended

 

 

30 September

2021

30 September 2021

30 September

2020

30 September 2020

31 December 2020

 

Notes

pence

Pence

pence

pence

pence

Basic 

6

14.2

3.9

(29.8)

(2.1)

(28.9)

Diluted

6

13.4

3.7

(28.3)

(2.0)

(27.4)

The notes to the financial statements are an integral part of these consolidated financial statements.

Consolidated statement of comprehensive income

 


Unaudited

Unaudited

Unaudited

Unaudited

Audited


Nine

months ended

Three months ended

Nine

 months ended

Three months ended

Year

ended


30 September

2021

30 September 2021

30 September

2020

30 September 2020

31

December 2020


£m

£m

£m

£m

£m

Profit/(loss) after taxation attributable to owners of the Company

31.6

 

 

8.7

(66.2)

 

 

(4.7)

(64.2)

Other comprehensive income






Items that may subsequently be reclassified to income statement






Exchange (losses)/gains on foreign currency translations

(30.0)

 

(2.5)

3.4

 

(5.8)

(4.1)

Net fair value gains/(losses) - cash flow hedges

2.7

 

4.6

(1.0)

 

(2.4)

1.3

Tax (charge)/credit on items that may be reclassified

(0.5)

 

(0.9)

(0.4)

 

(0.1)

(0.3)

Items that will not subsequently be reclassified to income statement






Actuarial gains/(losses) on retirement benefit asset

1.3

 

-

0.2

 

-

(1.4)

Tax (charge)/credit on items that will not be reclassified

(0.3)

 

-

(0.1)

 

-

0.3

Other comprehensive (expense)/income net of taxation

(26.8)

 

1.2

2.1

 

(8.3)

(4.2)

Total comprehensive income/(expense) for the period attributable to owners of the Company

4.8

 

 

 

9.9

(64.1)

 

 

 

(13.0)

(68.4)

 

The notes to the financial statements are an integral part of these consolidated financial statements.

 



 

Consolidated balance sheet

 


Unaudited

Unaudited

Unaudited

Unaudited

Audited



30 September

2021

30

June

2021

30 September

2020

30

June

2020

31 December 2020


Notes

£m

£m

£m

£m

£m

Assets







Non-current assets







Goodwill

8

23.3

23.4

24.9

24.7

24.4

Intangible assets

9

26.0

26.2

35.0

36.8

30.2

Property, plant and equipment

10

12.4

13.2

16.5

18.0

15.4

Right-of-use assets

11

15.2

16.6

16.2

17.9

17.5

Amounts receivable from customers

 

13

 

170.0

 

162.0

 

158.9

 

175.9

 

136.5

Deferred tax assets

12

126.6

125.5

135.8

137.2

135.7

Non-current tax asset

14

15.3

14.2

-

-

-

Retirement benefit asset


5.6

5.6

4.5

4.5

3.4



394.4

386.7

391.8

415.0

363.1

Current assets







Amounts receivable from customers

 

13

 

525.0

 

512.2

 

524.7

 

580.5

 

532.6

Derivative financial instruments


2.3

1.3

5.2

8.1

0.5

Cash and cash equivalents


92.5

100.4

201.2

100.6

116.3

Other receivables


19.4

15.9

11.8

26.1

9.9

Current tax assets

14

1.2

1.6

0.8

36.6

1.5



640.4

631.4

743.7

751.9

660.8

Total assets

3

1,034.8

1,018.1

1,135.5

1,166.9

1,023.9

Liabilities







Current liabilities







Borrowings

15

(45.2)

(43.3)

(388.6)

(387.1)

(0.2)

Derivative financial instruments


(3.0)

(3.7)

(1.7)

(1.2)

(6.7)

Trade and other payables


(124.6)

(113.4)

(96.8)

(92.0)

(89.1)

Provisions for liabilities and charges

 

17

 

(21.8)

 

(24.2)

 

(13.5)

 

(12.1)

 

(19.2)

Lease liabilities

11

(6.9)

(7.3)

(8.7)

(9.0)

(7.4)

Current tax liabilities


(17.2)

(14.3)

(39.1)

(26.7)

(13.4)



(218.7)

(206.2)

(548.4)

(528.1)

(136.0)

Non-current liabilities







Deferred tax liabilities


(9.3)

(9.4)

(12.0)

(12.1)

(13.8)

Lease liabilities

11

(10.0)

(11.0)

(8.6)

(10.0)

(11.8)

Borrowings

15

(423.3)

(428.5)

(190.0)

(228.2)

(491.8)



(442.6)

(448.9)

(210.6)

(250.3)

(517.4)

Total liabilities

3

(661.3)

(655.1)

(759.0)

(778.4)

(653.4)

Net assets


373.5

363.0

376.5

388.5

370.5

Equity attributable to owners of the Company






Called-up share capital


23.4

23.4

23.4

23.4

23.4

Other reserve


(22.5)

(22.5)

(22.5)

(22.5)

(22.5)

Foreign exchange reserve


(25.0)

(22.5)

12.5

18.3

5.0

Hedging reserve


3.1

(0.6)

(1.5)

1.0

0.9

Own shares


(44.1)

(44.4)

(45.3)

(45.5)

(45.2)

Capital redemption reserve


2.3

2.3

2.3

2.3

2.3

Retained earnings


436.3

427.3

407.6

411.5

406.6

Total equity


373.5

363.0

376.5

388.5

370.5

The notes to the financial statements are an integral part of these consolidated financial statements.

Consolidated statement of changes in equity

 

 

Unaudited

 

Called-up share capital

£m

 

Other reserve

 

£m

 

*Other  reserves

 

£m

 

Retained

earnings

 

£m

 

Total

equity

 

£m

Balance at 1 January 2020

23.4

  (22.5)

  (34.8)

  470.3

436.4

Comprehensive income

 

 

 

 

 

Loss after taxation for the period

-

-

-

(66.2)

(66.2)

Other comprehensive income/(expense)

 

 

 

 

 

Exchange gains on foreign currency translation (note 19)

 

-

 

-

 

3.4

 

-

 

3.4

Net fair value losses - cash flow hedges

-

-

(1.0)

-

(1.0)

Actuarial gains on retirement benefit asset

-

-

-

0.2

0.2

Tax charge on other comprehensive income

-

-

(0.4)

(0.1)

(0.5)

Total other comprehensive income

-

-

2.0

0.1

2.1

Total comprehensive income/(expense) for the period

 

-

 

-

 

2.0

 

(66.1)

 

(64.1)

Transactions with owners

 

 

 

 

 

Share-based payment adjustment to reserves

-

-

-

4.2

4.2

Shares granted from treasury and employee trust

-

-

0.8

(0.8)

-

At 30 September 2020

23.4

(22.5)

(32.0)

407.6

376.5

 

Audited

At 1 January 2020

23.4

  (22.5)

  (34.8)

  470.3

436.4

Comprehensive income

 

 

 

 

 

Loss after taxation for the period

-

-

-

(64.2)

(64.2)

Other comprehensive (expense)/income

 

 

 

 

 

Exchange losses on foreign currency translation (note 19)

 

-

 

-

 

(4.1)

 

-

 

(4.1)

Net fair value gains - cash flow hedges

-

-

1.3

-

1.3

Actuarial loss on retirement benefit asset

-

-

-

(1.4)

(1.4)

Tax (charge)/credit on other comprehensive income

 

-

 

-

 

(0.3)

 

0.3

 

-

Total other comprehensive expense

-

-

(3.1)

(1.1)

(4.2)

Total comprehensive expense for the period

-

-

(3.1)

(65.3)

(68.4)

Transactions with owners

 

 

 

 

 

Share-based payment adjustment to reserves

-

-

-

2.5

2.5

Shares granted from treasury and employee trust

 

-

 

-

 

0.9

 

(0.9)

 

-

At 31 December 2020

23.4

(22.5)

(37.0)

406.6

370.5

 

 

 

 

Unaudited

 

 

Called-up share capital

£m

 

Other reserve

£m

 

*Other  reserves

£m

 

Retained

earnings

£m

 

Total

equity

£m

 

At 1 January 2021

23.4

(22.5)

(37.0)

406.6

370.5

 

Comprehensive income

 

 

 

 

 

 

Profit after taxation for the period

-

-

-

31.6

31.6

 

Other comprehensive (expense)/income

 

 

 

 

 

 

Exchange losses on foreign currency translation (note 19)

 

-

 

-

 

(30.0)

 

-

 

(30.0)

 

Net fair value losses - cash flow hedges

-

-

2.7

-

2.7

 

Actuarial gain on retirement benefit asset

-

-

-

1.3

1.3

 

Tax credit/(charge) on other comprehensive income

-

-

(0.5)

(0.3)

(0.8)

 

Total other comprehensive (expense)/income

-

-

(27.8)

1.0

(26.8)

 

Total comprehensive (expense)/income for the period

 

-

 

-

 

(27.8)

 

32.6

 

4.8

 

Transactions with owners

 

 

 

 

 

 

Share-based payment adjustment to reserves

-

-

 

(0.5)

(0.5)

 

Purchase of own shares

-

-

(1.3)

-

(1.3)

 

Shares granted from treasury and employee trust

-

-

2.4

(2.4)

-

 

At 30 September 2021

23.4

(22.5)

(63.7)

436.3

373.5

 

 

Unaudited

At 1 July 2021

23.4

(22.5)

(65.2)

427.3

363.0

Comprehensive income

 

 

 

 

 

Profit after taxation for the period

-

-

-

8.7

8.7

Other comprehensive income/(expense)

 

 

 

 

 

Exchange gains on foreign currency translation (note 19)

 

-

 

-

 

(2.5)

 

-

 

(2.5)

Net fair value gains - cash flow hedges

-

-

4.6

-

4.6

Actuarial gain on retirement benefit asset

-

-

-

-

-

Tax credit/(charge) on other comprehensive income

 

-

 

-

 

(0.9)

 

-

 

(0.9)

Total other comprehensive income

-

-

1.2

-

1.2

Total comprehensive income for the period

-

-

1.2

8.7

9.9

Transactions with owners

 

 

 

 

 

Share-based payment adjustment to reserves

-

-

-

0.6

0.6

Purchase of own shares

-

-

-

-

-

Shares granted from treasury and employee trust

 

-

 

-

 

0.3

 

(0.3)

 

-

At 30 September 2021

23.4

(22.5)

(63.7)

436.3

373.5

 

* Includes foreign exchange reserve, hedging reserve, own shares and capital redemption reserve.

 



Consolidated cash flow statement

 



Unaudited

Unaudited

Unaudited

Unaudited

Audited



Nine

months ended

Three months ended

Nine

 months ended

Three months ended

Year

ended



30 September

2021

30 September 2021

30 September

2020

30 September 2020

31

December 2020


Notes

£m

£m

£m

£m

£m

Cash flows from operating activities







  Cash generated from operating activities

 

18

 

71.5

 

12.8

 

294.4

 

118.4

 

329.8

  Finance costs paid


(16.2)

(4.9)

(44.5)

(4.8)

(54.7)

   Finance income received

7

-

-

9.9

9.9

9.9

  Income tax (paid)/received

14

(40.1)

(6.4)

18.4

30.9

(1.4)

Net cash generated from operating activities


 

15.2

 

1.5

 

278.2

 

154.4

 

283.6








Cash flows used in investing activities







  Purchases of intangible assets

9

(4.7)

(1.3)

(8.9)

(2.5)

(11.7)

  Purchases of property, plant and equipment

 

10

 

(3.6)

 

(2.3)

 

(2.7)

 

(0.8)

 

(3.8)

  Proceeds from sale of property, plant and equipment

 

 

 

0.2

 

0.1

 

0.2

 

-

 

0.4

Net cash used in investing activities


(8.1)

(3.5)

(11.4)

(3.3)

(15.1)

Net cash generated from operating and investing activities


 

7.1

 

(2.0)

 

266.8

 

151.1

 

268.5








Cash flows from financing activities







  Proceeds from borrowings


5.9

-

64.7

-

311.3

  Repayment of borrowings


(26.0)

(3.3)

(161.3)

(49.4)

(490.0)

  Principal elements of lease payments

11

(7.4)

(2.5)

(8.0)

(2.7)

(10.9)

  Shares acquired by employee trust


(1.3)

-

-

-

-

Net cash used in financing activities


(28.8)

(5.8)

(104.6)

(52.1)

(189.6)








Net (decrease)/increase in cash and cash equivalents


 

(21.7)

 

(7.8)

 

162.2

 

99.0

 

78.9

Cash and cash equivalents at beginning of period


 

116.3

 

100.4

 

37.4

 

100.6

 

37.4

Exchange (losses)/gains on cash and cash equivalents


 

(2.1)

 

(0.1)

 

1.6

 

1.6

 

-

Cash and cash equivalents at end of period


 

92.5

 

92.5

 

201.2

 

201.2

 

116.3

 

 

Notes to the Financial Statements

 

1.  Basis of preparation

 

These unaudited condensed consolidated interim financial statements for the nine months ended 30 September 2021 have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the United Kingdom. These condensed consolidated interim financial statements should be read in conjunction with the Annual Report and Financial Statements ('the Financial Statements') for the year ended 31 December 2020, which have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union. These condensed consolidated interim financial statements were approved for release on 29 November 2021.

 

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006.  The Financial Statements for the year ended 31 December 2020 were approved by the Board on 3 March 2021 and delivered to the Registrar of Companies. The Financial Statements contained an unqualified audit report and did not include an emphasis of matter paragraph or any statement under Section 498 of the Companies Act 2006. The Financial Statements are available on the Group's website (www.ipfin.co.uk).

 

The accounting policies applied to prepare these condensed consolidated interim financial statements are consistent with those applied to the most recent full year Financial Statements for the year ended 31 December 2020.

Board members

As at 30 September 2021, the Group's Board members were as follows:

Stuart Sinclair

Chairman

Gerard Ryan

Executive Director and Chief Executive Officer

Deborah Davis

Independent non-executive director

John Mangelaars

Independent non-executive director

Richard Holmes

Senior independent non-executive director

Bronwyn Syiek

Independent non-executive director

 

 

Subsidiaries included in the condensed consolidated interim financial statements

 

The subsidiary companies of IPF plc, which are 100% owned by the Group and included in these condensed consolidated interim financial statements are detailed below:

 

Subsidiary company

Country of incorporation and operation

Principal activity

Avalist Credit Secure, S.L.

Spain

Provision of services

Compaña Estelar Poniente, S.A. de C.V.

Mexico

Provision of services (agents)

División Estratégica Central, S.A. de C.V.

Mexico

Holding Company

Estrategias Divisionales Céntricas, S.A. de C.V.

Mexico

Provision of services (agents)

Estrategias Sureñas de Avanzada, S.A. de C.V.

Mexico

Provision of services (agents)

International Credit Insurance Limited

Guernsey

Provision of services

International Personal Finance Digital Spain S.A.U.

Spain

Digital credit

International Personal Finance Investments Limited

United Kingdom

Holding company

IPF Ceská republica s.r.o

Czech Republic

Non-trading

IPF Development (2003) Limited

United Kingdom

Provision of services

IPF Digital AS

Estonia

Provision of services

IPF Digital Australia Pty Limited

Australia

Digital credit

IPF Digital Finland Oy

Finland

Digital credit

IPF Digital Group Limited

United Kingdom

Holding company

IPF Digital Latvia, SIA

Latvia

Digital credit

IPF Digital Lietuva, UAB

Lithuania

Digital credit

IPF Digital Mexico S.A de C.V

Mexico

Digital credit

IPF Financial Services Limited

United Kingdom

Provision of services

IPF Financing Limited

United Kingdom

Provision of services

IPF Guernsey (2) Limited

Guernsey

Dormant

IPF Holdings Limited

United Kingdom

Holding company

IPF International Limited

United Kingdom

Provision of services

IPF Investments Polska sp. z o.o.

Poland

Provision of services

IPF Management

Ireland

Provision of services

IPF Nordic Limited

United Kingdom

Provision of services

IPF Polska sp. z o.o.

Poland

Digital credit

La Regional Operaciones Centrales, S.A. de C.V.

Mexico

Holding Company

La Tapatía Operaciones de Avanzada, S.A. de C.V.

Mexico

Provision of services (agents)

Metropolitana Estrella de Operaciones, S.A. de C.V.

Mexico

Provision of services (agents)

Operadora Regiomontana de Estrategias Integrales, S.A. de C.V.

 

Mexico

 

Provision of services (agents)

PF (Netherlands) B.V.

Netherlands

Provision of services

Provident Agent De Asigurae srl

Romania

Provision of services

Provident Financial Romania IFN S.A.

Romania

Home credit

Provident Financial s.r.o.

Czech Republic

Home credit

Provident Financial Zrt.

Hungary

Home credit

Provident Mexico S.A. de C.V.

Mexico

Home credit

Provident Polska S.A.

Poland

Home credit

Provident Polska sp. z o.o.

Poland

Non-trading

Provident Servicios de Agencia S.A. de C.V.

Mexico

Provision of services

Provident Servicios S.A. de C.V.

Mexico

Provision of services

 

All UK subsidiaries are registered at the same registered office as the Company, 26 Whitehall Road, Leeds, LS12 1BE.

 

Going Concern

 

In considering whether the Group is a going concern, the Board has taken into account the Group's financial forecasts, its principal risks (with particular reference to regulatory risks), and the expected trajectory of recovery from the Covid-19 pandemic. The forecasts have been prepared for the three years to 31 December 2023 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 expected recovery from the impact that Covid-19 had on the Group's businesses, and in particular the evolution of credit issuance and collection cash flows. 

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 regulatory risks) and evaluate the impact of a more challenging recovery from the impact of the Covid-19 pandemic than assumed in the business plan.  Consideration has also been given to multiple risks crystallising concurrently and the availability of mitigating actions that could be taken to reduce the impact of the identified risks.  In addition, we examined a reverse stress test on the financial forecasts to assess the extent to which a recession would need to impact our operational performance in order to breach a covenant.  This showed that net revenue would need to deteriorate significantly from the financial forecast and the Directors have a reasonable expectation that it is unlikely to deteriorate to this extent.

At 30 September 2021, the Group had £149.0 million 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 2.8 years. The total debt facilities as at 30 September 2021 amounted to £571.9 million of which £122.9 million (including £18 million 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), are expected to meet the Group's funding requirements for the foreseeable future (12 months from the date of approval of this report).Taking these factors into account, together with regulatory risks set out on page 51 of the Annual Report, the Board has a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future. For this reason, the Board has adopted the going concern basis in preparing the Consolidated Quarterly Financial Report for the period ended 30 September 2021.

Exceptional items

 

Exceptional items are items that are unusual because of their size, nature or incidence and which the directors consider should be disclosed separately to enable a full understanding of the Group's underlying results.

 

Critical accounting judgements and key sources of estimation uncertainty

 

The preparation of condensed consolidated interim financial statements requires the Group to make estimates and judgements that affect the application of policies and reported accounts.

Critical judgements represent key decisions made by management in the application of the Group accounting policies. Where a significant risk of materially different outcomes exists due to management assumptions or sources of estimation uncertainty, this will represent a critical accounting estimate. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

The estimates and judgements which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below.

Key sources of estimation uncertainty

In the application of the Group's accounting policies, the directors are required to make estimations that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the critical estimations, that the directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in these condensed consolidated interim financial statements.

Revenue recognition

The estimate used in respect of revenue recognition is the methodology used to calculate the EIR. In order to determine the EIR applicable to loans an estimate must be made of the expected life of each loan and hence the cash flows relating thereto. These estimates are based on historical data and are reviewed regularly.

Amounts receivable from customers

The Group reviews its portfolio of customer loans and receivables for impairment on a weekly or monthly basis. The Group reviews the most recent collections 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.

The application of IFRS 9 to the effects of Covid-19 had a significant impact on the Group's impairment accounting and charge, and our post model overlays (PMOs) have been prepared to ensure that the impacts of the pandemic are included within the Group's impairment provisions, see below for further details. Impairment on lending from June 2020 onwards has been recorded using our standard impairment accounting models without applying these overlays due to the reduction in operational disruption and the tightened credit settings on new lending.

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. In line with this, we updated the models in Q2 2021 and data that would normally be included within this periodic update contained Covid-19 impacted data. This included data from when there were restrictions on movements of agents and customers together with data driven by the tighter credit settings that were put in place as part of the Group's pandemic response strategy.  This data is not considered to be representative of the expected future performance and therefore we excluded it from our periodic update.

On the basis that the payment performance of customers could be different from the assumptions used in estimating expected losses and the future cash flows, an adjustment to the amounts receivable from customers may be required.  A 5% increase/decrease in expected loss parameters would be a decrease/increase in amounts receivable from customers of £5.9 million.  This level of estimated impact is based on historic fluctuations in performance compared to the models and is subject to impairment overlay provisions.

Covid-19 post model overlay (PMO) on amounts receivable from customers

In 2020 Government imposed restrictions on the freedom of movement and the introduction of debt repayment moratoria, together with the economic impact of the pandemic on our customers, had a significant adverse impact on collection cash flows in all our businesses. These events were unprecedented and, as a consequence, we reviewed our impairment modelling under IFRS 9 to identify risks that are not fully reflected in the standard impairment models. This included a full assessment of expected credit losses, including a forward-looking assessment of expected collection cash flows. As a result, for home credit lending issued before June 2020 and IPF Digital lending, we have prepared post model overlays (PMOs) to our impairment models in order to calculate the expected impact of the pandemic on the Group's impairment provisions. Based on management's current expectations, the impact of these PMOs was to increase impairment provisions at 30 September 2021 by £26.5 million as set out below.

 

ECL

£m

Discounting

£m

Total

£m

Home credit

(17.0)

(5.1)

(22.1)

IPF Digital

(4.4)

-

(4.4)

Total

(21.4)

(5.1)

(26.5)

 

Expected credit loss ('ECL')

Missed collections as a result of government imposed restrictions on the freedom of movement and the introduction of debt repayment moratoria is not considered to be an indicator of a significant increase in credit risk (SICR). However, our impairment models cannot distinguish between a missed payment arising from these factors and a missed payment arising from a customer not making a payment. Therefore, we have reduced the modelled ECL based on historic customer roll rates before calculating the increase in ECL arising from the pandemic. This latter assessment is based on estimated future repayment patterns on a market by market basis, taking into account operational disruption, debt repayment moratoria and the expected recessionary impact. We then assessed the extent to which the reduction in cash flows is likely to be permanent or temporary. In Q3 2021 we increased the PMO in relation to the permanent reduction in cashflows to reflect the higher risk resulting from the extension of the Hungary debt moratorium. The estimated permanent difference in cashflows has been recorded as an increase of £17.0 million in ECL in the Group's home credit businesses as a Covid-19 PMO.

In our digital businesses, in line with our home credit markets, we have reviewed the expected recessionary impact of the pandemic on our customers' debt repayment capacity. We used this information to calculate the increased probability of customers defaulting. The estimated increase in PD has been included as a £4.4 million Covid-19 PMO.

Discounting

We expect temporary missed repayments in our home credit businesses to be repaid at the end of the credit agreement, rather than at the point when agent service is resumed. The charges for lending are largely fixed and therefore these delayed cash flows have been discounted using the effective interest rate to arrive at a net present value. Included within this, is a further delay of the cashflows in Hungary driven by an extension of the moratorium that was announced in Q2 2021. In total this results in an additional impairment provision of £5.1 million that is expected to continue to unwind during the next 18 months as the temporary missed collections are collected from customers.  

We have performed analysis on the ECL and discounting Covid-19 PMOs to show the estimated variation to amounts receivable from customers as a result of the key variables influencing ECL (namely operational disruption, repayment moratoria and recessionary) being different to management's current expectations based on the following collection scenarios:

· ECL - variations in the key variables resulting in a 3% increase/decrease in the ECL would result in an increase/decrease in the Covid-19 PMO of £6.2 million.

· Discounting - temporary missed repayments in home credit, that are assumed to be repaid at the end of the loan, being received three months later/earlier than forecast would result in an increase/decrease in the Covid-19 PMO of £3.6 million.

 

These variations reflect management's current assessment of a reasonable range of outcomes from the actual collections performance.

Polish early settlement rebates

As previously reported, a comprehensive review has been conducted by UOKiK, the Polish competition and consumer protection authority, of rebating practices by banks and other consumer credit providers on early loan settlement, including those of the Group's Polish businesses. We assessed the impact of the resolution of this matter resulting in higher early settlement rebates being payable to customers that settled their agreements early before the balance sheet date. A number of risks and uncertainties remain, in particular with respect to future claims volumes relating to historic rebates paid from a customer contact exercise. The total amount provided of £19.8 million (30 September 2020: £13.5 million; 31 December 2020: £17.6 million) represents the Group's best estimate of the likely future outflow from increasing historic customer rebates. Whilst the volume of claims could differ from the estimates, the Group's expectation at this stage is that claims rates are unlikely to be more than 25% higher than the assumed rate.

Claims management charges in Spain

The Group holds provisions in respect of claims management charges in Spain following an increase in incidence of such claims in 2020. We reviewed the charges by reference to the claims incidence experience and average cost of resolution in the Spanish business. The provision recorded of £6.6 million (split £4.6 million against receivables and £2.0 million in provisions) represents the Group's best estimate of future claims volumes and the cost of their management, based on current claims management methodology, together with current and future product plans.  Whilst the future claims incidence and cost of management could differ from estimates, the Group's expectation at this stage is that overall costs are unlikely to be more than 25% higher than those assumed in the charges.

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. This exercise of estimation with regards to the EU State Aid investigation, which is disclosed in note 20, could have a significant effect on the Financial Statements, as there are significant uncertainties in relation to the amount and timing of associated cash flows.

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.

Critical accounting judgements

Accounting judgements have been made over whether the EU State Aid investigation requires a provision or disclosure as a contingent liability, see note 20 for further details.

 

There are no new standards adopted by the Group in 2021, and there are no new standards not yet effective and not adopted by the Group from 1 January 2021 which are expected to have a material impact on the Group.

 

Alternative Performance Measures

In reporting financial information, the Group presents alternative performance measures, 'APMs' which are not defined or specified under the requirements of IFRS.

 

The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the business. The APMs are consistent with how the business performance is planned and reported within the internal management reporting to the Board.

 

Each of the APMs used by the Group is set out below including explanations of how they are calculated and how they can be reconciled to a statutory measure where relevant.

 

The Group reports percentage change figures for all performance measures, other than profit or loss before taxation and earnings per share, after restating prior year figures at a constant exchange rate. The constant exchange rate, which is an APM, retranslates the previous year measures at the average actual periodic exchange rates used in the current financial year. These measures are presented as a means of eliminating the effects of exchange rate fluctuations on the year-on-year reported results.

 

The Group makes certain adjustments to the statutory measures in order to derive APMs where relevant. The Group's policy is to exclude items that are considered to be significant in both nature and/or quantum and where treatment as an adjusted item provides stakeholders with additional useful information to assess the year-on-year trading performance of the Group.

 

2.  Related parties

 

The Group has not entered into any material transactions with related parties in the first nine months of the year. 

 

3.  Segment analysis

As highlighted at the 2020 year end, we merged our two digital businesses in Poland in order to deliver efficiencies of scale and, as a result, the digital lending arm previously reported as part of European home credit is now included in IPF Digital. All comparatives have been amended accordingly and are presented on a like-for-like basis.


Unaudited

Unaudited

Unaudited

Unaudited

Audited


Nine months ended

Three months ended

Nine months ended

Three months ended

Year

ended


30 September

2021

30 September

2021

30 September

2020

30 September

2020

31 December 2020


£m

£m

Revenue






European home credit

207.0

66.9

269.2

84.3

351.2

Mexico home credit

102.8

37.9

123.0

32.0

157.1

Digital

89.7

31.8

124.8

38.5

153.0

Revenue

399.5

136.6

517.0

154.8

661.3

Impairment






European home credit

(12.2)

(3.2)

105.8

17.9

125.1

Mexico home credit

20.4

11.9

51.4

6.3

53.0

Digital

20.1

7.9

61.7

12.5

69.5

Impairment - pre-exceptional item

 

28.3

 

16.6

 

218.9

 

36.7

 

247.6

Exceptional item

-

-

2.5

-

2.5

Impairment

221.4

250.1

Other operating costs






European home credit

45.5

14.6

46.4

15.6

64.8

Mexico home credit

19.3

6.9

18.5

5.5

24.2

Digital

15.6

6.0

13.8

3.5

18.7

UK costs1

0.1

0.1

1.0

0.4

1.0

Other operating costs

79.7

108.7

Administrative expenses






European home credit

99.5

32.1

105.4

33.2

140.3

Mexico home credit

46.6

15.0

52.6

15.5

68.8

Digital

34.7

11.6

42.5

13.5

57.9

UK costs1

11.1

4.0

9.1

2.6

11.8

Administrative expenses - pre-exceptional item

 

191.9

 

62.7

 

209.6

 

64.8

 

278.8

Exceptional item

-

-

17.4

5.2

17.6

Administrative expenses

227.0

296.4

Profit / (loss) before taxation






European home credit

50.1

15.2

(12.2)

10.5

(11.6)

Mexico home credit

11.7

2.3

(5.2)

3.2

3.5

Digital

9.1

3.0

(2.8)

6.0

(8.0)

UK costs1

(11.1)

(4.0)

(9.8)

(2.9)

(12.7)

Profit /(loss) before taxation - pre-exceptional items

 

59.8

 

16.5

 

(30.0)

 

16.8

 

(28.8)

Exceptional items

-

-

(11.7)

(5.2)

(11.9)

Profit / (loss) before taxation

(41.7)

  (40.7)

1 Although UK costs are not classified as a separate segment in accordance with IFRS 8 'Operating Segments', they are shown separately in order to provide a reconciliation to other operating costs; administrative expenses and profit before taxation.

 

 

 

Unaudited

Unaudited

Unaudited

Unaudited

Audited

 

30 September

2021

30

June

2021

30 September

2020

30

June

2020

31

December 2020

 

£m

£m

£m

£m

£m

Segment assets




 

 

European home credit

510.0

504.9

519.9

584.2

485.1

Mexico home credit

189.7

178.3

149.2

164.6

170.2

Digital

207.8

207.7

224.9

278.6

224.4

UK2

127.3

127.2

241.5

139.5

144.2

Total

1,034.8

1,018.1

1,135.5

1,166.9

1,023.9

Segment liabilities




 

 

European home credit

314.8

312.2

282.9

216.8

275.7

Mexico home credit

87.7

82.9

97.6

108.1

76.2

Digital

84.0

91.0

147.3

181.2

138.4

UK2

174.8

169.0

231.2

272.3

163.1

Total

661.3

655.1

759.0

778.4

653.4

2 Although the UK is not classified as a separate segment in accordance with IFRS 8 'Operating Segments', it is shown separately above in order to provide a reconciliation to consolidated total assets and liabilities.

 

4. Finance costs

 

 

Unaudited

Unaudited

Unaudited

Unaudited

Audited

 

Nine months ended

30 September 2021

 

Three months ended

30 September 2021

Nine months ended

30 September 2020

 

Three months ended

30 September 2020

 

Year

ended

31 December 2020

 

£m

£m

£m

£m

£m

Interest payable on borrowings

 

38.0

 

12.9

 

39.3

 

11.3

 

55.2

Interest payable on lease liabilities

 

1.0

 

0.3

 

1.2

 

0.5

 

1.5

Interest income

-

-

(9.9)

(0.3)

(9.9)

Finance costs

39.0

13.2

30.6

11.5

46.8

 

In Q3 2020, interest income was received in respect of the successful appeal against the 2008 and 2009 tax decisions. £8.2 million of this income, which related to the period from January 2017 to December 2019 was treated as an exceptional item (see note 7 for further details).

 

 

5.  Tax expense

 

The taxation charge on the profit for the first nine months of 2021 (£28.2 million) has been based on an expected effective tax rate for 2021 of 47%.

 

The Group is subject to tax audit in Mexico (regarding 2017).

 

6.  Earnings/(loss) per share

 

 

Unaudited

Unaudited

Unaudited

Unaudited

Audited

 

Nine months ended

Three months ended

Nine months ended

Three months ended

Year

ended

 

30

September

2021

30

September

2021

30

September

2020

30

September

2020

31

December 2020

 

pence

Pence

pence

pence

pence

Basic E/(L)PS

14.2

3.9

(29.8)

(2.1)

(28.9)

Dilutive effect of awards

 

(0.8)

 

(0.2)

 

1.5

 

0.1

 

1.5

Diluted E/(L)PS

 

13.4

 

3.7

 

(28.3)

 

(2.0)

 

(27.4)

 

Basic earnings/(loss) per share ('E/(L)PS')  for the nine months ended 30 September 2021 is calculated by dividing the profit attributable to shareholders of £31.6 million (three months ended 30 September 2021: profit of £8.7 million, nine months ended 30 September 2020: loss of £66.2 million, three months ended 30 September 2020: loss of £4.7 million, 31 December 2020: loss of £64.2 million) by the weighted average number of shares in issue during the period of 223.1 million which has been adjusted to exclude the weighted average number of shares held in treasury and by the employee trust (three months ended 30 September 2021: 223.3 million, nine months ended 30 September 2020: 222.3 million, three months ended 30 September 2020: 222.6 million, 31 December 2020: 222.4 million). 

 

For diluted E/(L)PS for the nine months ended 30 September 2021 the weighted average number of shares has been adjusted to 235.5 million (three months ended 30 September 2021: 235.6 million, nine months ended 30 September 2020: 234.1 million, three months ended 30 September 2020: 234.3 million, 31 December 2020: 234.1 million) to assume conversion of all dilutive potential ordinary share options relating to employees of the Group.

7. Exceptional items

 

The September 2020 income statement included an exceptional loss of £10.7 million which comprised a pre-tax exceptional loss of £11.7 million and an exceptional tax credit of £1.0 million.

 

Nine months to September 2020

Pre-tax

Tax

Post-tax

 

£m

£m

£m

Finland closure

(10.6)

(1.1)

(11.7)

Restructuring costs

(9.3)

2.1

(7.2)

Interest income

8.2

-

8.2

Exceptional items

(11.7)

1.0

(10.7)

 

The decision to close our business in Finland and to collect out the portfolio following a tightening of the rate cap resulted in a loss of £11.7 million. It comprised a £10.6 million charge against loss before tax and the write-off of a deferred tax asset of £1.1 million that we no longer expect to be realised. The pre-tax loss comprised a provision taken against the carrying value of the receivables book based on our best estimate of the value of collections of £2.5 million and £8.1 million from accelerated amortisation of intangible assets. The restructuring charge of £9.3 million arose in connection with rightsizing exercises that were conducted in 2020 and there is an associated tax credit of £2.1 million relating to this item.  In addition, the H1 2020 profit and loss account included exceptional interest income of £8.2 million, relating to the interest accrued on the payments to the Polish tax authority made in January 2017 in respect of the 2008 and 2009 cases for 2017 to 2019.

 

In Q4 2020, a further £0.2 million of restructuring costs were incurred taking the full year 2020 pre-tax exceptional to £11.9 million. The full year 2020 exceptional tax charge was remained the same as at September 2020.

8.  Goodwill

 

 

Unaudited

Unaudited

Audited

 

30 September

30 September

31 December

 

2021

2020

2020

 

£m

£m

£m

Net book value at start of period

24.4

23.1

23.1

Exchange adjustments

(1.1)

1.8

1.3

Net book value at end of period

23.3

24.9

24.4

 

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. The key assumptions used in the value in use calculation relate to the discount rates and cash flows assumed. We adopt discount rates which reflect the time value of money and the risks specific to the legacy MCB business. The cash flow forecasts are based on the most recent financial forecasts which includes our best estimates of the impact of Covid-19 and include the decision to collect out the Finnish business. The rate used to discount the forecast cash flows is 10% (30 September 2020: 9% and 31 December 2020: 10%). The discount rate would need to increase to 20% before indicating that part of the goodwill may be impaired.

 

 

9.  Intangible assets

 

 

Unaudited

Unaudited

Audited

 

30 September

30 September

31 December

 

2021

2020

2020

 

£m

£m

£m

Net book value at start of period

30.2

43.2

43.2

Additions

4.7

8.9

11.7

Amortisation

(8.3)

(18.5)

(25.9)

Exchange adjustments

(0.6)

1.4

1.2

Net book value at end of period

26.0

35.0

30.2

 

Intangible assets comprise computer software. Amortisation in the nine months to 30 September 2021 includes accelerated amortisation of £1.5 million following a review of software assets.

 

As noted in note 7, in the year to 30 September 2020 and FY 2020, following a decision to close our digital business in Finland and to collect out the portfolio, we booked an exceptional charge of £8.1 million from accelerated amortisation of intangible assets.

 

10.  Property, plant and equipment

 

 

Unaudited

Unaudited

Audited

 

30 September

30 September

31 December

 

2021

2020

2020

 

£m

£m

£m

Net book value at start of period

15.4

20.0

20.0

Exchange adjustments

(0.5)

(0.3)

(0.6)

Additions

3.6

2.7

3.8

Disposals

(0.3)

(0.4)

(0.6)

Depreciation

(5.8)

(5.5)

(7.2)

Net book value at end of period

12.4

16.5

15.4

 

There are no significant additions or disposals in the period and no liabilities arising therefrom (nine months to 30 September 2020 and full year 2020: no significant additions or disposals and no liabilities arising therefrom).

 

As at 30 September 2021 the Group had £4.9 million of capital expenditure commitments with third parties that were not provided for (30 September 2020: £2.8 million; 31 December 2020: £2.6 million).

 

11. Right-of-use assets and lease liabilities

 

The recognised right-of-use assets relate to the following types of assets:

 

 

Unaudited

Unaudited

Audited

 

30 September

30 September

31 December

 

2021

2020

2020

 

£m

£m

£m

Properties

9.1

10.0

10.5

Motor vehicles

6.0

6.1

6.9

Equipment

0.1

0.1

0.1

Total right-of-use assets

15.2

16.2

17.5

The movement in the right-of-use assets in the period is as follows:

 

 

Unaudited

Unaudited

Audited

 

30 September

30 September

31 December

 

2021

2020

2020

 

£m

£m

£m

Net book value at start of period

17.5

18.8

18.8

Exchange adjustments

(0.6)

(0.6)

(0.5)

Additions

4.7

4.1

6.0

Modifications

-

1.1

3.6

Depreciation

(6.4)

(7.2)

(9.9)

Impairment

-

-

(0.5)

Net book value at end of period

15.2

16.2

17.5

The movement in lease liabilities in the period is as follows:

 

 

Unaudited

Unaudited

Audited

 

30 September

30 September

31 December

 

2021

2020

2020

 

£m

£m

£m

Lease liabilities at start of period

19.2

19.5

19.5

Exchange adjustments

(0.6)

(0.6)

(0.5)

Additions

4.7

5.2

9.6

Interest

1.0

1.2

1.5

Lease payments

(7.4)

(8.0)

(10.9)

Lease liabilities at end of period

16.9

17.3

19.2

 

 

Analysed as:

 


Unaudited

Unaudited

Audited


30 September

30 September

31 December


2021

2020

2020


£m

£m

£m

Current

6.9

8.7

7.4

 

 

 

 

Non-Current:

 

 

 

- between one and five years

10.0

8.5

11.1

- greater than five years

-

0.1

0.7

 

10.0

8.6

11.8

Lease liabilities at end of period

16.9

17.3

19.2

 

12. 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.

 

13.  Amounts receivable from customers

 

Amounts receivable from customers comprise:

 

 

Unaudited

Unaudited

Audited

 

30 September

30 September

31 December

 

2021

2020

2020

 

£m

£m

£m

Amounts due within one year

525.0

524.7

532.6

Amounts due in more than one year

170.0

158.9

136.5

Total receivables

695.0

683.6

669.1

All lending is in the local currency of the country in which the loan is issued. The currency profile of amounts receivable from customers is as follows:

 

 

Unaudited

Unaudited

Audited

 

30 September

30 September

31 December

 

2021

2020

2020

 

£m

£m

£m

Polish zloty

231.9

230.2

225.3

Czech crown

46.2

53.3

50.9

Euro*

91.0

135.2

117.0

Hungarian forint

Romanian leu

109.5

68.5

97.3

59.5

89.9

62.1

Mexican peso

123.3

88.3

100.8

Australian dollar

24.6

19.8

23.1

Total receivables

695.0

683.6

669.1

*Includes receivables in Estonia, Finland, Latvia, Lithuania and Spain.

Amounts receivable from customers are held at amortised cost and are equal to the expected future cash flows receivable discounted at the average effective interest rate ('EIR') of 93% (30 September 2020: 97%, 31 December 2020: 96%). All amounts receivable from customers are at fixed interest rates. The average period to maturity of the amounts receivable from customers is 12.5 months (30 September 2020: 12.2 months, 31 December 2020: 11.1 months).

 

Determining an increase in credit risk since initial recognition

 

IFRS 9 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 1) and lifetime expected credit losses for financial instruments for which the credit risk has increased significantly since initial recognition (stage 2) or which are credit impaired (stage 3).

 

When determining whether the risk of default has increased significantly since initial recognition the Group considers both quantitative and qualitative information based on the Group's historical experience.

 

The approach to identifying significant increases in credit risk is consistent across the Group's products. In addition, as a backstop, the Group considers that a significant increase in credit risk occurs when an asset is more than 30 days past due.

 

Financial instruments are moved back to stage 1 once they no longer meet the criteria for a significant increase in credit risk.

 

Definition of default and credit impaired assets

 

The Group defines a financial instrument as in default, which is fully-aligned with the definition of credit-impaired, when it meets one or more of the following criteria:

 

· Quantitative criteria: the customer is more than 90 days past due on their contractual payments in home credit and 60 days past due on their contractual payments in IPF Digital;

· Qualitative criteria: indication that there is a measurable movement in the estimated future cash flows from a group of financial assets. For example, if prospective legislative changes are considered to impact the collections performance of customers.

 

The default definition has been applied consistently to model the probability of default (PD), exposure at default (EAD) and loss given default (LGD) throughout the Group's expected credit loss calculations.

 

An instrument is considered to no longer be in default (i.e. to have cured) when it no longer meets any of the default criteria.

 

As highlighted at the 2020 year end, we merged our two digital businesses in Poland in order to deliver efficiencies of scale and, as a result, the digital lending arm previously reported as part of European home credit is now included in IPF Digital. All comparatives have been amended accordingly and are presented on a like-for-like basis.

 

The breakdown of receivables by stage is as follows:

 

 

 

30 September 2021

 

Stage 1

£m

 

Stage 2

£m

 

Stage 3

£m

Total net receivables

£m

Home credit

347.8

57.3

123.3

528.4

IPF Digital

155.8

7.1

3.7

166.6

Group

503.6

64.4

127.0

695.0

 

 

 

30 September 2020

 

Stage 1

£m

 

Stage 2

£m

 

Stage 3

£m

Total net receivables

£m

Home credit

268.3

60.0

148.9

477.2

IPF Digital

186.7

12.5

7.2

206.4

Group

455.0

72.5

156.1

683.6

 

 

 

 

31 December 2020

 

Stage 1

£m

 

Stage 2

£m

 

Stage 3

£m

Total net receivables

£m

Home credit

288.6

51.0

142.6

482.2

IPF Digital

177.9

7.1

1.9

186.9

Group

466.5

58.1

144.5

669.1

 

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.

 

 

 

30 September 2021

 

Stage 1

£m

 

Stage 2

£m

 

Stage 3

£m

 

Total

£m

Gross carrying amount

635.9

119.8

389.9

1,145.6

Loss allowance

(132.3)

(55.4)

(262.9)

(450.6)

Group

503.6

64.4

127.0

695.0

 

 

 

 

 

 

 

30 September 2020

 

Stage 1

£m

 

Stage 2

£m

 

Stage 3

£m

 

Total

£m

Gross carrying amount

566.3

132.0

536.4

1,234.7

Loss allowance

(111.3)

(59.5)

(380.3)

(551.1)

Group

455.0

72.5

156.1

683.6

 

 

 

 

31 December 2020

 

Stage 1

£m

 

Stage 2

£m

 

Stage 3

£m

 

Total

£m

Gross carrying amount

601.3

125.1

456.1

1,182.5

Loss allowance

(134.8)

(67.0)

(311.6)

(513.4)

Group

466.5

58.1

144.5

669.1

 

14. Non-current/current tax asset

 

As at 30 September2021, the non-current tax asset (£15.3 million) included an amount of £14.2 million that was paid in February 2021 pursuant to a HMRC Charging Notice in respect of an European Commission State Aid investigation into the Group Financing Exemption contained in the UK's controlled foreign company rules, a further £1.1 million of interest was paid in August 2021.  Details are set out at note 20.

 

As at 30 June 2020, the current tax asset included an amount of £34.9 million in respect of the tax paid to the Polish Tax Authority (30 September 2020 and 31 December 2020: £nil).  Our appeal against the Polish Tax Chamber's decisions for 2008 and 2009 was heard in the Warsaw District Administrative Court in March 2020 and the court found in our favour. The Court formally confirmed that the decision was final and we received repayment of the tax that was paid in January 2017 together with interest up to the repayment date in August 2020. 

 

 

15.  Borrowing facilities and borrowings

 

The maturity of the Group's bond and bank borrowings is as follows:

 

 

Unaudited

Unaudited

Audited

 

30 September

30 September

31 December

 

2021

2020

2020

 

£m

£m

£m

Repayable

 

 

 

- in less than one year

45.2

388.6

0.2

 

 

 

 

- between one and two years

17.5

86.1

74.3

- between two and five years

405.8

103.9

417.5

 

423.3

190.0

491.8

 

 

 

 

Total borrowings

468.5

578.6

492.0

 

 

 

 

Borrowings is stated net of deferred debt issuance costs of £6.9 million (30 September 2020: £1.8 million; 31 December 2020: £7.4 million).

 

The maturity of the Group's bond and bank facilities is as follows:

 

 

Unaudited

Unaudited

Audited

 

30 September

30 September

31 December

 

2021

2020

2020

 

£m

£m

£m

Repayable

 

 

 

- on demand

18.0

12.3

40.1

- in less than one year

104.9

504.5

45.7

- between one and two years

36.3

135.8

104.4

- between two and five years

412.7

105.2

433.8

Total facilities

571.9

757.8

624.0

 

 

 

The undrawn external bank facilities is as follows:

 

 

Unaudited

Unaudited

Audited

 

30 September

30 September

31 December

 

2021

2020

2020

 

£m

£m

£m

Expiring within one year

77.7

127.7

85.6

Expiring between one and two years

18.8

49.7

30.1

Expiring in more than two years

-

-

8.9

Total

96.5

177.4

124.6

 

Undrawn external facilities above does not include unamortised arrangement fees.

 

The average period to maturity of the Group's external bonds and committed external borrowings is 2.8 years (30 September 2020: 1.2 years; 31 December 2020: 3.3 years).

 

During 2020 and 2021 the Group did not have any delays in the principal and interest payments. The Group tests against covenants twice a year at June and December, and complied with all of its covenants at 31 December 2020.

 

In the period to September 2021 there were no bond issuances or redemptions. In the period to September 2020, GBP 44,098,100 retail bonds matured on 8 May 2020, and PLN 200 million Polish floating rate bond matured on 3 June 2020. In H2 2020, there was one bond maturity and one bond issue. Fixed rate Eurobonds to a nominal value of EUR 397,274,000 with an original maturity date of 7 April 2021 were redeemed on 12 November 2020. Fixed rate Eurobonds to a nominal value of EUR 341,228,000 were issued on 12 November 2020 with a maturity date of 12 November 2025.

 

16. Provisions

 

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. Customer redress provisions of £21.8 million represent the Group's best estimate of the costs that are expected to be incurred in relation to early settlement rebates in Poland (30 September 2021: £19.8 million; 31 December 2020: £17.6 million; 30 September 2020: £13.5 million) and claims management charges incurred in Spain (30 September 2021: £2.0 million; 31 December 2020: £1.6 million; 30 September 2020: £nil). All claims are expected to be settled within 12 months of the balance sheet date. Further details are included above.

 

17.  Fair values of financial assets and liabilities

 

IFRS 13 requires disclosure of fair value measurements of financial instruments by level of the following fair value measurement hierarchy:

 

·

quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);

·

inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and

·

inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

 

The fair value of derivative financial instruments has been calculated by discounting expected future cash flows using interest rate yield curves and forward foreign exchange rates prevailing at the relevant period end.

 

In 2020 and 2021, there has been no change in classification of financial assets as a result of a change in purpose or use of these assets.

 

Except as detailed in the following table, the carrying value of financial assets and liabilities recorded at amortised cost, which are all short-term in nature, are a reasonable approximation of their fair value:

 

 

 

Carrying value

Fair value

 

Unaudited

30 September

2021

£m

Unaudited

30 September

2020

£m

Audited

31 December

2020

£m

Unaudited

30 September

2021

£m

Unaudited

30 September

2020

£m

Audited

31 December

2020

£m

Financial assets

 

 

 

 

 

 

Amounts receivable from customers

695.0

683.6

669.1

898.8

914.0

908.8

 

695.0

683.6

669.1

898.8

914.0

908.8

Financial Liabilities

 

 

 

 

 

 

Bonds

400.4

477.8

415.9

430.7

421.1

405.4

Bank borrowings

68.1

100.8

76.1

68.1

100.8

76.1

 

468.5

578.6

492.0

498.8

521.9

481.5

 

The fair value of amounts receivable from customers has been derived by discounting expected future cash flows (as used to calculate the carrying value of amounts due from customers), net of agent collection costs, at the Group's weighted average cost of capital which we estimate to be 10% (30 September 2020: 9% and 31 December 2020: 10%) which is assumed to be a proxy for the discount rate that a market participant would use to price the asset.

 

The fair value of the bonds has been calculated by reference to their market value.

 

The carrying value of bank borrowings is deemed to be a good approximation of their fair value. Bank borrowings can be repaid within six months if the Group decides not to roll over for further periods up to the contractual repayment date. The impact of discounting would therefore, be negligible. This methodology has been used consistently for all periods.

 

 

18.  Reconciliation of profit after taxation to cash generated from operating activities

 


Unaudited

Unaudited

Unaudited

Unaudited

Audited


Nine months ended

Three months ended

Nine months ended

Three months ended

Year

Ended

 


30 September

2021

30 September 2021

30 September

2020

30 September 2020

31

December 2020


£m

£m

£m

£m

£m

Profit/(loss) after taxation

31.6

8.7

(66.2)

(4.7)

(64.2)

Adjusted for






  Tax charge

28.2

7.8

24.5

16.3

23.5

  Finance costs

39.0

13.2

40.5

11.8

56.7

  Finance income

-

-

(9.9)

(0.3)

(9.9)

  Share-based payment (credit)/charge

 

(0.5)

 

0.6

 

2.8

 

1.0

 

1.1

  Amortisation of intangible assets (note 10)

 

8.3

 

1.4

 

18.5

 

4.0

 

25.9

  Loss/(profit) on disposal of property, plant and equipment

 

0.1

 

(0.1)

 

0.2

 

0.3

 

0.2

  Depreciation of property, plant and equipment (note 11)

 

5.8

 

3.0

 

5.5

 

1.9

7.2

  Depreciation of right-of-use assets (note 12)

 

6.4

 

2.2

 

7.2

 

2.2

9.9

  Impairment of right-of-use assets (note 12)

 

-

 

-

 

-

 

-

0.5

  Short term and low value lease costs

 

0.9

 

0.3

 

1.4

 

0.5

1.7

Changes in operating assets and liabilities






  Amounts receivable from customers

 

(54.6)

 

(24.3)

 

289.9

 

78.0

 

294.9

  Other receivables

(9.3)

(3.5)

6.5

5.4

4.1

  Trade and other payables

15.5

2.6

(18.7)

(0.4)

(31.2)

  Provision for liabilities and charges

3.7

(2.1)

13.5

1.4

19.2

  Retirement benefit asset

(0.9)

-

(0.9)

-

(1.4)

  Derivative financial instruments

(2.7)

3.0

(20.4)

1.0

(8.4)

Cash generated from operating activities

 

71.5

 

12.8

 

294.4

 

118.4

 

329.8

19.  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

Q3

2021

Closing

September

2021

Average

Q3

2020

Closing

September

2020

Average Year

2020

Closing

December 2020

Polish zloty

5.3

5.4

5.0

5.0

5.0

5.1

Czech crown

29.7

29.7

30.2

29.7

30.1

29.3

Euro

1.1

1.2

1.1

1.1

1.1

1.1

Hungarian forint

410.1

419.0

399.6

398.0

399.0

405.7

Romanian leu

5.7

5.8

5.5

5.3

5.5

5.4

Mexican peso

28.0

27.5

28.7

28.4

28.3

27.1

Australian dollar

1.8

1.9

1.8

1.8

1.8

1.8

 

The £30.0 million exchange loss on foreign currency translations shown within the consolidated statement of comprehensive income arises on retranslation of net assets denominated in currencies other than sterling, due to the change in foreign exchange rates against sterling between December 2020 and September 2021 shown in the table above.

 

20. Contingent Liability Note

 

State Aid investigation

 

In late 2017 the European Commission (EC) opened a State Aid investigation into the Group Financing Exemption contained in the UK's controlled foreign company rules, which were introduced in 2013. In April 2019 the EC announced its finding that the Group Financing Exemption is partially incompatible with EU State Aid rules. In common with other UK-based international companies whose intra-group finance arrangements are in line with the UK's controlled foreign company rules, the Group is affected by this decision. On 12 February 2021 HMRC issued a Charging Notice, following the introduction of new legislation in December 2020 empowering HMRC to issue such Notices in order to collect alleged unlawful State Aid.  The Charging Notice requires a payment of £14.2 million with respect to accounting periods ended 2013 to 2018, which was paid in February 2021, with a further amount of interest of £1.1 million subsequently paid during August 2021. The payment of these amounts is a procedural matter, and the new law does not allow for postponement.  The company has appealed the Charging Notice on the grounds of the quantum assessed. 

 

The UK government has filed an annulment application before the General Court of the European Union. In common with a number of other affected taxpayers, IPF has also filed its own annulment application. Based on legal advice received regarding the strength of the technical position set out in the annulment applications, it is expected to be more likely than not that the payment of alleged State Aid that the Group has made under the Charging Notice will ultimately be repaid and therefore no provision has been recorded in the Financial Statements.

 

As a separate issue, HMRC has initiated a review of the Group's finance company's compliance with certain conditions under the UK domestic tax rules to confirm whether the company is eligible for the benefits of the Group Financing Exemption which it has claimed in its historic tax returns. IPF believes that all conditions have been complied with and have sought legal advice with regard to the interpretation of the relevant legislative condition. The legal advice has confirmed IPF's view and assessed that, in the event that HMRC were to take the matter to Tribunal, it is more likely than not that the company would succeed in defending its position.  In the unexpected event that HMRC were to conclude that the company is not in compliance with the conditions and to pursue the matter in Tribunal, and won, the amount at stake for years up to and including 2018 is £7.3 million. This domestic tax issue and the State Aid issue are mutually exclusive, and the UK legislation implemented in December 2020 and referred to above includes provisions to ensure no double charge to tax arises.  It is of note that currently HMRC have simply asked for information and no challenge has been made to the company's filing position.

 

21. Post Balance Sheet Events

 

There were no significant post balance sheet events.

 

22. Additional information required in accordance with the Warsaw Stock Exchange listing

 

Directors shareholdings and share interests

 

The table below presents the holdings of Company shares or options on Company shares of the directors of the Company as at the date of signing the year end Financial Statements (3 March 2021).

 

Shares held

Options held


Owned outright

Unvested and subject to performance conditions

Unvested and subject to deferral only

Unvested and subject to continued employment

Vested but not yet exercisable and subject to continued employment

Vested and exercisable, but not yet exercised

Executive Directors







Gerard Ryan

1,256,576

910,850

350,360

20,930

61,118

103,157

Justin Lockwood1

89,922

490,316

188,552

20,930

31,467

71,114

Non-executive Directors






Deborah Davis

45,000

-

-

-

-

-

Richard Holmes

275,133

-

-

-

-

-

John Mangelaars

50,000

-

-

-

-

-

Richard Moat2

15,000

-

-

-

-

-

Cathryn Riley3

14,795

-

-

-

-

-

Stuart Sinclair

86,944

-

-

-

-

-

Bronwyn Syiek

20,000

-

-

-

-

-

 

1 Justin Lockwood resigned from the Board on 23 July 2021

2 Richard Moat resigned from the Board on 29 April 2021

3 Cathryn Riley resigned from the Board on 29 April 2021

On 16 April 2021, Gerard Ryan acquired 140,697 shares following the exercise of share options under the Company Deferred Share Plan and Performance Share Plan.

The table below presents the holdings of Company shares or options on Company shares of the directors of the Company as at the date of issue of this report.

 

Shares held

Options held


Owned outright

Unvested and subject to performance conditions

Unvested and subject to deferral only

Unvested and subject to continued employment

Vested but not yet exercisable and subject to continued employment

Vested and exercisable, but not yet exercised

Executive Directors







Gerard Ryan

1,397,273

1,312,873

248,318

20,930

-

-

Non-executive Directors






Deborah Davis

45,000

-

-

-

-

-

Richard Holmes

275,133

-

-

-

-

-

John Mangelaars

50,000

-

-

-

-

-

Stuart Sinclair

86,944

-

-

-

-

-

Bronwyn Syiek

20,000

-

-

-

-

-

 

Shareholding structure

 

The information provided below was correct at the date of notification, however, the date of receipt may not have been in the current financial period. It should be noted that these holdings are likely to have changed since the Company was notified. A notification of any change is not required until the next notifiable threshold is crossed.

 

As notified to the Company, pursuant to DTR 5.1.2, the table below presents the shareholders holding more than 5% of the total number of shares/voting rights of the Company as at the date of signing the year end Financial Statements (3 March 2021).

 

Shareholder

Number of shares/voting rights

% of issued share capital/total voting rights1

Aberforth Partners LLP

29,306,786

13.10

Standard Life Aberdeen plc

26,857,976

12.00

Marathon Asset Management LLP

22,220,369

9.93

FMR LLC

11,222,609

5.28

Artemis Investment Management LLP

11,452,288

5.11

Schroders plc

12,017,299

5.01

1 The percentage of issued share capital in the table above is based on the Company's issued share capital at the point of notification.

 

Notifications were received from Aberforth Partners LLP on 12 March 2021 and from Artemis Investment Management LLP on 6 April 2021 of an interest in the issued share capital of the Company in accordance with the DTR.

 

As notified to the Company, pursuant to DTR 5.1.2, the table below presents the shareholders holding more than 5% of the total number of shares/voting rights of the Company as at the date of issue of this report.

 

Shareholder

Number of shares/voting rights

% of issued share capital/total voting rights1

Aberforth Partners LLP

31,544,397

14.10

Standard Life Aberdeen plc

26,857,976

12.00

Marathon Asset MGMT Limited

18,816,112

8.41

Pendal Group Limited

12,242,516

5.47

FMR LLC

11,222,609

5.28

Schroders plc

12,017,299

5.01

1 The percentage of issued share capital in the table above is based on the Company's issued share capital at the point of notification.

 

Seasonality or cyclicality of the business

The Group's operations are not subject to seasonal or cyclical fluctuations.

 

Information about loan sureties or guarantees extended by the Group

In the nine months to September 2021 (and the nine months to September 2020), the Group did not grant any sureties or guarantees for loans.

 

Unusual items

In the nine months to September 2021 (and the nine months to September 2020 other than noted in note 7), there are no items affecting assets, liabilities, equity, net income or cash flows that are unusual because of their nature, value or frequency.

 

Inventories

The Group does not hold any inventory, hence there have been no write downs or reversals of write downs from previous periods.

 

Write off of any assets

Other than noted in note 9, there are no items relating to write offs for impairment of financial assets, tangible fixed assets, intangible assets or any other assets, or reversal of such write offs from previous periods other than those specifically mentioned in this report.

 

Court cases

There have been no significant payments/settlements resulting from existing court cases in the nine months to September 2021 (Nine months to September 2020: no significant payments/ settlements).

 

Corrections of errors from previous periods

In the nine months to September 2021, there are no errors from previous periods which require correction. (Nine months to September 2020: no errors requiring correction).

 

Issue, redemption and repayment of non-equity and equity securities

In the nine months to September 2021 (and the nine months to September 2020), other than disclosed in note 15, there were no other issuances, redemptions or repayments of non-equity and equity securities.

 

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

 

 

Credit issued growth (%)

 

None

Not applicable

Credit issued is the principal value of loans advanced to customers and is an important measure of the level of lending in the business. Credit issued growth is the period-on-period change in this metric which is calculated by retranslating the previous nine month's credit issued 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.

Average net

receivables (£m)

 

None

Not applicable

Average net receivables are the average amounts receivable from customers translated at the average monthly actual exchange rate. This measure is presented to illustrate the change in amounts receivable from customers on a consistent basis with revenue growth.

Average net

receivables growth at constant exchange rates (%)

None

Not applicable

Average net receivables growth is the period-on-period change in average net receivables which is calculated by retranslating the previous nine month's average net receivables 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 September 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 nine month'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.

 

 

 

 

 

APM

 

Closest equivalent

statutory measure

Reconciling items to

statutory measure

Definition and purpose

 

Revenue yield (%)

None

Not applicable

Revenue yield is reported revenue divided by average net receivables and is an indicator of the gross return being generated from average net receivables.

Impairment as a

percentage of

revenue (%)

 

None

Not applicable

Impairment as a percentage of revenue is reported impairment divided by reported revenue and represents a measure of credit quality that is used across the business. This measure is reported on a rolling annual basis (annualised).

Cost-income ratio (%)

None

Not applicable

The cost-income ratio is other costs divided by reported revenue. Other costs represent all operating costs with the exception of amounts paid to agents as collecting commission. This measure is reported on a rolling annual basis

(annualised). This is useful for comparing performance across markets.

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.

Headroom (£m)

Undrawn

external bank

facilities

None

 

Headroom is an alternative term for undrawn external bank facilities.

 

Net debt

None

Not applicable

Borrowings less cash

Other measures

 

 

 

Customers

None

Not applicable

Customers that are being served by our agents or through our money transfer product in the home credit business and customers that are not in default in our digital business.



 

Constant exchange rate reconciliations

 

The period-on-period change in profit and loss accounts is calculated by retranslating the nine months to September 2020 profit and loss account at the average actual exchange rates used in the current year.

 

Nine months to September 2021

 

 

 

 

 

£m

European home credit

Mexico home credit

IPF Digital

Central costs

Group

 

Customer numbers (000s)

810

649

256

 

1,715

 

Credit issued

440.0

139.6

134.7

 

714.3

 

Average net receivables

397.3

99.4

171.5

 

668.2

 

Closing net receivables

418.0

110.4

166.6

 

695.0

 

Revenue

207.0

102.8

89.7

-

399.5

 

Impairment

12.2

(20.4)

(20.1)

-

(28.3)

 

Net revenue

219.2

82.4

69.6

-

371.2

 

Finance costs

(24.0)

(4.8)

(10.2)

-

(39.0)

 

Agents' commission

(32.0)

(16.4)

-

-

(48.4)

 

Other costs

(113.1)

(49.5)

(50.3)

(11.1)

(224.0)

 

Profit before tax

50.1

11.7

9.1

(11.1)

59.8

 

 

Nine months to September 2020, at average 2020 foreign exchange rates

£m

European home credit

Mexico home credit

IPF Digital

Central costs

Group

 

Customer numbers (000s)

609

273

-

1,715

 

Credit issued

309.9

101.8

135.9

-

547.6

 

Average net receivables

106.6

244.9

-

811.0

 

Closing net receivables

81.4

206.4

-

683.6

 

Revenue

123.0

124.8

-

517.0

 

Impairment

(51.4)

(61.7)

-

(218.9)

 

Net revenue

71.6

63.1

-

298.1

 

Finance costs

(5.6)

(9.8)

-

(38.8)

 

Agents' commission

(16.1)

-

-

(54.1)

 

Other costs

(114.2)

(55.1)

(56.1)

(9.8)

(235.2)

 

Pre-exceptional loss before tax

 

(12.2)

 

(5.2)

 

(2.8)

 

(9.8)

(30.0)

 

 

 

Foreign exchange movements

£m

European home credit

Mexico home credit

IPF Digital

Central costs

Group

 

Credit issued

(13.2)

(3.8)

(1.6)

-

(18.6)

 

Average net receivables

(18.4)

(2.6)

(5.1)

-

(26.1)

 

Closing net receivables

(23.4)

2.7

(12.6)

-

(33.3)

 

Revenue

(11.1)

(2.5)

(2.7)

-

(16.3)

 

Impairment

3.0

(0.8)

1.5

-

3.7

 

Net revenue

(8.1)

(3.3)

(1.2)

-

(12.6)

 

Finance costs

1.3

0.1

(0.2)

-

1.2

 

Agents' commission

1.6

0.3

-

-

1.9

 

Other costs

3.9

0.9

1.3

-

6.1

 

(Loss)/profit before tax

(1.3)

(2.0)

(0.1)

-

(3.4)

 

 

 

Nine months to September 2020, at average 2021 foreign exchange rates

£m

European home credit

Mexico home credit

IPF Digital

Central costs

Group

 

Credit issued

296.7

98.0

134.3

-

529.0

 

Average net receivables

441.1

104.0

239.8

-

784.9

 

Closing net receivables

372.4

84.1

193.8

-

650.3

 

Revenue

258.1

120.5

122.1

-

500.7

 

Impairment

(102.8)

(52.2)

(60.2)

-

(215.2)

 

Net revenue

155.3

68.3

61.9

-

285.5

 

Finance costs

(22.1)

(5.5)

(10.0)

-

(37.6)

 

Agents' commission

(36.4)

(15.8)

-

-

(52.2)

 

Other costs

(110.3)

(54.2)

(54.8)

(9.8)

(229.1)

 

 

Year-on-year movement at constant exchange rates

%

European home credit

Mexico home credit

IPF Digital

Central costs

Group

 

Credit issued

48.3%

42.4%

0.3%

-

35.0%

 

Average net receivables

(9.9%)

(4.4%)

(28.5%)

-

(14.9%)

 

Closing net receivables

12.2%

31.3%

(14.0%)

-

6.9%

 

Revenue

(19.8%)

(14.7%)

(26.5%)

-

(20.2%)

 

Impairment

111.9%

60.9%

66.6%

-

86.8%

 

Net revenue

41.1%

20.6%

12.4%

-

30.0%

 

Finance costs

(8.6%)

12.7%

(2.0%)

-

(3.7%)

 

Agents' commission

12.1%

(3.8%)

-

-

7.3%

 

Other costs

(2.5%)

8.7%

8.2%

(13.3%)

2.2%

 

 

 

A copy of this statement can be found on our website at www.ipfin.co.uk.

 

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