International Personal Finance plc

Welcome to the International Personnel Finance 2022 Q1 Trading Update Briefing hosted by Chief Executive Officer, Mr. Jared Ryan, and Chief Financial Officer, Mr. Gary Thompson. Today's conference has been recorded. I will now hand over the call to Mr. Jared Ryan to begin today's conference.

Thank you, Sharon, and good morning, everybody, and welcome to our Q1 Trading Update call. Gary Thompson, who joined the IPF Group as CFO at the beginning of the month, is with me here in Leeds. Good morning, Gary. Welcome to the team. And joining from Warsaw, we also have our Group Treasurer, Chris Adamski on the call. Hi, Chris. Now, hopefully you've had a chance to read our Q1 trading update, which was published earlier today. I'll cover the details behind the good trading performance delivered this quarter, as well as providing you with some color on what we're seeing in our markets, particularly in terms of the macroeconomic environment and the war in Ukraine. And as usual, we'll have plenty of time at the end for Q&A. You'll see from our statement that we made a good start to the year and the efforts of our teams in serving new loans to both existing and new customers resulted in credit issue growth of 10% and customer numbers increased by 3% to 1.7 million. Leading this growth story is Mexico Home Credit as we successfully execute our strategy to significantly grow this business. A strong operational performance and good consumer appetite for credit in Mexico resulted in a 31% increase in credit issued and a 9% growth in customers to 656,000 year-on-year. IPS Digital also delivered very positive growth momentum in the quarter, with strong contributions from both our new and established markets to generate a 29% increase in credit issued, and we're now serving 257,000 customers, and that's up 4% year-on-year. The macroeconomic environment in Europe created a more challenging trading landscape for our European home credit business in the first quarter of the year, and this resulted in a 2% contraction in both credit issued and customer numbers. As we noted at the time of our full year results, we saw a softer demand for credit in January and February, driven by consumer nervousness over rising costs of living. Our customers, whose disposable income is relatively low compared to other consumer groups, are disproportionately affected by increases in essentials such as fuel, energy, and food. And adding to these worries, the outbreak of war in Ukraine really unsettled people in our European markets, which has further impacted demand and sentiment in Central Europe in particular. However, I'm pleased to report that we've since seen an improvement in demand in March and through into April as well. Now, before I cover receivables and collections, it's probably a good point in today's briefing call to update you on the level of support that our colleagues across the group have given to those displaced from Ukraine since the start of the war. Members of the team have been involved in donating food, clothing, equipment and money, with many actually providing accommodation in their own homes and sourcing employment for refugees. Our Polish team, working closely with an NGO community partner, secured and renovated a large 11-bedroom property on the outskirts of Warsaw which has become a safe home for Ukrainian moms and their children. Our IPF digital businesses in Lithuania, Latvia, and Estonia have also donated over €150,000 to the cause. Returning now to our results, the strong growth delivered in Q1 boosted our closing receivables, which increased 14%, and in turn drove a 10% uplift in revenue year-on-year, and all three divisions contributed to this result. Our collections effectiveness is a core strength of the business, driven by solid operational discipline, and combined with the responsible lending decisions we take when serving our customers, the quality of our loan portfolio continues to be excellent. The strong collections performance in Q1 delivered annualized impairment as a percentage of revenue of 11.5%. This metric continues to benefit from the COVID-19 provisions released in 2021 and is broadly in line with our expectations. Throughout the period, we have continued to maintain a very strong balance sheet to support our growth aspirations and fund our new progressive dividend policy. At the quarter end, we had debt facilities of just over 560 million and capacity for growth on undrawn facilities and non-operational cash of 102 million. Before we move to the outlook in Q&A, let me cover off regulation in Poland. The European Council recently provided its response in respect of the proposed total cost of credit cap amendments, and it consisted largely of technical suggestions. The proposals are expected to be debated in the Polish Parliament, but there's no formal timeline at this point. As we've stated in the trading update, there are many different views on the proposals, and during the parliamentary process, they could be changed, dropped or adopted. And obviously, we will update the market when there is something more concrete to report on. Looking ahead, we will continue to execute our growth strategy of delivering an excellent service to our existing loyal customers and increasing product choices and channels to attract the next generation. We're making very good progress on our hybrid home credit digital offering. We launched our mobile wallet in Estonia last month, and we will be expanding in the Norte region of Mexico later in the year. We've always believed that we have a crucial role to play in society, responsibly providing finance to those people who are underbanked and underserved. Our purpose is to enable financial inclusion, and we will continue to be there for our customers even in more difficult times, providing them with affordable credit in a way that suits their lifestyle and financial circumstances. We clearly remain cautious because of the uncertain macroeconomic environment, as well as the impacts of the pandemic and the war in Ukraine. Notwithstanding these factors, we do expect to deliver good credit issue growth in 2022 by increasing customer choice while maintaining a clear focus on portfolio quality and costs. So to wrap up before we go to questions, we delivered a good trading performance in Q1, and this would not have been possible without the dedication and innovative work of a lot of my colleagues. And to all of you, I'd like to say thank you. We're closely monitoring the external landscape and its impact on consumer behaviors and, in particular, demand for credit. And we will respond quickly if we see any material changes. And finally, as I've just mentioned, we are very focused on our growth strategy, expanding our products and channel choices to attract new customers, and we continue to expect good growth for the year as a whole. Well, that completes the briefing for Q1. So, Sharon, I'll hand it back to you now to see if we have any questions, please.

Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach other equipment. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We will now take our first question from Gary Greenwood from Shore Capital. Your line is open. Please go ahead.