International Personal Finance plc

Welcome to the International Personal Finance First Quarter Trading Update hosted by Gerard Ryan, Chief Executive Officer, and Gary Thompson, Chief Financial Officer. Please note this call is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions, and this can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand it over to Gerard Ryan to begin today's conference. Please go ahead, sir.

Thank you, Priscilla. Good morning, everybody, and welcome to our Q1 trading update call. Today, as usual, I'm joined by Gary Thompson, our CFO, and today we will update you on performance in the first quarter of this year. I'd love to give you some additional color on what we're seeing in each of our divisions. And as you know, there'll be plenty of time for Q&A at the end. Now, hopefully you have a chance to read the statement we issued this morning. And in that, you will have seen that we got off to a very positive start to the year. All three divisions, so that's European Home Post, New Mexico Home Post, IPF Digital Office, performed very well. And we are trading ahead of our in-signal plan. My colleagues across the group are delivering on our strategy, and in meeting the continuing demands of credit from our customer segment, we delivered strong growth in customer lending of 15% year-on-year. European Home Credit and IPS Digital increased their year-on-year lending by 19% from 17% respectively, but it's worth noting that those results were against our relatively weak Q1 last year when demand in Europe was impacted by outbreaks of COVID and the beginning of the war in Ukraine. In Mexico, we increased customer lending year-on-year by 7%. And truthfully, we're actually very happy with that, given that the comparison of the Q1 of 2022 was 31%, that Mexico rebounded and the economy opened up post-COVID. The strong growth in customer lending resulted in 15% rise in closing net receivables to 883 million. And I'm particularly pleased that we increased our revenue yield by 1.5 percentage points in the quarter, 53.4%, so now we're within our target range of 53 to 56%. As a group, we're always very disciplined in our lending decisions to customers, and never more so than in difficult, even hard times, when we seek to protect our customers from over-indebtedness whilst maintaining our portfolio quality. Despite the increased cost of living for our customers, we haven't seen any discernible impact on their repayment behaviour, And together with our tight credit standard, credit quality remains good, and the annualized impairment rate was 10.5% at the end of the quarter. Of course, if we were to see deterioration in performance, we wouldn't hesitate to tighten credit standards to minimize any potential impairment impacts. Our previous actions in this area demonstrate that we can make required changes very quickly, and if we were to see improved, we can turn it back on again. A strong cost control focus continues to boost our efficiency, and in the quarter, I actually delivered a 2.1 percentage point improvement in our cost income ratio to 58.8%. In the mid, it is our investment in technology's drive productivity gains that is now paying off. And we're also examining the structural changes in the group might also deliver certain benefits. To complete the group picture, we continue to maintain a robust funding position and a well-capitalized fund sheet to support our goal conditions and deliver on our progressive dividend policy. We have 92 million headroom on underlying facilities and non-operational cash balances, and we expect our current funding capacity and strong cash generation to meet our funding requirements into 2024. Well, that's the clue picture, so now let me take you through a high-level overview of each of our exhibitions. European Home Credit has had a very good operational performance. We still see good customer demand, and as I mentioned earlier, growth in customer lending was very strong at 19% against Q1 last year. Closing customer receivables have reached just over half a billion pounds, or $503 billion, and that's at 15% year-on-year, and customer repayments remain strong over the period. A key focus in this division has been on the quality of life of our credit card operators and callers, following the introduction of a title rate cap in December of last year. This is progressing very well, with 20,000 cards now on issue and being used by our customers, who, as well as taking some of their credit-landing cash, are actually using their cards in ATMs online and in stores. Since we introduced credit cards in Q4 last year, we've taken a serious approach to the rollout, and today I'm pleased to confirm that all of our customer representatives and employees are now fully trained and we reached nationwide coverage across Poland in the first weeks of April. We will continue to take a test in many ways to ensure we fully understand our customers' experience with the card, and this will also support the introduction of new functionality as they become more familiar with the card. Although it is still very early days, we're very pleased with how the progress is next. Southern Africa and Mexico long-term business is also doing another very good operational performance. The Italian energy in Mexico we see that we've seen last week. And I spent time in Guadalajara, Guadalajara, and I also did a business operation in Pico. Actually, there's green energy and momentum in the business. And Mexico is now at the forefront of our efforts to introduce digital elements into the customer journey to improve the customer experience and their efficiency. And it will come with no surprise that there continues to be very strong demands for credit from our customer segments in Mexico. So we delivered a 7% year-on-year increase in customer lending against practice credit standards and a very strong quarter in Q1 2022. Customer numbers are also up, increasing 6% to $695,000, and closing net receivables grew by 12% to $169 million. So all in all, a very strong quarter. Let me go to ITF Digital. We continue to deliver a very positive growth momentum to gain scale and deliver on time . And we delivered a significant increase in lending growth to 17% year-on-year, against a weaker competitor for the reasons I mentioned earlier in the call. Mexico and Australia continue to outperform in terms of growth in lending, including net receivables and this now is excluding Finland and Spain, where our collectives are progressing very well. Customer numbers grew by 4% to 234,000. I should probably mention here that our digital business will be the focus of another of our webinars for investors and analysts on high stage on 10th of May, when panelists and colleagues of others meet up at the digital health panel and will provide a live webcast on talent in Estonia. Presentation will cover details on the customer research, key market trends, our technology, and how ITS is successfully executing on its strategy to realize future growth and returns. I hope you get the opportunity to join us for that session. It does seem like the webcast we did recently on the next part with the investors. So before we move on to Q&A, let me summarize our first four performance and what this means for the address for Q&A. Demand for credit is good, and we are continuing to support our customers with affordable credit and insurances in line with our purpose to build a better world through financial inclusion. All three divisions performed very well in Q1, and each delivered three levels of customer learning growth, which was particularly good in the case of expectations. This very fifth time of the year underpinned our confidence in our strategy, All right, thank you.

Ladies and gentlemen, If you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. We'll pause just for a moment to allow everyone an opportunity to signal for questions. We'll take our first question from Stuart Duncan from Peel Hunt. Please go ahead. Your line is open.