International Personal Finance plc

Good morning everybody and welcome to our results presentation for the six months to the 30th of June 2025. Now if you've been watching the airwaves this morning you'll note actually that we put out two announcements. One is our standard set of results for the six month period but the other is what's called a Rule 2.4 announcement and that's a statement regarding a possible recommended cash offer for IPF, our group, by Basepoint Capital LLC. Now there isn't anything I can tell you that isn't in that document so I can't talk about that document today. Everything you need to know is actually in the 2.4 announcement. So for today I'd like then to focus on what has been a very good set of results. Now, as usual, I'm going to start and do a high level overview of the numbers and then I'm going to go on and talk about our three pillar strategy. I'll then hand you over to Gary, who's going to take us through the trading business in detail, both at a group level and for each of our three divisions. Gary will also cover the funding, the portfolio quality and capital management and point out to us where we're doing really well and where we have more work to do. At the end I'll cover off a forward look and then we'll go on to Q&A. Now as regards Q&A, somewhere on the bottom of your screen there should be a dialogue box so at any point please feel free to type in a question there and we'll get that or alternatively just wait until the end and put the questions to us and Rachel will ask us all of those at the end of the presentation. Now in total I think it probably takes about 40 minutes. So with that let's talk about the overview. Now if you had a chance to see our RNS this morning you'll have seen that we put out a number of forty nine point nine million pounds profit before tax for the six months and that's up five point five percent year on year. But as Gary is going to give you more colour he'll explain that on a constant currency basis actually the rate of increase was more than three times that. We saw really good demand for credit across all of our businesses and as a result of great operational execution by our team, we've delivered 12% increase in the closing net receivables. As for returns, we're now delivering 15.4% return on required equity. So with a good set of results, a really strong balance sheet as always, and with the outlook for the rest of the year and into 26 looking positive, the board are happy to recommend an interim dividend of 3.8 pence per share. So let's look now at our strategy. Now for those of you who follow us on a regular basis, there is no surprise on this page. We have a three pillar strategy. First of all, next gen financial inclusion. And that's all about building the products and services that our customers want and delivering them through the channels that they want to receive them. Secondly, we have next-gen organisation, and that's about becoming a more efficient organisation and playing a positive role in society. And finally, we have next-gen tech and data, about being a smarter and more efficient partner for all of our stakeholders. So if we look at each of these in turn, and I'll give you some colour on what we've been up to over the last six months. First of all, next gen financial inclusion. Now, as you know, we launched a credit card in Poland some time ago. Well, I'm delighted to say it's proving very, very successful. So we currently have 160,000 active cards in the market. And in addition, a few weeks ago, we launched our first digital card there. So that means an applicant can go online pass the score test and then get a credit card without having to see a customer representative although the vast majority still do see a customer representative. The really good news on the card is that we're seeing increasing activity levels across our cards in particular in retail which is really fantastic because it means that the customers are finding value in the day-to-day use of what a card provides. Now the great thing here is that our view is that card can go on and grow even further and it currently represents more than 40 percent of our portfolio. If we look at short term products now we mentioned at the I think it was in our final results for last year that we just launched a short term lending product in both Poland and credit at Mexico. That's our digital business there. Well what we've seen as a result is really strong customer demand for that product. Now as most of you know for businesses that provide short term lending only a lot of those survive because they keep their customers in perpetual debt. Well that is absolutely not our strategy. So what we've done is we've designed the product so that if a customer finds it difficult to make the repayments under a short term loan then we will automatically offer them without any hidden fees the opportunity to transfer to a slightly longer loan at a significantly lower rate. So increasing the affordability for them. And that is proving very popular. But I can also tell you that over 70% of all customers on this product are actually paying on the nose. They're paying on time and that's really good. And our view here is there's a really big opportunity in this space for us to attract customers in with this product and if they wish later on offer them a larger and longer term service if that's what they want. Now the other area that we've been working on is our retail partnerships. Now as you know this is the idea that wherever our customers are out shopping or buying products they may need money and we would like to be there at the point at which they need that cash. So operating therefore through retailers. Well, I'm really delighted to say that in Romania we now have over 1,100 retail outlets working with us both on and offline. In Mexico it's over 70 and growing rapidly. And the really good thing here is it's bringing us traffic we otherwise would not have seen. So I can tell you that in Romania, fully 98% of our customers through this channel are completely new to us. Now to make this channel successful what we need to do are two things. First of all we need to make it easier to onboard a retailer. So we're very focused on that. And the second thing is we then need to optimize the scorecard for the particular traffic that's coming through each individual retailer. But our view here is this is a success and it's got a big opportunity ahead for us. Looking now to Mexico, as you know, the strategy in Mexico is geographic expansion. And I'm happy to say that our most recent branch opening was in Nueva Leon in Monterrey. And we will open a new branch again in the second half of the year. I can also confirm that the more recent branch openings, which were Guadalupe, Mexicali, and Tampico, are all operating very satisfactorily. So very positive about that. Then turning to Australia. Now I do remember that at the year end results we talked about how happy we were with our digital business in Australia and that trades under the brand name Creditea. Well after a lot of research we've decided that there's a lot more to play for in Australia. So we're going to invest a significant amount for us in the brand building in Australia and I expect that we'll start that towards the end of Q3 this year and that we should see the benefits of that coming through probably from the second half of 2026 and beyond. But our view is there is a much bigger role that we can play in Australia. And then finally turning to Romania. where we recently launched our digital operation there. And so this is just part of our commitment that wherever it's appropriate, if we have a home credit business, we should also be offering our customers digital options. So as you can see, quite a lot going on under this particular pillar of the strategy. If we turn now to next gen org now we believe that as our business we need to demonstrably show a positive face in the countries in which we operate. And by that means we mean to have a positive impact in the societies that we play in. Now if we take Mexico as an example, in Mexico over 90% of our estrellas, so that's our customer representatives, and over 70% of our customers are women. So I was really delighted when I saw that our local team there has recently signed up to the UN Women Partnership. And so really that's all about promoting gender equality and something that I feel very positively about. So we're going to hold ourselves to account on that both internally but also externally. Now, I did mention, I think, about building a great place to work in our previous set of results. And we very recently launched our global people survey where we surveyed over 20,000 colleagues. I'm delighted to say that we had a 91% participation rate and an 81% positive response rate across all the key categories of questions. So really very, very positive. And essentially what our colleagues told us is they feel proud and inspired to work for an organisation that wants to build financial inclusion. And probably you could see no better demonstration of that than the number of colleagues who take part on a regular basis in our volunteering exercises. So I have to say it feels really good to be part of an organisation like that. And finally, let's turn to our third pillar, and that's next-gen tech and data. Now, this year, we are going to spend more on tech and data than in any year in our history. And really, we have four goals that we're trying to achieve here. First of all, we want to make it easier to become a customer and stay a customer. Then we want to make the lives of our customer representatives easier and more productive. Then we want to build efficiency across the organization. And finally, what we've just talked about, we want to build out our product and our channel set. So that's where our investment is going. So let me give you some insights into how that translates into actions on a day-to-day basis. For instance, today over 80% of all applications for credit coming to our organisation now come through some form of digital channel. Over 80%. As another example, in Poland, over 200,000 customers have been using our customer app, which is called Provigo. And the great thing now is that we're going to roll out that same app across Hungary, Romania and Czech Republic within the next nine months. What we're also trying to do is to tailor the experience for the customer expectations in any given geography. So as examples, in Mexico, we've spent a lot of time and effort building WhatsApp into all of our customer communication channels and into the whole of the customer journey. And the reason being is that WhatsApp is ubiquitous in Mexico. Everybody uses it. Now, on the other hand, in European Home Credit, we spent our effort building out web chat because that's the customer preference across Europe at the moment. So you can see we're trying to tailor our investment to suit the expectations of the customers. The other thing I can say is that despite increasing expectations from all consumers about the service level they should get, I'm happy to say that our NPS scores are holding up very well. And personally I believe a lot of that is down to the investment that we're making across all of these channels to improve the customer experience with our business. And also the last thing on tech and data is just to say that behind the scenes, the piece that the customer never sees, we're spending a lot of time and effort to upgrade all of our internal technology to make it more robust and efficient. The piece of good news and that is that all of this investment I've just talked about is already baked into our numbers. It's in our operating run rate. So you shouldn't expect any surprises in terms of a number that pops up for this level of investment. It's actually embedded in our numbers. Now, the three pillar strategy hasn't changed, but there is a lot, as you can see, going on behind every one of those pillars to execute and deliver on the strategy. And to talk us more through about what that means then in terms of results and the numbers themselves, I'm going to hand you over to Gary.

Thank you, Gerard, and hello, everybody. As you heard in our introduction today, we have delivered an excellent set of results in the first half of 2025, with profit before tax increasing by 5.5% to £49.9 million. This result was ahead of our internal plans, mainly due to strong customer repayment performance across the Group, as credit quality remains very good. It's also worth adding that the year on year growth in profits was achieved despite a 5 million adverse impact from weaker foreign currencies in 2025. And that's mainly the Mexican peso. On a constant currency basis, pre-exceptional profit before tax was up an impressive 18.8%. Our first half performance provides a very strong foundation for a further acceleration of growth in the second half of the year. Accordingly, we expect second half profit to be at a similar level to the first half of 2024, as we absorb the impact of more IFRS 9 Day 1 impairment charges. And to help you with your forecasts, the chart on the bottom left shows the split of profit in 2024, with a profit before tax of £38 million being generated in the second half of the year. So let's look at lending growth. We delivered really good group lending growth of 11 percent at constant exchange rates in the first half of 2025 supported by continuing healthy demand in all of our markets. In European Home Credit, we delivered 13% lending growth. Romania delivered impressive growth of 19%, supported by the continued expansion of the partnership and hybrid digital channels, both of which are delivering really encouraging results. In Poland, the granting of a full payment institution license last November enabled the business to grow lending by 17%. And Hungary and the Czech Republic both continue to perform well, delivering solid growth of just over 5%, backing up the strong performances they achieved last year. Mexico Home Credit returned to growth delivering nearly 2% growth in the first half following the IT upgrade which began in Q4 last year but was not fully completed and embedded until midway through Q2 this year. Now that these changes are complete we saw a significant pickup in the momentum in June where lending volumes increased by nearly 5% and this momentum has continued into July where lending growth is running at 8%. Supported by strong consumer demand in the market and a very soft fourth quarter comparator, we expect growth to accelerate to up to 15% in the second half. And as a result, full year lending growth for the year as a whole is expected to be between 7% and 9%. IPF Digital continues to deliver impressive growth in both customer numbers and lending as demand for our fully remote credit solutions continues to rise. Year on year, customer and lending growth were 13% and 16% respectively. Now Mexico and Australia were again the standout performers delivering lending growth of 43% and 28% respectively. And Mexico passed a major milestone in the first half as it surged past the 100,000 customer mark. We are very excited about the growth prospects in both Mexico and Australia and are increasing our investment in both the brand and the product proposition to maintain the acceleration in growth and capture the very strong growth opportunity that we have in both these markets. Now on to receivables. The strong momentum in lending growth is flowing nicely through to receivables growth and we delivered 12% year-on-year growth in the first half. In European Home Credit, we delivered receivables growth of 12% to £502 million. And all four countries delivered very good growth, with 14% in both Hungary and Romania, 10% in Poland, and 9% in the Czech Republic. Poland's receivables book now stands at £170 million with growth of 10 million in the first half and credit cards continue to gain traction, now representing approximately 40% of the overall receivables book. Given the strong momentum in customer lending, we expect European home credit receivables growth to be between 15% and 20% for the year as a whole. In Mexico home credit, receivables showed a relatively modest increase of 3.8% to 168 million. But with the acceleration in lending growth I mentioned earlier, we anticipate full-year receivables growth of between 10% to 15%. In IPF Digital, we delivered receivables growth of 16%, which reflects consistent delivery of our digital strategy across all our markets. As you might expect, Mexico and Australia led the way with strong receivables growth of 32% and 28% respectively, whilst our other markets in the Baltics, Poland and the Czech Republic delivered combined growth of 9%. Looking ahead, we continue to expect IPF Digital's overall receivables growth for 2025 will be towards 20% as a whole. So if you look at the expected growth rates by division I've just discussed and doing the sums, you will see that we continue to expect full year receivable growth of around £150 million in 2025, which is wholly consistent with the guidance we provided with the full year results back in February. Turning now to the progress we are making against the core KPIs of revenue yield, impairment rate, and cost income ratio. Now before I delve into the metrics, I'd like to highlight that we have set out our KPIs both on a fully consolidated group basis, as well as on a group basis excluding Poland. Now, this is due to the major impact which the ongoing transition in Poland has had on our KPIs and their comparison to our medium term targets. However, The key message I want you to take away is that the trends I'm going to talk you through are fully in line with the guidance and expectations and that we are on track to deliver and operate within our group target metrics by 2027. So starting with the revenue yield in European Home Credit the yield reduced by one point six percentage points to forty five point six percent mainly due to the flow through of lower rate caps in Poland as well as a slight moderation in the yield in Hungary due to the reduction in the base rate linked interest rate cap and also in Romania due to the introduction of the new total cost of credit cap that came in in Q4 of last year. In Mexico home credit, we saw a reduction in the yield from 86.5% to 84.4%. Now this is wholly due to the 30% reduction in new customers that we saw in the fourth quarter of last year as we focused on serving good quality existing customers during the IT upgrade. The mix of lending between existing customers and new customers is now back to normal levels. And in IPF Digital, the annualized revenue yield was broadly stable at 42.7%, with the impact of reductions in base rate linked interest rate caps in the Baltics and Australia being offset by the growth in the receivables in Mexico, which carries a higher yield. Overall, the group's annualized revenue yield has reduced from 55.4% to 53.3% over the last 12 months. However, If we exclude Poland, the group's revenue yield was 57.1% and remains within the group's target range of 56% to 58%. We expect the ongoing shift to higher yielding products through both our credit cards in Poland and more new customers in Mexico to progressively increase the group's revenue yield as we go forward. I'm again pleased to say that despite some volatility in macroeconomic conditions, customer repayment behaviour has remained very strong. And together with the tight credit standards in place, the quality of our loan book continues to be excellent. The very good repayment performance has resulted in a marginal reduction in the payment coverage provision from 32.9% at December 2024 to 32% at June 2025. And together with the continued benefit of a strong debt sale market and the 100 million contraction in Poland receivables that we've seen through 2023 and 2024, all of these factors have combined to deliver a further 2.2 percentage point improvement in the annualised impairment rate to 8.3%. Now, if we exclude Poland, the group's impairment rate was actually stable at 14.5%, despite the rate of receivables growth in the first half being nearly double that achieved in the first half of last year. This rate was ahead of our internal plan and really highlights the strong credit quality of the receivables book. And looking ahead, We expect Poland's impairment rate to steadily increase back to somewhere between eight and 10% over the next two years as we accelerate the growth in the business and increase the receivables book by over 100 million. As a result, you'll see the group impairment rate move progressively towards our overall target range of between 14 to 16% over the next two years. Now we continue to maintain a strict focus on efficiency and cost control which resulted in cost growth of only 2.5% in the first half compared with receivables growth of 11.7%. The group's cost income ratio at 61.9% is 2.9 percentage points higher than June last year but that's mainly due to the reduction we saw in Poland's revenue. If we exclude the Polish home credit business, the group's cost income ratio was 56.1. Now that was up a little from 55.2 at June 2024, but it was due to the reduction in revenue yield, but as well our investment in growth initiatives. Now we expect the group's cost-income ratio to improve into our target range of 49% to 51% in the medium term as we grow the lending portfolio and maintain tight discipline of the investments made in building scale and expanding our capabilities to accelerate the pace of change. Moving on to returns and the increase in shareholder value that we are delivering. Our annualised pre-exceptional return on required equity was 15.4% at the end of the first half. This reflects the successful delivery of target returns of 20% in both European Home Credit and Mexico Home Credit, as well as improving returns in IPF Digital as we build scale. We expect our returns to moderate in the second half of 2025 and in 2026 due to the acceleration in receivables growth in Poland, which, as I described earlier, brings with it increased upfront impairment charges under IFRS 9. The group's annualized return on equity, which is based on actual equity, was 14.7% at June 2025, and that's up from 10.4% at this stage last year. Our pre-exception EPS increased by 12.7% to 14.2 pence, which is a faster rate of growth than the 5.5% growth in PBT due to a lower tax rate and fewer shares in issue following the successful completion of the share buyback in the second half of last year. Consistent with our guidance with the full year results, the effective tax rate in 2025 is 38%, which is a lower rate than the 40% used in the first half of last year. And finally on EPS, our reported EPS grew by 61% to 14.2 pence in the first half, a much higher rate than the 12.7% growth in pre-exceptional EPS. And this is due to the impact of the pre-tax exceptional charges of 10.8 million in the first half of last year. So on to dividends. In line with the Group's policy of paying 33% of the prior year's full dividend at the half year, the Board has proposed an interim dividend of 3.8 pence per share. This represents year-on-year growth of 11.8% and is underpinned by the Group's capital strength and the Board's confidence in our outlook. So before I hand back over to Gerard I'd like to talk you through our robust funding and capital position which underpins our growth ambitions. At the end of June we had total debt facilities of £650 million comprising £396 million in bonds and £254 million in bank funding. Net borrowings at the end of the first half totaled 558 million, resulting in the group having funding headroom of 92 million. Now, I'm pleased to report that during the first half, we successfully arranged 50 million of new bank facilities, and as at the end of July, have now extended a further 53 million of bank facilities in 2025, so a really good result. and we continue to have very good relationships with the 17 lending banks across our markets. In respect of debt capital markets, our strong funding position enabled us to repay the residual €2,020 bond early. Our credit ratings remain unchanged with both Fitch and Moody's and both maintained a stable outlook for the group. And very encouragingly our 2029 euro bonds and 2027 retail bonds both come to continue to perform very well in the secondary market yielding around 8 percent. And this reflects continued investor confidence in the group and position as well to access debt capital markets which we expect to do shortly. And lastly on funding, our blended cost of funding has reduced from 13.2% in the first half of last year to 12.5% this year. And that reflects both the benefit of lower interest rates but also reduced hedging costs. We expect the full year rate to remain around this level. And finally, on to capital. Our equity to receivables ratio stands at 53% at the end of June, down from 56% in June last year. The year-on-year reduction reflects the completion of the 15 million share buyback in the second half of last year and the acceleration in growth in receivables during the first half of this year. Now we'll continue to assess the appropriate time to commence the additional 15 million share buyback announced with the year end results. So our strong capital position supports the group's ambitious growth plans and our progressive dividend policy through to the point at which we are delivering our target returns and operating closer to our 40% equity to receivables target. And we expect this, consistent with previous guidance, to be around 2027. So to sum up, we've delivered another cracking set of results in the first half of 2025. Credit quality remains excellent. We're continuing to see much improved lending growth, lending momentum on lending growth, and we have a very robust funding and capital position to support our plans. And on that note, I will now hand you back to Gerard to take you through the outlook.

Thank you very much, Gary. So as you heard from Gary there a really great story. So let's wrap it up and go on to the Q&A that in summary we've had a really really positive six months of trading. You know top line trading has been very good. Yes I would have liked to touch more growth maybe in Poland and Mexico. But actually at the end of Q2 we saw great momentum in both of those businesses and that momentum has been carried very solidly into July. So I feel good about that portfolio quality, as Gary said, is really remarkable. Very, very good. And in terms of our three pillar strategy, I talk to you through all the things that we're doing to execute against that. So a really good first half performance. The second half, as Gary said, well, you now have a clear indication of what we're expecting there in terms of profitability. We are going to continue to invest to grow this business. It's a great business, it's got lots of opportunity and building financial inclusion is a journey that's never going to come to an end. So all in all we feel very good about the first six months, about what we've achieved but we also feel good about executing our strategy into the remainder of this year and beyond. So with that, let's move on now to the Q&A. So I'm going to ask Gary and Rachel to come up and we'll go through any questions that you've posed to us over the last half hour or so. Hey, guys. So, well, I'm going to guess and say zero questions on what is a very good set of results and lots of questions on the other announcement.

We've got a couple so far on the results and some of our news on how we're progressing our strategy. So I'll start with one of those. You mentioned new short-term online products are performing well. Are there any plans to expand into other markets like the UK or USA where demand for short-term loans is strong?

No, not new markets, but certainly based on our experience so far, and it's a short experience in Poland and Mexico, based on that experience, I would say most definitely we'll be taking short-term loan product to our other existing markets. But I think we'd be slow to go into a new market with that as the initial product. So at the moment, I think the big opportunity is Poland and Mexico and then move into our other existing markets.

OK, we've got one here. Will the current growth plans be sufficient to reduce the equity to receivables ratio down to the target?

I mean, yeah, that's the, if you, obviously we've talked through the statement in terms of hitting our targets, our financial model targets in 2027. And, you know, capital position you see at the end of the half year you know basically that capital position allows us to deliver our growth plans allows us to you know we expect our returns to moderate over the next 18 months so clearly we'll use some capital for that we'll use some capital for the receivables growth we'd expect it to move towards our 40 percent ish target you know by 2027 when we're fully operating in the financial model generating the growth, generating the returns to pay the minimum dividend, a 40% payout and also maintain the balance sheet close to that 40% equity to receivables ratio.

OK, and then one that runs on from that. As the business mix changes, will that result in any changes to the tax rate?

The tax rate is generally determined by where profits are generated. I mean, clearly tax rates and tax rules in countries do change. It's probably more a mixed thing, you know, and the level of impairment that we take in different countries. I mean, we've said we expect the tax rate to be 38% for this year. Clearly our job is to try and work on that and potentially reduce it, but it does need certain tax rules in countries to change to get significantly below that.

Moving on to Poland, when do you expect the transition period to end?

2027 pretty much. You know the business has lost around 100 million receivables over the last two years pretty much where we guided the market back in 2022 if people can remember. You know we need to get the business back up and beyond that in reality. And that's what you know the team in Poland are doing so we'd expect it to be somewhere near where the scale we expect in 2027 and that's why you know we talked about each of the financial metrics being heavily distorted by Poland when Poland's back to let's say scale in 2027 you'll see all our group metrics including Poland being you know towards and in those you know guardrails of our targets by around 2027.

And most of our mentions of Poland of late have been about it shrinking and getting smaller. And yes we got it to us. But I suppose we should remind people that we feel very positively about Poland. You know the credit card is doing really well. It's really resonating with customers. They like the card and they're using it. The personal loan product is hugely popular. And then short term lending is now And so that feels good as well. So we feel really positive about it. We carried a very, very good momentum from June into July. So that bodes well for the rest of the year. So, yeah, we're coming off probably our lowest base, but feeling really good about the trajectory.

Great. So I'm going to move now on to the other news that we announced this morning and I've tried to summarise some of the questions that we've had. We've had some questions about, have there been any discussions about management incentives as part of the proposal?

No, none. It's not permitted. Or if you were to have those types of discussions and you got to an offer, those discussions have to be fully disclosed in what's called a 2.7 document. But there have been zero discussions on anything like that.

Okay. And we've had a number around of questions relating to how the proposal might impact bondholders. Have you got any colour that you can add at all on that?

I mean, firstly, it's obviously a possible offer. What I would do is just refer people to the EMTN documentation. So if they're looking at what happens in a change of control or anything like that, yeah, I'll refer them to the EMT, which you can find on our website.

Okay. I think just looking through all the questions, I think we've covered everything there this morning.

Thank you. Okay. Thank you very much, Rich. Thank you, Gary. So the last thing to say is a huge thank you to all of our colleagues. It's been a tremendous period for us the last six months, a really good set of results. You wouldn't believe just how much hard work goes into executing a new strategy across 10 different countries and delivering those results. So my sincere thanks to all of our colleagues for that. Clearly, we did put out a different announcement this morning, the 2.4, about the potential for an offer at some stage in the future. So to the extent we can in due course, we will come back and update the market on that. But obviously we're governed by very strict stock exchange rules on that. But for now, we're going to sign off and say thank you very much for your continued support. Thank you to all of our colleagues. And we look forward to catching up with you all again shortly. Thank you very much.

Thank you.