international personal finance investor road show - paris · pdf fileinternational personal...
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www.ipfin.co.uk
International Personal Finance
Investor road show - Paris
Gerard Ryan – Chief Executive Officer
David Broadbent – Finance Director
20 March 2013
www.ipfin.co.uk
• Profitable growth business
• A resilient business model
• Consistently strong trading and financial
performance
• Growth strategy building momentum
International Personal Finance
2
www.ipfin.co.uk
• Leading international consumer credit provider
• Small sum consumer loans
• Listed on the London Stock Exchange in 2007
• Circa £1BN market capitalisation
• 6,330 employees and 28,500 agents around the world
International Personal Finance
2.4m
customers
£95.1M
2012 PBT
28,500
agents
6
markets
4
www.ipfin.co.uk
Our markets
5
Poland
2012 PBT £54.9M
Customers 821,000
Established 1997
Czech-Slovakia
2012 PBT £27.1M
Customers 383,000
Established 1997/2001
Hungary
2012 PBT £12.5M
Customers 268,000
Established 2001
Romania
2012 PBT £4.5M
Customers 260,000
Established 2006
Mexico
2012 PBT £9.2M
Customers 683,000
Established 2003
2012 PBT adjusted to account for change in interest allocation
www.ipfin.co.uk
6
A valued and responsible business
Non-banking lender with most
ethical approach 2012 - Czech
Republic
Customer Friendly Company
2012 - Poland
Pearl of the Polish
Economy 2012 - Poland
Ranked amongst best scoring
financial services companies
for environmental and social
governance ratings
www.ipfin.co.uk
Good growth and strong returns
2,415
1,781
2006 2012
Customers (‘000s)
Profit before tax (£M)
• 78% growth since 2006
• 138% growth since 2006
• All markets profitable
• 36% growth since 2006
• 56% customer retention
– customers on third or
subsequent loan
Revenue (£M)
• 163% growth since 2006
10.5
27.6
2006 2012
EPS (p)
39.9
95.1
2006 2012
7
365.3
651.7
2006 2012
www.ipfin.co.uk
Strong record of growth
Profit before tax (£M)
39.9
50.6
76.3
61.7
100.595.1*
92.1*
0
10
20
30
40
50
60
70
80
90
100
110
2006 2007 2008 2009 2010 2011 2012
* 2010 profit stated before exceptional charge of £3.9M. 2012 profit stated before exceptional restructuring charge of £4.8M
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Impairment % revenue
29.3%
21.8%23.2%
29.9%27.6%
25.8%27.0%
0%
5%
10%
15%
20%
25%
30%
35%
2006 2007 2008 2009 2010 2011 2012
www.ipfin.co.uk
Good profit margins at maturity
Revenue 100%
Agents’ commission 11 - 12%
Impairment 25 - 30%
Interest 7%
Direct expenses 30 - 35%
Profit margin c.20 - 25%
9
Average loan size
Group £291
Poland £310
Czech-Slovakia £452
Hungary £306
Mexico £179
Romania £277
www.ipfin.co.uk
Home credit business model
• Long-established, resilient and cash generative business model
• Simple, transparent, affordable and personal
• Small sum, short-term unsecured cash loans in local currency
• £50 - £1,000 loans repaid over a period of around 12-14 months
• Loans repaid by money transfer or optional home collection service
• Agents provide weekly face-to-face visits to customers in their homes
• Credit vetting in the home by agent, supported by application and behavioural scoring
• Low and grow lending strategy
• No default penalty charges on home collected loans
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www.ipfin.co.uk
• Recognised financial brand: 70%+ awareness in most
markets
• 28,500 agents provide powerful engine for effective and cost
efficient customer acquisition
• National and regional advertising
• Internet growing in importance in marketing mix
• Strong retention – high proportion of eligible customers
renew loans
• Strong focus on lifetime value
Sales process
12
www.ipfin.co.uk
Powerful credit management systems
Agents
• Development of customer relationship
• Assessment of customer character, circumstances and capacity to pay
Systems
• Application scoring
• Behavioural scoring
• Centralised arrears management
• Prudent provisioning
Business Model
• Agents remunerated based on collections
• Lending based on disposable income not asset value
• No introductory offers
Credit risk based around relationship between customer and agent, supported by
application and behavioural scoring systems
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www.ipfin.co.uk
Collections process
Field based collections Debt recovery
Wri
te o
ff –
12
we
ek
s n
on
-pa
ym
en
t
• Agent collects weekly
• Customers in arrears managed via
a combination of:
- letters
- Development Manager visits
- centralised telephone calls
• Process escalates as arrears
increase
• Central arrears management in all
markets
• Balances recovered through:
- letters
- calls
- collection agencies
- court action
• Typically collect 10 - 20% of write off
14
www.ipfin.co.uk
Prudent provisioning methodology
• Weekly Assessment
• Using third party developed actuarial models to estimate amount and timing of future cash flows
Impairment calculated
• In the event of any missed payment or portion of a payment even if agent fails to call
• No re-ageing of ‘poor’ payers
Impairment charge
• Systematic, with no management intervention
• Separate for each product in each country Models
• Formally reviewed on a regular basis to ensure reflects current performance
Provisions
Short-term loans and prudent provisioning means impairment charged to income
statement quickly
15
www.ipfin.co.uk
• Quoted UK plc on FTSE250 complying with all listing requirements
• Globally ranked in top 3 of FTSE4Good for environmental, social and corporate
governance management
• Regulated as a financial enterprise in Hungary by the PSZAF (Hungarian Financial
Supervisory Authority)
• Registered in the General Register of Non-banking Financial Institutions of the National
Bank of Romania
• In all other markets operating under local consumer credit legislation
• Proactive approach to monitoring regulatory change and involvement in policy
development
• Operate in rate cap environments (Poland 2006, Slovakia 2010, Hungary 2011)
• EU Consumer Credit Directive now implemented in all European markets
Regulation
16
www.ipfin.co.uk
18
• Strategy for growth building momentum
• Strong underlying trading performance continued
• Further improvement in Mexico
• Good returns
• Robust balance sheet and funding position
2012 highlights
www.ipfin.co.uk
19
Strong underlying trading performance
• £95.1M profit – strong underlying profit
increase of £20.3M
• Three key drivers:
1. Accelerating revenue growth
2. Impairment in middle of target range
3. Costs managed tightly
£100.5M
£10.8M
£14.9M£20.3M
£95.1M
2011 PBT Underlying
increase
Weaker FX
rates
Additional
ESR costs
2012 PBT
www.ipfin.co.uk
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Good returns
• Adjusted earnings per share of 27.6 pence
• Interest cover 3.3x
• Return on equity of 20.1%
• £25M share buyback completed
• Proposed full year dividend increase of 9%
to 7.7 pence per share
6.3p
7.1p
7.7p
2010 2011 2012
Increasing dividend
www.ipfin.co.uk
21
We lend short and borrow long
Receivables
£M
%
Borrowing
facilities
£M
%
Less than one year 627 96 16 5
Later than one year 23 4 295 95
650 100 311 100
At 31 December 2012
www.ipfin.co.uk
22
Robust balance sheet and funding position
• Fully funded to May 2015 • Headroom on bank facilities of £160M
• Further diversification of funding achieved • Local currency bond funding in all European
markets • Targeting further reductions in the cost of funding
Maturity profile of debt facilities
£M
0
50
100
150
200
250
300
350
400
450
500
2013
Q1
2013
Q2
2013
Q3
2013
Q4
2014
Q1
2014
Q2
2014
Q3
2014
Q4
2015
Q1
2015
Q2
2015
Q3
2015
Q4
2016 2017 2018
*At 6 March 2013
£228.7M
£182.7M
£39.9M
£12.3M
£6.7M
£11.2M
Total facilities £481.5M*
Bank facilities
EUR bonds
PLN bonds
CZK bonds
RON bonds
HUF bonds
www.ipfin.co.uk
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58.5%59.2%
57.8%
Target
55%
• Gearing low and stable at 0.8x
• £25M buyback completed in November
• Equity represents 57.8% of receivables
• Capacity to invest in growth opportunities
Equity to receivables
Robust balance sheet and funding position
Dec 2011 Jun 2012 Dec 2012
www.ipfin.co.uk
25
Our strategy for growth
Expand footprint
Improve customer engagement
Develop sales culture
Execution
www.ipfin.co.uk
26
• Adjacent market strategy
• Shorten J-curve
• Leverage existing infrastructure
• Reduce costs
• Favourable business environments
• Demand for shorter-term, lower value loans
• Positive economic prospects
• Controlled pilots to assess potential
• Expected £4M - £5M investment in 2013
Bulgaria
• 7.2 million population
• Retail banks dominate larger
loan supply
• Non-bank operators serving
target customers
Lithuania
• 3.2 million population
• Reduced lending by banks
• Some fast cash providers
Planned market entries in 2013
www.ipfin.co.uk
27
New product development
Criteria
• Lowest risk customers
• Customers qualify after 12
months
Impact
• Good levels of demand
• Higher average issue values
• Increased take up on longer-
term loan offers
• Lower impairment
Loans
• 90-week loan in Poland
• 100-week loan in Czech
Republic and Slovakia
Longer-term loans
www.ipfin.co.uk
28
New product development
Criteria in Slovakia
• High-quality customers
• c.6% of customer base
• Tier 1 discount after 1 year
• Tier 2 discount after 3 years
Impact in Slovakia
• Sales uplift on credit offers
• Lower yield but higher average
issue values
Scope
• Reduced interest rates for loyal
customers
• Rolled out in Slovakia, testing in
Poland and Hungary
• Further tests planned
Longer-term loans
Preferential pricing
www.ipfin.co.uk
29
New product development
Scope
• Hungary – six geographies
• Third party partnership with
QBE Insurance (Europe)
Limited
• Agents selling and introducing
insurance – qualification
dependent
• Commission paid by QBE on
sale of insurance
• Collection of premiums and
claims handling managed by
QBE
Impact
• Too early to assess
• No balance sheet risk
Longer-term loans
Preferential pricing
Home insurance test
www.ipfin.co.uk
31
Group
2012
£M
2011
£M
Change at CER %
Customer numbers (000s) 2,415 2,323 4.0
Credit issued 882.1 844.5 13.2
Average net receivables 588.3 575.5 11.2
Revenue (net of ESRs) 651.7 649.5 8.8
Impairment (176.2) (167.7) (14.3)
Finance costs (41.6) (42.9) (4.8)
Agents’ commission (74.9) (72.9) (11.3)
Other costs (263.9) (265.5) (4.6)
Profit before taxation* 95.1 100.5
Year ended 31 December 2012
* Excluding an exceptional restructuring charge of £4.8M
www.ipfin.co.uk
32
Balance sheet
Dec 2012
£M
Dec 2011
£M
Change at CER
%
Fixed assets 31.5 34.2 (9.5)
Receivables 650.3 560.4 12.7
Cash 24.2 17.9 32.2
Borrowings (310.8) (276.5) (9.9)
Other net liabilities (19.4) (8.3) (145.6)
Equity 375.8 327.7
www.ipfin.co.uk
33
Change in interest allocation
2012 Reported profit
Adjustment 2012 Adjusted
profit
£M £M £M
Poland 62.2 (7.3) 54.9
Czech-Slovakia 28.8 (1.7) 27.1
Hungary 10.1 2.4 12.5
Romania 2.2 2.3 4.5
Mexico 4.9 4.3 9.2
UK costs (13.1) - (13.1)
Profit before taxation* 95.1 - 95.1
* Excluding an exceptional restructuring charge of £4.8M
www.ipfin.co.uk
Strong financial fundamentals
49.4%
1.3x
3.2x
2009
54.5%
1.0x
3.8x
2010
58.5%
0.8x
3.4x
2011 2012
17.6% 22.2% 22.7%
Equity to receivables
Gearing
Interest cover
Return on equity
Strong cash flow and capital generation
34
57.8%
1.3x 0.8x
3.3x
20.1%
www.ipfin.co.uk
35
Our markets
Year entered
EU member?
Fitch rating
Population (M)
Customers (000s)
Dec 2012
Poland 1997 A- 38.2 821
Czech Republic 1997 A+ 10.5 383
Slovakia 2001 A+ 5.4
Hungary 2001 BB+ 10.0 268
Mexico 2003 BBB 114.8 683
Romania 2006 BBB- 21.4 260
www.ipfin.co.uk
36
Forecast GDP growth
Source: Citibank
2.0
1.3
2.8
0.9
2.0
0.7
1.7
0.3
1.3
3.93.6
3.8
0.2
1.0
2.9
0.0
0.40.7
(1.2)
(0.2)
(1.7)(2)
(1)
0
1
2
3
4
5
Poland Czech Slovakia Hungary Mexico Romania UK
2014 2012 2013
%
www.ipfin.co.uk
37
Consumer confidence
(40)
(35)
(30)
(25)
(20)
(15)
(10)
(5)
0Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
IPF European markets (weighted)
Mexico
UK Sources: Europe - EU Consumer confidence Indicator; Mexico - Reuters
2012 2010 2011
www.ipfin.co.uk
Contact
Rachel Moran
Investor Relations Manager
International Personal Finance No 3 Leeds City Office Park Leeds LS11 5BD United Kingdom
T: +44 (0)113 285 6700