Earnings call transcript: International Personal Finance sees growth in Q1 2025

International Personal Finance (IPF) reported a positive performance in its Q1 2025 earnings call, highlighting a 12% increase in customer lending and a 10% rise in closing net receivables. Despite a slight dip in annualized revenue yield, the company remains confident in its growth trajectory, which is reflected in its stock price, up 0.43% to 140 pounds. According to InvestingPro analysis, IPF currently trades near its Fair Value, with an overall financial health score of 2.32, indicating FAIR condition. The stock has shown strong momentum over the past three months, despite broader market volatility.

Key Takeaways

• Customer lending grew by 12% year-on-year.
• Net receivables increased to 885 million pounds.
• Impairment rate improved to below 9%, outperforming the target range of 14-16%.
• Secured 36 million dollars in new bank funding.
• Planning a 15 million share buyback by Q3.

Company Performance

International Personal Finance has demonstrated robust growth, particularly in its digital and home credit sectors across Poland, Romania, and Mexico. The company’s strategic expansion into digital services, such as Creditea in Mexico and new credit card products in Poland, has been pivotal. Despite the slight decrease in annualized revenue yield to just over 54%, excluding Poland, the yield strengthened to 57%, showcasing the company’s resilient financial model.

Financial Highlights

• Customer lending: Up 12% year-on-year
• Net receivables: Increased by 10% to 885 million pounds
• Revenue yield: Slight decrease from 54.7% to just over 54%
• Cost-income ratio: Stable at 61%
• Impairment rate: Improved to below 9%

Outlook & Guidance

The company expects accelerated growth in receivables, targeting an increase of 130-150 million through 2025. It remains confident in meeting market consensus for growth and net profit, with a strong focus on financial inclusion and shareholder returns. Future projections indicate a steady rise in EPS and revenue, with forecasts for FY2025 and FY2026 set at 1.26 USD and 2.02 USD respectively. InvestingPro analysis reveals that IPF has raised its dividend for 4 consecutive years and management has been actively buying back shares, demonstrating strong commitment to shareholder returns. IPF is among 1,400+ companies covered by detailed Pro Research Reports, offering comprehensive analysis of financial health and growth prospects.

Executive Commentary

CEO Gerard Ryan emphasized the company’s commitment to growth, stating, "We’re focused on delivering growth to enhance returns to our shareholders." CFO Guy noted the importance of capturing market opportunities, adding, "We want to make sure we capture that opportunity."

Risks and Challenges

• Potential increase in impairment rates as growth accelerates.
• Economic uncertainties in key markets like Poland and Mexico.
• Regulatory changes affecting digital financial services.
• Exchange rate fluctuations impacting financial performance.
• Competition from other digital financial service providers.

Q&A

During the earnings call, analysts inquired about the company’s impairment rate, which is currently below target but expected to rise with growth. Questions also focused on the impact of potential US-Mexico tariffs, which executives assured would have no significant effect. The performance of the new credit card product in Poland and expansion of retail partnerships in Romania and Mexico were also discussed, highlighting positive market reception and growth potential.

Full transcript - International Personal Finance PLC (IPF) Q1 2025:

Seb, Conference Call Operator, International Personal Finance: Hello, and welcome to the International Personal Finance twenty twenty five q one trading update briefing hosted by chief executive officer Gerard Ryan. My name is Seb, and I’ll be the operator for your call today. If you would like to ask a question, you can do so by pressing star one on your telephone keypad, or press 2 to withdraw your question. If you’re listening to the call online, you can submit a question by text using the q and a chat box in the top right hand corner of the screen. I will now hand over to Gerard to begin today’s conference.

Gerard Ryan, Chief Executive Officer, International Personal Finance: Thank you, Seth. Good morning, everyone, and thank you for joining us for our q one trading update call this morning. So I’m here today with Guy, our CFO, and together, we’ll take you through the strong performance we delivered in the first quarter. We’ll also share some color on what we’re seeing across our divisions and update you on our funding position and progress against our strategy. And as always, we’ll have plenty of time at the end for Q and A.

Now if you’ve had the opportunity to read today’s trading update, you’ll have seen that we’ve made an excellent start to 2025 and delivered good growth across all three of our divisions. We saw continued strong demand for credit from our customer segment, and I’m happy to report that we delivered an increase in customer lending of 12% year on year at constant exchange rates. Now in that, we had particularly robust performances in Poland and Romania Home Credit, and our digital businesses in Mexico and Australia continued their very strong momentum. In addition, I’m really pleased to report that Creditea, and that’s our Mexico, digital business, is now serving over 100,000 customers. And truthfully, I’d have to say, I think that’s only the beginning of their journey to becoming a very substantial part of our overall group.

As a result of our strong growth, closing net receivables increased by 10% to reach 885,000,000 at the March. And as as we look forward, we’d expect the pace of receivable growth to pick up as the year progresses. Now in the main, this will be driven by continued strong lending momentum as well as more favorable year on year comparisons, especially in Poland where our business is back in growth mode supported by the full payment institution license, but also, and this is really important, increased growth coming from Mexico home credit. Now moving on to the portfolio, we’re very pleased with customer repayment behavior, and credit quality continues to be excellent, driving the group annualized impairment rate down to just below 9%. Now as you know, this is clearly below our target range of 14 to 16%, and this puts us in a strong position to accelerate lending growth as we progress through the remainder of the year.

Our annualized revenue yield edged down slightly from 54.7% at the year end to just over 54% at the end of the quarter. And as expected, this was mainly driven by the lower yield coming from Poland. Now if we exclude Poland, our annualized revenue yield actually strengthened to 57%, which is right in the middle of our target range of 56 to 58%. Our costincome ratio held steady at 61% for the quarter, and we do expect to see this ratio start to improve as we continue to grow revenue, and most important they deliver on our investments in technology to improve cost efficiency, streamline the customer journey, and standardize our internal processes. Touching now on our balance sheet and funding position, both of which I’m pleased to say are in great shape and ready to support our goals for growth for the rest of the year plus our progressive dividend policy.

We saw a slight increase in our equity to receivables ratio from 54% to 55%, reflecting capital generation and favorable FX movements. We also successfully secured $36,000,000 of new bank funding in the first quarter, and we ended Q1 with $122,000,000 of headroom. Now for those of you who follow us regularly, you’ll have seen that we took advantage of our balance sheet strength and repaid the remaining 66,700,000.0 of our twenty twenty Eurobond at par, demonstrating our proactive approach to capital management. Our twenty twenty nine Eurobond and twenty twenty seven retail bonds continue to trade very positively, positioning us well to access the capital markets at the appropriate time given the growth that we’re expecting this year. And as we announced with our full year results, we intend to undertake a further 15,000,000 share buyback to be completed by the end of Q3 of this year.

Now as it’s just quarter one, I guess this is quite brief. So that brings me to the end of the current update. We’re focused on delivering growth to enhance returns to our shareholders. Our balance sheet is very strong with excellent portfolio quality. We have a solid funding base, and the execution of our NextGen strategy is progressing very well.

So looking ahead, our q one performance continues our excellent momentum and gives us confidence to accelerate our pace of growth and change, increase in financial inclusion, and perform successfully against our own financial plans for 2025, which I think most of you are well versed in. Now all of the details of our training statement are available on our website, and a recording of this call will be uploaded later this morning. So with that, I’m going to hand you back to Seb, and hopefully we have some questions from you that we can answer here today. So, Seb, over to you.

Seb, Conference Call Operator, International Personal Finance: Thank you. As a reminder, please press star one if you would like to ask a question. You can also submit a written question using the q and a chat box in the top right hand corner of the screen if you’re listening to the call online. Our first question on the phone lines is from Steven Payne at Peel Hunt. Please go ahead.

Steven Payne, Analyst, Peel Hunt: Good morning. Thanks for the questions. First one, I’m looking at the impairment rate. I mean, very strong performance down at nine percent, which is a long way below the sort of fourteen percent to 16% guided range. I appreciate that as the lending growth accelerates, that will move up.

But you know, will it actually get to the, the 14%, sixteen % range and what will drive that?

Guy, Chief Financial Officer, International Personal Finance: Morning, Steven, and, morning, everybody. Yes. I mean, clearly, as you can see, I mean, we’re very pleased with the impairment performance. It’s probably tracking a little bit ahead of our plans. I think in the first quarter, in terms of growth, we’ve obviously grown strongly, probably a touch behind where we were looking to be.

And that was a really slow start in January, but really momentum really picked up through the quarter. March was strong, April’s looking strong as well. You know, that that contributed to the impairment being a bit ahead. But, you know, to be honest, one of the main factors was, you know, the the the teams out in each of the markets, our field teams, the agents or customer reps, and the whole team, you know, collection performance has been very strong. So that’s why, you know, we’re we’re we’re we’re touch ahead.

I think as we go, you know, further forward, and as Gerard said, we’re looking to accelerate growth because there’s, you know, really strong demand. The businesses are performing well. And as you know, that will come with, you know, a a increased impairment. It naturally does. And I think when you then, you know, factor in the fact that both Mexico Digital is growing really strongly and its impairment rate is more around 20%, And equally Mexico Home Credit, you know, after the IT upgrade is now really starting to perform, and grow again, and they’ll come up against pretty weak comparatives at the back end of next year and and the impairment rate there is more around your 30%, you’ll see the impairment rate naturally, rise as we put through that growth.

But, you know, let’s are we on the right side of impairment in terms of our target range? Yes, we are.

Steven Payne, Analyst, Peel Hunt: Okay. Great. And, I mean, specifically on, you know, Mexico, just wondering if you’ve seen any impact on the ground there from the sort of, you know, US tariffs and impacting on the Mexican economy?

Gerard Ryan, Chief Executive Officer, International Personal Finance: No. Clearly, there’s a a lot of nervousness as you’d expect given how closely the Mexican economy is tied into The US. But that’s a two way relationship, and I think that’s something that the Americans are probably waking up to a bit more now. They if they go ahead with those tariffs in full, clearly, it would be damaging to the overall economy. It has to be said that our customer segment is a long way down the value chain, so there’s nothing that we see today.

And, truthfully, if the tariffs were to go ahead and pull, it would be some time I’d expect before we would see anything really impacting our customer segment. It’s it’s clearly something we hope will be avoided. I do think Scheinbaum is playing a clever game and trying to appease Trump. Let’s see where that gets to. I I think the big exposures are for specific industries, so salmon manufacturing, auto, stuff like that, a lot of agricultural stuff.

So it tends not to be where our customers are, but, hopefully, something to be avoided.

Steven Payne, Analyst, Peel Hunt: Okay. Great. Thank you.

Seb, Conference Call Operator, International Personal Finance: Thank you. Our next question is from Ray Miles at Panjer Liberum. Please go ahead.

Guy, Chief Financial Officer, International Personal Finance: Morning all. I wonder whether we could just touch on Poland and the credit card. Obviously, this is one of the key routes for growth this year. So how’s everything bedding down now, to the, the May 1?

Gerard Ryan, Chief Executive Officer, International Personal Finance: Morning, Ray. I’m sorry for missing you yesterday. Going well, actually. Obviously, the big thing for us was getting that large payment institution license and not to rehash all things, but it’s important to contact here, which is that with the smaller license, we were put in the NVIDIA’s position that we had to choose between looking for new customers and encouraging existing customers with cards to actively use their cards, which is the lifeblood of a card portfolio. So now that we have the large license, we can ignore those constraints, and it takes a little time just to warm up your existing portfolio.

So in terms of new customers, all good. Terms of the existing portfolio and ensuring the customers understand how they can actively use the card, it just takes a little time. But overall, I’d have to say we’re very pleased with the portfolio. We’re incredibly pleased, and I I still in some ways, very surprised at how actively, a large cohort of the customers are actively using that card every week of the month. And and that bodes well for having a a live portfolio as we go forward.

In terms of the quality of the portfolio, I’d have to say really very, very good. And to all intents and purposes, mimicking the the quality of an installment loan portfolio. Not surprising given that the the the card is designed to act like a an installment loan, I e, you make a drawdown, and then you have to repay that drawdown in 11 equal installments. So it’s not like the Evergreen that you and I might be used to. But overall, I’d say we’re we’re very pleased, and I think as we go through the year, we will see an acceleration of activity as we, I suppose, fire up the existing portfolio as well as bring on new customers.

Steven Payne, Analyst, Peel Hunt: That’s great. Thank you.

Seb, Conference Call Operator, International Personal Finance: Thank you. Our next question comes from Gary Greenwood at Shaw Capital. Please go ahead.

Gary Greenwood, Analyst, Shaw Capital: I just had one question around Romania, which I think you called out as having delivered strong growth in the first quarter. I presume that’s largely reflective of the retail partnership that you’ve got there. So maybe if you could just talk a little bit about how those are going and then also, sort of plans to expand that into other markets, given how well it seems to be going in Romania. Thank you.

Gerard Ryan, Chief Executive Officer, International Personal Finance: Yeah. Hi, Gary. So, yeah, there are a number of things going on there. The home credit business, as you would know it, is performing very well. We’re really pleased with that.

And then in addition to that, you have two new businesses, one of which you referred to, which is the retail partnerships, and the second is the digital business because, you know, our belief is that wherever we have home credit, we should have an embedded digital business to give our customers a broader range of options to access us. So both the digital and the partnerships pharmacists in retail are doing very nicely in terms of bringing to the volume. As we’ve discussed before, when you open up a new distribution channel, you automatically skew the customers that you bring through that channel, and so you have to calibrate a new scorecard first. Now in terms of partnerships, we’re doing very nicely on that, and digital is coming up the track as well. So I would say versus our internal plans, we’re really pleased with where we’ve got to.

At the end of twenty four, we did some tightenings on, one of those channels just to make sure the quality was right. We’re now seeing that quality improve, and we were pleased to open it up again to more volume, I suppose. All in all, I’d say we’re really happy with the performance of that business. In terms of where do we go next with retail, well, clearly, we’re already in Mexico, and we’ve signed up over 50 retailers in Mexico, and there’s a lot more to come. The issue in Mexico is that you can get absolutely inundated, with applications.

The the trick there is to sift for the good quality ones, and that’s what we’re doing at the moment. And, again, it’s back to the same thing, building your scorecard that’s appropriate for the channel through which you’re acquiring the customers. So in, in Romania, now in Mexico and building from there and, you know, my view is that it’s a perfectly appropriate channel. The retail channel is a perfectly appropriate channel for practically all countries where we have home credit. Maybe Hungary might be a little bit more difficult because of rate caps, but other than that, I would see it being in all the other, home credit countries.

Gary Greenwood, Analyst, Shaw Capital: Great. Thank you very much.

Seb, Conference Call Operator, International Personal Finance: Thank you. So we’ll now move on to questions we’ve received via text. First here from James Lowen at J. O. Hambro Capital Management.

How much will we push lending growth versus where you were at the start of the year given impairment trends Poland seems very positive? Can you reconcile that to the guided B in profit at the time of the changes?

Guy, Chief Financial Officer, International Personal Finance: Morning, James. Yeah. In terms of, growth, as we said, you know, the we started the business the the quarter really well, momentum’s really positive, and as you say, the impairment is in really good shape. So, with demand as it is and with the momentum we’ve got in the business, we want to make sure we capture that opportunity. And I think we guided to pretty strong growth, anything 130,000,000 to 150,000,000 receivables growth this year, which is still firmly our aim.

And effect, we want to invest a little bit of that impairment side into making sure we do capture the opportunity. So if it’s a question around the numbers in the market or consensus, we’re still very comfortable with where the market is both in terms of growth and the net profit line as well. So, all really happened. As Gerard mentioned, clearly, the first quarter for Poland was reestablishing itself post getting the full payment license, and we fully expect now the business to start picking up growth as well.

Seb, Conference Call Operator, International Personal Finance: Thank you. Moving on to our next question here. Can you please provide more color on revenue yield and a sense as to what extent the runoff of the back book in Poland is dragging down the yield? How big is the back book in Poland, and how much of it ran off in q one?

Guy, Chief Financial Officer, International Personal Finance: Yeah. Quite a number of things in that. I mean, I I would say in terms of Poland now, I would say, you know, there’s there really isn’t a back book anymore. It’s it’s pretty much all a front book, you know, that’s being written post the, the changes in in the rate cap that we saw both on the loans and on credit cards. So, from our perspective, I think we’re seeing the end of the revenue yield degradation that we’ve seen in Poland.

In terms of the group as a whole as you move forward, we’d fully expect to be, you know, obviously, you know, the the Polish revenue yield, probably something more in the mid forties. So you might say that would bring the group down a little bit as we go forward, but then you you know, more than compensated for that, you’ve got the growth that we’re delivering in Mexico digital where the yield is more near 60%. And clearly, you’ve got Mexico Home Credit where the yield is more in the mid-80s to 90%. So net net, we’d, you know, we expect the yield to, move to back between, you know, the the group’s target as we as we regrow, you know, particularly the Mexican businesses.

Seb, Conference Call Operator, International Personal Finance: Thank you. Next question is from Penelope Fitzhurbert at Guy Butler. Should we assume headroom reduced by the amount of the bond redemption just after the quarter end?

Guy, Chief Financial Officer, International Personal Finance: No, it was actually part of the number. So, our headroom of $122,000,000 is after that. I mean, clearly, we’ll be funding the share buyback. So you can assume $50,000,000 of the hundred and $22,000,000 will be going to that. The other 100,000,000 will be funding growth.

We’ve got some pretty strong growth targets for the remainder of the year. That funding will support that. And then clearly, as you know, we always look ahead. And so we’ll look to be active in the market again. Gerard mentioned in the summary, our bonds are trading really positively, and that puts us in really good stead to return to the market sort of Q2, Q3 to make sure that we’re funding 2026.

Seb, Conference Call Operator, International Personal Finance: Thank you. Moving on to the next question from Gary Stockdale at Vesta Wealth. What is the revenue yield target for the Polish business moving forward?

Guy, Chief Financial Officer, International Personal Finance: Yeah. I think I think I actually haven’t said that one previously. You know, something more in the mid forties, for Poland, Poland Home Credit. I think as we talked about earlier, the the credit quality is is very good in Poland. So, you know, its impairment rate will be, you know, sort of sort of high single digits, to go with that.

So, yeah, somewhere in in in the mid forties is probably about right. You know, mid to mid to late forties would be the target for Poland going forward.

Seb, Conference Call Operator, International Personal Finance: Thank you. Last question we have here is from David Butler at Alliance. Could you please say something about the drivers of the strong demand you mentioned, e. G, new customers coming on board versus existing customers increasing their balances or sustaining higher balances?

Gerard Ryan, Chief Executive Officer, International Personal Finance: Sure. Good morning, David. It’s a combination, as you’d expect, in a business like ours. We did mention at the the top of the call just how pleased we are with performances in certain businesses. You know, I’d have to say Romania and Poland, really strong growth, and it’s a combination of new and existing customers.

But on on the the existing customers, we need to bear in mind that practically in all our countries now, there are regulations around debt to income, so thresholds that you can’t breach. So despite customers might want more money, if their income doesn’t support them, we won’t lend them more money. So we do need to actively generate new customers, and that’s proving very successful for us. Then you have on the digital businesses, Australia and Mexico, Two powerhouses, and, perhaps, they’re absolutely delighted with their performance. And the fact that Mexico Creditea, that’s our digital business there, has just kicked over a hundred thousand customers, whereas, you know, it’s not that long ago.

We were talking about 60,000 customers. Feels really, really positive to us. Now the other thing is that with the channels we spoke about a minute ago with Gary, from Shore, that on the retail side, what we’re finding on retail and digital in Romania is that upwards 90% of the customers coming to us from those channels are new to us customers, never seen before. And that’s really encouraging because what we find is that once customers come to us one time, that actually a good proportion of them fully, probably two thirds, come back for a second or further loan. So very encouraging news all around, and I’m really positive about the impact that the new distribution channels can have for the business in acquiring new customers.

Seb, Conference Call Operator, International Personal Finance: Thank you. And we just had a follow-up here. On costincome ratio, are there any drivers in Q1 that drove the high number?

Guy, Chief Financial Officer, International Personal Finance: Well, I mean, the costincome ratio was flat, which is, in in one, which is, you know, cost being, the the revenue yield coming off a little bit of of Poland as we as we described, and cost being, you know, pretty pretty pretty flattish year on year. So that’s why the number is is is 61. Now if you look on a go forward basis, clearly, you know, with the shrinkage we had in in Poland over the last two years, which is, you know, circa hundred hundred million of receivables. We need to regrow those. We’ve always said that.

That’s why some of our capital is set aside to get the business back to where it was. So and as we deliver the strong growth this year and next year, we keep the revenue yield, you know, in our target range, particularly through the growth in the Mexican businesses, we’d expect that cost income ratio, you know, to obviously reduce to our target. And you obviously overlay to that, and we’ve talked quite extensively about, you know, a lot of the efficiencies that we’re looking at driving through the business, you know, some of it through technology, others through, you know, ensuring that we share best practice well throughout the group. So that’s all on track. So, you know, the the cost income ratio is in line with where we expect it to be.

Is it where we want it to be ultimately? No. And that’s why we’re looking at, you know, growing the business and maintaining our, you know, tight focus on cost. But we fully expect that over the next two years, we’ll be getting back down to our target range.

Seb, Conference Call Operator, International Personal Finance: Thank you. At this time, we have no further questions in the call. So I’ll just hand back

Gerard Ryan, Chief Executive Officer, International Personal Finance: to Gerard for any closing remarks. Thank you very much. Thank you, everybody, for joining us this morning. Obviously, all of these details will be up on our website, including this call very shortly. Just to round out, we’ve had a really good quarter, really good momentum, and the momentum built as we went through the quarter.

So I’m particularly optimistic as we face into the rest of the year. You know, the great thing about this business is we have a very clear purpose. Our people love working in this business. We have a lot of people who serve ten, twenty plus years, and they love it like the day they walked into the business. And I’ve been out in, both Poland and Hungary earlier this week, and, you know, it’s great to see the interaction between our people and our customers.

So it bodes well for the future of this business, and hopefully you can see that coming through in the results today. So thank you very much for joining us. If you have any further detailed questions, you can obviously contact us directly, the details are at the bottom of the release we put out this morning. But thank you very much. Enjoy your week.

Guy, Chief Financial Officer, International Personal Finance: Thank you.

Seb, Conference Call Operator, International Personal Finance: This concludes today’s conference call. Thank you all very much for joining, and you may now disconnect.

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