Annual Report and Financial Statements 2021
Building a better
world through
financial
inclusion
Effective rebuild strategy delivered
strong performance
Contents
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Find out more at www.ipfin.co.uk
Customers (‘000)
1,727
Credit issued (£m)
£982.1m
Closing receivables
(£m)
£716.8m
Profit before tax
(£m)
£67.7m
Earnings per share
(p)
18.8p
Dividend per share
(p)
8.0p
Alternative Performance Measures
This Annual Report and Financial Statements provides alternative
performance measures (APMs) which are not defined or specified under
the requirements of International Financial Reporting Standards. We believe
these APMs provide readers with important additional information on our
business. To support this, we have included an accounting policy note on
APMs on page 121, a reconciliation of the APMs we use where relevant
and a glossary on pages 160 to 161 indicating the APMs that we use,
an explanation of how they are calculated and why we use them.
Percentage change figures for all performance measures, other than profit
or loss before taxation and earnings per share, unless otherwise stated,
are quoted after restating prior year figures at a constant exchange rate
(CER) for 2021 in order to present the underlying performance variance.
International Personal Finance plc (IPF)
Company number: 6018973.
Strategic Report
IPF at a glance 02
Chair’s statement 04
A purpose-led business 06
Business model 14
Market review 16
Chief Executive Officer’s review 18
Our strategy 22
Key performance indicators 24
Operational review 26
Financial review 32
Stakeholder review 36
Environment 46
Task Force on Climate-related
Financial Disclosures 48
Non-financial information statement 51
Principal risks and uncertainties 52
Directors’ Report
Chair’s introduction 60
Our Board and Committees 62
Governance at a glance 64
Role of the Board and its Committees 66
Nomination Committee Report 79
Audit and Risk Committee Report 82
Technology Committee Report 88
Directors’ Remuneration Report 90
Directors’ Responsibilities 105
Financial Statements
Independent Auditor’s Report 107
Consolidated income statement 116
Statements of comprehensive income 116
Balance sheets 117
Statements of changes in equity 118
Cash flow statements 120
Notes to the Financial Statements 121
Supplementary Information
Alternative performance measures 160
Shareholder information 164
2
1
2
0
1
9
1
8
1
7
1,727
1,682
2,109
2,301
2,290
2
1
2
0
1
9
1
8
1
7
716.8
669.1
973.6
992.8
1,056.9
2
1
2
0
1
9
1
8
1
7
(28.9)
32.2
33.8
20.2
18.8
2
1
2
0
1
9
1
8
1
7
982.1
772.2
1,353.0
1,360.6
1,301.5
2
1
2
0
1
9
1
8
1
7
67.7
(40.7)
114.0
109.3
105.6
2
1
2
0
1
9
1
8
1
7
–
12.4
12.4
12.4
8.0
2021 highlights
Our customers turn to us to fulfil their plans when
it really matters. They are looking for a trusted
partner to provide simple, convenient and
affordable products. As a group of people who
are often financially excluded, we play a vital role
in their lives by responsibly providing unsecured
credit and a variety of tailored insurances to help
them and their families.
Annual Report and Financial Statements 2021 1
An international provider
of consumer finance
IPF at a glance
A robust investment proposition
IPF creates long-term value beyond profit and returns by
striving to have a positive effect on all our stakeholders.
Our history of growth and innovation has successfully
helped meet the credit needs of over 14 million
customers, created genuine career opportunities
for our people to develop and grow, and generated
more than £1 billion of profit
1
in the past decade.
1. Profit before tax and exceptional items.
1.7m
customers
Highly responsible
and financially inclusive
A specialist market-leading
lender, offering a growing sector of
underserved consumers access to
regulated credit in a responsible
way and at a fair, transparent price.
33%
credit issued
growth
Substantial opportunities
for long-term growth
Increasing demand, a scalable,
leading-edge digital business
and new products and distribution
channels offer attractive,
sustainable growth prospects.
10.2%
impairment
as a percentage
of revenue
Effective risk management
Successful track record of
managing key risks including
credit, regulation, competition
and liquidity. Well-developed
risk management framework
and processes, aligned
to strategic objectives.
51.2%
equity to
receivables
Strong financial profile
Highly cash and capital generative
business with a robust balance
sheet and strong funding position,
which provide a solid foundation
to support long-term growth and
a progressive dividend policy.
200+
years of financial
services experience
within the Board
and senior
leadership team
Experienced management team
Purpose-led and values-based
organisation, led by highly
experienced and proven team
with deep industry knowledge.
2
Strategic Report
International Personal Finance plc
Home credit
Our home credit customers often have low, fluctuating
incomes or a limited credit history meaning they may find
it difficult to access finance from banks or digital lenders.
They are looking for small loans with transparent costs
and affordable repayments, to help them manage the ups
and downs of their budget or to help run their microbusiness.
Our customer representatives, who visit customers at home,
understand their personal circumstances and needs in a way
that is not possible for remote lenders. Our loans are priced
fairly and we reward loyal, high-quality customers with
preferential pricing and discounted offers. We also operate
a ‘low and grow’ policy, only increasing credit offers
to those with a proven repayment history and, unlike other
providers, late payment fees are not a core revenue stream.
Europe
Poland, Czech Republic, Hungary and Romania
Mexico
810,000
customers
£285m
revenue
95,000
customers
£48m
revenue
168,000
customers
£70m
revenue
654,000
customers
£146m
revenue
Established markets
Estonia, Latvia and Lithuania
New markets
Poland, Australia and Mexico
IPF Digital
Our digital customers are looking for an affordable, end-to-end
digital service from a speedy application and decision for
credit, to being able to manage their finances online at any
time. They generally have medium incomes and an existing
credit history which enables them to borrow remotely. Our
consumer-focused, leading-edge lending platform enables
customers to apply for and manage their finances in a way
that suits their lifestyle, whether that’s on their mobile, tablet
or PC. Customers can choose from a range of innovative
products, from open-ended revolving credit lines to our
mobile wallet which features online payment transactions
and value-added services offering a competitive advantage
within our customer segment.
Home credit
Home credit and IPF Digital
Geographically diversified business models
evolving to meet changing consumer needs
Australia
Europe
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Poland
Romania
Mexico
IPF Digital
Products and features
– Cash loans with customer representative service
– Money transfer loans direct to customer bank account
– Microbusiness loans
– Home, medical and life insurances
– Weekly and monthly repayments
– Typical loan value £500 repaid over 14 months
Products and features
– Revolving credit line products
– Mobile wallet including online payment features
– Instalment loans with terms up to three years
– Flexible repayment schedules
– Average credit line principal outstanding £800
– Customers served online and through sales partners
Annual Report and Financial Statements 2021 3
My first full year as the Chair of IPF was as full of surprises
as my early months, but I am very pleased to say the Group is
healthy, growing and remains intensely relevant to the needs
of millions of people across the world. I would like to start by
saying thank you to all our colleagues for what they have
achieved during extraordinary times. Elsewhere in this report,
my colleagues discuss our continuing recovery from the
pandemic and return to financial health, not least marked by
the resumption of dividends, the work we do with colleagues
and the positive outlook for the future. Here, I shall focus on the
themes the Board examined and contributed to as part of its
governance remit in 2021, many of which will continue in
future years too.
First is our quest to fulfil our purpose of building a better world
through financial inclusion, and ensuring strategic relevance
– in other words, being sure that from Mexico City to Warsaw
and Sydney to Bucharest, we offer solutions which are
affordable, properly explained and fit our customers’ budgets.
I will call out five aspects which the Board has reflected upon
and together, we think of these as the health of the business.
1. Data gathered on our customer representatives’ attitudes
to their work and their view of customer satisfaction shows,
tellingly, an 84% “pride ratio”. They believe that what we
provide is vital, valued and good value. Of all the extensive
compliance, internal audit and risk assessments we carry
out as a regulated firm, this measure is my favourite. It’s an
unfiltered index of the integrity of what we do.
2. Some lenders are said to be expensive or poor value. I don’t
believe that to be true of our business. One very arresting
fact is that we have around one million customers who
purchase insurance from us because we are by far the
least expensive provider in their countries and for some the
only accessible option. The Board monitors claims ratios
closely to keep ourselves assured that customers choosing
our insurance are better protected as a result of the
products we provide.
Chair’s statement
“I remain excited about our
reason for being, or purpose,
which is to offer people
with modest or intermittent
incomes access to loans
and insurance in countries
where banks will rarely
consider them. Our many
checks and surveys assure
us that our offering in all our
markets is professionally
provided, transparent
and fairly priced.”
Stuart Sinclair
Chair
3. We have significant growth potential within our existing
footprint via product and brand extension, and we are
expanding our hybrid services which blend a mix of home
credit with digital services. There is also growing demand
for credit from our customer segment, and recent data
confirms we remain relevant to consumers’ needs.
– We now attract younger and often more affluent consumers
suggesting that our offering and the increasingly popular
hybrid ways of doing business, are attractive to a new
generation. This demonstrates the elasticity in a set of
brands that we have nurtured over many years.
– The way new customers like to deal with us is increasingly
digital. We are evolving from a provider of cash to
consumers into a variety of modes, increasingly digital, but
always at a pace set by the customer. The successful roll
out of our MyProvi app gives our representatives extensive
digital capability while visiting customers, and underpins
a seamless and fast service to our home credit customers.
4. We like the way that our home credit customer representatives
are incentivised. Most of their reward is paid in line with the
money they collect, not the loan value they originate, which
means they are always focused on affordability when they
offer credit. A household which cannot afford to repay their
loan from the outset is one where our customer representative
has served no purpose, and certainly not one which we
benefit from: almost uniquely in the lending industry, we do
not rely on penalty income to enhance our financial results
and we prefer to work with our customers to get them back
on track, rather than increasing their overall commitments.
5. Risk management and handling challenges obviously also
fall to the Board, assisted by the Audit and Risk Committee
and the executive risk teams. We have to protect the funds
entrusted to us by shareholders and bondholders, and we
must ensure that the operational risk inherent in managing
large, complex operations and IT projects across multiple
jurisdictions, are well controlled.
Taken together, I believe the Board has sought out and seen
evidence which confirms the vitality and value of our offer
across all our businesses.
Conducting business responsibly
International Personal Finance plc4
Strategic Report
Our purpose
Building a better world through financial inclusion.
Our strategy
Guided by our purpose, our strategy leverages our
market leadership and excellent execution to generate
strong returns, whilst making significant customer-
driven investments in our future.
See pages 21 to 23
Stakeholders
Considering stakeholder views and needs in our
decision making.
Responsible lending principles
Lending responsibly is core to the long-term
sustainability of the business and is one of our
key values, underpinning everything we do.
Our values
Guide our actions and the way we do business.
We are responsible
Taking due care in all our actions
and decisions.
We are respectful
Treating others as we would like to be treated.
We are straightforward
Being open and transparent in everything we do.
People and stakeholder engagement
Our Workforce and Stakeholder Engagement director,
Bronwyn Syiek, continues to provide the Board with valuable
insight into the opinions, wellbeing and concerns of colleagues.
Our Care Plan, which was designed specifically to support the
wellbeing of our people and their families during the pandemic,
has made a material difference to the wellbeing and confidence
of thousands of colleagues - this has been crucial given
the continued changes in the way we worked during the
pandemic. The Board has furthered its work on stakeholder
engagement, more of which is covered on pages 36 to 45.
Purpose and ESG
Our purpose encompasses all aspects of ESG and drives
our actions to ensure that our business is responsibly run
and sustainable. On our social impact, we provide a service
which is unusual, vital but difficult to fulfil. Indeed, when
I visited some customers’ homes in Budapest earlier this year
I was struck by the sympathetic and professional way our
customer representatives deal with people seeking transparent
borrowing options and explaining the obligations they are
taking on. During 2021, we also developed our climate
change road map to support the disclosures recommended
under the Task Force on Climate-related Financial Disclosures
and enhanced the Group’s environmental strategy.
Board changes
Richard Moat and Cathryn Riley stepped down from the Board
in April and Justin Lockwood, CFO, left the Group in July. I would
like to thank all three for their significant contribution and wise
counsel. Richard Holmes was appointed Senior Independent
Director and Chair of the Audit and Risk Committee and
Deborah Davis chairs the Remuneration Committee – both of
whom are proving to be worthy successors. I am also delighted
that in April we will welcome Gary Thompson as CFO. The Board
has a good level of diversity by gender and background,
comprising individuals who have worked in at least three
countries each, are very familiar with life in middle-income
countries, and have strong technology exposure. I believe
it is a Board well suited to the tasks ahead.
Outlook
The pandemic has illustrated the essential role our business
plays in helping underbanked and underserved communities
around the world. Despite continuing uncertainty ahead,
serving customers during their good and more challenging
moments, as we have done for the past 25 years, will ensure
we generate further sustainable returns for shareholders and
make a positive contribution to our colleagues, communities,
business partners and other investors.
Stuart Sinclair
Chair
Successfully executing on strategy
Shareholders are vital in our stakeholder mix, and I am
delighted to report excellent growth and a strong financial
rebound, demonstrating the successful execution of our
rebuild strategy. We delivered a £108.4 million swing in profit
before tax to £67.7 million with all divisions contributing to
this excellent performance. Considering this performance,
balance sheet strength and growth outlook, the Board is
recommending a final dividend of 5.8 pence per share,
bringing the full-year dividend benefit to 8.0 pence per share.
We continue to stay in touch closely with shareholders and
value the engagements we have throughout the year.
Annual Report and Financial Statements 2021 5
Playing a key role
in financial inclusion
Credit market structure
Working towards fulfilling the
UN’s Sustainable Development Goals (SDGs)
Enabling people to be part of the regulated financial
system and create a credit footprint makes an important
contribution towards tackling poverty, improving
inequality and achieving some of the United Nation’s
SDGs. A key part of our ESG journey is our intention to
align with a number of the UN’s SDGs from 2022 onwards,
demonstrating how our purpose, business strategy and
people contribute to these important goals.
Grey market
Unregulated lenders
Banking institutions
Central banks
Investment
Retail and commercial
A purpose-led business
A greater need for financial inclusion
Without the ability tobe a part of the regulated financial system,
people find it difficult to save, obtain fair-priced credit or start a
business. Access to regulated credit and insurance products can
help individuals and families plan for upcoming events, deal
with unexpected emergencies, help expand a microbusiness
and seek peace of mind with health and life cover – all of which
can contribute to the quality of their lives.
It is estimated that 1.7 billion people worldwide are unbanked
and as such excluded from day-to-day financial services. These
consumers may not be well served by the financial services
sector for a number of reasons:
– They work hard but their income is difficult to verify.
– They have never borrowed before and have no
formal credit history.
– They have defaulted on a credit agreement in
the past resulting in a damaged credit history.
– They do not have a bank account.
– They lack internet access excluding them from
digital services.
– They live in a rural area and access to a bank is difficult.
– The amount they wish to borrow and their repayment
schedule is not of interest to a bank.
How we are making a better world for our stakeholders
International Personal Finance
Non-bank financial institutions
Savings and loans
Insurance
Credit unions
We provide an entry
point to regulated
consumer finance
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We start the process for mainstream financial inclusion
for underserved consumers
Our positive social contribution extends to the wider
economy. Our customer representatives have a sense of
pride in being connected to people in their communities
and helping them obtain regulated credit. We also provide
exciting career opportunities for our colleagues, invest in
and support our communities, innovate with supplier
partners to deliver growth and, as a responsible taxpayer,
we believe in contributing our fair share to society in the
markets in which we operate.
Providing access to regulated credit in a responsible
way, when it really matters. We give consumers with low
to medium incomes a much better alternative than the
unregulated “grey” market.
International Personal Finance plc6
Strategic Report
Providing the help for the things
that matter most
Elena is a mother of three children
who works hard as an EU funding
consultant and accountant in
Romania. Our loans have helped
her overcome short-term financial
problems and also invest in her
children’s education. With a very
limited credit history, Elena first chose
to take a loan with us when she
urgently needed to repay a gas bill
that she hadn’t been able to cover.
She recently returned for a loan to
support her children’s education,
helping to prepare for the new
school year and pay for school trips,
something Elena sees as an investment
in their future. “Many people say these
are costs but, from my point of view,
they are an investment if you do
something good with the money.”
51%
of home credit customers choose to
return to us within 36 months of taking
their previous loan
accessible
credit
Connecting our
customers to
Annual Report and Financial Statements 2021 7
A trusted,
responsible lender
Responsible lending principles
We pride ourselves on being a responsible, ethical
and trusted lender. This approach starts with putting
the needs of our customers at the centre of everything
we do. Our customers trust and partner with us to help
them access credit and we do this in a supportive
and fair way. This understanding approach is central
to building strong, lasting and personal relationships
with each of our customers. They appreciate our
personal service, open conversations and respect,
especially when their circumstances change and they
need some flexibility with their repayment schedule.
A purpose-led business continued
Home credit
customer journey
Gender of our home credit customers
■
Female 62%
■
Male 38%
Behaving ethically and lending responsibly are core
to the sustainability of our business model, and are
embedded in everything we do, from strategic decision
making and product design to the millions of credit
checks and everyday interactions we have with
customers each year.
Advertising and marketing
We advertise our products in a clear, jargon-free
manner on TV, radio and online, complying with
the appropriate information requirements and
advertising ethics codes in each market.
Affordability
We thoroughly assess a customer’s ability to repay
the loan through customer representative visits,
credit bureau checks, application and behavioural
scorecards and advanced ‘Know Your Customers’
tools. We won’t offer a loan to a customer if we think
they will not be able to afford the repayments.
Product suitability
We provide customers with products that are best
suited to their needs, adjusting prices and credit
terms to ensure affordability.
Pricing
We offer customers fair and transparent pricing with
loyal, high-quality customers offered preferential
pricing and discounted products. Late payment
fees, if used, are designed to re-engage with
customers rather than as a primary revenue stream.
Customer communications
We communicate with customers in a clear manner,
uphold their right to confidentiality and have robust
processes to ensure data protection security. We
select and train our customer representatives to
serve customers to a high standard.
Collections and debt recovery
We collect loan instalments responsibly and at a
time to suit our customers. We do what we can to
avoid affecting a customer’s credit history adversely,
and in the case of external debt recovery we only
engage with reputable agencies.
Attracting customers
– Word of mouth recommendations
– Targeted advertising on TV, radio and online
– Repeat lending offers
– Visits by customer representatives
Loan request
– Simple and straightforward application
– Decision in principle through a customer
representative, online or hybrid offer
– Transparent costs and terms
– Personal customer relationships support
access to credit
Credit scoring
– Thorough affordability and creditworthiness
assessments
– Application and behaviour scorecards,
supported by variety of ‘Know Your
Customer’ solutions
– Help build credit score to access
future credit
Loan issued
– Cash loan delivered to customer’s
home or bank account
Repayments and managing arrears
– Strong customer relationships support
regular repayments
– Affordable payments via customer
representative, bank transfer and pay links
– Flexible in forbearance, respectfully
understanding the customer’s circumstances
– Customer representatives paid commission
primarily on collections
8
Strategic Report
International Personal Finance plc
Providing opportunities
to build businesses
and support livelihoods
With an ambition to be successful,
Norma used a loan from Provident
to invest in starting her small business
in Mexico. She had considered other
financial institutions offering group
credit but was keen to take out an
individual loan in her name alone.
We were able to arrange a transparent
and affordable loan which has helped
Norma to develop her microbusiness
and grow more quickly. As Norma
explains: “With the loan from Provident,
my business has advanced and
grown, and everything is going well.”
How customers use their loans
– Smoothing the weekly budget
and unexpected expenses
– Healthcare
– Household appliances and repairs
– Family celebrations and education
– Developing their microbusiness
£500
typical home credit loan
accessible
credit
Connecting our
customers to
Annual Report and Financial Statements 2021 9
technology
Connecting with our
customers through
Accessing credit online was fast
and flexible
Inga is an IPF Digital customer who
works in a Covid hospital ward in
Lithuania. Over the years, there have
been occasions when she faced
unexpected expenses and it’s at these
times that her Credit 24 credit line
proved to be the crucial helping hand
she needed. Inga found IPF Digital’s
services simple and straightforward,
explaining that as soon as the funds
were required, she simply tapped into
her account and immediately drew
down against her pre-agreed credit
limit, borrowing the exact amount to
pay for the things she needed. Inga
always tries to pay the full repayment
due, and this supported her most
recent application for a credit line
upgrade which provides a larger
credit facility to help out in future.
How customers use their loans
– Holidays
– Home improvements
– Healthcare and medical expenses
– Household goods
68%
of IPF Digital customers using
our credit line offering
A purpose-led business continued
International Personal Finance plc10
Strategic Report
Providing a service tailored for our customers
The way we serve our customers is tailored to meet their
unique personal needs and financial circumstances.
Personal service: Our personal face-to-face relationships with
home credit customers distinguish us from most other financial
services providers, and deliver customer satisfaction, retention
and growth. This regular contact helps customers to stay on
track with their repayment schedule. We are also in regular
dialogue with our digital customers whom we reach across a
range of digital channels. Knowing our customers so well helps
us to make better affordability assessments, thus allowing us
to approve more loans, further supporting financial inclusion.
Responsible and inclusive: Our strict affordability checks made
every time we grant credit, ensure that customers do not take
on debt they cannot afford. We support our customers’ credit
journey by initially lending smaller amounts over shorter periods
of time. As they prove their ability to repay their loan, they build
a positive credit history with us and the credit bureau, thus
enabling more credit choice in future including larger loans,
longer terms and access to new digital products. In our home
credit business, our customer representatives are rewarded
primarily on collections so it is in their interest to lend prudently.
In addition, all colleagues undertake annual ethics training to
ensure our business conduct and relationships are of the
highest standards.
Forbearance flexibility: When a borrower faces difficulty in
repaying their loan, we take a sympathetic, flexible approach
to rescheduling repayments or we can offer a payment
holiday if appropriate until they get back on track.
Improving our customers’ credit profile
We are creating a flexible path for customers to journey
between our home credit and digital offerings, if their financial
circumstances and credit history allow. We are in the unique
position to offer a human touch to the credit assessment
process through our home credit service which is particularly
well-suited to those new to credit or with a damaged credit
history. We see that, over time, we can help good paying
customers build a credit history that may open the door to
remote digital credit, or a hybrid service, tailored to their needs.
We now provide home credit alongside digital credit in three
markets – Poland, the Czech Republic and Mexico. For those
applying for digital credit but whose credit history precludes
this, we can offer to complete their application with one of our
representatives. This enables these customers to access the
credit they were looking for and supports our efforts to secure
their custom. We have also started to enable some of our
customer representatives to support digital customers with
repayment difficulties, by helping them get back on track
before returning to a remotely repaid loan. We intend to
extend these benefits to more customers as we introduce
digital offerings in Hungary and Romania.
IPF Digital
customer journey
Gender of our IPF Digital customers
£800
average outstanding credit line principal
■
Female
50%
■
Male
50%
Attracting customers
– Digital marketing and traditional media
– Customer relationship
management activities
Loan request
– Simple and straightforward application
– Transparent costs and terms
– Online or via sales partners including online
brokers and comparison sites
Credit scoring
– Rapid credit scoring and thorough
affordability checks
– Credit bureau
– Internal databases and statistical models
Credit issued
– Money transferred to bank account
– Customer notified by text on transfer
Repayments and managing arrears
– Active communications process
to encourage repayment
– Flexible and affordable repayment schedules
– Final demand at 60-90 days past due
Annual Report and Financial Statements 2021 11
We have always had a great sense of purpose,
providing credit to underserved consumers in a way
that is responsible and sustainable. But where are
we going from here? We are on a journey to evolve
the business: to balance the value we create for our
customers, colleagues and the communities where
we live and work; and to balance sustainable,
profitable growth with the positive contribution we
deliver to society through all our stakeholders, today
and into the future.
Our purpose journey
In taking steps to strengthen ownership of our purpose and
ensuring the long-term sustainability of the business, we
undertook an extensive engagement exercise in 2021. We
listened to all our stakeholder groups to understand why IPF –
and our credit brands – matter to them. Our conversations
with customers and colleagues as well as members of our
regulatory, community and investor audiences helped us
develop the statements on page 13, which are how we will
remind ourselves to consider all our stakeholders equally and
will act as a guide to balance their interests in everything we do.
We’re now building on all the great things our business
stands for and, reflecting on what our purpose means to our
stakeholders, we will continue our journey of improving our
day-to-day work from how we serve customers and design and
market products, to the way we make decisions, treat each
other and support our communities. We are also starting to
look at how we will monitor and measure purpose to make
it tangible, calculate returns and improve or maintain key
performance indicators.
What makes us proud
Our ability to serve low-income
customers responsibly through
a personal connection
Thorough affordability checks,
fair pricing and transparent
agreements
Being flexible and understanding
if customers have difficulties
making repayments
Customer representatives reward
is aligned to our customers’ ability
to repay
Our colleagues demonstrate
our high ethical standards in their
daily interactions
We are actively engaged in the
communities we serve
Care for our customers is reflected
in our strong Net Promoter Scores
Being a responsible
business is important to us
A purpose-led business continued
International Personal Finance plc12
Strategic Report
What our
means to our
stakeholders
purpose
Our people
We aim to support our colleagues to be proud of the work
they do and ensure they understand and act within our
values, ethics and standards of behaviours.
Our customers
We want to help people fulfil their plans
by providing access to simple, personal
and regulated financial solutions when
it really matters.
We want our customers to feel they
are treated as a partner in a fair and
transparent way by a company they
can trust and rely on.
We want our customers to receive an
individual approach to the loan they
take and flexibility when they face
unexpected events.
We want our customers to receive
affordable products at a fair price,
with terms and conditions that do not
overburden their personal budgets.
Our communities
We want to make a positive contribution
to our communities and the environment.
Our investors
We want to deliver good returns that reflect the ethical and
responsible management of our business.
Annual Report and Financial Statements 2021 13
A resilient, sustainable and
responsible business model
Business model
Relationships What we do
What makes us different
Home
credit
IPF
Digital
We play a valuable role in society
by helping underserved consumers
gain access to affordable financial
products and services that meet their
needs, delivered in a responsible
and sustainable way.
We are the only business to offer home credit and digital
credit options. We are inclusive of those customers who are
underserved by other lenders, and our long-held expertise
enables a tailored, personalised approach including close
customer contact, careful affordability assessments,
responsible and regulated lending practices together with
simple, flexible products tailored to our customers’ needs.
Our values
We are responsible • We are respectful • We are straightforward
Customers
Trusted, personal relationships help
us understand our customers and
design credit offerings that meet their
changing needs in a responsible,
affordable and sustainable way.
Colleagues
Motivating talented employees and
customer representatives who are
committed and proud to serve our
customers and deliver on our strategy.
Regulators and legislators
Regular open dialogue with
regulators and legislators builds their
understanding of our customers’ needs
and our essential role in society.
Suppliers
Collaboration with partners who
embrace our values and help our
business grow, improve efficiency,
develop sustainable processes
and enhance performance.
Communities
Our customer representatives live
and work in the communities they serve,
building positive relationships with
customers and providing unique insight
into the needs of our communities.
Investors
Relationships with our shareholders
and funding partners help us maintain
a strong financial profile and invest for
the long term.
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Building a better
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International Personal Finance plc14
Strategic Report
Value we create
How we create value
We provide small-sum cash loans to those on lower incomes and
our customer representatives have high levels of contact with their
customers to help them stay in control of their loans. We carefully
assess customer creditworthiness and lend responsibly with our
‘low and grow’ strategy, offering new customers smaller loans until
they demonstrate their ability to repay a loan. The home credit
model, with its large customer representative infrastructure, is
extremely difficult to replicate, and takes years of experience
to manage effectively.
Our digital business model meets the needs of a growing number
of customers in our consumer segment who want affordable credit
that can be managed online. We offer innovative, transparent and
flexible products with a seamless customer experience journey.
Our consumer-focused lending platform and agile infrastructure
supports the growth potential of this highly scalable business.
Our strategy aims to address our stakeholders’ expectations and
create long-term value beyond financial performance by lending
responsibly while managing the business effectively. Our credit
offering and approach to doing business optimises value for our
customers, colleagues, investors and society at large. This fits with
our purpose to build a better world through financial inclusion.
What we rely on
Talented people
Our ability to serve our customers relies upon having highly
engaged, skilled and knowledgeable colleagues who adhere
to our values and ethics. Our global team have outstanding
capabilities and are the most important ambassadors of our
good reputation.
Technology
Our agile approach and scalable technology is fundamental
to remaining at the forefront of digital lending, making robust
credit decisions, driving efficiency through digitisation of traditional
processes and communicating with our colleagues. Leveraging
data capabilities will continue to unlock significant opportunities.
Strong financial profile
We maintain a strong balance sheet and manage our
financial resources effectively, funding investment in growth and
modernisation, and generating good returns for our investors. Our
business model is based on borrowing long and lending short, and
this allows us to manage liquidity in challenging economic times.
Customers
Giving access to affordable credit
helps customers buy the things they
need and build a credit history.
1.7m
customers
Employees and
customer representatives
Motivating colleagues to serve
customers well, develop new skills
and achieve exciting careers.
22,000
people across the business
Regulators and government
Providing consumers with access
to regulated credit and complying
with the regulations in all our markets.
55
sector association memberships
Suppliers
Developing and deploying
innovation to grow our business
and improve efficiency.
10,500
supplier partners supporting IPF
Communities
Enabling financial inclusion,
supporting community initiatives,
providing careers and paying taxes.
£141m
total tax contribution*
Investors
Generating good returns, delivering
growth responsibly and capturing
market opportunities.
£18m
dividends proposed to shareholders
* Comprising £81 million taxes paid (representing a cost to the Group) and £60 million taxes collected on behalf of governments such as payroll taxes
and employees’ social security contributions.
Annual Report and Financial Statements 2021 15
Market trends
and opportunities
Market review
We continually monitor the market environment to
identify emerging trends and anticipate changes
that could be helpful or disruptive to our business.
We use these valuable insights to help shape
and adapt future strategic action, tailoring our
response to the challenges and opportunities
available to us.
Market trend Market trend highlights Our response
Good demand for
consumer credit
Related principal risks
7
10
– Consistent signs of regrowth in
demand in 2021.
– Significant long-term demand
for affordable credit from our
target consumers.
– Short-term demand and consumer
confidence correlated with pandemic
restrictions being imposed and lifted.
– Significantly improved GDP
outlook, though inflationary and
employment headwinds could
disrupt economic activity.
– Market recoveries expected
at different paces.
Selectively relaxing credit settings to return
towards pre-pandemic levels, all based on
local market conditions.
We will continue to develop customer choice
by increasing our digital and mobile options,
broadening price options offered to customers
and increasing the channels through which
customers can access our credit products.
GDP forecasts (%)
1
23
22
21
4.2
2.0
3.0
5.1
2.5
3.5
5.1
5.3
4.3
■
Weighted Europe
■
Mexico
■
Australia
1. Source: European Commission and HSBC quarterly
economic updates
High levels
of competition
Related principal risks
2
– The consumer finance sector
remains very competitive across
all our countries.
– Marketing investment increased as
largest lenders sought to regain lost
sales and rebuild portfolios.
– Increase in point of sale (POS)
‘buy now pay later’ attracting younger
customers than our typical home
credit demographic.
As Covid-related restrictions eased, we started to
invest more in advertising our offers to customers.
In many countries where there had been
temporary reductions in price caps, we gradually
started to return our pricing to more normal
levels, but being mindful all the time of our
customers’ affordability thresholds. We are also
starting to work with retailers where our customers
shop, with a view to making finance available at
the point at which they want to purchase goods.
Key competitors
– Banks
– Digital lenders
– Home credit
– Credit unions
– Pawn brokers
– Point of sale finance
– Payday lenders
Digital innovation
continues to drive growth
Related principal risks
2
4
6
10
– The pandemic accelerated online
shopping trends and consumers’ desire
for remote lending.
– Growing trend for personalisation
driving the best financing solutions.
– Consumers expecting africtionless
customer experience.
– Growth in partnerships to serve
finance in an increasingly digital,
interconnected world.
We are growing our digital lending capacity.
Our mobile wallet is unique to our target segment
of consumers and we will expand this offering
into new markets. We are leveraging digital
technology to improve the customer experience
and create a seamless, integrated customer
journey. Quality home credit customers are also
being given the opportunity to migrate to digital
offerings (including hybrid options) as they
improve their credit standing.
$60bn
estimated European mobile wallet
market size by 2026
Source: Market Insights Report 2021
Regulation
Related principal risks
1
3
7
– Most temporary rate caps and
moratoria introduced during the
pandemic expired in 2021.
– Regulators and legislators remain
focused on the consumer credit sector
with affordability, responsible lending
and fair pricing key areas of interest.
We are fully supportive of regulation that protects
consumers and ensures that only reputable
businesses are permitted to provide them with
financial products and services. We maintain
good relationships with regulators and legislators
who play a key role in shaping the consumer
finance sector and we strive to ensure that they
understand the important role our business plays
in extending financial inclusion in society.
Areas of interest
– Price
– Affordability
– Responsible lending
– Financial inclusion
– Regulatory compliance
International Personal Finance plc16
Strategic Report
Market trend Market trend highlights Our response
Good demand for
consumer credit
Related principal risks
7
10
– Consistent signs of regrowth in
demand in 2021.
– Significant long-term demand
for affordable credit from our
target consumers.
– Short-term demand and consumer
confidence correlated with pandemic
restrictions being imposed and lifted.
– Significantly improved GDP
outlook, though inflationary and
employment headwinds could
disrupt economic activity.
– Market recoveries expected
at different paces.
Selectively relaxing credit settings to return
towards pre-pandemic levels, all based on
local market conditions.
We will continue to develop customer choice
by increasing our digital and mobile options,
broadening price options offered to customers
and increasing the channels through which
customers can access our credit products.
GDP forecasts (%)
1
2
3
22
21
4.2
2.0
3.0
5.1
2.5
3.5
5.1
5.3
4.3
■
Weighted Europe
■
Mexico
■
Australia
1. Source: European Commission and HSBC quarterly
economic updates
High levels
of competition
Related principal risks
2
– The consumer finance sector
remains very competitive across
all our countries.
– Marketing investment increased as
largest lenders sought to regain lost
sales and rebuild portfolios.
– Increase in point of sale (POS)
‘buy now pay later’ attracting younger
customers than our typical home
credit demographic.
As Covid-related restrictions eased, we started to
invest more in advertising our offers to customers.
In many countries where there had been
temporary reductions in price caps, we gradually
started to return our pricing to more normal
levels, but being mindful all the time of our
customers’ affordability thresholds. We are also
starting to work with retailers where our customers
shop, with a view to making finance available at
the point at which they want to purchase goods.
Key competitors
– Banks
– Digital lenders
– Home credit
– Credit unions
– Pawn brokers
– Point of sale finance
– Payday lenders
Digital innovation
continues to drive growth
Related principal risks
2
4
6
10
– The pandemic accelerated online
shopping trends and consumers’ desire
for remote lending.
– Growing trend for personalisation
driving the best financing solutions.
– Consumers expecting africtionless
customer experience.
– Growth in partnerships to serve
finance in an increasingly digital,
interconnected world.
We are growing our digital lending capacity.
Our mobile wallet is unique to our target segment
of consumers and we will expand this offering
into new markets. We are leveraging digital
technology to improve the customer experience
and create a seamless, integrated customer
journey. Quality home credit customers are also
being given the opportunity to migrate to digital
offerings (including hybrid options) as they
improve their credit standing.
$60bn
estimated European mobile wallet
market size by 2026
Source: Market Insights Report 2021
Regulation
Related principal risks
1
3
7
– Most temporary rate caps and
moratoria introduced during the
pandemic expired in 2021.
– Regulators and legislators remain
focused on the consumer credit sector
with affordability, responsible lending
and fair pricing key areas of interest.
We are fully supportive of regulation that protects
consumers and ensures that only reputable
businesses are permitted to provide them with
financial products and services. We maintain
good relationships with regulators and legislators
who play a key role in shaping the consumer
finance sector and we strive to ensure that they
understand the important role our business plays
in extending financial inclusion in society.
Areas of interest
– Price
– Affordability
– Responsible lending
– Financial inclusion
– Regulatory compliance
Link to risk
1
Regulatory
2
Competition and product proposition
3
Taxation
4
Technology and change management
5
People
6
Business continuity and information security
7
Reputation
8
Safety
9
Funding, market and counterparty
10
Credit
Annual Report and Financial Statements 2021 17
A year of regeneration
Chief Executive Officer’s review
How would you sum up 2021?
2021 was a year of regeneration for IPF, with fantastic
performances from our colleagues around the world,
leading to excellent growth and a renewed belief in the
essential role our business plays in society. At the same time,
I want to acknowledge that it was not always easy. We lost
a number of colleagues to Covid, and each of these losses
touched us personally. Our business is built around people
who have a common belief in what we bring to our customers’
lives, and I therefore wanted to mention the impact on our
colleagues up front. We also took the difficult decision to
cease lending to customers in Spain as it became clear the
regulatory environment meant it was no longer possible
to make an acceptable return for our shareholders.
We launched our phased ‘Return to Growth’ plan during
2020 in response to the pandemic, and I am extremely happy
with how we have executed against that plan over the past
18 months. We are now firmly back in growth mode, with strong
portfolio quality, low impairment, and robust control on costs
reflected in our profit before tax for the year of £67.7 million.
These results, strong balance sheet and very positive outcome
led to the resumed dividend payments to our shareholders.
What other strategic highlights were there?
Investors will have heard us talking about offering a hybrid service
aimed at serving customers who fall between a full home credit
service and a digital credit offering. We made great progress and
have developed profitable digital and hybrid customer journeys
in Poland, which we plan to replicate across the rest of the
European home credit businesses. We also identified synergies
between our home credit and digital businesses in Mexico
to improve referrals and create a hybrid sales channel. We
obtained an e-money institution licence which will enable the
roll out of our mobile wallet product in Europe, and established
our first retail point of sale partnerships in Romania and Mexico.
“Our colleagues delivered
fantastic performances
around the world, leading
to excellent growth and
a renewed belief in the
essential role our business
plays in society.”
Gerard Ryan
Chief Executive Officer
Thinking about your customers, what differentiates IPF?
While the impacts of the pandemic on IPF have been very
serious, I cannot think of any other circumstances that would
have allowed us to showcase so positively the essential role
our business plays in helping underbanked and underserved
communities around the world. Throughout the pandemic and
even during freedom of movement lockdowns, we were able
to continue to serve our customers and help them in the most
difficult of times.
Once international travel restrictions were lifted, I got on
the road and visited our businesses, to spend time with our
front-line staff and thank them personally for their dedication.
The stories of the lengths our colleagues went to assist their
customers during lockdowns, made me feel proud and
humble in equal measure, to be part of such a great team.
Our purpose is to build a better world through financial inclusion,
and everything I have seen my colleagues do to help our
customers confirms for me that we are on the correct path to
contribute to this goal.
What actions did you take to effect such a positive
turnaround in the business performance?
Undoubtedly, the key to our business resurgence lies in the fact
that we put our people and our customers at the heart of our
strategy during the past 18 months. Once we were satisfied that
we had the appropriate protocols, training and equipment in
place to protect our colleagues, we set about rebuilding the
business at a pace appropriate for the circumstances in each of
our markets. Having reduced our sales to a third of our normal
run-rate, we slowly eased our credit settings as our collections
performance proved robust and sustainable.
We are now operating at close to our pre-pandemic credit
settings, with some exceptions where local circumstances
require an extra level of prudence. Having returned to growth
mode, we are investing more in front-line activities, especially
marketing, but with a tight rein on other costs we have
retained the bulk of the savings generated through our
rightsizing exercise in 2020.
International Personal Finance plc18
Strategic Report
With a strong rebound in 2021, where do you see
growth coming from in the year ahead?
Between July and November, we saw a strong desire from our
customer segments to obtain credit as their lives returned to
something approaching pre-pandemic norms. Towards the end
of the year, however, it became clear that with the latest variant
of Covid beginning to concern most countries, customers once
again started to be more conservative in their borrowing and
spending activities, and we saw this reflected in slightly reduced
demand for credit.
My view on this however is positive, as it clearly indicates that as
economies return to some semblance of normality, our services
will most certainly be required by our customers. I expect to see
our European home credit business continue to be the engine
of the Group in 2022, with credit issued growth in the high
single-digit percentages in the next 12 to 18 months. I see our
Mexico home credit and IPF Digital businesses delivering good
double-digit growth this year and continuing to offer very
exciting long-term significant growth opportunities.
We are mindful that renewed customer demand will not
come to us as a matter of right, and we are investing smartly
in technology and product innovation to ensure that our offers
and customer journeys are attractive enough to maintain our
leading position in the particular customer segments we serve.
How important are employees to the execution
of your strategy and purpose?
As I mentioned earlier, our colleagues are at the heart
of everything we do. Their desire to help their customers
is undoubted, and I saw it personally in every interaction
I had with them as I started travelling again from September.
Throughout the year we have been working on making our
purpose real. When I spoke with our customer representatives
about the idea of building a better world through financial
inclusion, It was really instructive for me when they looked at
me in some surprise, as if to say, this is what we do every day!
They may not use the exact words, but there is no doubt that
our team is a force for good and they believe in the work
they do. It is hard not to be hugely enthused when working
with colleagues with such faith. What I took from these
conversations is also reflected in the findings of the much
broader engagement we undertook during the year as we
looked at purpose through the eyes of all our stakeholders,
particularly those who meet our customers.
It seems the regulatory backdrop has been relatively
quiet. Do you think this will continue?
Actually, throughout the pandemic period, the regulatory
environment has been constantly changing, with temporary
regulations brought in by multiple governments to help
consumers. All these measures have now expired, with the
exception of the moratorium in Hungary, which is due
to expire in June 2022.
As planned, the EU commenced a review of the Consumer
Credit Directive, which we expect will conclude by the end
of 2022. In Romania, we expect to see a form of rate cap
introduced in the coming months. This has been debated
widely and we have been engaged in the discussions.
In Poland, there is a renewed move by some politicians
to amend certain aspects of the current consumer finance
regulations, in particular a proposal to reduce the existing
Total Cost of Credit cap. We are engaging with all major
Spotlight on…..People
Our ability to serve our customers well relies on having
highly engaged and skilled colleagues who adhere
to our values and ethics. Our global people strategy
focuses on three strands – Care, Perform and Develop.
Care
Ensuring that our people feel safe and valued lies
at the core of what we do. Our Global Care Plan
prioritises their safety and wellbeing and in 2021 we
extended its scope to ensure that, despite sometimes
being physically distanced, we maintained the same
levels of engagement and collaboration that we have
always enjoyed. Maintaining these critical aspects of
our culture has undoubtedly helped us to regrow the
business. This was also borne out by the findings of
our Global People Survey, where we experienced a
very high response rate and strong positive feedback
– which demonstrates that our teams are invested
and passionate about their work.
Perform
Maintaining customer relationships is underpinned by
our strategy to increase the stability and engagement
of our customer representatives. Throughout 2021,
we spent a significant amount of time engaging with
our customer representatives to understand their
working experience. As a result, we will make a
number of changes in 2022 to build out our employer
value proposition and enhance our ability to retain
top performers and attract the best external talent.
Develop
We strongly promote a learning environment where
colleagues are motivated to enhance their skills,
knowledge and capabilities to perform better,
develop resilience and achieve a deep sense of
pride in their work. As part of our talent planning and
people development programmes, we developed
new global learning paths for customer-facing roles
and hosted our first week-long learning festival.
Read more on people engagement on page 41
Annual Report and Financial Statements 2021 19
Chief Executive Officer’s review continued
stakeholders with a view to ensuring that if changes are
adopted, they will be positive for both consumers and the
providers of finance.
We have said for many years that we expect all our businesses
in Europe to operate under some form of rate cap in the future.
That is almost the case now, but as we have demonstrated on
many occasions in many countries, we are capable of adapting
our business model to cope with these changes. At the same
time, we have made it very clear that if regulatory change
denies us the ability to make an economic return, we will be
financially disciplined and redeploy our capital elsewhere. The
two obvious cases to mention are our businesses in Finland and
Spain, where we decided that the returns available no longer
meet our internal criteria.
Thinking about 2022 and beyond, it is hard to state categorically
where regulatory change is likely to occur. What I can say is
that experience teaches us that wherever we see political
instability, we tend to see poor and rushed regulatory change.
I believe we have invested sufficiently in building the right
relationships in the markets in which we operate, so that our
voice is heard when regulatory change is being debated.
Do you see the providers of ‘buy now pay later’
products as competitors and how do you see
competition evolving?
Whilst we saw some business exits as a result of the challenges
posed by the pandemic, there is no doubt that competition
continues to be very strong in all our markets. The experience
of lockdowns has accelerated consumers’ desire for online
transactions and lower-priced financial products. The remarkable
advance of the ‘buy now pay later’ sector plays very well to
these two desires, and hence the significant growth rates in
the numbers of consumers using these products.
We see some critically important differentiators between
what these competitors offer and what our customers need.
Specifically, our customers are looking to borrow a relatively
small sum, around £750 in European home credit for example,
repayable over about 14 months so that it is affordable and fits
comfortably within their budget. The ‘buy now pay later’ offer is
generally a fraction of this amount, repaid within three months
to take advantage of interest-free offers. In addition, remote
credit scoring is an additional barrier for many consumers who
have limited credit histories, which is where our home credit
service wins over. The close, personal contact of a customer
representative together with weekly collection of payments in
their home helps customers stay on track and build a credit
history with us. Notwithstanding this, we are working closely with
a number of retailers to develop credit products appropriate for
our customers’ needs. This is a new and exciting development
for our business and one that is likely to be appealing to both
our digital and best-quality home credit customers.
What are the most pressing ESG issues for IPF and how
are you responding?
We are very clear that we ensure that our business is
responsibly run and sustainable, and that means positioning
ESG as a core focus of our activities. In terms of what that
means for us, we intend to be a purpose-led business and
I see our purpose – building a better world through financial
inclusion – encompassing all aspects of ESG.
We will dedicate most of our energy into our impact on society,
and here we are wholeheartedly committed to providing
Spotlight on…..Digitisation
Digital transformation lies at the heart of our strategy
to meet the changing needs of customers and lay the
foundations for longer-term growth. Through digital
technology, we are adapting our business and
processes to give customers a better experience with
more personalisation, enabling better decision making
and delivering efficiencies.
We made significant progress on becoming more
digitally enabled in 2021:
– Introduced online identity verification, significantly
reducing the speed of lending decisions and
accelerating the delivery of home credit loans.
– Extended the roll out of our mobile wallet in Latvia
to attract new customer segments and
improve retention.
– Migrated to a cloud-based data centre to enhance
security, streamline IT processes and deliver cost
savings. This is also an important move to support
our green IT agenda.
– Introduced innovative technologies in our
Romanian contact centres, putting the business
on the path to offering omnichannel touch points
to customers. This innovation will be rolled out
across our European home credit businesses.
– Completed the roll out of our MyProvi mobile app
in Mexico. All 17,000 customer representatives
across the Group are using the app which has
reduced paper consumption significantly.
– Identified synergies between our home credit and
digital businesses in Mexico to improve referrals and
create a hybrid sales channel to serve customers
who fall between a full home credit service and
a digital credit offering.
– Extended the reach of our digital communications
app ‘MyNews’ to inform and engage colleagues
across our markets.
– Won the FS Tech Digital Transformation Project of
the Year award, recognising our ‘OneDigital’ single,
end-to-end digital lending platform across Europe.
Read our Technology Committee Report on page 88
International Personal Finance plc20
Strategic Report
credit in a responsible way to our customers, and ensuring
at all times that the loans we provide are affordable and
transparent. We are also committed to reducing our climate
impact where we can and we have embarked upon
developing our climate-change and environment strategy.
What is the outlook for IPF?
The past two years have been extremely challenging for
customers, colleagues, and the wider economy as we have
dealt with the impact of the pandemic. There is no doubt that
we, as a team and a business, have learned a huge amount
through the Covid period. We always have been, but are now
even more people-focused, and we recognise and applaud
the dedication of our teams to delivering positive outcomes for
our customers. We may be a long-established business, but we
have learned to be far more agile, investing in and adapting
new technologies to make our business more efficient and
improve our customers’ experience. The learnings are visible
in our results and this bodes well for our future.
Looking forward, we will be focused on extending our market-
leading positions by delivering great customer experiences
including the continuous development of our excellent digital
and mobile solutions. By doing so, we aim to expand our
reach in all three divisions and deliver solutions that are very
attractive to the next generation of customers as well as our
existing base.
We will also be seeking to provide additional sources of value
to our customers through partnerships, building on our highly
successful insurance business. Our activities will be guided
by our strong sense of purpose, which for us is a journey not
a rebranding exercise. We fully intend to make incremental
changes to our business so that it becomes obvious to all
stakeholders that our business plays a critical role in improving
financial inclusion as we aim to deliver sustainable profit whilst
making significant investments in our future.
Our strategy
Guided by our purpose to build a better world through financial inclusion, and fuelled by our
people, our strategy builds on our successful propositions for the next generation of customers
Excellent execution of our strategy will ensure we deliver a sustainable business with strong
growth prospects and consistently positive shareholder returns
Serving
our loyal
customers
Expanding
our reach
Provide valued
products and
excellent customer
experiences to our
loyal customer base
Launch and develop
digital and hybrid
offers in all markets
and test a credit
card offer
Extend insurances and offer additional great-value services to our customers
Diversify acquisition channels by developing ’pay later’ options for retailers
Improve customer
journeys and maintain
consistent delivery
to build market share
Expand territory and
create compelling
new propositions by
blending face-to-face
and digital journeys
Develop our market-
leading businesses in
the Baltics and deliver
the great potential of
Mexico and Australia
Create the market-
leading mobile
offering for credit for
low and medium
income customers
Mexico home credit IPF Digital
Attract
the next
generation
of customers
Create new
sources of
value through
partnerships
Leverage
our strong
foundations
European home credit
Annual Report and Financial Statements 2021 21
Strategic priorities Progress made Challenges encountered Strategic KPIs
Group
– Support the health and wellbeing of
our workforce through the pandemic
– Find out what matters most to our
stakeholders as we strive to become
more purpose-led
– Upgrade technology foundations
and migrate to the cloud
– Establish partnership team
and strategy
– Care Plan supported engagement
and retention of talent during
the pandemic
– Extensive engagement exercise:
listening to stakeholders to better
understand why IPF matters to them
– Migrated to cloud-based
data centre
– Partnership team established
and market positioning agreed
– Ongoing waves of the pandemic
interrupting operations
– Tight labour market challenges
for recruitment
1,727,000
Customers
33%
Year-on-year credit issued
-15%
Year-on-year revenue
10.2%
Impairment % revenue
55.7%
Cost-income ratio
£67.7m
Profit before tax
European
home credit
– Rebuild profitability
– Return to growth
– Increase digital opportunities
for customers
– Upgrade telephony
– Develop credit card proposition
for testing in Poland in 2022
– Strong execution delivered
significantly improved
financial performance
– Delivered sales momentum
and receivables growth
– Launched digital offering in the
Czech Republic
– Introduced strategic telephony
technology in Romania with
roll out planned
– Credit card product defined and
development being progressed
– Lockdown restrictions impacted
demand early in 2021
– Temporary debt repayment
moratorium in Hungary extended
to June 2022
810,000
Customers
39%
Year-on-year credit issued
-16%
Year-on-year revenue
-0.6%
Impairment % revenue
54.4%
Cost-income ratio
£54.5m
Profit before tax
Mexico
home credit
– Rebuild profitability
– Return to growth
– Embed strong
operational disciplines
– Identify territory
expansion opportunities
– Roll out mobile applications
– Significantly improved
financial performance
– Delivered sales momentum
and receivables growth
– Improved customer
representative stability
– Expanded network by 750 agencies
– Territory expansion plan approved
– Introduced mapping technology
to support territory management
– Rolled out collections functionality
in MyProvi mobile app
– Lockdown restrictions suppressed
demand early in 2021
654,000
Customers
40%
Year-on-year credit issued
- 6%
Year-on-year revenue
23.2%
Impairment % revenue
44.4%
Cost-income ratio
£18.4m
Profit before tax
IPF
Digital
– Rebuild profitability
– Return to growth
– Develop our new markets
– Create synergies with home
credit businesses
– Redesign and develop
mobile wallet offering
– Significantly improved
financial performance
– Growth momentum achieved
as the year progressed
– E-money licence obtained to
support mobile wallet roll out
– Launched scalable,
digital platform for
mobile wallet to support
roll out plans
– Lockdown restrictions suppressed
demand early in 2021 and slowed
our regrowth plan
– Delivered collect-out of Finland
portfolio following tightening
of rate cap
– Decision taken to stop lending in
Spain due to regulatory landscape
263,000
Customers
10%
Year-on-year credit issued
-21%
Year-on-year revenue
20.3%
Impairment % revenue
61.0%
Cost-income ratio
£8.7m
Profit before tax
Our strategy
Performance against
our strategy
International Personal Finance plc22
Strategic Report
Strategic priorities Progress made Challenges encountered Strategic KPIs
Group
– Support the health and wellbeing of
our workforce through the pandemic
– Find out what matters most to our
stakeholders as we strive to become
more purpose-led
– Upgrade technology foundations
and migrate to the cloud
– Establish partnership team
and strategy
– Care Plan supported engagement
and retention of talent during
the pandemic
– Extensive engagement exercise:
listening to stakeholders to better
understand why IPF matters to them
– Migrated to cloud-based
data centre
– Partnership team established
and market positioning agreed
– Ongoing waves of the pandemic
interrupting operations
– Tight labour market challenges
for recruitment
1,727,000
Customers
33%
Year-on-year credit issued
-15%
Year-on-year revenue
10.2%
Impairment % revenue
55.7%
Cost-income ratio
£67.7m
Profit before tax
European
home credit
– Rebuild profitability
– Return to growth
– Increase digital opportunities
for customers
– Upgrade telephony
– Develop credit card proposition
for testing in Poland in 2022
– Strong execution delivered
significantly improved
financial performance
– Delivered sales momentum
and receivables growth
– Launched digital offering in the
Czech Republic
– Introduced strategic telephony
technology in Romania with
roll out planned
– Credit card product defined and
development being progressed
– Lockdown restrictions impacted
demand early in 2021
– Temporary debt repayment
moratorium in Hungary extended
to June 2022
810,000
Customers
39%
Year-on-year credit issued
-16%
Year-on-year revenue
-0.6%
Impairment % revenue
54.4%
Cost-income ratio
£54.5m
Profit before tax
Mexico
home credit
– Rebuild profitability
– Return to growth
– Embed strong
operational disciplines
– Identify territory
expansion opportunities
– Roll out mobile applications
– Significantly improved
financial performance
– Delivered sales momentum
and receivables growth
– Improved customer
representative stability
– Expanded network by 750 agencies
– Territory expansion plan approved
– Introduced mapping technology
to support territory management
– Rolled out collections functionality
in MyProvi mobile app
– Lockdown restrictions suppressed
demand early in 2021
654,000
Customers
40%
Year-on-year credit issued
- 6%
Year-on-year revenue
23.2%
Impairment % revenue
44.4%
Cost-income ratio
£18.4m
Profit before tax
IPF
Digital
– Rebuild profitability
– Return to growth
– Develop our new markets
– Create synergies with home
credit businesses
– Redesign and develop
mobile wallet offering
– Significantly improved
financial performance
– Growth momentum achieved
as the year progressed
– E-money licence obtained to
support mobile wallet roll out
– Launched scalable,
digital platform for
mobile wallet to support
roll out plans
– Lockdown restrictions suppressed
demand early in 2021 and slowed
our regrowth plan
– Delivered collect-out of Finland
portfolio following tightening
of rate cap
– Decision taken to stop lending in
Spain due to regulatory landscape
263,000
Customers
10%
Year-on-year credit issued
-21%
Year-on-year revenue
20.3%
Impairment % revenue
61.0%
Cost-income ratio
£8.7m
Profit before tax
Annual Report and Financial Statements 2021 23
Key performance indicators
Key performance indicators
Financial key performance indicators
Closing receivables
£717m
2
1
2
0
1
9
1
8
1
7
716.8
669.1
973.6
992.8
1,056.9
What we measure: The closing amounts receivable from customers translated at constant
exchange rates.
Why it is important: This enables changes in customer receivables to be compared
on a consistent basis, which is important because it is a key driver of revenue growth.
How we performed: Closing receivables increased by 13% (at CER) in 2021 driven by our focus
on rebuilding the business. We expect closing receivables to increase further in 2022.
Revenue
£549m
2
1
2
0
1
9
1
8
1
7
548.7
661.3
889.1
866.4
825.8
What we measure: Income generated from customer receivables.
Why it is important: Revenue is one of the key drivers of overall performance outcomes in
the income statement.
How we performed: Revenue reduced by 15% (at CER) driven by the impact of the pandemic
on credit issued in 2020, and the subsequent reduction in average receivables. In 2022,
we expect to return to revenue growth.
Impairment % revenue
10.2%
2
1
2
0
1
9
1
8
1
7
10.2
37.4
27.4
26.2
24.4
What we measure: The amount charged as a cost to the income statement as a result
of customers defaulting on contractual loan payments.
Why it is important: Profitability is maximised by optimising the balance between growth
and credit quality.
How we performed: Impairment reduced materially driven by our excellent operational
performance and restricted credit issuance during the pandemic. We expect this ratio to
increase to more normalised levels but remain below our target range of 25% to 30% in 2022.
Cost-income ratio
55.7%
2
1
2
0
1
9
1
8
1
7
55.7
47.7
43.5
44.9
45.8
What we measure: The direct expenses of running the business (excluding customer
representatives’ commission) as a percentage of revenue.
Why it is important: To ensure that we focus on running our business in the most efficient
manner because the cost-income ratio is a key driver of profitability.
How we performed: The cost-income ratio increased in 2021 because revenue contracted
at a faster rate than costs. We expect the ratio to reduce in 2022 due to improving efficiencies
associated with increased revenue.
Return on Assets
11.1%
2
1
2
0
1
9
1
8
1
7
0.5
11.3
12.5
11.5
11.1
What we measure: Profit before interest after tax, and divided by average net receivables.
Why it is important: ROA is a good measure of our financial performance showing the
ongoing return on the total equity and debt capital invested in the average net receivables
of our operating segments and the Group.
How we performed: Group ROA improved materially driven by a significant improvement
in profitability. We aim to generate progressive improvements in ROA as we deliver
longer-term growth.
International Personal Finance plc24
Strategic Report
1. The net promoter score was introduced in 2021 and is now an integral part of management reporting in European home credit and IPF Digital. This will be
extended to Mexico home credit in 2022.
Non-financial key performance indicators
Customers
1.7m
2
1
2
0
1
9
1
8
1
7
1,727
1,682
2,109
2,301
2,290
What we measure: Total number of customers using our products and services
across the Group.
Why it is important: Customer numbers demonstrate our scale in our markets.
How we performed: In 2021, customer numbers increased by 3% driven by our focus
on rebuilding the business. We expect customer numbers to increase further in 2022.
Returning home credit customers
51%
What we measure: The proportion of home credit customers who have chosen to return to
us within 36 months of taking their previous loan.
Why it is important: Customers choosing to return to the business for a new loan indicates
that our products and services meet their needs.
How we performed: A 51% returning customer score reflects a good mix in our home credit
portfolio of new and returning customers.
Employee and customer representative retention
82%
Employees
72%
Customer representatives
2
1
2
0
1
9
1
8
1
7
82.1
81.0
73.2
76.2
75.2
What we measure: The proportion of our people who have worked with us for more than
12 months.
Why it is important: Higher and stable retention of our people correlates with providing
high levels of customer service and a strong financial performance.
How we performed: Employee retention remained high at 82%. Customer representative
retention reduced to 72%, which is aligned to pre-Covid levels. This was driven by Mexico
home credit where the proportion of new customer representatives recruited to support
growth increased.
2
1
2
0
1
9
1
8
1
7
71.8
81.0
69.8
71.0
61.7
Customer recommendations (Net Promoter Score
1
)
51
European home credit
net promoter score
69
IPF Digital net
promoter score
What we measure: The proportion of customers recommending our products to others
minus those who would not.
Why its important: Net Promoter Score is a measurement of customer loyalty and satisfaction
measurement which are important drivers of future growth.
How we performed: Our net promoter scores for European home credit and IPF Digital
at December 2021 were 51 and 69 respectively. Our focus on 2022 will be on maintaining
these strong scores.
Annual Report and Financial Statements 2021 25
Group performance review
Operational review
We delivered an extremely strong full-year performance.
We are delighted to report that the successful execution of
our rebuild strategy, focused on serving our customers to an
exceptionally high standard, has generated excellent growth
and a strong financial result. Group profit before tax increased
by £108.4 million to £67.7 million.
Each of our business divisions adapted well to the constantly
changing environment, becoming more agile and cost effective
whilst enhancing their customer product offerings. As a result of
this excellent operational execution, all business divisions made
a strong contribution to our overall Group profit before tax.
FY 2020
£m
FY 2021
£m
European home credit (9.2) 54.5
Mexico home credit 0.8 18.4
IPF Digital (19.2) 8.7
Central costs (13.1) (13.9)
(Loss) / profit before tax (40.7) 67.7
We saw a steady increase in levels of customer demand for credit
from Q2, driven by the easing of freedom of movement rules
in most of our markets, the opening up of retail and hospitality
sectors and the progression of government vaccination
programmes. Returning to growth mode, we delivered a 33%
increase in credit issued, with robust contributions from all
business divisions. Our strong collections performance throughout
the year underpinned our strategy to selectively relax credit
settings and take advantage of sales opportunities when
demand for credit increased.
We are also pleased to report that our closing receivables
portfolio is growing once again, with a £48 million increase
(13% at CER) to £717 million at the year end, which contributed
to improved revenue growth in the second half of the year. We
expect to continue to grow both credit issued and customer
receivables in 2022 building further on current revenue
momentum. Average net receivables reduced by 9% year on
year due to the lower levels of credit issued in 2020 and,
together with the impact of temporary Covid-related rate caps
in Hungary and Poland which have since expired, this resulted
in a 15% contraction in revenue year on year. However, as we
successfully rebuilt the portfolio over the course of the year,
revenue growth returned from Q2 2021 and was 10% higher in
the second half of the year compared with H1.
The credit quality of our lending portfolio is excellent across all
business divisions, particularly the performance of the receivables
portfolio written since June 2020, which was granted largely
under tighter than normal credit settings, has been better than
predicted by our impairment models. This, together with the
combination of selectively relaxed credit settings tailored to local
market conditions and consistently strong collections execution,
has contributed to an exceptionally low impairment charge
of £56 million in 2021. This includes the positive impact
of Covid-19 discounting and expected credit loss provisions
releases totalling around £32 million. Impairment as
a percentage of revenue year-on-year improved by 27.2 ppt to
10.2%. We expect impairment as a percentage of revenue to
increase in 2022 as we continue to grow the business, but to
remain below our target range of 25% to 30%.
We have continued to maintain tight control on costs while
investing more in marketing to drive our successful growth
strategy and, as a result, other costs remained flat year on
year. As we look ahead, we expect inflationary pressures to
feed through to costs in 2022, but at a lower rate than the
anticipated growth in receivables.
Strong strategic progress
IPF creates long-term value beyond profit and returns by
striving to have a positive effect on all our stakeholders. Our
strategy, anchored by the essential role our business performs
in society by promoting financial inclusion, centres on meeting
the financial needs of our customers and delivering a positive
customer experience, and in so doing, recapturing longer-
term growth as consumer demand increases in our markets.
During the pandemic period, we have extended forbearance
across the Group over and above our normal practices,
ensuring that where customers face difficulty meeting their
repayments, we provide revised schedules to suit their current
circumstances, with payment holidays and deferred
payments. Protecting our people and customers remains our
top priority. We provide PPE for customer representatives
visiting their customers and a range of remote repayment
options are available if customer visits are not possible. We
also have in place appropriate protocols to address any
adverse impact from future lockdowns, should they occur.
Our core strategic goals have driven the successful return to
full-year profitability, created the foundation for longer-term
growth and enabled the resumption of dividends to our
shareholders. In addition to the significant progress made in
financial performance, we also delivered a number of
strategic milestones in 2021 including;
– Obtained an e-money institution licence which will enable
the roll out of our mobile wallet product in Europe.
– Developed profitable digital and hybrid customer journeys
in our Polish business to be replicated across the rest of the
European home credit businesses.
– Defined a credit card proposition in our Polish business for
testing in 2022.
– Introduced innovative technologies in our Romanian
contact centres putting the business on the path to offering
omnichannel touch points for customers. This innovation will
be rolled out across our European home credit businesses.
– Completed the roll out of MyProvi mobile app in Mexico. All
17,000 customer representatives across the Group are now
using the app in their day-to-day work and this digital
transformation has reduced paper consumption
significantly.
– Identified synergies between our home credit and digital
businesses in Mexico to improve referrals and create a
hybrid sales channel to serve customers who fall between
a full home credit service and a digital credit offering.
– Expanded our agency network in Mexico by around 750
agencies as part of our territory expansion plans.
– Established our first retail point of sale partnerships in
Romania and Mexico.
“We delivered an extremely strong full-year
performance, reporting excellent growth
in credit issued, profit before tax of
£67.7 million and the resumption of
dividends to our shareholders.”
International Personal Finance plc26
Strategic Report
Environmental, social and governance (ESG)
Our purpose, Building a better world through financial inclusion
encompasses all aspects of ESG and drives our actions to ensure
that our business is responsibly run and sustainable. We have
an important role to play in helping people who have limited
borrowing options to access credit in a responsible way and
provide an opportunity for them to develop their credit profile.
As a business with a strong social purpose, we focus our ESG
agenda on the very positive impact our business has on society
through our commitment to responsibly providing credit to our
customers and ensuring that our loans are affordable and
transparent. During 2021, we also embarked upon a process
to develop our climate-related strategy and identify the key
opportunities and risks posed by climate change that relate to
IPF. It is also our intention to align our strategy with a number of
the UN’s Sustainable Development Goals to highlight how our
business contributes to these important objectives.
Regulatory update
Of the temporary Covid-19 related regulations introduced in
2020, only the debt repayment moratorium in Hungary remains
in place and this is due to expire on 30 June 2022.
The European Union commenced a review of the Consumer
Credit Directive, which we expect will conclude by the end of
2022. Our Group and European Union market teams are
closely engaged in the process with a view to contributing to
an acceptable outcome for both customers and market
participants.
In Poland, the proposal to reduce the non-interest cost of credit
cap, which was first raised in 2016, has been relaunched by the
same political party. The proposal, which relates to non-interest
costs of a consumer loan, would see the maximum cap reduced
from 100% of the loan value to 45% (excluding interest). The
proposals have been referred to the EU Commission for
consideration with a deadline of 28 March 2022 for response by
the Commission to the Polish Parliament, during which time the
proposals cannot be finalised. There is a likelihood that there will
be a range of views on the merits of the proposals and, as they
are scrutinised in detail, they could be changed, abandoned
or agreed. We will continue to review the draft proposals to
assess any potential implications for our Polish business, should
they be implemented, and update the market as appropriate.
In December 2021, a revised draft law imposing a total cost
of credit cap of 100% for loans with issue values below 15,000
RON (c.€3,000) and 15% for loans above 15,000 RON passed
the Upper Chamber of the Romanian Parliament and moved
to the Second Chamber in February this year. Approximately
one year ago, a similar proposal had been sent back to the
Parliament by the Constitutional Court citing procedural errors.
Most loans in our Romanian portfolio are below 15,000 RON
in value.
Outlook
The pandemic has illustrated the essential role our business
plays in helping underbanked and underserved communities
around the world. Throughout this difficult period, we were
able to continue to serve our customers and help them with
extended forbearance and payment holidays. There is
significant long-term demand for affordable credit from the
group of consumers we serve in all our markets and we intend
to build on the excellent momentum achieved in 2021 by
continuing to execute our growth strategy to rescale
the business.
We expect to be able to generate double-digit credit issued
growth in both Mexico home credit and IPF Digital in 2022,
supported by a strategic focus on strengthening customer
choice by increasing the digital and mobile wallet options
available. We expect to be able to grow credit issued in
European home credit – the engine of the Group – by
single-digit percentage supported by extending our
digital/hybrid offerings as 2022 progresses. As always,
we will continue to serve our customers safely and responsibly,
while maintaining a clear focus on portfolio quality and costs.
FY 2020
£m
FY 2021
£m
Change
£m
Change
%
Change at
CER %
Customer numbers (000s) 1,682 1,727 45 2.7 2.7
Closing receivables 669.1 716.8 47.7 7.1 13.4
Credit issued 772.2 982.1 209.9 27.2 32.8
Average net receivables 777.6 677.0 (100.6) (12.9) (9.4)
Revenue 661.3 548.7 (112.6) (17.0) (15.0)
Impairment (247.6) (56.2) 191.4 77.3 77.6
Net revenue 413.7 492.5 78.8 19.0 24.7
Finance costs (55.0) (54.0) 1.0 1.8 (2.5)
Agents’ commission (72.0) (65.3) 6.7 9.3 5.4
Other costs (315.5) (305.5) 10.0 3.2 0.1
Pre-exceptional (loss) / profit before taxation (28.8) 67.7 96.5
Exceptional items (11.9) – 11.9
(Loss) / profit before taxation (40.7) 67.7 108.4
Annual Report and Financial Statements 2021 27
European home credit
Operational review continued
The strong operational performance delivered by our
European home credit businesses resulted in a £63.7 million
swing in profit before tax year on year to £54.5 million. This
significantly improved financial result was driven primarily by
continued strong collections flowing through to lower
impairment charges in each market.
Our business responded well to growing consumer demand,
and we increased credit issued year on year by 39%. Although
customer numbers contracted year on year by 2% to 810,000,
our successfully executed rebuild strategy delivered an
increase of 2,000 in the second half of the year. Average net
receivables reduced by 5% year on year, but credit issued
growth momentum delivered a 17% (at CER) increase in
closing receivables since December 2020 to £426 million,
up 8% (at CER) from £406 million at 30 June 2021.
Our strong collections performance together with the
unwinding of Covid-19 impairment provisions booked in
2020 and higher-quality lending, resulted in impairment as
a percentage of revenue improving by 36.2 ppts since the
2020 year end to (0.6)% (an impairment credit). Other costs
increased by just 4% (£6.2 million at CER) year on year as a
result of a much lower 2020 comparative together with a
modest increase in costs to fund higher credit issuance.
The strong execution of our strategy in 2021 delivered good
sales momentum, receivables growth and a significantly
improved financial performance. Looking ahead to 2022, our
focus is to increase the scale of our European home credit
operations, which will continue to be the engine of the Group.
We plan to deliver credit issued growth of around 8% to 10% to
rebuild the receivables portfolio while maintaining robust
collections, credit quality and strong cost control. We will also
continue to enhance the customer experience through
improved technology, expand our digital and hybrid credit
options for quality customers and test a credit card proposition.
FY 2020
£m
FY 2021
£m
Change
£m
Change
%
Change at
CER %
Customer numbers (000s) 827 810 (17) (2.1) (2.1)
Closing receivables 389.5 425.9 36.4 9.3 16.6
Credit issued 453.8 599.2 145.4 32.0 39.4
Average net receivables 443.0 403.3 (39.7) (9.0) (4.5)
Revenue 351.1 284.7 (66.4) (18.9) (16.4)
Impairment (125.1) 1.6 126.7 101.3 101.3
Net revenue 226.0 286.3 60.3 26.7 33.8
Finance costs (32.3) (34.0) (1.7) (5.3) (10.0)
Agents’ commission (50.7) (42.9) 7.8 15.4 10.8
Other costs (154.7) (154.9) (0.2) (0.1) (4.2)
Pre-exceptional (loss) / profit before taxation (11.7) 54.5 66.2
Exceptional items 2.5 – (2.5)
(Loss) / profit before taxation (9.2) 54.5 63.7
“The strong execution of our strategy in
2021 delivered good sales momentum,
receivables growth and a significantly
improved financial performance.”
International Personal Finance plc28
Strategic Report
Mexico home credit
Mexico home credit reported another significantly improved
financial performance with profit before tax increasing by
£17.6 million year on year to £18.4 million. This robust outcome,
driven primarily by a reduction in impairment and a lower cost
base, was delivered against a challenging further wave of the
Covid-19 pandemic in Mexico during Q3 2021.
Consumer appetite for credit is recovering and despite rising
Covid-19 cases in Q3, exacerbated by relatively low vaccination
rates in Mexico, we delivered a 9% increase in customer
numbers to 654,000, an increase of 55,000 customers. This,
in turn, supported a 40% increase in credit issued year on year.
Average net receivables increased by a lower amount at 3%
year on year due to lower credit issued in 2020. Revenue
decreased by 6% year on year, driven primarily by our strategic
decision to extend loan terms and offer more attractive pricing
to higher-quality customers. However, it is pleasing to report
that H2 revenue was 23% higher than the first half. This growth
also supported the delivery of a 30% (at CER) increase in
closing receivables since December 2020 to £118 million.
Our operational rigour around collections and credit quality
over the past two years, together with the unwinding of
Covid-19 impairment provisions booked in 2020, resulted in
annualised impairment as a percentage of revenue improving
by 10.5 ppts since the 2020 year end to 23.2%. We continued
to manage costs tightly, maintaining the benefits of savings
achieved in 2020, and delivered an 8% reduction in Other
costs year on year.
Our Mexico home credit business delivered good growth in
2021 and offers very exciting and significant long-term prospects.
Our strategy in 2022 is to build on this momentum through strong
operational execution to deliver sustainable, 15% to 20%
credit issued growth in 2022, and increase the size of the
receivables portfolio. We will enhance territory management
to maximise customer reach within the current geographic
footprint, selectively digitise the customer journey, expand the
functionality of our MyProvi agent app to further improve cost
efficiency and rebuild our receivables portfolio.
FY 2020
£m
FY 2021
£m
Change
£m
Change
%
Change at
CER %
Customer numbers (000s) 599 654 55 9.2 9.2
Closing receivables 92.8 117.6 24.8 26.7 29.5
Credit issued 143.6 194.2 50.6 35.2 40.2
Average net receivables 102.5 102.8 0.3 0.3 2.9
Revenue 157.1 146.0 (11.1) (7.1) (6.5)
Impairment (53.0) (33.8) 19.2 36.2 40.0
Net revenue 104.1 112.2 8.1 7.8 12.4
Finance costs (7.7) (6.6) 1.1 14.3 12.0
Agents’ commission (21.3) (22.4) (1.1) (5.2) (7.2)
Other costs (71.6) (64.8) 6.8 9.5 7.7
Pre-exceptional profit before taxation 3.5 18.4 14.9
Exceptional items (2.7) – 2.7
Profit before taxation 0.8 18.4 17.6
“Our Mexico home credit business
delivered good growth in 2021 and offers
very exciting and significant long-term
growth prospects.”
Annual Report and Financial Statements 2021 29
IPF Digital
Operational review continued
IPF Digital delivered a record profit before tax of £8.7 million,
a significant year on year improvement of £27.9 million.
Reinvesting in growth together with continuing good credit
quality and tight cost control supported the delivery of very
strong financial performances by both our established and
new markets.
The profitability of IPF Digital is segmented as follows:
FY 2020
£m
FY 2021
£m
Change
£m
Change
%
Established markets 8.7 21.2 12.5 143.7
New markets (16.3) (0.3) 16.0 98.2
Head office costs (11.6) (12.2) (0.6) (5.2)
IPF Digital (19.2) 8.7 27.9 145.3
While our digital business made strong financial progress
overall, we made the difficult decision in December 2021 to
stop new lending to customers in Spain. Although our team
had worked diligently to build a viable business with a new
product construct, the regulatory environment meant it was
no longer possible to make an acceptable return for our
shareholders. In line with our disciplined use of capital, we
have decided to redeploy our resources elsewhere.
Returning demand for consumer credit driven by the relaxation
of Covid-19 lockdown restrictions, together with our successful
strategy to relax credit settings to near pre-pandemic levels,
is creating a good foundation on which to rebuild the digital
business and deliver sustainable growth. Customer numbers
increased by 3% year on year to 263,000 and we delivered an
increase of 16,000 new customers in the second half of the
year driven by an excellent performance in Mexico. Excluding
the impact of the portfolio collect-out in Finland, customer
growth increased by 8%. Credit issued was 10% higher year on
year, with H2 credit issued 27% higher than H1. Average net
receivables reduced by 24% year on year, driving a 21%
reduction in revenue. Closing receivables contracted by just
2% year on year to £173 million, and acceleration in growth
momentum in the second half of the year resulted in closing
receivables being £5 million (5% at CER) higher at the end of
December compared with June 2021.
Continued high-quality lending and strong collections
performance resulted in a 25.1 ppt improvement in annualised
impairment as a percentage of revenue to 20.3% since the
2020 year end. Costs reduced by 3% year on year, driven mainly
by the benefits of our rightsizing exercise in 2020, partially offset
by increased investment in growth and a £3 million one-off cost
impact of the decision to run off the Spanish business.
IPF Digital offers significant, long-term growth prospects and
is expected to deliver 15% to 20% credit issued growth in
2022 and 2023 while maintaining credit quality and costs.
The e-money licence obtained in 2021 will enable the further
roll out of our mobile wallet product offering, and our digital
and home credit businesses in Mexico will partner to explore
new hybrid lending opportunities.
FY 2020
£m
FY 2021
£m
Change
£m
Change
%
Change at
CER %
Customer numbers (000s) 256 263 7 2.7 2.7
Closing receivables 186.8 173.3 (13.5) (7.2) (1.6)
Credit issued 174.8 188.7 13.9 8.0 10.2
Average net receivables 232.1 170.9 (61.2) (26.4) (24.1)
Revenue 153.1 118.0 (35.1) (22.9) (20.6)
Impairment (69.5) (24.0) 45.5 65.5 64.5
Net revenue 83.6 94.0 10.4 12.4 15.9
Finance costs (14.9) (13.3) 1.6 10.7 6.3
Other costs (76.6) (72.0) 4.6 6.0 3.1
Pre-exceptional (loss) / profit before taxation (7.9) 8.7 16.6
Exceptional items (11.3) – 11.3
(Loss) / profit before taxation (19.2) 8.7 27.9
“IPF Digital delivered a record profit before
tax of £8.7 million in 2021 and offers
significant, long-term growth prospects.”
International Personal Finance plc30
Strategic Report
Established markets
FY 2020
£m
FY 2021
£m
Change
£m
Change
%
Change at
CER %
Customer numbers (000s) 116 95 (21) (18.1) (18.1)
Closing receivables 98.8 78.5 (20.3) (20.5) (15.6)
Credit issued 85.0 66.6 (18.4) (21.6) (20.2)
Average net receivables 117.9 83.6 (34.3) (29.1) (27.0)
Revenue 71.6 48.3 (23.3) (32.5) (30.4)
Impairment (20.5) (1.9) 18.6 90.7 90.5
Net revenue 51.1 46.4 (4.7) (9.2) (6.3)
Finance costs (7.8) (6.5) 1.3 16.7 12.2
Other costs (24.9) (18.7) 6.2 24.9 23.0
Pre-exceptional profit before taxation 18.4 21.2 2.8
Exceptional items (9.7) – 9.7
Profit before taxation 8.7 21.2 12.5
New markets
FY 2020
£m
FY 2021
£m
Change
£m
Change
%
Change at
CER %
Customer numbers (000s) 140 168 28 20.0 20.0
Closing receivables 88.0 94.8 6.8 7.7 13.9
Credit issued 89.8 122.1 32.3 36.0 39.2
Average net receivables 114.2 87.3 (26.9) (23.6) (21.2)
Revenue 81.5 69.7 (11.8) (14.5) (12.1)
Impairment (49.0) (22.1) 26.9 54.9 53.7
Net revenue 32.5 47.6 15.1 46.5 50.6
Finance costs (7.1) (6.8) 0.3 4.2 –
Other costs (40.1) (41.1) (1.0) (2.5) (5.9)
Pre-exceptional loss before taxation (14.7) (0.3) 14.4
Exceptional items (1.6) – 1.6
Loss before taxation (16.3) (0.3) 16.0
Established markets
The established markets delivered a very strong £12.5 million
increase in profit before tax to £21.2 million, driven by low
impairment and a significant reduction in costs, partially offset
by lower revenue arising from a contraction in our portfolio.
Customers and credit issued contracted year on year by
18% and 20% respectively, as a result of tighter credit settings
introduced in response to Covid-19, softer demand during
ongoing periods of people movement restrictions, and our
decision to cease lending in Finland and collect out the
portfolio. Our focus on building growth momentum through
easing credit settings to meet increasing demand resulted
in credit issued being 21% higher in H2 compared with H1.
Average net receivables contracted year on year by 27% due
to the lower credit issued and this resulted in a reduction in
revenue of 30% in the same period. Excluding Finland, where
the portfolio collect-out is progressing well, the contraction in
average net receivables and revenue year on year was
significantly lower at 13% and 19% respectively.
Good collections and lower levels of credit issued resulted
in a lower impairment charge in the period and a 24.7 ppt
improvement in annualised impairment as a percentage of
revenue to 3.9% since the year end. We continued to manage
costs tightly, and together with the benefit of the 2020
rightsizing programme, costs reduced by 23% year on year.
New markets
The new markets generated a small loss before tax of
£0.3 million, a significant improvement of £16.0 million year
on year. This near-breakeven result was driven by a reduction
in the cost base and improved credit quality, partly offset by
a £6 million charge arising from the decision to collect out our
business in Spain.
As lockdown restrictions eased during the second half of the
year and consumer demand improved, we continued to relax
credit settings and increase our investment in growth related
activities in our new markets. This delivered further sales
momentum, resulting in a 28,000 (20%) increase in customer
numbers year on year to 168,000, with significantly faster
growth in H2 of 23,000. This was also reflected in credit issued
growth which increased significantly by 39% year on year, with
H2 credit issued 30% higher than H1. Average net receivables
and revenue reduced by 21% and 12% respectively year on
year, however, we delivered revenue growth of 18% in the
second half of the year.
Credit quality continued to improve resulting in a 28.4 ppt
reduction in impairment as a percentage of revenue since
the 2020 year end to 31.7%. Other costs increased by £1 million
(6% at CER) year on year driven by the benefits of the rightsizing
exercise in 2020, partially offset by costs of £3 million incurred as
a result of our decision to collect out the portfolio in Spain.
Annual Report and Financial Statements 2021 31
The Group delivered a strong return to growth driven
by our continual adjustment of credit risk settings in
response to our excellent operational performance
and the maintenance of our conservative balance
sheet. These actions helped us to rebuild the business
whilst maintaining excellent credit quality and a tight
rein on costs.
Rebuilding sustainable profitability
We are pleased to report that executing our rebuild strategy,
supported by the Group’s strong balance sheet and robust
funding position, provided the foundation on which to deliver a
return to growth, a rapid rebound in profitability and resumption
of dividend returns to shareholders in 2021. We are now firmly
back in growth mode, reflected in the 33% increase in credit
issued which was driven by a combination of recovering
consumer demand and our decision to selectively ease credit
settings based on the circumstances prevailing in each of our
markets. As a result, closing receivables increased by 13%. With
a strong rebound in 2021, we are now well placed to deliver on
our purpose by supporting customers, colleagues and other
stakeholders through the ongoing challenges created by the
Covid crisis and to generate long-term sustainable growth.
Our financial model and strategy
We aim to generate value for our stakeholders, deliver
sustainable profitable growth and deploy capital efficiently
by offering relevant products and services to our customers.
The Group financial model focuses on: returns and the efficient
use of capital; financial profile; and balancing investment,
growth and risk. Over the medium term, we aim to achieve
a good return on the capital invested in receivables for each
of our businesses, recognising their different stages of
development and investment profile, and pay an appropriate
level of dividends to shareholders. We continue to maintain
a strong balance sheet with appropriate capital supporting
receivables, and have a strong debt funding position with
good headroom on debt facilities and debt covenants.
We ensure that we have adequate equity capital and debt
funding to support future growth and to withstand external
shocks (such as the pandemic) if they arise, enabling us
to achieve good returns over the long term.
Our businesses are at different stages of development. The
European home credit business is now more than two decades
old and generates cash and capital, and attractive returns.
We will continue to invest in all our businesses, in particular IPF
Digital and Mexico home credit which provide very significant
opportunities for sustained multi-year growth. We have a very
strong balance sheet which was recently refinanced, and a
robust financial risk management process in place that has
proven its effectiveness through multiple financial cycles. We
operate with a target equity to receivables capital ratio of
around 40%. The ratio at 31 December 2021 was 51.2%. Having
strengthened materially in 2020 due to the successful liquidity
management actions taken in response to the onset of the
pandemic, the ratio reduced in 2021 (2020: 55.4%) as we grew
receivables and resumed dividend payments. In the coming
years, we expect the ratio to reduce further as we continue
with planned receivables growth and dividend payments. To
maintain the credit quality of lending, we target an impairment
to revenue range of 25-30% and prior to the pandemic, we had
always operated within or just below this. At December 2021,
the ratio was 10.2%, having reduced materially on the back of
Strong financial performance
delivering returns to shareholders
Financial review
our excellent operational performance and restricted credit
issuance during the pandemic period. We expect impairment
to increase to more normalised levels but remain below our
target range of 25% to 30% in 2022. Our debt funding strategy
provides a strong foundation for the existing business and for
future growth, through a diversified debt portfolio of bond and
bank facilities. Bymaintaining our strong financial profile, we
are able to operate with good headroom on the financial
covenants in our debt facilities.
Receivables
Borrowings
■
More than one year £567m 79%
■
Less than one year £150m 21%
£717m
£472m
1
■
More than one year £469m 99%
■
Less than one year £3m 1%
Impairment
Impairment in 2021 was impacted by liquidity management
and provisioning actions undertaken in 2020 to manage the
impact of the pandemic on the business. These factors resulted
in a smaller but higher-quality receivables portfolio than prior to
the pandemic. As we continue to grow the scale of the business
we expect impairment as a percentage of revenue to increase
but to remain below our target range of 25% to 30% in 2022.
Further details relating to the 2021 impairment charge are
included on page 127.
1. Number includes unamortised arrangement fees and issue discount.
International Personal Finance plc32
Strategic Report
Returns
As a Group, we aim to deliver long-term profitable growth,
good returns for shareholders, and the efficient deployment
of capital to support growth and pay dividends. We believe
that the return on assets (ROA) metric is a good measure of
financial performance, showing the ongoing return on the
total equity and debt capital invested in the receivables book
for those businesses, and for the Group. In addition, we believe
that the Group return on equity (ROE) metric is a good measure
of overall returns for shareholders.
The table below shows the ROA for our European home credit,
Mexico home credit and IPF Digital businesses, and for the Group
as a whole. ROA is measured as profit before interest, after tax,
divided by the average net receivables during the period.
2020
1
2021
European home credit 0.7% 13.6%
Mexico home credit 1.6% 15.1%
IPF Digital 0.5% 8.0%
Group 0.5% 11.1%
1. 2020 ROA pre-exceptional
The returns in 2021 improved materially across all reporting
segments as the businesses returned to full-year profitability.
Return on equity
ROE for the Group is measured as profit after tax divided
by average equity. ROE improved materially by 24.6 ppts
in 2021 to 11.4%, driven by significant improvement in the
business profitability.
Capital generation
Strong capital generation was always a key feature of
our business prior to the pandemic, providing capital for
the continuing growth of the business and dividends to
shareholders, while maintaining our strong financial profile.
The following table shows the capital generated by our
businesses, along with dividends declared. We aim to fund our
receivables book with approximately 40% equity and 60% debt.
Capital generated is calculated as profit after tax, assuming
that 60% of the growth in receivables is funded with debt and
40% with equity.
Capital generated before investment in receivables growth
was £41.9 million as a result of the strong turnaround in profit.
Of this capital, £34.5 million was used to invest in receivables
growth (based on 40% equity funding for receivables growth)
and, therefore, net capital generation was £7.4 million before
the declaration of dividends totalling £4.9 million. Each of our
business units generated capital in the year reflecting their
good financial performance together with an increase in
their investment in receivables. The other balance of capital
consumption relates to central costs. Total net capital
consumption was £1.4 million.
2021
£m
Profit before tax 67.7
Tax (25.8)
Profit after tax 41.9
Receivables growth funded by equity (40%) (34.5)
Capital generated 7.4
European home credit 8.6
Mexico home credit 0.7
IPF Digital 6.7
Other (8.6)
Dividends declared (4.9)
Shares acquired by employee and treasury trust (3.9)
Capital consumed (1.4)
Earnings/loss per share
The earnings per share of 18.8 pence in 2021 compared with
28.9 pence loss per share in 2020, reflects the return to full-year
profitability in 2021.
Dividend
With the Group’s strong recovery in 2021, our confidence in the
growth potential of the business and our current strong capital
base, the Board is pleased to declare a final dividend of 5.8
pence per share, bringing the full-year dividend to 8.0 pence
per share (2020: nil). Subject to shareholder approval, the final
dividend will be paid on 6 May 2022 to shareholders on the
register at the close of business on 8 April 2022. The shares will
be marked ex-dividend on 7 April 2022. The Board also reviewed
the future capital requirements of the Group and agreed to
introduce a progressive dividend policy aimed at reducing, at
an appropriate pace, the equity to receivables ratio to bring it
closer to our broad target of 40%. In addition, it was agreed
that future interim dividend payments would be set at 33% of
the prior year’s full dividend payments. The Board may also
consider returning surplus capital to shareholders periodically,
subject to prevailing market conditions.
“The returns in 2021 improved materially
across all reporting segments as the
businesses returned to full-year profitability.
It is expected that returns will improve
further in 2022 and beyond.”
Annual Report and Financial Statements 2021 33
Balance sheet, treasury risk management
and funding
Balance sheet
We have a strong balance sheet, funding position and robust
financial risk management. At December 2021, the equity
to receivables ratio was 51.2% (2020: 55.4%) and the gearing
ratio was 1.3x (2020: 1.4x). Group debt funding facilities
at December 2021 totalled £575 million, with headroom
and non-operational cash balances of £108 million.
Total cash balances at December 2021 were £42 million
(2020: £116 million) which included £11 million that was not
required for operational purposes but is available to support
future receivables growth.
Closing receivables in 2021 were £717 million, which is
£85 million (13%) higher than 2020 at CER, reflecting the
Group’s strategy to rebuild the business during 2021. The
average period of receivables outstanding at December 2021
was 12.3 months (2020: 11.1 months) with 79% of year-end
receivables due within one year (2020: 80%). The average
period of receivables outstanding has increased primarily
due to normalisation of our product terms as the external
environment improved during 2021.
The equity to receivables ratio reduced in 2021 compared
with 2020 when it strengthened materially as a result of the
contraction in receivables portfolio. This level of equity funding
will provide sufficient capital to fund planned receivables
growth whilst maintaining the resilience of the balance sheet.
Following the refinancing of the Group in 2020, the debt
funding covenants place restrictions on the ability of the
business to make material reductions in equity capital levels.
Gearing remained stable during 2021at 1.3x at December
2021, compared with 1.4x in 2020. This is well within the
covenant level of 3.75x maximum on our debt facilities.
Treasury risk management and funding
There are Board-approved policies to address the key
treasury risks that the business faces – funding and liquidity
risk, financial market risk (currency and interest rate risk), and
counterparty risk. The policies are designed to provide robust
risk management, even in more volatile financial markets
and economic conditions within our planning horizon.
Our funding policy requires us to maintain a resilient funding
position for our existing business and for future growth. We aim
to maintain a prudent level of headroom on undrawn bank
facilities. Our currency policy addresses economic currency
exposures and requires us to fund our receivables portfolios
with local currency borrowings (directly or indirectly) to
achieve a high level of balance sheet hedging. We do not
hedge the translational risk of foreign currency movements on
accounting profits and losses. Our interest rate policy requires
us to hedge interest rate risk in each currency to a relatively
high level. Our counterparty policy requires exposures to
financial counterparties to be limited to BBB-rated entities as
a minimum except as approved, or delegated for approval,
by the Board. In addition to these policies, our operational
procedures and controls ensure that funds are available in
the right currency at the right time to serve our customers
throughout the Group.
The currency structure of our debt facilities matches the
asset and cash flow profile of our business. We have multiple
local currency bank facilities and our main €341 million
(£287 million) Eurobond provides direct funding to our markets
using the Euro currency, and to markets using other currencies
via foreign exchange transactions. For this reason, we do not
expect fluctuations in the value of sterling to have a major
impact on our funding position.
Debt funding is provided through a diversified debt portfolio
with acceptable terms and conditions. We have bonds
denominated in Euros, Sterling and Swedish Krona, wholesale
and retail, with varying maturities, together with facilities from
a group of banks that have a good strategic and geographic
fit with our business. IPF’s debt is senior unsecured debt,
with all lenders substantially in the same structural position.
We maintain our Euro Medium Term Note programme as the
platform for bond issuance across a range of currencies.
The Group’s funding requirements remained stable
during 2021 as the business deployed cash generated into
receivables growth, with a net cash outflow from operating
and investing activities of £40.0 million in 2021 compared
with cash generation of £268.5 million in 2020. During 2021,
debt facilities amounting to £185 million were extended or
added to the funding portfolio. This included the refinancing
of the existing SEK bond with a new 7% SEK 450 million
(£37 million) maturing October 2024, and the extension
and addition of £148 million of bank facilities.
The extended debt facilities together with the equity capital
provide strong capital foundations to support our growth plans.
At December 2021, we had total debt facilities of £575 million
(£402 million bonds and £173 million bank facilities) and gross
borrowings of £478 million. A full analysis of the maturity profile
of the debt facilities is set out in note 21 to the Financial
Statements and is summarised below.
Maturity profile of debt facilities (£m)
Maturity £m
Eurobond November 2025 287
Swedish krona bond October 2024 37
Sterling bond December 2023 78
Total bonds 402
Bank facilities 2022 to 2026 173
Total debt facilities 575
Total borrowings 478
Headroom against debt facilities 97
Non-operational cash balances 11
Headroom and non-operational
cash balances 108
Financial review continued
■
Overdrafts
■
Term loans
■
Revolving credit facilities
■
Bonds
2026
2025
2024
2023
2022
287
13
37 36 20
78
10
36
29
29
Maturity profile of debt facilities (£m)
International Personal Finance plc34
Strategic Report
Our bank facilities comprise term loans, revolving credit
facilities and overdrafts with £144 million being committed
and the balance of £29 million is uncommitted. The level of
drawn funding at December 2021 was £478 million, £11 million
higher than our operational requirements due to the scale of
the bonds and term loans. This non-operational cash is held
on our balance sheet and is available to fund planned growth
in the receivables portfolio in 2022. Gross borrowings net of this
non-operational cash at December 2021 was £467 million and
total available liquidity in the form of non-operational cash
and headroom on bank facilities was £108 million.
As a result of maintaining a strong financial profile, we operate
with adequate headroom on the key financial covenants
in our debt facilities, as set out in the table below.
2020 Covenant Actual
Headroom
£m
Gearing
1
Max 3.75x 1.4x 235.0
Interest cover
2
Min 1.0x times 2.1x 58.3
2021 Covenant Actual
Headroom
£m
Gearing
1
Max 3.75x 1.3x 236.6
Interest cover Min 1.75x times 2.5x 24.0
1. Borrowings adjusted for lease liabilities; derivative financial instruments;
pension assets; unamortised arrangement fees and issue discount; and
surplus cash in accordance with the debt funding covenant definitions.
2. 2020 actual data includes adjustments for material items of an unusual
or non-recurring nature arising from the pandemic made in accordance
with the terms of the debt facilities.
The Group is rated by Fitch Ratings and Moody’s at BB- stable
outlook and Ba3 stable outlook, respectively. During 2021,
Fitch Ratings improved IPF’S outlook from Negative to Stable
and reaffirmed its long-term credit rating of BB-.
Foreign exchange on reserves
The majority of the Group’s net assets are denominated in our
operating currencies and, therefore, the sterling value fluctuates
with changes in currency exchange rates. In accordance with
accounting standards, we have restated the opening foreign
currency net assets at the year-end exchange rate and this
resulted in a £38 million foreign exchange movement, which
has been debited to the foreign exchange reserve.
Taxation
The taxation charge on the profit for 2021 is £25.8 million,
which represents an expected effective tax rate for the year of
approximately 38%. The tax charge is affected by a combination
of factors but is largely driven by the lack of tax deductibility in
some countries for impairment charges, liability to certain taxes
that are computed with reference to profits for prior periods
rather than current year, and the write-off of deferred tax assets.
With regard to the European Commission’s State Aid challenge
to the UK’s Group Financing Exemption regime, following the
enactment of new legislation in December 2020, HMRC issued
a Charging Notice seeking payment of £14.2 million in respect
of the alleged State Aid for the affected years. The payment of
this amount is a procedural matter, and the new law does not
allow for postponement. Accordingly, this amount was paid in
February 2021 and we appealed the Charging Notice on the
grounds of the quantum assessed. A further amount of interest
of £1.1 million was subsequently paid during August 2021.
Whether the UK’s Group Financing Exemption regime constitutes
State Aid is ultimately to be decided and we continue to await
a decision of the General Court of the European Union on
this matter. The £15.3 million paid is held on the balance sheet
as a non-current tax asset reflecting the Directors’ judgement
that it is more likely than not that the amount will ultimately be
repaid. This judgement is based on legal advice received on the
strength of the technical position included in IPF’s annulment
application. Further details of the risks associated with the
Group’s finance company are set out at note 32.
Going concern
In considering whether the Group is a going concern,
the Board has taken into account the Group’s 2022 business
plan, its principal risks (with particular reference to regulatory
risks), and the expected trajectory of recovery from the
Covid-19 pandemic. The forecasts have been prepared for
the five years to 31 December 2026 and include projected
profit and loss, balance sheet, cashflows, borrowings,
headroom against debt facilities and funding requirements.
These forecasts represent the best estimate of the expected
recovery from the impact that Covid-19 had on the Group’s
businesses, and in particular the evolution of credit issuance
and collection cash flows.
The financial forecasts have been stress tested in a range
of downside scenarios to assess the impact on future
profitability, funding requirements and covenant compliance.
The scenarios reflect the crystallisation of the Group’s principal
risks (with particular reference to regulatory risks) and evaluate
the impact of a more challenging recovery from the impact
of the Covid-19 pandemic than assumed in the business plan.
Consideration has also been given to multiple risks crystallising
concurrently and the availability of mitigating actions that
could be taken to reduce the impact of the identified risks.
In addition, we examined a reverse stress test on the financial
forecasts to assess the extent to which a recession would need
to impact our operational performance in order to breach
a covenant. This showed that net revenue would need to
deteriorate significantly from the financial forecast and the
Directors have a reasonable expectation that it is unlikely
to deteriorate to this extent.
At 31 December 2021, the Group had £108 million of
non-operational cash and headroom against its debt facilities
(comprising a range of bonds and bank facilities), which
have a weighted average maturity of 2.9 years. The total debt
facilities as at 31 December 2021 amounted to £575 million of
which £58 million (including £29 million which is uncommitted)
is due for renewal over the following 12 months. A combination
of these debt facilities, the embedded business flexibility
in respect of cash generation and a successful track record
of accessing funding from debt capital markets over a long
period (including periods with challenging macroeconomic
conditions and a changing regulatory environment), are
expected to meet the Group’s funding requirements for the
foreseeable future (12 months from the date of approval of
this report). Taking these factors into account, together with
regulatory risks set out on page 54 of the Annual Report, the
Board has a reasonable expectation that the Group has
adequate resources to continue in operation for the
foreseeable future. For this reason, the Board has adopted
the going concern basis in preparing the Annual Report and
Financial Statements.
Annual Report and Financial Statements 2021 35
stakeholders
We are committed to living
our purpose and meeting
our responsibilities to our
Stakeholder review
“The Board is fully
committed to doing what’s
right for our customers,
colleagues, investors and
other stakeholders. Active
engagement is essential
for us to live our purpose
and to understand the
impact of decisions we
take on our stakeholders.”
Gerard Ryan,
Chief Executive officer
International Personal Finance plc36
Strategic Report
Engaging with
our stakeholders
Engaging with key stakeholders helps us gain a better
understanding of their needs and how Board and operational
decisions impact them. It is crucial to delivering on our
purpose and enhancing an open, caring culture, maintaining
high operational standards and delivering our strategy to
achieve long-term sustainable value. It is also important that
our stakeholders understand our unique business model
and the essential role we play in helping consumers access
affordable financial products and services, and supporting
the wider community.
Our strategy starts with our core purpose, to build a better
world through financial inclusion. This is the reason why our
organisation exists and through which we create value for
all our stakeholders. The Board is fully committed to doing
what’s right for our customers, colleagues, shareholders
and wider stakeholders.
In addition to our continual programme of listening and
responding to matters that mean most to our stakeholders,
we also undertook an extensive engagement exercise
to understand what our purpose means to our customers,
employees, regulators, communities and investors.
This process encompassed research and conversations
with stakeholders in most of our markets and delivered a set
of stakeholder statements against which we will measure
our progress.
Looking ahead we plan to extend our transparent
performance reporting to provide more information to our
stakeholders on our contribution towards our most material
ESG matters and our chosen UN Sustainability Development
Goals (SDGs).
Awards and accreditation
Section 172(1)
On the following pages, we have set out how the Board
has acted in a way that promotes the success of the
Company for the benefit of its members as a whole,
in accordance with the requirements of the Companies
(Miscellaneous Reporting) Regulations 2018, whilst having
regard to the following matters set out in s172(1)
of the Act:
– the likely consequences of any decision in the
long term;
– the interests of the Group’s employees;
– the need to foster the Group’s business relationships
with suppliers, customers and others;
– the impact of the Group’s operations on the community
and the environment;
– the desirability of the Group maintaining a reputation
for high standards of business conduct; and
– the need to act fairly between members
of the Company.
We understand that it is important for the business at all
levels, including the Board, to engage with its shareholders
and wider stakeholder groups. By engaging with our
stakeholders we gain a better understanding of what areas
they are interested in or concerned about and also how
our decisions have impacted them. Healthy engagement
with our stakeholders underpins our governance framework
and helps to ensure we maintain high standards
of business conduct.
The next few pages set out the stakeholders that continue
to represent the key resources and relationships that
support the generation and preservation of value
in the Group, as well as our culture of openness and
communication. For each stakeholder we have explained
why we engage with them, key areas of interest, how we
engaged with them and how their interests were
considered in Board decision making.
Annual Report and Financial Statements 2021 37
Customers Employees and
customer representatives
Regulators and legislators
Stakeholder review continued
42,000
customers participated
in our purpose engagement
and customer research
96%
colleagues completed
ethics training
55
sector association memberships
Investing in relationships
with our stakeholders
Delivering on our purpose and remaining attractive to customers is influenced by our stakeholder relationships.
We invest time in listening to our key stakeholders to understand their needs, and use this insight to drive our
strategy and actions. Our stakeholders are an integral part of Board discussions and decisions made, an
important focus of which is balancing their needs, particularly where they may differ.
Why we engage
Listening to our customers
allows us to build a greater
understanding of their needs and
behaviours so we can find ways
to add value to their experience
with us. They benefit from relevant
credit products and it helps us
retain quality customers and
attract new ones.
Key areas of interest
– Affordability and price
– Flexible repayments
– Convenience
– Simple and seamless
experience
– Trusted brands
How we engage
– Customer visits
– Digital interfaces
– Customer satisfaction surveys
– Responsible lending
communications
– Product innovation
– Website tools
– Product information
Why we engage
It is important that our colleagues
feel safe, supported and engaged
so that they are able to provide
a great service to our customers.
Creating opportunities to
contribute and develop is vital to
the sustainability of the business.
Key areas of interest
– Development opportunities
– Recognition and reward
– Wellbeing
– Ethical customer-focused
culture
– Safe and productive
working environment
How we engage
– Development programmes
– Engagement surveys
– Conferences and
business updates
– Recognition
– Global Care Plan
– MyNews app, intranet,
social media and email news
– Interactions with Workforce
and Stakeholder
Engagement Director
Why we engage
Together with our sector trade
associations, we talk to regulators
and legislators to build their
understanding of consumer
needs and our important role
in extending financial inclusion.
Key areas of interest
– Regulatory compliance
– Control and supervision
– Fair pricing and promotions
– Responsible lending
– Social inclusion
– Tax contribution
– Fair employment contracts
– Ethics training
How we engage
– Sector association membership
– Public consultations
– Engagement
on draft regulations
– External advisor network
– Partnership with NGOs
International Personal Finance plc38
Strategic Report
Suppliers Communities Investors
10,500
supplier partners across
the Group
5,388
hours of volunteering
by IPF colleague
£185m
of funding extended in 2021
Why we engage
In collaboration with our key
suppliers, we develop policies
and improve practices to minimise
sustainability risk within our supply
chain. Our interactions also help
extend their expertise and
innovation to our business.
Key areas of interest
– Strategy and
business challenges
– Business performance
– Timely payments
– Customers’ service requirements
and opportunities
– Good reputation
How we engage
– Strategic sourcing processes
– Voice of the Supplier survey
– Ongoing supplier and
contract management
– Due diligence and risk
management processes
– Industry research
– Strategic governance processes
– Service-level
performance reviews
Why we engage
We work to forge meaningful
relationships in the communities
we serve to help support causes
and address issues that
colleagues and customers care
about locally. Building better
relationships also helps attract
employees and customer
representatives to work with us.
Key areas of interest
– Financial literacy
– Social wellbeing
– Volunteering
– Community
support programmes
How we engage
– Financial literacy programmes
– NGO partnerships
– Financial wellbeing research
– Colleague volunteering
– Supporting causes chosen
by colleagues
Why we engage
Our investors expect to earn
a return on their investment in
a sustainable, ethical business.
They want access to timely,
fair and balanced information
so they can understand our
business and make an informed
investment decision.
Key areas of interest
– Performance and
growth potential
– Governance quality
and effectiveness
– Regulation and credit risk
– Risk management
– Cash generation
– ESG risks and reporting
– Executive remuneration
– Dividends
How we engage
– Dialogue and meetings
– AGM
– Results presentations
and trading updates
– Annual Report
– Roadshows and conferences
– Website
– Remuneration Policy
engagement
Annual Report and Financial Statements 2021 39
Stakeholder review continued
Our customer engagement strategy, delivered
througha range of channels, gives those we serve
theopportunity to interact with our business in a way
that suits them. In turn, listening to their feedback
allows us to build a greater understanding of their
needs and guides both Board and operational
decision making, particularly as to how we can
designsimple, affordable and personal financial
products and add value to their customer journey,
ensuring it is always fair, transparent and flexible.
– Personal contact lies at the core of our home credit
business model. Every year our customer representatives
make thousands of home visits to customers, providing
unique insight into their lifestyles and this further supports
our data-driven affordability scoring process.
– We help our customers access credit when they need it. Our
responsible lending principles and code of ethics form the
foundation of our interactions in providing affordable credit.
– The executive directors and senior leadership team analyse
customer experience and Net Promoter Scores as part
of monthly performance reviews. They also review customer
complaints to understand areas where we can improve
operations and our response to customers.
– Paused by the pandemic, we returned to developing
our customer experience across our European home
credit operations. We undertook extensive engagement
with customers to understand their experiences, affirm
areas where we deliver well and importantly where
improvements need to be made. The outputs of this
engagement include more sophisticated customer
response tracking, enabling instant feedback to identify
areas to adapt. Customer Experience Committees have
been created to bring the customer voice to market board
meetings and Customer Voice forums have been
introduced to share insights between customer-facing
and non customer-facing colleagues.
– We are committed to respecting the choices customers
make about how personal data is processed throughout our
business. We protect customers’ privacy rights and freedoms
by implementing robust business processes and rules which
are regularly monitored and tested. This is supported by
mandatory training for colleagues on information security
and data protection awareness.
– We support our customers and the causes close to them
through our community programmes, from delivering
financial literacy education and volunteering campaigns
to supporting customers facing environmental crisis.
Considering customers
in Board decisions
The Board engages with customers through
twice-yearly strategy retreats where they form the
central strand to discussions. They also receive insight
through regular CEO board reports and presentations
which include matters such as consumer behaviour,
customer reputation and brand tracker surveys.
These provide valuable insights into the relevance
of the Group’s product and services and guide future
product development and customer communications.
All major product developments are reviewed
by the Board.
In 2021 the gradual lifting of travel restrictions
enabledsome Board members to revisit our
operations in person. In Hungary and Poland, the
Chair visited customers in their homes, listened to
livecustomer calls and heard presentations covering
the customer experience and the modernisation of
customer service centres.
Key matters debated and agreed by the Board
in 2021 included:
– The decision to relax credit settings, allowing more
customers to access regulated credit and enabling
them to buy the things they need.
– The decision to progress the roll out of our mobile
wallet to our digital businesses once the concept
had been proven in the ‘test and learn’ phase of
product deployment.
– In line with our focus on growth and to capture
the significant potential of our Mexico home credit
division, the Board approved the expansion into
new territories to support the ability to serve more
customers in this market.
– Discussions relating to the importance of the
customer journey and an improved customer
experience so that our customers may benefit
from our tailored credit offering, encourage them
to return to us in the future and recommend our
offering to others.
Customers
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Strategic Report
We are committed to developing a culture that
develops and rewards talent, and enables colleagues
to achieve their full career potential. We also recognise
that their wellbeing and engagement are critical
to creating a sense of pride in providing financial
help to our customers in a fair and transparent way.
Our people strategy focuses on listening to and
engaging colleagues so they understand our purpose,
develop their capabilities with us and feel inspired
to give their best efforts when serving customers.
Our successful and evolving people strategy is built around
three global pillars – Care, Perform and Develop.
Care
We place a huge importance on ensuring that our people are
safe, connected and feel a true sense of wellbeing. In 2021,
we expanded our Global Care Plan significantly:
– Safety is our number one priority and we continued to supply
all colleagues with PPE so they could serve customers safely
and confidently. We also transitioned colleagues from
remote to flexible, hybrid working.
– We hosted a series of virtual events, including a Global
Togetherness Day attended by 400 colleagues from all our
markets who celebrated staying connected.
– We developed a global mental health awareness campaign
to build understanding of good mental wellbeing.
– We performed a review of ISO 45003:2021 – the new
guidelines for managing psychosocial risks in the workplace.
We plan to utilise the guidelines to improve our processes
during 2022.
Perform
– A key strategic focus was to further build upon the stability
and engagement of customer representatives.
– We engaged with colleagues at our annual conferences
to motivate them in their role to help rebuild the business.
– To attract and retain the best people, we developed
and launched an employer value proposition.
Develop
– We hosted our first week-long learning festival which was
open to all colleagues and attended by internal and
external guest speakers. Twenty-six events created 40 hours
of lectures, training sessions and master classes to build
a global knowledge base for future self-improvement
and onboarding.
– We introduced a global approach to development with
the creation of learning pathways for customer-facing roles
and we are specifically targeting an increase in the number
of female customer representatives who are promoted
to development manager.
– Based on feedback from graduates of our leadership
development programme, Aspire, we refreshed the
curriculum to focus on global collaboration and networking.
We also engaged a globally-recognised educational
establishment to help deliver the programme and enhance
recognition from this valued institution.
– We launched a Learning Academy in Mexico.
Employees and customer representatives
Employer value proposition
During 2021, we developed and introduced an
employer value proposition designed to retain our
internal talent and attract the best external talent.
Starting with extensive research, we sought insight
directly from colleagues to our distinct proposition.
We had tremendous engagement throughout each
session and received incredibly valuable feedback
that we are acting upon. As a result, we are now
working on the creation of development pathways
for all employees and a number of upgrades to our
value proposition for customer representatives.
Our employer value proposition is centred around
our purpose and focuses on how we build
connections with customers and colleagues to
makea true impact on society through financial
inclusion. It signifies what our Group stands for and
what we require and offer as an employer. It also
clearly sets out and communicates the attributes
thatmake our business distinctive, and delivers an
experience that appeals to those people who will
thrive and perform best in our culture.
800
participants contributed
to our research
80
focus groups
Annual Report and Financial Statements 2021 41
Diversity
We need a diverse workforce that is reflective of our customer
base and communities that we serve. We also want to make
sure everyone feels welcome and included. Our customer
representatives often live and work in the communities
they serve. A large proportion have also been customers
so have a deep understanding of our customers’ lives,
financial circumstances and credit needs. As an international
company, we are fortunate to have a wide range of cultures
and people groups. The membership of our Board is also
diverse with nationals from Australia, the Netherlands and
Ireland as well as the UK.
Considering colleagues
in Board decision making
The lifting of people movement restrictions during
the year allowed the Board to enhance in-person
engagement with colleagues to complement the
extensive use of virtual technology that was adopted
during the pandemic. Our Workforce and Stakeholder
Engagement Director, Bronwyn Syiek, had regular
interactions with leaders to discuss people
engagement and participated in multiple meetings
with colleagues including human resource directors,
corporate affairs directors, and the Mexico training
and development team. Her feedback to the Board
provided valuable and important insight into our
relationships with stakeholders and specifically how
colleagues feel about the business, its direction
and actions taken to support them.
Key matters debated and agreed
by the Board included:
– An annual stakeholder outreach plan as the
foundation of Board stakeholder engagement to
ensure stakeholders are fully aware of the Group’s
key strategic goals.
– Facilitated Board discussions focused exclusively on
stakeholder engagement, supported by twice-
yearly reports to monitor engagement activity and
underpin Board decisions. In order to facilitate this,
Bronwyn Syiek undertook the following:
– Attendance at the Group’s climate-related
change workshop in June 2021 with senior
leaders from across the business. This initiative
together with the review and assessment of
climate-related risks and opportunities relevant to
IPF resulted in the Board classifying climate-
related change as a principal risk to the Group.
– Attendance at IPF’s Women’s Conference
alongside non-executive director, Deborah Davis,
to contribute to career development and learning
discussions. The event also provided a unique
opportunity for the Board to hear the voices of the
extensive female talent across the Group.
– Reviewed and debated the purpose strategy
proposed by the executive team.
– The results of the 2021 Global People Survey were
presented to and reviewed by the Board.
– The Board hosted a ‘skip-a-level’ dinner with
members of the UK team, without members of the
senior leadership team present, enabling the Board
to meet a range of colleagues from finance, credit,
legal, HR and IT to gain valuable insight into
colleagues’ views on a wide range of matters.
– The Board approved the resumption of the
employee SAYE scheme, which supports
engagement, financial wellbeing and aligns
with shareholder interests.
Stakeholder review continued
Gender split at 31 December 2021
In 2021, the definition of senior management was changed. It is defined
as the executive committee or first layer of management below Board level,
including the company secretary and direct reports.
Focus on women
In 2021, we introduced a series of initiatives focused on
driving support of women at IPF, the first step of which was
our inaugural Women’s Conference in March. More than
300 female leaders including non-executive directors
Bronwyn Syiek and Deborah Davis, colleagues and customer
representatives gathered to inspire and share career
development experiences.
Our European home credit business hosted a Women’s Month
to recognise female employees and raise awareness of their
contribution to supporting customers.
In the UK, a new Women’s Forum provided an environment
to discuss career path development, mentoring and
coaching support.
Looking ahead, this empowerment agenda including the
Women’s Conference will open up opportunities to further
engage and develop female colleagues in terms of their
professional careers, gaining new skills, boosting self-esteem,
as well as bringing wellbeing to the fore.
Human rights
We are committed to human rights and make a regular
communication on progress through our membership
of the United Nations Global Compact Network UK. We are
committed to opposing slavery and human trafficking both
in our direct operations and in the indirect operations of our
supply chain. Our statement on the Modern Slavery Act 2015
can be found at www.ipfin.co.uk. All employees within our
management team, procurement, marketing, legal, corporate
affairs and human resources undertake training each year
covering the Modern Slavery Act.
■
Male
■
Female
Board
Senior
management
All other
3,232 5,214
2
3361
4
International Personal Finance plc42
Strategic Report
Communities
Building better relationships with those that live and
work in our communities sits at the heart of our social
purpose. Our international teams support local
charities, community groups and individuals through
financial education and volunteering support to
improve the quality of life in our communities.
Our global network of 22,000 colleagues helps us to be
a highly visible and valuable member of our local communities.
In 2021, our community initiatives reached more than 7 million
people and since 2017 we have invested £3.9 million in
programmes to support the communities where our colleagues
live and work.
Volunteering
Volunteering is an important way to engage with communities
and every year colleagues join campaigns to support the
causes they care about.In times of need, they also choose
to help and support our customers well beyond their day-to-
day roles. In 2021, our colleagues told us that despite the
pandemic, they wanted to continue contributing to our
annual volunteering month. Consequently, more than
1,200 colleagues volunteered in their communities in May.
Their efforts included:
– 400 colleagues in Mexico volunteering to set up a toy
collection for 400 children. They also created two computer
labs for 200 school children and participated in the
Provident Run to raise funds for children with cancer;
– 130 colleagues in the Czech Republic signed up to running
10,000 km in support of two shelters for children; and
– 120 colleagues joined the Provident Run in Poland to raise
funds to support terminally ill children.
Considering our communities
in Board decision making
The Board fully understands that relationships we build
with our communities are fundamental to our wider
engagement in society and supports engagement
activities to further strengthen these.
Key matters debated and agreed by the
Board included:
– Feedback from the Chair on recent visits to
customers’ homes reinforced the fundamental
roleour representatives have in the communities
in which we operate and their continued relevance
to the next generation of borrowers.
The Invisibles
During 2021, colleagues in the Czech Republic
developed a highly effective campaign highlighting
the plight of underprivileged, marginalised and
excluded members of society. Extensive research
revealed more than 10% of the population are
deemed to be “Invisible”. The campaign highlighted
five groups – Young Families, Lone Parents, Shadow
Economy Workers, Poor Students and the Experienced
but Unemployed. In addition to an extensive media
campaign to raise awareness of this issue, the
programme focused on building a platform to
connect the Invisibles with public institutions and
partner NGOs who can provide support. To date,
the programme has attracted over 15,000 visitors to its
website and 4,500 fans to the dedicated Facebook
profile. The next phase will involve engaging more
NGOs and public sector stakeholders to endorse the
programme. More media attention and a larger base
of partner organisations will be instrumental in aiming
for systematic changes which can effectively support
the inclusion of the ‘Invisibles’ back into society.
Following feedback from colleagues and community
partners as part of our purpose engagement work,
we are looking at the possibility of extending this
campaign into a global initiative supported by all
our markets.
Financial education
For many customers, we are their first contact with a financial
services business so it’s crucial to help them make informed
financial decisions. Our annual financial wellbeing research
has consistently found that many consumers do not receive
formal financial education and would value the opportunity
to learn about budgeting. This was also the case in 2021
whenonly 54% of respondents said they felt confident about
financial products and services. In response, we established
and supported financial education programmes that promote
financial skills development, help consumers engage with the
financial sector with more confidence, and make informed
decisions about their budget. In 2021 our business in Romania
received two awards for their ‘Open Provident’ campaign
recognising our efforts to promote financial education
to consumers.
Colleagues in Poland volunteering
in their local community in 2022
Annual Report and Financial Statements 2021 43
Stakeholder review continued
Regulators and legislators
Suppliers
We co-operate professionally with our supplier
partners, developing long-term, trusting relationships
based on our values and mutual benefits. We want our
suppliers to be informed about and engaged with our
business so they are better able to understand how
their products and services contribute to the delivery
of our goals.
Our Voice of the Supplier survey, undertaken at the end of
2020, helped us better understand our strengths and address
areas for development. In response, we are developing a
Supplier Relationship Management strategy devoted to
procurement standards for strategic and critical partners
including defining supplier strategy, contact frequency,
partner ratings and regular two-way qualitative feedback.
When working with suppliers who process customer or
employee data, we ensure the appropriate due diligence
is carried out through internally conducted pre-assessments
(including security verifications) to ensure that appropriate
safeguards are in place with mutual rights and obligations
carefully addressed in the Data Processing Agreements.
Considering suppliers
in Board decision making
The Board recognises the importance of partnering
with suppliers that share our values and sustainable
approach to business. The Board is fully supportive
of the operational policies and procedures in place
that help to govern and guide these relationships.
In 2021 the Group’s Responsible Procurement Policy,
which consolidates the processes and standards
that must be followed when choosing and working
with suppliers, was refreshed to ensure that all
IPF Group companies only collaborate with
responsible suppliers.
Key matters debated and agreed by the
Board included:
– Approval of key contracts in line with the delegation
of authority and matters reserved for the Board.
– Kept abreast of developments planned as a result
of the Voice of the Supplier survey.
We support regulation that protects consumers
and ensures that only responsible businesses are
permitted to provide financial products and services.
We maintain good relationships with regulators
and legislators who play a key role in shaping the
consumer finance sector, and we strive to ensure
that they understand we are an important member
of a well-functioning market playing a vital role in
affordably extending financial inclusion in society.
We engage in each of our markets through a range of industry
forums, meetings, legislative consultations and conferences
to communicate our views to policy makers.
We engage through relevant industry associations about
legislative plans or proposals. Feedback from regulators
and legislators indicates their preference to talk to groups
of companies rather than individual market players. It also
contributes to maintaining high standards across the industry,
building a positive reputation and creates a sustainable
regulatory and operational environment.
We are also committed to working with regulators and
legislators to help shape the regulatory future of the consumer
lending sector. In Romania, for example, we worked with
a research institution in 2021 to map the views of politicians,
regulators and journalists on the health of the financial system,
financial regulation and financial education. This work should
also contribute to a more sustainable financial regulatory
environment in the market.
Considering regulators
and legislators in Board
decision making
The Board receives regular updates on legal and
regulatory developments in Board reports and from
presentations by the leadership team including
the Group Corporate Affairs Director and the
Chief Legal Officer.
Key matters debated and agreed by the
Board included:
– The changes in our credit risk management
strategy as temporary Covid-19 legislation
was extended or lapsed during the year.
– Agreed the regulatory engagement strategy
to support the review of the EU Consumer
Credit Directive.
– Discussed and agreed a range of possible
strategies in connection with potential consumer
credit legislation in Spain, Poland and Romania.
– The impact of the legal interpretation of Spanish
usury laws resulting in the difficult decision to cease
lending in Spain. In reaching this decision, the
Board considered the impact on other stakeholders,
including colleagues, customers and communities.
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Strategic Report
Investors
We engage with shareholders, providers of debt
funding and credit ratings agencies so they
understand the business and can make informed
decisions on investing in and rating IPF. We undertake
a proactive engagement programme through
one-to-one and group meetings, regular results and
strategy announcements, webcasts and the AGM.
All key information is available on our website at
www.ipfin.co.uk.
– Open and regular dialogue with investors ensured that
our Covid-response strategy to rebuild the business was
clearly articulated and well understood. More than 400
investors and analysts joined the results webcasts and
conference calls, with a record number of questions
demonstrating the high level of interest in the business.
– We hosted virtual meetings with 40 institutional investors
following the full and half-year results. This provided the
opportunity for investors and non-holders to meet
management and discuss material matters.
– Workforce and Stakeholder Engagement Director,
Bronwyn Syiek, engaged directly with shareholders
during a number of meetings with investors.
– The Board considered that it was in the Company’s
best interests to proceed with the 2021 AGM but in light
of restrictions resulting from the pandemic, it was
attended in person by a limited number of Company
representatives. Shareholders were fully informed and
invited to appoint the Chair of the meeting as their
proxy to vote on the proposed resolutions.
Developing our ESG strategy
Increasingly, we are engaging with investors on
ESG matters as part of their screening diligence,
with particular focus on responsible lending, climate-
related change, diversity and data security. As a
business with a strong social purpose and long history
of creating financial inclusion opportunities, we
strengthened our ESG approach to ensure we deliver
on our purpose in a responsible and transparent way
and underline our commitment to respond to climate-
related change. The strategy was developed following
extensive engagement with our brokers, funding
partners and investors to identify material ESG matters
– both current and emerging. The Board also took an
active role in engaging with the ESG development
journey. It regularly assessed material ESG-related
developments including financial inclusion, affordability
and information security and how they are considered
in managing the business. The climate-related
change roadmap to meet the recommendations of
the TCFD was agreed and a leading investment fund
manager attended a meeting to further educate the
Board on how ESGfactors are incorporated into
investment researchframeworks.
Considering our investors
in Board decision making
Board engagement with investors is primarily through
the CEO and CFO who meet investors to present
theCompany’s results and discuss strategic issues.
Investor feedback is gathered formally twice a year,
providing an excellent opportunity for the Board to
consider their views in decision making.
Key matters debated and agreed by the
Board included:
– A review of feedback from investors who provided
positive comments in relation to how management
was navigating the pandemic, executing
successfully the return to growth plan and the
welcome resumption of a dividend at the half year.
Investors also highlighted areas for future focus by
management, including the rebuilding of IPF Digital,
succession planning and communication to
support an improved valuation of the Group.
– Through the Remuneration Committee, the Board
consulted with the Company’s major shareholders
on remuneration matters in the 2020 Directors’
Remuneration Report which was approved at the
2021 AGM.
– Development of the next phase of the Group’s
rebuild strategy at a dedicated session to
agree strategic priorities. In conjunction with
the Company’s broker, consideration was given
to investor sentiment and feedback on our
strategic direction.
– Approved the proposed funding strategy which
resulted in the successful issuance of a new
three-year SEK 450 million bond at a reduced
cost of funding, and the extension of £148 million
of bankfacilities.
– Approval of the resumption of the interim and final
dividend, and a new progressive dividend policy.
Annual Report and Financial Statements 2021 45
Environment
Environment
The Board is committed to managing the Group’s
environmental impact through responsible resource
use and education for our people, recognising that
the direct environmental impact through the use
of transport, energy and natural resources should be
conducted in a way that causes the least possible
harm to the planet.
As a consumer financial services business, we consider the
Group’s direct carbon-emission footprint to be relatively small
compared to some other sectors and recognise that the risks
and opportunities for the business are emerging from, and
driven mainly by, the external landscape in which we operate.
We seek to minimise our environmental impact by regularly
reviewing our direct and indirect impact. Data is compiled in
all our businesses and analysed by our sustainability function.
The actions we take to minimise and reduce our environmental
footprint include:
– Car fleet reviews to reduce fuel consumption
and CO
2
emissions;
– Route optimisation for customer representatives
visiting customers;
– Our MyProvi mobile app for customer representatives
reducing paper usage and improving efficiency; and
– Office consolidation, where appropriate, reducing water,
electricity and gas use.
In 2021 we also introduced a number of climate-related
initiatives:
Provident Forest
We set up a green partnership in Poland with the social
foundation Dotleni.org assigning a proportion of revenue
generated by sales for planting trees. Members of our team
volunteered to plant the saplings, helping to create a forest
of 40,000 trees in the north east of Poland, which will produce
5,600 kg of oxygen in 24 hours, the equivalent to the demand
of around 20,000 people, and will absorb 28,800 kg of CO
2
every year. Similar initiatives are taking place in Romania
and Hungary.
Five for the Planet
We designed a global education programme for all colleagues
to improve environmental awareness. In collaboration with
one of Poland’s leading climate experts, Sylwia Majchrzak,
the campaign advised colleagues how they can reduce their
carbon footprint and be more environmentally conscious.
ProviGreen
Our colleagues in Hungary launched a long-term programme
aimed at raising environmental awareness and introducing
climate change risk and opportunities in making business
decisions. As a part of this programme, roles, responsibilities
and controls regarding climate change have been
embedded into the overall management structure.
Green IT
Our IT strategy now includes green computing initiatives
to reduce the environmental effect of our operations.
The leading light has been the introduction of MyProvi – our
agent mobile app that has digitised the sales and collections
service to home credit customers and reduced paper
consumption significantly. Switching our data centres to the
public cloud, has not only improved data security, it will deliver
environmental benefits due to lower carbon emissions and
electricity consumption. The use of the public cloud means
that we can flex the amount of computing power we use by
scaling up and down based on the required performance.
International Personal Finance plc46
Strategic Report
Carbon emissions report
Tonnes CO
2
e
Carbon emissions sources Travel and utilities 2020 2021 Difference
Scope 1 Gas 1,008 462 (54.1%)
Business travel by car 16,304 18,277 12.1%
Scope 2 Purchased electricity and district heating 2,665 2,102 (21.1%)
Scope 1 and 2 19,976 20,841 4.3%
CO
2
e emissions by customer 0.011 0.013 14.5%
Note:
Scope 1 carbon emissions do not include leakage from air conditioning systems as it is difficult to collect this data for all the offices we lease.
Scope 2 carbon emissions have been calculated using location-based methodology. IEA electricity emissions factors have been used for non-UK
countries for more precise accounting. Note that the IEA electricity factors are for CO
2
.
Greenhouse gas reporting
We have reported on the most material carbon emission
sources required under the Companies Act 2006 (Strategic
Report and Directors’ Report) Regulations 2013 – Scope 1 and
2 Greenhouse Gas emissions and energy consumption data.
We do not currently consider the monitoring of Scope 3
emissions to be appropriate for our business. We have applied
the Greenhouse Gas (GHG) Protocol Corporate Accounting
and Reporting Standard to calculate our emissions data and
have used emission factors from the UK Government’s GHG
conversion factors and the current edition of the IEA emission
factors for non-UK electricity. To calculate GHG emissions we
include all entities within the IPF Group and all our offices.
We state emissions per customer because we believe that
it is the most quantifiable factor associated with the nature of
our business. We monitor and report this ratio to the Board.
These sources fall within our Consolidated Financial
Statements. Where available data was incomplete,
we have extrapolated data.
In 2021, our GHG emissions for Scopes 1 and 2 increased
by 4.3% compared with 2020 as we began to rebuild the
business following the impacts of the pandemic. As people
movement restrictions were lifted, colleagues in most of our
markets returned to work in our offices on a flexible basis
and travelled to visit customers more regularly. This resulted
in a 12.1% increase in business-related car travel compared
with 2020, when customer visits, in particular, were curtailed
as a result of the pandemic. We did, however, reduce the
consumption of district heating significantly by 21.1% compared
with 2020 as we rescaled the business and consolidated our
office infrastructure where it was appropriate to do so.
In 2021, we observed an increase in CO
2
emissions per
customer of 14.5%, back to levels reported in 2019 prior to
thepandemic.
Our carbon emissions report has been reviewed and verified
by Be Sustainable Limited and the statement of verification
can be found on our website at www.ipfin.co.uk. We aim
tofurther improve our environmental data collection and
management system by considering recommendations
fromthis review, which include setting emissions targets and
expanding reporting scope, and plan to incorporate the
mostappropriate actions into our climate-related change
strategy in 2022.
ESG ratings
Annual Report and Financial Statements 2021 47
Taskforce on Climate-related Financial Disclosures (TCFD)
TCFD
In 2021,we embarked upon a process to develop
our climate-related strategy and identify the key
opportunities and risks posed by climate change that
relate to IPF. Our aim was to better understand where
the business is in terms of climate-related challenges
and how our strategy should be developed in response
to these.
In accordance with Listing Rule (LR 9.8.6(8)) the table
below provides details of our compliance with the TCFD
recommended disclosures. Where we have not complied,
we have provided an explanation as to why this is the case
and the steps being taken to enable disclosure. We have also
included the timeframe within which we expect to be able
to make these disclosures.
We also report on the most material carbon emission sources
required under the Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations 2013 on page 47.
TCFD recommendations Explanation Next steps and timeframes
Governance
a) Describe the
Board’s oversight
of climate-related risks
and opportunities.
We consider that we are compliant with this recommendation.
The Board considered and approved the climate-related change
strategy to deliver compliance with the TCFD recommendations.
As a result the Board has direct oversight of climate-related risks
and opportunities.
It is the Board’s intention to examine relevant
targets and metrics in 2022 with a view to
monitoring progress against these commitments
in future years.
Discussions on climate-related risks and
opportunities will also be incorporated in to the
Board’s twice-yearly strategy reviews.
b) Describe
management’s role in
assessing and managing
climate-related risks
and opportunities.
We consider that we are compliant with this recommendation.
A risk owner has been appointed with specific responsibility
for managing climate-related risks and opportunities across
the Group.
The requirements of our key stakeholders were considered and
climate-related risks and opportunities identified in relation to their
expectations. These considerations included potential impacts
on the Group’s financial performance, reputation and funding.
This assessment concluded that climate-related change is
a significant risk to the business and it was therefore proposed,
and subsequently agreed by the Board, that it be included
as one of the Group’s principal risks.
At an operational level, management
of climate-related risk and opportunities will
be co-ordinated among existing functional
committees. This is because the climate-related
risks and opportunities identified have strong links
with other principal risks including reputation,
safety, credit and product. We are now in the
process of developing a transition plan which will
include timelines for achieving a net zero goal.
Strategy
a) Describe the
climate-related risks
and opportunities the
organisation has
identified over the short,
medium and long term.
We consider that we are compliant with this recommendation.
The material climate-related risks and opportunities relating
to IPF were identified. These are detailed together with relevant
timeframes on page 50.
The material climate-related risks and
opportunities, together with relevant timeframes,
will continue to be reviewed and monitored
in line with the Group’s well-established risk
management framework in 2022 and over the
longer term.
b) Describe the impact
of climate-related risks
and opportunities in
the organisation’s
businesses, strategy,
and financial planning.
We consider that we are not currently compliant with this
recommendation. Due to the focus in 2021 being on identifying
the most material climate-related risks and opportunities pertinent
to the business, this assessment has yet to be undertaken.
The aim in 2022 is to produce an impact
assessment scale to measure the impact of
climate-related risks on the Group’s strategy,
business model and financial planning. This will
include products and services, value chain and
access to capital, and will be undertaken as part
of the Group’s regular risk assessments.
Discussions on climate-related risks and
opportunities will be incorporated in to the
Board’s twice-yearly strategy reviews.
International Personal Finance plc48
Strategic Report
TCFD recommendations Explanation Next steps and timeframes
Strategy continued
c) Describe the resilience
of the organisation’s
strategy, taking into
consideration different
climate-related
scenarios, including
a 2
o
C or lower scenario.
We consider that we are partially compliant with this
recommendation. Our focus in 2021 has been on identifying the
most material climate-related risks and opportunities pertinent to
the business and, as such, we have not yet considered different
climate-related scenarios. We have, however, undertaken an
exercise to understand the range and extent of meaningful
climate-related scenarios, guidelines and standards set by
external organisations.
We aim to commence the process of scenario
analysis in 2022.
Risk Management
a) Describe the
organisation’s
processes for identifying
and assessing
climate-related risks.
We consider that we are compliant with this recommendation.
The process for identifying and assessing climate-related risks
began with a consultation with the Group’s senior leadership
team which included an engagement workshop on climate-
related change. Non-executive director, Bronwyn Syiek,
attended this session to provide Board oversight.
A detailed process to generate a gap analysis was also
undertaken to build a broader understanding of climate-related
issues. This analysis, together with a benchmarking exercise
against peers, identified how current internal processes and
reporting compared to the TCFD recommendations, and where
there may be gaps in disclosure.
To ensure a comprehensive view and scope of assessing
climate-related risks, we also developed a taxonomy of climate-
related risks aligned to the TCFD recommendations.
In 2022, we aim to evaluate the risks in terms
of likelihood and impact utilising the impact
scale described above.
b) Describe the
organisation’s processes
for managing climate-
related risks.
We consider that we are compliant with this recommendation.
The management of climate-related risks is now integrated into
the Group’s well-established and robust enterprise risk
management framework as described on page 52.
We are in the process of developing a transition
plan which we intend to implement during 2022.
c) Describe how
processes for identifying,
assessing, and managing
climate-related risks are
integrated into the
organisation’s overall
risk management.
We consider that we are compliant with this recommendation.
We identified climate-related risk as a principal risk and as such
it is integrated into the Group’s enterprise risk management
framework as described in detail on page 52.
In 2022 and in the longer term, updates on the
assessment and management of climate-related
risks will be reported to the Board twice a year
through the Audit and Risk Committee as part of
the Group’s enterprise risk management framework.
Metrics and targets
a) Disclose the metrics
used by the organisation
to assess climate-related
risks and opportunities
in line with its strategy and
risk management process.
We consider that we are partially compliant with this
recommendation. Our focus in 2021 was to identify the most
material climate-related risks and opportunities pertinent to the
business and, as such, we have not yet agreed the metrics we will
use to assess climate-related risks and opportunities. We did,
however, begin the process of identifying any existing metrics that
could be used in our future assessments.
In 2022, we aim to complete the process
of assessing relevant internal metrics as well as
identifying new metrics, in order to assess our
material climate-related risks and opportunities.
This will include the development of methodologies
to calculate these targets and agreement on
timeframes on relevant KPIs. In addition, as part of
the work to develop the 2023 Remuneration Policy,
which is being reviewed in 2022, we will consider
appropriate metrics.
Annual Report and Financial Statements 2021 49
Material risks and opportunities
The concentration of climate-related risks are most relevant to our medium-term strategy, while opportunities are linked to our
longer-term strategy:
Material risks Opportunities Horizons
– Physical risks (fires, floods, other natural disasters, etc.) to
our customers, customer representatives and employees.
– Regulatory and litigation risks due to our inability
to comply with environmental law.
– Shareholder risks due to a perceived lack
of an appropriate Group strategy to address
climate-related risks.
– Operational opportunity- greater efficiency
and cost reduction through reduced air travel.
– Opportunity – Resource efficiency
Short-term
(<1 year)
– Regulatory and litigation risks due to our inability
to comply with environmental law.
– Reputational risks resulting from stakeholders’ negative
perception of the Group’s inability to transition effectively
to a lower-carbon economy.
– Shareholder risks due to a perceived lack
of an appropriate Group strategy to address
climate-related risks.
– Competition risks due to failure of the Group to take
appropriate action on climate-related issues.
– Operational opportunity – greater efficiency
and cost reduction through reduced air travel.
– Opportunity – Resource efficiency
– Market opportunity – competitive advantage
(including talent attraction) by effectively
communicating the Group’s approach and
progress on climate-related issues.
– Market opportunity – lower-priced funding.
Medium-term
(between 1
and 5 years)
– Transition risks due to unexpected costs incurred
in moving to a net zero economy.
– Market opportunity – lower-priced funding
– Market opportunity – new ‘green’ products
and services expanding customer choice.
Long-term
(>5 years)
TCFD recommendations Explanation Next steps and timeframes
Metrics and targets continued
b) Disclose Scope 1,
Scope 2 and, if
appropriate, Scope 3
greenhouse gas (GHG)
emissions, and the
related risks.
We consider that we are compliant with this recommendation.
We calculate Scope I and Scope 2 GHG emissions and energy
consumption data for all our offices. We do not currently
consider the monitoring of Scope 3 emissions to be appropriate
for our business.
Further details are reported on page 47.
In 2022 we will consider the implications of
calculating GHG emissions for other operational
activities. As part of these assessments, we will
consider further whether monitoring Scope 3
emissions is appropriate to our business.
c) Describe the targets
used by the organisation
to manage climate-related
risks and opportunities
and performance
against targets.
We consider that we are not yet compliant with this
recommendation. Our focus in 2021 has been on developing an
appropriate climate-related strategy for the Group and identifying
the material climate-related risks and opportunities and as such
we have not yet agreed any targets.
We aim to consider the most relevant climate-
related change targets for the Group including
a net zero goal as we advance our climate-
related strategy in 2022.
Task Force for Climate-related Disclosures (TCFD) continued
International Personal Finance plc50
Strategic Report
Non-financial information statement
Non-financial
information statement
The table below sets out where stakeholders can find information in our Annual Report that relates to non-financial
matters detailed under section 414CB of the Companies Act 2006.
Reporting
requirement Relevant policies Relevant section of our report Measurements of effectiveness
Business Model
– Our business model – p14-15
– A purpose-led business – p6-13
– Key performance indicators – p24-25
– Principal risks and uncertainties – p52-58
– Customer numbers
– Returning home credit
customer retention
– Customer recommendations
Employees
– Code of ethics
– Group health
and safety policy
– Wellbeing policy
– Diversity policy
– Stakeholder review: Employees and customer
representatives – p41-42
– Stakeholder review: Diversity – p42
– Board diversity – p42, p65 and p80
– Equal opportunities – p78
– Principal risks: People and Safety risks – p56 and p57
– Employee and customer
representative retention
– Risk assessment completion
by customer representatives
– Percentage of relevant
employees and customer
representatives completing
safety training
Human Rights
– Code of ethics
– Human rights
and modern
slavery policy
– Chairman’s Statement: Our values – p4
– Responsible lending principles – p8
– Stakeholder Review: Human rights – p42
– Access to confidential
whistleblowing service
– Percentage of relevant
employees and customer
representatives completing
ethics and modern slavery
awareness training
Social Matters
– Code of ethics
– Tax Strategy
– A purpose-led business – p6-13
– Principal risks: Reputation risk – p57
– Stakeholder review: Communities – p43
– Investment in local
communities
– Hours of employee
volunteering
Anti-bribery
and corruption
– Anti-bribery and
corruption policy
– Gifts and
hospitality policy
– Anti-facilitation of
tax evasion policy
– Stakeholder review: Code of ethics – p40
– Anti-bribery policy – p78
– Percentage of relevant
employees and customer
representatives completing
anti-bribery training, ethics
training and anti-facilitation
of tax evasion training
– Coverage of current
anti-bribery risk assessments
– Completion of current
anti-facilitation of tax evasion
risk assessment
Environmental
Matters
– TCFD – p48-50
– Greenhouse gas reporting – p47
– Tonnes of CO
2
e emissions per
customer per annum
Principal Risks
– Principal risks and uncertainties – p52-59
Non-financial KPIs
– Customer numbers – p25
– Returning home credit customer retention – p25
– Employee and customer representative retention – p25
– Customer recommendations (Net Promoter Score) – p25
Annual Report and Financial Statements 2021 51
Principal risks
and uncertainties
In order to deliver long-term shareholder value and
to protect our people, assets and reputation, effective
management of risks, uncertainties and opportunities
continues to be critical to our business particularly
in times of heightened uncertainty.
Risk management process
Our risk management process is tailored to deliver appropriate
and adequate information to ensure risk information is
considered in the wider business decision-making process,
our Board has relevant risk data to perform its supervisory role,
and that Group risk management activities are aligned to the
UK Corporate Governance Code (2018).
A principal risk to the Group is any uncertainty that could have
a significant impact on the strategic objectives or on a key
stakeholder expectation. They are identified, evaluated and
managed in accordance with the risk governance and
oversight structure as illustrated on page 53.
A bottom-up assessment (i.e. operational perspective) of risks
by our business-level teams is aggregated by their Group-level
owners and then validated to produce an overall assessment
(i.e. top-down, strategic perspective) of those risks.
In 2021, we continued to identify and manage the same
principal risks as last year but, following a review of climate-
related risks and opportunities, we decided to include climate
change within the enterprise risk management process, in
alignment with the above-mentioned definition of principal risk.
In addition, world economic environmental risk factors have
been reflected in specific principal risks for the past few years
and as such, we decided to remove this category from the
principal risks list.
We set out our principal risks, key focus areas during 2021,
a summary of key controls and mitigating factors as well
as their movement during the year on pages 54 to 58.
Risk appetite
We evaluate each risk at least quarterly based on
the likelihood and potential impact at both market and
Group level. We consider two aspects:
– Inherent risk – the level of the risk before internal controls;
and
– Residual risk – the risk that remains after the effect of current
controls is considered.
In addition, we measure and monitor the key risk indicators set
for each principal risk. Using this assessment, we then compare
the level of current risk with the Board-approved risk appetite
and determine whether further actions are required to mitigate
the risk to fit within our Board-approved risk appetite levels.
Risk appetite is reviewed and approved by the Board at least
on an annual basis.
Our risk management strategy involves mitigating, to the
maximum reasonable extent, those risks which are within our
control. Externally-driven risks are actively monitored to ensure
prompt response, should the context become favourable,
to further mitigate the risk and are subject to contingency
planning to ensure business resilience.
We further separate risks into strategic and operational risks.
This allows us to identify those risks that will be addressed
through our strategy and those that will be addressed through
our internal control framework.
Emerging risks
With the consideration of climate change risks and opportunities,
we have updated our definition of emerging risks. In our view, an
emerging risk is that existing or future trend which could have a
significant impact on the Group, where the likelihood, timescale
and / or materiality may be difficult to accurately assess.
Emerging risks are monitored to determine if they have become
significant risks and if any mitigating actions should be taken.
While we are currently working to fully embed this updated
definition of what emerging risks represent to us, we have
identified a number of trends that follow the above definition:
– Climate change: We are shaping our strategy to address
climate-related change matters and our risk management
approach, as detailed in the case study on page 53 and our
TCFD disclosures on pages 48 to 50. We currently consider
climate change to be an emerging risk and have further
identified it as a principal risk that will be actively addressed
through the enterprise risk management framework.
Disclosure of the assessed impact of climate change as
aprincipal risk will be made for the first time in the 2022
Annual Report and Financial Statements.
– Technology: Advancements in technology will bring
opportunities to improve our business model, but can also
pose a certain amount of risk of not aligning to the pace
and direction of these advancements. We have a Board-
level committee that oversees technology-related risks that
isfocused on this specific emerging risk;
– Competition: Competition posed by disruptive business
models including ‘buy now pay later’ is a market trend that
we actively monitor. It is less clear what will be the appeal
and reach of these models to our core customer segment
and the impact it might have on our business. This is,
therefore, considered an emerging risk.
Risk governance and oversight structure
Our framework for the identification, evaluation and
management of our principal and emerging risks is illustrated
on the following page.
The framework has been designed to ensure there is
adequateoversight on how risks are managed across the
Group, and to allocate roles and responsibilities in the risk
management and internal control systems.
The three lines of defence
Risk ownership and assurance is defined in alignment with the
three lines of defence principles as follows:
– Business-level risk ownership: business-level management
identifies, assesses and controls risks principally at market
level and within major projects and change initiatives.
This level represents the first line of defence;
– Group-level risk ownership: Group-level management risk
owners provide oversight on the effectiveness of the risk
management and internal control systems. This level
approximates to the second line of defence; and
– Independent-level risk ownership: Internal Audit reviews the
operation of and oversight to the systems of internal control,
including risk management.
Principal risks and uncertainties
International Personal Finance plc52
Strategic Report
Determines
nature and extent
of principal risks
we are willing to
take to achieve
strategic objectives
Reviews processes
for management
of principal risks
and internal control
systems on behalf
of Board
Supports Audit
and Risk Committee
in reviewing risk
exposure levels
against risk appetite
Responsible for
day-to-day risk
management
and internal
control systems
Climate-related change
We acknowledge the growing expectations of
stakeholders as to how the Group approaches
climate change matters. As we moved into 2021,
we embarked upon a process in partnership with
an external consultancy to develop our climate-
related change strategy and further understand
the requirements of the TCFD. This initiative
involved undertaking a detailed gap analysis,
including a benchmarking review of peers,
together with a climate workshop for senior
leaders across the Group, including members of
the Group Board, the UK leadership team and
country managers.
The main output of this activity was the
identification of a number of material opportunities
and risks relating to the global climate challenge,
details of which are included in the TCFD section
on pages 48 to 50. This review and assessment of
the climate-related risks and opportunities relevant
to IPF resulted in the Board classifying climate
change as a principal risk to the Group. The risk
is defined and considered internally as the risk
resulting from climate change, including physical
consequences of future climatic conditions on
our colleagues and customers as well as from the
transition to a low-carbon economy.
Early in 2022, we clarified the roles and
responsibilities for the management of climate-
related risk, including a dedicated risk owner. We
are also working to define and embed the risk
management strategy for this particular principal
risk, including risk response actions, a core list
of key risk indicators, and relevant thresholds,
to help measure the current level of risk and
anticipate future exposures.
As a principal risk under our wider enterprise risk
management framework, risks and opportunities
relating to climate-related change will be
assessed on a quarterly basis and reported to the
Board, through the Audit and Risk Committee,
twice a year. It will also be part of our regular risk
communication plan to all key stakeholders,
including disclosures in future annual reports.
The Board is committed to proactively addressing
climate-related risks and opportunities.
Board of
Directors
Audit and Risk
Committee
Risk Advisory
Group
Management
Team
Risk governance
and oversight structure
Assurance through three
lines of defence
Business-level:
Identify, assess and control risks in business unit
Group-level:
Oversight on effectiveness of risk management and internal
control systems
Independent-level:
Review of operation and oversight of internal control,
with Head of Internal Audit reporting to Chair of the
Audit and Risk Committee of the IPF plc Board
53Annual Report and Financial Statements 2021
Risk Exposures
Measurement,
mitigation and monitoring Risk environment
1 Regulatory
Lead responsibility:
Chief Executive Officer
We suffer losses or fail to
optimise profitable growth
due to a failure to operate in
compliance with, or effectively
anticipate changes in, all
applicable laws and regulations
(including data protection
and privacy laws), or due to
a regulator interpreting these
in a different way.
Objective
We aim to ensure that effective
arrangements are in place to
enable us to comply with legal
and regulatory obligations
and take fully assessed and
informed commercial risks.
Changes in regulation,
differences in interpretation
or clarification of regulation,
or changes in the enforcement
of laws by regulators, courts
or other bodies can lead to
challenge of our products and/
or practices. We monitor legal
and regulatory developments to
ensure we maintain compliance,
remain competitive and provide
value for our customers.
The likelihood of legal and
regulatory change and the
impact of challenge vary
by market and the area of
regulation, but the majority
have already introduced price
legislation and strengthened
consumer protection regulation,
although there remains
a likelihood that further
changes may be made.
Highly skilled and experienced
legal, public affairs, compliance
and data privacy teams at
Group and market level.
Monitoring political, legislative
and regulatory developments
and risks.
Expert third-party advisors used
where necessary.
Engagement with regulators,
legislators, politicians and
other stakeholders. Active
participation in relevant
sector associations.
Compliance programme
focused on key consumer
legislation and data privacy.
Oversight of regulatory risks
by the legal leadership team.
Regular reporting to the
Audit and Risk Committee
on key regulatory and
compliance risks.
All temporary legislation introduced
in response to the pandemic in 2020
expired, except the repayment
moratorium in Hungary.
New early-settlement rebate standards
in Poland resulted in higher payments to
customers settling their agreements early.
The European Commission commenced
a review of the Consumer Credit Directive.
Draft consumer credit proposals including
potential changes to rate caps were
published in Poland and Romania.
For more information see the CEO’s
review on pages 19 and 20, and the
operational review on page 27.
2 Competition and product proposition
Lead responsibility:
Chief Executive Officer
We suffer losses or fail to
optimise profitable growth
through failure to be aware of
and respond to the competitive
environment or failing to ensure
our proposition meets customer
needs while we maintain
product profitability.
Objective
We aim to ensure we understand
competitive threats and promote
financial inclusion by delivering
customer-focused products
that drive profitable growth.
In an environment where
customer choice is growing,
ensuring our products
meet customers’ needs
is critical to delivering
a sustainable business.
We continue to operate in
highly competitive markets
with regular new products and
services being made available
to our customer segment.
The nature of competition
varies by market.
Regular monitoring of
competitors and their offerings,
advertising and share of voice
in our markets.
Strategic planning and
tactical responses on
competition threats.
Product development
committees and processes
in place to review the product
development roadmap,
manage product risks and
develop new products.
Following a lull in competitor activity
in 2020 as a result of the pandemic,
levels of competition increased in 2021.
We continue to develop our propositions
to improve financial inclusion, enhance
customer value, improve the customer
experience, and extend our digital and
mobile propositions to meet consumers’
changing needs.
We will seek to offer point of sale
finance at retailers popular with our
customer segment.
Risk environment
Risk environment improving
Risk environment remains stable
Risk environment worsening
Risk appetite
Risk appetite increasing
Risk appetite stable
Risk appetite decreasing
Principal risks and uncertainties continued
International Personal Finance plc54
Strategic Report
Risk Exposures
Measurement,
mitigation and monitoring Risk environment
3 Taxation
Lead responsibility:
Chief Financial Officer
We suffer financial loss arising
from a failure to comply with
tax legislation or adoption
of an interpretation of the law
which cannot be sustained
together with the risk of
a higher future tax burden.
Objective
We aim to generate
shareholder value through
effective management
of tax while acting as
a good corporate citizen.
We are committed to ensuring
compliance with tax law and
practice in all of the territories in
which we operate.
Against a backdrop of
increasing fiscal challenges
formost economies, many
authorities are turning to
corporate taxpayers to
increase revenues, either via
taxation reforms or through
changes to interpretations
of existing legislation.
The likelihood of changes
or challenges to tax positions
varies by market. This may
increase due to Covid-19
budget deficits. Globally,
OECD and EU-led
developments may lead
to further changes in tax law
and practice and an increase
in audits and enquiries into
cross-border arrangements.
Tax strategy and policy
in place.
Qualified and experienced tax
teams at Group level
and in market.
External advisors used for
all material tax transactions
in line with tax strategy.
Binding rulings or clearances
obtained from authorities
where appropriate.
Appropriate oversight at
executive committee-level over
taxation matters.
We are awaiting a decision of the
General Court of the European Union
regarding applications for the annulment
of the European Commission’s Decision
on State Aid announced in April 2019.
Further information regarding risks
associated with the Group’s finance
company is set out in note 32.
During the year international tax
developments have been monitored,
including with regard to the OECD’s
minimum corporate income tax initiative
(“Pillar 1 and 2”). To date, no adverse
financial impact on the Group is
expected.
See the financial review on page 35 for
further detail.
4 Technology and change management
Lead responsibility:
Chief Executive Officer
We suffer losses or fail to
optimise profitable growth
dueto a failure to develop and
maintain effective technology
solutions or manage key
business projects in an
effectivemanner.
Objective
We aim to effectively manage
the design, delivery and
benefits realisation of major
technology and strategic
business projects. We look
to maintain systems that are
adequate to support the
ongoing operations in the
business and deploy new
technology that supports future
business strategy.
Technology risks can arise
from speed of technology
advancements that could
make current technology
obsolete or require significant
effort to align it to strategic
requirements. Another
significant factor is the
availability of technical skills
internally or with partners.
The Group executes
a significant change agenda
and risks can arise if the
number of changes becomes
too great, if the benefits
realisation process is not
adequate or we fail in
adequately managing the
risksin projects, programmes
and portfolios.
Change management
framework and monitoring
process in place.
Appropriate methods and
resources used in the delivery
of programmes.
Continuous review of
programmes, with strong
governance of all major
delivery activity.
Ongoing reviews of services
and relationships with
partnersto ensure effective
service operations.
Annual review to prioritise
investment in technology
and ensure appropriateness of
the technology estate.
Technology Committee
oversees technology and
change risks.
The key focus in 2021 was to deliver
solutions for “customer-facing” activities,
and reduce the risk of technology
obsolescence. This included e-licensing in
IPF Digital, product development, territory
extension and commercial partnerships.
See the Technology Committee Report
on page 88 for further detail.
Annual Report and Financial Statements 2021 55
Risk environment
Risk environment improving
Risk environment remains stable
Risk environment worsening
Risk appetite
Risk appetite increasing
Risk appetite stable
Risk appetite decreasing
Risk Exposures
Measurement,
mitigation and monitoring Risk environment
5 People
Lead responsibility:
Chief Executive Officer
Our strategy is impacted by not
having sufficient depth and
quality of people, or being
unable to retain key people
and treat them in accordance
with our values and
ethical standards.
Objective
We aim to have sufficient
breadth of capabilities and
depth of personnel to ensure
that we can meet our
strategic objectives.
The Group’s largest people-
related risk relates to turnover
in our customer representative
population.
Other key risks include:
– Critical skills shortage
– Lack of succession
to critical roles
– Recruitment risks
– Appropriate use of
rewardand compliance
with delegated authority
from the Remuneration
Committee
Our HR control environment
identifies key people risks
and controls to mitigate
them covering:
– Monitoring and action with
regards to key people risks
and issues
– Appropriate distribution of
strategy-aligned objectives
– Key people processes
Our people, organisation
and planning processes
ensure that we develop
appropriate and significant
strength and depth of talent
across the Group and we have
the ability to move people
between countries, which
reduces our exposure to
critical roles being under-
resourced.
The pandemic has resulted in
companiescompeting for a limited
talentpool duetoincreased longer-term
sickness, and career shifts for certain
employee segments.
Actions to retain, develop and engage
customer representatives were
undertaken to understand how we can
make their experience more rewarding.
We will re-engineer the customer
representative value proposition
Our continued Care Plan, designed
to ensure the health, safety and
wellbeing of our people, supported
engagement and retention of talent
during the pandemic.
We developed a number of
capabilitiesincluding internal personal
development and external talent
acquisition. We also focused on retaining
and developing ourmost talented
employees through tailored leadership
and engagement programmes.
For further information see pages 41
and 42.
6 Business continuity and information security
Lead responsibility:
Chief Executive Officer
We suffer losses or fail to
optimise profitable growth due
to a failure of our systems,
suppliers or processes or due
tothe unavailability, loss,
unauthorised disclosure or
corruption of information.
Objective
We aim to maintain adequate
arrangements and controls that
reduce the threat of service
and business disruption and
the risk of data loss to as low a
level as reasonably practicable.
Unable to perform the
necessary day-to-day activities
in our business, leading
to loss of income, increased
impairment, regulatory failings,
reputational impact and staff,
agent and customer attrition.
While the external threat
to our systems is increasing in
the digital age, the tools in
place reduce the likelihood
of a significant failure
or information loss.
Robust business
continuity and information
security policies.
Annual review of critical
processes, business impact
analysis risks and mitigations.
Periodic testing and
ongoing monitoring of
securityand recovery
capability for technology
andbusiness processes.
Skilled team with relevant
specialist qualifications.
Dedicated committees
(including Board-level)
overseebusiness continuity,
information security, and
technology and change risks.
In 2021, we revisited the Group business
continuity framework focusing on
operational resilience, including the
transfer of data to cloud-based facilities.
We developed a three-year roadmap to
improve cyber and information security
defence in light of increased risks of
hybridhome-office practices. No security
incidents resulted in significant impact to
the business during 2021.
Principal risks and uncertainties continued
International Personal Finance plc56
Strategic Report
Risk Exposures
Measurement,
mitigation and monitoring Risk environment
7 Reputation
Lead responsibility:
Chief Executive Officer
We suffer financial or
reputational damage due
to our methods of operation,
ill-informed comment,
malpractice, fines or activities
of some of our competition.
Objective
We aim to promote a positive
reputation based on our
purpose, ethical standards, our
commitment to responsible
lending via proactive
engagement with all our
stakeholders, including media.
Our reputation and that of the
consumer lending sector can
impact customer sentiment
and the engagement of key
stakeholders, and as such our
ability to serve our customers.
Some elements of this risk
relate to external factors that
are beyond our influence.
Controls in place have
reduced residual risk.
Clearly defined corporate
values and ethical standards
are communicated throughout
the organisation.
Employees and
customer representatives
undertake annual ethics
e-learning training.
Regular monitoring of key
reputation drivers both
internally and externally.
Media and key stakeholder
strategy to support the key
drivers of our business
reputation and that of the
non-banking financial
institution sector.
Strong oversight by the
senior leadership team on
reputation challenges.
The impact of the pandemic increased
negative sentiment against the financial
sector. We proactively maintain dialogue
with customers to enable continued
access to credit, and offer repayment
support where appropriate.
We received awards recognising our
business as a top employer, our high
standards of customer experience and
for being a socially responsible business.
We maintain strong relationships with key
stakeholders to develop their
understanding of our business model,
our purpose and role in society and how
we deliver services to our customers.
This helps protect the business from
unforeseen events that could damage
our reputation.
8 Safety
Lead responsibility:
Chief Executive Officer
The risk of personal injury
or harm to our customer
representatives or employees.
Objective
We aim to maintain adequate
arrangements and controls that
reduce the risks to as low as is
reasonably practicable.
A significant element of our
business model involves our
customer representatives and
employees interacting with our
customers in their homes or
travelling to numerous
locations daily.
Their safety while performing
their role is paramount to us.
Safety risks typically arise from
the behaviour of individuals
both internal and external to
the business and, therefore,
it is not possible to remove the
risk entirely with the current
business model involving
17,000 customer
representatives. Improvements,
however, are constantly
sought to reduce the risk
where possible.
Safety management systems
based on internationally
recognised standards.
Market safety committees.
Annual safety survey.
Biannual Safety Campaigns
including refresher training for
all employees and customer
representatives.
Annual self-certification
of safety compliance
by managers.
Regular branch safety
meetings and safety
performance reviews.
Role-specific training
and competence.
Covid-19 presented the most significant
health and safety risk. Vaccines offer the
greatest protection and we encourage
vaccination for all colleagues. This is
supported by extensive Covid-19
prevention training and PPE provision
to keep colleagues safe and minimise the
risk of workplace transmission.
Safety committees met frequently
across the Group providing assurance
and oversight of health and safety
risk management.
We hold the ISO 45001 Occupational
Health and Safety Management
Standard in all European home credit
businesses. Mexico home credit has now
entered the ISO 45001 accreditation
process with a plan to gain certification
in2022.
9 Funding, market and counterparty
Lead responsibility:
Chief Financial Officer
The risk of insufficient availability
of funding, unfavourable
pricing, or that performance is
significantly impacted by
interest rate or currency
movements, or failure of a
banking counterparty.
Objective
To maintain a robust funding
position, and to limit the impact
of interest rate and currency
movements and exposure to
financial counterparties.
Debt investors risk appetite
and strategy may change over
time and this could lead to
adverse funding terms or
limited availability of credit.
In addition, the interest
and foreign currency rate
changes may lead to
adverse changes in the
cost of funding.
Board-approved policies
require us to maintain a
resilient funding position with
good headroom on undrawn
bank facilities, appropriate
hedging of market risk, and
appropriate limits to
counterparty risk.
Strong debt funding position.
SEK 450 million Swedish Krona bonds
refinanced at a reduced cost of
funding and extended £148 million
of bank facilities.
Fitch revised the Group’s outlook from
Negative to Stable and reaffirmed its
BB- credit rating while Moody’s reaffirmed
the Group’s credit ratings at Ba3.
For further information on funding see the
financial review on pages 34 and 35.
Annual Report and Financial Statements 2021 57
Risk environment
Risk environment improving
Risk environment remains stable
Risk environment worsening
Risk appetite
Risk appetite increasing
Risk appetite stable
Risk appetite decreasing
Risk Exposures
Measurement,
mitigation and monitoring Risk environment
10 Credit
Lead responsibility:
Chief Financial Officer
The risk of the Group suffering
financial loss if its customers fail
to meet their contracted
obligations or the Group failing
to optimise profitable business
opportunities because of its
credit, collection or fraud
strategies and processes.
Objective
To maintain robust credit
and collections policies
and regularly monitor
credit performance.
Increased impairment due
to aggressive growth plans.
Reduced profit due to
unexpected levels of credit
or fraud losses.
Not achieving growth potential
because credit controls are
too restrictive.
A comprehensive credit
control framework developed
using data and experience
from years of operating in our
specific customer segment
and markets.
Weekly cycle of credit
reporting and performance
calls between each business
and the Credit Risk Director.
Monthly cycle of portfolio
quality and scorecard
monitoring feeding
market and Group
credit committees.
Controlled introduction
of credit changes using
a ‘test and learn’ approach.
A comprehensive control
framework covering internal
and external fraud risks
and anti-money laundering.
Specific roles for monitoring
and reporting of frontline
controls and audit of the
control framework.
Specific controls to cover
anti-bribery.
At the start of the pandemic in March
2020, we took the decision to tighten
credit rules significantly to protect
liquidity. This prudent approach resulted
in a reduction in credit issued but
provided a solid foundation on which to
rebuild the business in 2021.
Credit issued and collections in 2021
were better than anticipated. In most
cases, credit losses were lower than
pre-pandemic levels, and impairment as
a percentage of revenue at the year end
of 10.2% is well within our risk appetite.
Our credit-control action plan executed
in Mexico since 2019 has proven
successful and the business is now
performing well.
During 2021, we performed various
scenarios and analysis in the home
credit markets in order to respond to
operational disruptions caused by
thepandemic.
IPF Digital performed in line with
expectations, delivering improved
credit quality.
Climate change
Our work undertaken to identify material opportunities and risks relating to the global climate challenge concluded with the Board
classifying climate change as a principal risk to the Group at the end of 2021. Further details can be found on page 53. External
reporting of this principal risk will be incorporated in the 2022 Annual Report and Financial Statements.
Principal risks and uncertainties continued
International Personal Finance plc58
Strategic Report
Approval of the Strategic Report
This Strategic Report has been approved by the Board
of Directors and signed on its behalf by:
Gerard Ryan
Chief Executive Officer
23 February 2022
Viability Statement
The Directors have assessed the long-term prospects of the
business and taken into account:
– the impact of Covid-19 and structural changes impacting
business growth and profitability;
– the beneficial portfolio effect of operating across a number
of different jurisdictions which mitigates concentration risk;
– IPF’s multi-channel strategy and strategic priorities;
– risk appetite, principal risks and risk management processes;
– that IPF provides access to regulated credit in a responsible,
transparent and ethical manner, for people who might
otherwise be excluded from mainstream credit operators
acknowledging that it is possible to regulate away the
supply of credit but not the demand; and
– the historical resilience of the IPF business model over
a decades-long period including times of adverse
macroeconomic conditions and a changing competitive
and regulatory environment.
Assessment of continuing operations
Whilst the impact of Covid-19 on the business was material,
the Group has a clear strategy to rebuild its businesses and
deliver long-term profitable growth as set out on pages 21 to
23. The Group has a robust capital structure supported by
significant equity and a balanced portfolio of debt funding,
the largest element of which matures in 2025, all of which
together form the strong capital foundations required to
support business growth. Based on this analysis, the Directors
confirm that they have a reasonable expectation that the
Group will continue to operate and meet its liabilities as they
fall due for the period of three years from the date of this report
and that the Group has adequate long-term prospects. This
assessment has been made with reference to the Group’s
current financial position, its prospects, its strategy and its
principal risks, as set out in the Strategic Report.
Business planning and stress-testing
The Group undertakes an annual business planning and
budgeting process that includes updated strategic plans
together with an assessment of expected performance,
cash flows, funding requirements and covenant compliance.
The financial forecasts in the business plan have been stress
tested over a range of downside scenarios to assess the
impact on future profitability, funding requirements and
covenant compliance. The scenarios reflect the crystallisation
of the Group’s principal risks (with particular reference
to regulatory risk) as outlined on pages 52 to 58, and evaluate
the impact of a more challenging recovery from the impact
ofthe Covid-19 pandemic than assumed in the business plan.
Consideration has also been given to multiple risks crystallising
concurrently and the availability of mitigating actions that
could be taken to reduce the impact of the identified risks.
Inaddition, the Group undertook a reverse stress test on the
financial forecasts to assess the extent to which a recession
would need to impact our operational performance in order
tobreach a covenant.
Viability assessment
The Directors have determined that three years is an
appropriate period over which to provide the viability
statement because it aligns to the key period of the planning
process, and reflects the relatively short-term nature of our
business and our ability to change products, adjust credit risk
in the receivables book and flex our business model. Delivery
of the business plan is expected to require the Group to
access wholesale funding markets by 2023 and the Directors
have assumed that those markets remain accessible so as to
allow the Group’s existing arrangements to be refinanced and
further funding put in place if necessary, and that the legal,
taxation, and regulatory framework allows for the provision of
short-term credit to the markets in which the Group operates.
For further information on funding see pages 34 and 35.
Annual Report and Financial Statements 2021 59
Chair’s introduction
“Having an effective
corporate governance
framework supports our
culture and the delivery
of our strategy”
Stuart Sinclair
Chair
I am pleased to present the Corporate Governance Report
forthe year ended 31 December 2021, a year in which
wehavecontinued to successfully navigate a variety of
externalchallenges, driven predominantly by the ongoing
Covid-19 pandemic.
Good governance is at the heart of everything we do.
As a Board we remain committed to the highest standards
of corporate governance in delivering long-term, sustainable
value to our stakeholders and have worked closely with our
management team to provide oversight, challenge and
debateto drive positive outcomes.
During the first half of the year, the Board continued to meet
virtually but as Covid-imposed restrictions eased, hybrid and
face to face meetings resumed in line with the appropriate
government guidelines. While we have all become adept at
using video conferencing in our day-to-day work, we all felt the
great benefits of engaging with colleagues across the Group
face-to-face. I am pleased to report that when international
lockdown restrictions permitted and in accordance with relevant
Covid-19 measures, I was able to resume market visits and
visited colleagues in Poland and Hungary. This included
accompanying customer representatives on home visits and
sitting with colleagues in our call centres, enabling me to
increase my knowledge and understanding of the business
and its culture first hand.
Board changes
After many years of serving the business as non-executive
directors, Richard Moat and Cathryn Riley both retired in April
following the AGM. I am grateful to them for their support and
advice during their tenure and in the year we worked together
following my appointment as Chair. At the end of July,
Justin Lockwood stepped down as CFO. Justin made an
outstanding contribution during his 11 years with the business
and on behalf of all the directors and management team I
thank him for his service and wish him every success in the
future. Justin will be succeeded as CFO by Gary Thompson
following his appointment to the Board in April 2022. The process
the Board followed to secure Gary’s appointment is described in
the Nomination Committee Report on page 79.
Board composition
The composition and size of the Board is reviewed regularly and
the skills and experience directors bring are summarised on
page 64. Our Board is well-balanced and diverse, with a good
mix of international skills, experience, business background,
independence and knowledge. During the year, in accordance
with the Corporate Governance Code, more than half of the
Board (excluding the Chair) were independent non-executive
directors and the Board met the Hampton-Alexander review
target for 33% female representation. The Board currently
comprises four males and two females and three with
a birthplace outside the UK. For a Company such as ours,
with a diverse workforce and a wide geographic spread,
this diversity is important to ensure the provision of appropriate
support and challenge.
Diversity and succession planning
The Board and Nomination Committee have continued
to deepen understanding of executive talent requirements
and the capabilities needed to ensure effectiveness in driving
the business forward. There is an annual session dedicated to
succession planning as well as a mid-year review to ensure
robust succession plans and talent development pipelines are
in place.
The Board and the Nomination Committee were satisfied that
the Company has effective and up-to-date succession planning
processes, including appropriate development plans for
individuals, and understands areas where external candidates
may need to be considered. We have made good progress
and are committed to continuing to develop our talent at all
levels to create our leaders of the future
International Personal Finance plc60
Directors’ Report
Stakeholder engagement
The Board values the insight gained from stakeholder
engagement and places significant importance on maintaining
close relationships with all of our stakeholders, taking account
of and responding to their views.
The Board actively seeks opportunities outside the Boardroom to
understand what is happening across the organisation and this
engagement provides deeper insights into particular areas as
well as supporting the senior leadership team. We keep under
review our engagement with key stakeholders to ensure we
have appropriate mechanisms in place to understand their
views and take them into account in our discussions and
decision making. The directors’ duties under s172 of the
Companies Act 2006 underpin the good governance at the
centre of our decision making. Further information regarding
ours172(1) statement is on page 37. We have a diverse and
global community of stakeholders which includes colleagues,
customers, shareholders and supplier partners as well as the
communities in which we operate. The Board receives regular
updates throughout the year on the extensive engagement
undertaken with stakeholders. It also undertakes ad-hoc
engagement activities, for example, in October the Board held
a ‘skip-a-level’ dinner with managers without senior executives
present in order that we could listen to the views of colleagues
first hand.
These insights help shape our strategy and the decisions we
take. On pages 38 to 45 we describe how the Board engages
with each of our key stakeholders and gives some examples
of how we have considered them in decisions made during the
year. It is not practicable to please all stakeholders all of the time
and a key part of the Board process is to balance the sometimes
conflicting needs of our stakeholders to ensure all are treated
consistently and fairly.
Purpose, culture and values
Our purpose is to build a better world through financial
inclusion and our culture of doing what is right for our customers,
colleagues and communities is integral to this. An extensive
engagement exercise was undertaken in 2021 in which we
proactively engaged with representatives of our key
stakeholders to better understand and assess what IPF means
to them. The Board was encouraged to note that the important
role we play in society, the trusted personal customer
relationships fostered by our customer representatives, our high
ethical standards and the opportunities we create for financial
inclusion were all highly valued. The outcome of this exercise
was the creation of aspirational statements for each
of our stakeholder groups which will help to guide future
monitoring of our purpose and culture by the Board. In relation
to colleague engagement, the Board was encouraged by the
overwhelmingly positive responses received to the Group’s
Global People Survey which had the highest response rate ever
received. The results showed that colleagues feel that we have
a shared and meaningful purpose, centred around our
customers. For further information on how we ensure that our
purpose, values, culture and strategy are aligned and
embedded throughout the Group, see pages 12 to 13, 21
and 68.
ESG
ESG matters have risen in prominence for all Boards as
institutional investors and other stakeholders make the link
between ESG performance and long-term sustainability of
businesses. The Board recognises the importance of responding
to the key ESG issues such as climate change, inequality and
poverty, and creating a truly sustainable business. We pride
ourselves on being a lender that is responsible, ethical and
trusted. Our social purpose is strong and the wider role the
business plays in society to help our customers access credit for
everyday necessities in a supportive and fair way is integral to
our strategy. The Board approved the development of the
Group’s ESG strategy including the approach to meet the TCFD
recommendations. To enhance its wider understanding of ESG,
the Board also invited a leading fund manager to attend a
Board meeting to provide further insight.
The Board is conscious of the impact of climate-related change
on the Group’s business and how the Group’s activities affect
the environment. It reviewed and approved the assessment of
climate-related risks as a principal risk and reviewed the Group’s
phased approach to responding to the challenges and
opportunities faced. The Board approved the Group’s climate-
related strategy and details of our climate-related disclosures
under LR 9.8.6(8) in relation to the TCFD recommendations are
on pages 48 to 50.
Board evaluation and effectiveness
It is an important requirement of good governance that an
annual evaluation is carried out to ensure that the Board
continues to operate and perform effectively. The Corporate
Governance Code requires that the evaluation is facilitated
externally at least every three years. The Board and Committee
review in 2021 was facilitated internally as was the case in 2020,
following an externally facilitated evaluation in 2019. The
outcome of the evaluation was positive and noted that good
progress had been made in implementing the outcomes from
the 2020 evaluation in relation to a refocus on strategic
discussions and the continued focus on succession planning.
Further details on the 2021 Board evaluation are set out on
page 72.
Board training
The Board recognises the importance of ongoing training.
As well as a formal annual Board training session, directors are
given the opportunity to update their skills and experience on
a regular basis. The non-executive directors are conscious of the
need to keep themselves properly briefed and informed about
current issues and to deepen their understanding of the
business. Any individual development needs are discussed
with the directors on an ad-hoc basis and at the annual
performance evaluation. Board training received during the
year included:
– an overview of the Group’s value-added services, including
insurances, with a focus on financial performance, regulatory
compliance and customer outcomes;
– management of credit risk; and
– management of foreign exchange risks.
(See page 86 for further details of Board and Committee
training received during the year.)
Annual Report and Financial Statements 2021 61
Length of service: 2 years
Responsibilities: Good corporate
governance and best practice, leading
an effective Board with a focus on
strategic planning and implementation.
Chair on Nomination Committee.
Key skills: Highly experienced
non-executive director, committee chair
and senior independent director (SID)
with a background in consumer
financial services.
Contributions: A strong and effective
leader of the Board, his extensive
experience in retail banking, insurance
and consumer finance ensures a good
balance of strategic and operational
oversight. His insightful and inclusive
style encourages a culture of openness
and debate within the Board with
an appropriate level of challenge
to management.
Current directorships: Non-executive
director and chair of remuneration
committee for Lloyds Banking Group plc
and non-executive director and chair
of Willis Ltd.
Former roles: Non-executive director
roles at QBE Insurance (Europe) Ltd,
Provident Financial Group plc, Swinton
Group Ltd, PruHealth/Vitality Ltd and
Universal Insurance Inc. Also council
member of the Royal Institute of
International Affairs, president and
COO at Aspen, president and CEO
at GE Capital, China, Chief Executive
of Tesco Personal Finance and director
of UK Retail Banking at Royal Bank of
Scotland Group plc.
Qualifications: Master’s degree in
Economics and Master in Business
Administration from University of
California (UCLA).
International expertise: EMEAs,
Americas, Asia Pacific
Length of service: 10 years and 1 month
Responsibilities: Group strategy,
operational management and
leadership of the Executive Committee
and senior leadership team and
Chair of the Disclosure Committee.
Ensuring good relations with employees,
customer representatives, customers,
regulators and investors.
Key skills: Inspirational leadership
and effective, objective implementation
of strategy; over 30 years’ multi-country
experience in consumer
financial services.
Contributions: Acute market insight
which provides a real advantage
in driving the implementation of the
strategy and identifying and pursuing
growth opportunities.
Former roles: CEO for Citigroup’s
consumer finance businesses in Western
Europe, Middle East and Africa region,
a director of Citi International plc, Egg
plc and Morgan Stanley Smith Barney UK,
CFO of Garanti Bank, Turkey and CEO
of GE Money Bank, Prague.
Qualifications: Fellow of the Institute
of Chartered Accountants in Ireland.
International expertise: EMEAs,
Americas
Length of service: 3 years and 4 months
Responsibilities: Chair of the
Remuneration Committee.
Key skills: Experience in
fintech, consumer andtechnology
businesses undergoing digital
transformation, growth and geographic
expansion. Digital technology expertise
including omni-channel payments;
over 25 years’ senior leadership
experience in high-growth companies
ininternational markets.
Contributions: Valuable strategic
and operational insights on growth and
expansion of digital capabilities as well
as customer experience, innovation and
governance throughout the Company.
Current directorships: Non-executive
Chair of Diacetics PLC, non-executive
director of The Institute of Directors
in the UK, IDEX Biometrics in Norway,
and a Trustee of Southern African
Conservation Trust in South Africa.
Former roles: Vice President of Global
Partnerships and Global Risk Operations
at PayPal, London, and Vice President
of European Operations for eBay
Marketplaces, Germany. Member of
The Digital Banking Club Advisory Panel
and non-executive director of Which?
and IEDigital.
Qualifications: Chartered Director
(CDir), Diploma in Company Direction,
MSc in Management, BAppSc in
Electronics and a fellow of the Institute
of Directors UK.
International expertise: EMEAs,
Americas, Asia Pacific
Stuart Sinclair
Chair
Gerard Ryan
Executive director and
Chief Executive Officer
Deborah Davis
Independent
non-executive director
Our Board
and Committees
Audit and Risk Committee
Disclosure Committee
Executive Committee
Nomination Committee
Remuneration Committee
Technology Committee
Workforce and Stakeholder Engagement Director
Committee Chair
International Personal Finance plc62
Directors’ Report
Length of service: 2 years
Responsibilities: Chair of the Audit and
Risk Committee and SID.
Key skills: A former senior executive with
over 40 years of broad international
financial services experience, including
20 years as CEO and board member
in private banking, wholesale banking,
capital markets, trading operations,
strategy and finance.
Contributions: Risk management
and how this interacts with strategy
and operations with technical expertise
valued in Board discussions.
Current directorships: Advisor to
Revolut UK Ltd, non-executive director
of Itau BBA International PLC and
a trustee of the Barry and Peggy High
Charitable Foundation.
Former roles: Non-executive director
and member of the audit, risk and
sustainability committees for Ulster Bank
Ireland DAC Ltd; non-executive director
for Business Growth Fund and British
Bankers Association; Chair of Financial
Services Council at CBI; CEO, Europe at
Standard Chartered plc, Chair and CEO
of American Express Bank at American
Express Company and executive
vice president of private bank at
Bank of America Corporation.
Qualifications: Degree and Master’s
degree in Economics and a fellow of the
Institute of Chartered Accountants.
International expertise: EMEAs,
Americas
Richard Holmes
Senior independent
non-executive director
Length of service: 6 years and 7 months
Responsibilities: Chair of the
Technology Committee.
Key skills: Extensive experience in sales,
e-commerce and marketing of online
products such as MSN Messenger,
Hotmail and Bing; over 20 years’
experience in an international
technology business.
Contributions: His experience supports
the expansion of our digital lending
business and the Company’s objective
to increase its technology capabilities.
Current directorships: CEO of
Skyscanner Ltd.
Former roles: CEO of online travel
agency Travix International, various roles
at Microsoft since 1990 including Vice
President of Europe for Advertising and
Online, and Vice President of Western
Europe for Consumer and Online.
Qualifications: Bachelor in Information
and Communication Technology (BICT).
International expertise: EMEAs,
Americas, Asia Pacific
John Mangelaars
Independent
non-executive director
Length of service: 3 years and 4 months
Responsibilities: Workforce and
Stakeholder Engagement Director.
Key skills: President of leading Silicon
Valley fintech with 15 years’ leadership
experience in high-growth businesses
in Silicon Valley, developing industry-
leading technologies and consumer
direct marketing. Executive and
non-executive director experience
gained in a non-profit scientific research
organisation and education; 14 years’
experience as a consultant, focused
on strategy and change in large
international companies; extensive
experience in M&A.
Contributions: Enhancing Board
discussions focused on technology,
promoting the right balance for the
Board between guidance and oversight.
A creative problem-solver and
experience of attracting, developing
and retaining people. Developed
a stakeholder outreach plan as
the foundation of Board
stakeholder engagement.
Current directorships: President of
Credit Sesame Inc. Emeritus Trustee of
SETI Institute, a member of the Finance
Committee at Oxford University Press
andTrustee of ABRSM, the music
examination Board.
Former roles: Co-founder and President
of NASDAQ-listed QuinStreet Inc.,
management committee member
of De La Rue, and a consultant with
McKinsey & Company, Inc.
Qualifications: MA in Natural Sciences.
International expertise: EMEAs,
Americas
Bronwyn Syiek
Independent
non-executive director
Annual Report and Financial Statements 2021 63
Governance at a glance
Board skills International expertise
Financial services
Customer service
Non-profit making
organisations
Finance
Capital markets
Digital/technology
Banking
Overseas markets
Operational experience
ESG
Governance/regulatory
Cyber security
100%
67%
67%
67%
100%
100%
67%
100%
50%
50%
67%
67%
EMEA
Americas
Asia Pacific
100%
100%
67%
To enhance our distribution channels and product
propositions for the next generation of customers.
To address any potential regulatory changes and make
sound economic decisions regarding capital allocation.
To increase awareness of the essential role and positive
impact the business has on society as a key strand
of developing our purpose-led ESG strategy including
climate-related change actions.
To invest smartly in technology to support the innovation,
improve customer journeys and make the business
more efficient.
Continued strong performance in the Group’s
Covid-19 response strategy, rebuilding sales
and portfolio.
The Care Plan continued to make a material
difference to the wellbeing of colleagues.
Good progress made on the Group’s purpose
journey with strong foundations to ensure that
purpose becomes fully embedded in the
Group’sculture.
Resumption of dividend payments reflecting the
Company’s strong performance, balance sheet
strength and growth outlook.
Significant progress made on the Group’s digital
transformation journey.
Key priorities for 2022 2021 highlights
Directors’ Report continued
International Personal Finance plc64
Directors’ Report
Board composition
Nomination Committee Technology Committee Audit and Risk Committee Remuneration Committee
Board tenure Board diversity
■
Chair 17%
■
Executive directors 17%
■
Non-executive directors 67%
■
Chair 20%
■
Executive directors 20%
■
Non-executive directors 60%
■
Chair 50%
■
Executive directors 0%
■
Non-executive directors 50%
■
Chair 33%
■
Executive directors 0%
■
Non-executive directors 67%
■
Chair 33
%
■
Executive directors
0%
■
Non-executive directors
67%
■
Under 3 years 33%
■
3-6 years 33%
■
6-9 years 17%
■
Over 9 years 17%
■
Male
67%
■
Female 33
%
Committee compositions
Board attendance 2021
There were seven scheduled Board meetings, as well as a mid-year and annual strategy review.
Director
Scheduled
meetings
1
No. of
meetings
attended
% of
meetings
attended
Stuart Sinclair 7 7 100%
Gerard Ryan 7 7 100%
Justin Lockwood
2
4 4 100%
Deborah Davis 7 7 100%
Richard Holmes 7 7 100%
John Mangelaars 7 7 100%
Richard Moat
3
3 3 100%
Cathryn Riley
4
3 3 100%
Bronwyn Syiek 7 7 100%
1. The scheduled meetings that each individual was entitled to and had the opportunity to attend.
2. Justin Lockwood stepped down as a director of the Board in July 2021.
3. Richard Moat stepped down as a director of the Board at the 2021 AGM.
4. Cathryn Riley stepped down as a director of the Board at the 2021 AGM.
Annual Report and Financial Statements 2021 65
Role of the Board
and its Committees
The Board
Role of the Board
The role of the Board is to represent shareholders and promote and protect the interests of the Group in the short and long term.
The Board considers the interests of the Group’s shareholders as a whole and the interests of other relevant stakeholders.
It is responsible for approving Group strategy consistent with the purpose of the business and for overseeing its implementation.
The CEO is responsible for preparing and recommending the strategy and for the day-to-day management of the Group.
The Group’s senior leadership team implements the Group’s strategy and provides the CEO and the Board as a whole
with the information needed to make decisions that will determine the long-term success of the Group.
In carrying out their duties as a Board, the directors are fully aware of, and comply with, their responsibilities and duties under
Section 172 of the Companies Act 2006 (see page 37 for our s172(1) statement).
There is a schedule of matters reserved for the decision of the Board. The formal schedule can be found on our website
at www.ipfin.co.uk and includes: approval of strategy and determining the nature and extent of significant risks the Group is willing
to take; Board and committee composition and committee terms of reference; annual budgets, significant project expenditure
and funding strategy; and approval of the Annual Report and Financial Statements and regulatory announcements.
The Board has established certain principal committees to assist it in fulfilling its oversight responsibilities, providing dedicated focus
on particular areas, as set out below. Each committee chair reports to the Board on the committee’s activities after each meeting.
Board committees and their reserved matters
The Board delegates authority to the Board committees which are responsible for maintaining effective governance. The specific
responsibilities of the Board’s committees are set out in their terms of reference available on our website at www.ipfin.co.uk.
Nomination Committee
Review structure, size and
composition of the Board
and its committees
Review annually the
succession plan
Assist in the process of selection
and appointment of new directors
and other senior executives
Evaluate the balance of skills,
knowledge, experience and
diversity of the Board
Technology Committee
Oversee the role of technology in
executing the business strategy
Review alignment of the technology
strategy to the Group’s
business strategy
Review technology-related risks
and opportunities
Monitor key technology deliverables
and review the Group’s technology
operational effectiveness
Audit and Risk Committee
Monitor integrity of the Financial
Statements and provide advice to
the Board on whether they are fair,
balanced and understandable
Review effectiveness of the internal
control system and review principal
and emerging risks and opportunities
Appoint and evaluate the external
auditor and its independence
Review and monitor effectiveness
of the internal audit function
Executive Committee
Manage the Group generally,
other than on matters reserved
to the Board and its committees
Set and communicate the strategy
and ensure that the financial plan
supports this strategy
Monitor operational and
financial performance
Remuneration Committee
Approve all aspects of
remuneration policy and make
recommendations to the Board
Determine the remuneration
packages of the executive
directors, the Chair, the Company
Secretary and the senior
leadership team
Review wider workforce
remuneration
Disclosure Committee
Assist in design and evaluation of
disclosure controls and procedures
Review requirement for,
and content of, regulatory
announcements
Monitor compliance with
disclosure controls and procedures
Directors’ Report continued
International Personal Finance plc66
Directors’ Report
Board objectives
The Board was supported by its committees in progressing its objectives during the year as detailed below:
2021 progress Key priorities for 2022
Strategy
– Continued to monitor the operational and financial performance
of the Group’s businesses by reviewing and scrutinising trading
performance against budget.
– Oversaw implementation of the Group’s rebuild strategy through
careful easing of credit settings to return the business to full-year
profitability and long-term growth in response to increasing
demand for credit as freedom of movement restrictions
were eased.
– Monitor the operational and financial performance of the Group’s
businesses, including the strength of the balance sheet.
– Support receivables portfolio growth by realising new opportunities
and further synergies to increase scale and efficiencies in the
European home credit business.
– Support the delivery of well-controlled sustainable growth with
investment in new technologies and territory expansion in Mexico
home credit.
– Support the development of product innovation.
– Support the identification and pursuit of new growth opportunities
including partnerships and value-added services.
Colleagues
– Continued to support the Global Care Plan and monitored the
operation of safe systems of work across the Group to continue
to protect colleagues, customers and the wider community.
– Continue to oversee the Group’s ongoing management of the
impact of the Covid-19 pandemic, including protection and
support for colleagues across the business with regard to safety,
mental health and wellbeing.
Purpose
– Approved the approach to the Group’s purpose refresh including
engagement with stakeholders to ensure that purpose becomes
fully embedded in the Group’s culture and ways of working.
– Recognised the increasing prominence of ESG issues and
approved the Group’s ESG and climate-related strategies.
– To support the drive to become a more purpose-led business
ensuring alignment with the Group’s business model, values,
culture and strategy.
– Oversee the development of the Group’s ESG strategy including
monitoring and reviewing ESG risks and opportunities, and increase
awareness of the social importance of the business and the wider
role it plays in society.
Digitisation
– Supported the digital transformation programme with the focus
on integrating digital technology to enhance the way we interact
with customers.
– Continue to support the enablement of new technologies and
innovation to enhance the product proposition and improve the
customer experience.
Risk management
– Continued to monitor the risks facing the Group and, following
a review of the impact of climate-related change, approved the
addition of climate-related risk as a principal risk.
– Continue to monitor the principal and emerging risks facing the
Group, establishing the Group’s risk appetite for each, and
promoting actions to ensure that, so far as possible, each risk falls
within such risk appetite.
Stakeholder engagement
– Despite the continued restrictions caused by Covid-19, a wide
range of stakeholder engagement activities were undertaken
to ensure appropriate consideration in Board decision making.
– Continue to engage effectively with all stakeholders and apply
their feedback in the Board’s decision making including in relation
to ESG matters.
Succession planning
– Oversaw the refresh of the senior leaders Aspire development
programme with the introduction of the IPF Global Leaders’
Connect Programme which will contribute to the personal
development of the Group’s key talent.
– Continue to support the Group’s people strategy in the furtherance
of leadership, development and succession planning including
through the annual People and Organisational Planning process
and capability assessments.
Funding strategy
– Approved the successful issuance of new three-year SEK 450 million
bond thereby extending the maturity profile of the Company’s
sources of debt funding.
– Approved the reinstatement of dividend payments for 2021.
– Continue to monitor the Group’s funding position and the
development of longer-term funding strategies.
Annual Report and Financial Statements 2021 67
Board overview of purpose
Company purpose
The Board has overall responsibility for the Company’s
purpose, values and strategy to deliver long-term sustainable
success and generate value for all stakeholders including
shareholders. It places great importance on ensuring that
these continue to be appropriate for the business and markets
in which we operate, while being aligned with our culture.
Having a clear purpose guides colleagues in their
daily decision making and provides a common goal.
By delivering on our purpose, we serve and create value for
our stakeholders. This supports a strong culture which drives
performance across the business both in terms of financial
and non-financial value. The Board sets the strategy for the
Group and throughout the year it receives regular updates
to ensure it is delivered in line with our purpose.
Bringing our purpose to life
Our purpose – ‘to build a better world through financial
inclusion’ – explains why we exist and reminds us of who we
serve and why. As a business we have always had a great
sense of purpose, providing credit to the underbanked and
underserved in a way that is responsible and sustainable.
We help consumers who have lower incomes and often
a limited credit history access the financial system. We are
a responsible lender, well positioned to provide an entry point
to mainstream consumer finance, serving customers with
regulated credit products.
Over the course of 2021, the Board provided support and
guidance on initiatives undertaken to strengthen the sense
of ownership of the Company’s purpose. The Board considers
that the purpose statement encapsulates how we have always
strived to make a positive difference to all of our stakeholders.
Throughout the year, the Board oversaw the internal and
external engagement process undertaken to enhance
understanding of stakeholders’ views on the Group’s purpose.
It also oversaw the plan to ensure that colleagues and other
stakeholders were engaged so that purpose becomes fully
embedded in our culture. The Board recognised that it was
important that colleagues not only understand our purpose
but consider it as a guide in their everyday interactions,
behaviour and actions and that it is embedded in business-as-
usual activities and the operating rhythm of the business.
This included the creation of a set of aspirational stakeholder
purpose statements, validated with the stakeholders
themselves, to act as a guide in reviewing our business and
how we measure ourselves and which will help to provide
guidance in future monitoring of purpose and culture.
The Board recognises that this is a long-term and evolving
journey and it has been consulted on each stage, reviewing
and contributing to the plan and associated activities.
Culture and values
The Board recognises that it is accountable to stakeholders
for ensuring that the Group is appropriately managed and
achieves its objectives in a way that is supported by the right
culture and behaviours. Our values – Responsible, Respectful,
Straightforward – are recognised across the Group and support
our culture. They ensure that all colleagues understand
what is important, how we work together as a team and how
customers are at the centre of what we do. Leadership
behaviours further guide our conduct and decision making so
that we do the right thing for the business and our stakeholders.
The Board understands that the cultural tone of our business
comes from the top. The benefits of a strong culture are seen in
the success of delivering the strategy and in the engagement,
retention and productivity of our employees and customer
representatives. The Board monitors and assesses the
Group’s culture along with its purpose and values through
receiving regular updates from members of the senior
leadership team. The Board also assesses cultural indicators
such as management’s attitude to risk, behaviours and
compliance within the Group’s policies and procedures
as well as reviewing the results of employee surveys.
In addition, the Board routinely interacts with colleagues
as part of the stakeholder engagement programme as well
as other ad hoc interactions. Further details can be found on
pages 41 to 42. Direct interactions with colleagues allows the
Board to understand first hand the key issues identified by the
workforce and provides an opportunity to feed back specific
insights to them.
As part of this activity the Board is able to satisfy itself that the
Group’s policies, practices and behaviour throughout the
business are wholly aligned with the Company’s purpose
and strategy.
Directors’ Report continued
International Personal Finance plc68
Directors’ Report
Board activities during 2021
The Board has ultimate responsibility for the overall leadership
of the Group. It oversees the development and delivery
of a clear Group strategy ensuring the long-term sustainable
success of the Company for all stakeholders. It monitors
operational and financial performance against agreed goals
and objectives, and challenges the executive team. The Board
ensures that appropriate controls and systems exist to manage
risk and that there are the financial resources and people with
the required skills to achieve the strategic goals the Board has
set. The information in this section summarises the Board’s
activities over the year and the discussions that took place in
the discharge of its duties to the Company. Further information
on our s172(1) statement is on page 37.
With support from the Company Secretary and the CEO, the
Chair sets the annual Board programme and Board meeting
agendas, and determines the number of meetings to be held
during the year. He ensures that enough time is devoted,
during meetings and throughout the year, to discuss all material
matters, including strategic, financial, operational, business, risk
and human resource. Board agendas are structured to ensure
a balance is maintained between reporting, approvals and
governance matters, while also ensuring a significant proportion
of each meeting is devoted to strategic topics. At each
scheduled Board meeting the CEO and CFO (or the CFO’s
representative) present separate reports, detailing business
performance and progress against strategy. These are
supplemented by regular performance updates from each of
the divisional heads of the Group. Presentations from members
of the senior leadership team and more informal opportunities
to meet a wider range of employees are also incorporated
as well as free agenda discussion time to enable the Board
to exchange views and debate elements of the Company’s
performance, specific projects or areas of strategic importance.
In 2021, the majority of Board meetings were held either
remotely or as hybrid meetings with some or all directors joining
by video call. The Board continued to adapt well to this
dynamic and its decision making was not affected. In-person
meetings resumed where appropriate and in line with
government guidance. The Board looks forward to the benefits
of more face-to-face engagement with the senior leadership
team and colleagues, when it is safe and appropriate to do so.
Strategy remained a key focus throughout the year. In addition
to Board meetings, the Board participated in an annual and
mid-year strategy review. Topics of discussion included:
rebuilding the business and laying the foundations for future
growth, progress of strategy execution, level of growth,
leadership capabilities, and purpose and ESG – including
climate-related change.
Most of the of the Board’s focus was to support the Group’s
rebuild strategy to return the business to full-year profitability
and long-term sustainable growth.
An overview of the range of matters that the Board discussed
and debated, and the stakeholders considered, at its
meetings during the year can be found in this section.
Customers
Our stakeholders
Regulators and legislators Communities
Suppliers Investors and shareholders
Employees and
customer representatives
Strategy and management
– Agreed the Board’s objectives for 2021. Reviewed
operational and financial performance with the CEO
and CFO (or the CFO’s representative) presenting their
own reports to enable oversight of business
performance against targets, budget and strategy.
– Reviewed how the business continued to support
employees and customer representatives in safe ways of
working within the Covid-19 landscape, including
mental health and wellbeing as well as the continued
safety of customers.
– Considered and approved the Group’s climate-related
strategy in line with the TCFD recommendations.
– Received regular updates on continuing government
measures imposed in response to the ongoing
pandemic including the status of temporary
legislation,freedom of movement restrictions and
socialdistancing rules.
– Oversight of the collect-out of the IPF Digital operation
in Finland.
– Discussed and reviewed development of the Group’s
IT strategy.
– Reviewed the Group’s strategy at the annual and
mid-year review meetings.
– Invited a leading fund manager to undertake a learning
exercise with the Board on key ESG matters.
– Supported the launch of a strategic partnership initiative
with the long-term aim of strengthening our market
position, including the launch of pilot schemes in
Romania and Mexico.
– Approved the decision to cease new lending in the
IPF Digital business in Spain.
Board composition and effectiveness
– Reviewed Board, committeeand senior management
succession plans.
– Participated in an internally facilitated Board evaluation
and agreed actions following a review of findings.
For more information see page 72.
– Training received included insurance KPIs, credit-flexing
sensitivities and foreign exchange risks and mitigations.
– Reviewed and considered conflicts ofinterest.
Annual Report and Financial Statements 2021 69
Governance
– Approved the appointment of the new CFO.
– Approved the resolutions to be put to the 2021 AGM.
– Approved the proposal to withdraw shares traded on the
Warsaw Stock Exchange.
– Proactively sought and considered feedback from
investors and proxy advisors on the Company’s 2021
AGM resolutions.
– Agreed that, in view of ongoing Covid-19 restrictions and
to ensure that the meetings could be undertaken safety,
the 2021 AGM and GM should be closed meetings with
the opportunity for shareholders to submit questions
in advance.
– Reviewed and approved the Board Diversity Policy.
– Reviewed and approved the Group’s tax strategy.
Stakeholder engagement
– Reviewed updates presented by the Stakeholder
and Workforce Engagement Director on engagement
activities undertaken.
– Received updates on the general wellbeing and health
and safety of colleagues and customer representatives
in light of the continued impact of Covid-19.
– Considered the results of the Global People Survey
to assess the sentiment and engagement of colleagues
and customer representatives across the business.
– Received updates on investor sentiment in response
to financial results, and feedback from bondholders
and potential bondholders garnered in connection
with the issuance of the SEK bond.
– Reviewed relationships with the Group’s key
banking partners.
– Received regular updates on the external regulatory
environment in each of our markets, and the
management and engagement strategy to ensure
alignment with the Group’s business priorities.
– As part of the purpose refresh, the Board was made
aware of an increased focus on community and
supported a number of community-based initiatives,
including The Invisibles. Further details can be found
on page 43.
Financial reporting
– Approved the 2020 Annual Report andFinancial
Statements and the long-term viability andgoing
concern statements.
– Reviewed and approved half-andfull-year results
announcements and presentations to investors
and analysts.
– Reviewed cash flow, dividend cover and shareholder
returns particularly in the context of rebuilding the
business following the impact of Covid-19, and agreed
the reinstatement of dividends for 2021.
– Monitored the Group’s funding position and compliance
with the Group’s financial covenants.
– Approved the issuance of SEK 450 million bond at
7% coupon, maturing in October 2024.
– Approved the 2022 Group budget andbusiness plan,
reviewing key assumptions, inputs and risks,
and monitored performance and variances against
the 2021 plan.
Risk management and internal controls
– Reviewed and approved risk appetiteproposals and
the Group Scheduleof Key Risks in the context of the
continued impact of Covid-19.
– Reviewed and approved the assessment of climate-
related risks as a principal risk and reviewed the Group’s
phased approach to responding to the challenges
and opportunities faced.
– Received regular health and safety updates.
– Received reports from the Audit and Risk Committee
on the effectiveness ofthe Group’s systems of risk
management and internal controls.
– Approved the reappointment of Deloitte LLP as auditor
on the recommendation of the Audit and
RiskCommittee.
– Reviewed output from the operation of the ‘Speak Up’
whistleblowing service.
– Received regular updates through the Audit and Risk
Committee in respect ofinternal and external audit
reviews and agreed the internal audit programme
for the year.
Customers
Our stakeholders
Regulators and legislators Communities
Suppliers Investors and shareholders
Employees and
customer representatives
Directors’ Report continued
International Personal Finance plc70
Directors’ Report
The Board and ESG
The Board recognises the importance of ESG matters
and their significance in the execution of the Group’s strategy.
As a business with a strong social purpose and long history
of creating financial inclusion opportunities, we have
strengthened our ESG strategy to ensure we deliver on our
purpose in a responsible and transparent way and underline
our commitment to respond to climate-related change. The
Board recognises that its role in relation to ESG is to ensure
governance and oversight with the senior leadership team
responsible for managing the ESG-related risks and
opportunities on a day-to-day basis. ESG issues are discussed
regularly, including during Board strategy decisions, business
operational reviews and in the context of stakeholder
engagement. In addition, stakeholder attitudes, including
those of investors, and the direction and momentum of their
expectations are considered in relation to ESG. The Board has
further oversight on ESG matters and related risks and
opportunities for the Group through the risk management
process. A review of climate-related risks and opportunities
relevant to IPF resulted in the Board including climate-related
change as a principal risk to the Group.
Board members bring experience from a range of sectors
and perspectives, including finance, technology, banking,
customer service and non-profit making. This equips them
to consider the potential implications of ESG on operational
capacity, as well as understanding the nature of the debate as
it develops. In addition, there is a deep understanding of the
risks and opportunities for the Group. The Board seeks the input
of the senior leadership team, including the Group Corporate
Affairs Director, who keeps the Board regularly informed on
ESG matters. Discussion points in the year included the
increasing importance of ESG, our ESG opportunity including
strengthening the awareness of the Group’s essential role in
society, and reviewing and approving our climate-related
strategy and roadmap to support the disclosures recommended
under the TCFD. For further information on our work around
ESG, including TCFD, please see pages 46 to 50.
The Board recognises that its education in ESG matters,
including climate change, and the implications for the
Group is ongoing and developing. To enhance the Board’s
understanding, a leading fund manager was invited to
attend a Board meeting to enable a deep dive and provide
further insight into the expectations of investors and their ESG
investment research frameworks.
Looking ahead, the Group’s ESG strategy will be further
developed and progressed. The Board will assess and review
the use of the most appropriate and relevant targets for IPF,
ensuring that the approach is proportionate and aligned with
strategy. The review of the Company’s Remuneration Policy in
2022 ahead of the shareholder vote in 2023 will pay particular
attention to the developing ESG landscape and consider
the inclusion of appropriate ESG metrics relevant to the
Group’s stakeholders.
Our purpose ‘to build a better world through financial inclusion’
encompasses all aspects of ESG and drives our actions to
ensure that our business is responsibly run and sustainable.
Consideration of ESG issues is fundamental to the way in which
we operate as a purpose-led and responsible business. The
Board’s approach is reflected in the Group’s corporate culture
and values of being responsible, respectful and straightforward
as highlighted throughout the Strategic Report.
The Board
Board oversight of ESG
Performance
updates
Functional
teams
Senior
leadership team
Risk Advisory
Group
Annual Report and Financial Statements 2021 71
committees continue to operate at a high standard. The Board
is regarded as being cohesive with an open, inclusive and
supportive culture and strong governance relating to risks
and controls and managing regulatory requirements. The
composition of the Board was considered to be effective and
it continued to provide successful leadership to the Group,
and comprises the appropriate balance of experience, skills,
knowledge and diversity of background to implement the
Group’s strategy. The Board places significant reliance on its
committees by delegating a broad range of responsibilities
and issues to them and receives oral updates from the chairs
of each of the committees at the Board.
The Chair confirmed that the non-executive directors standing
for re-election at this year’s AGM continued to perform
effectively, both individually and collectively as a Board,
and that each demonstrated commitment to their role.
The 2021 evaluation provided an opportunity to reflect on
the strengths of how the Board operates and where it can
improve. The Board discussed areas identified for improvement
and will continue to focus on them during 2022. The main
conclusions and key areas for focus highlighted by the 2021
evaluation are detailed below:
Board and committee evaluation
The Board is in the final year of the three-year evaluation cycle
recommended by the 2018 UK Corporate Governance Code.
An internal evaluation was carried out in 2021 and 2020
and the 2022 evaluation is expected to be externally facilitated.
The 2021 review sought directors’ views on a range of topics
including: strategy; planning and performance; risk and control;
Board composition and size; balance of skills, experience
and knowledge; diversity; culture; meeting agendas; the quality
and timeliness of information; and support for directors and
committees. The topics were selected by the Chair and the
Company Secretary as being the most pertinent when
considering the Board’s effectiveness, and also referenced
previous years’ topics to track trends and improvements. The
Senior Independent non-executive director also led a separate
evaluation of the Chair with the directors to appraise the Chair’s
performance. There continues to be positive support for the
Chair. He is seen as being supportive but challenging and
manages meetings with professionalism, ensuring each director
has the opportunity to express their view. It was concluded that
his performance and contribution remain strong and that he
demonstrates effective leadership.
The findings of the evaluation were presented to the Board in
January 2022, and the Board discussed the points raised by
the review and recommendations on follow-up actions were
discussed. Overall the evaluation found that the Board and its
Actions from 2020 Key findings from 2021 Actions for 2022
Board composition and
succession planning
Continue to keep under review Board
composition and succession planning
in light of the Group’s post Covid-19
strategy and the smaller scale of
the business.
The appointment of the new CFO was
a positive addition to the Group and will
assist in building succession strategy
in other key roles across the Group.
The successful onboarding of the
new CFO and continue to review and
develop succession plans for key roles
in the Group and across the business,
including continued interactions with
the senior leadership team to assess
‘bench strength’.
Strategy
Following the necessary focus on
operational issues in order to manage
the impact of the pandemic on the
Group, there was a desire to return to
discussions of a more strategic nature.
Strategy was discussed regularly at Board
meetings and consideration was given to
introducing further deep dives into strategy
related matters to enhance focus, in
addition to the twice- yearly strategy reviews.
To consider the most effective ways to
increase understanding of the Group’s
ESGrole in society.
To resume Board strategy dinners, when
circumstances allow, to facilitate deep
dives into particular strategic matters.
To increase awareness of the social
purpose of the business and the wider
role it plays in society.
Stakeholder engagement
Further develop our engagement with
stakeholders ensuring a ‘closed loop’
approach whereby feedback
gathered is actively applied in
Board decision-making.
Detailed updates on stakeholder
engagement activities presented by the
Workforce and Stakeholder Engagement
Director were valued by the Board
and provided a good insight into
activities undertaken.
To continue to develop the effectiveness
of the Group’s stakeholder engagement
strategy to ensure clearer alignment
with discussions and decisions made
by the Board and its committees.
Training
Continue to monitor the training
needsof the Board and individual
directors and continue to provide
opportunities to non-executive directors
for learning and engagement activities
in relation to material aspects of the
Group’s business.
The Board received formal training
on insurance KPIs, the management of
credit risks and the management of foreign
exchange risks. In addition, the Audit and
Risk Committee received other specific
training (see page 86).
Continue to monitor the training
needs of the Board and to provide
opportunities for non-executive directors
to gain first-hand insights into
the business.
Directors’ Report continued
International Personal Finance plc72
Directors’ Report
Compliance with the UK Corporate Governance Code
2018 (the Code)
The Company complied with the provisions set out in the 2018
version of the Code, which applied throughout the financial
year ended 31 December 2021. The Code is available on the
FRC’s website: www.frc.org.uk. We set out below how the Code
principles have been applied.
Board leadership and company purpose
A successful company is led by an effective and entrepreneurial
board, whose role is to promote the long-term sustainable
success of the company, generating value for shareholders and
contributing to wider society. See pages 36 to 45 and 72.
The board should establish the company’s purpose, values
and strategy, and satisfy itself that these and its culture are
aligned. All directors must act with integrity, lead by example
and promote the desired culture. See pages 12 to 13, 61
and 68.
The board should ensure that the necessary resources are
in place for the company to meet its objectives and measure
performance against them. The board should also establish
a framework of prudent and effective controls, which enable
risk to be assessed and managed. See pages 32 to 35.
In order for the company to meet its responsibilities to
shareholders and stakeholders, the board should ensure
effective engagement with, and encourage participation from,
these parties. See pages 36 to 45.
The board should ensure that workforce policies and practices
are consistent with the company’s values and support its
long-term sustainable success. The workforce should be able
to raise any matters of concern. See pages 41, 70 and 78.
Division of responsibilities
The chair leads the board and is responsible for its overall
effectiveness in directing the company. They should
demonstrate objective judgement throughout their tenure
and promote a culture of openness and debate. In addition,
the chair facilitates constructive board relations and the
effective contribution of all non executive directors, and
ensures that directors receive accurate, timely and clear
information. See page 72.
The board should include an appropriate combination of
executive and non executive (and, in particular, independent
non executive) directors, such that no one individual or small
group of individuals dominates the board’s decision-making.
There should be a clear division of responsibilities between the
leadership of the board and the executive leadership of the
company’s business. See page 74.
Non executive directors should have sufficient time to meet
their board responsibilities. They should provide constructive
challenge, strategic guidance, offer specialist advice and hold
management to account. See page 74.
The board, supported by the company secretary,
should ensure that it has the policies, processes, information,
time and resources it needs in order to function effectively
and efficiently. See pages 72 and 75.
Composition, succession, evaluation
Appointments to the board should be subject to a formal,
rigorous and transparent procedure, and an effective
succession plan should be maintained for board and senior
management. Both appointments and succession plans
should be based on merit and objective criteria and, within
this context, should promote diversity of gender, social and
ethnic backgrounds, cognitive and personal strengths.
See pages 80 to 81.
The board and its committees should have a combination
of skills, experience and knowledge. Consideration should
be given to the length of service of the board as a whole
and membership regularly refreshed. See pages 62 to 65
and 72.
Annual evaluation of the board should consider its composition,
diversity and how effectively members work together to
achieve objectives. Individual evaluation should demonstrate
whether each director continues to contribute effectively.
See page 72.
Audit, risk and internal control
The board should establish formal and transparent
policies and procedures to ensure the independence
and effectiveness of internal and external audit functions
and satisfy itself as to the integrity of financial and narrative
statements. See pages 85 to 87.
The board should present a fair, balanced and understandable
assessment of the company’s position and prospects.
See page 87.
The board should establish procedures to manage risk,
oversee the internal control framework, and determine the
nature and extent of the principal risks the company is willing
to take in order to achieve its long-term strategic objectives.
See pages 52 to 58 and 87.
Remuneration
Remuneration policies and practices should be designed to
support strategy and promote long-term sustainable success.
Executive remuneration should be aligned to company
purpose and values, and be clearly linked to the successful
delivery of the company’s long-term strategy. See page 93
to 95.
A formal and transparent procedure for developing policy
on executive remuneration and determining director and
senior management remuneration should be established.
No director should be involved in deciding their own
remuneration outcome. See pages 94 to 95 and 104.
Directors should exercise independent judgement
and discretion when authorising remuneration outcomes,
taking account of company and individual performance,
and wider circumstances. See pages 92 and 94 to 95.
In addition to the Code, we are required to comply with the
Companies Act 2006 (the Act), the Disclosure Guidance and
Transparency Rules (DTR) and the Listing Rules (LR). Where not
covered elsewhere, these requirements are included in
this section.
In accordance with DTR 4.1.5R, the Strategic Report and the
Directors’ Report together are the management report for the
purposes of DTR 4.1.8R.
There are no disclosures to be made under LR 9.8.4R.
Annual Report and Financial Statements 2021 73
The Board has taken advantage of section 414C(11) of the
Companies Act 2006 to include disclosures in the Strategic
Report including:
– the financial position of the Group (see pages 32 to 35).
Articles of Association (Articles)
The Articles may only be amended by a special resolution at
a general meeting of the shareholders. The Articles are
available on our website at www.ipfin.co.uk or direct from
Companies House, UK.
Appointment and replacement of directors
The Articles provide that the Company may by ordinary
resolution at a general meeting appoint any person to act as a
director, provided that written notice is given of the intention to
propose such person and that the Company receives written
confirmation of that person’s willingness to act as director if he
or she has not been recommended by the board. The Articles
also empower the board to appoint as a director any person
who is willing to act as such. The maximum number of directors
under the Articles is fifteen.
The Articles provide that, at every annual general meeting,
the following directors must retire: (a) any director appointed
by the board since the Company’s previous annual general
meeting; (b) any director who has held office at the time of
the Company’s two preceding annual general meetings and
who did not retire at either of them; and (c) any director who
has held office with the Company (other than employment or
executive office) for a continuous period of nine years or more
at the date of the meeting. A director who retires from office
is eligible for re-appointment by the Company’s shareholders.
Notwithstanding the provisions of the Articles, the Company’s
current practice, in accordance with the recommendations
of the UK Corporate Governance Code, is to require each
director to stand for election or re-election by the Company’s
shareholders on an annual basis.
The Articles further provide that the Company may, in addition
to any powers of removal conferred by law, by special
resolution remove any director before the expiration of his or
her period of office. The Articles also set out the circumstances
in which a director shall vacate office.
Division of responsibilities
The roles of the Chair and CEO are clearly defined and the
division of responsibilities is established and set out in writing.
The Chair is responsible for the leadership and effectiveness
of the Board. He is also responsible for the effective running of
the Board and its committees in accordance with corporate
governance standards. He is responsible for ensuring that
consideration is given to the main challenges and opportunities
facing the Company, and facilitates open and constructive
discussion during meetings. The Chair was independent on
his appointment.
The CEO is responsible for executing the strategy effectively,
and managing the Group’s businesses.
Commitment
The Chair and the non-executive directors should have
sufficient time to fulfil their duties and directors’ other
commitments are kept under review to ensure that they have
sufficient time to dedicate to the business.
As part of our annual review of responsibilities, we considered
the time non-executive directors are required to give to
their roles. We were satisfied that each director continues
to contribute the time as well as the focus, care and quality
of attention, to fulfilling their duties to the Company
and its shareholders. Based upon the evaluation of the Board,
its committees and the continued effective performance of
individual directors, the Nomination Committee recommended
to the Board that all directors stand for re-election at the
Company’s 2022 AGM. It is also recommended that Gary
Thompson stands for election in accordance with the
Company’s Articles of Association.
The Board has approved a policy on other directorships;
any request for an exception to this is considered on
its merits. An executive director will be permitted to hold one
non-executive directorship (and to retain the fees from that
appointment) provided that the Board considers this will not
affect their executive responsibilities adversely. The executive
director currently does not hold any external directorships.
A non-executive director should not hold more than four other
material non-executive directorships. If they hold an executive
role in a FTSE 350 company, they should not hold more than
two other material non-executive directorships.
In line with the Code, non-executive directors are required
to seek Board approval prior to taking on any additional
appointments. In November 2021, Bronwyn Syiek took on the
role of President of Credit Sesame Inc. The Board considered
and approved her taking on this appointment and was
confident that she would be able to continue to devote
the appropriate time to her role as a non-executive director.
The external commitments of the Chair and the other
non-executive directors have been reviewed and the Board
is satisfied that these do not conflict with their required
commitment to the Company.
The independent non-executive directors are appointed for
an initial period of three years, subject to annual re-election by
shareholders at the AGM. The initial period may be extended,
following recommendation by the Nomination Committee,
for two further three-year periods. The Board will not normally
extend the aggregate period of service of any independent
non-executive director beyond nine years. Their letters
of appointment may be inspected at our registered office
and copies are available from the Company Secretary.
Each of the non-executive directors has been formally
determined by the Board to be independent for the purposes
of the Code and the Chair was considered to be independent
on appointment. Richard Holmes was appointed as the Senior
Independent Director at the conclusion of the 2021 AGM.
Hewill be available to shareholders should they have concerns
which contact through the normal channels of Chair
and CEO has failed to address or for which such contact is
inappropriate. The Senior Independent Director will review the
performance of the Chair on an annual basis and will consult
with other Board members as part of the review. He will also
consider the relationship between the Chair and the CEO.
Directors’ Report continued
International Personal Finance plc74
Directors’ Report
Development
Our policy is to provide appropriate training to directors.
Training takes into account each individual’s qualifications
and experience and includes ESG training as appropriate.
Training needs are reviewed annually as part of the Board
evaluation process. Training also covers generic and specific
business topics and in 2021 included presentations to the
Board on an overview of the value-added services offered
across the Group, including insurances – with a focus on
financial performance, regulatory understanding and
customer outcomes; and management of credit and foreign
exchange risks. Although continued Covid-19 restrictions
meant that the Board was unable to undertake its usual
annual market visit, directors participated in a number of
direct engagement activities with the markets using video
conferencing facilities. As some people movement restrictions
started to ease, face-to-face engagement activities with the
business resumed in line with local guidelines and the Chair
was able to visit colleagues in Poland and Hungary.
All directors are able to consult with the Company Secretary,
who also updates the Board on governance developments.
The appointment and removal of the Company Secretary
is a matter for the Board. The Company Secretary acts as
secretary to the Board and its committees. Any director may
take independent professional advice at the Company’s
expense relating to the performance of their duties.
If directors have concerns about the running of the Company,
which cannot be resolved, their concerns are recorded in the
Board minutes. There have been no concerns raised during
the period under review.
Evaluation
In 2021, an internally facilitated evaluation of the performance
of the Board and its committees was carried out. Directors
completed a questionnaire, the results of which were collated,
reviewed and presented for discussion at the January 2022
Board meeting. Details of the principal outcomes relating
to the Board evaluation can be found on page 72.
Election or re-election of directors
All directors are subject to election or re-election at the AGM,
in accordance with the Code. All directors will seek
re-election,or election at our AGM on 28 April 2022. Details of
the directors can be found on pages 62 to 63.
Shares in issue
As at 31 December 2021, the issued share capital was
234,244,437 ordinary shares of 10 pence each, of which
12,143,507 were held in treasury. 12,143,507 shares are held as
treasury shares for the purpose of satisfying options under the
Group’s share option plans. Details of share capital are shown
in note 29 to the Financial Statements.
Share class rights
The share class rights, which are set out in the Company’s
Articles, are summarised as follows. The ordinary shares are
listed on the London Stock Exchange and, up until 22 February
2022, the Warsaw Stock Exchange.
Restrictions on shareholders’ rights
Any share may have rights attached to it as the Company may
decide by ordinary resolution or the Board may decide, if no
such resolution has been passed. Such rights and restrictions
shall apply to the relevant shares as if the same were set out in
the Articles.
Restrictions on transfer of shares and limitations
on holdings
There are no restrictions on the transfer or limitations on the
holding of ordinary shares other than under the Articles or
under restrictions imposed by law or regulation. The Articles set
out the directors’ rights of refusal to effect a transfer of any share.
Interest in voting rights
As at 31 December 2021, we had been notified, pursuant to DTR 5.1.2, of the following interests in voting rights in our issued share
capital. The information provided below was correct at the date of notification, however, the date of receipt may not have been
within the current financial year. It should be noted that these holdings are likely to have changed since the Company was
notified. A notification of any change is not required until the next notifiable threshold is crossed.
Name Date notified % of issued share capital
1
Aberforth Partners LLP 12/03/2021 14.10
Standard Life Aberdeen plc 14/08/2020 12.00
Marathon Asset Management LLP 23/08/2021 8.41
Pendal Group Limited 26/07/2021 5.47
FMR LLC 10/01/2018 5.28
Artemis Investment Management LLP 12/10/2021 5.04
Schroders plc 17/03/2014 5.01
Old Mutual Asset Managers (UK) Ltd 12/04/2010 4.88
BlackRock, Inc. 16/07/2009 4.54
Oppenheimer Funds Inc/Baring Asset Management Ltd 26/06/2009 3.02
Hendrik Marius van Heyst 09/11/2020 3.02
BNP Paribas Investment Partners 08/07/2015 3.02
On 27 January 2022, the following shareholder notified an interest in our issued share capital in accordance with the DTR:
Name Date notified % of issued share capital
1
Pendal Group Limited 27/01/2022 6.20
1. The percentage of issued share capital in the table above is based on the Company’s issued share capital at the point of notification.
Annual Report and Financial Statements 2021 75
Voting rights
There are no restrictions on voting rights except as set
out in the Articles. Electronic and paper proxy appointments,
and voting instructions, must be received by the Company’s
registrar not less than 48 hours before a general meeting
(or such shorter time as the Board may determine) and the
Board may exclude non-working days in its calculation. The
Company is not permitted to exercise any right in respect of
treasury shares, including any right to attend or vote
at meetings.
Variation of rights
This covers the rights attached to any class of shares that from
time to time may be varied either with the written consent of
the holders of not less than three-quarters in nominal value of
the issued shares of that class or with the sanction of a special
resolution passed at a separate general meeting of the
holders of those shares.
Authority to purchase own shares
At the 2021 AGM, we received shareholder authority to buy
back up to 22,373,988 of the Company’s shares until the earlier
of the conclusion of the 2022 AGM or 30 June 2022.
Shares purchased can be cancelled or held in treasury.
This authority was not exercised in 2021. A further authority
to purchase our own shares will be sought at the 2022 AGM.
On 19 August 2021, the Company announced its intention
to withdraw its ordinary shares of 10 pence each from trading
on the main market operated by the Warsaw Stock Exchange
(WSE). This was achieved by the completion of a tender offer
to purchase IPF’s ordinary shares traded on the WSE which
was approved by shareholders in a General Meeting of the
Company on 16 September 2021. The share buyback was
completed in October 2021 with a total of 1,673,203 ordinary
shares purchased at the offer price of 154.3 pence per share
which were transferred to the Company’s treasury shares
account. This represented 0.7% of the Company’s issued share
capital (at the date of the buyback) and the aggregate
amount paid for the shares was £2,581,752.23. An application
to withdraw the Company’s ordinary shares from trading on
the WSE was submitted to the Polish Financial Supervision
Authority, the Komisja Nadzoru Finansowego (KNF) at the end
of October 2021 and the process was completed in February
2022, with the delisting effective from 22 February 2022.
Authority to issue shares
At the 2021 AGM, an ordinary resolution was passed authorising
the directors to issue new shares up to an aggregate nominal
amount of £7,457,996, representing approximately one third of
the issued share capital of the Company (excluding treasury
shares) and allot further new shares in the case of a rights issue
only up to an aggregate nominal amount of £7,457,996,
representing approximately a further one third of the issued
share capital. Further special resolutions were passed to effect
a disapplication of pre-emption rights in certain circumstances.
Resolutions to renew these authorities will be proposed at the
2022 AGM. Further details can be found in the separate notice
of meeting.
Directors
Details of the current directors can be found on pages 62 to
63. Richard Moat and Cathryn Riley who were non-executive
directors, did not seek re-election at the 2021 AGM and
stepped down from the Board. Executive director and CFO,
Justin Lockwood, left the business at the end of July. Gary
Thompson will join the Board as CFO in April 2022.
Indemnities
Our Articles permit us to indemnify our directors (or those
of any associated company) in accordance with the Act.
However, no qualifying indemnity provisions were in force in
2021 or at any time up to 23 February 2022. We have
appropriate directors’ and officers’ liability insurance and this
wasin force when the Directors’ Reportwas approved.
Directors’ conflicts of interest
To take account of the Act, the directors adopted a policy
on conflicts of interest and established a register of conflicts.
The directors consider that these procedures have operated
effectively in 2021 and up to 23 February 2022.
Powers and proceedings of directors
The directors are responsible for the management of the
Company and may exercise all the powers of the Company,
subject to the provisions of the relevant statutes and the
Articles. The Articles contain specific provisions and restrictions
regarding the following: the Company’s powers to borrow
money; provisions relating to the appointment of directors
(subject to subsequent shareholder approval); and delegation
of powers to a director or committees. They also provide that,
subject to certain exceptions, a director shall not vote on or be
counted in a quorum in relation to any resolution of the Board
in respect of any contract in which they have an interest which
they know is material.
Agreements on change of control
We do not have any agreements with any director or
employee that would provide compensation for loss of office
or employment resulting from atakeover.
We are not party to any significant agreements that would
take effect, alter or terminate upon a change of control
following a takeover bid, apartfrom:
– our bank facility agreements, which provide for
a negotiation period following a change of control and
the ability of a lender to cancel its commitment and for
outstanding amounts to become due and payable;
– our Euro Medium Term Note
1
programme, which entitles any
holder of a note to require us to redeem such holder’s notes
if there is a change of control and, following such change
of control, the notes are downgraded; and
– provisions in our equity share incentive plans may cause
awards granted to directors and employees to vest
on a takeover.
1. The Euro Medium Term Note programme was established in 2010.
The following notes (listed on the London or Nasdaq Stockholm stock
exchanges) have been issued under the programme and are outstanding
as at the date of this report: €341.2 million with a five-year term and a
9.75% coupon; £78.1 million with a four and a half-year term; and a 7.75%
coupon and SEK450 million Swedish krona bond with a three-year term
and a coupon of three-month STIBOR plus a margin of 7.00%.
Directors’ Report continued
International Personal Finance plc76
Directors’ Report
Employee equity incentive plans
UK eligible employees are able to participate in our equity share incentive plans, details of which are shown below.
Awards granted to the executive directors in 2021 are set out in the Directors’ Remuneration report on page 100.
Plan Abbreviated name Eligible participants
The International Personal Finance plc Approved Company
Share Option Plan
CSOP Executive directors and senior managers
The IPF Deferred Share Plan DSP Executive directors and senior managers
The IPF Performance Share Plan PSP Executive directors and senior managers
The IPF Save As You Earn Plan SAYE Executive directors and UK employees
The International Personal Finance plc
Discretionary AwardPlan
Discretionary Award Plan Employees other than executive directors
Details of outstanding awards are included in note 28 to the Financial Statements.
Related party transactions
Related party transactions are set outin note 33 to the
Financial Statements.
Financial instruments
Details of the Group’s financial instruments are set out in
note 23 totheFinancial Statements. The information in note 23
is incorporated by reference into, and forms part of,
this Directors’ Report.
Dividends
A final dividend of 5.8 pence per share has been proposed
bringing the full year dividend to 8.0 pence per share. Thefinal
dividend will be payable on 6 May 2022 to shareholders on the
register of members on 8 April 2022. Thedeadline to elect for
the Dividend Reinvestment Plan (DRIP) is 13 April 2022.
Employees
Employee engagement and communication
IPF prioritised employee communications and engagement
throughout the Covid-19 pandemic and has invested in
technology which allowed us to communicate effectively with
all levels of our organisation in all countries. Ofparticular note
is our use of ‘My News’, a communication app devoted
specifically to ensuring that we keep closely connected to our
colleagues. During 2021 we conducted our Global People
Survey which included all of our customer representatives.
Weachieved an exceptionally high participation rate of 91%
globally and highly positive feedback overall confirming
excellent engagement with and commitment to IPF.
Operationally, our individual businesses have successfully
adjusted their local engagement activities and
communications to support a dynamic work environment
due to government imposed restrictions relating to the
pandemic. Our strong IPF culture which is based on strong
ethics and values provided a resilient and stable anchor
during external volatility. Hybrid working is now operational
in each of our countries and we have adjusted our
communications and engagement protocols and strategies
to reap the many benefits to both the organisation and
colleagues that these new working patterns offer. Further
information on how we engaged with employees and
customer representatives can be found on pages 41 to 42.
Employee benefit trust
We operate an employee benefit trust with an independent
trustee, Apex Financial Services (Trust Company) Limited,
tohold shares on behalf of employees pending entitlement
to them under our equity share incentive plans. As at
31December 2021, the trustees held 320,475 shares in
International Personal Finance plc. The trust waives its dividend
entitlement and abstains from voting at general meetings.
Anyshares to be acquired through our share plans do not
have special rights and rank pari passu with the shares
already in issue.
Annual Report and Financial Statements 2021 77
Employment policies and tax strategy
Equal opportunities
The Group is an equal opportunities employer. It is our policy
that no job applicant, employee or customer representative
will receive less favourable treatment because of their race,
colour, nationality, ethnic or other national origin, gender,
sexual orientation, marital status, age, disability or religion.
The aim of this policy is to ensure that recruitment and
progression opportunities are open to all and are based
purely on merit, with all employees having the same access
to training and career development. The Group gives full
and fair consideration to applications for employment from
disabled persons, having regard to their particular aptitudes
and abilities. If an employee becomes disabled, every effort
is made by the Group to ensure their employment with
theGroup continues and appropriate training career
development and promotion, and reasonable adjustments
are arrangedwhere necessary.
Human rights, diversity and modern slavery
Information relating to diversity and gender, human rights,
and Board diversity is shown on pages 42 and 65.
The Board reviewed and approved the Board Diversity Policy.
This and our Modern Slavery Act 2015 statement are available
on our website at www.ipfin.co.uk.
Anti-bribery policy
The Group is committed to conducting its affairs in an ethical
manner and to ensuring that its trading activities are
conducted with honesty and integrity and ensuring compliance
with relevant anti-bribery and corruption legislation, in any
jurisdiction where the Group operates. Internal controls and
procedures are in place to ensure that no one acting on
our behalf:
– offers, promises or gives a bribe;
– requests, agrees to accept or receives a bribe; or
– bribes a public official to obtain or retain business
or an advantage.
All employees must complete anti-bribery and corruption
training. The Anti-bribery Policy was reviewed in 2021.
Political donations
The Group did not make any political donations nor incur any
political expenditure.
Tax strategy
We are a responsible taxpayer, committed to ensuring
compliance with tax law and practice in all of the territories
in which we operate, whilst recognising our responsibility
to protect shareholder value. We seek to maintain honest
and open relationships with the relevant tax authorities and
operate in a straightforward and transparent manner in our
dealings with them. More information on our approach can
be found in the Group’s Tax Strategy, which has been
reviewed and approved by the Board, on our website at
www.ipfin.co.uk.
External oversight
The Group’s activities in Mexico and Spain are subject to
general trade licences only. Our other operations in Europe
and Australia are subject to certain licensing provisions or
supervision by a financial authority as detailed below.
European home credit
Czech Republic – licensed by Czech National Bank
Hungary – operates under the supervision of the National Bank
of Hungary and subject to an operating licence issued by the
Hungarian National Bank
Poland – registered in the special registry of the Komisja
Nadzoru Finansowego (KNF), the Polish Financial Supervision
Authority, and also licensed and registered in the register
of the Small Payment Institution Licence of the KNF.
Romania – under the supervision of the National Bank
of Romania in the Special Registry of credit providers
IPF Digital
Australia – holds a credit licence issued by the
Australia Securities and Investment Commission
Estonia – licences issued by the Estonian Financial
Supervision Authority
Finland – in a register of credit providers maintained by the
Regional State Administrative Agency of South Finland
Latvia – operates under a licence from the Consumer Rights
Protection Centre
Lithuania – in a register of credit providers maintained by the
Bank of Lithuania
Poland – registered in the special register of the KNF.
Budgetary process and financial reporting
The Board approves annually a detailed budget for the year
ahead. Actual performance against budget is monitored
regularly and reported monthly for review by the Board.
TheBoard requires the Group’s subsidiaries to operate
in accordance with corporate policies.
The Financial Statements for the Group are prepared by
aggregating submissions from each statutory entity. Prior to
submission to the Group reporting team, each country
submission is reviewed and approved by the finance director
of the relevant business. When the submissions have been
aggregated and consolidation adjustments made to remove
intercompany transactions, the consolidated result is reviewed
by the Group Financial Controller and the CEO. The results are
compared with the budget and prior year figures, and any
significant variances are explained. Checklists are completed
by each statutory entity and by the Group reporting team to
confirm that all required controls, such as key reconciliations,
have been performed and reviewed.
The Financial Statements, which are agreed directly to the
consolidation of the Group results, are prepared by the Group
reporting team and reviewed by the Group Financial Controller
and the CEO. The supporting notes to the Financial Statements
are prepared by aggregating submission templates from each
market and combining them with central information where
applicable. The Financial Statements and all supporting notes
are reviewed, approved and signed by the CEO. For further
details on our risk and internal control processes, see pages 52
to 58.
Directors’ Report continued
International Personal Finance plc78
Directors’ Report
Dear Shareholder,
I am delighted to introduce the Nomination Committee Report
for the year. As Chair of the Committee, I am pleased to report
on the ongoing objectives and responsibilities of the Committee,
the work that has been carried out during 2021 and the plans
for 2022 and beyond.
I continue to be impressed by the level of commitment shown
byBoard members and colleagues in rebuilding the business
and in supporting our customers and each other. These
qualities, together with our focus on diverse teams and inclusive
environments, drive the best outcomes for all of our stakeholders.
Role of the Committee
The Committee reviews the leadership and succession needs
of the organisation and ensures that appropriate procedures
are in place for nominating, training and evaluating directors.
Due regard is given to the benefits of a diverse senior leadership
team that appropriately reflects the Group’s operations
(including but not restricted to gender, age, nationality, ethnic
origin, background, knowledge and experience), the
operational geographies, our future strategic plans and the
customer base.
Board and committee changes
As set out in my introduction to the Corporate Governance
Report on page 60, there have been changes to the Board
and its committees during the year. Following the 2021 AGM,
Richard Moat stepped down as the Senior Independent Director
and Chair of the Audit and Risk Committee, and Cathryn Riley
stepped down as a non-executive director and Chair of the
Remuneration Committee. I would like to reiterate my thanks
to both Richard and Cathryn for their service, insight and
contribution during their time at IPF. Richard Holmes was
appointed as Senior Independent Director, Chair of the Audit
and Risk Committee and a member of the Nomination and
Remuneration Committees, and Deborah Davis was appointed
as Chair of the Remuneration Committee. The experience that
Richard and Deborah bring to the Board make them ideal
candidates to chair these important committees.
Justin Lockwood, our former CFO and executive director, left the
business at the end of July. Our search for Justin’s successor has
concluded and Gary Thompson will be appointed as a director
and CFO in April 2022. When considering the recruitment of
new directors, the Committee and the Board adopt a formal
and transparent procedure which takes into account the skills,
knowledge and level of experience required as well as diversity.
Gary’s appointment follows a thorough and orderly process
to appoint a successor as detailed on page 81. During the
interim period between Justin leaving and Gary joining the
business, Gerard Ryan took on the role as acting CFO in
addition to his ongoing responsibilities as CEO, with a range
of measures put in place to provide support. Senior members
of the finance team have stepped up and participated in Board
and committee meetings which, as well as supporting the CEO
has increased their level of direct interaction with the Board.
Nomination
Committee Report
Stuart Sinclair
Chair of the Nomination Committee
Committee members
Stuart Sinclair, Chair
Deborah Davis, Independent non-executive director
Richard Holmes, Independent non-executive director
John Mangelaars, Independent non-executive director
Gerard Ryan, Executive director and
Chief Executive Officer
“The Nomination Committee continues
to play a vital role in ensuring that the
Board and senior leadership team
comprise high calibre individuals
to deliver the Group’s strategy.”
The table below shows the number of meetings held
and the directors’ attendance during 2021.
Committee
member
Scheduled
meetings
1
No. of
meetings
attended
% of
meetings
attended
Stuart
Sinclair
4 4 100%
Deborah
Davis
4 4 100%
Richard
Holmes
2
2 2 100%
John
Mangelaars
4 4 100%
Cathryn
Riley
3
2 2 100%
Gerard
Ryan
4 4 100%
Notes
1. The scheduled meetings that each individual was entitled
to and had the opportunity to attend.
2. Richard Holmes became a Committee member on
29 April 2021.
3. Cathryn Riley stepped down as a director from the Board
at the 2021 AGM.
Annual Report and Financial Statements 2021 79
Directors’ Report continued
This also enabled the Board’s commitment in recognising and
nurturing talent within the executive and management levels
across the Group to create opportunities to develop our current
and future leaders.
Succession planning
The Committee recognises the importance for the Board to
anticipate and prepare for the future and to ensure that the
skills, experience, knowledge and perspectives of individuals
reflect the changing demands of the business. We have
a strong talent pipeline, which considers the core competencies
and capabilities for potential future leaders, comprising
many high-performing individuals. When considering succession
plans, the Committee and the Board are cognisant of the need
to ensure that a diverse range of individuals are included.
We believe that the range of perspectives provided by a diverse
and inclusive organisation such as IPF, which are also reflective
of the communities we serve, gives us a competitive advantage.
The Committee and the Board continued to deepen their
understanding of executive talent requirements and the
capabilities needed to ensure effectiveness in driving the business
forward. The Committee leads the Board’s annual session
dedicated to succession planning as well as a mid-year review as
part of the Group-wide talent mapping exercise to ensure robust
succession plans. During 2021 the Committee and the Board
affirmed the appointment of a number of key senior leadership
positions including several notable female appointments
demonstrating our commitment to developing and nurturing
key talent and supporting greater gender balance in the Group.
In line with our commitment to develop future leaders, the Board
oversaw a refresh of the Aspire programme with the introduction
of the Global Leaders Connect programme. This programme is
an important means of investment in our key talent to meet the
Group’s return to growth strategy. In addition, the first ever
IPF Women’s Conference was held virtually across all our markets
in March 2021 to coincide with International Women’s Day.
This was attended by our female non-executive directors who
each led a break-out session, and gave them direct insight into
the wealth of female talent across our business
Board appointments and diversity
The Committee reviewed and reapproved the Board Diversity
policy during the year, a copy of which is available on our
website at www.ipfin.co.uk. The policy sets out the approach
for the Board of Directors and provides a high-level indication
of the approach to diversity in senior leadership roles. As set out
in the policy, in identifying suitable candidates, the Committee
will consider people talent on merit against objective criteria
and with due regard for the benefits of diversity on the Board.
The Board will aim to ensure that:
– it considers candidates from a wider pool including those with
little or no listed company board experience;
– non-executive director ‘long lists’ will include 50%
female candidates;
– it only engages executive search firms which have signed
up to the voluntary Code of Conduct on gender diversity
and best practice; and
– the Board comprises at least two female directors.
The Board places great emphasis on ensuring that its
membership reflects diversity in its broadest sense and
which appropriately represents the Group’s operations,
the geographies in which we operate, our strategic plans
and the customer base. The membership of our Board is also
diverse geographically with nationals from Australia, the
Netherlands and Ireland as well as the UK. This diversity aids
the Board’s discussions and decision-making processes, given
the international nature of our business. The Committee’s work
on diversity and inclusion is closely aligned with succession
planning activities delivered through our talent management
processes to improve the depth, quality and diversity of the
Company’s talent. Diversity is also built into Group policies as
appropriate and as a business operating in different countries,
collaboration between our international operations is a central
dynamic of our culture. Diversity and inclusion is about treating
people fairly, equitably and without bias, creating conditions
that encourage and value diversity and promote respect,
dignity and belonging. This is embedded in our culture
andvalues.
The Board supported a number of initiatives undertaken in
2021 to encourage greater gender balance, including the
introduction of women’s forums and coaching initiatives for
senior female employees across the Group. Further information
on the Group’s approach to diversity, and details of our
current gender diversity statistics, including the balance for the
senior leadership team and their direct reports, are set out on
page 42.
We are pleased to report that we continue to meet the target of
33% female representation on the Board, as recommended by
the Hampton-Alexander Review: FTSE Women Leaders. The
Committee recognises that following the appointment of Gary
Thompson as CFO in April, the Board will fall short of this target.
The Board, which has met the Hampton-Alexander target for a
number of years, reiterates its continued strong support and
confirms this will be a key focus area in any future recruitment of
Board members.
Board Evaluation
An internal Board effectiveness review was undertaken in 2021
and the Committee’s performance was assessed as part of this.
The Committee concluded that it operates effectively and that
no immediate changes are required. The results of this review,
which were considered by the Board at its meeting in January
2022, included the finding that the Committee had met its key
objectives and carried out its responsibilities effectively. It also
concluded that the composition of the Board was appropriate
and that this would continue to be kept under review.
Please see page 72 for further information.
International Personal Finance plc80
Directors’ Report
Appointment of new CFO
In conducting our search for a CFO, a thorough
and rigorous recruitment process was initiated and
overseen by the Nomination Committee and the
Board. HW Global was appointed to assist with
a comprehensive search of the external market.
HW Global is a signatory to HM Treasury’s Women
in Finance Charter regarding the representation of
women in senior managerial roles in financial services
and has no connection with the Company or any
of our individual directors. The search specifically
focused on identifying a CFO who would be a
strategic partner to the CEO; helping to set the future
direction of the organisation, enhancing business
performance and delivering increased shareholder
value, as well as managing the financial operations
of the Company. The candidate selection process
focused on both technical expertise and experience
as well as the personal values and behavioural traits
important for success at IPF. Psychometric assessments
were used to further enhance and refine the
selection process.
Following this process, the Committee recommended
to the Board that Gary Thompson be appointed as the
new CFO recognising the particular strengths that he
would bring to this role including his extensive financial
services experience and operational expertise
combined with his commitment to the Group’s purpose
and strategic aims. The Board decided unanimously
to appoint Gary Thompson as CFO and he will join the
Board on 4 April 2022. Gary has been the Finance
Director of Vanquis Bank Limited, the major subsidiary
of Provident Financial plc, since May 2020 and he
has nearly 20 years’ financial services experience spent
in both the accounting and corporate sectors.
He qualified as a Chartered Accountant in 1997 at
PricewaterhouseCoopers and spent 10 years working in
professional practice. He joined Provident Financial plc
in August 2004 where he performed a number of
finance roles, more latterly as Director of Group Finance
and Investor Relations, prior to his appointment
at Vanquis Bank.
Progress against 2021 key objectives
– The appointment of a new CFO.
– The re-election of the directors at the 2021 AGM.
– Review of the Board Diversity Policy.
Key objectives for 2022
– To keep under review the Boardcomposition.
– To continue to review succession planning.
– To continue to support the development of potential
internal candidates and capability assessment.
Annual re-election of directors
As in previous years, Board members will stand for election or
re-election by shareholders at the 2022 AGM. All non-executive
directors are considered independent in accordance with UK
requirements and they continue to make effective contributions,
constructively challenge management and devote sufficient
time to their role. Accordingly, all directors are proposed for
re-election. Further details are contained in the Notice of
Meeting circulated to shareholders.
Responsibilities of the Committee
The primary objectives of the Committee are to support the
Board in:
– regularly reviewing Board composition and the balance
of skills, knowledge, experience and diversity;
– determining when appointments and retirements are
appropriate, and lead any director searches ensuring formal,
rigorous and transparent processes;
– giving full consideration to succession planning and
overseeing the development of a diverse pipeline for
succession at Board and senior management levels;
– ensuring that effective, deliberate and well thought through
succession planning and contingency planning processes
are in place across the Group for all key positions; and
– ensuring the Group continues to have the necessary level of
Board and senior management skills and leadership to deliver
the strategy.
The Committee’s terms of reference continue to be aligned with
the 2018 Corporate Governance Code and can be found on
the Company’s website at: www.ipfin.co.uk
Stuart Sinclair
23 February 2022
Annual Report and Financial Statements 2021 81
Dear Shareholder,
On behalf of the Board, I am pleased to present the Audit and
Risk Committee’s Report for the year ended 31 December 2021.
The year in review
This section of the Annual Report sets out how the Committee
has addressed both routine and emerging issues during the
year. As mentioned elsewhere in this Annual Report, the key
challenge for the business and for the Committee has been
the execution of the phased return to growth plan, introduced
in response to the Covid-19 pandemic, and rebuilding the
business. The Committee closely monitored the consequent
impacts on the Group’s Financial Statements and despite
remaining Covid-19 uncertainty, was pleased to see the delivery
of a strong financial performance, resulting in a return to
sustainable profitability. The Committee also addressed a range
of routine matters, including the management of regulatory
issues, cyber threat and information security and the continuing
development of the compliance framework. The Committee’s
time was also dedicated to considering and then approving
Deloitte LLP’s plan for the 2021 external audit and the 2022
internal audit plan.
The year ahead
The Covid-19 pandemic has had a significant impact on the
sector in which we operate, and we continue to respond to the
challenges and opportunities that this brings. The Committee
fulfils a key role in ensuring the continuing integrity of the
Group’s Financial Statements and the effectiveness of its internal
financial controls and risk management systems. Through the
Committee’s composition, resources and commitment,
it remains well placed to meet those challenges and discharge
its duties in the year ahead.
Composition, role and responsibilities
The Committee consists of independent non-executive
directorsand met six times during the year. Members and
theirattendance at meetings can be found on the left.
The external auditor, Deloitte LLP, the CEO, the CFO, and the
Group Head of Internal Audit are invited to attend all meetings.
Periodically, senior management from across the Group
are invited to present on specific aspects of the business.
The members of the Committee meet on a regular basis outside
of scheduled committee meetings, and the Committee also
meets from time to time with the external auditor, without an
executive director or another member of the senior leadership
team being present.
Audit and Risk
Committee Report
Richard Holmes
Chair of the Audit and Risk Committee
Committee members
Richard Holmes, Chair and Senior Independent
non-executive director
Deborah Davis, Independent non-executive director
Bronwyn Syiek, Independent non-executive director
“I am pleased to present my first report as
Chair of the Audit and Risk Committee.
The Report provides an overview of the
Committee’s activities in the year under
review, during which the continuing
impact of Covid-19 on the Financial
Statements of the Group remained
a key area of focus.”
Directors’ Report continued
The table below shows the number of meetings held
and the directors’ attendance during 2021.
Committee
member
Scheduled
meetings
1
No. of
meetings
attended
% of
meetings
attended
Richard
Holmes
2
6 6 100%
Deborah
Davis
6 6 100%
Bronwyn
Syiek
3
6 5 83%
Richard
Moat
4
2 2 100%
Notes
1. The scheduled meetings that each individual was entitled
to and had the opportunity to attend.
2. Richard Holmes was appointed Chair of the Committee and
Senior Independent non-executive director at the AGM on
29 April 2021.
3. Bronwyn Syiek was unable to attend the December meeting
due to an unavoidable and unforeseen scheduling conflict.
She received the papers for the meeting and had the
opportunity to discuss any issues with the Chair.
4. Richard Moat stepped down as a director from the Board
at the 2021 AGM.
International Personal Finance plc82
Directors’ Report
Functionally, the Group Head of Internal Audit reports directly
to the Chair of the Committee. For routine administrative
matters, the Group Head of Internal Audit’s principal contact
is the CFO (or the CFO’s representative). The Group Head of
Internal Audit operates within a clearly defined remit and has
good linkage to the CEO and to the rest of the organisation.
The Committee supports the Board in fulfilling its responsibilities
in relation to financial reporting, monitoring the integrity of the
Financial Statements and reviewing and challenging any
significant financial reporting issues and judgements in relation
to the Financial Statements. The Committee’s responsibilities are
outlined in its terms of reference which are available on our
website at www.ipfin.co.uk. The Committee’s main
responsibilities are to:
– monitor the Group’s systems of internal control, including
financial, operational and compliance controls and risk
management systems, and to perform an annual review
of their effectiveness;
– monitor the integrity of the Financial Statements of the
Company and the formal announcements relating to the
Company’s financial performance, reviewing the significant
financial reporting judgements contained in them;
– provide advice to the Board on whether the Annual Report
and Financial Statements, taken as a whole, are fair,
balanced and understandable, and provide the information
necessary for shareholders to assess the Group’s position
and performance, business model and strategy;
– make recommendations to the Board, for the Board to put to
shareholders in general meeting, relating to the appointment,
reappointment and removal of the external auditor and to
approve its terms of appointment; review and monitor the
objectivity and independence of the external auditor
and the effectiveness of the external audit process,
taking into consideration relevant UK professional and
regulatory requirements;
– review and approve the internal audit programme for the year
and monitor the effectiveness of the internal audit function in
the delivery of its plan;
– keep under review the work of the Risk Advisory Group,
in particular the Group schedule of key and emerging risks
and consider the principal and emerging risks stated on
pages 54 to 58 facing the Group and their mitigation; and
– review and approve risk appetite proposals for 2022, together
with the mechanisms that will be used for monitoring
adherence to them during the year.
Progress against 2021 key objectives
– Focused on the impact of the Covid-19 pandemic
on the Group’s risk profile.
– Monitored throughout the year the development of
the execution of the return to growth strategy.
– Supported an advisory review of the efficiency
of the risk management process and followed up
on its recommendations.
– Reviewed the normalising of credit policy as the
uncertainty generated by Covid-19 reduced.
– Challenged the management of information
security risk in the continuing hybrid work from
home/office environment.
Key objectives for 2022
– Continue to keep under review during the ongoing
pandemic, the Group’s management of Covid-
generated risks for the business.
– Focus on the changing UK regulatory reporting
requirements in the near future in respect of internal
control frameworks.
– Obtain assurance on the execution of ESG
strategic objectives.
– Monitor the management of ongoing consumer credit
regulatory challenges.
– Continue to monitor cyber security measures and
operational resilience across the Group.
Annual Report and Financial Statements 2021 83
Directors’ Report continued
Activities in 2021
Financial reporting
The Committee reviewed and considered the following areas
in respect of the preparation of the half-year and full-year
Financial Statements:
– the appropriateness of accounting policies used;
– compliance with external and internal financial reporting
standards and policies;
– significant judgements made by management;
– disclosures and presentations; and
– whether the Annual Report and Financial Statements are fair,
balanced and understandable.
In carrying out this review, the Committee considered the
work and recommendations of management and received
reports from the external auditor setting out its view on the
accounting treatments and judgements underpinning the
Financial Statements.
The significant judgements considered by the Committee were:
– Impairment of receivables: the application of IFRS 9 to the
issues arising from Covid-19 had a significant impact on the
impairment charge and the calculation of provisions. The key
areas of judgement in respect of impairment provisions
made against amounts receivable from customers are the
parameters used in the expected loss models, the expected
timing of future cash flows and post-model overlays.
The expected loss models are driven by historic data in respect
of probability of default and exposure at default together with
loss given default for each portfolio. At both the half-year and
full-year results, the Committee considered a paper prepared
by management summarising the work performed to update
parameters used in the expected loss and the cash flow
timing models, and the judgements applied in this process.
This paper also addressed the use of post-model overlays in
instances where the most recent trends in the data were felt to
be more relevant than some of the more historic information.
This was particularly relevant in 2021 due to the use of Covid-19
post-model overlays arising from a full assessment of expected
collection cash flows in order to calculate the expected
impact of the pandemic on the Group’s impairment provisions.
Further detail on the post-model overlays considered is given
in the key sources of estimation uncertainty section of this
Annual Report on page 127. The external auditor performed
audit procedures on impairment provisioning and reported
its findings to the Committee. The Committee concluded
that the receivables impairment provisioning in the
Financial Statements was appropriate.
– Revenue recognition: the judgement in respect of
revenue recognition is the methodology used to calculate the
effective interest rate. The calculation takes into account all
the contractual terms together with the extent and timing of
customer early settlement behaviour. The external auditor
performed procedures to assess management’s calculations
and assumptions used to calculate the effective interest rate
and reported its findings to the Committee. The Committee
concluded that revenue recognition in the Financial
Statements was appropriate.
– Taxation: IPF operates in multiple jurisdictions where the
taxation treatment of transactions is not always certain.
Management is therefore required to make judgements,
based on internal expertise and external advice, on the
methodology to be adopted for accounting for uncertain
tax positions. Key areas of focus in 2021 include judgements
taken relating to accounting for the impact of the European
Commission’s State Aid decision and recent HMRC enquiries
on the Group’s finance company (see note 32). The external
auditor performed procedures to assess management’s
judgement and reported its findings to the Committee.
The Committee concluded that the provision for uncertain
tax risks included in the Financial Statements was appropriate.
– Regulation: the business is subject to regulatory scrutiny in
multiple jurisdictions and at times it is appropriate to make
provisions for potentially adverse rulings by regulatory
authorities. The Board received reports from the Group legal
function outlining the various regulatory and other similar
issues and management’s approach including, Polish early
settlement rebating and claims management charges in
Spain. The Company Secretary attended all meetings of the
Committee, who also had free and full access to the Chief
Legal Officer at all times for any enquiry it may have had.
The Committee concluded that the provisions for potentially
adverse rulings by regulatory authorities and other similar
issues included in the Financial Statements were appropriate.
Internal control and risk management
While the Board is responsible for overseeing the Group’s
systems of internal control, including risk management,
the review of its effectiveness is delegated to the Committee.
The Group recognises the importance of strong systems of
internal control in the achievement of its strategy and objectives.
It is also recognised that any system can provide only
reasonable and not absolute assurance against material
misstatement or loss.
The Committee reviews and approves the Group schedule
of key risks, which describes the principal risks and uncertainties
facing the business. The Board formally considers the schedule
on a six-monthly basis and approves risk appetite annually. The
Committee closely monitors and is supported in its work by the
Risk Advisory Group, which in 2021 comprised the CEO, CFO,
Group Credit Director and Chief Legal Officer, together with
other members of the senior leadership team, UK Executive and
senior management. The Risk Advisory Group meets four times
a year. It reports to the Audit and Risk Committee and considers
the risk assessments and risk registers produced in each country
and updates the Group schedule of key risks. It also considers
emerging risks, areas of specific risk and particular issues.
During the year the Committee supported an advisory review
of the efficiency of the Group’s risk management process,
by a third-party assurance provider, and will closely monitor the
implementation of its recommendations.
The Committee challenged robustly the identification,
assessment and planned mitigation of the principal risks
facingthe business, notably in the light of the continuing
Covid-19 pandemic. See principal risks and uncertainties on
pages 52 to 59.
Closer attention was paid by the Committee specifically
to the management of the threat of cyber security breach due
to our employees continuing to work remotely from home
throughout the year, as a result of further waves of the Covid-19
pandemic, and to the threat of fraud, given the changed
working environment.
International Personal Finance plc84
Directors’ Report
In response to the onset of the Covid-19 pandemic from
April 2020, governments in several of our markets introduced
temporary regulation, including price controls and opt-in and
opt-out debt repayment moratoria. These regulatory changes
were particularly challenging due to the speed with which they
were introduced. Nonetheless, the Committee was pleased
to note that they were addressed swiftly by management which
has a strong track record of responding successfully to significant
regulatory developments in our markets. With the exception of
the debt repayment moratorium in Hungary, all Covid-related
temporary regulations expired by the end of the first half of 2021,
but we continue to monitor the situation closely. Additionally, the
European Union commenced a review of the Consumer Credit
Directive, which we expect will conclude by the end of 2022. Our
Group and European market teams are closely engaged in the
process with a view to achieving an acceptable outcome for
both customers and market players. Details are covered in the
Operational Review on pages 26 to 31 and in our principal risks
and uncertainties on pages 52 to 58.
Additionally, the Committee continued to monitor developments
in respect of the European Commission’s State Aid challenge.
The Committee also received regular updates on associated
matters related to this and ongoing tax audits within the Group,
together with OECD and European Union international tax
initiatives that could potentially impact the Group in the future.
Details of the current status of tax audits are included in our
principal risks and uncertainties on page 55.
The Committee noted that following the Group’s successful
refinancing of the business last year, and in addition to securing
a SEK 450 million bond in 2021, its total debt facilities including
a range of bonds and bank facilities remain diversified and are
appropriate for the reduced scale of the business.
The Committee will continue to assess the impact of these
matters on the business and will monitor management’s
response throughout 2022.
The internal control environments in place to manage the impact
of each risk are monitored by the Committee on a regular basis,
as are the principal actions being taken to mitigate them.
The Committee requests additional presentations on key business
areas as necessary to supplement its understanding of control
environments in place. The areas covered by these in 2021 are
referred to in the ‘Training’ section on page 86.
Through the Committee, the Group internal audit function
provides independent assurance to the Board on the
effectiveness of the systems of internal control. The Committee
provides oversight and direction to the internal audit plan,
which was developed using an inherent risk-based approach,
to ensure that it provides independent assurance over the
integrity of internal controls and the operational governance
framework. In addition, the external auditor communicates
to the Committee any control deficiencies in the internal control
environment it observes as part of its audit procedures.
Deloitte LLP, as part of its audit, did not highlight any control
weaknesses that we as a Committee considered to be material.
Internal audit
Group Internal Audit is an independent assurance function
within the Group providing services to the Committee and all
levels of management. Its remit is to provide objective
assurance over the design and operating effectiveness of the
system of internal control, through a risk-based approach.
It also provides insight, delivers value, protects and helps the
organisation to achieve its priorities. Group Internal Audit
does this by bringing a systematic, disciplined approach to
evaluating and improving the effectiveness of risk management,
control and governance processes.
The Group Head of Internal Audit reports into the Chair of the
Committee with administrative oversight from the CFO (or the
CFO’s representative). Group Internal Audit is composed of
teams across the markets and at the Group head office in the
UK, and has a high level of qualified personnel with a wide range
of professional skills and experience. Co-sourcing agreements
with the largest professional services firms ensure access to
additional specialist skills and an advanced knowledge base.
Group Internal Audit activities are based on a robust
methodology and are subject to ongoing internal quality
assurance reviews to ensure compliance with the standards
of the Institute of Internal Auditors. The function has invested
in several initiatives to continuously improve its effectiveness
including a third-party quality assessment in 2019, which
concluded positively on the effectiveness of the function
and which will be repeated in 2022. Having also invested in the
adoption of new technology, data analytics in particular has
started to provide deeper audit testing capability and will drive
increased insight for Group Internal Audit. The team follows
a continuous improvement plan and measures its operational
effectiveness via a set of key performance indicators which are
reported to each meeting of the Committee, and via individual
post-audit quality assessments by auditees, the results of which
are also reported to the Committee.
The Committee has a permanent agenda item to cover internal
audit-related topics. Prior to the start of each financial year,
and at the half year, having considered the principal areas
of risk within the business, the Committee reviews and approves
a 12-month rolling inherent risk-based internal audit plan,
assesses the adequacy of the available internal audit resources
and reviews the operational initiatives for the continuous
improvement of the function’s effectiveness.
The Committee reviews progress against the approved internal
audit plan and the results of audit activities, with a focus on
unsatisfactory audit results which require timely attention.
During the year, Group Internal Audit focused on the principal
risks which included regulatory compliance, reputation risk,
cyber threat and information security, and the execution
of projects and initiatives of strategic importance.
The Committee monitors progress on the implementation of any
action plans arising on significant audit findings to ensure they
are completed satisfactorily.
The Committee is satisfied that the quality, experience and
expertise of the function are appropriate for the business.
Annual Report and Financial Statements 2021 85
Directors’ Report continued
External auditor effectiveness and independence
The Committee considered the external auditor’s assessment
of the significant risks in the Group’s Financial Statements set out
in its audit plan and approved the scope of the external audit
that addressed these risks. The Committee considered these
risks and the associated work undertaken by the external auditor
when forming its judgement on the Financial Statements.
In line with its established practice, the Committee monitored
the effectiveness and conduct of the external auditor
by reviewing:
– the experience and capabilities of the auditor and the calibre
of the audit firm;
– provision of non-audit services;
– robustness and perceptiveness of the external auditor in its
handling of key accounting and audit judgements;
– the interaction between management and the
external auditor;
– the delivery of its audit work in accordance with the
agreed plan; and
– the quality of its report and communications
to the Committee.
The effectiveness of the external audit process was also
evaluated via a questionnaire which was completed by the
Committee members and attendees, and by business unit
finance directors across the Group. The results of the evaluation
were reviewed and considered by the Committee which
concluded that the external audit process is effective.
In order to confirm its independence and objectivity,
the external auditor issued a formal statement of independence
to the Committee. In addition, the Committee ensured
compliance with the Group’s policy on the use of the external
auditor for non-audit services.
The key requirements of this policy are:
– the external auditor is prohibited from providing certain
services which include: tax services; payroll services; designing
and implementing internal controls or risk management
procedures; legal services; internal audit services; human
resource services; valuation services; or general management
consultancy; and
– the Committee Chair must approve any individual non-audit
service over a specific fee level.
The policy of the Committee in respect of non-audit services
is that the external auditor is only appointed to perform a
non-audit service when doing so would be consistent with both
the requirements and overarching principles of the Financial
Reporting Council’s Revised Ethical Standard (2019), and when
its skills and experience make it the most suitable supplier.
The Committee believes that the Group receives a particular
benefit from certain non-audit services where a detailed
knowledge of its operations is important or where the auditor
has very specific skills and experience. However, other large
accountancy practices are also used to provide services where
appropriate. During the year, the non-audit services carried out
by Deloitte LLP were as follows.
Audit tendering and auditor rotation
The Company’s policy is to undertake a formal tendering
exercise of the audit contract at least once every 10 years.
The Group last went out to tender in 2010. However, the Group
requested and received the approval of the Financial Reporting
Council to defer the tender process for up to two years due
to the challenges associated with the process in the context
of Covid-19 and other competing priorities for management
time arising from the pandemic. The Group plans to hold
a competitive tender process for the 2023 financial year
(at the latest) by which time Deloitte LLP will have been the
external auditor for up to 12 years. The Committee will continue
to consider Deloitte’s performance on an annual basis and
having undertaken its review for 2021, it is satisfied with the
relationship and, in particular, with its independence, objectivity
and effectiveness. Therefore, at its February 2022 meeting,
the Committee recommended to the Board that Deloitte LLP
be reappointed as auditor at the 2022 AGM.
During the year ended 31 December 2021, and up to the date
of this Report, the Company has complied with the provisions
of the Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes
and Audit committee Responsibilities) Order 2014, subject to the
approval received from the Financial Reporting Council to defer
the tender process for up to two years as detailed above.
Training
The Committee, with the Board, undertook a significant amount
of training during 2021. This included presentations on the
following key business areas:
– overview of the Group’s value-added services offering,
including insurance with a focus on financial performance
and regulatory compliance;
– the management of credit risk;
– a deep dive into the management of foreign exchange risks
embedded in the business;
– the results of a mapping and reliability assessment of the
provision of second-line assurance provision in the Group;
– an explanation of political and regulatory developments
in the markets in which we operate;
– an update on tax developments and emerging risks;
– the continuing development of the Group’s
compliance framework;
– a recap by the external auditor on Audit and Risk Committee
responsibilities, focus areas and best practice;
– advice on the potential implications of ESG regulations
for the Group;
– an update on the development of governance,
compliance and control at IPF Digital;
– corporate governance reforms including Audit
and Risk Committee focus areas and best practice; and
– calculation and oversight of revenue and impairment under
IFRS 9 in the continuing Covid-19 environment.
This training was complemented by discussions directly with
management teams in connection with specific focus areas
in the Group.
Non-audit services carried out by Deloitte LLP in 2021 Fee £’000
Other assurance services 100
International Personal Finance plc86
Directors’ Report
Committee effectiveness
The Committee’s performance was reviewed as part of the
external Board evaluation review as discussed on page 72.
Feedback on the frequency of meetings, volume of business
handled, the conduct of meetings and the provision of training
and access to external advice was positive. The Committee is
considered to function well, with structured meetings and good
engagement and challenge provided across its remit by all its
members. It continues to be regarded as thorough and
effective, and to provide the Board with a high level of
assurance that audit matters are dealt with appropriately.
Review of the effectiveness of the internal control and risk
management systems
On behalf of the Board, the Committee has monitored the
Group’s internal control and risk management systems,
and its processes for managing principal and emerging risks
throughout 2021 and has performed an assessment of their
effectiveness. In addition, the Committee, where appropriate,
ensures that necessary actions have been or are being taken
to remedy identified failings or weaknesses in the internal control
framework. These processes were in place throughout 2021 and
up to 23 February 2022.
Annual Report and Financial Statements
The Committee has reviewed and considered the Annual Report
and Financial Statements, in line with other information the
Committee has considered throughout the course of the year.
It concluded, and recommended to the Board, that the
Annual Report and Financial Statements 2021, taken as a whole,
are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
Richard Holmes
23 February 2022
Annual Report and Financial Statements 2021 87
Dear Shareholder,
I am pleased to present the Technology Committee’s report
which provides an overview of how the Committee discharged
its responsibilities during the year ended 31 December 2021.
Accelerated by the pandemic, our digital transformation
programme lies at the heart of our strategy to adapt the
business to meet the future needs of consumers and create
a firm foundation for longer-term growth.We are focused on
integrating digital technology to enhance the way we interact
with our customers and provide an improved customer journey,
and to make the Group more efficient. This change agenda
can be assessed through three different lenses:
– regulatory-driven change, which is unpredictable and has
significant business impact if not addressed and prioritised;
– migration to next-generation platforms that mitigate current
technology debt or end of life risk; and
– business-driven change which reflects the changes requested
that will enable improvements or enhance performance.
This year saw a continued focus on delivery through close
partnership between IT and its internal customers, enabling
the business to increase the pace of change and innovation,
and enhance efficiencies through collaboration, simplification
and standardisation to achieve the desired business outcomes
for the Group.
Role of the Committee
The Committee assists the Board in overseeing the role of
technology in executing the business strategy, assuring
operational performance and risk, and assessing future
technology developments and their implications for the Group.
The Committee consists of two independent non-executive
directors and it met four times during the year. The attendance
of members at each meeting is set out on the table on the left.
The CEO, CFO and Group IT Director are invited to attend all
meetings. The detailed responsibilities of the Committee are set
out in its terms of reference, which are available on the Group’s
website at www.ipfin.co.uk.
IT Strategy
Digitisation remains a key focus for the business. In 2021,
the Committee oversaw the continued development and
implementation of the Group’s cloud strategy to improve the
experience of both our customers and colleagues. Phase one
of the cloud migration project was successfully delivered on time
and under budget with no disruption to the business. It was
a major milestone in the home credit cloud transformation
strategy, allowing the business to have a single secure data
centre footprint in the UK to enhance technical resilience and
stability. This enables the Group to leverage digital technologies
to enhance the business with increased agility, reduced costs
and an improved customer strategy. This project exemplified
Technology
Committee Report
John Mangelaars
Chair of the Technology Committee
Committee members
John Mangelaars, Chair and independent
non-executive director
Bronwyn Syiek, Independent non-executive director
“Accelerated by the pandemic,
our digital transformation programme
lies at the heart of our strategy to adapt
the business to meet the future needs of
consumers and create a firm foundation
for longer-term growth.”
Directors’ Report continued
The table below shows the number of meetings held
and the directors’ attendance during 2021.
Committee
member
Scheduled
meetings
1
No. of
meetings
attended
% of
meetings
attended
John
Mangelaars
4 4 100%
Richard
2
Moat
2 2 100%
Cathryn
3
Riley
2 2 100%
Bronwyn
Syiek
4 4 100%
Notes
1. The scheduled meetings that each individual was entitled
to and had the opportunity to attend.
2. Richard Moat stepped down as a director of the Board at the
2021 AGM.
3. Cathryn Riley stepped down as a director of the Board at the
2021 AGM.
International Personal Finance plc88
Directors’ Report
strong partnership and collaboration and was assisted by the
mobilisation of the Group’s new Cloud Centre of Excellence,
an important step in harnessing the opportunities that cloud
technology presents.
The Committee received regular updates on new and ongoing
digitisation projects and provided challenge and support where
necessary. Good progress was made in the European home
credit division where investment was made in a customer service
centre modernisation project to invest in next-generation
customer relationship management (CRM) and telephony
systems. The aim is to have a single, cloud-based connectivity
tool for our European home credit customer service centres
supporting sales and services, collections and debt recovery.
This will include an omni-channel platform offering different
methods of communicating with our customers. Within IPF Digital,
the redesign and development of mobile wallet to attract new
customer segments and improve retention was successfully
delivered with its roll out in Latvia. The focus is to ensure that the
business has a scalable digital platform for the future as well
as ensuring that customer data remains safe and secure.
Running alongside these projects is the ongoing focus on the
NextGen Digital Transformation to incrementally improve the
Group’s technology, organisation, processes and data while
systematically removing blockers and dependencies to enable
the operational capabilities of the business to create value.
Cyber security
The senior leadership team understands its enhanced
responsibility for data security whilst operating in the financial
sector and an internal team of dedicated professionals is
focused on all aspects of data security. The Group maintains
records of information security risks which include evidence of
alltechnology and people risks related to data security.
Eachriskhas an individual assessment and mitigation plan.
Aspart of the Group’s governance processes, risk owners
regularly report on progress to the Group IT Director. The
Committee reviewed the Group’s approach to cyber security
risks and the actions taken to manage these.
Our business provides a policy-based risk analysis and applies
personal data security measures adequate to the risk, including
reference to ISO 27001 as good practice in the information
security management system.
Focus for 2022
The Committee will ensure that firm foundations are in place
to ensure the IT function is well prepared and is a trusted partner
of the business. The business is evolving its customer experience
to create a seamless, integrated journey and leveraging digital
technology to serve customers more effectively and efficiently.
The Committee will continue to oversee, challenge and support
the IT function in its delivery of meaningful enhancements
to improve the experience of customers and colleagues as the
Group progressively modernises its IT and data architecture,
and improves its processes.
Progress against 2021 key objectives
– Successfully delivered the migration of our UK data
centre to the cloud-based Amazon Web Services
creating a single secure datacentre, streamlining IT
processes in European home credit while providing
savings and efficiencies.
– Commenced modernisation of the European home
credit telephony and CRM to improve customer
service and make sales and collections activities
more efficient.
– Introduced online identity verification and customer
e-contracts, significantly reducing the speed of
lending decisions and delivery of home credit loans.
– Redeveloped and commenced the deployment
of mobile wallet in Latvia to attract new customer
segments and improve retention.
– Completed the roll out of MyCollections and MyTeam
in Mexico – now supporting 18,000 agents with
digital collections.
Key objectives for 2022
– Continue with phase two of the cloud
migration strategy.
– Continue the modernisation of European home
credit’s telephony and CRM systems to generate
growth opportunities and serve our customers more
efficiently and effectively.
– Further roll out of mobile wallet to enable customers
to benefit from end-to-end digital credit, payment and
value-added services.
– Progress the transformation of the IT function.
Fintech award win
IPF, together with IT partner, HCL,
won the FStech “Digital Transformation
Project of the Year” award in
recognition of our OneDigital project,
which has created a single, end-to-end digital
lending platform across Europe. This allows customers
access to finance in a frictionless customer journey
and was recognised for bringing a human touch to
technological change. The platform extends our
products to potential new consumer segments and
offers digital repayment options when customers are
unable to meet with their customer representative.
John Mangelaars
23 February 2022
Annual Report and Financial Statements 2021 89
Directors’ Remuneration Report
Directors’
Remuneration
Report
Deborah Davis
Chair of the Remuneration Committee
Committee Members
Deborah Davis, Chair and independent
non-executive director
Richard Holmes, Independent
non-executive director
Stuart Sinclair, Chair of the Board
The table below shows the number of meetings held
and the directors’ attendance during 2021.
Committee
member
Scheduled
meetings
1
No. of
meetings
attended
% of
meetings
attended
Deborah
Davis
4 4 100
Richard
Holmes
2
1 1 100
Stuart
Sinclair
4 4 100
Cathryn
Riley
3
3 3 100
Richard
Moat
4
3 3 100
Notes
1. The scheduled meetings that each individual was entitled
to and had the opportunity to attend.
2. Richard Holmes was appointed to the Committee following
the 2021 AGM.
3. Cathryn Riley stepped down as a director from the Board at
the 2021 AGM.
4. Richard Moat stepped down as a director from the Board at
the 2021 AGM.
Dear Shareholder,
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ended 31 December 2021,
my first as Chair of the Remuneration Committee. The report
is divided into two sections:
– a summary of our Director’s Remuneration Policy (the 2020
Policy), the full detail of which can be found on pages 88-96
of the 2019 Annual Report and Financial Statements; and
– the Annual Remuneration Report, providing detail of
amounts paid during the reporting year, including incentive
outcomes and the planned implementation of our
Remuneration Policy in 2022.
The Committee’s principal goals in 2021 were:
– to maintain a clear view of macroeconomic conditions
arising from the pandemic and their impact on the business
and market remuneration practice; and
– to ensure that executive pay decisions were made with
a clear understanding of the overall performance of the
business, its evolving strategy, governance developments
and the experience of our stakeholders, including our
employees and shareholders.
While it is clear that potential headwinds remain in all of our
markets, the achievements of the leadership team in 2021
have been considerable.
Following the proportionate, responsible and highly effective
action taken to protect our people, prioritise our customers
and safeguard the long-term future of the business in the
face of the Covid-19 pandemic in 2020, the business has
made considerable strides in 2021 towards rebuilding and
delivering longer-term growth. As detailed elsewhere in the
Annual Report, this included:
– successfully executing against the phased return to growth
plan to rebuild the business (though a degree of Covid-19
uncertainty remains), as evidenced by a 33% increase in
credit issued year on year; a 13% increase in closing
customer receivables and a return to customer growth;
– delivering a strong financial performance in 2021, including
a return to profit of £67.7 million; and
– the resumption of dividend payments to our shareholders,
with a full-year dividend of 8.0 pence per share.
The Committee has noted the exceptional commitment
of management and teams across the Company in delivering
these results and believes the remuneration outcomes as
outlined in this Report are a fair reflection of Company and
individual performance, and align with the experience of all
our stakeholders.
“The Company delivered a strong return
to profitability and growth, and the
Committee remains committed to
maintaining prudent and appropriate
remuneration that aligns with our wider
purpose and values.”
Directors’ Remuneration Report
International Personal Finance plc90
Directors’ Report
The Committee will be reviewing the Remuneration Policy in
2022, ahead of a shareholder vote in 2023. The review, which
will be comprehensive in nature and incorporate feedback
from our major shareholders, will pay particular attention to the
developing ESG landscape to ensure that, in addition to key
financial metrics, management focuses on the material
sustainability matters that are of relevance to our stakeholders.
In the meantime, no Policy changes are anticipated in 2022
and our overall remuneration principles are unchanged:
simplicity and transparency; alignment with business strategy;
and a strong relationship with business performance.
Overview
Role and composition
The Committee comprises two independent non-executive
directors and the Chair of the Board. Full biographical details
can be found on pages 62 to 63. The Committee met four
times during the year, with attendance detailed on page 90.
The Committee’s responsibilities include:
– approving the remuneration policy for executive
directorsand the senior leadership team, and making
recommendations to the Board. The Committee takes
account of the remuneration of the wider workforce when
setting policy for, and making remuneration decisions
in respect of, the executive directors;
– determining appropriate performance targets and
incentiveoutcomes; and
– engaging with shareholders on matters relating
to remuneration.
The Committee’s terms of reference are available via the
Investors section of our website at www.ipfin.co.uk.
2021 focus and progress
The Committee’s work focused on the following in 2021:
– maintaining a clear view of macroeconomic conditions
arising from the Covid-19 pandemic and their impact on
market practice;
– likewise, maintaining a keen interest in the steps taken
by the leadership team to manage and mitigate the impact
of the pandemic on the wider workforce, as detailed in the
employee and customer representative context section
of this Report opposite;
– ensuring effective implementation of the 2020 Policy;
– considering the remuneration package of the incoming
Chief Financial Officer, which is in line with the 2020 Policy
and detailed on page 103; and
– considering the exit terms of the outgoing Chief Financial
Officer, as detailed on page 92.
Business context
The successful implementation of our rebuild strategy
to return the business to full-year profitability and long-term
growth delivered a substantial improvement in our financial
performance. Group profit before tax was £67.7 million, an
increase of £108.4 million year on year, with all three business
divisions profitable and contributing to this improvement.
This incredibly strong result was driven by the successful
execution of our rebuild strategy focused on serving customers
to an exceptionally high standard. Lower impairment charges
generated by strong collections and higher quality lending,
together with tight control of costs, more than offset
a reduction in revenue resulting from the smaller receivables
portfolio year on year.
Strong Group collections performance was maintained
throughout the year, and we saw growing consumer appetite
for credit. This resulted in a strong increase in credit issued of
33% year on year; it also supported our goal to rebuild
customer numbers, the result of which has been steady growth
over H2 and a year on year increase of 2.7% to over 1.7 million.
The closing receivables portfolio increased by over 13% (at
CER), which contributed to improved revenue growth in the
second half of the year.
Cost control remained tight following the rightsizing
exerciseundertaken in 2020, with the resulting costs being
flatyear on year.
Shareholder context
Strong performance led to the decision to reintroduce
dividend payments in 2021 (final dividend of 8.0 pence per
share).
Employee and customer representative context
The Committee continued to take into account wider
workforce remuneration and related policies in making its
remuneration decisions.
Notwithstanding the undoubted success of the business
in returning to profit in H1, pandemic-related challenges
remained throughout the year. For a second successive year,
no general salary increases were awarded in 2021 to
employees across the Group. However, the benefits derived
from maintaining a stable customer representative workforce,
resulting from our decision to protect their earnings in 2020
in response to the Covid-19 pandemic, were clear.
The business has worked hard to reward our employees and
customer representatives and make IPF a better place to work,
and this is reflected in:
– ongoing activities under the Company’s employee and
customer representative Care Plan, which was established
in 2020 as part of the initial response to Covid-19;
– significant and ongoing work to develop and
implement new value propositions for our employees
and customer representatives;
– an extremely positive response to our Global People Survey;
– initiatives to support the diversity of the business,
includingour inaugural Women’s Conference,
as detailed on page 42; and
– the launch of our first ever Learning Festival (see page 41).
Finally, and in view of the Company’s strong recovery,
the Committee has been pleased to note a commitment
to award general salary increases in all markets in 2022.
Annual Report and Financial Statements 2021 91
Key remuneration decisions made in 2021
Remuneration for the outgoing CFO
Justin Lockwood resigned as Chief Financial Officer and
stepped down from the Board on 23 July 2021. The Committee
took into account both contractual commitments and the
Remuneration Policy in determining Justin’s remuneration on
cessation as well as his excellent performance and diligence
during his 11 years with IPF, and his outstanding contribution
to the Company’s response to the impact of Covid-19.
Consequently, the Committee decided that Justin would be
treated as a Good Leaver and remain entitled (in accordance
with his service agreement) to receive a 2021 annual bonus
pro-rated to reflect time served during the year and paid
wholly in cash. Awards made under the 2019 and 2021 PSP
shall be pro-rated to his date of leaving (his 2020 PSP award
having already been voluntarily surrendered) and shall vest
subject to the original performance conditions being met
at the normal time. The Committee also determined that the
post-cessation shareholding requirement introduced as part
of 2020 Policy would apply to any shares acquired after the
date on which the 2020 Policy was introduced.
Other key decisions made in respect of 2021
– No base salary increases in 2021 for our Chief
ExecutiveOfficer or outgoing Chief Financial Officer
prior to his departure;
– PSP awards of 160% of base salary (in line with Policy) made
to the executive directors, following their decision in 2020
to voluntarily surrender awards made that year;
– legacy 2019 PSP awards that have vested at 0% reflecting
negative TSR performance over the life of the scheme
and the impact of Covid-19 on EPS and net revenue growth
(see page 99);
– approval of the remuneration package for the incoming
Chief Financial Officer, which is in line with the 2020 Policy
and is disclosed on page 103 of this Report.
Note also that no decision was required by the Committee
in respect of annual bonus outcomes for 2020 in light of the
senior leadership team voluntarily opting to cancel the
2020 annual bonus plan due to the Covid-19 pandemic.
As detailed on page 96, discretion was exercised in respect of
annual bonus plan payouts for the Chief Executive Officer and
outgoing Chief Financial Officer, to acknowledge the
significant operational out performance on collections that
resulted in approximately £67 million excess cash being
collected, which in turn increased cash reserves and reduced
impairment and receivables. The Committee was satisfied that
the adjustment to the formulaic net receivables bonus
outcome was fully merited in light of the Company’s excellent
overall performance. No performance conditions or targets for
in-flight long-term incentives have been adjusted.
Implementation of Remuneration Policy in 2022
The Committee has approved:
– an increase in base salary of 5% in 2022 for our Chief
Executive Officer in line with the wider UK workforce,
with salary increasing to £559,650, following no increase
since 2019 and no increase in four of the previous six years;
– financial year 2021 bonus awards of 98% of maximum for the
Chief Executive Officer and 98% of maximum, pro-rata) for
the outgoing Chief Financial Officer (see pages 96
to 99) reflecting performance against financial metrics
and personal objectives;
– 2022 Performance Share Plan awards of 190% of salary
for the Chief Executive Officer and 120% for the incoming
Chief Financial Officer, to support a focus on generation
of shareholder value as the Company continues to rebuild
and grow in line with our strategy. The award of 190% of
salary for the Chief Executive Officer reflects his outstanding
contribution, over and above what would normally be
expected, in very difficult circumstances. In particular, the
Committee has noted the V-shaped recovery of the business
following the impact of Covid-19; the fact that he has
covered in a highly effective way in the absence of a Chief
Financial Officer during H2 2021 and Q1 2022; that he
voluntarily surrendered his PSP award in 2020 in order to
support the business during the pandemic, and also
volunteered the cancellation of the 2020 annual bonus; and
his strong commitment to protecting the wider workforce
throughout the pandemic, the benefits of which are now
seen in highly stable and motivated employee and
customer representative cohorts.
Other remuneration priorities for the Committee
in 2022
In addition to continuing to monitor broader market and
governance trends, the Committee will be reviewing the
Remuneration Policy in 2022, ahead of a shareholder vote
in 2023.
The Committee will seek to incorporate feedback on our
current remuneration structure and implementation of the
Policy from our major shareholders and will pay particular
attention to the developing ESG landscape to ensure that,
in addition to key financial metrics, management focuses on
the material sustainability matters that are of relevance to our
strategy and our stakeholders.
In conclusion, the Committee is satisfied that all decisions have
been made fairly and equitably, and with the interests of you,
our shareholders, at the forefront of our thinking.
As Chair of the Committee I am completely committed
to maintaining an open dialogue with you and look forward
to reporting on further positive progress in 2022.
Deborah Davis
23 February 2022
Directors’ Remuneration Report continued
International Personal Finance plc92
Directors’ Report
Remuneration at a glance
Our remuneration framework is intended to strike an appropriate balance between fixed and variable pay components,
and to provide a clear link between pay and our key strategic priorities. Executive director and senior leadership remuneration are
structured so that individuals are rewarded only for the successful delivery of the key strategic priorities of the Company over both
the short and long term.
Our remuneration outcomes 2021
Base pay award forourCEO 5%
Base pay award for our CFO
1
N/A
Bonus as % of maximum for CEO 98%
Bonus as % of maximum for CFO
2
98%
Performance Share Plan awards for CEO 190%
Performance Share Plan awards for CFO
3
120%
Legacy 2019 Performance Share Plan vested at 0%
1. No increase will be given in 2022 to the incoming CFO.
2. Justin Lockwood remained eligible for an annual bonus payment, paid pro-rata to his date of leaving.
3. An award of 120% will be made to the incoming CFO (pro-rata of the normal award level).
* At constant exchange rates
Our return to growth plan Our strategy
Rebuild the business
– Continue performance trajectory
– Be financially strong
– Enable longer-term growth
Longer-term growth
– Deliver excellent service to our loyal customers
– Attract the next generation of customers
– Live our purpose
2021
2022+ Underway
Our 2020 Remuneration Policy at a glance
Our Remuneration Policy Links to strategy Key features
2021
2022
2023
2024
2025
2026
Salary,
pension
and benefits
To attract and retain talent capable
of delivering the Group’sstrategy.
Normally reviewed annually. Increases take into account
salary reviews across the Group and increases paid
to UK employees.
Annual
bonus
Deferral of 50%
To motivate and reward sustainable
Group profit before tax and
the achievement of specific
personal objectives linked to the
Company’s strategy.
On-target performance delivers 50% of maximum.
Maximum opportunity 130% of base. 50% cash and
50% deferred for three years. Typically, 80% based on
financial measures and 20% on personal objectives
linked to strategy.
Malus on deferral
Clawback
on cash
Long-term
incentive
plan
Vest period
To motivate and reward longer-term
performance, and support
shareholder alignment through
incentivising absolute shareholder
value creation.
Award normally equivalent to 160% ofbase salary at time
of grant (maximum 250%). Three-year performance period
with three weighted metrics. 25% vesting at threshold;
straight line to maximum. Two-year post-vesting holding
period. Two-year post-cessation shareholding requirement.
2-year holding
Clawback period
2021 performance
Profit before tax
£67.7m
+£108.4m
Group net receivables growth
£47.7m
+13.4%*
Earnings per share
18.8p
+47.7p
Revenue less impairment
£492.5m
+24.7%*
Annual Report and Financial Statements 2021 93
Directors’ Remuneration Policy
The Remuneration Policy was explained in detail on pages 88-96 of the 2019 Annual Report and Financial Statements. A copy
of the Report can be found on our website via the Investors section at www.ipfin.co.uk, together with all notes to the policy,
which are unchanged other than as detailed below. The Policy was approved by shareholders at the 2020 AGM and took effect
from 30 April 2020.
Key aspects of the Policy are summarised below.
Element Operation Maximum opportunity
Metrics, weightings
and period
Base salary
– Normally reviewed annually.
– Set considering role, experience, responsibility
and performance of both the individual andthe
Company; also taking intoaccount market
conditions and thesalaries for comparable roles
in similarcompanies.
– Takes into account salary
reviews across the Group;
usually in line with increases
awarded to UK employees.
– None. Overall performance
of the individual considered by
the Committee when setting
and reviewing salaries annually.
Pension
– Company operates a stakeholder scheme; at the
discretion of the Committee, this may be paid
as a cash allowance.
– Company contribution set
at the most common rate
for the wider workforce,
currently 12%, for new-hire
executive directors.
– None.
Benefits
– Company pays the cost of providing benefits
on a monthly, annual or one-off basis.
– All benefits are non-pensionable.
– Standard benefits package
includes: life assurance
of 4x salary; car allowance;
long-term disability cover;
private medical cover for
executive director and
immediate family; annual
medical; and ability to
participate in the IPF Save
As You Earn Plan (SAYE).
– None.
Annual
bonus
– Measures and targets set annually; payout levels
determined by the Committee after the year end,
based on performance.
– 50% of total amount deferred for three years in
Company shares through the Deferred Share
Plan(DSP).
– Remaining 50% paid in cash. Provisions for clawback
adjustments on the occurrence of certain events.
– On target bonus:
50% of maximum.
– Maximum opportunity:
130% of base salary.
– Performance measured
over the financial year
and assessed using financial
and strategic measures
(typically 80%) and personal
objectives (typically 20%)
linked to achievement
of Company strategy.
– Committee will set a minimum
threshold profit target
before any other metrics
are assessed.
Deferred
Share Plan
(DSP)
– 50% of total bonus amount subject to compulsory
deferral for three years in Company shares without
any matching.
– DSP has provision for malus and clawback
adjustments on the occurrence of certain events.
– 50% of the total bonus amount
received during the year.
– None.
Performance
Share Plan
(PSP)
– Annual grant of awards, made generally as nil-cost
options over a specific number of shares subject
to meeting specified performance targets.
– Committee has discretion to decide whether,
and to what extent, targets have been met.
– Executive directors required to hold shares acquired
on vesting (net of any shares that may need to be
sold to cover taxes) for a two-year period starting on
the date of vesting.
– Provisions for malus and clawback adjustments
on the occurrence of certain events.
– In normal circumstances,
award levels for executive
directors equivalent to 160%
of base salary at the time
of grant.
– Rules permit annual grants
up to individual limit of 250%.
– 25% of award vests at
threshold performance,
with straight-line vesting
to maximum.
– Service and performance
conditions must be met over
three-year periods.
– Performance assessed against
three independently measured
metrics: 1/2 absolute TSR
performance; 1/4 cumulative
EPS growth; and 1/4 growth
in revenue less impairment.
– Committee will compare
the Company’s absolute TSR
performance with comparator
groups considered appropriate
at point of vesting.
– Targets set by the Committee
and described in the annual
Directors’ Remuneration Report
of the relevant year.
Directors’ Remuneration Report continued
International Personal Finance plc94
Directors’ Report
Element Operation Maximum opportunity
Metrics, weightings
and period
Shareholding
requirement
– Executive directors expected to acquire
a beneficial shareholding over time.
– 50% of share awards vesting under Company’s
share incentive plans (net of exercise costs, income
tax and social security contributions) must be
retained until the shareholding requirement is met.
– Current shareholding
requirement for
executive directors
is 200% of base salary.
– None.
Post-
cessation
shareholding
– Post-cessation shareholding policy set at
1x the shareholding requirement or the number of
shares actually held at leaving, whichever is lower,
for two years.
– Not applicable. – Two-year post-cessation
holding period.
Annual Directors’ Remuneration Report 2021
Single figure of total remuneration (audited information)
The following table sets out the single figure of total remuneration for directors for the financial years ended 2020 and 2021.
A.
Salary/Fees
£’000
B.
Benefits
£’000
C.
Bonus
1
£’000
D.
LTIP
£’000
E.
Pension
£’000
Total £’000
(A, B, C, D, E)
Total fixed
remuneration
£’000
(A, B, E)
Total variable
remuneration
£’000
(C, D)
2021 2020 2021 2020 2021 2020 2021
2
2020
3
2021 2020 2021 2020 2021 2020 2021 2020
Executive directors
Gerard Ryan 533 533 26 25 681 – 19 25 94 94 1,353 677 653 652 700 25
Justin Lockwood
4
172 305 12 22 220 – 10 13 24 41 438 381 208 368 230 13
Non-executive
directors
Deborah Davis
5
62 55 – – – – – – – – 62 55 62 55 – –
Richard Holmes
6
79 44 – – – – – – – – 79 44 79 44 – –
John Mangelaars
7
65 65 – – – – – – – – 65 65 65 65 – –
Richard Moat
8
30 90 – – – – – – – – 30 90 30 90 – –
Cathryn Riley
9
21 65 – – – – – – – – 21 65 21 65 – –
Stuart Sinclair
10
200 141 – – – – – – – – 200 141 200 141 – –
Bronwyn Syiek 55 55 – – – – – – – – 55 55 55 55 – –
1. Bonus payable in respect of the financial year including any deferred element at face value at date of award. No annual bonus plan was operated in 2020.
2. The value of awards included in the table for 2021 relates to the PSP award granted in 2019, the performance period for which was the three financial years
ending 31 December 2021 and did not vest. This value also includes the anticipated value of dividend equivalents that will be payable in 2022, relating to
the 2019 Deferred Share Plan from grant to date of vesting.
3. The value of awards included in the table for 2020 has been revised to reflect the actual value of awards at date of vesting and any dividend equivalents
received in 2021 when the awards became exercisable.
4. The amounts shown for 2021 reflect that Justin Lockwood resigned from the Board and Company effective from 23 July 2021.
5. Deborah Davis took over as Chair of the Remuneration Committee following the 2021 AGM. In addition to her base fee of £55,000 she is paid a fee
of £10,000 per annum (pro-rata) for this additional responsibility.
6. Richard Holmes was appointed Senior Independent Director and Chair of the Audit and Risk Committee following the 2021 AGM. In addition to his base
fee of £55,000 he was paid a fee of £20,000 (pro-rata) as Senior Independent Director and £15,000 (pro-rata) as Chair of the Audit and Risk Committee.
7. John Mangelaars chaired the Technology Committee during 2021. In addition to his base fee of £55,000, he was paid a fee of £10,000 per annum for his
additional responsibility as Chair of the Technology Committee.
8. Richard Moat was Senior Independent Director until he stepped down at the conclusion of the 2021 AGM. His fee for 2021 was paid pro rata.
9. Cathryn Riley was Chair of the Remuneration Committee until she stepped down at the conclusion of the 2021 AGM. Her fee for 2021 was paid pro rata.
10. Stuart Sinclair is Chair of the Board and also Chair of the Nomination Committee; no additional fee is paid for his work as Chair of the Nomination Committee.
Annual Report and Financial Statements 2021 95
Additional disclosures for Single Figure of Total Remuneration
Base salary
The base salary of the Chief Executive Officer remained at £533,000, following no increase in 2021. The base salary of the
Chief Financial Officer also remained unchanged at £305,000 until his departure in July 2021.
Benefits
The benefits provided to the executive directors in 2021 included: private healthcare, life assurance, annual medical, long-term
disability cover, and a cash allowance in lieu of a company car.
Determination of 2021 annual bonus
The maximum bonus opportunity for the Chief Executive Officer and, prior to his departure, the Chief Financial Officer was
130% of salary (50% of maximum for on-target performance). During 2021, a balanced scorecard approach was used to ascertain
annual bonus outcomes whereby:
– 60% of total bonus opportunity was subject to achieving the profit before tax (PBT) element;
– a further 20% was contingent on Net Receivables Growth (NRG); and
– the remaining 20% of the plan was subject to the achievement of personal objectives and conditional upon achievement of the
financial measures.
Qualifiers for the 2021 annual bonus were:
– for any bonus to be payable, the Group must first achieve the PBT qualifying figure;
– once the Group PBT qualifier is achieved, the NRG metric may pay providing the qualifier for that element is achieved; but
– for the PBT element to pay the Group PBT threshold must be achieved.
Group bonus targets
Group bonus targets were set considering the Company’s operating budget. Targets were designed to be stretching in support
of the Company’s strategic objectives to rebuild and grow, and to focus on metrics and personal targets that would deliver in line
with this strategy, as well as stretching and motivating participants. Bonus targets for the executive directors for 2021 were
as follows:
Metric
Weighting
in Scheme Qualifier Threshold Target Stretch Achievement
Bonus
Payment %
Financial
1
Group PBT 60% £33.8m £35.6m £42.6m £47.8m £67.7m 78.0
Group Net Receivables Growth 20% 12.7% 14.1% 17.2% 19.5% 18.7% 23.8
1. Straight line between each point.
Bonus targets were adjusted for constant exchange rates in line with actual performance.
The Group delivered a strong return to profitability in 2021, with an increase in profit before tax of £108.4 million. Excellent
execution of the agreed strategy delivered a consistently strong collections performance and exceptionally low impairment,
coupled with the maintenance of strong cost control following the Group’s rightsizing in 2020. All business divisions were profitable
in the year. This resulted in the achievement of the stretch profit before tax target and a bonus of 78% for each of the executive
directors against this metric.
In respect of performance against target for Group net receivables, the committee exercised its discretion to amend the outcome
by 5% to acknowledge the significant operational outperformance on collections that resulted in approximately £67 million excess
cash being collected, which increased cash reserves and reduced impairment and receivables. This resulted in an increase in the
bonus award of 23.8ppt against this metric.
Consequently, the bonus payment in respect of financial elements totalled 101.8%.
Personal objectives
The tables on pages 97 and 98 explain the objectives that were set for each executive director in 2021 and achievement
against them.
Directors’ Remuneration Report continued
International Personal Finance plc96
Directors’ Report
Gerard Ryan – Chief Executive Officer
Category Objective Weighting Results Achievement
People and structure
– Successfully hire a new
Group CFO and effectively
manage the period prior to
the CFO’s commencement.
20%
– Gary Thompson appointed and will join
in April 2022 following an exhaustive
and highly effective search process to
find a candidate with the best fit for the
Company. Extremely effective oversight
of the Finance function and leadership
team in the interim.
– Further strengthen the leadership
team by the appointment and
deployment of a Strategic
Partnerships Director.
– Appointment made as planned in
Q1 2021, together with an appropriately
skilled team.
– Engage and deploy two new
digitally enabled channels
through the strategic
partnerships strategy.
– Total partnerships plan developed
and targets identified, of which two
were signed and launched in Romania
and Mexico in support of the strategic
development of retail point-of-sale
finance options.
– Review the succession pipeline
to ensure a seamless transition
following the re-deployment of
the IPF Digital Managing Director.
– Succession pipeline successfully
delivered a number of key internal
appointments, including to IPF Digital
and Strategic Partnerships.
Purpose and culture
– Lead and embed a new and
sustainable purpose for the IPF
Group, ensuring that progress
can be clearly highlighted and
explained to shareholders.
20%
– Significant progress made to define
and embed purpose across the
Company. Clear support from external
stakeholders, including NGOs,
and a clear plan in place to measure
and report on progress, including
engagement with shareholders
in Q1 2022.
Business performance
and Covid-19
– Demonstrate a strong and
responsible rebuild of the
organisation as it continues
to operate through the
Covid-19 pandemic.
20%
– Delivery against strategy has resulted
in a V-shaped recovery following the
impact of the pandemic in 2020.
– Maintain health and safety
of our employees and customer
representatives as our number
one priority.
– The Company’s Care Programme has
consistently supported health, safety
and wellbeing. This is reflected in key
people metrics, including the Global
People Survey.
Technology
enablement
– Lead the next phase of improved
customer choice and experience
through the application of smart
technology solutions and use
of data.
20%
– Several key projects successfully
launched in 2021, including the roll out
of the mobile wallet platform in the
Baltics; delivery of a more seamless
customer experience in Romania,
and the launch of the ProviGo app
in Poland.
– Position the business in readiness
for the test and launch of a credit
card offering in Poland.
– Ground work largely complete in
readiness for the launch of a credit
card offering in Poland, including
application for the appropriate licence.
Diversity and inclusion
– Personally lead the international
drive to support women in IPF,
leading to greater throughput
of female talent.
20%
– Very good progress made, with the
proportion of senior female leadership
increasing year on year; significant
female appointments in Partnerships,
Advanced Analytics and Product and
Channel Development; and the first
Global Women’s Conference.
Additional one-to-one and structured
development is now offered to many
high-potential female employees
Criteria met
Criteria partially met
Criteria not met
Annual Report and Financial Statements 2021 97
Justin Lockwood – Chief Financial Officer (to 23 July 2021)
Category Objective Weighting Results Achievement
Support top line
performance
– Implement processes
to identify profitable growth
opportunities within
Covid-related constraints.
25%
– Processes implemented to deliver
continued improvements in collections
effectiveness and, in turn, seek out
growth opportunities by dynamically
managing profitability of lending on
a cohort-by-cohort basis, based on
emerging credit performance. This laid
the foundations for delivering net
receivables growth of 13.4% (at CER)
whilst managing continued changes in
Covid-related regulations in Hungary.
Deliver a sustainable
financial result
– Manage balance sheet risk
to optimise ability to grow while
maintaining the need for caution
during the pandemic.
25%
– Processes and controls implemented
to closely monitor and drive the recovery
of the business from the Covid-related
reduction in scale in 2020. This included
delivering impairment as a percentage
of revenue of 10.2% as a platform to
support growth opportunities and costs
maintained at 2020 levels. The Group
operated well within its debt facilities
during the year with adequate liquidity
to support its growth. The foundations
were laid for a stabilisation of Fitch’s
credit rating and the refinancing of the
Group’s SEK bond at a lower cost in Q3.
Enable long-term
growth
– Establish a framework for
funding capital-intensive
strategic investments.
25%
– Established a funding control framework
for major IT-related developments that
aimed to modernise and broaden the
customer proposition. Ensured that
project risks were dynamically
managed and funding remained
available at appropriate times
through project lifecycle.
Continuity planning
– Design and implement
a continuity plan to ensure
no loss of momentum in the
Finance function on exit from
the business.
25%
– A comprehensive plan was prepared
setting out in detail every element
of the CFO role, the key accountabilities
across the finance function, and how
the function should be reorganised
so that execution across Finance
continued uninterrupted in the absence
of a CFO. A professional handover
plan was organised and implemented,
and the reporting lines of all critical
roles redesignated to the CEO and
Group Credit Director.
The Committee reviewed in detail the executive directors’ performance against their personal objectives, and, in the case of the
Chief Financial Officer, has taken into account in particular his exemplary contribution prior his departure from the business.
In the case of the Chief Executive Officer, the Committee agreed that he has been responsible for leading the Company’s
outstanding recovery and for delivering against the Company’s rebuild strategy in 2021. The significant progress made in the
adoption and roll out of smart technology was also noted, as was work to define and embed a clear and logical purpose
across the business. Consequently, the Committee determined that the bonus payout in respect of personal objectives for the
Chief Executive Officer is 26% and 26% for the outgoing Chief Financial Officer.
Directors’ Remuneration Report continued
Criteria met
Criteria partially met
Criteria not met
International Personal Finance plc98
Directors’ Report
Bonus outcomes for 2021
The Committee awarded bonuses to the executive directors as follows, for the year ending 31 December 2021.
Name
Financial objectives
– achievement
as % of
base salary
Personal objectives
– achievement
as % of
base salary
Cash bonus
£’000
DSP – face value
of shares due to
vest in 2025
£’000
Total value of 2021
annual bonus
£’000
Cash and DSP
shares awarded as
a % of maximum
available bonus
Gerard Ryan 101.8 26 340.7 340.7 681.4 98.3
Justin Lockwood
1
101.8 26 220.4 – 220.4 98.3
1. Justin Lockwood’s bonus calculations are made on a pro-rata basis to his leaving date of 23 July 2021 in line with the terms of his service agreement.
Payment is made in full in cash, with no deferral.
For the Chief Executive Officer, the bonus is payable 50% in cash and 50% in deferred shares, which will vest at the end of
a three-year period, subject to the Chief Executive Officer not being dismissed for misconduct. There are also provisions for
clawback with respect to the cash element of the bonus, and malus and clawback with respect to the deferred element of bonus.
For the outgoing Chief Financial Officer, as explained on page 92, payment is made in full in cash, which is subject
to clawback provisions.
Pension
The Company has two pension schemes, the International Personal Finance plc Pension Scheme (‘the Pension Scheme’) and the
International Personal Finance Stakeholder Pension Scheme (‘the Stakeholder Scheme’). New employees are eligible to join the
Stakeholder Scheme. The rate of Company pension contribution for the Chief Executive Officer is 20% of base salary (17.4% net);
for the outgoing Chief Financial Officer was 15% of base salary (13.4% net); and for the incoming Chief Financial Officer will be
12% of base salary. At the discretion of the Committee, this may be paid wholly, or in part, as a cash allowance, net of employer’s
National Insurance contributions.
The Company’s contributions in respect of Gerard Ryan during 2021 amounted to £94,000, all of which was paid as a cash
allowance. The Company’s contributions in respect of Justin Lockwood during 2021 amounted to £24,000, £22,000 of which was
paid as a cash allowance.
As detailed in the 2020 Policy, the Company contribution rate for new-hire executive directors is set at the most common rate for
the wider workforce, currently 12%. The Committee reiterates its commitment, made in the 2019 Directors’ Remuneration Report,
to align executive director pension contribution rates with those of the wider workforce by the end of 2022, consistent with the
Investment Association’s position.
Long-term incentives
Awards estimated to vest during 2022 (included in 2021 Single Figure)
The LTIP amount included in the 2021 single figure table relates to the PSP awards granted in 2019. Theperformance achieved
against the performance targets is shown below:
PSP
Performance condition Weighting Threshold Maximum Achieved
Projected
vesting
Absolute TSR growth
1
50%
30% TSR
over 3 years
60% TSR
over 3 years (29%) 0%
Cumulative EPS growth 25% 82.8 pence 100.6 pence 31.6 pence 0%
Growth in revenue less impairment 25% 5.7% p.a. 6.9% p.a. (7.8%) p.a. 0%
Total 0%
1. Based on TSR from 1 January 2019 to 31 December 2021.
Annual Report and Financial Statements 2021 99
Awards granted during 2021
Executive directors were granted long-term incentive plan awards structured as PSP options in March 2021. The resulting
number of PSP shares and associated performance conditions are set out below. Awards granted in 2022 will be in line with the
2020 Policy.
Name
Number of
PSP nil-cost
options
Face value
£
Percentageof
base salary
End of
performance
period
Threshold
vesting Weighting
Performance
conditions
Gerard Ryan 810,185 852,800 160% 31 December 2023 25% 50% Absolute TSR
25% 25% Cumulative EPS growth
25% 25% Net Revenue growth
Justin Lockwood 463,614 488,000 160% 31 December 2023 25% 50% Absolute TSR
25% 25% Cumulative EPS growth
25% 25% Net Revenue growth
The Committee determined that, in consideration of his excellent contribution to the Group over a period of 11 years and in light
of his decision to voluntarily surrender his PSP award in 2020, Justin Lockwood should be treated as a Good Leaver in respect
of the 2021 award, such that he may benefit on a pro-rata basis to his date of leaving from any future vesting of the award.
The 2021 LTIP awards will be measured against the following targets, each of which will operate on the basis of a straight line
between threshold, target and stretch.
Performance condition Weighting
Threshold
(vesting
25%)
Maximum
(Vesting
100%)
Absolute TSR Performance ½ 30% 60%
Cumulative EPS Growth ¼ 45.1 pence 54.8 pence
Net Revenue Growth ¼ 11.6% 14.1%
DSP
As no annual bonus plan was offered to executive directors in 2020 and no payments were made, there was no deferral into the
DSP in 2021.
SAYE
As noted in the 2020 Policy, UK-based executive directors are entitled to participate in the Company’s all-employee plan.
The executive directors did not participate in the SAYE with the result that no options were granted to them under the plan in 2021.
Loss of office payments
On 23 July 2021, Justin Lockwood stepped down from the Board and the role of Chief Financial Officer.
The following remuneration arrangements were agreed by the Committee and are in line with the provisions of the
Remuneration Policy:
– In accordance with his service agreement, Justin Lockwood received salary, pension and contractual benefits
up to 23 July 2021.
– For the purposes of the IPF Performance Share Plan (PSP), he will be treated as a Good Leaver. Any outstanding PSP share
awards under the PSP will be pro-rated to 23 July 2021 and will only vest to the extent that the applicable performance
conditions are satisfied, and malus and clawback provisions will continue to apply. Any shares that vest will remain subject
to the two-year holding requirement.
– Outstanding Deferred Share Plan (DSP) awards, will vest on the normal vesting date, in accordance with the rules of the DSP.
– In accordance with the Company’s Remuneration Policy and his service agreement, he is eligible for an annual bonus in
respect of 2021, pro-rated to the date of resignation, and payable in March 2022. As noted on page 92, the Committee
determined that his 2021 pro rata annual bonus payment may be made fully in cash.
No other remuneration payment, or payment for loss of office, has been or will be made.
Payments to past directors (audited information)
No payments were made to past directors during the year.
Directors’ Remuneration Report continued
International Personal Finance plc100
Directors’ Report
Annual percentage change in the remuneration of directors and employees
The table below shows how the percentage change in each director’s salary, benefits and bonus compared with the average
percentage change in each of those components for employees, on a full-time equivalent basis. The table will build over time
to show five years’ data. Leavers during the year are excluded.
2020 vs. 2019 2021 vs. 2020
Percentage change in the relevant period Base salary Benefits Bonus Base salary Benefits
1
Bonus
2
Executive directors
Gerard Ryan 1% 0% (100%) 0% 0% 100%
Non-executive directors
Deborah Davis 0% N/A N/A 12% N/A N/A
Richard Holmes
3
N/A N/A N/A 79% N/A N/A
John Mangelaars 0% N/A N/A 0% N/A N/A
Stuart Sinclair
4
N/A N/A N/A 42% N/A N/A
Bronwyn Syiek 0% N/A N/A 0% N/A N/A
Employees 1% 3% (100%) (2%) (2%) 100%
1. Non-executive directors are ineligible for any benefits.
2. Non-executive directors are ineligible for any bonus.
3. Richard Holmes was appointed to the Board from 16 March 2020.
4. Stuart Sinclair was appointed as director of the Board from 16 March 2020 and as Chairman of the Board from the 2020 AGM.
TSR performance
The graph below compares the TSR of the Company with the companies comprising the FTSE 250 Index for the 10-year period
ended 31 December 2021. This index was chosen for comparison because it is the index on which IPF originally listed, and to
which it continues to compare itself. TSR data is presented in tandem with CEO single figure total remuneration for the same
period to highlight the relationship between remuneration and shareholder returns.
The table below shows the corresponding Chief Executive Officer remuneration, as well as the annual variable element award
rates and long-term vesting rates against maximum over the same period:
Year CEO
CEO single figure
of remuneration
£’000
Annual
bonus payout
(as % of maximum
opportunity)
LTIP vesting
(as % of maximum
opportunity)
2021 Gerard Ryan 1,353 98.3% –
2020 Gerard Ryan 677 – –
2019 Gerard Ryan 1,260 72.3% 33%
2018 Gerard Ryan 1,158 98.0% –
2017 Gerard Ryan 1,130 96.6% –
2016 Gerard Ryan 838 16% 23.3%
2015 Gerard Ryan 1,197 45% 58.8%
2014 Gerard Ryan 2,172 74.2% 100%
2013 Gerard Ryan 1,037 100% –
2012
Gerard Ryan
1
889 80% –
John Harnett
2
718 – –
1. Gerard Ryan was appointed Chief Executive Officer on 1 April 2012.
2. John Harnett resigned on 31 March 2012.
IPF Total Shareholder Return vs FTSE 250
100 £1,00
0
150 £1,50
0
200 £2,00
0
250 £2,50
0
300 £3,00
0
CEO Single Figure £000TSR
50 £50
0
31 Dec 202131 Dec 202031 Dec 201931 Dec 201829 Dec 201731 Dec 201631 Dec 201531 Dec 201431 Dec 201331 Dec 2012
■
CEO Single Figure £000
■
IPF TSR
■
FTSE 250 TSR
Annual Report and Financial Statements 2021 101
Relative spend on pay
The table below shows the expenditure and percentage change in overall spend on employee remuneration and dividend:
£ million unless otherwise stated 2021 2020
Percentage
change
Overall expenditure on pay 156.9 171.8 (8.7%)
1
Dividend paid in the year 4.9 – 100%
1. The percentage change at a constant exchange rate is 2.3%.
Other directorships
The Chief Executive Officer does not currently hold any external directorships or external appointments.
Directors’ shareholdings and share interests (audited information)
The interests of each person who has served as a director of the Company during the year as at 31 December 2021 (together with
interests held by his or her persons closely associated) are shown in the table below. Stuart Sinclair is currently within the three-year
period to build his shareholding. Executive directors are required to retain half of any vested Company share plan options until the
shareholding requirement is met.
Shares held Options held
Owned
outright
Unvested and
subject to
performance
conditions
Unvested
and subject
to deferral
only
Unvested
and subject
to continued
employment
Vested but
not yet
exercisable
and subject
to continued
employment
Vested and
exercisable,
but not yet
exercised
Shareholding
required
(% salary/fee)
Shareholding
(% salary/fee)
1
Requirement
met
Executive
directors
2
Gerard Ryan 1,397,273 1,312,873 248,317 20,930 – – 200 338 Y
Non-executive
directors
3
Deborah Davis 45,000 – – – – – 100 106 Y
Richard Holmes 275,133 – – – – – 100 645 Y
John Mangelaars 50,000 – – – – – 100 117 Y
Stuart Sinclair 86,944 – – – – – 100 56 N
Bronwyn Syiek 20,000 – – – – – 100 47 N
1. Based on a share price of 129 pence, being the closing price on 31 December 2021 and using the non-executive directors’ base fee. Any vested but
unexercised shares are included in the shareholding requirement calculation net of tax and NI.
2. Executive directors are expected to acquire a beneficial shareholding over time with 50% of all share awards vesting to be retained until the requirement
is met. Of the 1.4 million shares held by Gerard Ryan, 0.9 million were purchased outright by him using his own funds.
3. Non-executive directors are expected to acquire a beneficial shareholding equivalent to 100% of their director fee within three years of appointment.
There were no changes to these interests between 31 December 2021 and 23 February 2022.
No director has notified the Company of an interest in any other shares, transactions or arrangements which requires disclosure.
The current shareholding requirements for executive and non–executive directors are described in the 2020 policy which can be
found on pages 89 to 92 of the 2019 Annual Report and Financial Statements, available via the Investor section of the Company
website at www.ipfin.co.uk.
Directors’ Remuneration Report continued
International Personal Finance plc102
Directors’ Report
Executive directors’ interests in Company share options (audited information)
Date of
award
Awards held at
31 December
2020
Awarded
in 2021
Exercised
in 2021
Lapsed /
Surrendered
in 2021
1
Awards held at
31 December
2021
Performance
condition
period
Market price
at date of
grant (p)
Exercise
price (p) Exercise period
Gerard
Ryan
PSP 11 Apr 17 122,236 – (122,236) – –
1 Jan 2017 –
31 Dec 2019 170 –
11 Apr 2020 –
10 Apr 2027
19 Apr 18 408,162 – – (408,162) –
1 Jan 2018 –
31 Dec 2020 248 –
19 Apr 2021 –
18 Apr 2028
08 Mar 19 502,688 – – – 502,688
1 Jan 2019 –
31 Dec 2021 191 –
8 Mar 2022 –
7 Mar 2029
23 Mar 21 – 810,185 – – 810,185
1 Jan 2021 –
31 Dec 2023 –
23 Mar 2024 –
22 Mar 2031
DSP:
Deferred 11 Apr 17 31,608 – (31,608) – – – 170 – –
Matching 11 Apr 17 10,431 – (10,431) – –
1 Jan 2017 –
31 Dec 2019 170 –
11 Apr 2020 –
10 Apr 2027
Deferred 10 Apr 18 102,043 – (102,043) – – – 246 – –
Deferred 08 Mar 19 128,709 – – – 128,709 – 191 – –
Deferred 28 Feb 20 119,608 – – 119,608 – 147 – –
SAYE 30 Aug 19 20,930 – – – 20,930 – – 86
1 Nov 2022 –
31 May 2023
Total 1,446,415 810,185 (266,318) (408,162) 1,582,120
1. The April 2018 PSP lapsed in full.
The mid-market closing price of the Company’s shares on 31 December 2021 was 129 pence and the range during 2021 was
78.4 pence to 155.4 pence. The aggregate gains of directors arising from the exercise of options granted under the DSP in the year
totalled £179,202.71.
Share dilution
The Company manages dilution rates within the standard guidelines of 10% of issued ordinary share capital in respect of the all
employee share plan and 5% in respect of discretionary plans.
Shareholder voting
The table below summarises voting outcomes at the 2019, 2020 and 2021 AGMs (% of total votes cast):
AGM For Against Withheld
1
2019 Annual Remuneration Report 87.64% 12.36% 0.01%
2020 Annual Remuneration Report 87.24% 12.76% 0.00%
2020 Directors’ Remuneration Policy 87.89% 12.11% 0.00%
2021 Annual Remuneration Report 99.98% 0.02% 0.00%
1. Votes withheld are not counted in the votes for or against a resolution but would be considered by the Committee in the event of a significant number
of votes being withheld.
Statement of Remuneration Policy implementation for 2022
The base salary for the Chief Executive Officer will increase by 5% to £559,650.
The base salary for the incoming Chief Financial Officer will be £325,000.
Maximum bonus opportunity will be 130% of base salary (on target 50% of maximum), in line with the 2020 Policy, with performance
measures weighted 80% financial and strategic and 20% personal, also in line with the 2020 Policy. Annual bonus targets are not
disclosed on a forward–looking basis because they are considered by the Board to be commercially sensitive but will continue
to be disclosed retrospectively to ensure transparency. Any annual bonus due to the incoming Chief Financial Officer will be paid on
a pro rata basis for the 2022 financial year.
The Committee expects to make 2022 LTIP awards, including to the incoming Chief Financial Officer, prior to the 2022 AGM
in accordance with the 2020 Policy; awards will be at 190% of base salary for the Chief Executive officer and 120% of base salary
for the incoming Chief Financial Officer (pro rata of the normal 160%), in line with the 2020 Policy.
Annual Report and Financial Statements 2021 103
The 2022 LTIP awards will be measured against the following targets, each of which will operate on the basis of a straight line
between threshold, target and maximum.
Performance condition Weighting
Threshold
(vesting 25%)
Maximum
(Vesting 100%)
Absolute TSR Performance ½ 30% 60%
Cumulative EPS Growth ¼ 60.3 pence 82.9 pence
Net Revenue Growth ¼ 5.7% p.a 11.4% p.a
No changes are anticipated to the operation of the 2020 Policy.
Consideration by the directors of matters relating to directors’ remuneration
The following directors were members of the Remuneration Committee when matters relating to the directors’ remuneration for the
year were being discussed and are considered to be independent:
– Deborah Davis
– Stuart Sinclair
– Richard Holmes
– Richard Moat
1
– Cathryn Riley
1
1. Richard Moat and Cathryn Riley stepped down from the Committee and the Board at the conclusion of the 2021 AGM.
The Committee received assistance from the Chief People Officer and Group Head of Reward. Other members of management
may attend meetings by invitation except when matters relating to their own remuneration are being discussed.
Advisor to the committee
Willis Towers Watson, appointed in April 2016, provides independent remuneration advice to the Committee. During 2021,
total fees in respect of advice to the Committee (based on time and materials) totalled £22,600 (excluding VAT). Willis Towers
Watson is a founding member of the Remuneration Consultants Group and is a signatory to, and abides by, the Remuneration
Consultants Group Code of Conduct. Further details can be found at www.remunerationconsultantsgroup.com. The Committee
is satisfied that the advice it receives is objective and independent, and that Willis Towers Watson does not have any connections
with the Company or any of the directors that may impair its independence.
Approved by the Board
Deborah Davis
Chair
23 February 2022
Directors’ Remuneration Report continued
International Personal Finance plc104
Directors’ Report
Annual Report and Financial Statements
International Personal Finance plc presents its Annual Report and Financial Statements and its consolidated Annual Report
and Financial Statements as a single Annual Report.
Directors’ responsibilities in relation to the Financial Statements
The directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law
and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law, the directors are
required to prepare the Group Financial Statements in accordance with United Kingdom adopted International Accounting
Standards (UKIAS) and Article 4 of the International Accounting Standard (IAS) Regulation and have also chosen to prepare the
Parent Company Financial Statements under UKIASs. Under company law, the directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of
the profit or loss of the Group and the Company for that period.
In preparing these Financial Statements, IAS 1 requires that directors:
– properly select and apply accounting policies;
– present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
– provide additional disclosures when compliance with the specific requirements in UKIASs are insufficient to enable users
to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial
performance; and
– make an assessment of the Company’s ability to continue as a going concern.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them
to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the
assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Post-balance sheet events and future developments
There are no post-balance sheet events. Information on indications of future developments is provided in the Strategic Report.
Responsibility statement under the Disclosure and Transparency Rules
Each of the persons who is a director at the date of approval of this report confirms to the best of his/her knowledge that:
– the Financial Statements, prepared in accordance with UKIASs, give a true and fair view of the assets, liabilities, financial position
and profit/loss of the Company and the undertakings included in the consolidation taken as a whole;
– the Strategic Report and Directors’ Report contained in this report includes a fair review of the development and performance
of the business and the position of the Company and the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties that they face; and
– the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for
shareholders to assess the Company’s position and performance, business model and strategy.
Directors’
responsibilities
Annual Report and Financial Statements 2021 105
Report review process for Annual Report
The Board came to this view following a rigorous review process throughout the production schedule. The statements are drafted
by appropriate members of the reporting and leadership teams and co-ordinated by the Investor Relations Manager to ensure
consistency. A series of planned reviews is undertaken by the reporting team, leadership team and executive directors.
In advance of final consideration by the Board, they are reviewed by the Audit and Risk Committee.
Disclosure of information to the auditor
In the case of each person who is a director at the date of this report, it is confirmed that, so far as the director is aware, there is
no relevant audit information of which the Company’s auditor is unaware; and he/she has taken all the steps that ought to have
been taken as a director in order to make himself/herself aware of any relevant audit information and to establish that the
Company’s auditor is aware of that information.
Going concern and viability statement
The Board statement on its adoption of the going concern basis in preparing these Financial Statements and the
viability statement concerning the assessment of the Company’s long-term prospects is given on pages 35 and 59.
The Board’s review of the system of internal control
The Board is responsible for the Group’s overall approach to risk management and internal control and, on the advice of the
Audit and Risk Committee, has reviewed the Group’s risk management and internal controls systems for the period 1 January 2021
to the date of this Annual Report and Financial Statements and is satisfied that they are effective.
By order of the Board
Laura Dobson
Company Secretary
23 February 2022
Directors’ responsibilities continued
International Personal Finance plc106
Directors’ Report
Independent Auditor’s Report
to the members of International
Personal Finance plc
Annual Report and Financial Statements 2021
107
Report on the audit of the Financial Statements
1. Opinion
In our opinion:
– the Financial Statements of International Personal Finance plc (the ‘parent company’) and its subsidiaries (the ‘Group’) give a true
and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2021 and of the Group’s profit for
the year then ended;
– the Group Financial Statements have been properly prepared in accordance United Kingdom adopted international accounting
standards;
– the parent company Financial Statements have been properly prepared in accordance with United Kingdom adopted
international accounting standards and as applied in accordance with the requirements of the Companies Act 2006; and
– the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the Financial Statements which comprise:
– the consolidated income statement;
– the consolidated statement of comprehensive income;
– the consolidated and parent company balance sheets;
– the consolidated and parent company statements of changes in equity;
– the consolidated cash flow statement;
– the statement of accounting policies; and
– the related notes 1 to 33.
The financial reporting framework that has been applied in the preparation of the Group Financial Statements is applicable law and
United Kingdom adopted international accounting standards and, as regards the Parent Company Financial Statements, as applied in
accordance with the provisions of the Companies Act 2006, and IFRSs as issued by the IASB.
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditor’s responsibilities for the audit of the Financial Statements section of our report.
We are independent of the Group and the parent company in accordance with the ethical requirements that are relevant to our audit
of the Financial Statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services
provided to the Group and Parent Company for the year are disclosed in note 4 to the Financial Statements. We confirm that we have
not provided any non- audit services prohibited by the FRC’s Ethical Standard to the Group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Annual Report and Financial Statements 2021 107
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108
International Personal Finance plc
3. Summary of our audit approach
Key audit matters The key audit matters that we identified in the current year were:
– Revenue recognition; and
– Impairment of receivables
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality The materiality that we used for the Group Financial Statements was £4.9m which was determined on the basis of 1.3% of net
assets.
Scoping We focused our Group audit primarily on the key components based in seven locations, six of which were subject to a full audit,
with the remaining subject to testing of specific balances.
Significant changes
in our approach
Following the Group’s return to profitability and the refinancing of certain of its long-term borrowings in 2021, there has been the
following significant change in our audit approach from the prior period: the removal of a key audit matter around going
concern.
4. Conclusions relating to going concern
In auditing the Financial Statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the Financial Statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s and parent company’s ability to continue to adopt the going concern basis
of accounting included:
– obtaining an understanding of the relevant controls performed at the Group-level in relation to the going concern and forecasting
processes;
– reviewing the availability and terms of the Group’s financing arrangements, and challenging whether management’s forecasts could
result in a breach of banking covenants in the future;
– testing the mechanical accuracy of management’s future forecasts, and evaluating the reasonableness of assumptions made with
reference to our understanding of the Group’s performance in prior periods, changes in its legal and regulatory environment and the
impacts that Covid-19 has had, and is expected to have, on its material components;
– assessing the adequacy and completeness of stress testing performed by management, with reference to our understanding of the
Group’s business and external environment;
– challenging the likelihood that the reverse stress test scenario prepared by management, which resulted in the Group breaching its
banking covenants, will crystalise during the going concern period; and
– reviewing the disclosures relating to going concern, included on page 35, in order to assess their consistency with our understanding
of the Group’s forecast performance and position.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group’s and parent company’s ability to continue as a going concern for a period of at
least twelve months from when the Financial Statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the Financial Statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we
identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
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Annual Report and Financial Statements 2021
109
5.1. Revenue recognition
Key audit matter
description
The Group recognises revenue on loans using the effective interest rate (“EIR”) method applicable under IFRS 9 Financial
Instruments. This method involves the application of significant management judgement, in particular over ensuring that early
redemptions experience and all contractual terms are reflected in management’s calculation of the EIR for each product issued.
Specifically, we identified a risk around the accuracy and completeness of cash flows included in management’s calculation of the
‘EIR’ for each product, in order to ensure that evidence of early settlement behaviour – including early settlement rebates where
applicable – had been appropriately considered.
The key audit matter is described further in the Audit and Risk Committee’s report on page 84 and within the key sources of
estimation uncertainty on page 127. The revenue balance for the period is disclosed in the consolidated income statement, and
note 1 to the Financial Statements.
How the scope of our
audit responded to
the key audit matter
We tested the relevant controls to the revenue recognition cycle, including those performed in the component markets, to ensure
that the cash flow data used in management’s calculations is accurate and complete.
We worked with our IT specialists to re-calculate a sample of product and cohort EIRs, based on an independent extract of source
data from core lending systems, and tested the mechanical accuracy of models used by management.
We assessed the appropriateness of management’s key judgements used to calculate the EIR by reference to recently observable
collections phasing and early redemption behaviour of the Group’s loan portfolios, as well as the impact of recent changes in
rebate legislation in Poland.
We also assessed whether the revenue recognition policies applied to all material loan types offered by the Group were appropriate
and in accordance with IFRS 9 and other applicable accounting standards.
Key observations As a result of our audit testing, we found that the methodology used for calculating the EIRs is materially accurate and complete in
the context of the Group’s accounting policies and the requirements of the relevant accounting standards.
5.2. Impairment of receivables
Key audit matter
description
Determination of impairment provisions against customer receivables is highly judgemental, requiring estimates to be made
regarding the future losses that are expected to accrue on the Group’s loan portfolios. Key judgements applied include
determination of an individual loan’s probability of default, exposure at default and loss given default. These estimates are based on
a combination of historically observable collections performance and post model overlays made to account for emerging risks that
are not yet fully observable in the Group’s data.
The emergence of Covid-19 during 2020 had a disruptive impact on each of the Group’s markets, and there is ongoing uncertainty
over how the pandemic will impact the Group’s expected credit losses on the element of the loan book that was advanced prior to
April 2020. In addition, there are high degrees of uncertainty over how rising inflation rates in the Group’s markets may impact the
ability of its customers to service their loans, and therefore the expected credit losses that are expected to crystallise in future periods.
We identified a key audit matter over the accuracy and completeness of post model overlays applied due to their reliance on
management judgement, as well as their materiality to the Financial Statements of the Group.
The key audit matter is described further in the Audit and Risk Committee’s report on page 84 and within the key sources of
estimation uncertainty on page 127. Please also see note 17 further information.
How the scope of our
audit responded to
the key audit matter
We obtained an understanding of the relevant controls performed at a Group-level in relation to the impairment cycle, and worked
with our IT specialists to test the key automated controls in place. In addition, we tested the relevant controls performed in the
component markets to ensure that the cash flow data used within management’s calculations was accurate and complete.
Where necessary, we tested the completeness and accuracy of information used in relevant lending controls, which included
extraction of source data from the core lending systems used and independent re-calculation of the relevant information.
We also worked with our IT specialists to test the key IT controls over the systems in which source customer receivable data is
maintained, and reviewed minutes to confirm the existence of key governance review controls.
We reviewed and challenged management’s impairment provisioning methodology against the requirements of IFRS 9, and
assessed whether management’s approach was materially consistent with those applied by other similar financial institutions.
We evaluated the appropriateness of the probability of default, exposure at default, and loss given default assumptions used with
reference to our understanding of recently observable collections performance. We also challenged the appropriateness of using
historical data to predict future collections performance, with reference to our understanding of internal and external factors
affecting the Group’s businesses.
We tested a sample of these assumptions from independent extracts of customer receivable data and re-performed the year-end
impairment calculations on a sample basis to confirm the mechanical accuracy of management’s calculations.
Finally, we reviewed and challenged the completeness and accuracy of management’s provisioning overlays, with reference to
analysis of recent collections performance, other identified impairment risks for each of the Group’s material markets. This included
working with internal credit and economic to challenge the reasonableness of assumptions made over collectability of loans
affected by the Covid-19 pandemic, and the impact that high levels of inflation in the Group’s core markets may have on the
Group’s customers, producing independent estimates using alternative data sets and professional judgement. We also considered
the Group’s assessment of future legal and regulatory risks and how these might impact collections.
Key observations As a result of our testing, we found that the impairment methodology applied by management was reasonable and that the
assumptions used in the calculations performed were appropriately applied.
We concluded that the rationale for post model overlays proposed by management was appropriate, and that the valuation and
disclosed sensitivities on page 128 are reasonable.
Annual Report and Financial Statements 2021 109
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110
International Personal Finance plc
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the Financial Statements that makes it probable that the economic decisions
of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit
work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:
Group Financial Statements Parent Company Financial Statements
Materiality £4,900,000 (2020: £4,900,000) £2,450,000 (2020: £2,450,000)
Basis for determining materiality 1.3% of consolidated net assets
(2020: 1.3% of consolidated net assets).
Parent company materiality equates to 1% of net assets,
which is capped at 50% of group materiality (2020: 1% of
net assets, capped at 50% of Group materiality).
Rationale for the benchmark
applied
Given the ongoing volatility in the Group’s reported
profit/loss before taxation, we have determined net assets to
be the most stable and appropriate benchmark for
assessing materiality.
The main operations of the Parent Company are to obtain
external finance, with the main balances being the
investments held in its subsidiaries and the external loan
balances. We have therefore selected net assets as the
benchmark for determining materiality.
6.2. Performance materiality
We set performance materiality at a level lower than materiality
to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the Financial
Statements as a whole.
Group Financial Statements Parent Company Financial Statements
Performance materiality 65% (2020: 65%) of Group materiality 50% (2020: 70%) of Parent Company materiality
Basis and rationale for
determining performance
materiality
In determining performance materiality, we considered the
heightened level of risk arising from the ongoing impacts of
COVID-19 on the Group, as well as the level of uncorrected
misstatements identified in prior periods, and elected to
maintain performance materiality at 65% of materiality in
line with the prior period.
In determining performance materiality, we reduced
performance materiality to a lower level than the prior
period after considering the heightened level of risk arising
from the ongoing impacts of COVID-19 and the level of
uncorrected misstatements identified in prior periods.
6.3. Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in excess of £245,000 (2020:
£245,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the
Audit and Risk Committee on disclosure matters that we identified when assessing the overall presentation of the Financial Statements.
■
Group Materiality
■
Net Assets
Net Assets £367.2m
■
Group Materiality
■
Component materiality
■
Audit Committee
reporting threshold
£0.25m
£4.9m
£2.0m to £2.9m
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7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and
assessing the risks of material misstatement at the Group level. Based on that assessment, we focused our Group audit scope primarily
on the audit work at given locations, which were subject to a full audit, and one location which involved the testing of specific balances.
The locations subject to a full audit were the components in Poland, Romania, Czech Republic, Hungary, Mexico and the UK, with
a further six entities managed in Poland subject to specific balance testing. The scope of our audit was consistent with that from the
prior period.
These twelve entities represent the principal business units of the Group, and account for 99% (2020: 96%) of the Group’s net credit
receivables, 99% (2020: 97%) of the Group’s revenue and 95% (2020: 97%) of the Group’s profit (2020: loss) before taxation.
7.2. Our consideration of the control environment
We worked with internal IT specialists to perform testing of relevant IT controls over all relevant systems to the financial reporting process,
as well as the lending process, revenue recognition process and impairment process. Our component auditors also worked with local IT
specialists to perform testing of the relevant IT controls over the data storage platform used in-market to record and administrate
customer lending.
Our work in this area enabled us to place controls reliance over all identified relevant IT systems.
We also obtained an understanding of and tested manually operated controls performed at a Group level in relation to the impairment
of receivables key audit matter, and tested relevant controls in place over the revenue recognition and customer lending cycles.
As a result of the controls work performed at both a group and component level, we were able to place controls reliance over both the
revenue and gross carrying value of the customer receivables.
Revenue Net credit receivables
■
Full audit scope 80%
■
Specified audit procedures 19%
■
Review at Group level 1%
■
Full audit scope 81%
■
Specified audit procedures 18%
■
Review at Group level 1%
Annual Report and Financial Statements 2021
111
7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and
assessing the risks of material misstatement at the Group level. Based on that assessment, we focused our Group audit scope primarily
on the audit work at given locations, which were subject to a full audit, and one location which involved the testing of specific balances.
The locations subject to a full audit were the components in Poland, Romania, Czech Republic, Hungary, Mexico and the UK, with
a further six entities managed in Poland subject to specific balance testing. The scope of our audit was consistent with that from the
prior period.
These twelve entities represent the principal business units of the Group, and account for 99% (2020: 96%) of the Group’s net credit
receivables, 99% (2020: 97%) of the Group’s revenue and 95% (2020: 97%) of the Group’s profit (2020: loss) before taxation.
7.2. Our consideration of the control environment
We worked with internal IT specialists to perform testing of relevant IT controls over all relevant systems to the financial reporting process,
as well as the lending process, revenue recognition process and impairment process. Our component auditors also worked with local IT
specialists to perform testing of the relevant IT controls over the data storage platform used in-market to record and administrate
customer lending.
Our work in this area enabled us to place controls reliance over all identified relevant IT systems.
We also obtained an understanding of and tested manually operated controls performed at a Group level in relation to the impairment
of receivables key audit matter, and tested relevant controls in place over the revenue recognition and customer lending cycles.
As a result of the controls work performed at both a group and component level, we were able to place controls reliance over both the
revenue and gross carrying value of the customer receivables.
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International Personal Finance plc
7.3. Working with other auditors
At the parent company level we tested the consolidation process and carried out analytical procedures to confirm our conclusion that
there were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject
to audit or audit of specified account balances.
The Group audit team continued to closely monitor and liaise with all significant component audit teams. Due to Covid-19, we were
unable to visit any of the significant components. We included the component audit partner and team in our team briefing, discussed
their risk assessment, and reviewed documentation of the findings from their work. In addition, we held virtual meetings with component
teams and with members of component management, and we reviewed component team working papers remotely.
8. Other information
The other information comprises the information included in the Annual Report, other than the Financial Statements and our auditor’s
report thereon. This includes the Chairman’s Statement, the Chief Executive Officer’s Review, the Strategic Report, Principal Risks and
Uncertainties, the Directors’ Report, the Corporate Governance Report, the Audit and Risk Committee Report, and the Directors’
Remuneration Report. The directors are responsible for the other information contained within the Annual Report.
Our opinion on the Financial Statements does not cover the other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with
the Financial Statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a
material misstatement in the Financial Statements themselves. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the Financial
Statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary
to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, the directors are responsible for assessing the Group’s and the parent company’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the parent company or to cease operations, or have no realistic
alternative but to do so.
10. Auditor’s responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.
A further description of our responsibilities for the audit of the Financial Statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
– the nature of the industry and sector, control environment and business performance including the design of the Group’s
remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
– results of our enquiries of management, internal audit and the audit committee about their own identification and assessment of the
risks of irregularities;
– any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
– the matters discussed among the audit engagement team including significant component audit teams and relevant internal
specialists, including tax, valuations, pensions, and IT specialists regarding how and where fraud might occur in the Financial
Statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the following areas: revenue recognition and impairment of receivables. In common with all
audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on provisions of those
laws and regulations that had a direct effect on the determination of material amounts and disclosures in the Financial Statements. The
key laws and regulations we considered in this context included the UK Companies Act, and the London Stock Exchange Listing Rules.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the Financial Statements but
compliance with which may be fundamental to the group’s ability to operate or to avoid a material penalty. These included the Group’s
compliance with consumer credit regulatory regimes applicable to each of its significant territories.
11.2. Audit response to risks identified
As a result of performing the above, we identified revenue recognition and impairment of receivables as key audit matters related to the
potential risk of fraud or non-compliance with laws and regulations. The key audit matters section of our report explains the matters in
more detail and also describes the specific procedures we performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
– reviewing the Financial Statement disclosures and testing to supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on the Financial Statements;
– enquiring of management, the audit committee and in-house legal counsel concerning actual and potential litigation and claims;
– performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement
due to fraud;
– reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with
the Group’s regulators and tax authorities in each of its significant territories; and
– in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including
internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws
and regulations throughout the audit.
Annual Report and Financial Statements 2021 113
Independent Auditor’s Report to the members of International Personal Finance plc continued
114
International Personal Finance plc
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
– the information given in the strategic report and the directors’ report for the financial year for which the Financial Statements are
prepared is consistent with the Financial Statements; and
– the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent company and their environment obtained in the course
of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
13. Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the Financial Statements and our knowledge obtained during the audit:
– the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 35;
– the directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period
is appropriate set out on page 59;
– the directors’ statement on fair, balanced and understandable set out on page 87;
– the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 52;
– the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out
on page 87; and
– the section describing the work of the audit committee set out on pages 84 and 85.
International Personal Finance plc114
Financial Statements
Annual Report and Financial Statements 2021
115
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
– we have not received all the information and explanations we require for our audit; or
– adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
– the parent company Financial Statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not
been made or the part of the directors’ remuneration report to be audited is not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit and Risk committee, we were appointed by the members of International Personal Finance
plc on 11 May 2011 to audit the Financial Statements for the year ending 31 December 2011 and subsequent financial periods. The
period of total uninterrupted engagement including previous renewals and reappointments of the firm is 11 years, covering the years
ending 31 December 2011 to 31 December 2021.
15.2. Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with ISAs (UK).
16. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R, these financial
statements will form part of the ESEF-prepared Annual Financial Report filed on the National Storage Mechanism of the UK FCA
in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report provides no assurance over whether the
annual financial report has been prepared using the single electronic format specified in the ESEF RTS.
Peter Birch FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Leeds, United Kingdom
23 February 2022
Annual Report and Financial Statements 2021 115
Consolidated Income Statement
for the year ended 31 December
116
International Personal Finance plc
Group Notes
2021
£m
2020
Pre-
exceptional
items
£m
2020
Exceptional
items
(note 10)
£m
2020
£m
Revenue 1
Impairment 1 (56.2 ) (24 7.6 ) (2.5 ) (25 0.1 )
Revenue less impairment
Finance costs 2 (54.0 ) (55. 0 ) 8.2 (46.8 )
Other operating costs (111.4 ) (108.7 ) – (108.7 )
Administrative expenses
(259.4 ) (278.8 ) (17.6 ) (296.4 )
Total costs
(424.8 ) (442.5 ) (9.4 ) (451.9 )
Profit/(loss) before taxation 1 67.7 (28. 8 ) (11.9 ) (40. 7 )
Tax income – UK 6.6 2.3 0.1 2.4
Tax (expense)/income – overseas (32.4 ) (26.8 ) 0. 9 (2 5.9 )
Total tax (expense)/income 5
(25.8 ) (24.5 ) 1. 0 (2 3.5 )
Profit/(loss) after taxation attributable to owners of the Company 41.9 (53.3 ) (1 0.9 ) (64.2 )
Group Notes
2021
pence
2020
pence
Earnings/(loss) per share – statutory
Basic 6 18.8 (28. 9 )
Diluted 6
See note 6 for further information on Earnings per share
Statements of comprehensive income
for the year ended 31 December
Group Company
2021
£m
2020
£m
2021
£m
2020
£m
Profit/(loss) after taxation attributable to owners of the Company 41.9 (6 4.2 ) (48.2) 181.7
Other comprehensive (expense)/income
Items that may subsequently be reclassified to income statement
Exchange losses on foreign currency translations
(37.6 ) (4. 1 ) – –
Net fair value gains – cash flow hedges
Tax charge on items that may be reclassified 5
(0.7 ) (0. 3 ) – –
Items that will not subsequently be reclassified to income statement
Actuarial gains/(losses) on retirement benefit obligation 27
Tax credit on items that will not be reclassified 5
Other comprehensive (expense)/income net of taxation
(36.3 ) (4. 2 ) 0.6 (1.1)
Total comprehensive income/(expense) for the year attributable to owners
of the Company
The accounting policies and notes 1 to 33 are an integral part of these Financial Statements.
International Personal Finance plc116
Financial Statements
Balance sheets
as at 31 December
Annual Report and Financial Statements 2021
117
Group Company
Notes
2021
£m
2020
£m
2021
£m
2020
£m
Assets
Non-current assets
Goodwill 11 22.9 24.4 – –
Intangible assets 12
Investment in subsidiaries 13
Property, plant and equipment 14
Right-of-use assets 15
Amounts receivable from customers 17
Deferred tax assets 16
Non-current tax asset
Retirement benefit asset 27
Current assets
Amounts receivable from customers 17 566. 6 532.6 – –
Derivative financial instruments 23
Cash and cash equivalents 18
Other receivables 19
Current tax assets
Total assets 999.3 1,023.9 1,301.0 1,381.7
Liabilities
Current liabilities
Borrowings 21 (3.1 ) (0.2 ) – –
Derivative financial instruments 23
(7.6 ) (6.7 ) (0.1) –
Trade and other payables 20
(112.8 ) (89.1 ) (383.4) (391.3)
Provision for liabilities and charges 26
(5.4 ) (19.2 ) – –
Lease liabilities 15
(6.4 ) (7.4 ) (0.1) –
Current tax liabilities
(8.2 ) (13.4 ) – –
(143.5 ) (136.0 ) (383.6) (391.3)
Non-current liabilities
Deferred tax liabilities 16 (7.9 ) (13.8 ) (1.2) (0.2)
Borrowings 21
(468.5 ) (491.8 ) (395.8) (415.9)
Lease liabilities 15
(12.3 ) (11.8 ) (2.7) –
(488.7 ) (517.4 ) (399.7
)
(416.1)
Total liabilities (632.2 ) (653.4 ) (783.3) (807.4)
Net assets 367.1 370.5 517.7 574.3
Equity attributable to owners of the Company
Called-up share capital 29 23.4 23.4 23.4 23.4
Other reserve
(22.5 ) (22.5 ) 226.3 226.3
Foreign exchange reserve
(32.6 ) 5.0 – –
Hedging reserve
Own shares
(46.6 ) (45.2 ) (46.6) (45.2)
Capital redemption reserve
Retained earnings
Total equity
The accounting policies and notes 1 to 33 are an integral part of these Financial Statements.
The loss after taxation of the Parent Company for the period was £48.2 million (2020: profit of £181.7 million).
The Financial Statements of International Personal Finance plc, registration number 6018973 comprising the consolidated income
statement, statements of comprehensive income, balance sheets, statements of changes in equity, cash flow statements, accounting
policies and notes 1 to 33 were approved by the Board on 23 February and were signed on its behalf by:
Gerard Ryan
Chief Executive Officer
Annual Report and Financial Statements 2021 117
Statements of changes in equity
118
International Personal Finance plc
Group – Attributable to owners
of the Company
Notes
Called-up
share
capital
£m
Other
reserve
£m
Foreign
exchange
reserve
£m
Hedging
reserve
£m
Own
shares
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Total
equity
£m
At 1 January 2020 23.4 (22.5 ) 9.1 (0.1 ) (46.1 ) 2.3 470.3 436.4
Comprehensive income
Loss after taxation for the year – – – – – – (64.2 ) (64.2 )
Other comprehensive (expense)/income
Exchange losses on foreign currency
translation – – (4.1 ) – – – – (4. 1 )
Net fair value gains – cash flow hedges – – – 1. 3 – – – 1.3
Actuarial loss on retirement benefit obligation 27 – – – – – – (1.4 ) (1.4 )
Tax (charge)/credit on other comprehensive
income 5 – – – (0.3 ) – – 0.3 –
Total other comprehensive (expense)/income – – (4.1 ) 1.0 – – (1.1 ) (4.2 )
Total comprehensive (expense)/income for
the year – – (4. 1 ) 1.0 – – (65.3 ) (68.4 )
Transactions with owners
Share-based payment adjustment to reserves – – – – – – 2.5 2. 5
Shares granted from treasury and
employee trust
At 31 December 2020 23.4 (22.5 ) 5.0 0.9 (45.2 ) 2.3 406.6 370.5
At 1 January 2021 23.4 (22.5 ) 5.0 0.9 (45.2 ) 2. 3 406.6 370.5
Comprehensive income
Profit after taxation for the year – – – – – – 41.9 41.9
Other comprehensive (expense)/income
Exchange losses on foreign currency
translation
Net fair value gains – cash flow hedges
Actuarial gain on retirement benefit obligation
27 – – – – – – 0.5 0.5
Tax (charge)/credit on other comprehensive
income
5 – – – (0.7 ) – – 0.1 (0.6 )
Total other comprehensive (expense)/income
Total comprehensive (expense)/income for
the year
Transactions with owners
Share-based payment adjustment to reserves – – – – – – (0.2 ) (0.2 )
Shares acquired by employee and treasury
trusts
Shares granted from treasury and
employee trust
Dividends paid to Company shareholders
At 31 December 2021
International Personal Finance plc118
Financial Statements
Annual Report and Financial Statements 2021
119
Company – Attributable to owners of the Company Notes
Called-up
share
capital
£m
Other
reserve
£m
Hedging
reserve
£m
Own
shares
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Total
equity
£m
At 1 January 2020 23.4 226.3 – (46.1) 2.3 185.3 391.2
Comprehensive income
Profit after taxation for the year – – – – – 181.7 181.7
Other comprehensive (expense)/income
Actuarial loss on retirement benefit obligation 27 – – – – – (1.4) (1.4)
Tax credit on other comprehensive income 5 – – – – – 0.3 0.3
Total other comprehensive expense – – – – – (1.1) (1.1)
Total comprehensive income for the year – – – – – 180.6 180.6
Transactions with owners
Share-based payment adjustment to reserves – – – – – 2.5 2.5
Shares granted from treasury and employee trust – – – 0.9 – (0.9) –
At 31 December 2020 23.4 226.3 – (45.2) 2.3 367.5 574.3
At 1 January 2021 23.4 226.3 – (45.2) 2.3 367.5 574.3
Comprehensive income
Loss after taxation for the year – – – – – (48.2) (48.2)
Other comprehensive (expense)/income
Actuarial gain on retirement benefit obligation 27 – – – – – 0.5 0.5
Tax credit on other comprehensive income
5 – – – – 0.1 0.1
Total other comprehensive income
– – – – – 0.6 0.6
Total comprehensive expense for the year – – – – – (47.6) (47.6)
Transactions with owners
Share-based payment adjustment to reserves – – – – – (0.2) (0.2)
Shares acquired by employee and treasury trusts
– – – (3.9) – – (3.9)
Shares granted from treasury and employee trust
– – – 2.5 – (2.5) –
Dividends paid to Company shareholders
7 – – – – – (4.9) (4.9)
At 31 December 2021
23.4 226.3 (46.6) 2.3 312.3 517.7
The other reserve represents the difference between the nominal value of the shares issued when the Company became listed on
16 July 2007 and the fair value of the subsidiary companies acquired in exchange for this share capital.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent Company
income statement.
The accounting policies and notes 1 to 33 are an integral part of these Financial Statements.
Annual Report and Financial Statements 2021 119
Cash flow statements
for the year ended 31 December
120
International Personal Finance plc
Group Company
Notes
2021
£m
2020
£m
2021
£m
2020
£m
Cash flows from operating activities
Cash generated from operating activities 30 74.3 329.8 6.6 189.5
Finance costs paid
(52.7 ) (54.7 ) (73.2) (76.2)
Finance income received
Income tax paid
(46.4 ) (1. 4 ) (0.9) (0.3)
Net cash (used in)/generated from operating activities
(24.8 ) 283.6 (29.1) 148.4
Cash flows from investing activities
Purchases of property, plant and equipment 14 (5.1 ) (3. 8 ) (1.5) –
Proceeds from sale of property, plant and equipment
Purchases of intangible assets 12
(10.3 ) (11.7 ) – –
Purchase of shares in subsidiary
Net cash used in investing activities
(15.2 ) (15.1 ) (1.7) –
Net cash (used in)/generated from operating and investing activities (40.0 ) 268.5 (30.8) 148.4
Cash flows from financing activities
Proceeds from borrowings 49.4 311.3 38.2 305.9
Repayment of borrowings
(62.9 ) (490.0 ) (59.3) (389.4)
Principal elements of lease payments
(9.9 ) (1 0.9 ) – –
Dividends paid to Company shareholders 7
(4.9 ) – (4.9) –
Shares acquired by employee and treasury trusts
(3.9 ) – (3.9) –
Net cash used in financing activities
(32.2 ) (189.6 ) (29.9) (83.5)
Net (decrease)/increase in cash and cash equivalents (72.2 ) 78.9 (60.7) 64.9
Cash and cash equivalents at beginning of year 116.3 37.4 65.1 0.2
Exchange losses on cash and cash equivalents (2.4 ) – – –
Cash and cash equivalents at end of year 18
Cash and cash equivalents at end of year comprise:
Cash at bank and in hand 18
The accounting policies and notes 1 to 33 are an integral part of these Financial Statements.
International Personal Finance plc120
Financial Statements
Notes to the Financial Statements
Annual Report and Financial Statements 2021
121
General information
Companies Act and is registered in England and Wales . The address of the registered office is shown on the back cover of this Annual
Report and Financial Statements.
The principal activities of the Company and its subsidiaries (the Group) and the nature of the Group’s operations are set out in the
Strategic Report on page 2.
These Financial Statements are presented in sterling because that is the currency of the primary economic environment in which the
Group operates. Foreign operations are set out in accordance with the policies set out on page 125.
The Consolidated Group and Parent Company Financial Statements of International Personal Finance plc and its subsidiaries (‘IPF’ or the
‘Group’) have been prepared in accordance with International Financial Reporting Standards (‘IFRSs’), International Financial Reporting
Interpretations Committee (‘IFRIC’) interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.
The following amendment to standards is mandatory for the first time for the financial year beginning 1 January 2021 but do not have
any material impact on the Group:
– Impact of the initial application of Interest Rate Benchmark Reform amendments, Phase 2, to IFRS 9, IFRS 7, IFRS4 and IFRS 16;
– Impact of the initial application of COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16).
The following standards, interpretations and amendments to existing standards are not yet effective and have not been early adopted
by the Group:
– IFRS 17 ‘Insurance contracts’;
– Amendments to IFRS 10 and IAS 28 ‘Sale or Contribution of Assets between an Investor and its Associate or Joint Venture’;
– Amendments to IFRS 3 ‘Reference to the Conceptual Framework’;
– Amendments to IAS 16 ‘Property, Plant and Equipment – Proceeds before Intended Use’;
– Amendments to IAS 1 ‘Classification of Liabilities as Current or Non-current’;
– Amendments to IAS 37 ‘Onerous Contracts – Cost of Fulfilling a Contract’;
– Annual Improvements to IFRS Standards 2018-2020 – ‘Amendments to IFRS 1 First-time Adoption of International Financial Reporting
Standards, IFRS 9 Financial Instruments, IFRS 16 Leases, and IAS 41 Agriculture’;
– Amendments to IAS 1 and IFRS Practice Statement 2 ‘Disclosure of Accounting Policies’;
– Amendments to IAS8 ‘Definitions of Accounting Estimates’; and
– Amendments to IAS 12 ‘Deferred Tax related to Assets and Liabilities arising from a Single Transaction’.
Alternative Performance Measures
In reporting financial information, the Group presents alternative performance measures, ‘APMs’ which are not defined or specified under
the requirements of IFRS.
The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders
with additional helpful information on the performance of the business. The APMs are consistent with how the business performance is
planned and reported within the internal management reporting to the Board. Some of these measures are also used for the purpose
of setting remuneration targets.
Each of the APMs, used by the Group are set out on pages 160 and 161 including explanations of how they are calculated and how they
can be reconciled to a statutory measure where relevant.
The Group reports percentage change figures for all performance measures, other than profit or loss before taxation and earnings per
share, after restating prior year figures at a constant exchange rate. The constant exchange rate, which is an APM, retranslates the
previous year measures at the average actual periodic exchange rates used in the current financial year. These measures are presented
as a means of eliminating the effects of exchange rate fluctuations on the year-on-year reported results.
The Group makes certain adjustments to the statutory measures in order to derive APMs where relevant. The Group’s policy is to exclude
items that are considered to be significant in both nature and/or quantum and where treatment as an adjusted item provides
stakeholders with additional useful information to assess the year-on-year trading performance of the Group.
Basis of preparation
The Consolidated Financial Statements have been prepared under the historical cost convention, as modified by the revaluation of
derivative financial instruments at fair value. The principal accounting policies, which have been applied consistently, are set out in the
following paragraphs.
Going concern
The directors have, at the time of approving the Financial Statements, a reasonable expectation that the Group and Company have
adequate resources to continue in operational existence for the foreseeable future (12 months from the date of this report). Thus they
continue to adopt the going concern basis of accounting in the Financial Statements. Further detail is contained in the Financial review
on page 35.
Annual Report and Financial Statements 2021 121
Notes to the Financial Statements continued
122
International Personal Finance plc
Basis of consolidation
The Consolidated Financial Statements incorporate the Financial Statements of the Company and the entities controlled by the
Company (its subsidiaries) made up to 31 December each year. Control is achieved when the Company:
– has the power over the investee;
– is exposed, or has rights, to variable return from its involvement with the investee; and
– has the ability to use its power to affects its returns.
All intra-Group assets and liabilities, equity, income, expenses and cash flows relating to transactions between Group companies are
eliminated on consolidation.
The accounting policies of the subsidiaries are consistent with the accounting policies of the Group.
Finance costs
Finance costs comprise the interest on external borrowings which are recognised on an effective interest rate (‘EIR’) basis, and gains or
losses on derivative contracts taken to the income statement. Finance costs also include interest expenses on lease liabilities as required
under IFRS 16.
Segment reporting
The Group’s operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of operating
segments, has been identified as the Board. This information is by business line – European home credit, Mexico home credit and IPF
Digital. A business line is a component of the Group that operates within a particular economic environment and that is subject to risks
and returns that are different from those of components operating in other economic environments.
Revenue
Revenue, which excludes value added tax and intra-Group transactions, comprises revenue earned on amounts receivable from
customers. Revenue on customer receivables is calculated using an effective interest rate (‘EIR’). All fees, being interest and non-interest
fees are included within the EIR calculation. The EIR is calculated reflecting all contractual terms using estimated cash flows, being
contractual payments adjusted for the impact of customers paying early.
Directly attributable issue costs are also taken into account in calculating the EIR. Interest income is accrued on all receivables using the
original EIR applied to the loan’s carrying value. Revenue is calculated using the EIR on the gross receivable balance for loans in stages 1
and 2. For loans in stage 3, the calculation is applied to the net receivable from the start of the next reporting period after the loan
entered stage 3. Revenue is capped at the amount of interest fees charged.
Commissions in respect of insurance products intermediated by the Group are recognised when the underlying insurance is sold
(alongside a loan agreement) if no further service obligations are identified. These commission amounts do not make up a significant
part of the revenue of the Group. The insurance premium payable by the customer is capitalised alongside the customer loan receivable
and both are accounted for on an amortised cost basis.
The accounting for amounts receivable from customers is considered further below.
Exceptional items
Exceptional items are items that are unusual because of their size, nature or incidence and which the directors consider should be
disclosed separately to enable a full understanding of the Group’s underlying results.
Other operating costs
Other operating costs include agents’ commission, marketing costs and foreign exchange gains and losses. All other costs are included
in administrative expenses.
Share-based payments
The cost of providing share-based payments to employees is charged to the income statement over the vesting period of the award.
The corresponding credit is made to retained earnings. The cost is based on the fair value of awards granted at the grant date, which is
determined using both a Monte Carlo simulation and Black-Scholes option pricing model.
At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect
of non market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the income statement
such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.
In the Parent Company Financial Statements, the fair value of providing share-based payments to employees of subsidiary companies is
treated as an increase in the investment in subsidiaries.
International Personal Finance plc122
Financial Statements
Annual Report and Financial Statements 2021
123
Financial instruments
Classification and measurement
Under IFRS 9 the classification of financial assets is based both on the business model within which the asset is held and the contractual
cash flow characteristics of the asset. There are three principal classification categories for financial assets that are debt instruments:
(i) amortised cost, (ii) fair value through other comprehensive income (FVTOCI) and (iii) fair value through profit or loss (FVTPL). Equity
instruments in the scope of IFRS 9 are measured at fair value with gains and losses recognised in profit or loss unless an irrevocable
election is made to recognise gains or losses in other comprehensive income.
There is no impact on the classification and measurement of the following financial assets held by the Group: derivative financial
instruments; cash and cash equivalents; other receivables and current tax assets.
There is no change in the accounting for any financial liabilities.
Hedge accounting
On initial application of IFRS 9, an entity may choose, as its accounting policy, to continue to apply the hedge accounting requirements
of IAS 39 instead of the hedge accounting requirements of IFRS 9. The Group has elected to apply the IAS 39 hedge accounting
requirements.
Amounts receivable from customers
Amounts receivable from customers are measured at amortised cost under IFRS 9.
Impairment
The impairment model under IFRS 9 reflects expected credit losses. Under the impairment approach in IFRS 9, it is not necessary for a
credit event to have occurred before credit losses are recognised. Instead, an entity always accounts for expected credit losses and
changes in those expected credit losses. The amount of expected credit losses should be updated at each reporting date. The new
impairment model will apply to the Group’s financial assets that are measured at amortised cost, namely amounts receivable from
customers.
Forward-looking information
Under IFRS 9 macroeconomic overlays are required to include forward-looking information when calculating expected credit losses.
The short-term nature of our lending means that the portfolio turns over quickly, and as a result, any changes in the macroeconomic
environment will have very little impact on our amounts receivable from customers.
Where extreme macroeconomic scenarios are experienced, we will use management judgement to identify, quantify and apply any
required approach.
We have calculated probability of default (PD); loss given default (LGD) and cash flow projections based on the most recent collections
performance, including management overlays where we deem that historic performance is not representative of future collections
performance.
In some markets, the most recent impairment parameters are not considered to be representative of expected future performance due
to changes in operational performance. This is particularly the case in 2020 and 2021 due to the impact of Covid-19 on the Group’s
operations and it’s impairment charge, therefore an overlay has been applied to increase certain parameters at both 31 December 2020
and 31 December 2021.
See page 127 for key sources of estimation uncertainty on amounts receivable from customers in relation to Covid-19.
Other receivables
Every year we will assess other receivables, including amounts due from Group undertakings, for any evidence of impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand. Cash also includes those balances held by agents for operational
purposes. Bank overdrafts are presented in current liabilities to the extent that there is no right of offset with cash balances.
Annual Report and Financial Statements 2021 123
Notes to the Financial Statements continued
124
International Personal Finance plc
Derivative financial instruments
The Group uses derivative financial instruments, principally interest rate swaps, currency swaps and forward currency contracts, to
manage the interest rate and currency risks arising from the Group’s underlying business operations. No transactions of a speculative
nature are undertaken and we do not expect there to be any sources of hedge ineffectiveness.
All derivative financial instruments are assessed against the hedge accounting criteria set out in IAS 39. The majority of the Group’s
derivatives are cash flow hedges of highly probable forecast transactions and meet the hedge accounting requirements of IAS 39.
Derivatives are recognised initially at the fair value through profit or loss (EVTPL) on the date a derivative contract is entered into and are
remeasured subsequently at each reporting date at their fair value. Where derivatives do not qualify for hedge accounting, movements
in their fair value are recognised immediately within the income statement.
For derivatives that are designated as cash flow hedges and where the hedge accounting criteria are met, the effective portion of
changes in the fair value is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised
immediately in the income statement as part of finance costs. Amounts accumulated in equity are recognised in the income statement
when the income or expense on the hedged item is recognised in the income statement.
The Group discontinues hedge accounting when:
– it is evident from testing that a derivative is not, or has ceased to be, highly effective as a hedge;
– the derivative expires, or is sold, terminated or exercised; or
– the underlying hedged item matures or is sold or repaid.
Borrowings
Borrowings are recognised initially at fair value, being their issue proceeds net of any transaction costs incurred. Borrowings are stated
subsequently at amortised cost; any difference between proceeds net of transaction costs and the redemption value is recognised in the
income statement over the expected life of the borrowings using the EIR. Borrowings are classified as current liabilities unless the Group
has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that
the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance
sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash
flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable net assets of the
acquired subsidiary at the date of acquisition.
Goodwill is recognised initially as an asset at cost and is measured subsequently at cost less any accumulated impairment losses.
Goodwill is held in the currency of the acquired entity and revalued to the closing rate at each end of reporting period date.
Goodwill is not amortised but is tested for impairment at least annually and whenever there is an indication that the asset may be
impaired. Impairment is tested by comparing the carrying value of goodwill to the net present value of latest forecast cash flows from the
legacy MCB Finance business cash generating unit. Any impairment is recognised immediately in the income statement. Subsequent
reversals of impairment losses for goodwill are not recognised.
Intangible assets
Intangible assets comprise computer software. Computer software is capitalised as an intangible asset on the basis of the costs incurred
to acquire or develop the specific software and bring it into use.
Intangible assets are amortised (within administrative expenses) on a straight-line basis over their estimated useful economic lives which
are five years. The residual values and economic lives are reviewed by management at each balance sheet date, and any shortfall
recognised through the profit and loss account.
Investments in subsidiaries
Investments in subsidiaries are stated at cost, where cost is equal to the fair value of the consideration used to acquire the asset.
Investments are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be
recoverable. An impairment loss is recognised for the amount by which the investment carrying value exceeds the higher of the asset’s
value in use or its fair value less costs to sell.
International Personal Finance plc124
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Annual Report and Financial Statements 2021
125
Property, plant and equipment
Property, plant and equipment is shown at cost less subsequent depreciation and impairment. Cost represents invoiced cost plus any
other costs that are attributable directly to the acquisition of the items. Repair and maintenance costs are expensed as incurred.
Depreciation is calculated to write down assets to their estimated realisable value over their useful economic lives. The following are the
principal bases used:
Category Depreciation rate Method
Fixtures and fittings 10% Straight–line
Equipment 20% to 33.3% Straight–line
Motor vehicles 25% Reducing balance
The residual value and useful economic life of all assets are reviewed, and adjusted if appropriate, at each balance sheet date. All items
of property, plant and equipment are tested for impairment whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. An impairment loss is recognised through the income statement for the amount by which the asset’s
carrying value exceeds the higher of the asset’s value in use or its fair value less costs to sell.
Share capital
International Personal Finance plc has only ordinary share capital. These shares, with a nominal value of 10 pence per share, are
classified as equity.
Shares held in treasury and by employee trust
The net amount paid to acquire shares is held in a separate reserve and shown as a reduction in equity.
Foreign currency translation
Items included in the Financial Statements of each of the Group’s subsidiaries are measured using the currency of the primary economic
environment in which the subsidiary operates (‘the functional currency’). The Group’s financial information is presented in sterling.
Transactions that are not denominated in an entity’s functional currency are recorded at the rate of exchange ruling at the date of the
transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the relevant functional currency at the rates of
exchange ruling at the balance sheet date. Differences arising on translation are charged or credited to the income statement, except
when deferred in other comprehensive income as qualifying cash flow hedges.
The income statements of the Group’s subsidiaries (none of which has the currency of a hyperinflationary economy) that have a
functional currency different from sterling are translated into sterling at the average exchange rate and the balance sheets are
translated at the exchange rates ruling at each balance sheet date.
Upon consolidation, exchange differences arising from the translation of the net investment in foreign subsidiaries, and of borrowings and
other currency instruments designated as hedges of such investments, are taken to other comprehensive income.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The Group has adopted IFRIC 23. IFRIC 23 sets out how to determine the accounting tax position when there is uncertainty over income
tax treatments. The interpretation requires the Group to determine whether uncertain tax positions are assessed separately or as a group;
and to assess whether it is probable that a tax authority will accept an uncertain tax treatment used/proposed by the entity in its income
tax filings. If this is deemed to be the case, the Group should determine its accounting tax position with the treatment used/proposed in
its income tax filings. If this is not deemed to be the case, the Group should reflect the effect of uncertainty in determining its accounting
tax position using either the most likely amount or the expected value method.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never
taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted
by the balance sheet date.
Annual Report and Financial Statements 2021 125
Notes to the Financial Statements continued
126
International Personal Finance plc
Taxation continued
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the Financial Statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and
interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available in the foreseeable future to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based
on tax laws and rates that have been enacted or substantively enacted at the balance sheet date.
The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the
Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
Current tax and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive
income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly
in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is
included in the accounting for the business combination.
Employee benefits
Defined benefit pension scheme
The charge or credit in the income statement in respect of the defined benefit pension scheme comprises the actuarially assessed
current service cost of working employees together with the interest charge on pension liabilities offset by the expected return on pension
scheme assets. As there are no working employees that are members of the defined benefit pension scheme, there are no current
service costs. All charges or credits are allocated to administrative expenses.
The asset or obligation recognised in the balance sheet in respect of the defined benefit pension scheme is the fair value of the scheme’s
assets less the present value of the defined benefit obligation at the balance sheet date.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present
value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality
corporate bonds that have terms to maturity approximating to the terms of the related pension liability.
Cumulative actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised
immediately in other comprehensive income.
The Parent Company share of the defined benefit retirement obligation is based on the proportion of total Group contributions made by
the Parent Company.
Defined contribution schemes
Contributions to defined contribution pension schemes are charged to the income statement on an accruals basis.
International Personal Finance plc126
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Annual Report and Financial Statements 2021
127
Critical accounting judgements and key sources of estimation uncertainty
The preparation of Consolidated Financial Statements requires the Group to make estimates and judgements that affect the application
of policies and reported accounts.
Critical judgements represent key decisions made by management in the application of the Group accounting policies. Where a
significant risk of materially different outcomes exists due to management assumptions or sources of estimation uncertainty, this will
represent a critical accounting estimate. Estimates and judgements are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results
may differ from these estimates.
The estimates and judgements which have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities are discussed below.
Key sources of estimation uncertainty
In the application of the Group’s accounting policies, the directors are required to make estimations that have a significant impact on
the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
The following are the critical estimations, that the directors have made in the process of applying the Group’s accounting policies and
that have the most significant effect on the amounts recognised in the Financial Statements.
Revenue recognition
The estimate used in respect of revenue recognition is the methodology used to calculate the EIR. In order to determine the EIR
applicable to loans an estimate must be made of the expected life of each loan and hence the cash flows relating thereto. These
estimates are based on historical data and are reviewed regularly. During the year, the regulations relating to payment of rebates in
Poland changed, which is expected to impact the cash flows relating to loans in that market. Based on a 3% variation in the EIR, it is
estimated that the amounts receivable from customers would be higher/lower by £7.7 million (2020: £7.7 million). This sensitivity is based
on historic fluctuations in EIRs.
Amounts receivable from customers
The Group reviews its portfolio of customer loans and receivables for impairment on a weekly or monthly basis. The Group reviews the
most recent collections performance to determine whether there is objective evidence which indicates that there has been an adverse
effect on expected future cash flows. For the purposes of assessing the impairment of customer loans and receivables, customers are
categorised into stages based on days past due as this is considered to be the most reliable predictor of future payment performance.
The level of impairment is calculated using historical payment performance to generate both the estimated expected loss and also the
timing of future cash flows for each agreement. The expected loss is calculated using probability of default (‘PD’) and loss given default
(‘LGD’) parameters.
Recurring post model adjustments on amounts receivable from customers
Impairment models are monitored regularly to test their continued capability to predict the timing and quantum of customer repayments
in the context of the recent customer payment performance. The models used typically have a strong predictive capability reflecting the
relatively stable nature of the business and therefore the actual performance does not usually vary significantly from the estimated
performance. The models are ordinarily updated at least twice per year. Where we expect the models to show an increase in the
expected loss or a slowing of the future cashflows in the following 12 months, we apply an adjustment to the models. At 31 December
2021, this adjustment was a reduction in receivables of £13.6 million (2020: reduction of £7.7 million). This adjustment is included within
the Other impairment line in note 17. Where expected loss parameters have shown significant improvements through the pandemic this
is due to the tighter credit settings that were put in place as part of the Group’s pandemic response. This data is not considered to be
representative of the expected future performance and therefore we have excluded it from our periodic update.
Annual Report and Financial Statements 2021 127
Notes to the Financial Statements continued
128
International Personal Finance plc
Key sources of estimation uncertainty continued
Post model overlays (PMOs) on amounts receivable from customers
2021
CV19 PMO
£m
Disposable Income PMO
£m
Total PMOs
£m
Home credit
15.6 5.3 20.9
IPF Digital – 1.5 1.5
Group
15.6 6.8 22.4
2020
CV19 PMO
£m
Disposable Income PMO
£m
Total PMOs
£m
Home credit 33.5 – 33.5
IPF Digital 5.2
–
5.2
Group 38.7
–
38.7
Government imposed restrictions on the freedom of movement and debt repayment moratoria introduced in 2020 had a significant
adverse impact on 2021 collection cash flows for home credit lending issued before June 2020 (back book portfolio). In 2021, the
Hungarian debt repayment moratorium was extended into 2022, further impacting expected collection cash flows. There remains a small
but significant proportion of this pre-June 2020 issue within the home credit portfolio and, given the age of these loans, we have prepared
post model overlays (PMOs) to our impairment models in order to calculate the continued risks that are not fully reflected in our standard
impairment models. Based on management’s current expectations, the impact of these PMOs was to increase impairment provisions at
31 December 2021 by £15.6 million, of which £7.8 million relates to the risks associated with the loans impacted by the Hungarian debt
moratorium and £7.8 million relates to the remaining home credit lending issued before June 2020. In order to calculate the PMO, we
segmented the portfolio by analysis of the most recent payment performance and, using this information, made assumptions around
expected credit losses, which resulted in a range of outcomes being calculated from £12.9 million to £18.3 million. £15.6 million was
selected as most appropriate. This represents management’s current assessment of a reasonable range of outcomes from the actual
collections performance on the back book portfolio.
In addition, we have noted the unprecedented high inflation forecasts and the ongoing disruption caused by new Covid 19 variants and
have identified a risk associated with reductions in our customers’ disposable incomes, which we believe will negatively impact their
ability to make repayments. We have performed a full assessment of the impact of reduced disposable income in our customer base
and have concluded that it would result in increased risks across our home credit and IPF Digital businesses that are also not reflected in
our standard impairment models. We have prepared PMOs and based on management’s current expectations, the impact of these
PMOs was to increase impairment provisions at 31 December 2021 by a further £6.8 million. In order to calculate this PMO, we have made
assumptions around the level of inflation and wage growth in each of our markets. An increase/decrease in inflation by 10ppts would
result in an increase/decrease in the PMO of £3.9 million. This represents management’s current assessment of a reasonable range in our
assumptions.
Polish early settlement rebates
As previously reported, a comprehensive review has been conducted by UOKiK, the Polish competition and consumer protection
authority, of rebating practices by banks and other consumer credit providers on early loan settlement, including those of the Group’s
Polish businesses. We assessed the impact of the resolution of this matter resulting in higher early settlement rebates being payable to
customers that settled their agreements early before the balance sheet date. A number of risks and uncertainties remain, in particular
with respect to future claims volumes relating to historic rebates paid and the nature of any customer contact exercise required. The total
amount provided of £3.3 million (31 December 2020: £17.6 million) represents the Group’s best estimate of the likely future cost of
increasing historic customer rebates, based on its current strategy to achieve resolution. Whilst the volume of claims could differ from the
estimates, the Group’s expectation at this stage is that claims rates are unlikely to be more than 25% higher than the assumed rate.
International Personal Finance plc128
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Annual Report and Financial Statements 2021
129
Claims management charges in Spain
The Group holds provisions in respect of claims management charges in Spain following an increase in incidence of these claims in
2020. We reviewed the charges by reference to the claims incidence experience and average cost of resolution in the Spanish business.
The provision recorded of £7.1 million, split £5.0 million against receivables and £2.1 million in provisions, (2020: £8.0 million, split £6.4
million against receivables and £1.6 million in provisions) represent the Group’s best estimate of future claims volumes and the cost of
their management, based on current claims management methodology, together with current and future product plans. Whilst the
future claims incidence and cost of management could differ from estimates, the Group’s expectation at this stage is that overall costs
are unlikely to be more than 25% higher than those assumed in the charges.
Investment in subsidiaries
During the year, as a result of the Group net asset position and the market capitalisation of the Company being lower than the carrying
value of the investment in subsidiaries, we carried out a review of the recoverable amount of the carrying value of the investment. This
review entails comparing the investments value to the net present value of latest forecast cash flows from the operating businesses. This
review confirmed that no impairment of the investment is required. A shortfall in profitability compared to current expectations may result
in future adjustments to investments in subsidiary balances.
Tax
Estimations must be exercised in the calculation of the Group’s tax provision, in particular with regard to the existence and extent of tax
risks. This exercise of estimation with regards to the EU State Aid investigation, which is disclosed in note 32, could have a significant effect
on the Financial Statements, as there are significant uncertainties in relation to the amount and timing of associated cash flows.
Deferred tax assets arise from timing differences between the accounting and tax treatment of revenue and impairment transactions
and tax losses. Estimations must be made regarding the extent to which timing differences reverse and an assessment must be made of
the extent to which future profits will be generated to absorb tax losses. A shortfall in profitability compared to current expectations may
result in future adjustments to deferred tax asset balances.
Critical accounting judgements
Accounting judgements have been made over whether the EU State Aid investigation requires a provision or disclosure as a contingent
liability, see above for further details.
Annual Report and Financial Statements 2021 129
Notes to the Financial Statements continued
130
International Personal Finance plc
1. Segment analysis
Group
Revenue Impairment
Profit/(loss) before taxation
2021
£m
2020
£m
2021
£m
2020
£m
2021
£m
2020
£m
European home credit 284.7 351.1 (1.6) 125.1 54.5 (11.7)
Mexico home credit 146.0 157.1 33.8 53.0 18.4 3.5
Digital
118.0 153.1 24.0 69.5 8.7 (7.9)
UK costs*
– – – – (13.9) (12.7)
Total – pre-exceptional items
548.7 661.3 56.2 247.6 67.7 (28.8)
Exceptional items – – – 2.5 – (11.9)
Total
548.7 661.3 56.2 250.1 67.7 (40.7)
* Although UK costs are not classified as a separate segment in accordance with IFRS 8 ‘Operating segments’, they are shown separately above in order to provide a reconciliation to
profit before taxation.
Group
Segment assets
Segment liabilities
2021
£m
2020
£m
2021
£m
2020
£m
European home credit 511.5 485.1 305.5 275.7
Mexico home credit 192.8 170.2 86.9 76.2
Digital
211.6 224.4 91.3 138.4
UK
83.4 144.2 148.5 163.1
Total
999.3 1,023.9 632.2 653.4
Group
Capital expenditure
Depreciation
2021
£m
2020
£m
2021
£m
2020
£m
European home credit 2.2 3.0 4.0 5.0
Mexico home credit 1.1 0.5 1.1 1.4
Digital
0.3 0.3 0.5 0.6
UK
1.5 – – 0.2
Total
5.1 3.8 5.6 7.2
Group
Expenditure on
intangible assets
Amortisation
2021
£m
2020
£m
2021
£m
2020
£m
European home credit – –
Mexico home credit – –
Digital
3.8 4.8 5.6 15.9
UK
6.5 6.9 9.1 10.0
Total
10.3 11.7 14.7 25.9
All revenue comprises amounts earned on amounts receivable from customers.
The Group is domiciled in the UK and no revenue is generated in the UK. Total revenue from external customers is £548.7 million (2020:
£661.3 million) and the breakdown by segment is disclosed above.
As set out in the accounting policy note, the receivables portfolio is valued based on expected cash flows discounted at the effective
interest rate.
The total of non-current assets other than financial instruments and deferred tax assets located in the UK is £25.4 million (2020:
£22.7 million), and the total of non-current assets located in other countries is £209.3 million (2020: £204.7 million).
There is no single external customer from which significant revenue is generated.
The segments shown above are the segments for which management information is presented to the Board, which is deemed to be the
Group’s chief operating decision maker.
International Personal Finance plc130
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Annual Report and Financial Statements 2021
131
2. Finance costs
Group
2021
£m
2020
£m
Interest payable on borrowings
52.6 55.2
Interest payable on lease liabilities 1.4 1.5
Interest income
– (9.9)
Finance costs
54.0 46.8
In 2020, interest income was received in respect of the successful appeal against the 2008 and 2009 tax decisions £8.2 million of this
income, which relates to the period from January 2017 to December 2019 was treated as an exceptional item (see note 10 for further
details).
3. Profit/(loss) before taxation
Profit/(loss) before taxation is stated after charging:
Group
2021
£m
2020
£m
Depreciation of property, plant and equipment (note 14)
5.6 7.2
Depreciation of right-of-use assets (note 15) 8.4 9.9
Impairment of right-of use assets (note 15)
– 0.5
Loss on disposal of property, plant and equipment
0.4 0.2
Amortisation of intangible assets (note 12)
14.7 25.9
Employee costs (note 9)
156.9 171.8
In 2020, £8.1 million of amortisation of intangible assets was accelerated amortisation relating to the decision to close our business in
Finland, this was treated as an exceptional item (see note 10 for further details).
4. Auditor’s remuneration
During the year, the Group incurred the following costs in respect of services provided by the Group auditor:
Group
2021
£m
2020
£m
Fees payable to the Company auditor for the audit of the Parent Company and Consolidated Financial Statements
0.1 0.1
Fees payable to the Company auditor and its associates for other services:
– audit of Company’s subsidiaries pursuant to legislation 0.9 0.9
– other assurance services
0.1 0.1
Further details on auditor remuneration can be found in the Audit and Risk Committee Report on page 86.
5. Tax expense
Group
2021
£m
2020
£m
Current tax expense
25.7 20.0
Deferred tax expense/(income) (note 16)
– current year 1.9 4.9
– prior year
(1.8) (0.4)
0.1 4.5
Pre-exceptional tax expense 25.8 24.5
Exceptional tax credit – (1.0)
Total tax expense 25.8 23.5
Further information regarding the deferred tax expense/(income) is shown in note 16, and primarily relates to timing differences in
respect of revenue and impairment and tax losses.
The taxation charge on the profit for 2021 is £25.8 million representing an effective tax rate for the year of 38.1% (2020: an effective tax rate
of negative 58%).
In 2020, tax paid in the cash flow statement is net of £35.1 million repaid by the Polish tax authorities in respect of the successful appeal
against the 2008 and 2009 Tax decisions.
Annual Report and Financial Statements 2021 131
Notes to the Financial Statements continued
132
International Personal Finance plc
5. Tax expense continued
Group
2021
£m
2020
£m
Tax (charge)/credit on other comprehensive income
Deferred tax charge on net fair value gains – cash flow hedges (0.7) (0.3)
Deferred tax credit on actuarial gains on retirement benefit asset
0.1 0.3
(0.6) –
The rate of tax expense on the profit before taxation for the year ended 31 December 2021 is higher than (2020: higher than) the
standard rate of corporation tax in the UK of 19.0% (2020: 19.0%). The differences are explained as follows:
Group
2021
£m
2020
£m
Profit/(loss) before taxation
67.7 (28.8)
Profit/(loss) before taxation multiplied by the standard rate of corporation tax in the UK of 19.0% (2020: 19.0%) 12.9 (5.5)
Effects of:
– adjustment in respect of prior years
(3.4) (0.7)
– adjustment in respect of foreign tax rates
5.7 6.8
– non-deductible bad debt expense
5.2 13.0
– other expenses not deductible for tax purposes
(1.3) (1.9)
– change in unrecognised deferred tax assets
5.9 12.2
– impact of UK rate change on deferred tax asset / liability
0.8 0.6
Pre-exceptional tax expense
25.8 24.5
Exceptional tax credit – (1.0)
Total tax expense 25.8 23.5
The Group is subject to a tax audit in Mexico (regarding 2017).
6. Earnings/(loss) per share
Basic earnings/(loss) per share (‘E/(L)PS’) is calculated by dividing the profit attributable to shareholders of £41.9 million (2020: loss of
£64.2 million) by the weighted average number of shares in issue during the period of 223.2 million (2020: 222.4 million) which has been
adjusted to exclude the weighted average number of shares held in treasury and by the employee trust.
For diluted EPS, the weighted average number of IPF plc ordinary shares in issue is adjusted to assume conversion of all dilutive potential
ordinary share options relating to employees of the Group.
The weighted average number of shares used in the basic and diluted EPS calculations can be reconciled as follows:
Group
2021
£m
2020
£m
Used in basic E/(L)PS calculation
223.2 222.4
Dilutive effect of awards 12.1 11.7
Used in diluted E/(L)PS calculation
235.3 234.1
Basic and diluted EPS are presented below:
Group
2021
pence
2020
pence
Basic E/(L)PS
18.8 (28.9)
Dilutive effect of awards (1.0) 1.5
Diluted E/(L)PS
17.8 (27.4)
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Annual Report and Financial Statements 2021
133
7. Dividends
Group and Company
2021
£m
2020
£m
Interim dividend of 2.2 pence per share (2020: interim dividend of nil pence per share)
4.9 –
Final 2020 dividend of nil pence per share (2020: final 2019 dividend of nil pence per share) – –
4.9 –
The Board has considered the strong trading performance of the Group delivered in 2021, the medium-term outlook and the strength of
the balance sheet, and is pleased to declare a final dividend of 5.8 pence per share, bringing the full-year dividend to 8.0 pence per
share (2020: full-year dividend nil pence per share). Subject to shareholder approval, the final dividend will be paid on 6 May 2022 to
shareholders on the register at the close of business on 8 April 2022. The shares will be marked ex-dividend on 7 April 2022.
8. Remuneration of key management personnel
The key management personnel (as defined by IAS 24 ‘Related party disclosures’) of the Group are deemed to be the executive and
non-executive directors of IPF and the members of the Senior Leadership Team.
2021
£m
2020
£m
Short-term employee benefits
3.8 3.9
Post-employment benefits 0.1 0.1
Share-based payments
0.1 0.2
Total
4.0 4.2
Short-term employee benefits comprise salary/fees and benefits earned in the year.
Post-employment benefits represent the sum of contributions into the Group’s stakeholder pension scheme and personal pension
arrangements.
For gains arising on executive directors’ share options see page 103.
Disclosures in respect of the Group’s directors are included in the Directors’ Remuneration Report.
9. Employee information
The average full-time equivalent of people employed by the Group (including executive directors) was as follows:
Group
2021
Number
2020
Number
Full-time*
5,842 6,482
Part-time** 1,465 1,647
7,307 8,129
* Includes 770 agents in Hungary and Romania (2020: includes 712 agents in Hungary and Romania).
** Includes 1,285 agents in Hungary and Romania (2020: includes 1,385 agents in Hungary and Romania).
Agents are self-employed other than in Hungary and Romania where they are required by legislation to be employed.
The average number of employees by category was as follows:
Group
2021
Number
2020
Number
Operations
4,330 4,749
Administration 441 591
Head office and loss prevention
2,536 2,789
7,307 8,129
Group employment costs for all employees (including executive directors) were as follows:
Group
2021
£m
2020
£m
Gross wages and salaries
137.4 148.4
Social security costs 19.1 22.1
Pension charge – defined contribution schemes (note 27)
0.7 0.8
Pension credit – defined benefit schemes (note 27)
(0.1) (0.5)
Share-based payment charge (note 28)
(0.2) 1.1
Total
156.9 171.8
Annual Report and Financial Statements 2021 133
Notes to the Financial Statements continued
134
International Personal Finance plc
10. Exceptional items
In 2020, the income statement included a net exceptional loss of £10.9 million which comprised a pre-tax exceptional loss of £11.9 million
and an exceptional tax credit of £1.0 million.
Group
Pre-tax
£m
Tax
£m
Post-tax
£m
Finland closure
(10.6) (1.1) (11.7)
Restructuring costs (9.5) 2.1 (7.4)
Interest income
8.2 – 8.2
Total
(11.9) 1.0 (10.9)
The decision to close our business in Finland and to collect out the portfolio following a tightening of the rate cap resulted in a loss of
£11.7 million. It comprised a £10.6 million charge against loss before tax and the write-off of a deferred tax asset of £1.1 million that we no
longer expected to be realised. The pre-tax loss comprised a provision taken against the carrying value of the receivables book based on
our best estimate of the value of collections of £2.5 million and £8.1 million from accelerated amortisation of intangible assets. The
restructuring charge of £9.5 million arose in connection with rightsizing exercises that were conducted in 2020 and there was an
associated tax credit of £2.1 million relating to this item. In addition, the profit and loss account included exceptional non-taxable interest
income of £8.2 million, relating to the interest accrued for the period up to 31 December 2019 on the payments to the Polish tax authority
made in January 2017 in respect of the 2008 and 2009 cases which were refunded in 2020.
11. Goodwill
Group
2021
£m
2020
£m
Net book value
At 1 January 24.4 23.1
Exchange adjustments
(1.5) 1.3
At 31 December
22.9 24.4
Goodwill is tested annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable
amount is determined from a value in use calculation. The key assumptions used in the value in use calculation relate to the discount
rates and growth rates adopted. We adopt discount rates which reflect the time value of money and the risks specific to the legacy
MCB business. The cash flow forecasts are based on the most recent financial budgets approved by the Board which includes our
best estimates of the impact of Covid-19 and include the decision to collect out the Finnish business. The rate used to discount the
forecast cash flows is 10% (2020: 10%). The discount rate would need to increase to 17% before indicating that part of the goodwill
may be impaired.
12. Intangible assets
Group
2021
£m
2020
£m
Net book value
At 1 January 30.2 43.2
Additions
10.3 11.7
Amortisation
(14.7) (25.9)
Exchange adjustments
(0.6) 1.2
At 31 December
25.2 30.2
Analysed as:
– cost
126.2 117.4
– amortisation
(101.0) (87.2)
At 31 December
25.2 30.2
Intangible assets comprise computer software and are a mixture of self-developed and purchased assets. All purchased assets have
had further capitalised development on them, meaning it is not possible to disaggregate fully between the relevant intangible
categories.
In 2020, £8.1 million of amortisation of intangible assets was accelerated amortisation relating to the decision to close our business in
Finland, this was treated as an exceptional item (see note 10 for further details).
The Company has no intangible assets.
International Personal Finance plc134
Financial Statements
Annual Report and Financial Statements 2021
135
13. Investment in subsidiaries
Company
2021
£m
2020
£m
Investment in subsidiaries
712.5 712.3
Share-based payment adjustment 18.9 18.9
731.4 731.2
IPF plc acquired the international businesses of the Provident Financial plc Group on 16 July 2007 by issuing one IPF plc share to the
shareholders of Provident Financial plc for each Provident Financial plc share held by them. The fair value of the consideration issued in
exchange for the investment in these international businesses was £663.6 million and this amount was therefore capitalised as a cost of
investment. On 6 February 2015 the Group acquired 100% of the issued share capital of MCB Finance Group plc (‘MCB’) for a cash
consideration of £23.2 million. Subsequent to this, further investment of £25.7m has been made in these acquired businesses.
£18.9 million (2020: £18.9 million) has been added to the cost of investment representing the fair value of the share-based payment
awards over IPF plc shares made to employees of subsidiary companies of IPF plc. Corresponding credits are taken to reserves.
During the year, as a result of the Group net asset position and the market capitalisation of the Company being lower than the carrying
value of the investment in subsidiaries, we carried out a review of the recoverable amount of the carrying value of the investment. This
review entails comparing the investments value to the net present value of latest forecast cash flows from the operating businesses. The
cash flow forecasts are based on the most recent financial budgets approved by the Board. The rate used to discount the forecast cash
flows is 10% (2020: 10%). This review confirmed that no impairment of the investment is required.
The subsidiary companies of IPF plc, which are 100% owned by the Group and included in these Consolidated Financial Statements,
are detailed below:
Subsidiary company Country of incorporation and operation Principal activity
Avalist Credit Secure, S.L. Spain Provision of services
Compañía Estelar Poniente, S.A. de C.V. Mexico Provision of services (agents)
División Estratégica Central, S.A. de C.V. Mexico Holding Company
Estrategias Divisionales Céntricas, S.A. de C.V. Mexico Provision of services (agents)
Estrategias Sureñas de Avanzada, S.A. de C.V. Mexico Provision of services (agents)
International Credit Insurance Limited Guernsey Provision of services
International Personal Finance Digital Spain S.A.U. Spain Digital credi
t
International Personal Finance Investments Limited United Kingdom Holding company
IPF Ceská republica s.r.o Czech Republic Non
-
trading
IPF Development (2003) Limited United Kingdom Provision of services
IPF Digital AS Estonia Digital credit/provision of services
IPF Digital Australia Pty Limited Australia Digital credi
t
IPF Digital Finland Oy Finland Digital credi
t
IPF Digital Group Limited United Kingdom Holding company
IPF Digital Latvia, SIA Latvia Digital credi
t
IPF Digital Lietuva, UAB Lithuania Digital credi
t
IPF Digital Mexico S.A de C.
V
Mexico Digital credi
t
IPF Financial Services Limited United Kingdom Provision of services
IPF Financing Limited United Kingdom Provision of services
IPF Guernsey (2) Limited Guernsey Dorman
t
IPF Holdings Limited United Kingdom Holding company
IPF International Limited United Kingdom Provision of services
IPF Investments Polska sp. z o.o. Poland Provision of services
IPF Managemen
t
Ireland Provision of services
IPF Nordic Limited United Kingdom Provision of services
IPF Polska sp. z o.o. Poland Digital credi
t
La Regional Operaciones Centrales, S.A. de C.V. Mexico Holding Company
La Tapatía Operaciones de Avanzada, S.A. de C.V. Mexico Provision of services (agents)
Metropolitana Estrella de Operaciones, S.A. de C.V. Mexico Provision of services (agents)
Operadora Regiomontana de Estrategias Integrales, S.A. de C.V. Mexico Provision of services (agents)
PF (Netherlands) B.V. Netherlands Provision of services
Provident Agent De Asigurae srl Romania Provision of services
Provident Financial Romania IFN S.A. Romania Home credi
t
Provident Financial s.r.o. Czech Republic Home credi
t
Provident Financial Zrt. Hungary Home credi
t
Provident Mexico S.A. de C.V. Mexico Home credi
t
Provident Polska S.A. Poland Home credi
t
Provident Polska sp. z o.o. Poland Non
-
trading
Provident Servicios de Agencia S.A. de C.V. Mexico Provision of services
Provident Servicios S.A. de C.V. Mexico Provision of services
Annual Report and Financial Statements 2021 135
Notes to the Financial Statements continued
136
International Personal Finance plc
13. Investment in subsidiaries continued
All UK subsidiaries are registered at the same registered office as the Company, and this address is shown on the back cover of this
Annual Report and Financial Statements. All subsidiaries are tax resident in their country of incorporation except for International Credit
Insurance Limited which is tax resident in the UK.
14. Property, plant and equipment
Group
Computer
equipment
£m
Fixtures and
fittings
£m
Motor
vehicles
£m
Total
£m
Cost
At 1 January 2020 80.8 26.2 2.6 109.6
Exchange adjustments (0.7) (0.8) (0.1) (1.6)
Additions 3.2 0.6 – 3.8
Disposals (2.3) (2.2) (0.8) (5.3)
At 31 December 2020 81.0 23.8 1.7 106.5
Depreciation
At 1 January 2020 (69.0) (19.2) (1.4) (89.6)
Exchange adjustments 0.5 0.5 – 1.0
Charge to the income statement (4.5) (2.5) (0.2) (7.2)
Disposals 2.3 1.9 0.5 4.7
At 31 December 2020 (70.7) (19.3) (1.1) (91.1)
Net book value at 31 December 2020 10.3 4.5 0.6 15.4
Group
Computer
equipment
£m
Fixtures and
fittings
£m
Motor
vehicles
£m
Total
£m
Cost
At 1 January 2021 81.0 23.8 1.7 106.5
Exchange adjustments
(1.9) (0.9) (0.1) (2.9)
Additions
3.0 2.1 – 5.1
Disposals
(2.8) (2.1) (1.1) (6.0)
At 31 December 2021
79.3 22.9 0.5 102.7
Depreciation
At 1 January 2021 (70.7) (19.3) (1.1) (91.1)
Exchange adjustments
1.5 0.8 0.1 2.4
Charge to the income statement
(3.8) (1.7) (0.1) (5.6)
Disposals
2.6 2.0 0.8 5.4
At 31 December 2021
(70.4) (18.2) (0.3) (88.9)
Net book value at 31 December 2021 8.9 4.7 0.2 13.8
The Company has property, plant and equipment with a cost of £2.4 million (2020: £1.0 million); depreciation of £1.0 million
(2020: £1.0 million); and a net book value of £1.4 million (2020: £nil). All of these assets are computer equipment and Head Office fixtures
and fittings.
International Personal Finance plc136
Financial Statements
Annual Report and Financial Statements 2021
137
15. Right-of-use assets and lease liabilities
The movement in the right-of-use assets is as follows:
Motor vehicles
£m
Properties
£m
Equipment
£m
Group
£m
Net book value at 1 January 2020 6.4 12.4 – 18.8
Exchange adjustments (0.2) (0.3) – (0.5)
Additions 4.2 1.7 0.1 6.0
Modifications 0.1 3.5 – 3.6
Impairment – (0.5) – (0.5)
Depreciation (3.6) (6.3) – (9.9)
Net book value at 31 December 2020 6.9 10.5 0.1 17.5
Motor vehicles
£m
Properties
£m
Equipment
£m
Group
£m
Net book value at 1 January 2021
6.9 10.5 0.1 17.5
Exchange adjustments (0.4) (0.3) – (0.7)
Additions
2.4 5.9 – 8.3
Modifications
0.4 0.6 – 1.0
Depreciation
(3.6) (4.8) – (8.4)
Net book value at 31 December 2021
5.7 11.9 0.1 17.7
The amounts recognised in profit and loss are as follows:
Group
2021
£m
2020
£m
Depreciation on right-of-use assets
8.4 9.9
Interest expense on lease liabilities 1.4 1.5
Expense relating to short term leases
1.2 1.6
Expense relating to leases of low value assets
– 0.1
11.0 13.1
The movement in the lease liability in the period is as follows:
2021
£m
2020
£m
Lease liability at 1 January
19.2
19.5
Exchange adjustments (0.8) (0.5)
Additions
8.8 9.6
Interest
1.4 1.5
Lease payments
(9.9) (10.9)
Lease liability at 31 December
18.7 19.2
Current liabilities 6.4 7.4
Non-current liabilities:
– between one and five years
10.6 11.1
– greater than five years
1.7 0.7
12.3 11.8
Lease liability at 31 December 18.7 19.2
Lease liabilities are measured at the present value of the remaining lease payments, discounted using the rate implicit in the lease,
or if that rate cannot be readily determined, at the lessee’s incremental borrowing rate. The weighted average lessee’s incremental
borrowing rate applied to the lease liabilities at 31 December 2021 was 7.2% (2020: 7.4%).
The total cash outflow in the year in respect of lease contracts was £10.3 million (2020: £11.4 million).
The Company has one lease as at 31 December 2021 (2020: £nil) in respect of the new UK head office premises, with a lease liability of
£2.8 million.
Annual Report and Financial Statements 2021 137
Notes to the Financial Statements continued
138
International Personal Finance plc
16. Deferred tax
Deferred tax is calculated in full on temporary differences under the balance sheet liability method using the appropriate tax rate for
the jurisdiction in which the temporary difference arises. The movement in the deferred tax balance during the year can be analysed
as follows:
Group
Company
2021
£m
2020
£m
2021
£m
2020
£m
At 1 January 121.9 131.7 (0.2) 0.6
Exchange adjustments (4.4) (3.9) – –
Tax charge to the income statement
(0.1) (5.9) (0.6) (1.2)
Tax (charge)/credit on other comprehensive income
(0.6) – 0.1 0.4
At 31 December
116.8 121.9 (0.7) (0.2)
The Finance Act 2016, which was substantively enacted on 6 September 2016, included an amending provision to reduce the UK
corporation tax rate to 17% with effect from 1 April 2020. The UK corporation tax rate was 19% throughout 2021. However, the Finance Act
2021, which was substantively enacted on 24 May 2021, included an amending provision to increase the UK corporation tax rate to 25%
with effect from 1 April 2023. Accordingly, 19% and/or 25% has been used in the calculation of UK deferred tax assets and liabilities at 31
December 2021.
Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so.
An analysis of the deferred tax assets and liabilities is set out below:
Group
Company
2021
£m
2020
£m
2021
£m
2020
£m
Deferred tax assets 124.7 135.7 0.5 –
Deferred tax liabilities (7.9) (13.8) (1.2) (0.2)
At 31 December
116.8 121.9 (0.7) (0.2)
Group Company
Losses
£m
Revenue
and
impairment
differences
£m
Other
temporary
differences
£m
Total
£m
Retirement
benefit
obligations
£m
Other
temporary
differences
£m
Total
£m
At 1 January 2020 10.7 120.6 0.4 131.7 (0.7) 1.3 0.6
Exchange adjustments 0.8 (4.1) (0.6) (3.9) – – –
Tax credit/(charge) to the income statement 14.3 (21.2) 1.0 (5.9) (0.4) (0.8) (1.2)
Tax credit on items taken directly to equity – – – – 0.4 – 0.4
At 31 December 2020 25.8 95.3 0.8 121.9 (0.7) 0.5 (0.2)
At 1 January 2021 25.8 95.3 0.8 121.9 (0.7) 0.5 (0.2)
Exchange adjustments
(0.5) (4.0) 0.1 (4.4) – – –
Tax credit/(charge) to the income statement
18.1 (15.4) (2.8) (0.1) (0.6) – (0.6)
Tax (charge)/credit on items taken directly to equity
– – (0.6) (0.6) 0.1 – 0.1
At 31 December 2021
43.4 75.9 (2.5) 116.8 (1.2) 0.5 (0.7)
Deferred tax assets have been recognised in respect of tax losses and other temporary timing differences (principally relating to
recognition of revenue and impairment) to the extent that it is probable that these assets will be utilised against future taxable profits. The
recoverability of deferred tax assets is supported by the expected level of future profits in the countries concerned.
At 31 December 2021, the Group has unused tax losses of £218.2 million (2020: £139.2 million) available for offset against future profits.
A deferred tax asset has been recognised in respect of £149.7 million (2020: £85.8 million) of these losses where profit projections indicate
the existence of sufficient taxable profits to support the recognition of the asset. The recognition for 2021 was based on the forecast profits
contained in the Group’s five year business plan approved by the board in December 2021. See information on Going Concern on page
35 for more details regarding the business plan. For deferred tax asset recognition purposes, no profit growth is projected for periods after
2026. No deferred tax has been recognised in respect of the remaining £68.5 million (2020: £53.4 million) as it is not considered probable
that there will be future taxable profits available against which these losses can be offset. None of the unrecognised losses are subject to
an expiry date.
International Personal Finance plc138
Financial Statements
Annual Report and Financial Statements 2021
139
16. Deferred tax continued
Dividends received from overseas subsidiaries are largely exempt from UK tax but may be subject to dividend withholding taxes levied
by certain overseas tax jurisdictions in which the Group’s subsidiaries operate (currently the Czech Republic and Romania). The gross
temporary differences of those subsidiaries affected by such potential withholding taxes is circa £26 million (2020: £15.4 million).
A deferred tax liability of circa £0.4 million (2020: nil) has been recognised on the unremitted earnings of those subsidiaries affected by
such potential withholding taxes only to the extent that the Group is anticipating dividends to be distributed by those subsidiaries in the
foreseeable future. No deferred tax liability is recognised on remaining temporary differences of circa £19 million (2020: £15.4 million) as
the Group is able to control the timings of the reversal of these temporary differences and it is probable that they will not reverse in the
foreseeable future.
17. Amounts receivable from customers
Group
2021
£m
2020
£m
Amounts receivable from customers comprise:
– amounts due within one year 566.6 532.6
– amounts due in more than one year
150.2 136.5
716.8 669.1
All lending is in the local currency of the country in which the loan is issued. The currency profile of amounts receivable from customers is
as follows:
Group
2021
£m
2020
£m
Polish zloty
247.6 225.3
Czech crown 48.7 50.9
Euro
87.8 117.0
Hungarian forint
101.7 89.9
Mexican peso
133.3 100.8
Romanian leu
69.8 62.1
Australian dollar
27.9 23.1
716.8 669.1
Amounts receivable from customers are stated at amortised cost and calculated in accordance with the Group’s accounting policies.
Depending on the risks associated with each loan, they are categorised into three stages where stage 3 is the highest risk.
Determining an increase in credit risk since initial recognition
IFRS 9 requires the recognition of 12 month expected credit losses (the expected credit losses from default events that are expected
within 12 months of the reporting date) if credit risk has not significantly increased since initial recognition (stage 1) and lifetime expected
credit losses for financial instruments for which the credit risk has increased significantly since initial recognition (stage 2) or which are
credit impaired (stage 3).
When determining whether the risk of default has increased significantly since initial recognition the Group considers both quantitative
and qualitative information based on the Group’s historical experience.
The approach to identifying significant increases in credit risk is consistent across the Group’s products. In addition, as a backstop, the
Group considers that a significant increase in credit risk occurs when an asset is more than 30 days past due.
Financial instruments are moved back to stage 1 once they no longer meet the criteria for a significant increase in credit risk.
Definition of default and credit impaired assets
The Group defines a financial instrument as in default, which is fully aligned with the definition of credit-impaired, when it meets one or
more of the following criteria:
– Quantitative criteria: the customer is more than 90 days past due on their contractual payments in home credit and 60 days past due
on their contractual payments in IPF Digital; and
– Qualitative criteria: indication that there is a measurable movement in the estimated future cash flows from a group of financial assets.
For example, if prospective legislative changes are considered to impact the collections performance of customers.
The default definition has been applied consistently to model the probability of default (PD), and loss given default (LGD) throughout the
Group’s expected credit loss calculations.
An instrument is considered to no longer be in default (i.e. to have cured) when it no longer meets any of the default criteria.
Annual Report and Financial Statements 2021 139
Notes to the Financial Statements continued
140
International Personal Finance plc
17. Amounts receivable from customers continued
Write-offs
A financial instrument is written off (in full or in part) when the Group judges there to be no reasonable expectation that the instrument
can be recovered (in full or in part). This is typically the case when the Group determines that the customer is not able to generate
sufficient cash flows to repay the amounts subject to the write-off. This assessment is performed at the individual instrument level. The
related impairment loss allowance is also written off once all the necessary procedures have been completed and the loss amount has
crystallised. Financial instruments that are written off could still be subject to recovery activities and subsequent recoveries of amounts
previously written off decrease the amount of impairment losses recorded in the income statement.
We have not disclosed amounts written off, including those still subject to recovery activities, separately in the receivables by stage as our
impairment models do not analyse default performance in this manner.
The table below shows the amount of the net receivables in each stage at 31 December:
2021 2020
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total Net
Receivables
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total Net
Receivables
£m
Home credit 360.3 57.9 125.3 543.5 288.7 51.0 142.6 482.3
IPF Digital 159.8 8.6 4.9 173.3 177.8 7.1 1.9 186.8
Group
520.1 66.5 130.2 716.8 466.5 58.1 144.5 669.1
Gross carrying amount and loss allowance
The amounts receivable from customers includes a provision for the loss allowance, which relates to the expected credit losses on each
agreement. The gross carrying amount is the present value of the portfolio before the loss allowance provision is deducted. The gross
carrying amount less the loss allowance is equal to the net receivables.
2021 2020
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total Net
Receivables
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total Net
Receivables
£m
Gross carrying amount 649.7 124.1 379.0 1,152.8 601.3 125.1 456.1 1,182.5
Loss allowance (129.6) (57.6) (248.8) (436.0) (134.8) (67.0) (311.6) (513.4)
Net receivables
520.1 66.5 130.2 716.8 466.5 58.1 144.5 669.1
Gross carrying amount
The changes in gross carrying amount recognised for the period is impacted by a variety of factors:
– Credit issued in the period;
– Transfers between the three stages due to changes in the risk associated with each loan;
– Revenue recognised within the period;
– Recoveries from receivables; and
– Other movements to gross carrying amount and foreign exchange retranslations.
Loss allowance
The changes to the loss allowance recognised for the period is impacted by a variety of factors:
– Total impairment charge for the period, which comprises the following:
– Loss allowance on credit issued;
– Transfers between the three stages due to changes in the risk associated with each loan;
– Changes in risk parameters (PDs, and LGDs) in the period arising from the regular refresh of the inputs into the expected loss
model; and
– Other impairment impact including the impact of movements in days past due within each stage, impairment impact of write-offs
and post field write-off collections.
– Recoveries from receivables not included within impairment; and
– Other movements to the loss allowance and foreign exchange retranslations.
International Personal Finance plc140
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Annual Report and Financial Statements 2021
141
17. Amounts receivable from customers continued
The following tables explain the changes for home credit in the gross carrying amount, the loss allowance and net receivables between
the beginning of the year and the end of the year:
2021 2020
Gross carrying amount – home credit
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Opening gross carrying amount at 1 January 385.2 101.9 403.0 890.1 522.8 152.3 426.7 1,101.8
Credit issued 793.4
– –
793.4 597.3
– –
597.3
Transfers between stages:
(201.5) 69.7 131.8
–
(275.3) 15.9 259.4
–
From stage 1
(220.3) 102.7 117.6
–
(293.2) 84.5 208.7
–
From stage 2
5.3 (34.0) 28.7
–
7.3 (69.3) 62.0
–
From stage 3
13.5 1.0 (14.5)
–
10.6 0.7 (11.3)
–
Revenue
269.3 52.8 108.6 430.7 264.6 52.4 191.2 508.2
Recoveries
(765.8) (97.6) (366.4) (1,229.8) (726.8) (120.1) (472.2) (1,319.1)
Other movements
(23.4) (18.9) 65.6 23.3 2.6 1.4 (2.1) 1.9
Closing gross carrying amount at
31 December
457.2 107.9 342.6 907.7 385.2 101.9 403.0 890.1
2021 2020
Loss allowance – home credit
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Opening loss allowance at 1 January (96.5) (50.9) (260.4) (407.8) (99.4) (67.9) (240.2) (407.5)
Loss allowance on credit issued (90.7)
– –
(90.7) (68.4)
– –
(68.4)
Transfers between stages:
39.1 (20.5) (18.6)
–
48.5 13.3 (61.8)
–
From stage 1
48.9 (32.9) (16.0)
–
57.0 (21.0) (36.0)
–
From stage 2
(1.7) 12.8 (11.1)
–
(2.4) 34.6 (32.2)
–
From stage 3
(8.1) (0.4) 8.5
–
(6.1) (0.3) 6.4
–
Change in risk parameters
1.9 (0.1) –
1.8
2.1 0.0 0.1
2.2
Covid-19 PMO
(3.3) (0.6) (17.0) (20.9) (20.4) (3.6) (9.5) (33.5)
Other impairment
37.4 4.7 35.5 77.6 (37.2) (29.4) (7.7) (74.3)
Total impairment
(15.6) (16.5) (0.1) (32.2) (75.4) (19.7) (78.9) (174.0)
Recoveries
5.8 7.8 62.6 76.2 65.6 43.0 54.2 162.8
Other movements
9.4 9.6 (19.4) (0.4) 12.7 (6.3) 4.5 10.9
Closing loss allowance at 31 December
(96.9) (50.0) (217.3) (364.2) (96.5) (50.9) (260.4) (407.8)
2021 2020
Net receivables – home credit
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Opening net receivables at 1 January 288.7 51.0 142.6 482.3 423.4 84.4 186.5 694.3
Credit issued 793.4 – – 793.4 597.3 – – 597.3
Transfers between stages:
(201.5) 69.7 131.8 – (275.3) 15.9 259.4 –
From stage 1
(220.3) 102.7 117.6 – (293.2) 84.5 208.7 –
From stage 2
5.3 (34.0) 28.7 – 7.3 (69.3) 62.0 –
From stage 3
13.5 1.0 (14.5) – 10.6 0.7 (11.3) –
Revenue
269.3 52.8 108.6 430.7 264.6 52.4 191.2 508.2
Impairment
(15.6) (16.5) (0.1) (32.2) (75.4) (19.7) (78.9) (174.0)
Recoveries
(760.0) (89.8) (303.8) (1,153.6) (661.2) (77.1) (418.0) (1,156.3)
Other movements
(14.0) (9.3) 46.2 22.9 15.3 (4.9) 2.4 12.8
Closing net receivables at 31 December
360.3 57.9 125.3 543.5 288.7 51.0 142.6 482.3
Annual Report and Financial Statements 2021 141
Notes to the Financial Statements continued
142
International Personal Finance plc
17. Amounts receivable from customers continued
The following tables explain the changes for IPF Digital in the gross carrying amount, the loss allowance and net receivables between the
beginning of the year and the end of the year:
2021 2020
Gross carrying amount – IPF Digital
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Opening gross carrying amount
at 1 January
216.1 23.2 53.1 292.4 292.8 36.6 33.2 362.2
Credit issued 188.7 – – 188.7 174.9 – – 174.9
Transfers between stages:
(33.3) (4.6) 37.9 – (64.5) (21.8) 86.3 –
From stage 1
(82.3) 78.6 3.7 – (142.8) 140.8 2.0 –
From stage 2
46.2 (84.6) 38.4 – 76.1 (164.7) 88.6 –
From stage 3
2.8 1.4 (4.2) – 2.2 2.1 (4.3) –
Revenue
105.7 8.3 4.0 118.0 126.3 14.8 12.0 153.1
Recoveries
(267.6) (9.0) (58.5) (335.1) (324.5) (6.5) (74.9) (405.9)
Other movements
(17.1) (1.7) (0.1) (18.9) 11.1 0.1 (3.5) 7.7
Closing gross carrying amount
at 31 December
192.5 16.2 36.4 245.1 216.1 23.2 53.1 292.4
2021 2020
Loss allowance
–
IPF Di
g
ital
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Opening loss allowance at 1 January (38.3) (16.1) (51.2) (105.6) (34.9) (16.5) (31.9) (83.3)
Loss allowance on credit issued (24.7) – – (24.7) (16.1) – – (16.1)
Transfers between stages:
(8.3) 30.2 (21.9) – (9.4) 60.2 (50.8) –
From stage 1
11.7 (11.3) (0.4) – 20.1 (19,9) (0.2) –
From stage 2
(17.9) 42.4 (24.5) – (27.9) 81.4 (53.5) –
From stage 3
(2.1) (0.9) 3.0 (1.6) (1.3) 2.9 –
Change in risk parameters
2.9 1.6 0.1 4.6 (4.3) (1.9) (0.6) (6.8)
Covid-19 PMO
(1.2) (0.1) (0.2) (1.5) (2.4) (1.6) (1.2) (5.2)
Other impairment
20.8 (39.2) 16.0 (2.4) 24.9 (57.6) (15.3) (48.0)
Total post-exceptional impairment
(10.5) (7.5) (6.0) (24.0) (7.3) (0.9) (67.9) (76.1)
Recoveries
– – 40.0 40.0 – – 52.6 52.6
Other movements
16.1 16.0 (14.3) 17.8 3.9 1.3 (4.0) 1.2
Closing loss allowance at 31 December
(32.7) (7.6) (31.5) (71.8) (38.3) (16.1) (51.2) (105.6)
2021 2020
Net receivables
–
IPF Di
g
ital
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Opening net receivables at 1 January 177.8 7.1 1.9 186.8 257.9 20.1 1.3 279.3
Credit issued 188.7 – – 188.7 174.9 – – 174.9
Transfers between stages:
(33.3) (4.6) 37.9 – (64.5) (21.8) 86.3 –
From stage 1
(82.3) 78.6 3.7 – (142.8) 140.8 2.0 –
From stage 2
46.2 (84.6) 38.4 – 76.1 (164.7) 88.6 –
From stage 3
2.8 1.4 (4.2) – 2.2 2.1 (4.3) –
Revenue
105.7 8.3 4.0 118.0 126.3 14.8 12.0 153.1
Post-exceptional impairment
(10.5) (7.5) (6.0) (24.0) (7.3) (0.9) (67.9) (76.1)
Recoveries
(267.6) (9.0) (18.5) (295.1) (324.5) (6.5) (22.3) (353.3)
Other movements
(1.0) 14.3 (14.4) (1.1) 15.0 1.4 (7.5) 8.9
Closing net receivables at 31 December
159.8 8.6 4.9 173.3 177.8 7.1 1.9 186.8
International Personal Finance plc142
Financial Statements
Annual Report and Financial Statements 2021
143
17. Amounts receivable from customers continued
Impairment as a percentage of revenue for each geographical segment is shown below:
Group
2021
%
2020
%
European home credit
(0.6) 35.6
Mexico home credit 23.2 33.7
Digital
20.3 45.4
The carrying value of amounts receivable from customers that would have been impaired had their terms not been renegotiated is £nil
(2020: £nil).
Amounts receivable from customers are held at amortised cost and are equal to the expected future cash flows receivable discounted
at the average EIR of 93% (2020: 96%). All amounts receivable from customers are at fixed interest rates. The average period to maturity of
the amounts receivable from customers is 12.3 months (2020: 11.1 months).
No collateral is held in respect of any customer receivables.
Management monitor credit quality using two key metrics: impairment as a percentage of revenue and gross cash loss (‘GCL’)
development. Commentary on impairment as a percentage of revenue is set out in the operational review at both Group and segment
level. GCL represents the expected total value of contractual cash flows that will not be collected and will ultimately be written off for any
loan or group of loans. Until collections on any group of receivables are complete, the GCL forecast is a composite of actual and
expected cash flows. This represents a leading-edge measure of credit quality with forecasts based on the actual performance of
previous lending.
The Company has no amounts receivable from customers (2020: £nil).
18. Cash and cash equivalents
Group
Company
2021
£m
2020
£m
2021
£m
2020
£m
Cash at bank and in hand 41.7 116.3 4.4 65.1
The currency profile of cash and cash equivalents is as follows:
Group
Company
2021
£m
2020
£m
2021
£m
2020
£m
GBP Sterling 3.9 56.8 4.0 56.8
Polish zloty 11.4 14.5 – –
Czech crown
2.9 3.6 – –
Euro
9.9 32.3 0.4 8.3
Hungarian forint
1.7 1.1 – –
Mexican peso
8.1 5.0 – –
Romanian leu
2.7 2.4 – –
Australian dollar
1.1 0.6 – –
Total
41.7 116.3 4.4 65.1
19. Other receivables
Group
Company
2021
£m
2020
£m
2021
£m
2020
£m
Other receivables 6.8 2.1 – 0.1
Prepayments 7.2 7.8 0.1 0.2
Amounts due from Group undertakings
– – 555.4 581.6
Total
14.0 9.9 555.5 581.9
No balance within other receivables is impaired.
Amounts due from Group undertakings are unsecured and due for repayment in less than one year.
Annual Report and Financial Statements 2021 143
Notes to the Financial Statements continued
144
International Personal Finance plc
20. Trade and other payables
Group
Company
2021
£m
2020
£m
2021
£m
2020
£m
Trade payables 10.8 7.7 – 0.1
Other payables including taxation and social security 44.0 41.5 0.3 0.1
Accruals
58.0 39.9 11.9 8.2
Amounts due to Group undertakings
– – 371.2 382.9
Total
112.8 89.1 383.4 391.3
Amounts due to Group undertakings are unsecured and due for repayment in less than one year.
21. Borrowing facilities and borrowings
The Group and Company’s borrowings are as follows:
Group
Company
2021
£m
2020
£m
2021
£m
2020
£m
Borrowings
Bank borrowings 75.8 76.1 – –
Bonds
395.8 415.9 395.8 415.9
Total
471.6 492.0 395.8 415.9
The Group’s external bonds comprise the following:
Bond Coupon %
Maturity
date
2021
£m
€341.2 million 9.750 2025
287.2
Swedish krona 450.0 million Three–month STIBOR plus 700 basis points 2024 36.9
£78.1 million 7.750 2023
78.1
402.2
Less: unamortised arrangement fees and issue discount (6.4)
395.8
The Swedish Krona 450 million (£36.9 million) bond is a floating rate bond. The external bank borrowings of the Group are at a
combination of floating and fixed rates.
The maturity of the Group and Company’s external bond and external bank borrowings is as follows:
Group Company
2021
£m
2020
£m
2021
£m
2020
£m
Borrowings
Repayable:
– in less than one year
3.1 0.2 – –
– between one and two years
87.4 74.3 77.2 40.1
– between two and five years
381.1 417.5 318.6 375.8
Total
471.6 492.0 395.8 415.9
The average period to maturity of the Group’s external bonds and committed external borrowing facilities is 2.9 years (2020: 3.3 years).
International Personal Finance plc144
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145
21. Borrowing facilities and borrowings continued
The currency exposure on external borrowings is as follows:
Group Company
2021
£m
2020
£m
2021
£m
2020
£m
Sterling 77.2 76.8 77.2 76.8
Polish zloty 0.8 – – –
Czech crown
– 5.5 – –
Euro
281.7 299.0 281.7 299.0
Hungarian forint
71.6 69.4 – –
Romanian leu
3.4 1.2 – –
Swedish krona
36.9 40.1 36.9 40.1
Total
471.6 492.0 395.8 415.9
The maturity of the Group and Company’s external bond and external bank facilities is as follows:
Group
Company
2021
£m
2020
£m
2021
£m
2020
£m
Bond and bank facilities available
Repayable:
– on demand 28.8 40.1 9.7 9.8
– in less than one year
29.1 45.7 5.5 5.0
– between one and two years
124.1 104.4 90.3 70.2
– between two and five years
392.8 433.8 324.1 383.2
Total
574.8 624.0 429.6 468.2
The undrawn external bank facilities at 31 December were as follows:
Group
Company
2021
£m
2020
£m
2021
£m
2020
£m
Expiring within one year 54.8 85.6 15.2 14.8
Expiring between one and two years 35.8 30.1 12.2 30.1
Expiring in more than two years
6.2 8.9 – –
Total
96.8 124.6 27.4 44.9
Undrawn external facilities above does not include unamortised arrangement fees and issue discount.
22. Risks arising from financial instruments
Risk management
Treasury related risks
The Board approves treasury policies and the treasury function manages the day-to-day operations. The Board delegates certain
responsibilities to the Treasury Committee. The Treasury Committee is empowered to take decisions within that delegated authority.
Treasury activities and compliance with treasury policies are reported to the Board on a regular basis and are subject to periodic
independent reviews and audits, both internal and external. Treasury policies are designed to manage the main financial risks faced by
the Group in relation to funding and liquidity risk; interest rate risk; currency risk; and counterparty risk. This is to ensure that the Group is
properly funded; that interest rate and currency risk are managed within set limits; and that financial counterparties are of appropriate
credit quality. Policies also set out the specific instruments that can be used for risk management.
The treasury function enters into derivative transactions, principally interest rate swaps, currency swaps and forward currency contracts.
The purpose of these transactions is to manage the interest rate and currency risks arising from the Group’s underlying business
operations. No transactions of a speculative nature are undertaken and written options may only be used when matched by purchased
options.
Annual Report and Financial Statements 2021 145
Notes to the Financial Statements continued
146
International Personal Finance plc
22. Risks arising from financial instruments continued
Liquidity risk
The Group is subject to the risk that it will not have sufficient borrowing facilities to fund its existing business and its future plans for growth.
The short-term nature of the Group’s business means that the majority of amounts receivable from customers are receivable within twelve
months with an average period to maturity of around eleven months. The risk of not having sufficient liquid resources is therefore low.
The treasury policy adopted by the Group serves to reduce this risk further by setting a specific policy parameter that there are sufficient
committed debt facilities to cover forecast borrowings plus an appropriate level of operational headroom on a rolling basis. Further, the
aim is to ensure that there is a balanced refinancing profile; that there is diversification of debt funding sources; that there is no over-
reliance on a single or small group of lenders; and that debt facilities and hedging capacity are sufficient for the currency requirements
of each country. At 31 December 2021, the Group’s bonds and committed borrowing facilities had an average period to maturity of 2.9
years (2020: 3.3 years).
As shown in note 21, total undrawn facilities as at 31 December 2021 were £96.8 million (2020: £124.6 million).
A maturity analysis of gross borrowings included in the balance sheet is presented in note 21. A maturity analysis of bonds, bank
borrowings and overdrafts outstanding at the balance sheet date by non-discounted contractual cash flow, including expected interest
payments, is shown below:
Group
Company
2021
£m
2020
£m
2021
£m
2020
£m
Not later than six months 20.1 25.6 240.6 322.6
Later than six months and not later than one year 23.7 21.3 33.6 34.8
Later than one year and not later than two years
125.2 116.8 247.6 77.3
Later than two years and not later than five years
446.7 510.8 377.9 538.0
615.7 674.5 899.7 972.7
The analysis above includes the contractual cash flow for borrowings and the total amount of interest payable over the life of the loan.
Where borrowings are subject to a floating interest rate, an estimate of interest payable is taken. The rate is derived from interest rate yield
curves at the balance sheet date.
In line with paragraph 39(a) of IFRS 7, the maturity table for the Company also includes amounts payable to Group companies of
£371.2 million (2020: £382.9 million).
The following analysis shows the gross non-discounted contractual cash flows in respect of foreign currency contract derivative assets
and liabilities which are all designated as cash flow hedges:
2021 2020
Group
Outflow
£m
Inflow
£m
Outflow
£m
Inflow
£m
Not later than one month 189.2 185.7 270.4 265.6
Later than one month and not later than six months 182.0 174.9 159.9 156.5
Later than six months and not later than one year
17.1 16.7 16.9 16.8
388.3 377.3 447.2 438.9
Company
2021
2020
Outflow
£m
Inflow
£m
Outflow
£m
Inflow
£m
Not later than one month 4.3 4.2 31.7 31.4
Later than one month and not later than six months 0.6 0.6 0.7 0.7
Later than six months and not later than one year
0.4 0.4 0.4 0.4
5.3 5.2 32.8 32.5
When the amount payable or receivable is not fixed, the amount disclosed has been determined with reference to the projected interest
rates as illustrated by the interest rate yield curves existing at the balance sheet date.
International Personal Finance plc146
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Annual Report and Financial Statements 2021
147
22. Risks arising from financial instruments continued
A maturity analysis of the Group’s receivables and borrowing facilities as at 31 December is presented below:
Group
Receivables
£m
Percentage
of total
%
Borrowing
facilities
£m
Percentage
of total
%
2020
Less than one year 532.6 79.6 85.8 13.8
Later than one year 136.5 20.4 538.2 86.2
669.1 100.0 624.0 100.0
2021
Less than one year 566.6 79.0 57.9 10.1
Later than one year
150.2 21.0 516.9 89.9
716.8 100.0 574.8 100.0
This demonstrates the short-term nature of the amounts receivable from customers which contrasts with the longer-term nature of the
Group’s committed funding facilities.
Amounts receivable from customers
Risk management policies in respect of amounts receivable from customers are discussed in the credit risk section within this note, and in
note 17.
Interest rate risk
The Group has an exposure to interest rate risk arising on changes in interest rates in each of its countries of operation and, therefore,
seeks to limit this net exposure. This is achieved by the use of techniques to fix interest costs, including fixed rate funding (predominantly
longer-term bond funding); forward currency contracts used for non-functional currency funding; bank borrowing loan draw-down
periods; and interest rate hedging instruments. These techniques are used to hedge the interest costs on a proportion of borrowings over
a certain period of time, up to five years.
Interest costs are a relatively low proportion of the Group’s revenue (9.8% in 2021; 8.3% in 2020) and therefore the risk of a material impact
on profitability arising from a change in interest rates is low. If interest rates across all markets increased by 200 basis points this would
have the following impact, net of existing hedging arrangements.
Group
2021
£m
2020
£m
Reduction in profit before taxation
0.4 0.5
This sensitivity analysis is based on the following assumptions:
– the change in the market interest rate occurs in all countries where the Group has borrowings and/or derivative financial instruments;
– where financial liabilities are subject to fixed interest rates or have their interest rate fixed by hedging instruments it is assumed that
there is no impact from a change in interest rates; and
– changes in market interest rate affect the fair value of derivative financial instruments.
Currency risk
The Group is subject to three types of currency risk: net asset exposure; cash flow exposure; and income statement exposure.
Net asset exposure
The majority of the Group’s net assets are denominated in currencies other than sterling. The balance sheet is reported in sterling and this
means that there is a risk that a fluctuation in foreign exchange rates will have a material impact on the net assets of the Group. The
impact in 2021 is a reduction in net assets of £37.6 million (2020: reduction of £4.1 million). The Group aims to minimise the value of net
assets denominated in each foreign currency by funding overseas receivables with borrowings in local currency, where possible.
Cash flow exposure
The Group is subject to currency risk in respect of future cash flows which are denominated in foreign currency. The policy of the Group is
to hedge a large proportion of this currency risk in respect of cash flows which are expected to arise in the following 12 months. Where
forward foreign exchange contracts have been entered into, they are designated as cash flow hedges on specific future transactions.
Income statement exposure
As with net assets, the majority of the Group’s profit is denominated in currencies other than sterling but translated into sterling for
reporting purposes. The result for the period is translated into sterling at the average exchange rate. A risk therefore arises that a
fluctuation in the exchange rates in the countries in which the Group operates will have a material impact on the consolidated result for
the period.
Annual Report and Financial Statements 2021 147
Notes to the Financial Statements continued
148
International Personal Finance plc
22. Risks arising from financial instruments continued
The following sensitivity analysis demonstrates the impact on equity of a 5% strengthening or weakening of sterling against all exchange
rates for the countries in which the Group operates:
Group
2021
£m
2020
£m
Change in reserves
4.4 0.1
Change in profit/(loss) before taxation 7.0 0.5
This sensitivity analysis is based on the following assumptions:
– there is a 5% strengthening/weakening of sterling against all currencies in which the Group operates (Polish zloty, Czech crown, euro,
Hungarian forint, Mexican peso, Romanian leu, and Australian dollar); and
– there is no impact on retained earnings or equity arising from those items which are naturally hedged (where the currency asset is
exactly equal to the currency liability).
Counterparty risk
The Group is subject to counterparty risk in respect of the cash and cash equivalents held on deposit with banks; and foreign currency
and derivative financial instruments.
The Group only deposits cash, and only undertakes currency and derivative transactions, generally with highly rated banks and sets strict
limits in respect of the amount of exposure to any one institution. Institutions with lower credit ratings can only be used as approved, or
delegated for approval, by the Board.
No collateral or credit enhancements are held in respect of any financial assets. The maximum exposure to counterparty risk is as follows:
Group
2021
£m
2020
£m
Cash and cash equivalents
41.7 116.3
Derivative financial assets 0.7 0.5
Total
42.4 116.8
The table above represents a worst case scenario of the counterparty risk that the Group is exposed to at the year end. An analysis of the
cash and cash equivalents by geographical segment is presented in note 18.
Cash and cash equivalents and derivative financial instruments are neither past due nor impaired. Credit quality of these assets is good
and the cash and cash equivalents are with bank counterparties in accordance with the limits set out in our treasury policies, to ensure
the risk of loss is minimised.
Credit risk
The Group is subject to credit risk in respect of amounts receivable from customers.
Amounts receivable from customers
The Group lends small amounts over short-term periods to a large and diverse group of customers across the countries in which it
operates. Nevertheless, the Group is subject to a risk of material unexpected credit losses in respect of amounts receivable from
customers. This risk is minimised by the use of credit scoring techniques which are designed to ensure the Group lends only to those
customers who we believe can afford the repayments. The amount loaned to each customer and the repayment period agreed are
dependent upon the risk category the customer is assigned to as part of the credit scoring process. The level of expected future losses is
generated on a weekly or monthly basis by business line and geographical segment. These outputs are reviewed by management to
ensure that appropriate action can be taken if results differ from management expectations.
Group
2021
£m
2020
£m
Amounts receivable from customers
716.8 669.1
The table above represents the maximum exposure to credit risk of the Group at the year end. Further analysis of the amounts receivable
from customers is presented in note 17.
Capital risk
The Group is subject to the risk that its capital structure will not be sufficient to support the growth of the business. The Group is not
required to hold regulatory capital.
The Group aims to maintain appropriate capital to ensure that it has a strong balance sheet but at the same time is providing a good
return on equity to its shareholders. The Group’s long-term aim is to ensure that the capital structure results in an optimal ratio of debt and
equity finance.
International Personal Finance plc148
Financial Statements
Annual Report and Financial Statements 2021
149
22. Risks arising from financial instruments continued
Capital is monitored by considering the ratio of equity to receivables and the gearing ratio. The equity of the Group and these ratios are
shown below:
Group
2021
£m
2020
£m
Receivables
716.8 669.1
Borrowings (471.6) (492.0)
Other net assets
121.9 193.4
Equity
367.1 370.5
Equity as % of receivables 51.2% 55.4%
Gearing 1.3 1.3
Equity as a percentage of receivables was above the Group’s internally-set target.
Following the implementation of temporary amendments to the Group’s debt funding covenants, we continue to operate with significant
headroom on the key financial covenants, further details are included on page 35.
23. Derivative financial instruments
The Group’s derivative assets and liabilities that were measured at fair value at 31 December are as follows:
Group
2021
£m
2020
£m
Assets
Foreign currency contracts 0.7 0.5
Total
0.7 0.5
Group
2021
£m
2020
£m
Liabilities
Foreign currency contracts 7.6 6.7
Total
7.6 6.7
Company
2021
£m
2020
£m
Assets
Foreign currency contracts – 0.1
Total
– 0.1
Company
2021
£m
2020
£m
Liabilities
Foreign currency contracts 0.1 –
Total
0.1 –
The fair value of derivative financial instruments has been calculated by discounting expected future cash flows using interest rate yield
curves and forward foreign exchange rates prevailing at 31 December.
Annual Report and Financial Statements 2021 149
Notes to the Financial Statements continued
150
International Personal Finance plc
23. Derivative financial instruments continued
Cash flow hedges
The Group uses foreign currency contracts (‘cash flow hedges’) to hedge those foreign currency cash flows that are highly probable to
occur within 12 months of the balance sheet date and interest rate swaps (‘cash flow hedges’) to hedge those interest cash flows that
are expected to occur within two years of the balance sheet date. The effect on the income statement will also be within these periods.
An amount of £1.4 million has been credited to equity for the Group in the period in respect of cash flow hedges (2020: £1.3 million
credited to equity), Company: £nil (2020: £nil).
The following table shows the notional maturity profile of outstanding cash flow hedges:
Group
Repayable
up to one
year
£m
In more than
one year but
less than two
years
£m
Total
£m
As at 31 December 2020
Foreign currency contracts 447.2 – 447.2
Cash flow hedges 447.2 – 447.2
As at 31 December 2021
Foreign currency contracts 388.3 – 388.3
Cash flow hedges
388.3 – 388.3
Company
Repayable
up to one
year
£m
In more than
one year but
less than two
years
£m
Total
£m
As at 31 December 2020
Foreign currency contracts 32.8 – 32.8
Cash flow hedges 32.8 – 32.8
As at 31 December 2021
Foreign currency contracts 5.3 – 5.3
Cash flow hedges
5.3 – 5.3
The Group and the company had held no interest rate swaps at 31 December 2021 (31 December 2020: nil).
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24. Analysis of financial assets and financial liabilities
Financial assets
An analysis of Group financial assets is presented below:
Group
2021
2020
Financial
assets at
amortised
cost
£m
Derivatives
used for
hedging
£m
Total
£m
Financial
assets at
amortised
cost
£m
Derivatives
used for
hedging
£m
Total
£m
Amounts receivable from customers 716.8 – 716.8 669.1 – 669.1
Derivative financial instruments – 0.7 0.7 – 0.5 0.5
Cash and cash equivalents
41.7 – 41.7 116.3 – 116.3
Other receivables
14.0 – 14.0 9.9 – 9.9
772.5 0.7 773.2 795.3 0.5 795.8
Financial liabilities
An analysis of Group financial liabilities is presented below:
Group
2021
2020
Financial
liabilities at
amortised
cost
£m
Derivatives
used for
hedging
£m
Total
£m
Financial
liabilities at
amortised
cost
£m
Derivatives
used for
hedging
£m
Total
£m
Bonds 395.8 – 395.8 415.9 – 415.9
Bank borrowings 75.8 – 75.8 76.1 – 76.1
Derivative financial instruments
– 7.6 7.6 – 6.7 6.7
Trade and other payables
112.8 – 112.8 89.1 – 89.1
Provision for liabilities and charges
5.4 – 5.4 19.2 – 19.2
589.8 7.6 597.4 600.3 6.7 607.0
Annual Report and Financial Statements 2021 151
Notes to the Financial Statements continued
152
International Personal Finance plc
25. Fair values of financial assets and liabilities
IFRS 13 requires disclosure of fair value measurements of derivative financial instruments by level of the following fair value measurement
hierarchy:
– quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
– inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices) (level 2); and
– inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
With the exception of derivatives, which are held at fair value, amounts receivable from customers, and bonds, the carrying value of all
other financial assets and liabilities (which are short-term in nature) is considered to be a reasonable approximation of their fair value.
Details of the significant assumptions made in determining the fair value of amounts receivable from customers and bonds are included
below, along with the fair value of other Group assets and liabilities.
The fair value and carrying value of the financial assets and liabilities of the Group are set out below:
At 31 December 2020
Carrying
value
£m
Fair values
Total fair
value
£m
Level 1
£m
Level 2
£m
Level 3
£m
Financial assets
Amounts receivable from customers 669.1 – – 908.8 908.8
Derivative financial instruments 0.5 – 0.5 – 0.5
Cash and cash equivalents 116.3 116.3 – – 116.3
Other receivables 9.9 – – 9.9 9.9
795.8 116.3 0.5 918.7 1,035.5
Financial liabilities
Bonds 415.9 405.4 – – 405.4
Bank borrowings 76.1 76.1 – – 76.1
Derivative financial instruments 6.7 – 6.7 – 6.7
Trade and other payables 89.1 – – 89.1 89.1
Provision for liabilities and charges 19.2 – – 19.2 19.2
607.0 481.5 6.7 108.3 596.5
Carrying
value
£m
Fair values
Total fair
value
£m
At 31 December 2021
Level 1
£m
Level 2
£m
Level 3
£m
Financial assets
Amounts receivable from customers 716.8 – – 938.4 938.4
Derivative financial instruments
0.7 – 0.7 – 0.7
Cash and cash equivalents
41.7 41.7 – – 41.7
Other receivables
14.0 – – 14.0 14.0
773.2 41.7 0.7 952.4 994.8
Financial liabilities
Bonds
395.8 419.9 – – 419.9
Bank borrowings
75.8 75.8 – – 75.8
Derivative financial instruments
7.6 – 7.6 – 7.6
Trade and other payables
112.8 – – 112.8 112.8
Provision for liabilities and charges
5.4 – – 5.4 5.4
597.4 495.7 7.6 118.2 621.5
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153
25. Fair values of financial assets and liabilities continued
The fair value and carrying value of the financial assets and liabilities of the Company are set out below:
At 31 December 2020
Carrying
value
£m
Fair values
Total fair
value
£m
Level 1
£m
Level 2
£m
Level 3
£m
Financial assets
Derivative financial instruments 0.1 – 0.1 – 0.1
Cash and cash equivalents 65.1 65.1 – – 65.1
Other receivables 581.9 – – 581.9 581.9
647.1 65.1 0.1 581.9 647.1
Financial liabilities
Bonds 415.9 405.4 – – 405.4
Trade and other payables 391.3 – – 391.3 391.3
807.2 405.4 – 391.3 796.7
Carrying
value
£m
Fair values
Total fair
value
£m
At 31 December 2021
Level 1
£m
Level 2
£m
Level 3
£m
Financial assets
Derivative financial instruments – – – – –
Cash and cash equivalents 4.4 4.4 – – 4.4
Other receivables
555.5 – – 555.5 555.5
559.9 4.4 – 555.5 559.9
Financial liabilities
Bonds 395.8 419.9 – – 419.9
Trade and other payables
383.4 – – 383.4 383.4
779.2 419.9 – 383.4 803.3
The fair value of amounts receivable from customers has been derived by discounting expected future cash flows (as used to calculate
the carrying value of amounts due from customers), net of collection costs, at the Group’s weighted average cost of capital which we
estimate to be 10% (2020: 10%) which is assumed to be a proxy for the discount rate that a market participant would use to price the
asset.
Under IFRS 13 ‘Fair value measurement’, receivables are classed as level 3 as their fair value is calculated using future cash flows that are
unobservable inputs.
The fair value of the bonds has been calculated by reference to their market value where market prices are available.
The carrying value of bank borrowings is deemed to be a good approximation of their fair value. Bank borrowings can be repaid within
six months if the Group decides not to roll over for further periods up to the contractual repayment date. The impact of discounting would
therefore be negligible.
Derivative financial instruments are held at fair value which is equal to the expected future cash flows arising as a result of the
derivative transaction.
For other financial assets and liabilities, which are all short-term in nature, the carrying value is a reasonable approximation of their
fair value.
26. Provisions
The Group receives claims brought by or on behalf of current and former customers in connection with its past conduct. Where
significant, provisions are held against the costs expected to be incurred in relation to these matters. Customer redress provisions of £5.4
million represent the Group’s best estimate of the costs that are expected to be incurred in relation to early settlement rebates in Poland
(2021: £3.3 million; 2020: £17.6 million) and claims management charges incurred in Spain (2021: £2.1 million; 2020: £1.6 million). All
claims are expected to be settled within 12 months of the balance sheet date. Further details are included on pages 128 and 129.
Annual Report and Financial Statements 2021 153
Notes to the Financial Statements continued
154
International Personal Finance plc
27. Retirement benefit asset/obligation
Pension schemes – defined benefit
With effect from 1 March 2010, the Group’s defined benefit pension scheme was closed to further accrual of defined benefit obligations.
Scheme assets are stated at fair value as at 31 December 2021. The major assumptions used by the actuary were:
Group and Company
2021
%
2020
%
Price inflation (‘CPI’)
2.7 2.2
Rate of increase to pensions in payment 3.3 2.7
Discount rate
1.8 1.5
The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current
investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the balance sheet date.
Expected returns on equity investments reflect long-term real rates of return experienced in the respective markets.
The mortality assumptions are based on standard tables which allow for future mortality improvements. Different assumptions are used for
different groups of members. Most members have not yet retired. On average, we expect a male retiring in the future at age 65 to live for
a further 25 years. On average, we expect a female retiring in the future at age 65 to live for a further 27 years. If life expectancies had
been assumed to be one year greater for all members, the defined benefit asset would reduce by approximately £1.9 million.
If the discount rate was 25 basis points higher/(lower), the defined benefit asset would increase by £2.2 million/(decrease by £2.4 million).
If the price inflation rate was 25 basis points higher/(lower), the defined benefit asset would decrease by £1.4 million/(increase by
£1.3 million).
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit asset, as it is unlikely that
the changes in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
The amounts recognised in the balance sheet are as follows:
Group and Company
2021
£m
2020
£m
Diversified growth funds
7.9 8.4
Corporate bonds 20.2 20.4
Liability driven investments
23.1 23.0
Other
0.1 0.4
Total fair value of scheme assets
51.3 52.2
Present value of funded defined benefit obligations (46.4) (48.8)
Net asset recognised in the balance sheet
4.9 3.4
The amounts recognised in the income statement are as follows:
Group and Company
2021
£m
2020
£m
Interest cost
0.7 0.8
Past service gain – (0.4)
Expected return on scheme assets
(0.8) (0.9)
Net credit recognised in the income statement
(0.1) (0.5)
The net credit is included within administrative expenses and in 2020 included a past service credit of £0.4 million due to a Pension
Increase Exchange exercise that took place in that year.
Movements in the fair value of scheme assets were as follows:
Group and Company
2021
£m
2020
£m
Fair value of scheme assets at 1 January
52.2 45.8
Expected return on scheme assets 0.8 0.9
Actuarial gain on scheme assets
(1.6) 6.7
Contributions by the Group
0.9 0.9
Net benefits paid out
(1.0) (2.1)
Fair value of scheme assets at 31 December
51.3 52.2
The Group expects to make a contribution of £0.9 million (2020: £0.9 million) to the deferred benefit pension scheme in the year ending
31 December 2022. The Group is committed to paying £0.9 million per annum into the scheme until 2022 pursuant to a recovery plan
agreed with the scheme Trustee.
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155
27. Retirement benefit asset/obligation continued
Movements in the present value of the defined benefit obligation were as follows:
Group and Company
2021
£m
2020
£m
Defined benefit obligation at 1 January
(48.8) (42.4)
Interest cost (0.7) (0.8)
Actuarial gain/(loss) on scheme liabilities
2.1 (8.1)
Past service gain
– 0.4
Net benefits paid out
1.0 2.1
Defined benefit obligation at 31 December
(46.4) (48.8)
The weighted average duration of the defined benefit asset is 21 years (2020: 24 years).
The actual return on scheme assets compared to the expected return is as follows:
Group and Company
2021
£m
2020
£m
Expected return on scheme assets
0.8 0.9
Actuarial (loss)/gain on scheme assets (1.6) 6.7
Actual (loss)/return on scheme assets
(0.8) 7.6
Actuarial gains and losses have been recognised through the statement of comprehensive income (‘SOCI’) in the period in which
they occur.
An analysis of the amounts recognised in the SOCI is as follows:
Group and Company
2021
£m
2020
£m
Actuarial (loss)/gain on scheme assets
(1.6) 6.7
Actuarial gain/(loss) on scheme liabilities 2.1 (8.1)
Total gain/(loss) recognised in the SOCI in the year
0.5 (1.4)
Cumulative amount of losses recognised in the SOCI (16.7) (17.2)
The history of experience adjustments are as follows:
Group and Company 2021 2020 2019* 2018* 2017*
Actuarial (losses)/gains on scheme assets:
– amount (£m) (1.6) 6.7 4.4 (2.2) 3.9
– percentage of scheme assets (%)
(3.1) 12.8 9.6 (5.3) 9.2
Experience gains on scheme liabilities:
– amount (£m)
1.7 – – – 2.9
– percentage of scheme liabilities (%)
3.7 – – – 7.1
* As required under IAS 19.
Pension schemes – defined contribution
The defined benefit pension scheme is no longer open to further accrual. All eligible UK employees are invited to join stakeholder pension
schemes into which the Group contributes between 8% and 20% of members’ pensionable earnings, provided the employee contributes
a minimum of 5%. The assets of the scheme are held separately from those of the Group. The pension charge in the income statement
represents contributions payable by the Group in respect of the scheme and amounted to £0.7 million for the year ended 31 December
2021 (2020: £0.8 million). £nil contributions were payable to the scheme at the year end (2020: £nil).
Annual Report and Financial Statements 2021 155
Notes to the Financial Statements continued
156
International Personal Finance plc
28. Share-based payments
The Group currently operates five categories of share schemes: The International Personal Finance plc Performance Share Plan
(‘the Performance Share Plan’); The International Personal Finance plc Approved Company Share Option Plan (‘the CSOP’); The
International Personal Finance plc Employee Savings-Related Share Option Scheme (‘the SAYE scheme’); The International Personal
Finance plc Deferred Share Plan (‘the Deferred Share Plan’); and The International Personal Finance plc Discretionary Award Plan (‘the
Discretionary Award Plan’). A number of awards have been granted under these schemes during the period under review. No awards
have been granted under the CSOP, or the DSP in 2021.
Options granted under the Performance Share Plans and CSOPs may be subject to a total shareholder return (‘TSR’) performance target
and/or earnings per share (‘EPS’) growth; net revenue growth; customer numbers growth; agent turnover; and earnings before interest
and tax (‘EBIT’) performance targets. The income statement charge in respect of the Performance Share Plan and the CSOP has been
calculated using both a Monte Carlo simulation (for TSR) and Black-Scholes model (for the other non-market related conditions) as these
schemes include performance targets. There are no performance conditions associated with the Discretionary Award Plan, the income
statement charge in respect of this scheme is calculated using the share price at the date of grant.
The income statement charge in respect of the SAYE scheme is calculated using a Monte Carlo simulation model, however, no TSR
targets are assigned. The Deferred Share Plan comprises deferred awards with matching awards. From the 2018 scheme onwards, the
Deferred Share Plan does not have matching awards. There are no additional performance criteria attached to the deferred awards,
therefore, the income statement charge is calculated using the actual share price at the date the award is granted. The matching
awards are subject to the same criteria as the Performance Share Plan.
The total income statement credit in respect of these share-based payments is £0.2 million (2020: charge of £1.1 million).
The fair value per award granted and the assumptions used in the calculation of the share-based payment charge are as follows:
Group and Company
SAYE
Scheme
Performance
Share Plan*
Discretionary
Award Plan
Grant date
24/8/21 23/3/21 29/4/21
Share price at award date 1.47 1.04 1.29
Base price for TSR
n/a 0.80 n/a
Exercise price
1.11 Nil n/a
Vesting period (years)
3 and 5 3 3
Expected volatility
63.6% - 69.2% 61.7% - 68.5% n/a
Award life (years)
Up to 5 3
n/a
Expected life (years)
Up to 5 3
n/a
Risk-free rate
0.54% 0.76%
n/a
Expected dividends expressed as a dividend yield
14.04% 5.95%
n/a
Deferred portion
n/a
50.0%
n/a
TSR threshold
n/a
30.0%
n/a
TSR maximum target
n/a
60.0%
n/a
EPS threshold
n/a
45.1p
n/a
EPS maximum target
n/a
54.8p
n/a
Net revenue threshold
n/a
11.6%
n/a
Net revenue maximum target
n/a
14.1%
n/a
Fair value per award (£)
0.87 – 0.92 0.62 – 0.87
n/a
* Performance conditions only apply for the Executive Directors and Senior Leadership Team schemes.
No exercise price is payable in respect of any awards made under the Performance Share Plan, Discretionary Award Plan or the Deferred
Share Plan. The risk-free rate of return is the yield on zero coupon UK government bonds with a remaining term equal to the expected life
of the award.
The 2020 grant under the Performance Share Plan was surrendered in full.
Further detail in respect of the Performance Share Plans, CSOPs, Deferred Share Plans, SAYE schemes and Discretionary Award Plan is
given in the Corporate Governance Report.
International Personal Finance plc156
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157
28. Share-based payments continued
The movements in awards during the year for the Group are outlined in the table below:
SAYE
schemes
CSOPs
Deferred
Share Plans
Performance
Share Plans
Discretionary
Award Plan
Group Number
Weighted
average
exercise
price
Number
Weighted
average
exercise
price
Number
Weighted
average
exercise
price
Number
Weighted
average
exercise
price
Number
Weighted
average
exercise
price
Outstanding at
1 January 2020 1,193,370 0.94 33,998 3.16 2,918,331 – 10,144,022 – 382,621 –
Granted – – – – 852,870 – 1,755,178 – 526,902 –
Expired/lapsed (234,971) 0.99 (23,071) 2.62 (176,121) – (4,083,978) – – –
Exercised – – – – (372,219) – (236,154) – – –
Outstanding at
31 December 2020 958,399 0.93 10,927 4.30 3,222,861 – 7,579,068 – 909,523 –
Outstanding at
1 January 2021
958,399 0.93 10,927 4.30 3,222,861 – 7,579,068 – 909,523 –
Granted
229,536 1.11 – – – – 4,133,773 – 838,491 –
Expired/lapsed
(163,297) 1.15 (2,270) 5.26 (61,540) – (3,705,148) – (25,999) –
Exercised
– – – – (824,594) – (584,570) – (348,277) –
Outstanding at
31 December
2021
1,024,638 0.94 8,657 4.05 2,336,727 – 7,423,123 – 1,373,738 –
Share awards outstanding at 31 December 2021 had exercise prices of £0.86 – £5.26 (2020: £0.86 – £5.26) and a weighted average
remaining contractual life of 8.2 years (2020: 7.9 years).
The movements in awards during the year for the Company are outlined in the table below:
SAYE
schemes CSOPs
Deferred
Share Plans
Performance
Share Plans
Discretionary
Award Plan
Group Number
Weighted
average
exercise
price
Number
Weighted
average
exercise
price
Number
Weighted
average
exercise
price
Number
Weighted
average
exercise
price
Number
Weighted
average
exercise
price
Outstanding at
1 January 2020 736,430 0.91 27,733 2.96 1,022,891 – 4,142,030 – – –
Granted – – – – 353,728 – 1,182,345 – – –
Expired/lapsed (97,115) 0.87 (21,837) 2.40 (60,878) – (2,046,164) – – –
Exercised – – – – (117,013) – (95,134) – – –
Outstanding at
31 December 2020
639,315 0.91 5,896 5.01 1,198,728 – 3,183,077 – – –
Outstanding at
1 January 2021
639,315 0.91 5,896 5.01 1,198,728 – 3,183,077 – –
Granted 132,699 1.11 – – – – 2,091,986 – 655,521 –
Expired/lapsed
(93,187) 1.10 (2,000) 5.26 (30,774) – (1,693,137) – – –
Exercised
– – – – (348,761) – (299,629) – – –
Outstanding at
31 December
2021
678,827 0.93 3,896 4.87 819,193 – 3,282,297 – 655,521 –
Share awards outstanding at 31 December 2021 had exercise prices of £0.86 – £5.26 (2020: £0.86 – £5.26) and a weighted average
remaining contractual life of 8.1 years (2020: 7.9 years).
Annual Report and Financial Statements 2021 157
Notes to the Financial Statements continued
158
International Personal Finance plc
29. Share capital
Company
2021
£m
2020
£m
234,244,437 fully paid up shares at a nominal value of 10 pence
23.4 23.4
The Company has one class of ordinary shares which carry no right to fixed income.
The own share reserve represents the cost of shares in International Personal Finance purchased from the market, which can be used to
satisfy options under the Group’s share options schemes (see note 28). The number of ordinary shares held in treasury and by the
employee trust at 31 December 2021 was 12,463,982 (2020: 11,560,509). During 2021 the employee trust acquired 1,000,000 shares at an
average price of £1.34 (2020 nil acquired) and the treasury trust acquired 1,673,203 shares at a price of £1.54 following completion of a
share buyback in connection with the Company’s withdrawal of its ordinary shares from trading on the Warsaw Stock Exchange (2020 nil
acquired).
30. Reconciliation of profit/(loss) after taxation to cash generated from operating activities
Group Company
2021
£m
2020
£m
2021
£m
2020
£m
Profit/(loss) after taxation from operations 41.9 (64.2) (48.2) 181.7
Adjusted for:
– tax charge
25.8 23.5 1.5 1.8
– finance costs
54.0 56.7 73.3 65.4
– finance income
– (9.9) (40.1) (35.4)
– share-based payment (credit)/charge (note 28)
(0.2) 1.1 (0.2) 0.2
– depreciation of property, plant and equipment (note 14)
5.6 7.2 0.1 –
– loss on disposal of property, plant and equipment (note 14)
0.4 0.2 – –
– amortisation of intangible assets (note 12)
14.7 25.9 – –
– depreciation of right-of-use assets (note 15)
8.4 9.9 0.1 –
– impairment of right-of-use assets (note 15)
– 0.5 – –
– short term and low value lease costs (note 15)
1.2 1.7 – –
Changes in operating assets and liabilities:
– (increase)/decrease in amounts receivable from customers
(88.4) 294.9 – –
– (increase)/decrease in other receivables
(3.7) 4.1 29.1 49.1
– increase/(decrease) in trade and other payables
26.7 (31.2) (8.2) (71.8)
– change in provisions
(13.2) 19.2 – –
– change in retirement benefit asset
(1.0) (1.4) (1.0) (1.4)
– increase/(decrease) in derivative financial instrument liabilities
2.1 (8.4) 0.2 (0.1)
Cash generated from operating activities
74.3 329.8 6.6 189.5
31. Capital commitments
Group
2021
£m
2020
£m
Capital expenditure commitments contracted with third parties but not provided for at 31 December
8.6 2.6
Capital expenditure commitments increased during 2021 due to a Europe wide mobile phone and tablet refresh programme and the
refurbishment of head office premises in Europe. The Company has no commitments as at 31 December 2021 (2020: £nil).
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159
32. Contingent liabilities
The Company has a contingent liability for guarantees given in respect of the borrowings of certain other Group companies to a
maximum of £161.3 million (2020: £185.7 million). At 31 December 2021, the fixed and floating rate borrowings under these facilities
amounted to £89.2 million (2020: £75.8 million). The directors do not expect any loss to arise. These guarantees are defined as financial
guarantees under IFRS 9 and their fair value at 31 December 2021 was £nil (2020: £nil).
State Aid investigation
In late 2017 the European Commission (EC) opened a State Aid investigation into the Group Financing Exemption contained in the UK’s
controlled foreign company rules, which were introduced in 2013. In April 2019 the EC announced its finding that the Group Financing
Exemption is partially incompatible with EU State Aid rules. In common with other UK-based international companies whose intra-group
finance arrangements are in line with the UK’s controlled foreign company rules, the Group is affected by this decision. On 12 February
2021 HMRC issued a Charging Notice, following the introduction of new legislation in December 2020 empowering HMRC to issue such
Notices in order to collect alleged unlawful State Aid. The Charging Notice required a payment of £14.2 million with respect to
accounting periods ended 2013 to 2018, which was paid in February 2021, with a further amount in respect of interest of £1.1 million,
which was paid in August 2021. The payment of this amount is a procedural matter, and the new law does not allow for postponement.
The company has appealed the Charging Notice on the grounds of the quantum assessed.
The UK government has filed an annulment application before the General Court of the European Union. In common with a number of
other affected taxpayers, IPF has also filed its own annulment application. Based on legal advice received regarding the strength of the
technical position set out in the annulment applications, it is expected to be more likely than not that the payment of alleged State Aid
that the Group has made under the Charging Notice will ultimately be repaid, and therefore no provision has been recorded in the
Financial Statements. The £15.3 million paid is held on the balance sheet as a non-current tax asset.
As a separate issue, HMRC has initiated a review of the Group’s finance company’s compliance with certain conditions under the UK
domestic tax rules to confirm whether the company is eligible for the benefits of the Group Financing Exemption which it has claimed in
its historic tax returns. IPF believes that all conditions have been complied with and have sought legal advice with regard to the
interpretation of the relevant legislative condition. The legal advice has confirmed IPF’s view and assessed that, in the event that HMRC
were to take the matter to Tribunal, it is more likely than not that the company would succeed in defending its position. In the unexpected
event that HMRC were to conclude that the company is not in compliance with the conditions and to pursue the matter in Tribunal, and
won, the amount at stake for open years up to and including 2018 is £7.3 million. This domestic tax issue with respect to years up to and
including 2018 and the State Aid issue are mutually exclusive, and the UK legislation implemented in December 2020 and referred to
above includes provisions to ensure no double charge to tax arises. It is of note that currently HMRC have simply asked for information
and no challenge has been made to the company’s filing position. In the unlikely event that the Group’s position were not to be
sustained with respect to the domestic condition, a further amount of up to £1.5 million would be payable with respect to 2019.
33. Related party transactions
International Personal Finance plc has various transactions with other companies in the Group. Details of these transactions along with
any balances outstanding are shown below:
Company
2021
2020
Recharge
of costs
£m
Interest
charge
£m
Outstanding
balance
£m
Recharge
of costs
£m
Interest
charge
£m
Outstanding
balance
£m
Europe 0.1 – (0.1) 0.1 – 0.2
Mexico – 6.8 – – 7.1 –
Other UK companies
6.6 1.6 55.7 2.1 (1.0) 37.2
6.7 8.4 55.6 2.2 6.1 37.4
The outstanding balance represents the gross intercompany balance receivable by the Company. This balance has increased during
2021 due to the increase of a proportion of these intercompany loans.
The Group’s only related party transactions are remuneration of key management personnel as disclosed in note 8.
Annual Report and Financial Statements 2021 159
Alternative performance measures
Annual Report and Financial Statements 2021
160
This Annual Report and Financial Statements provides alternative performance measures (APMs) which are not defined or specified
under the requirements of International Financial Reporting Standards. We believe these APMs provide readers with important additional
information on our business. To support this we have included a reconciliation of the APMs we use, where relevant, and a glossary
indicating the APMs that we use, an explanation of how they are calculated and why we use them.
APM
Closest
equivalent
statutory measure
Reconciling items
to statutory measure
Definition and purpose
Income statement
measures
Credit issued
growth (%)
None Not applicable Credit issued is the principal value of loans advanced to customers and is an
important measure of the level of lending in the business. Credit issued growth is
the period-on-period change in this metric which is calculated by retranslating
the previous year’s credit issued at the average actual exchange rates used in
the current financial year. This ensures that the measure is presented having
eliminated the effects of exchange rate fluctuations on the period-on-period
reported results (constant exchange rates).
Average net receivables
(£m)
None Not applicable Average net receivables are the average amounts receivable from customers
translated at the average monthly actual exchange rate. This measure is
presented to illustrate the change in amounts receivable from customers on a
consistent basis with revenue growth.
Average net receivables
growth at constant
exchange rates (%)
None Not applicable Average net receivables growth is the period-on-period change in average net
receivables which is calculated by retranslating the previous year’s average net
receivables at the average actual exchange rates used in the current financial
year. This ensures that the measure is presented period-on-period reported results
(constant exchange rates).
Closing net receivables
growth at constant
exchange rates (%)
None Not applicable Closing net receivables growth is the period-on-period change in closing net
receivables which is calculated by retranslating the previous year’s closing net
receivables at the closing actual exchange rate used in the current financial
year. This ensures that the measure is presented having eliminated the effects of
exchange rate fluctuations on the period-on-period reported results.
Revenue growth at
constant exchange rates
(%)
None Not applicable The period-on-period change in revenue which is calculated by retranslating the
previous year’s revenue at the average actual exchange rates used in the
current financial year. This measure is presented as a means of eliminating the
effects of exchange rate fluctuations on the period-on-period reported results
(constant exchange rates).
Revenue yield (%) None Not applicable Revenue yield is reported revenue divided by average net receivables and is an
indicator of the gross return being generated from average net receivables.
Impairment as a
percentage of revenue
(%)
None Not applicable Impairment as a percentage of revenue is reported impairment divided by
reported revenue and represents a measure of credit quality that is used across
the business. This measure is reported on a rolling annual basis (annualised).
Cost-income ratio (%) None Not applicable The cost-income ratio is other costs divided by reported revenue. Other costs
represent all operating costs with the exception of amounts paid to agents as
collecting commission. This measure is reported on a rolling annual basis
(annualised).This is useful for comparing performance across markets.
Pre-exceptional
profit/(loss) before tax
(£m)
Profit/(loss)
before tax
Exceptional items Profit/(loss) before tax and exceptional items. This is considered to be an
important measure where exceptional items distort the operating performance
of the business.
Pre-exceptional
earnings/(loss) per share
(pence)
Earnings/(loss)
per share
Exceptional items Earnings/(loss) per share before the impact of exceptional items. This is
considered to be an important measure where exceptional items distort the
operating performance of the business.
International Personal Finance plc160
Supplementary information
Annual Report and Financial Statements 2021
161
APM
Closest
equivalent
statutory measure
Reconciling items
to statutory measure Definition and purpose
Balance sheet and
returns measures
Return on assets (‘ROA’)
(%)
None Not applicable Calculated as profit before interest less tax at the effective tax rate divided by
average net receivables. We believe that ROA is a good measure of the financial
performance of our businesses, showing the ongoing return on the total equity
and debt capital invested in average net receivables of our operating segments
and the Group.
Return on equity (‘ROE’)
(%)
None Not applicable Calculated as profit after tax divided by average opening and closing equity. It is
used as a measure of overall shareholder returns.
Equity to receivables ratio
(%)
None Not applicable Total equity divided by amounts receivable from customers.
This is a measure of balance sheet strength.
Headroom (£m) Undrawn external
bank facilities
None Headroom is an alternative term for undrawn external bank facilities.
Net debt None Not applicable Borrowings less cash
Other measures
Customers None Not applicable Customers that are being served by our agents or through our money transfer
product in the home credit business and customers that are not in default in our
digital business.
Customer retention (%) None Not applicable The proportion of customers that are retained for their third or subsequent loan.
Our ability to retain customers is central to achieving our strategy and is an
indicator of the quality of our customer service. We do not retain customers who
have a poor payment history as it can create a continuing impairment risk and
runs counter to our responsible lending commitments.
Employees and Agents Employee
information
Not applicable Agents are self-employed individuals who represent the Group’s subsidiaries and
are engaged under civil contracts with the exception of Hungary and Romania
where they are employees engaged under employment contracts due to local
regulatory reasons.
Agent and employee
retention (%)
None Not applicable This measure represents the proportion of our employees and agents that have
been working for or representing the Group for more than 12 months. Experienced
people help us to achieve and sustain strong customer relationships and a high
quality service, both of which are central to achieving good customer retention.
Good agent and employee retention also helps reduce costs of recruitment and
training, enabling more investment in people development.
Annual Report and Financial Statements 2021 161
Alternative performance measures continued
162
International Personal Finance plc
Constant exchange rate reconciliations
The year-on-year change in profit and loss accounts is calculated by retranslating the 2020 profit and loss account at the average actual
exchange rates used in the current year.
2021
£m
European
home credit
Mexico
home credit
IPF Digital Central costs Group
Customers (000)
810 654 263 – 1,727
Closing receivables 425.9 117.6 173.3 – 716.8
Credit issued
599.2 194.2 188.7 – 982.1
Average net receivables
403.3 102.8 170.9 – 677.0
Revenue
284.7 146.0 118.0 – 548.7
Impairment
1.6 (33.8) (24.0) – (56.2)
Net revenue
286.3 112.2 94.0 – 492.5
Finance costs
(34.0) (6.6) (13.3) (0.1) (54.0)
Agents’ commission
(42.9) (22,4) – – (65.3)
Other costs
(154.9) (64.8) (72.0) (13.8) (305.5)
Profit/(loss) before tax
54.5 18.4 8.7 (13.9) 67.7
2020 performance at 2020 average foreign exchange rates
£m
European
home credit
Mexico
home credit
IPF Digital Central costs Group
Customers (000) 827 599 2,256 – 1,682
Closing receivables 389.5 92.8 186.8 – 669.1
Credit issued 453.8 143.6 174.8 – 772.2
Average net receivables 443.0 102.5 232.1 – 777.6
Revenue 351.1 157.1 153.1 – 661.3
Impairment (125.1) (53.0) (69.5) – (247.6)
Net revenue 226.0 104.1 83.6 – 413.7
Finance costs (32.3) (7.7) (14.9) (0.1) (55.0)
Agents’ commission (50.7) (21.3) – – (72.0)
Other costs (154.7) (71.6) (76.6) (12.6) (315.5)
Pre-exceptional (loss)/profit before tax (11.7) 3.5 (7.9) (12.7) (28.8)
Foreign exchange movements
£m
European
home credit
Mexico
home credit IPF Digital Central costs Group
Closing receivables (24.2) (2.0) (10.6) – (36.8)
Credit issued (24.1) (5.1) (3.6) – (32.8)
Average net receivables (20.7) (2.6) (6.8) – (30.1)
Revenue (10.4) (1.0) (4.4) – (15.8)
Impairment (1.7) (3.3) 1.9 – (3.1)
Net revenue (12.1) (4.3) (2.5) – (18.9)
Finance costs 1.4 0.2 0.7 – 2.3
Agents’ commission 2.6 0.4 – – 3.0
Other costs 6.0 1.4 2.3 – 9.7
Pre-exceptional (loss)/profit before tax (2.1) (2.3) 0.5 – (3.9)
2020 performance at 2021 average exchange rates
£m
European
home credit
Mexico
home credit
IPF Digital Central costs Group
Closing receivables 365.3 90.8 176.2 – 632.3
Credit issued 429.7 138.5 171.2 – 739.4
Average net receivables 422.3 99.9 225.3 – 747.5
Revenue 340.7 156.1 148.7 – 645.5
Impairment (126.8) (56.3) (67.6) – (250.7)
Net revenue 213.9 99.8 81.1 – 394.8
Finance costs (30.9) (7.5) (14.2) 0.1 (52.7)
Agents’ commission (48.1) (20.9) – – (69.0)
Other costs (148.7) (70.2) (74.3) (12.6) (305.8)
International Personal Finance plc162
Supplementary information
Annual Report and Financial Statements 2021
163
Year-on-year movement at constant exchange rates
European
home credit
Mexico
home credit
IPF Digital Central costs Group
Closing receivables 16.6% 29.5% (1.6%) – 13.4%
Credit issued 39.4% 40.2% 10.2% – 32.8%
Average net receivables (4.5%) 2.9% (24.1%) – (9.4%)
Revenue (16.4%) (6.5%) (20.6%) – (15.0%)
Impairment 101.3% 40.0% 64.5% – 77.6%
Net revenue 33.8% 12.4% 15.9% – 24.7%
Finance costs (10.0%) 12.0% 6.3% – (2.5%)
Agents’ commission 10.8% (7.2%) – – 5.4%
Other costs (4.2%) 7.7% 3.1% (9.5%) 0.1%
Return on assets (ROA)
ROA is calculated as profit/(loss) before interest after tax divided by average receivables
2021
European
home credit
Mexico
home credit
IPF Digital Central cost Group
Profit/(loss) before tax (£m)
54.5 18.4 8.7 (13.9) 67.7
Interest (£m) (34.0) (6.6) (13.3) (0.1) (54.0)
Profit before interest and tax (£m)
88.5 25.0 22.0 (13.8) 121.7
Taxation (£m)
(33.7) (9.5) (8.4) 5.3 (46.4%)
Profit before interest after tax (£m)
54.8 15.5 13.6 (8.5) 75.3
Average net receivables (£m)
403.3 102.8 170.9 – 677.0
Return on assets (ROA)
13.6% 15.1% 8.0% – 11.1%
2020
European
home credit
Mexico
home credit
IPF Digital Central costs Group
Pre-exceptional (loss)/profit before tax (£m) (11.7) 3.5 (7.9) (12.7) (28.8)
Interest (£m) (32.3) (7.7) (14.9) (0.1) (55.0)
Pre-exceptional profit/(loss) before interest and tax (£m) 20.6 11.2 7.0 (12.6) 26.2
Taxation (£m) (17.5) (9.5) (6.0) 10.7 (22.3)
Pre-exceptional profit before interest after tax (£m) 3.1 1.7 1.0 (1.9) 3.9
Average net receivables (£m) 443.0 102.5 232.1 – 777.6
Pre-exceptional return on assets (ROA) 0.7% 1.6% 0.5% – 0.5%
Return on equity (ROE)
ROE is calculated as profit after tax divided by average net assets
2021
£m
2020
£m
2019
£m
Equity (net assets)
367.1 370.5 436.4
Average equity 368.8 403.5
Profit/(loss) after tax
41.9 (53.3)
Return on equity
11.4% (13.2%)
Annual Report and Financial Statements 2021 163
Financial calendar for 2022
23 February Announcement of 2021 full-year results
7 April Ex-dividend date for final dividend
8 April Record date for final dividend
13 April DRIP cut-off date
28 April 2022 AGM
6 May Payment of 2021 final dividend
27 July Announcement of 2022 half-year results
1 September Ex-dividend date of interim dividend
2 September Record date for interim dividend
9 September DRIP cut-off date
30 September Payment of 2022 interim dividend
Dividend history
Details of previous dividend payments can be found on our
website at www.ipfin.co.uk
Year GBP Ex-date Pay date Type
2021 0.022 02/09/2021 01/10/2021 Interim
Dividends
Dividends can be paid directly into a shareholder’s bank or
building society account. This ensures secure delivery and
means that cleared funds are received on the payment date.
For shareholders that are resident outside the UK, dividend
payments are made by Link’s International Payment Service
and are paid in local currency. The Company offers a dividend
reinvestment plan (DRIP). A DRIP is a convenient and easy way
to build a shareholding by using cash dividends to buy
additional shares rather than receiving a cheque or having
your bank account credited with cash. To receive more
information, change your preferred dividend payment method,
or if you would like to participate in the DRIP, please contact
the Company’s registrar, Link Group.
Registrar
Queries relating to your shareholdings including transfers,
dividend payments/reinvestments, lost share certificates,
duplicate accounts and amending personal details should
be addressed to the Company’s registrar:
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Telephone:
0371 664 0300 (calls are charged at the standard geographic
rate and will vary by provider). If you are calling from outside
the UK please call +44 (0)371 644 0300 (calls outside the
UK will be charged at the applicable international rate).
Lines are open between 09:00 and 17:30, Monday to Friday,
excluding public holidays in England and Wales.
Email:
enquiries@linkgroup.co.uk
Website:
www.linkgroup.com
Go paperless
Shareholders can register for electronic communications
by visiting the website at www.myipfshares.com.
Why receive information this way?
– Online access to personal shareholding information
– Ability to manage shareholding and personal
details proactively
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– Helps save paper
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To register, shareholders will need their investor code,
which is printed on correspondence received from Link Group.
This service will require a user ID and password to be provided
on registration.
ShareGift
If you have a small shareholding in
International Personal Finance plc and
it would be uneconomical to sell the shares,
you may wish to donate them to ShareGift (registered charity
no. 1052686), which is an independent charity. ShareGift can
amalgamate small shareholdings in order to sell the shares
and pass the proceeds on to other charities. More information
is available at www.sharegift.org or telephone 020 7930 3737.
Cautionary statement
The purpose of this report is to provide information
to the members of the Company. It has been prepared for,
and only for, the members of the Company, as a body, and
no other persons. The Company, its directors and employees,
customer representatives or advisors do not accept or
assume responsibility to any other person to whom this
document is shown or into whose hands it may come and
any such responsibility or liability is expressly disclaimed.
The Annual Report and Financial Statements contains certain
forward-looking statements with respect to the operations,
performance and financial condition of the Group. By
their nature, these statements involve uncertainty since
future events and circumstances can cause results and
developments to differ materially from those anticipated. The
forward-looking statements reflect knowledge and information
available at the date of preparation of the Annual Report and
Financial Statements and the Company undertakes no
obligation to update these forward-looking statements (other
than to the extent required by legislation and the Listing Rules
and the Disclosure and Transparency Rules of the Financial
Conduct Authority). Nothing in this year’s Annual Report and
Financial Statements should be construed as a profit forecast.
Shareholder information
International Personal Finance plc164
Supplementary information
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committed to all round excellence and improving environmental
performance is an important part of this strategy.
Pureprint Ltd aims to reduce at source the effect its operations have on
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Pureprint Ltd is a Carbon / Neutral
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International Personal Finance plc
Telephone: +44 (0)113 539 5466
Email: investors@ipfin.co.uk
Website: www.ipfin.co.uk
Registered in England and Wales
Company number: 6018973