29 November 2021, 07:00

Source - LSE Regulatory

RNS Number : 7996T

International Personal Finance Plc

29 November 2021

International Personal Finance plc

Interim Condensed Consolidated Financial Report for the period 1 January to 30 September 2021

Management Board Report

Principal activity

International Personal Finance plc specialises in providing unsecured consumer credit to 1.7 million customers across 11 markets. We operate the world's largest home credit business and a fintech operator, IPF Digital.

Financial and operational highlights

Ø	Continued strong and improving financial performance
	o	Group profit before tax for the nine months to 30 September 2021 of £59.8 million driven by strong collections performance (YTD 2020: loss of £41.7 million)
	o	In the quarter to 30 September 2021, Group profit before tax of £16.5 million (Q3 2020: £16.8 million)

Ø	Strong operational performance and well-positioned for further growth
	o	Rebuild strategy proving highly effective and delivering sustained growth momentum
	o	Improving consumer demand and selective relaxation of credit settings delivered 35% increase in credit issued year on year
	o	Building sales momentum delivered 8% increase in closing receivables since the 2020 year end (at CER)
	o	Strong collections and high-quality lending resulted in very low annualised impairment as a percentage of revenue at 12.0%

Ø	Strong funding position and well capitalised balance sheet
	o	Successful issue of SEK 450 million bond at 7% coupon, maturing October 2024
	o	Equity to receivables ratio 53.7% at 30 September 2021
	o	Bond and bank facilities total £572 million to support future growth
	o	Undrawn facilities and non-operational cash balances of £149 million
	o	Fitch Ratings improved IPF outlook to Stable and reaffirmed long-term credit rating of BB-
Group key statistics			Nine months to 30 September 2020	Nine months to 30 September 2021	YOY change at CER
Customer numbers (000s)			1,715	1,715	-
Credit issued (£m)			547.6	714.3	35.0%
Closing receivables			683.6	695.0	6.9%
Revenue (£m)			517.0	399.5	(20.2%)
Annualised impairment % revenue			38.1%	12.0%	26.1 ppts
Annualised cost-income ratio			44.8%	55.1%	(10.3 ppts)
Statutory (LBT) / PBT (£m)			(41.7)	59.8
Statutory (LPS) / EPS (pence)			(29.8)	14.2

Gerard Ryan, Chief Executive Officer at IPF commented:

"I am delighted to announce that IPF delivered another strong operational and financial performance, reporting £59.8 million profit before tax in the year to date. Our business plays an essential role in society by providing credit to people who are underbanked or underserved, and we are successfully serving a growing number of customers in a responsible and sustainable way. Despite the ongoing challenges posed by the pandemic, we see significant long-term demand for affordable credit in all our markets and will continue to execute our rebuild strategy by increasing credit issued and growing the receivables portfolio while maintaining a clear focus on portfolio quality and costs. My thanks go to all of our colleagues who are working diligently to serve our customers safely and rebuild the business at this important time."

Group performance

The successful implementation of our rebuild strategy to return the business to full-year profitability and long-term growth delivered a further improvement in our financial performance. Group profit before tax was £59.8 million, an increase of £101.5 million year on year, with all three business divisions contributing to the Group's step-up in performance. For the quarter to 30 September 2021, Group profit before tax was £16.5 million (Q3 2020: £16.8 million).

The improved year-on-year profit performance was reflected across all our business divisions, each of which was profitable in the nine months to 30 September 2021.

	Nine months to 30 September 2020 £m	Nine months to 30 September 2021 £m
European home credit	(12.2)	50.1
Mexico home credit	(5.2)	11.7
IPF Digital	(2.8)	9.1
Central costs	(9.8)	(11.1)
Pre-exceptional (loss) / profit before tax	(30.0)	59.8

This strong result for the year to date was driven by excellent operational focus on the rebuild strategy. 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 average size of the portfolio year on year. It is, however, pleasing to report a £54 million increase (8% at CER) in the closing receivables portfolio to £695 million in the year to date, which contributed to improving revenue trends in Q3.

	Nine months to 30 September 2020 £m	Nine months to 30 September 2021 £m	Change £m	Change %	Change at CER %
Customer numbers (000s)	1,715	1,715	-	-	-
Closing receivables	683.6	695.0	11.4	1.7	6.9
Credit issued	547.6	714.3	166.7	30.4	35.0
Average net receivables	811.0	668.2	(142.8)	(17.6)	(14.9)

Revenue	517.0	399.5	(117.5)	(22.7)	(20.2)
Impairment	(218.9)	(28.3)	190.6	87.1	86.8
Net revenue	298.1	371.2	73.1	24.5	30.0
Finance costs	(38.8)	(39.0)	(0.2)	(0.5)	(3.7)
Agents' commission	(54.1)	(48.4)	5.7	10.5	7.3
Other costs	(235.2)	(224.0)	11.2	4.8	2.2
Pre-exceptional (loss) / profit before taxation	(30.0)	59.8	89.8	299.3
Exceptional items	(11.7)	-	11.7	100.0
(Loss) / profit before taxation	(41.7)	59.8	101.5	243.4

The strong Group collections performance achieved in the first half of the year continued through the third quarter and we saw growing consumer appetite for credit. This resulted in a strong increase in credit issued of 35% year on year, with Q3 credit issued improving by 4% compared with Q2. It also supported our goal to rebuild customer numbers, the result of which has been steady growth over the past five months and at the end of Q3, customer numbers were in line year on year despite the significant impact of the pandemic and the collect-out of our operation in Finland. We have returned to serving 1.7 million people, adding a further 36,000 new customers in Q3. Year on year, average net receivables reduced by 15% due to the lower levels of credit issued in 2020. This resulted in a 20% contraction in revenue year on year, but as we successfully rebuild our portfolio, revenue is growing once again with Q3 3% higher compared with Q2.

With the company returning to growth mode we also delivered an 8% increase in closing receivables since the year end (at CER) to £695 million. We expect this growth trend to continue for both credit issued and receivables in the final quarter of the year which will, in turn, drive further revenue growth.

The strong collections performance resulted in an exceptionally low impairment charge of £28.3 million in the nine months to September 2021, which includes the benefit of Covid-19 discounting and expected credit loss provisions releases totalling £20.8 million. The year-to-date charge comprised £11.7 million in H1 and £16.6 million in Q3, the increase being driven by reduced Covid-19 provision releases of £0.8 million compared with £20.0 million in H1, together with higher levels of up-front impairment resulting from the increased level of sales.

The performance of the receivables portfolio since June 2020, which was granted largely under tighter than normal credit settings, has also been better than predicted by our impairment models, and this has had a further positive impact on our impairment charge. Taken together, these factors resulted in a 25.4 ppt improvement in annualised impairment as a percentage of revenue since the 2020 year end to 12.0%. As previously reported, we expect impairment as a percentage of revenue to remain below our target range of 25% to 30% in 2021 before increasing in 2022 as we continue to rebuild the business.

Other costs reduced year on year by 2% (£5.1 million at CER) reflecting our continued approach of maintaining tight control of costs while continuing to invest to deliver higher volumes of credit.

Market overview and Covid-19 response strategy

We play a very important role in society, providing affordable finance responsibly to underbanked and underserved consumers. Our strategy centres on delivering a positive customer experience and an expanded product range across all our businesses, recapturing growth as consumer demand increases in our markets. Our phased plan, implemented in response to the Covid-19 pandemic, is driving the return to full-year profitability and progressive returns to our shareholders.

We saw a steady increase in levels of demand over the course of Q2 which continued throughout the third quarter of the year. This pick up was driven by the easing of freedom of movement and social distancing rules in most of our markets, the opening up of retail and hospitality sectors and the progression of government vaccination programmes. While there is uncertainty ahead, particularly as Covid-19 cases are increasing in some markets, we are confident that our customer segment will continue to seek credit to meet their needs as markets return to normal. The macroeconomic conditions in our markets remain on course to generate GDP growth in 2021 and 2022 of between 2% and 7%. The more positive outlook and eased pandemic restrictions have resulted in consumer credit providers, including our businesses, choosing to market products more intensely in order to capture renewed consumer demand and rebuild receivables portfolios. While the consumer finance sector continues to be highly competitive, we are in a very good position to serve our customers responsibly with products that suit their financial needs and circumstances, both now and into the future.

The way we have operated throughout the pandemic has allowed us to demonstrate the important role our business performs. In addition to supporting our loyal, high-quality customers with credit, 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, and PPE together with a range of remote alternative repayment options are available to customers if agents are unable to visit them. We also have in place appropriate protocols to address any adverse impact from future lockdowns, should they occur.

Of the temporary Covid-19 related regulations introduced in 2020, only the temporary debt repayment moratorium in Hungary remains in place. This legislation was due to expire on 30 September 2021 but was further extended to 30 June 2022. The terms of the moratorium have, however, changed to an opt-in scheme and new eligibility criteria have been introduced. Customers who wished to remain in the moratorium had until the end of October to apply.

Business division performance review

As highlighted at the 2020 year-end, we merged our two digital businesses in Poland in order to deliver efficiencies of scale and, as a result, the digital lending arm previously reported as part of European home credit is now included in IPF Digital. All comparatives have been amended accordingly and are presented on a like-for-like basis.

European home credit

The strong operational performance delivered by our European home credit businesses resulted in a £62.3 million swing in profit before tax year on year to £50.1 million. Profit before tax in Q3 was £15.2 million. This significantly improved financial result was driven primarily by continued strong collections flowing through to lower impairment charges in each market.

	Nine months to 30 September 2020 £m	Nine months to 30 September 2021 £m	Change £m	Change %	Change at CER %
Customer numbers (000s)	833	810	(23)	(2.8)	(2.8)
Closing receivables	395.8	418.0	22.2	5.6	12.2
Credit issued	309.9	440.0	130.1	42.0	48.3
Average net receivables	459.5	397.3	(62.2)	(13.5)	(9.9)

Revenue	269.2	207.0	(62.2)	(23.1)	(19.8)
Impairment	(105.8)	12.2	118.0	111.5	111.9
Net revenue	163.4	219.2	55.8	34.1	41.1
Finance costs	(23.4)	(24.0)	(0.6)	(2.6)	(8.6)
Agents' commission	(38.0)	(32.0)	6.0	15.8	12.1
Other costs	(114.2)	(113.1)	1.1	1.0	(2.5)
Pre-exceptional (loss) / profit before taxation	(12.2)	50.1	62.3	510.7

Our business responded well to growing consumer demand, and we increased credit issued year on year by 48%, with Q3 in line with Q2 at £152 million. Customer numbers contracted year on year by 3% to 810,000 but as we successfully executed our rebuild strategy, they increased by 2,000 in Q3. Year on year, average net receivables reduced by 10% but credit issued growth momentum delivered a 12% (at CER) increase in closing receivables since December 2020 to £418 million, up 4% from £401 million at June.

Our collections performance together with the unwinding of Covid-19 impairment provisions booked in 2020 and higher-quality lending, resulted in annualised impairment as a percentage of revenue improving by 30.9 ppts since the 2020 year-end to 4.7%. Other costs increased by 3% (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.

Mexico home credit

Mexico home credit reported another significantly improved financial performance with profit before tax increasing by £16.9 million year on year to £11.7 million, which included £2.3 million delivered in the third quarter. This robust outcome, driven primarily by a reduction in impairment and a lower cost base, was delivered against a challenging third wave of the Covid-19 pandemic in Mexico during Q3 2021.

	Nine months to 30 September 2020 £m	Nine months to 30 September 2021 £m	Change £m	Change %	Change at CER %
Customer numbers (000s)	609	649	40	6.6	6.6
Closing receivables	81.4	110.4	29.0	35.6	31.3
Credit issued	101.8	139.6	37.8	37.1	42.4
Average net receivables	106.6	99.4	(7.2)	(6.8)	(4.4)

Revenue	123.0	102.8	(20.2)	(16.4)	(14.7)
Impairment	(51.4)	(20.4)	31.0	60.3	60.9
Net revenue	71.6	82.4	10.8	15.1	20.6
Finance costs	(5.6)	(4.8)	0.8	14.3	12.7
Agents' commission	(16.1)	(16.4)	(0.3)	(1.9)	(3.8)
Other costs	(55.1)	(49.5)	5.6	10.2	8.7
Pre-exceptional (loss) / profit before taxation	(5.2)	11.7	16.9	325.0

Consumer appetite for credit is recovering and despite a third wave of the Covid-19 pandemic in Q3 exacerbated by relatively low vaccination rates in Mexico, we delivered a 7% increase in customer numbers year on year to 649,000, adding a further 25,000 in Q3. This, in turn, supported a 42% increase in credit issued year on year, with Q3 9% higher than Q2. Average net receivables reduced by 4% year on year due to lower credit issued in 2020 and incremental impairment provisions. Revenue on the smaller receivables portfolio decreased by 15% year on year, but it is pleasing to report that Q3 revenue was 11% higher than Q2 as we focused on rebuilding the business. This also supported the delivery of a 21% (at CER) increase in closing receivables since December 2020 to £110 million at the end of Q3. Closing receivables growth in Q3 was 7% (at CER).

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 16.0 ppts since the 2020 year-end to 17.7% at 30 September 2021. As we eased credit settings to serve more new customers and rebuild the receivables portfolio, annualised impairment as a percentage of revenue increased by 5.1 ppts in Q3. We continued to manage costs tightly maintaining the benefits of savings achieved in 2020 and delivered a 9% reduction in Other costs year on year.

IPF Digital

IPF Digital reported an £11.9 million improvement in profit before tax to £9.1 million driven by significantly improved impairment and a reduction in costs, offset partially by lower revenue. This improved performance included profit before tax of £3.0 million in Q3.

	Nine months to 30 September 2020 £m	Nine months to 30 September 2021 £m	Change £m	Change %	Change at CER %
Customer numbers (000s)	273	256	(17)	(6.2)	(6.2)
Closing receivables	206.4	166.6	(39.8)	(19.3)	(14.0)
Credit issued	135.9	134.7	(1.2)	(0.9)	0.3
Average net receivables	244.9	171.5	(73.4)	(30.0)	(28.5)

Revenue	124.8	89.7	(35.1)	(28.1)	(26.5)
Impairment	(61.7)	(20.1)	41.6	67.4	66.6
Net revenue	63.1	69.6	6.5	10.3	12.4
Finance costs	(9.8)	(10.2)	(0.4)	(4.1)	(2.0)
Other costs	(56.1)	(50.3)	5.8	10.3	8.2
Pre-exceptional (loss) / profit before taxation	(2.8)	9.1	11.9	425.0

The pre-exceptional profitability of IPF Digital is segmented as follows:

	Nine months to 30 September 2020 £m	Nine months to 30 September 2021 £m	Change £m	Change %
Established markets	13.8	15.7	1.9	13.8
New markets	(5.6)	1.8	7.4	132.1
Head office costs	(11.0)	(8.4)	2.6	23.6
IPF Digital	(2.8)	9.1	11.9	425.0

Increasing demand for consumer credit is creating a good foundation on which to rebuild the digital business and deliver sustainable growth. Year on year, customer numbers reduced by 6% to 256,000 driven by suppressed demand early in 2021 as a result of the pandemic, our continued cautious credit settings in Spain and the cessation of lending in Finland. However, it is pleasing to note that we delivered an increase of 9,000 customers in Q3. The rate of credit issued also improved as the year progressed and new lending was in line year on year, with Q3 credit issued 12% higher than Q2. (Excluding Finland 19% increase year on year). Average net receivables reduced by 28% year on year, with revenue contracting by 27% in the period and by 12% in Q3. Closing receivables since December 2020 contracted by 7% to £167 million at the end of Q3, however, building momentum in the business resulted in closing receivables being broadly flat in Q3 (at CER) compared with H1 2021.

Continued high-quality lending and improving collections performance resulted in a 21.7 ppt improvement in annualised impairment as a percentage of revenue to 23.7% since the 2020 year end. Costs continued to be tightly managed and reduced by 8% year on year, driven mainly by the benefits of our rightsizing exercise in 2020, lower marketing expenditure and other volume-related costs.

Established markets

The established markets delivered a £1.9 million increase in profit before tax to £15.7 million, driven by lower impairment and a reduction in costs, partially offset by lower revenue arising from a contraction in our portfolio. This improved performance included profit before tax of £4.5 million in Q3.

	Nine months to 30 September 2020 £m	Nine months to 30 September 2021 £m	Change £m	Change %	Change at CER %
Customer numbers (000s)	125	98	(27)	(21.6)	(21.6)
Closing receivables	109.3	79.5	(29.8)	(27.3)	(22.2)
Credit issued	70.0	49.1	(20.9)	(29.9)	(29.4)
Average net receivables	123.2	85.5	(37.7)	(30.6)	(29.2)

Revenue	55.3	37.3	(18.0)	(32.5)	(30.9)
Impairment	(19.6)	(2.1)	17.5	89.3	89.0
Net revenue	35.7	35.2	(0.5)	(1.4)	0.9
Finance costs	(5.2)	(5.1)	0.1	1.9	-
Other costs	(16.7)	(14.4)	2.3	13.8	11.1
Pre-exceptional profit before taxation	13.8	15.7	1.9	13.8

Customers and credit issued contracted year on year by 22% and 29% respectively, as a result of tighter credit settings introduced in response to Covid-19 together with our decision to cease lending in Finland and collect out the portfolio. As we eased credit settings in response to increasing demand as lockdown restrictions lifted, credit issued was 9% higher in Q3 compared with Q2. Average net receivables contracted year on year by 29% due to the lower credit issued and this resulted in a reduction in revenue of 31% in the same period (Q3: contraction of 30%). Excluding Finland, the contraction in average net receivables and revenue year on year was significantly lower at 15% and 19% respectively.

Good collections and lower levels of credit issued resulted in a lower impairment charge in the period and a 23.2 ppt improvement in annualised impairment as a percentage of revenue to 5.4% since the year end. We continued to manage costs tightly and together with the benefit of the 2020 rightsizing programme, costs reduced by 11% year on year.

New markets

The new markets delivered further improved profit before tax of £1.8 million, an increase of £7.4 million compared to 2020, driven by a reduction in the cost base and improved credit quality. This improved performance comprised profit before tax of £1.2 million in Q3.

	Nine months to 30 September 2020 £m	Nine months to 30 September 2021 £m	Change £m	Change %	Change at CER %
Customer numbers (000s)	148	158	10.0	6.8	6.8
Closing receivables	97.1	87.1	(10.0)	(10.3)	(4.9)
Credit issued	65.9	85.6	19.7	29.9	32.1
Average net receivables	121.7	86.0	(35.7)	(29.3)	(27.8)

Revenue	69.5	52.4	(17.1)	(24.6)	(23.1)
Impairment	(42.1)	(18.0)	24.1	57.2	56.2
Net revenue	27.4	34.4	7.0	25.5	27.4
Finance costs	(4.6)	(5.1)	(0.5)	(10.9)	(4.1)
Other costs	(28.4)	(27.5)	0.9	3.2	1.1
Pre-exceptional (loss) / profit before taxation	(5.6)	1.8	7.4	132.1

As lockdown restrictions eased and consumer demand improved, we continued to relax credit settings in our new markets. This resulted in further growth momentum in customer numbers delivering a 7% increase year on year to 158,000, and a faster growth rate in Q3 when customer numbers increased by 13,000 since the half year. This was also reflected in credit issued growth which increased by 32% year on year, with Q3 credit issued 14% higher than Q2. Average net receivables and revenue reduced by 28% and 23% respectively year on year. In Q3, revenue increased by 3%.

Credit quality continued to improve driven by tighter credit settings and good collections which, together with lower credit issued, resulted in a 21.1 ppt improvement in impairment as a percentage of revenue since the 2020 year end to 39.0%. Other costs reduced by 1% year on year driven by the benefits of the rightsizing exercise in 2020.

Taxation

The taxation charge on profit for the nine months to September 2021 (£28.2 million) is based on an expected effective tax rate for the full year of approximately 47%.

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 are set out at note 20.

Funding and balance sheet

We continue to maintain a very conservatively capitalised balance sheet, a strong funding position and robust financial risk management. At 30 September 2021, the equity to receivables ratio was 53.7% (2020: 55.1%) and the gearing ratio was 1.3x (2020: 1.5x).

As at 30 September 2021, the Group had total debt facilities of £572 million (£407 million of bonds and £165 million of bank facilities) and borrowings of £475 million, with undrawn facilities and non-operational cash balances of £149 million. Total cash balances at 30 September 2021 were £92 million and include £52 million that was not required for operational purposes but is available to drive receivables growth that is anticipated in Q4 and beyond.

In October, we successfully issued a new 3-year SEK 450 million bond priced at 7%, the proceeds of which were used to refinance the SEK bond maturing in 2022. The new notes, due in October 2024, were issued under the Group's euro medium-term note programme and extend the maturity profile of IPF's sources of debt funding.

Fitch Ratings improved the outlook for IPF to Stable and reaffirmed its long-term credit rating of BB-.

Outlook

Our business plays an essential role in society, and we have a longstanding and successful record of providing affordable credit in a responsible way to those who are underbanked or underserved by banks. There is significant long-term demand for affordable credit from this group of consumers in all our markets and we will continue to execute our rebuild strategy by continuing to serve our customers safely, progressively and responsibly, increasing credit issued and growing the receivables portfolio while maintaining a clear focus on portfolio quality and costs.

Alternative performance measures

This Interim Condensed Consolidated Financial Report provides alternative performance measures (APMs) which are not defined or specified under the requirements of International Financial Reporting Standards. We believe these APMs provide stakeholders with important additional information on our business. To support this we have included an accounting policy note on APMs in the notes to this Interim Condensed Consolidated Financial Report, a glossary indicating the APMs that we use, an explanation of how they are calculated and how we use them, and a reconciliation of the APMs we use to a statutory measure, where relevant.

Financial Highlights - additional information in accordance with the Warsaw Stock Exchange listing

	£'m		PLN'm			EUR'm
	1 Jan-30 Sep 2021	1 Jan-30 Sep 2020	1 Jan-30 Sep 2021	1 Jan-30 Sep 2020	1 Jan-30 Sep 2021		1 Jan-30 Sep 2020
	Unaudited	Unaudited	Unaudited	Unaudited	Unaudited		Unaudited
Revenue	399.5	507.4	2,109.2	2,539.8	462.7		571.9
Profit before tax	59.8	(41.7)	315.7	(208.7)	69.3		(47.0)
Profit after tax	31.6	(66.2)	166.8	(331.4)	36.6		(74.6)
Net cash generated from operating activities	15.2	278.2	80.2	1,392.5	17.6		313.6
Net cash used in investing activities	(8.1)	(11.4)	(42.8)	(57.1)	(9.4)		(12.9)
Net cash used in financing activities	(28.8)	(104.6)	(152.0)	(523.6)	(33.4)		(117.9)
Net change in cash and cash equivalents	(21.7)	162.2	(114.6)	811.9	(25.1)		182.8
Earnings per share (pence)	14.2	(25.0)	75.0	(125.1)	16.4		(28.2)
Average number of shares (million)	223.1	222.3	223.1	222.3	223.1		222.3

	£'m		PLN'm			EUR'm
As at	30 September 2021	31 December 2020	30 September 2021	31 December 2020	30 September 2021		31 December 2020
	Unaudited	Audited	Unaudited	Audited	Unaudited		Audited
Total assets	1,034.8	1,023.9	5,552.0	5,255.4	1,198.4		1,149.0
Current liabilities	(218.7)	(136.0)	(1,173.4)	(698.0)	(253.3)		(152.6)
Non-current liabilities	(442.6)	(517.4)	(2,374.7)	(2,655.7)	(512.6)		(580.6)
Total equity	373.5	370.5	2,003.9	1,901.7	432.6		415.8
Share capital	23.4	23.4	125.5	120.1	27.1		26.3
Net assets per share - £ / PLN / €	1.67	1.67	8.98	8.56	1.94		1.87

The financial highlights have been translated into PLN and EUR as follows:

Items relating to the income statement and cash flow statement have been translated using the mean of mid rates quoted by the National Bank of Poland for the last day of each month in the period; the exchange rates calculated are:

	PLN	EUR
For 1 Jan-30 September 2021	5.2795	1.1581
For 1 Jan-30 September 2020	5.0055	1.1272

Items relating to the balance sheet have been translated using the mid rate quoted by the National Bank of Poland for the end of the reporting period; the exchange rates calculated are:

	PLN	EUR
For 30 September 2021	5.3653	1.1581
For 31 December 2020	5.1327	1.1222

	PLN	EUR
Highest rate 1 Jan-30 September 2021	5.4679	1.1738
Lowest rate 1 Jan-30 September 2021	5.1190	1.1279

Financial Statements

Consolidated income statement

		Unaudited	Unaudited	Unaudited	Unaudited	Audited
		Nine months ended	Three months ended	Nine months ended	Three months ended	Year ended
		30 September 2021	30 September 2021	30 September 2020	30 September 2020	31 December 2020
	Notes	£m	£m	£m	£m	£m
Revenue	3	399.5	136.6	507.4	145.2	661.3
Impairment	3	(28.3)	(16.6)	(209.3)	(27.1)	(247.6)
Revenue less impairment		371.2	120.0	298.1	118.1	413.7

Finance costs	4	(39.0)	(13.2)	(38.8)	(11.5)	(55.0)
Other operating costs		(80.5)	(27.6)	(79.7)	(25.0)	(108.7)
Administrative expenses		(191.9)	(62.7)	(209.6)	(64.8)	(278.8)
Total costs		(311.4)	(103.5)	(328.1)	(101.3)	(442.5)

Pre-exceptional profit/(loss) before taxation	3	59.8	16.5	(30.0)	16.8	(28.8)
Exceptional items:
- Impairment		-	-	-	-	(2.5)
- Finance costs		-	-	-	-	8.2
- Administrative expenses		-	-	-	(5.2)	(17.6)
Total exceptional items before taxation		-	-	(11.7)	(5.2)	(11.9)
Profit/(loss) before taxation		59.8	16.5	(41.7)	11.6	(40.7)
Pre-exceptional tax expense - UK		-	-	-	-	2.3
Pre-exceptional tax expense - Overseas		(28.2)	(7.8)	(25.5)	(17.5)	(26.8)
Pre-exceptional Tax expense	5	(28.2)	(7.8)	(25.5)	(17.5)	(24.5)
Exceptional tax (expense)/income		-	-	1.0	1.2	1.0
Total tax expense		(28.2)	(7.8)	(24.5)	(16.3)	(23.5)
Profit/(loss) after taxation attributable to owners of the Company		31.6	8.7	(66.2)	(4.7)	(64.2)

Earnings/(loss) per share - statutory

		Unaudited	Unaudited	Unaudited	Unaudited	Audited
		Nine months ended	Three months ended	Nine months ended	Three months ended	Year ended
		30 September 2021	30 September 2021	30 September 2020	30 September 2020	31 December 2020
	Notes	pence	Pence	pence	pence	pence
Basic	6	14.2	3.9	(29.8)	(2.1)	(28.9)
Diluted	6	13.4	3.7	(28.3)	(2.0)	(27.4)

The notes to the financial statements are an integral part of these consolidated financial statements.

Consolidated statement of comprehensive income

	Unaudited	Unaudited	Unaudited	Unaudited	Audited
	Nine months ended	Three months ended	Nine months ended	Three months ended	Year ended
	30 September 2021	30 September 2021	30 September 2020	30 September 2020	31 December 2020
	£m	£m	£m	£m	£m
Profit/(loss) after taxation attributable to owners of the Company	31.6	8.7	(66.2)	(4.7)	(64.2)
Other comprehensive income
Items that may subsequently be reclassified to income statement
Exchange (losses)/gains on foreign currency translations	(30.0)	(2.5)	3.4	(5.8)	(4.1)
Net fair value gains/(losses) - cash flow hedges	2.7	4.6	(1.0)	(2.4)	1.3
Tax (charge)/credit on items that may be reclassified	(0.5)	(0.9)	(0.4)	(0.1)	(0.3)
Items that will not subsequently be reclassified to income statement
Actuarial gains/(losses) on retirement benefit asset	1.3	-	0.2	-	(1.4)
Tax (charge)/credit on items that will not be reclassified	(0.3)	-	(0.1)	-	0.3
Other comprehensive (expense)/income net of taxation	(26.8)	1.2	2.1	(8.3)	(4.2)
Total comprehensive income/(expense) for the period attributable to owners of the Company	4.8	9.9	(64.1)	(13.0)	(68.4)

The notes to the financial statements are an integral part of these consolidated financial statements.

Consolidated balance sheet

		Unaudited	Unaudited	Unaudited	Unaudited	Audited
		30 September 2021	30 June 2021	30 September 2020	30 June 2020	31 December 2020
	Notes	£m	£m	£m	£m	£m
Assets
Non-current assets
Goodwill	8	23.3	23.4	24.9	24.7	24.4
Intangible assets	9	26.0	26.2	35.0	36.8	30.2
Property, plant and equipment	10	12.4	13.2	16.5	18.0	15.4
Right-of-use assets	11	15.2	16.6	16.2	17.9	17.5
Amounts receivable from customers	13	170.0	162.0	158.9	175.9	136.5
Deferred tax assets	12	126.6	125.5	135.8	137.2	135.7
Non-current tax asset	14	15.3	14.2	-	-	-
Retirement benefit asset		5.6	5.6	4.5	4.5	3.4
		394.4	386.7	391.8	415.0	363.1
Current assets
Amounts receivable from customers	13	525.0	512.2	524.7	580.5	532.6
Derivative financial instruments		2.3	1.3	5.2	8.1	0.5
Cash and cash equivalents		92.5	100.4	201.2	100.6	116.3
Other receivables		19.4	15.9	11.8	26.1	9.9
Current tax assets	14	1.2	1.6	0.8	36.6	1.5
		640.4	631.4	743.7	751.9	660.8
Total assets	3	1,034.8	1,018.1	1,135.5	1,166.9	1,023.9
Liabilities
Current liabilities
Borrowings	15	(45.2)	(43.3)	(388.6)	(387.1)	(0.2)
Derivative financial instruments		(3.0)	(3.7)	(1.7)	(1.2)	(6.7)
Trade and other payables		(124.6)	(113.4)	(96.8)	(92.0)	(89.1)
Provisions for liabilities and charges	17	(21.8)	(24.2)	(13.5)	(12.1)	(19.2)
Lease liabilities	11	(6.9)	(7.3)	(8.7)	(9.0)	(7.4)
Current tax liabilities		(17.2)	(14.3)	(39.1)	(26.7)	(13.4)
		(218.7)	(206.2)	(548.4)	(528.1)	(136.0)
Non-current liabilities
Deferred tax liabilities		(9.3)	(9.4)	(12.0)	(12.1)	(13.8)
Lease liabilities	11	(10.0)	(11.0)	(8.6)	(10.0)	(11.8)
Borrowings	15	(423.3)	(428.5)	(190.0)	(228.2)	(491.8)
		(442.6)	(448.9)	(210.6)	(250.3)	(517.4)
Total liabilities	3	(661.3)	(655.1)	(759.0)	(778.4)	(653.4)
Net assets		373.5	363.0	376.5	388.5	370.5
Equity attributable to owners of the Company
Called-up share capital		23.4	23.4	23.4	23.4	23.4
Other reserve		(22.5)	(22.5)	(22.5)	(22.5)	(22.5)
Foreign exchange reserve		(25.0)	(22.5)	12.5	18.3	5.0
Hedging reserve		3.1	(0.6)	(1.5)	1.0	0.9
Own shares		(44.1)	(44.4)	(45.3)	(45.5)	(45.2)
Capital redemption reserve		2.3	2.3	2.3	2.3	2.3
Retained earnings		436.3	427.3	407.6	411.5	406.6
Total equity		373.5	363.0	376.5	388.5	370.5

The notes to the financial statements are an integral part of these consolidated financial statements.

Consolidated statement of changes in equity

	Unaudited
	Called-up share capital £m	Other reserve £m	*Other reserves £m	Retained earnings £m	Total equity £m
Balance at 1 January 2020	23.4	(22.5)	(34.8)	470.3	436.4
Comprehensive income
Loss after taxation for the period	-	-	-	(66.2)	(66.2)
Other comprehensive income/(expense)
Exchange gains on foreign currency translation (note 19)	-	-	3.4	-	3.4
Net fair value losses - cash flow hedges	-	-	(1.0)	-	(1.0)
Actuarial gains on retirement benefit asset	-	-	-	0.2	0.2
Tax charge on other comprehensive income	-	-	(0.4)	(0.1)	(0.5)
Total other comprehensive income	-	-	2.0	0.1	2.1
Total comprehensive income/(expense) for the period	-	-	2.0	(66.1)	(64.1)
Transactions with owners
Share-based payment adjustment to reserves	-	-	-	4.2	4.2
Shares granted from treasury and employee trust	-	-	0.8	(0.8)	-
At 30 September 2020	23.4	(22.5)	(32.0)	407.6	376.5
	Audited
At 1 January 2020	23.4	(22.5)	(34.8)	470.3	436.4
Comprehensive income
Loss after taxation for the period	-	-	-	(64.2)	(64.2)
Other comprehensive (expense)/income
Exchange losses on foreign currency translation (note 19)	-	-	(4.1)	-	(4.1)
Net fair value gains - cash flow hedges	-	-	1.3	-	1.3
Actuarial loss on retirement benefit asset	-	-	-	(1.4)	(1.4)
Tax (charge)/credit on other comprehensive income	-	-	(0.3)	0.3	-
Total other comprehensive expense	-	-	(3.1)	(1.1)	(4.2)
Total comprehensive expense for the period	-	-	(3.1)	(65.3)	(68.4)
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	(22.5)	(37.0)	406.6	370.5

	Unaudited
	Called-up share capital £m		Other reserve £m		*Other reserves £m	Retained earnings £m		Total equity £m
At 1 January 2021	23.4		(22.5)		(37.0)	406.6		370.5
Comprehensive income
Profit after taxation for the period	-		-		-	31.6		31.6
Other comprehensive (expense)/income
Exchange losses on foreign currency translation (note 19)	-		-		(30.0)	-		(30.0)
Net fair value losses - cash flow hedges	-		-		2.7	-		2.7
Actuarial gain on retirement benefit asset	-		-		-	1.3		1.3
Tax credit/(charge) on other comprehensive income	-		-		(0.5)	(0.3)		(0.8)
Total other comprehensive (expense)/income	-		-		(27.8)	1.0		(26.8)
Total comprehensive (expense)/income for the period	-		-		(27.8)	32.6		4.8
Transactions with owners
Share-based payment adjustment to reserves	-		-			(0.5)		(0.5)
Purchase of own shares	-		-		(1.3)	-		(1.3)
Shares granted from treasury and employee trust	-		-		2.4	(2.4)		-
At 30 September 2021	23.4		(22.5)		(63.7)	436.3		373.5
	Unaudited
At 1 July 2021	23.4	(22.5)		(65.2)			427.3		363.0
Comprehensive income
Profit after taxation for the period	-	-		-			8.7		8.7
Other comprehensive income/(expense)
Exchange gains on foreign currency translation (note 19)	-	-		(2.5)			-		(2.5)
Net fair value gains - cash flow hedges	-	-		4.6			-		4.6
Actuarial gain on retirement benefit asset	-	-		-			-		-
Tax credit/(charge) on other comprehensive income	-	-		(0.9)			-		(0.9)
Total other comprehensive income	-	-		1.2			-		1.2
Total comprehensive income for the period	-	-		1.2			8.7		9.9
Transactions with owners
Share-based payment adjustment to reserves	-	-		-			0.6		0.6
Purchase of own shares	-	-		-			-		-
Shares granted from treasury and employee trust	-	-		0.3			(0.3)		-
At 30 September 2021	23.4	(22.5)		(63.7)			436.3		373.5

* Includes foreign exchange reserve, hedging reserve, own shares and capital redemption reserve.

Consolidated cash flow statement

		Unaudited	Unaudited	Unaudited	Unaudited	Audited
		Nine months ended	Three months ended	Nine months ended	Three months ended	Year ended
		30 September 2021	30 September 2021	30 September 2020	30 September 2020	31 December 2020
	Notes	£m	£m	£m	£m	£m
Cash flows from operating activities
Cash generated from operating activities	18	71.5	12.8	294.4	118.4	329.8
Finance costs paid		(16.2)	(4.9)	(44.5)	(4.8)	(54.7)
Finance income received	7	-	-	9.9	9.9	9.9
Income tax (paid)/received	14	(40.1)	(6.4)	18.4	30.9	(1.4)
Net cash generated from operating activities		15.2	1.5	278.2	154.4	283.6

Cash flows used in investing activities
Purchases of intangible assets	9	(4.7)	(1.3)	(8.9)	(2.5)	(11.7)
Purchases of property, plant and equipment	10	(3.6)	(2.3)	(2.7)	(0.8)	(3.8)
Proceeds from sale of property, plant and equipment		0.2	0.1	0.2	-	0.4
Net cash used in investing activities		(8.1)	(3.5)	(11.4)	(3.3)	(15.1)
Net cash generated from operating and investing activities		7.1	(2.0)	266.8	151.1	268.5

Cash flows from financing activities
Proceeds from borrowings		5.9	-	64.7	-	311.3
Repayment of borrowings		(26.0)	(3.3)	(161.3)	(49.4)	(490.0)
Principal elements of lease payments	11	(7.4)	(2.5)	(8.0)	(2.7)	(10.9)
Shares acquired by employee trust		(1.3)	-	-	-	-
Net cash used in financing activities		(28.8)	(5.8)	(104.6)	(52.1)	(189.6)

Net (decrease)/increase in cash and cash equivalents		(21.7)	(7.8)	162.2	99.0	78.9
Cash and cash equivalents at beginning of period		116.3	100.4	37.4	100.6	37.4
Exchange (losses)/gains on cash and cash equivalents		(2.1)	(0.1)	1.6	1.6	-
Cash and cash equivalents at end of period		92.5	92.5	201.2	201.2	116.3

Notes to the Financial Statements

1. Basis of preparation

These unaudited condensed consolidated interim financial statements for the nine months ended 30 September 2021 have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the United Kingdom. These condensed consolidated interim financial statements should be read in conjunction with the Annual Report and Financial Statements ('the Financial Statements') for the year ended 31 December 2020, which have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union. These condensed consolidated interim financial statements were approved for release on 29 November 2021.

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Financial Statements for the year ended 31 December 2020 were approved by the Board on 3 March 2021 and delivered to the Registrar of Companies. The Financial Statements contained an unqualified audit report and did not include an emphasis of matter paragraph or any statement under Section 498 of the Companies Act 2006. The Financial Statements are available on the Group's website (www.ipfin.co.uk).

The accounting policies applied to prepare these condensed consolidated interim financial statements are consistent with those applied to the most recent full year Financial Statements for the year ended 31 December 2020.

Board members

As at 30 September 2021, the Group's Board members were as follows:

Stuart Sinclair	Chairman
Gerard Ryan	Executive Director and Chief Executive Officer
Deborah Davis	Independent non-executive director
John Mangelaars	Independent non-executive director
Richard Holmes	Senior independent non-executive director
Bronwyn Syiek	Independent non-executive director

Subsidiaries included in the condensed consolidated interim financial statements

The subsidiary companies of IPF plc, which are 100% owned by the Group and included in these condensed consolidated interim 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 credit
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	Provision of services
IPF Digital Australia Pty Limited	Australia	Digital credit
IPF Digital Finland Oy	Finland	Digital credit
IPF Digital Group Limited	United Kingdom	Holding company
IPF Digital Latvia, SIA	Latvia	Digital credit
IPF Digital Lietuva, UAB	Lithuania	Digital credit
IPF Digital Mexico S.A de C.V	Mexico	Digital credit
IPF Financial Services Limited	United Kingdom	Provision of services
IPF Financing Limited	United Kingdom	Provision of services
IPF Guernsey (2) Limited	Guernsey	Dormant
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 Management	Ireland	Provision of services
IPF Nordic Limited	United Kingdom	Provision of services
IPF Polska sp. z o.o.	Poland	Digital credit
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 credit
Provident Financial s.r.o.	Czech Republic	Home credit
Provident Financial Zrt.	Hungary	Home credit
Provident Mexico S.A. de C.V.	Mexico	Home credit
Provident Polska S.A.	Poland	Home credit
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

All UK subsidiaries are registered at the same registered office as the Company, 26 Whitehall Road, Leeds, LS12 1BE.

Going Concern

In considering whether the Group is a going concern, the Board has taken into account the Group's financial forecasts, 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 three years to 31 December 2023 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 30 September 2021, the Group had £149.0 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 2.8 years. The total debt facilities as at 30 September 2021 amounted to £571.9 million of which £122.9 million (including £18 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 51 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 Consolidated Quarterly Financial Report for the period ended 30 September 2021.

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.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of condensed consolidated interim 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 these condensed consolidated interim 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.

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.

The application of IFRS 9 to the effects of Covid-19 had a significant impact on the Group's impairment accounting and charge, and our post model overlays (PMOs) have been prepared to ensure that the impacts of the pandemic are included within the Group's impairment provisions, see below for further details. Impairment on lending from June 2020 onwards has been recorded using our standard impairment accounting models without applying these overlays due to the reduction in operational disruption and the tightened credit settings on new lending.

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. In line with this, we updated the models in Q2 2021 and data that would normally be included within this periodic update contained Covid-19 impacted data. This included data from when there were restrictions on movements of agents and customers together with data driven by the tighter credit settings that were put in place as part of the Group's pandemic response strategy. This data is not considered to be representative of the expected future performance and therefore we excluded it from our periodic update.

On the basis that the payment performance of customers could be different from the assumptions used in estimating expected losses and the future cash flows, an adjustment to the amounts receivable from customers may be required. A 5% increase/decrease in expected loss parameters would be a decrease/increase in amounts receivable from customers of £5.9 million. This level of estimated impact is based on historic fluctuations in performance compared to the models and is subject to impairment overlay provisions.

Covid-19 post model overlay (PMO) on amounts receivable from customers

In 2020 Government imposed restrictions on the freedom of movement and the introduction of debt repayment moratoria, together with the economic impact of the pandemic on our customers, had a significant adverse impact on collection cash flows in all our businesses. These events were unprecedented and, as a consequence, we reviewed our impairment modelling under IFRS 9 to identify risks that are not fully reflected in the standard impairment models. This included a full assessment of expected credit losses, including a forward-looking assessment of expected collection cash flows. As a result, for home credit lending issued before June 2020 and IPF Digital lending, we have prepared post model overlays (PMOs) to our impairment models in order to calculate the expected impact of the pandemic on the Group's impairment provisions. Based on management's current expectations, the impact of these PMOs was to increase impairment provisions at 30 September 2021 by £26.5 million as set out below.

	ECL £m	Discounting £m	Total £m
Home credit	(17.0)	(5.1)	(22.1)
IPF Digital	(4.4)	-	(4.4)
Total	(21.4)	(5.1)	(26.5)

Expected credit loss ('ECL')

Missed collections as a result of government imposed restrictions on the freedom of movement and the introduction of debt repayment moratoria is not considered to be an indicator of a significant increase in credit risk (SICR). However, our impairment models cannot distinguish between a missed payment arising from these factors and a missed payment arising from a customer not making a payment. Therefore, we have reduced the modelled ECL based on historic customer roll rates before calculating the increase in ECL arising from the pandemic. This latter assessment is based on estimated future repayment patterns on a market by market basis, taking into account operational disruption, debt repayment moratoria and the expected recessionary impact. We then assessed the extent to which the reduction in cash flows is likely to be permanent or temporary. In Q3 2021 we increased the PMO in relation to the permanent reduction in cashflows to reflect the higher risk resulting from the extension of the Hungary debt moratorium. The estimated permanent difference in cashflows has been recorded as an increase of £17.0 million in ECL in the Group's home credit businesses as a Covid-19 PMO.

In our digital businesses, in line with our home credit markets, we have reviewed the expected recessionary impact of the pandemic on our customers' debt repayment capacity. We used this information to calculate the increased probability of customers defaulting. The estimated increase in PD has been included as a £4.4 million Covid-19 PMO.

Discounting

We expect temporary missed repayments in our home credit businesses to be repaid at the end of the credit agreement, rather than at the point when agent service is resumed. The charges for lending are largely fixed and therefore these delayed cash flows have been discounted using the effective interest rate to arrive at a net present value. Included within this, is a further delay of the cashflows in Hungary driven by an extension of the moratorium that was announced in Q2 2021. In total this results in an additional impairment provision of £5.1 million that is expected to continue to unwind during the next 18 months as the temporary missed collections are collected from customers.

We have performed analysis on the ECL and discounting Covid-19 PMOs to show the estimated variation to amounts receivable from customers as a result of the key variables influencing ECL (namely operational disruption, repayment moratoria and recessionary) being different to management's current expectations based on the following collection scenarios:

· ECL - variations in the key variables resulting in a 3% increase/decrease in the ECL would result in an increase/decrease in the Covid-19 PMO of £6.2 million.

· Discounting - temporary missed repayments in home credit, that are assumed to be repaid at the end of the loan, being received three months later/earlier than forecast would result in an increase/decrease in the Covid-19 PMO of £3.6 million.

These variations reflect management's current assessment of a reasonable range of outcomes from the actual collections performance.

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 from a customer contact exercise. The total amount provided of £19.8 million (30 September 2020: £13.5 million; 31 December 2020: £17.6 million) represents the Group's best estimate of the likely future outflow from increasing historic customer rebates. 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.

Claims management charges in Spain

The Group holds provisions in respect of claims management charges in Spain following an increase in incidence of such 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 £6.6 million (split £4.6 million against receivables and £2.0 million in provisions) represents 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.

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 20, 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 note 20 for further details.

There are no new standards adopted by the Group in 2021, and there are no new standards not yet effective and not adopted by the Group from 1 January 2021 which are expected to have a material impact on the Group.

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.

Each of the APMs used by the Group is set out below 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.

2. Related parties

The Group has not entered into any material transactions with related parties in the first nine months of the year.

3. Segment analysis

As highlighted at the 2020 year end, we merged our two digital businesses in Poland in order to deliver efficiencies of scale and, as a result, the digital lending arm previously reported as part of European home credit is now included in IPF Digital. All comparatives have been amended accordingly and are presented on a like-for-like basis.

	Unaudited	Unaudited	Unaudited	Unaudited	Audited
	Nine months ended	Three months ended	Nine months ended	Three months ended	Year ended
	30 September 2021	30 September 2021	30 September 2020	30 September 2020	31 December 2020
	£m	£m	£m	£m	£m
Revenue
European home credit	207.0	66.9	269.2	84.3	351.2
Mexico home credit	102.8	37.9	123.0	32.0	157.1
Digital	89.7	31.8	124.8	38.5	153.0
Revenue	399.5	136.6	517.0	154.8	661.3
Impairment
European home credit	(12.2)	(3.2)	105.8	17.9	125.1
Mexico home credit	20.4	11.9	51.4	6.3	53.0
Digital	20.1	7.9	61.7	12.5	69.5
Impairment - pre-exceptional item	28.3	16.6	218.9	36.7	247.6
Exceptional item	-	-	2.5	-	2.5
Impairment	28.3	16.6	221.4	36.7	250.1
Other operating costs
European home credit	45.5	14.6	46.4	15.6	64.8
Mexico home credit	19.3	6.9	18.5	5.5	24.2
Digital	15.6	6.0	13.8	3.5	18.7
UK costs¹	0.1	0.1	1.0	0.4	1.0
Other operating costs	80.5	27.6	79.7	25.0	108.7
Administrative expenses
European home credit	99.5	32.1	105.4	33.2	140.3
Mexico home credit	46.6	15.0	52.6	15.5	68.8
Digital	34.7	11.6	42.5	13.5	57.9
UK costs¹	11.1	4.0	9.1	2.6	11.8
Administrative expenses - pre-exceptional item	191.9	62.7	209.6	64.8	278.8
Exceptional item	-	-	17.4	5.2	17.6
Administrative expenses	191.9	62.7	227.0	70.0	296.4
Profit / (loss) before taxation
European home credit	50.1	15.2	(12.2)	10.5	(11.6)
Mexico home credit	11.7	2.3	(5.2)	3.2	3.5
Digital	9.1	3.0	(2.8)	6.0	(8.0)
UK costs¹	(11.1)	(4.0)	(9.8)	(2.9)	(12.7)
Profit /(loss) before taxation - pre-exceptional items	59.8	16.5	(30.0)	16.8	(28.8)
Exceptional items	-	-	(11.7)	(5.2)	(11.9)
Profit / (loss) before taxation	59.8	16.5	(41.7)	11.6	(40.7)

¹ Although UK costs are not classified as a separate segment in accordance with IFRS 8 'Operating Segments', they are shown separately in order to provide a reconciliation to other operating costs; administrative expenses and profit before taxation.

	Unaudited	Unaudited	Unaudited	Unaudited	Audited
	30 September 2021	30 June 2021	30 September 2020	30 June 2020	31 December 2020
	£m	£m	£m	£m	£m
Segment assets
European home credit	510.0	504.9	519.9	584.2	485.1
Mexico home credit	189.7	178.3	149.2	164.6	170.2
Digital	207.8	207.7	224.9	278.6	224.4
UK²	127.3	127.2	241.5	139.5	144.2
Total	1,034.8	1,018.1	1,135.5	1,166.9	1,023.9
Segment liabilities
European home credit	314.8	312.2	282.9	216.8	275.7
Mexico home credit	87.7	82.9	97.6	108.1	76.2
Digital	84.0	91.0	147.3	181.2	138.4
UK²	174.8	169.0	231.2	272.3	163.1
Total	661.3	655.1	759.0	778.4	653.4

² Although the UK is not classified as a separate segment in accordance with IFRS 8 'Operating Segments', it is shown separately above in order to provide a reconciliation to consolidated total assets and liabilities.

4. Finance costs

	Unaudited	Unaudited	Unaudited	Unaudited	Audited
	Nine months ended 30 September 2021	Three months ended 30 September 2021	Nine months ended 30 September 2020	Three months ended 30 September 2020	Year ended 31 December 2020
	£m	£m	£m	£m	£m
Interest payable on borrowings	38.0	12.9	39.3	11.3	55.2
Interest payable on lease liabilities	1.0	0.3	1.2	0.5	1.5
Interest income	-	-	(9.9)	(0.3)	(9.9)
Finance costs	39.0	13.2	30.6	11.5	46.8

In Q3 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 related to the period from January 2017 to December 2019 was treated as an exceptional item (see note 7 for further details).

5. Tax expense

The taxation charge on the profit for the first nine months of 2021 (£28.2 million) has been based on an expected effective tax rate for 2021 of 47%.

The Group is subject to tax audit in Mexico (regarding 2017).

6. Earnings/(loss) per share

	Unaudited	Unaudited	Unaudited	Unaudited	Audited
	Nine months ended	Three months ended	Nine months ended	Three months ended	Year ended
	30 September 2021	30 September 2021	30 September 2020	30 September 2020	31 December 2020
	pence	Pence	pence	pence	pence
Basic E/(L)PS	14.2	3.9	(29.8)	(2.1)	(28.9)
Dilutive effect of awards	(0.8)	(0.2)	1.5	0.1	1.5
Diluted E/(L)PS	13.4	3.7	(28.3)	(2.0)	(27.4)

Basic earnings/(loss) per share ('E/(L)PS') for the nine months ended 30 September 2021 is calculated by dividing the profit attributable to shareholders of £31.6 million (three months ended 30 September 2021: profit of £8.7 million, nine months ended 30 September 2020: loss of £66.2 million, three months ended 30 September 2020: loss of £4.7 million, 31 December 2020: loss of £64.2 million) by the weighted average number of shares in issue during the period of 223.1 million which has been adjusted to exclude the weighted average number of shares held in treasury and by the employee trust (three months ended 30 September 2021: 223.3 million, nine months ended 30 September 2020: 222.3 million, three months ended 30 September 2020: 222.6 million, 31 December 2020: 222.4 million).

For diluted E/(L)PS for the nine months ended 30 September 2021 the weighted average number of shares has been adjusted to 235.5 million (three months ended 30 September 2021: 235.6 million, nine months ended 30 September 2020: 234.1 million, three months ended 30 September 2020: 234.3 million, 31 December 2020: 234.1 million) to assume conversion of all dilutive potential ordinary share options relating to employees of the Group.

7. Exceptional items

The September 2020 income statement included an exceptional loss of £10.7 million which comprised a pre-tax exceptional loss of £11.7 million and an exceptional tax credit of £1.0 million.

Nine months to September 2020	Pre-tax	Tax	Post-tax
	£m	£m	£m
Finland closure	(10.6)	(1.1)	(11.7)
Restructuring costs	(9.3)	2.1	(7.2)
Interest income	8.2	-	8.2
Exceptional items	(11.7)	1.0	(10.7)

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 expect 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 £9.3 million arose in connection with rightsizing exercises that were conducted in 2020 and there is an associated tax credit of £2.1 million relating to this item. In addition, the H1 2020 profit and loss account included exceptional interest income of £8.2 million, relating to the interest accrued on the payments to the Polish tax authority made in January 2017 in respect of the 2008 and 2009 cases for 2017 to 2019.

In Q4 2020, a further £0.2 million of restructuring costs were incurred taking the full year 2020 pre-tax exceptional to £11.9 million. The full year 2020 exceptional tax charge was remained the same as at September 2020.

8. Goodwill

	Unaudited	Unaudited	Audited
	30 September	30 September	31 December
	2021	2020	2020
	£m	£m	£m
Net book value at start of period	24.4	23.1	23.1
Exchange adjustments	(1.1)	1.8	1.3
Net book value at end of period	23.3	24.9	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 cash flows assumed. 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 forecasts 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% (30 September 2020: 9% and 31 December 2020: 10%). The discount rate would need to increase to 20% before indicating that part of the goodwill may be impaired.

9. Intangible assets

	Unaudited	Unaudited	Audited
	30 September	30 September	31 December
	2021	2020	2020
	£m	£m	£m
Net book value at start of period	30.2	43.2	43.2
Additions	4.7	8.9	11.7
Amortisation	(8.3)	(18.5)	(25.9)
Exchange adjustments	(0.6)	1.4	1.2
Net book value at end of period	26.0	35.0	30.2

Intangible assets comprise computer software. Amortisation in the nine months to 30 September 2021 includes accelerated amortisation of £1.5 million following a review of software assets.

As noted in note 7, in the year to 30 September 2020 and FY 2020, following a decision to close our digital business in Finland and to collect out the portfolio, we booked an exceptional charge of £8.1 million from accelerated amortisation of intangible assets.

10. Property, plant and equipment

	Unaudited	Unaudited	Audited
	30 September	30 September	31 December
	2021	2020	2020
	£m	£m	£m
Net book value at start of period	15.4	20.0	20.0
Exchange adjustments	(0.5)	(0.3)	(0.6)
Additions	3.6	2.7	3.8
Disposals	(0.3)	(0.4)	(0.6)
Depreciation	(5.8)	(5.5)	(7.2)
Net book value at end of period	12.4	16.5	15.4

There are no significant additions or disposals in the period and no liabilities arising therefrom (nine months to 30 September 2020 and full year 2020: no significant additions or disposals and no liabilities arising therefrom).

As at 30 September 2021 the Group had £4.9 million of capital expenditure commitments with third parties that were not provided for (30 September 2020: £2.8 million; 31 December 2020: £2.6 million).

11. Right-of-use assets and lease liabilities

The recognised right-of-use assets relate to the following types of assets:

	Unaudited	Unaudited	Audited
	30 September	30 September	31 December
	2021	2020	2020
	£m	£m	£m
Properties	9.1	10.0	10.5
Motor vehicles	6.0	6.1	6.9
Equipment	0.1	0.1	0.1
Total right-of-use assets	15.2	16.2	17.5

The movement in the right-of-use assets in the period is as follows:

	Unaudited	Unaudited	Audited
	30 September	30 September	31 December
	2021	2020	2020
	£m	£m	£m
Net book value at start of period	17.5	18.8	18.8
Exchange adjustments	(0.6)	(0.6)	(0.5)
Additions	4.7	4.1	6.0
Modifications	-	1.1	3.6
Depreciation	(6.4)	(7.2)	(9.9)
Impairment	-	-	(0.5)
Net book value at end of period	15.2	16.2	17.5

The movement in lease liabilities in the period is as follows:

	Unaudited	Unaudited	Audited
	30 September	30 September	31 December
	2021	2020	2020
	£m	£m	£m
Lease liabilities at start of period	19.2	19.5	19.5
Exchange adjustments	(0.6)	(0.6)	(0.5)
Additions	4.7	5.2	9.6
Interest	1.0	1.2	1.5
Lease payments	(7.4)	(8.0)	(10.9)
Lease liabilities at end of period	16.9	17.3	19.2

Analysed as:

	Unaudited	Unaudited	Audited
	30 September	30 September	31 December
	2021	2020	2020
	£m	£m	£m
Current	6.9	8.7	7.4

Non-Current:
- between one and five years	10.0	8.5	11.1
- greater than five years	-	0.1	0.7
	10.0	8.6	11.8
Lease liabilities at end of period	16.9	17.3	19.2

12. Deferred tax assets

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.

13. Amounts receivable from customers

Amounts receivable from customers comprise:

	Unaudited	Unaudited	Audited
	30 September	30 September	31 December
	2021	2020	2020
	£m	£m	£m
Amounts due within one year	525.0	524.7	532.6
Amounts due in more than one year	170.0	158.9	136.5
Total receivables	695.0	683.6	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:

	Unaudited	Unaudited	Audited
	30 September	30 September	31 December
	2021	2020	2020
	£m	£m	£m
Polish zloty	231.9	230.2	225.3
Czech crown	46.2	53.3	50.9
Euro*	91.0	135.2	117.0
Hungarian forint Romanian leu	109.5 68.5	97.3 59.5	89.9 62.1
Mexican peso	123.3	88.3	100.8
Australian dollar	24.6	19.8	23.1
Total receivables	695.0	683.6	669.1

*Includes receivables in Estonia, Finland, Latvia, Lithuania and Spain.

Amounts receivable from customers are held at amortised cost and are equal to the expected future cash flows receivable discounted at the average effective interest rate ('EIR') of 93% (30 September 2020: 97%, 31 December 2020: 96%). All amounts receivable from customers are at fixed interest rates. The average period to maturity of the amounts receivable from customers is 12.5 months (30 September 2020: 12.2 months, 31 December 2020: 11.1 months).

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;

· 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), exposure at default (EAD) 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.

The breakdown of receivables by stage is as follows:

30 September 2021	Stage 1 £m	Stage 2 £m	Stage 3 £m	Total net receivables £m
Home credit	347.8	57.3	123.3	528.4
IPF Digital	155.8	7.1	3.7	166.6
Group	503.6	64.4	127.0	695.0

30 September 2020	Stage 1 £m	Stage 2 £m	Stage 3 £m	Total net receivables £m
Home credit	268.3	60.0	148.9	477.2
IPF Digital	186.7	12.5	7.2	206.4
Group	455.0	72.5	156.1	683.6

31 December 2020	Stage 1 £m	Stage 2 £m	Stage 3 £m	Total net receivables £m
Home credit	288.6	51.0	142.6	482.2
IPF Digital	177.9	7.1	1.9	186.9
Group	466.5	58.1	144.5	669.1

The Group has one class of loan receivable and no collateral is held in respect of any customer receivables.

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.

30 September 2021	Stage 1 £m	Stage 2 £m	Stage 3 £m	Total £m
Gross carrying amount	635.9	119.8	389.9	1,145.6
Loss allowance	(132.3)	(55.4)	(262.9)	(450.6)
Group	503.6	64.4	127.0	695.0

30 September 2020	Stage 1 £m	Stage 2 £m	Stage 3 £m	Total £m
Gross carrying amount	566.3	132.0	536.4	1,234.7
Loss allowance	(111.3)	(59.5)	(380.3)	(551.1)
Group	455.0	72.5	156.1	683.6

31 December 2020	Stage 1 £m	Stage 2 £m	Stage 3 £m	Total £m
Gross carrying amount	601.3	125.1	456.1	1,182.5
Loss allowance	(134.8)	(67.0)	(311.6)	(513.4)
Group	466.5	58.1	144.5	669.1

14. Non-current/current tax asset

As at 30 September2021, the non-current tax asset (£15.3 million) included an amount of £14.2 million that was paid in February 2021 pursuant to a HMRC Charging Notice in respect of an European Commission State Aid investigation into the Group Financing Exemption contained in the UK's controlled foreign company rules, a further £1.1 million of interest was paid in August 2021. Details are set out at note 20.

As at 30 June 2020, the current tax asset included an amount of £34.9 million in respect of the tax paid to the Polish Tax Authority (30 September 2020 and 31 December 2020: £nil). Our appeal against the Polish Tax Chamber's decisions for 2008 and 2009 was heard in the Warsaw District Administrative Court in March 2020 and the court found in our favour. The Court formally confirmed that the decision was final and we received repayment of the tax that was paid in January 2017 together with interest up to the repayment date in August 2020.

15. Borrowing facilities and borrowings

The maturity of the Group's bond and bank borrowings is as follows:

	Unaudited	Unaudited	Audited
	30 September	30 September	31 December
	2021	2020	2020
	£m	£m	£m
Repayable
- in less than one year	45.2	388.6	0.2

- between one and two years	17.5	86.1	74.3
- between two and five years	405.8	103.9	417.5
	423.3	190.0	491.8

Total borrowings	468.5	578.6	492.0

Borrowings is stated net of deferred debt issuance costs of £6.9 million (30 September 2020: £1.8 million; 31 December 2020: £7.4 million).

The maturity of the Group's bond and bank facilities is as follows:

	Unaudited	Unaudited	Audited
	30 September	30 September	31 December
	2021	2020	2020
	£m	£m	£m
Repayable
- on demand	18.0	12.3	40.1
- in less than one year	104.9	504.5	45.7
- between one and two years	36.3	135.8	104.4
- between two and five years	412.7	105.2	433.8
Total facilities	571.9	757.8	624.0

The undrawn external bank facilities is as follows:

	Unaudited	Unaudited	Audited
	30 September	30 September	31 December
	2021	2020	2020
	£m	£m	£m
Expiring within one year	77.7	127.7	85.6
Expiring between one and two years	18.8	49.7	30.1
Expiring in more than two years	-	-	8.9
Total	96.5	177.4	124.6

Undrawn external facilities above does not include unamortised arrangement fees.

The average period to maturity of the Group's external bonds and committed external borrowings is 2.8 years (30 September 2020: 1.2 years; 31 December 2020: 3.3 years).

During 2020 and 2021 the Group did not have any delays in the principal and interest payments. The Group tests against covenants twice a year at June and December, and complied with all of its covenants at 31 December 2020.

In the period to September 2021 there were no bond issuances or redemptions. In the period to September 2020, GBP 44,098,100 retail bonds matured on 8 May 2020, and PLN 200 million Polish floating rate bond matured on 3 June 2020. In H2 2020, there was one bond maturity and one bond issue. Fixed rate Eurobonds to a nominal value of EUR 397,274,000 with an original maturity date of 7 April 2021 were redeemed on 12 November 2020. Fixed rate Eurobonds to a nominal value of EUR 341,228,000 were issued on 12 November 2020 with a maturity date of 12 November 2025.

16. 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 £21.8 million represent the Group's best estimate of the costs that are expected to be incurred in relation to early settlement rebates in Poland (30 September 2021: £19.8 million; 31 December 2020: £17.6 million; 30 September 2020: £13.5 million) and claims management charges incurred in Spain (30 September 2021: £2.0 million; 31 December 2020: £1.6 million; 30 September 2020: £nil). All claims are expected to be settled within 12 months of the balance sheet date. Further details are included above.

17. Fair values of financial assets and liabilities

IFRS 13 requires disclosure of fair value measurements of 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).

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 the relevant period end.

In 2020 and 2021, there has been no change in classification of financial assets as a result of a change in purpose or use of these assets.

Except as detailed in the following table, the carrying value of financial assets and liabilities recorded at amortised cost, which are all short-term in nature, are a reasonable approximation of their fair value:

	Carrying value			Fair value
	Unaudited 30 September 2021 £m	Unaudited 30 September 2020 £m	Audited 31 December 2020 £m	Unaudited 30 September 2021 £m	Unaudited 30 September 2020 £m	Audited 31 December 2020 £m
Financial assets
Amounts receivable from customers	695.0	683.6	669.1	898.8	914.0	908.8
	695.0	683.6	669.1	898.8	914.0	908.8
Financial Liabilities
Bonds	400.4	477.8	415.9	430.7	421.1	405.4
Bank borrowings	68.1	100.8	76.1	68.1	100.8	76.1
	468.5	578.6	492.0	498.8	521.9	481.5

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 agent collection costs, at the Group's weighted average cost of capital which we estimate to be 10% (30 September 2020: 9% and 31 December 2020: 10%) which is assumed to be a proxy for the discount rate that a market participant would use to price the asset.

The fair value of the bonds has been calculated by reference to their market value.

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. This methodology has been used consistently for all periods.

18. Reconciliation of profit after taxation to cash generated from operating activities

	Unaudited	Unaudited	Unaudited	Unaudited	Audited
	Nine months ended	Three months ended	Nine months ended	Three months ended	Year Ended
	30 September 2021	30 September 2021	30 September 2020	30 September 2020	31 December 2020
	£m	£m	£m	£m	£m
Profit/(loss) after taxation	31.6	8.7	(66.2)	(4.7)	(64.2)
Adjusted for
Tax charge	28.2	7.8	24.5	16.3	23.5
Finance costs	39.0	13.2	40.5	11.8	56.7
Finance income	-	-	(9.9)	(0.3)	(9.9)
Share-based payment (credit)/charge	(0.5)	0.6	2.8	1.0	1.1
Amortisation of intangible assets (note 10)	8.3	1.4	18.5	4.0	25.9
Loss/(profit) on disposal of property, plant and equipment	0.1	(0.1)	0.2	0.3	0.2
Depreciation of property, plant and equipment (note 11)	5.8	3.0	5.5	1.9	7.2
Depreciation of right-of-use assets (note 12)	6.4	2.2	7.2	2.2	9.9
Impairment of right-of-use assets (note 12)	-	-	-	-	0.5
Short term and low value lease costs	0.9	0.3	1.4	0.5	1.7
Changes in operating assets and liabilities
Amounts receivable from customers	(54.6)	(24.3)	289.9	78.0	294.9
Other receivables	(9.3)	(3.5)	6.5	5.4	4.1
Trade and other payables	15.5	2.6	(18.7)	(0.4)	(31.2)
Provision for liabilities and charges	3.7	(2.1)	13.5	1.4	19.2
Retirement benefit asset	(0.9)	-	(0.9)	-	(1.4)
Derivative financial instruments	(2.7)	3.0	(20.4)	1.0	(8.4)
Cash generated from operating activities	71.5	12.8	294.4	118.4	329.8

19. Foreign exchange rates

The table below shows the average exchange rates for the relevant reporting periods and closing exchange rates at the relevant period ends.

	Average Q3 2021	Closing September 2021	Average Q3 2020	Closing September 2020	Average Year 2020	Closing December 2020
Polish zloty	5.3	5.4	5.0	5.0	5.0	5.1
Czech crown	29.7	29.7	30.2	29.7	30.1	29.3
Euro	1.1	1.2	1.1	1.1	1.1	1.1
Hungarian forint	410.1	419.0	399.6	398.0	399.0	405.7
Romanian leu	5.7	5.8	5.5	5.3	5.5	5.4
Mexican peso	28.0	27.5	28.7	28.4	28.3	27.1
Australian dollar	1.8	1.9	1.8	1.8	1.8	1.8

The £30.0 million exchange loss on foreign currency translations shown within the consolidated statement of comprehensive income arises on retranslation of net assets denominated in currencies other than sterling, due to the change in foreign exchange rates against sterling between December 2020 and September 2021 shown in the table above.

20. Contingent Liability Note

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 requires 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 of interest of £1.1 million subsequently paid during August 2021. The payment of these amounts 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.

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 years up to and including 2018 is £7.3 million. This domestic tax issue 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.

21. Post Balance Sheet Events

There were no significant post balance sheet events.

22. Additional information required in accordance with the Warsaw Stock Exchange listing

Directors shareholdings and share interests

The table below presents the holdings of Company shares or options on Company shares of the directors of the Company as at the date of signing the year end Financial Statements (3 March 2021).

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
Executive Directors
Gerard Ryan	1,256,576	910,850	350,360	20,930	61,118	103,157
Justin Lockwood¹	89,922	490,316	188,552	20,930	31,467	71,114
Non-executive Directors
Deborah Davis	45,000	-	-	-	-	-
Richard Holmes	275,133	-	-	-	-	-
John Mangelaars	50,000	-	-	-	-	-
Richard Moat²	15,000	-	-	-	-	-
Cathryn Riley³	14,795	-	-	-	-	-
Stuart Sinclair	86,944	-	-	-	-	-
Bronwyn Syiek	20,000	-	-	-	-	-

¹ Justin Lockwood resigned from the Board on 23 July 2021

² Richard Moat resigned from the Board on 29 April 2021

³ Cathryn Riley resigned from the Board on 29 April 2021

On 16 April 2021, Gerard Ryan acquired 140,697 shares following the exercise of share options under the Company Deferred Share Plan and Performance Share Plan.

The table below presents the holdings of Company shares or options on Company shares of the directors of the Company as at the date of issue of this report.

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
Executive Directors
Gerard Ryan	1,397,273	1,312,873	248,318	20,930	-	-
Non-executive Directors
Deborah Davis	45,000	-	-	-	-	-
Richard Holmes	275,133	-	-	-	-	-
John Mangelaars	50,000	-	-	-	-	-
Stuart Sinclair	86,944	-	-	-	-	-
Bronwyn Syiek	20,000	-	-	-	-	-

Shareholding structure

The information provided below was correct at the date of notification, however, the date of receipt may not have been in the current financial period. 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.

As notified to the Company, pursuant to DTR 5.1.2, the table below presents the shareholders holding more than 5% of the total number of shares/voting rights of the Company as at the date of signing the year end Financial Statements (3 March 2021).

Shareholder	Number of shares/voting rights	% of issued share capital/total voting rights¹
Aberforth Partners LLP	29,306,786	13.10
Standard Life Aberdeen plc	26,857,976	12.00
Marathon Asset Management LLP	22,220,369	9.93
FMR LLC	11,222,609	5.28
Artemis Investment Management LLP	11,452,288	5.11
Schroders plc	12,017,299	5.01

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.

Notifications were received from Aberforth Partners LLP on 12 March 2021 and from Artemis Investment Management LLP on 6 April 2021 of an interest in the issued share capital of the Company in accordance with the DTR.

Shareholder	Number of shares/voting rights	% of issued share capital/total voting rights¹
Aberforth Partners LLP	31,544,397	14.10
Standard Life Aberdeen plc	26,857,976	12.00
Marathon Asset MGMT Limited	18,816,112	8.41
Pendal Group Limited	12,242,516	5.47
FMR LLC	11,222,609	5.28
Schroders plc	12,017,299	5.01

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.

Seasonality or cyclicality of the business

The Group's operations are not subject to seasonal or cyclical fluctuations.

Information about loan sureties or guarantees extended by the Group

In the nine months to September 2021 (and the nine months to September 2020), the Group did not grant any sureties or guarantees for loans.

Unusual items

In the nine months to September 2021 (and the nine months to September 2020 other than noted in note 7), there are no items affecting assets, liabilities, equity, net income or cash flows that are unusual because of their nature, value or frequency.

Inventories

The Group does not hold any inventory, hence there have been no write downs or reversals of write downs from previous periods.

Write off of any assets

Other than noted in note 9, there are no items relating to write offs for impairment of financial assets, tangible fixed assets, intangible assets or any other assets, or reversal of such write offs from previous periods other than those specifically mentioned in this report.

Court cases

There have been no significant payments/settlements resulting from existing court cases in the nine months to September 2021 (Nine months to September 2020: no significant payments/ settlements).

Corrections of errors from previous periods

In the nine months to September 2021, there are no errors from previous periods which require correction. (Nine months to September 2020: no errors requiring correction).

Issue, redemption and repayment of non-equity and equity securities

In the nine months to September 2021 (and the nine months to September 2020), other than disclosed in note 15, there were no other issuances, redemptions or repayments of non-equity and equity securities.

Alternative performance measures

This financial report 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 nine month'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.
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 nine month's average net receivables 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.
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 September 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 nine month'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.

APM	Closest equivalent statutory measure	Reconciling items to statutory measure	Definition and purpose
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.
Balance sheet and returns measures
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.

Constant exchange rate reconciliations

The period-on-period change in profit and loss accounts is calculated by retranslating the nine months to September 2020 profit and loss account at the average actual exchange rates used in the current year.

Nine months to September 2021
£m	European home credit	Mexico home credit	IPF Digital	Central costs	Group
Customer numbers (000s)	810	649	256		1,715
Credit issued	440.0	139.6	134.7		714.3
Average net receivables	397.3	99.4	171.5		668.2
Closing net receivables	418.0	110.4	166.6		695.0
Revenue	207.0	102.8	89.7	-	399.5
Impairment	12.2	(20.4)	(20.1)	-	(28.3)
Net revenue	219.2	82.4	69.6	-	371.2
Finance costs	(24.0)	(4.8)	(10.2)	-	(39.0)
Agents' commission	(32.0)	(16.4)	-	-	(48.4)
Other costs	(113.1)	(49.5)	(50.3)	(11.1)	(224.0)
Profit before tax	50.1	11.7	9.1	(11.1)	59.8

Nine months to September 2020, at average 2020 foreign exchange rates
£m	European home credit	Mexico home credit	IPF Digital	Central costs	Group
Customer numbers (000s)	833	609	273	-	1,715
Credit issued	309.9	101.8	135.9	-	547.6
Average net receivables	459.5	106.6	244.9	-	811.0
Closing net receivables	395.8	81.4	206.4	-	683.6
Revenue	269.2	123.0	124.8	-	517.0
Impairment	(105.8)	(51.4)	(61.7)	-	(218.9)
Net revenue	163.4	71.6	63.1	-	298.1
Finance costs	(23.4)	(5.6)	(9.8)	-	(38.8)
Agents' commission	(38.0)	(16.1)	-	-	(54.1)
Other costs	(114.2)	(55.1)	(56.1)	(9.8)	(235.2)
Pre-exceptional loss before tax	(12.2)	(5.2)	(2.8)	(9.8)	(30.0)

Foreign exchange movements
£m	European home credit	Mexico home credit	IPF Digital	Central costs	Group
Credit issued	(13.2)	(3.8)	(1.6)	-	(18.6)
Average net receivables	(18.4)	(2.6)	(5.1)	-	(26.1)
Closing net receivables	(23.4)	2.7	(12.6)	-	(33.3)
Revenue	(11.1)	(2.5)	(2.7)	-	(16.3)
Impairment	3.0	(0.8)	1.5	-	3.7
Net revenue	(8.1)	(3.3)	(1.2)	-	(12.6)
Finance costs	1.3	0.1	(0.2)	-	1.2
Agents' commission	1.6	0.3	-	-	1.9
Other costs	3.9	0.9	1.3	-	6.1
(Loss)/profit before tax	(1.3)	(2.0)	(0.1)	-	(3.4)

Nine months to September 2020, at average 2021 foreign exchange rates
£m	European home credit	Mexico home credit	IPF Digital	Central costs	Group
Credit issued	296.7	98.0	134.3	-	529.0
Average net receivables	441.1	104.0	239.8	-	784.9
Closing net receivables	372.4	84.1	193.8	-	650.3
Revenue	258.1	120.5	122.1	-	500.7
Impairment	(102.8)	(52.2)	(60.2)	-	(215.2)
Net revenue	155.3	68.3	61.9	-	285.5
Finance costs	(22.1)	(5.5)	(10.0)	-	(37.6)
Agents' commission	(36.4)	(15.8)	-	-	(52.2)
Other costs	(110.3)	(54.2)	(54.8)	(9.8)	(229.1)

Year-on-year movement at constant exchange rates
%	European home credit	Mexico home credit	IPF Digital	Central costs	Group
Credit issued	48.3%	42.4%	0.3%	-	35.0%
Average net receivables	(9.9%)	(4.4%)	(28.5%)	-	(14.9%)
Closing net receivables	12.2%	31.3%	(14.0%)	-	6.9%
Revenue	(19.8%)	(14.7%)	(26.5%)	-	(20.2%)
Impairment	111.9%	60.9%	66.6%	-	86.8%
Net revenue	41.1%	20.6%	12.4%	-	30.0%
Finance costs	(8.6%)	12.7%	(2.0%)	-	(3.7%)
Agents' commission	12.1%	(3.8%)	-	-	7.3%
Other costs	(2.5%)	8.7%	8.2%	(13.3%)	2.2%

A copy of this statement can be found on our website at www.ipfin.co.uk.

Legal Entity Identifier: 213800II1O44IRKUZB59

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