International Personal Finance plc Debt provider presentation September 2017
International Personal Finance plc International consumer finance provider with good profit and returns, and strong balance sheet 2.5M customers 1.1BN credit issued 940M receivables 25,600 agents 92.6M PBT 7,000 employees 11.6% ROA 1.5x gearing 430M net assets 46% Equity to receivables As at 31 December 2016 2
Strong track record Delivering long-term profitability with consistent credit quality - even during global financial crisis Profit before tax ( M) Impairment % revenue 140 120 100 80 76.3* 100.5 92.1** 95.1** 123.5** 118.1** 116.1** 92.6 35% 30% 25% 20% 29.3% 21.8% 23.2% 29.9% 27.6% 28.1% 27.0% 25.8% 26.6% 25.7% 26.8% Target range 60 40 39.9 50.6* 61.7* 15% 10% 20 5% 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 * From continuing operations ** profit stated before exceptional items 3
A clear strategy Multi-channel strategy generating good returns and enabling investment in growth Expanded product offering IPF Digital Growth focus Strong demand for credit especially digital Improved channel choice Mexico home credit Growth focus Reinvesting in growth Technology to drive efficiency and customer experience European home credit Returns focus Generating returns 4
A robust investment proposition Straightforward consumer finance Resilient long-established home credit product and newer digital product to meet customer needs Effective risk management Long track record of managing key risks including credit, regulation, competition and liquidity Experienced management team Broad range of financial services experience Strong financial profile Robust balance sheet and strong funding position Focused business and financial strategy Develop high return businesses and maintain strong financial profile 5
Straightforward consumer finance Resilient long-established home credit product and newer digital product to meet customer needs
Our customers Business models tailored to meet the needs of our target consumer segment C/D socio-economic customer segment relatively underserved by mainstream credit providers Want to borrow smaller sums, quickly and conveniently, repayable in affordable amounts Credit used to smooth household budget, seasonal celebrations, home items and travel Home credit customers Digital customers Families with low, fluctuating income Little or no previous credit history Agent important to credit management Manage finances carefully Seek flexibility Low to middle income Like to shop and borrow online High smartphone ownership Credit history potential to qualify for remote loan Seek flexibility 7
Home credit 130 year old business model with around 25,000 agents meeting customers in their homes Small sum, short-term unsecured loans Cash loans with personal agent service in the home Money transfer loans direct to bank account 2.3M customers 64 weeks Average term Weekly and monthly repayments Responsible lending - agents paid commission primarily on collections 100-2,000 Loan amount As at 31 December 2016 400 Credit issued per customer No hidden charges for missed or late repayments within contract 8
Home credit: personal, flexible service Customer acquisition Application Credit decision Loan remittance Repayment / collection Well-recognised brand Targeted marketing Word of mouth recommendation Repeat lending offers to existing customers Simple, straightforward Online decision in principle Initial credit vetting call centre and/or agent Repeat lending offers to existing customers New customers Application score card Credit bureaux Agent judgement Low and grow strategy Existing customers Behavioural score card Agent judgement Agent home service Cash loan delivered to customer s home. Money transfer Loan delivered to customer s bank account Agent home service Money transfer Centralised arrears management Prudent automated provisioning Less than 48 hours from application to receipt of loan with agent service 9
IPF Digital Digital business model operating successfully for more than 10 years Small sum, short-term unsecured instalment loans Click and draw consumer credit line facility Remote lending model providing credit direct to and repaid from customer s bank account 221,000* customers 2 years Average term Flexible, fast and responsible credit decision making Monthly repayments Up to 3,500 Loan amount As at 31 December 2016 * As at 30 June 2017 680 Average customer outstanding balance Engaging technology-enabled customer experience 10
IPF Digital: fast and flexible remote lending model Customer acquisition Application Credit decision Money transfer Repayment / collection Above the line marketing and search engine optimisation Ongoing CRM to generate repeat business All loans generated online or via distribution partners Simple, straightforward application process Rapid, centralised, digital credit scoring External/internal databases and statistical models Low and grow strategy Affordability checks prior to approval Cash transferred to customer bank account Customers notified by text on transfer Standard procedures for managing repayments Active repayment reminder process to customers No refinancing or extension of delinquent loans c.15 minutes from application to money transfer / receipt 11
Good profit margins at maturity Established home credit and digital business models deliver good profit margins at maturity Our European home credit operations are mature. Mexico home credit and IPF Digital building to scale European home credit Mexico home credit IPF Digital* Group Revenue yield 82.6% 124.6% 64.2% 88.4% Impairment % revenue 22.9% 36.5% 16.7%* 26.8% Cost-income 38.1% 39.6% 48.6% 43.6% Profit margin 20.9% 6.3% 27.3% 12.5% As at 31 December 2016 Revenue yield; revenue / average net receivables *includes benefit generated on the sale of non-performing receivables 12
Prudent, objective and centrally controlled provisioning Short terms and prudent provisioning means impairment charged to income statement quickly Business Home credit IPF Digital Assessment Impairment trigger Provisioning Models Weekly and monthly Missed payment or part of a missed payment even if agent fails to visit the customer, with exception of first four weeks for new customers to allow repayment pattern to be established No re-ageing of poor payers Provision percentages for each arrears stage derived using statistical modelling of past customer performance that estimates amount and timing of future cash flows Formally reviewed on a regular basis to ensure reflects current performance Centralised and systematic with no management intervention Separate for each product in each country Monthly Default point when the debt is passed to a thirdpart collection agency - around 60 days past due. An incurred but not reported provision is held for receivables pre-default. This is calculated based on probability of default factors. Debt segmented based on number days past due and provision based on expected loss of each segment Calculation updated quarterly Centralised and systematic with no management intervention 13
Responsible lending Recognised for operating high quality, responsible businesses Demonstrating strong Environmental, Social and Governance practices Top Responsible Company Czech Republic Financial brand of the year Poland Masters in Business award Poland Financial services provider of the year Hungary Superbrand Hungary 14
Effective risk management Long track record of managing key risks including credit, regulation, competition and liquidity
Effective risk management Framework for identification, evaluation and management of key risks IPF Board Determines nature and extent of principle risks willing to take to achieve strategic objectives Management Team Responsible for day-to-day risk management and internal control systems Risk Advisory Group Supports Audit and Risk Committee in reviewing risk exposure levels against risk appetite Audit and Risk Committee Reviews processes for management of principle risks and internal control systems on behalf of Board Three Assurance Lines of Defence 1. Business-level identify, assess and control risks in market 2. Group-level oversight on effectiveness of risk management and internal control systems 3. Internal audit reviews operation and oversight of internal control. Head of Internal Audit reports to Chairman of the Audit and Risk Committee 16
Effective risk management - credit Powerful suite of credit management systems Robust credit scoring Centralised credit management systems and dedicated credit professionals in established markets Application and behavioural credit score per market including credit bureau data Scoring models built using database of over 40 million loans Lending based on disposable income not asset value Low and grow strategy Centralised arrears strategy Home credit Higher risk credit profile agent critical to credit management and customer relationship Assessment of customer character, circumstances and capacity to repay Agents remunerated primarily on collections IPF Digital Lower risk credit profile - remote customer experience Rapid, continual development of scoring models Customer transfer 1 cent bank account verification Forward flow early debt sale 17
Effective risk management - regulation High level of corporate disclosure and successful track record of adapting to regulatory change Shares and bonds listed on a number of EU stock exchanges comply with all listing and disclosure requirements, EMTN bond prospectus kept up-to-date disclosing risk factors Regulated by National Banks in certain jurisdictions, local consumer credit legislation and civil codes (Consumer Credit Directive in Europe) Operate under credit price controls in most European markets (Poland interest rate cap since 2006) Actively manage regulatory issues in-house and external legal and public affairs teams, strong relationships with regulators and other stakeholders Higher cost credit means higher regulatory scrutiny track record of evolving products and services, or successfully withdrawing from market if necessary 18
Effective risk management - regulation Managing current regulatory issues changing how we do business Poland adapted product to comply with cap on non interest charges introduced March 2016. Tighter cap proposed December 2016 which would have material impact if introduced. No update but continue to engage with Government ministries to achieve more positive outcome for consumers and businesses Romania more restrictive creditworthiness assessments introduced January 2017. More recent changes mean Romania business will be regulated directly by the National Bank - likely further tightening of credit criteria and significant reduction in the volume of loans provided to customers. Clarifying regulatory changes and the resultant impact on our operating model and profitability. Lithuania tighter debt to income rules resulted in move to fully IPF Digital offering Slovakia total cost of credit cap resulted in decision to collect out existing book and close business. Successfully achieved with positive cash outcome Poland using court appeal process on tax issues relating to transfer pricing and home collection fee 19
Effective risk management - competition Adapting business to changing competitor environment External environment Digital technology development - Arrival of online, digital lenders - High profile offers - Quick and easy customer journey Our responses Launch of digital offerings and building scale New products and channel choice to broaden appeal to home credit customers Changing customer demands - Shift towards digital credit - More choice driving less loyalty Provident Direct - leveraging strong home credit brand awareness with digital offering 20
Effective risk management liquidity Home credit model is important defensive feature during an economic cycle significant cash is generated when credit growth is slowed 250 227.3 M 200 150 100 172.6 144.3 122.1* 133.9 111.3* 116.7* 97.3 98.2 82.7 84.2 70.4* 175.1 158.0 158.8 132.5 121.7 100.3 50 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 * From continuing operations Operating cash flow after receivables growth Operating cash flow before receivables growth 21
Effective risk management liquidity Short-term lending means principal repaid quickly, and gives flexibility to slow credit growth during economic downturn Typical 60 week home credit product repayment profile (Poland) 160 140 120 100 80 60 40 Average term of credit - weeks Home credit Europe Northern Europe 69 Southern Europe 76 Home credit Mexico 45 IPF Digital 106 20 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Month Repayment Loan principal 22
Experienced management team Financial services and technology experience at Board and senior management level
Experienced management team Financial services and technology experience at Board and senior management level International banking and financial services experience Citigroup, GE Capital, HSBC, AIB, Lloyds TSB, Aviva, Amex Specialist professionals in functional areas International technology experience to support digital development Microsoft, EE, T-mobile, Orange Long-serving home credit experience New business Digital set-up and development experience Structured management development plans in place 24
Strong financial profile Robust balance sheet and strong funding position
Strong financial profile We borrow long and lend short which provides stable cover for our receivables Receivables Borrowings 147.1M 15% 73.9M 11% 863.1M 85% 610.4M 89% Less than one year More than one year At 30 June 2017 26
Strong financial profile Key metrics show consistent strong balance sheet and returns, low gearing and high interest cover FY 2014 FY 2015 FY 2016 HY 2017** Gearing 1.3x 1.7x 1.5x 1.4x Interest cover* 3.7x 3.9x 3.2x 3.2x Return on equity* 23.6% 23.3% 17.7% 17.7% Return on assets 16.1% 15.1% 11.6% 12.2% Equity to receivables ratio 47.5% 40.8% 45.7% 47.2% * Prior years pre-exceptional Annualised ** 2017 from continuing operations 27
Strong balance sheet and funding position Good headroom on undrawn bank facilities M 900 800 700 600 500 400 300 200 100 - Total debt facilities 2017 2018 2019 2020 2021 Equity to receivables 47.2% 140M of headroom on debt facilities 22M new bank funding secured in 2017 Total debt facilities of 824M - c. 583M bonds and c. 241M bank facilities Secure long-term bond funding 494M maturing 2020 or 2021. No bond maturities in H2 2017 and 46M in H1 2018 Interim dividend maintained at 4.6 pence per share Bond facilities At 30 June 2017. * Rolling extensions assumed Bank facilities* 28
Strong financial profile Strong funding position with a balanced debt portfolio C. 241M of bank facilities from long-standing core bank group with good strategic and geographic fit large international banks plus local banks C. 583M bonds across a number of currencies, wholesale and retail, issued under Euro Medium Term Note and Polish programmes All debt senior unsecured with lenders in the same structural position Consistent terms across debt facilities with core financial covenants in all facilities minimum interest cover 2.0x, maximum gearing 3.75x Bank Facilities 2017-2020 29% Sources and maturity profile of debt facilities Other Bonds 2018-2019 11% Main Eurobond, retail bond and Polish bond 2020-2021 60% BB Fitch credit rating (negative outlook) * At 30 June 2017 29
Strong cash collection in wind down scenario Strong cash collection against receivables accounting value in Slovakia and Lithuania Slovakia collect-out performance 41.1M Equity 16.4M 146% of debt funding 36.0M Pleasing performance from businesses being wound down - 5.4M combined profit Collect-out in both markets largely completed Target equity to receivables ratio of 40% o Debt funding o Equity funding Debt 24.7M Slovakian net cash flow forecast at 36M Net cash collection 146% of debt funding Receivables carrying value Dec 2015 Capital structure Forecast net cash flow * At 30 June 2017 30
Focused business and financial strategy Develop high return businesses and maintain strong financial profile
Focused business and financial strategy Recent performance - H1 2017 Good financial and operational performance Group profit before tax increased to 43.0M o Credit issued growth of 10% o Consistent credit quality management Home credit o Strong credit issued growth and improved impairment in Mexico o Good operational performance in European home credit IPF Digital o Excellent top-line growth o Established markets delivered improved growth in profit Robust funding and balance sheet position - 140M headroom on funding facilities Interim dividend maintained at 4.6 pence per share 32
Focused business and financial strategy Develop high return businesses and maintain strong financial profile Good track record of achieving high returns even during periods of market volatility and change European Home Credit - c 100M PBT, cash and capital generative, providing attractive returns IPF Digital and Mexico Home Credit growing strongly - continue investment to further build returns Strong balance sheet and funding position, and robust financial risk management Target equity to receivables capital ratio of 40% (c47.2% June 2017) Target impairment to revenue range 25-30% (Annualised 26.4% June 2017) Significant headroom on financial covenants and resilience to counter external factors including regulatory turbulence and taxation challenges 33
Focused business and financial strategy Develop high return businesses and maintain strong financial profile Return on Assets shows return on total equity and debt capital invested in receivables Higher returns from mature European HC, lower but growing returns for Mexico HC and Digital Investment taking place while maintaining capital and impairment targets, and significant headroom on financial covenants Return on equity shows overall return for shareholders, 17.7% in 2016 66.9M capital generated in 2016, with 55M of this invested in receivables growth (at 40% equity funding for receivables) 20 15 10 5 0-5 15.8% European home credit 2016 ROA 9.8% Mexico home credit (4.4%) IPF Digital 11.6% Group As at 31 December 2016 34
A robust investment proposition Strong position for debt providers Straightforward consumer finance Resilient long-established home credit product and newer digital product to meet customer needs Effective risk management Long track record of managing key risks including credit, regulation, competition and liquidity Experienced management team Broad range of financial services experience Strong financial profile Robust balance sheet and strong funding position Focused business and financial strategy Develop high return businesses and maintain strong financial profile 35
International Personal Finance plc Appendices 36
Group Half-year to 30 June 2017 HY 2016 M HY 2017 M Change at CER % Customer numbers (000s) ** 2,477 2,395 (3.3%) Credit issued 506.8 616.0 9.9% Revenue 353.3 400.8 2.6% Annualised impairment % revenue 25.3% 26.4% (1.1 ppts) Annualised cost-income ratio 41.6% 43.3% (1.7 ppts) PBT* ( M) 33.0 43.0 EPS* (pence) 10.9 13.6 Excluding Slovakia, Lithuania and Bulgaria * From continuing operations ** Adjusted following change to treatment of very slow paying customers in our home credit businesses 37
Northern Europe Half-year to 30 June 2017 HY 2016 M HY 2017 M Change at CER % Customer numbers (000s) 920 798 (13.3) Credit issued 220.4 248.4 0.1 Average net receivables 388.8 415.4 (5.1) Revenue 162.8 161.5 (11.9) Impairment (42.7) (41.4) 14.6 Finance costs (10.3) (12.1) (5.2) Agents commission (17.7) (16.2) 18.6 Other costs (60.9) (63.2) 6.4 Profit before taxation 31.2 28.6 Poland Czech Republic 23.0 8.2 22.3 6.3 Profit before taxation 31.2 28.6 38
Poland Half-year to 30 June 2017 HY 2016 M HY 2017 M Change at CER % Customer numbers (000s) 759 666 (12.3) Credit issued 174.0 205.0 4.4 Average net receivables 304.0 335.3 (2.3) Revenue 130.3 134.8 (8.4) Impairment (37.6) (40.7) 4.9 Finance costs (8.3) (10.3) (10.8) Agents commission (14.1) (12.8) 19.5 Other costs (47.3) (48.7) 7.2 Profit before taxation 23.0 22.3 39
Czech Republic Half-year to 30 June 2017 HY 2016 M HY 2017 M Change at CER % Customer numbers (000s) 161 132 (18.0) Credit issued 46.4 43.4 (16.2) Average net receivables 84.8 80.1 (15.3) Revenue 32.5 26.7 (26.2) Impairment (5.1) (0.7) 87.7 Finance costs (2.0) (1.8) 18.2 Agents commission (3.6) (3.4) 15.0 Other costs (13.6) (14.5) 3.3 Profit before taxation 8.2 6.3 40
Southern Europe Half-year to 30 June 2017 HY 2016 M HY 2017 M Change at CER % Customer numbers (000s) 586 535 (8.7) Credit issued 124.5 130.4 (5.0) Average net receivables 185.9 229.6 11.7 Revenue 80.0 89.2 0.8 Impairment (20.4) (22.1) 3.5 Finance costs (4.8) (5.7) (7.5) Agents commission (10.3) (11.9) (4.4) Other costs (28.8) (30.5) 1.9 Profit before taxation 15.7 19.0 41
Mexico Half-year to 30 June 2017 HY 2016 M HY 2017 M Change at CER % Customer numbers (000s) 814 841 3.3 Credit issued 102.6 131.2 20.1 Average net receivables 140.8 168.9 13.1 Revenue 87.5 106.0 13.9 Impairment (34.2) (35.8) 0.3 Finance costs (4.2) (5.9) (31.1) Agents commission (11.4) (14.1) (15.6) Other costs (35.4) (44.9) (20.1) Profit before taxation 2.3 5.3 42
IPF Digital Half-year to 30 June 2017 HY 2016 M HY 2017 M Change at CER % Customer numbers (000s) 157 221 40.8 Credit issued 59.3 106.0 61.1 Average net receivables 69.0 138.6 81.2 Revenue 23.0 44.1 72.3 Impairment (8.0) (18.8) (108.9) Finance costs (1.8) (3.4) (70.0) Other costs (17.6) (30.1) (53.6) Loss before taxation (4.4) (8.2) 43
IPF Digital established markets Half-year to 30 June 2017 HY 2016 M HY 2017 M Change at CER % Customer numbers (000s) 130 141 8.5 Credit issued 47.4 63.7 21.8 Average net receivables 60.8 97.8 45.8 Revenue 19.4 27.9 29.8 Impairment (5.9) (5.5) 16.7 Finance costs (1.6) (2.4) (33.3) Other costs (9.5) (12.0) (13.2) Profit before taxation 2.4 8.0 44
IPF Digital new markets Half-year to 30 June 2017 HY 2016 M HY 2017 M Change at CER % Customer numbers (000s) 27 80 196.3 Credit issued 11.9 42.3 213.3 Average net receivables 8.2 40.8 334.0 Revenue 3.6 16.2 295.1 Impairment (2.1) (13.3) (454.2) Finance costs (0.2) (1.0) (400.0) Other costs (5.4) (13.9) (127.9) Loss before taxation (4.1) (12.0) 45
Underlying profit reconciliation HY 2016 reported profit M Underlying profit movement M IPF Digital investment M FX rates M HY 2017 reported profit M Home credit 45.0 6.0-7.3 58.3 IPF Digital (4.4) 5.5 (8.7) (0.6) (8.2) Central costs (7.6) 0.5 - - (7.1) Profit before taxation 33.0 12.0 (8.7) 6.7 43.0 46
Strong financial profile Robust balance sheet position, good returns, low gearing, and high interest cover FY 2015 FY 2016 HY 2017** Receivables 802.4 939.9 1,010.2 Equity 327.2 429.5 477.0 Equity to receivables ratio 40.8% 45.7% 47.2% Gearing 1.7x 1.5x 1.4x Return on assets 15.1% 11.6% 12.2% Return on equity* 23.3% 17.7% 17.7% Adjusted earnings per share* 37.1p 30.2p 34.8p Interest cover* 3.9x 3.2x 3.2x * Prior years pre-exceptional Annualised ** 2017 from continuing operations 47
Balance sheet M June 2016 June 2017 Change at CER % Goodwill 22.9 23.9 4.4 Fixed assets 54.1 59.2 6.3 Receivables 874.7 1,010.2 7.3 Cash 42.1 32.3 (27.7) Borrowings (602.4) (684.3) (6.5) Other net (liabilities) / assets (10.2) 35.7 520.0 Equity 381.2 477.0 21.9 48
Foreign exchange rates Current rates 24 July 2017 2017 2016 Closing June Average Closing June Average Polish zloty 4.7 4.8 4.9 5.2 5.6 Czech crown 29.1 29.8 31.0 32.4 34.5 Euro 1.1 1.1 1.2 1.2 1.3 Hungarian forint 341.0 350.8 358.8 382.0 397.2 Mexican peso 23.0 22.9 24.1 24.3 26.1 Romanian leu 5.1 5.2 5.3 5.4 5.7 Australian Dollar 1.6 1.7 1.7 1.8 2.0 49
International Personal Finance plc Investor relations contact and further information Nick Dahlgreen Group Treasurer T: + 44 (0) 113 285 6700 E: investors@ipfin.co.uk Annual report https://www.ipfin.co.uk/en/index.html EMTN prospectus https://www.ipfin.co.uk/en/investors/debt-funding-information.html 5-year performance summary https://www.ipfin.co.uk/en/investors/financial-performance/5-year-summary.html Recent performance https://www.ipfin.co.uk/en/investors/results-reports-presentations.html IFRS 9 and impacts on IPF https://www.ipfin.co.uk/en/investors/results-reports-presentations.html 50