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IPF facing headwinds

Caps on interest rate charges threaten profits at the alternative lender
July 31, 2015

Headline numbers for personal loans group International Personal Finance (IPF) were distorted by one-off adjustments, and putting these to one side left half-year profits 8 per cent lower at £43.3m.

IC TIP: Hold at 385.1p

Around a third of group revenue is generated in Poland, where customer numbers were flat from a year earlier. And while average net receivables were down, lower impairment charges and lower costs left pre-tax profits virtually unchanged at £28.3m. The big worry is that proposed legislation to cap the level of interest rates charged on loans could have an impact on earnings.

Tough competition and new regulation trimmed profits in the Czech Republic and Slovakia, while adverse exchange rates - a factor that cost the whole group £8m - resulted in lower profits in southern Europe. However, demand for credit from low-to-medium income consumers remains consistent across all of IPF's markets, and some bright spots are starting to emerge.

In Mexico, customer numbers grew by more than 7 per cent to 813,000, and while there was a small increase in impairments, profits grew by nearly a third to £8.6m, boosted by a 15 per cent increase in profit per customer. The group is also improving its product range, and in February it bought MCB Finance, driving forward the progress of its digital business, where it offers credit remotely with no agent involvement. The group is also expanding into Spain.

Analysts at Numis are forecasting full-year pre-tax profits of £115.8m and EPS of 37p (from £123.5m and 37.2p in 2014).

INTERNATIONAL PERSONAL FINANCE (IPF)
ORD PRICE:385.1pMARKET VALUE:£895m
TOUCH:385.1-385.6p12-MONTH HIGH:590pLOW: 348p
DIVIDEND YIELD:3.2%PE RATIO:11
NET ASSET VALUE:149p 

Half-year to 30 JunPre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201424.56.74.2
201538.611.64.6
% change+58+73+10

Ex-div: 3 Sep

Payment: 2 Oct