What's new:
■ Customer numbers up
■ No deterioration in credit quality
■ Mexican operation moves into profit
Non-standard loan provider International Personal Finance started the new year on a positive footing, with growth in credit issued up 16 per cent in the first quarter, and customer numbers rising 9.2 per cent to 2.43m year on year. But the increase in lending has not come at the expense of credit quality, and impairment levels actually fell slightly from 26.6 per cent of receivables a year ago to 26 per cent.
Despite this stellar growth, first-quarter pre-tax profits fell from £8.3m to £6.1m as a result of higher early settlement rebates on loans (a £3.1m hit) and sterling's strength, which trimmed a further £1.6m from overseas generated earnings. Collections were also £1m down as a result of the severe weather in Romania, and a first-quarter loss there of £0.1m last year deepened to £2m.
On a positive note, the group's Mexican operation finally moved into profitability, turning last year's first-quarter loss of £1m into a modest profit of £0.1m. Attention there has focused on increasing revenue per customer so, while customer numbers rose at an annualised rate of 13 per cent to 674,000, credit issued grew by 36 per cent.
Numis Securities says...
Buy. IPF's track record is impressive. Despite the credit crunch there has been no rights issue, bail-out or dividend cut, while all its funding requirements have been renewed. We believe that the business of short-duration, high-margin loans is lower risk than conventional loans because of the high margins earned. The first quarter is traditionally the weakest period for the business and, with Mexico now moving into profitability, we believe the shares can enjoy a much higher rating. Expect 2012 EPS of 25.9p, rising to 31.9p next year.
Peel Hunt says...
Buy. Perhaps the key point is the absence of any visible impact on credit quality from the economic slowdown, and IPF is on track to deliver significant growth to offset the financial headwinds faced. Even so, adjusted pre-tax profits this year are expected to be down around 10 per cent to £89.4m, giving EPS of 25.1p. But, assuming there is no repeat of the bad weather in Romania, and Mexico continues its recovery, then we are forecasting profits next year to rise to £106m to produce EPS of 29.9p. While eurozone uncertainties are likely to persist, IPF's current rating fails to reflect the group's growth potential.
