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IPF finds some relief in Mexico

The subprime lender improved its performance during the first half, but regulatory uncertainty abounds
July 27, 2017

Managers at International Personal Finance (IPF) were no doubt chuffed with its strategy to push expansion in its Mexico business during the first half. After suffering operational difficulties last year, average net receivables here were up 13 per cent at constant currencies to £169m. But in IPF's mature markets, regulatory changes and competition continued to put pressure on earnings.

IC TIP: Sell at 196.5p

The total-cost-of-credit cap in Poland forced the lender to lower its pricing, causing a compression in revenue yield during the six months to the end of June. This was despite a 4 per cent uplift in credit issuance. However, in the Czech Republic the decision to focus on customers with longer-term loans, amid competitive pressure, resulted in a 16 per cent contraction in credit issued. Overall profits for the Northern European business were down 8 per cent to £28.6m.  

In Southern Europe, stronger demand in Hungary partially offset a decline in new credit of almost a quarter in Romania. This follows the introduction of creditworthiness assessments for non-banking financial institutions in the latter country. The group also managed better collections than expected in its Lithuania and Slovakia businesses, which are being wound down. These contributed a combined £5.4m in profit.

IPF Digital also grew credit issuance by an impressive 61 per cent, but losses almost doubled to £8.2m due to start-up costs in new markets. Analysts at Numis expect earnings per share of 26p for the 12 months to December 2017, down from 32.5p in 2016.

INTERNATIONAL PERSONAL FINANCE (IPF) 
ORD PRICE:196.5pMARKET VALUE:£ 438m
TOUCH:196-196.5p12-MONTH HIGH: 342pLOW: 144p
DIVIDEND YIELD:6.3%PE RATIO:6
NET ASSET VALUE: 214pNET DEBT:137%
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20163623310.94.6
20174014313.64.6
% change+11+30+25 
Ex-div:07 Sep   
Payment:06 Oct