Blackfriar: Lender should take credit for getting through hard times

At a time of economic austerity, the group's shares are not an obvious punt on the stock market.

But yesterday the group issued a strong trading update and said it had seen no adverse impact from the Greek debt crisis and trading is ahead of plan in the year to date.

IPF makes cash loans of between 150 and 500, mainly to women who are trying to manage the household budget.

Common reasons for borrowing money are to pay for Christmas, summer holidays and back-to-school necessities and the money is collected in weekly payments by doorstep debt agents.

Earlier this year IPF saw its share price tumble on the news of a difficult first few months after heavy snow, especially in Poland, hit the business hard.

The severe weather meant that the group's agents were unable to visit customers at home.

But the lender has come back fighting and is now making up for the lost business.

IPF believes that the worst is behind it and it expects to see strong growth in customers this year.

The group was disappointed that profits fell 19 per cent in 2009, but given the significant impact of the recession this was a credible performance at a time when many of the Eastern European banks have had to be bailed out by their Governments.

A return to normal trading in March and good weather in the first half of April meant the group produced a 2m pre-tax profit in the three and a half months to April 14. This compares with an 8.5m loss in the first quarter last year.

Yesterday the group said the amount of credit issued is growing steadily and credit quality in all markets is good.

While credit controls are still cautious, especially in Romania, where the impact of government cuts to public sector pay and pensions have yet to be felt, the company is right to limit its ambitions.

Yesterday analysts said the shares look too cheap at just 8.7 times this year's earnings. They closed up just 0.6p at 219.8p last night, a rise of only 0.3 per cent despite gaining over four per cent earlier in the day.

The group has ambitious expansion plans that include a major drive into Mexico, a market that has huge potential.

Once that is underway the group's next targets include India – another massive market – and possibly Bulgaria.

IPF's model has one major attraction over UK-focused rivals – there are so many more geographic areas for expansion.

The current management has proved it can get through the hard times, it is looking at a much brighter future once the global economy hauls itself out of recession.

Spice shareholders have been on something of a rollercoaster journey over the past year or so.

So the offer from European buyout firm Cinven, which emerged last week, may offer weary investors an attractive way out.

Back in February, investors were vocal in insisting that Spice change its strategy to focus on organic growth, and true to his word, new chief executive Martin Towers has done so.

And while this has helped shares recover some of their losses, they are still some way off the 134.5p high achieved in July 2007.

So former chief executive Simon Rigby's comments that Cinven would provide a "good home" may strike a chord with some investors.

Mr Rigby, who founded the group and still holds about nine per cent, wouldn't be drawn on what he will do.

But he thinks the 56p a share offer adds a "significant premium".

It'll just take a few more big investors to agree, and Spice may have to open its books to Cinven.