Blackfriar: Tough climate but lender IPF strong enough to withstand the pressures

First it was hit by its association with the sub-prime sector – despite the fact that the eastern European countries where it operates are in a far better economic state than the UK or the eurozone.

IPF’s shares tumbled again last night, down nearly three per cent, a fall of 10p to 344p.

This was on a word of warning from management that it will continue to lend cautiously in case its eurozone neighbours get into trouble.

The fact is that IPF has seen absolutely no signs of any problems in its markets and it doesn’t expect to see any impact in the future.

IPF’s four main regions – Poland, ‘Czech-Slovakia’, Hungary and Romania – have negligible links to highly stretched eurozone countries such as Greece and Ireland, or to countries that could get into trouble such as Portugal, Italy and Spain.

Poland, ‘Czech-Slovakia’, Hungary and Romania mainly export to Germany and to a lesser extent France. The likelihood of either of these two European giants crumbling in the eurozone crisis is negligible.

IPF is right to be cautious and not let the leash off on lending criteria, but there is no reason to expect the company to start performing badly.

The fact that the group is on a growth setting is evident in customer growth of eight per cent and credit issued up 14 per cent. This should flow through into second half revenues.

IPF is a cautious company, rightly so for a credit lender operating in the current economic environment.

But it has a sound business model, an experienced management team and has just managed to raise half year profits by 17 per cent.

The company also says it is on course to deliver a good performance for the year as a whole.

If we get good news from the eurozone crisis talks being held today, it will do a lot to put IPF’s share price back near the 400p mark where it deserves to be.

n The structural steel industry is a useful barometer of the health of UK construction.

Projects ranging from new schools to hospitals need a spine of steel. But with these projects on the wane as public sector funding dries up, the industry faces an extended lean spell.

Barnsley-based Billington Holdings’ latest venture – teaming up with its privately-owned rival, Bourne – is a logical solution to the sector’s woes. United under the BS2 banner they will tap the buoyant London market for high-rise steel jobs worth at least £8m.

Billington’s chief executive Steve Fareham insists it is the right time to enter the London office market, which is dominated by larger rivals William Hare and Thirsk-based Severfield-Rowen.

He believes their joint scale give developers confidence to hand them the bigger contracts they have previously been excluded from. “Although times are difficult we will have done the spade work,” he said.

London office space is a rare bright spot in this subdued market.

Joint ventures are a fashionable way of diversifying in this downturn. Severfield launched one in India in November to tap into the country’s construction boom.

Mr Fareham says the group is not just targeting London, but will look to growth in other UK cities too.

“The world is coming back to life in Yorkshire, in Sheffield, Leeds and Bradford,” he said. “If all the big buildings that have been talked about come to fruition, the industry will need somebody else.”

Blackfriar has his worries over the joint venture. He fears Billington will face difficulties in convincing contractors to give it work instead of the two high-rise specialists already firmly established. In teaming up with a rival, it also risks cannibalising its own order book. Crucially, no figure has been put on the potential earnings from the 50/50 deal.

But these are risks worth taking. Billington’s joint venture is a timely attempt to diversify beyond its traditional boundaries.

The group is home to a valuable array of skills, which must be preserved as an increasingly scarce commodity in UK manufacturing.