Europe growth helps IPF to record profits

The Leeds-based company said it has seen an encouraging start to the year and its key markets in Central Europe are enjoying a strong increase in economic growth.

IPF chief executive John Harnett said the markets the group operates in are performing “immensely better” than the UK.

“Our markets are growing between three and five per cent a year,” he said. “People are becoming better off and are less of a credit risk. Central European economies are very linked to Germany, which is doing very well. These countries have strong manufacturing links to the German economy.”

While IPF is confident of continued growth in its markets, the group’s shares closed down 2.4 per cent last night, a fall of 8p to 322p.

Analysts are wary about IPF’s exposure to global economic wealth, despite the fact that the countries IPF operates in are showing good growth.

Analyst Andrew Mitchell at Charles Stanley said: “The full year results were within the range of estimates and, as expected, the group is targeting faster growth in 2011 on the basis of economic growth in its markets.

“The medium/long-term growth story remains very attractive, but uncertainty over global economic growth and increased risk aversion have been a drag on the share price year-to-date and remain prominent today.”

He added that on current trading, the group reported a good start to the year and is pushing for stronger growth this year, but he went on to say: “This may cause some unease in the short term given the current market worries over economic growth.”

Mr Harnett replied: “We’re not letting loose in terms of credit controls. We expect to grow the business with lower levels of credit risk. We expect lower levels of impairment.”

He added that the City has concerns about the recent unrest in North Africa and the Middle East.

“When there is upset in the Middle East, it impacts international businesses like ours, even though we don’t operate in the Middle East,” he said, adding that in the long run the group’s share price will be driven by the profit performance.

IPF’s pre-tax profits for the year to December 31 rose 49.3 per cent to £92.1m following an eight per cent increase in revenues to £608.7m.

The company hopes to grow its customer base from 2.2 million to 2.4 million in 2011, an increase of 10 per cent.

It hopes to lend around £850m in loans in 2011, up 15 per cent on last year.

IPF’s finance director David Broadbent said the group has an “incredibly strong” balance sheet following the completing of funding in November when it bought new facilities of £480m.

“We can fuel all growth until 2013,” he said. “Our gearing is at an all-time low.”

Analysts at Numis said: “We are looking for the economic recovery seen in the last few months in Poland to drive impairment down significantly.

“At the same time we expect strong growth in the loan book and revenue as both impairment and loan size is determined by the prior 12 weeks repayment profile. We believe the worst of the economic crisis in Romania is now past and despite this crisis Romania delivered its first profit in 2010 as forecast.”

Numis has a ‘buy’ recommendation on the stock and a target price of 437p.

Mr Harnett said IPF has no plans to pull out of its headquarters in Leeds, despite the fact that all of its business is based abroad.

“We have got a pool of very experienced people in Leeds, ” he said.