IPF recovering from effects of a winter chill

CREDIT lender International Personal Finance is upbeat about its performance over the coming year after the group swung back into profit in the first quarter.

The Leeds-based group said that improving economic conditions and cost controls had offset the weak collections seen in the first two months of the year when heavy snow hit profits.

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.

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Chief executive John Harnett said the company should claw back losses caused by the snow in the second quarter.

"Given that we started off the year with very difficult weather conditions, we have put in a really good performance," he said. "Consumer confidence is good and customer credit quality is good. We look forward to the rest of the year with confidence."

The group suffered extremely cold weather in January and February, especially in Poland where it was minus five degrees during the day and it snowed all but two days in the first six weeks.

The company, which offers small loans to consumers in emerging markets such as Poland, Hungary and Mexico, warned last month that the severe weather in the first eight weeks of the year had hit its performance.

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But the market welcomed the news that trading is back to normal and losses should be clawed back over the next few months. The shares rose 3.3 per cent, a rise of 8p to 244.6p

The group said that first-quarter profits in Poland, the Czech Republic and Slovakia rose by 11 per cent to 4.9m.

Growth in these three markets has been good with the improvement in economic conditions and tight management of credit quality enabling the group to ease its credit controls. As a result credit issued rose by nine per cent year on year and customer numbers were up 14,000 since the start of the year to 1.16 million.

The Hungarian business, which underperformed last year, is now on course to make a profit this year.

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The group said the division had performed well following the restructuring of the business last autumn.

Since the start of 2010 it has started to ease credit controls and customer numbers have grown by 2,000 to 229,000 with the credit quality remaining good.

The business reported a loss of 400,000 in the first quarter compared with a loss of 5.8m last year. The group said the division is on track to make profit in 2010 and re-build profitability over the medium-term.

In Mexico, credit issued rose 26 per cent year on year, customer numbers grew by 17,000 to 541,000 and the division reported a quarterly pre-tax profit of 200,000 compared with a loss of 2.9m last year.

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The first branch was opened in the Mexican region of Monterrey in March.

The group is not planning any new pilot operations this year but it will continue to open new branches in the Guadalajara and Puebla regions of Mexico as well as Monterrey.

Mr Harnett said four more branches are due to open in Monterrey this year and the plan is to open 11-13 in Mexico in total.

Mexico offers a huge opportunity for the group. The target is to reach three million customers over the next five years.

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In Romania, economic conditions remained stable, but the group has maintained tight credit controls and a focus on collections.

Credit quality continues to be good and the business delivered good growth with customer numbers up by 13,000 to 177,000 and credit issued up by 36 per cent year on year.

As a result the Romanian division broke even during the first quarter compared with a 1.5m loss last year. It remains on track to report a profit for 2010.

Next year the group may look at launching a pilot in India. Bulgaria is another possibility, but no decisions have been made.

Borrowings at the end of March were 339m, down from 348m at the end of 2009.

Mr Harnett said he was happy with consensus forecasts of between 85m and 90m for 2010 pre-tax profits.

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