IPF says digital division on track for maiden profit

An IPF customer and agent in Mexico
An IPF customer and agent in Mexico
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Home credit firm International Personal Finance reported a good performance in the first half of 2019, with credit growth of 7 per cent.

The Leeds-based firm said the rise in credit was led by IPF Digital, which is on track to deliver a maiden profit in 2019. The digital division saw a 28 per cent increase in credit growth, driven by new markets.

IPF's chief executive Gerard Ryan said: "We were really pleased with IPF Digital. We almost broke even in the first half and we are seeing really strong top line growth."

IPF said an improved financial performance in European home credit and IPF Digital was partially offset by lower profit in Mexico home credit.

Pre-tax profit was flat at £56m in the six months to June 30, but this reflected an increase in like-for-like pre-tax profit of £4.8m.

Mr Ryan said: "Pre-tax profit was spot on target for us."

Chief financial officer Justin Lockwood added: "We saw an improvement in like-for-like profitability, taking out the foreign exchange rate.

"We've continued to invest. We've invested in branch expansion in Mexico and that cost around £1.4m.

"The incremental investment was about £4m. Foreign exchange rates overall were weaker for us and that impacted profit by around £1.4m while like-for-like profit grew by £4.8m."

IPF said it was disappointed by changes to draft proposals to reduce non-interest charges in Poland.

Mr Ryan said: "Operational execution by our teams in European home credit was excellent, delivering a strong performance.

"Clearly we were very disappointed by the changes to draft proposals to reduce non-interest charges in Poland, which we are monitoring closely and working on potential responses should they be enacted.

"We are clear on the need to improve performance in Mexico, and as previously announced, have changed the leadership and focused on execution to allow us to benefit from the significant growth opportunities that this market continues to present."

He said the firm expects to deliver a full year result in line with market consensus, with a stronger than originally expected performance in European home credit being offset by a weaker performance in Mexico.

IPF provides small sum, unsecured personal loans to customers who are under served by mainstream operators.

The group is expanding its home credit business in Mexico and, while more challenging macroeconomic conditions and weaker collections hit its performance, the firm said its Mexican business offers significant growth prospects.

IPG said good levels of demand for consumer credit in all its markets are expected to continue.

Analyst Stuart Duncan at Peel Hunt said: "IPF’s shares are trading at distressed levels, on just under 4 times earnings, as sentiment has been continually hit by potential regulatory change in Poland.

"This is masking the true underlying value of the group – our sum-of-the-parts valuation estimate is that the Polish and northern European business is in effect valued at zero. "Our target price is based on a sensible resolution, and therefore valuation, in Poland. On this basis we maintain our 'buy' recommendation and highlight the dividend yield that stands at just over 12 per cent."