The worst is behind us, says credit lender IPF

CREDIT lender International Personal Finance said the worst is behind it and it expects to see strong growth in customers this year.

The Leeds-based group said it was disappointed that profits fell 19 per cent in 2009, but given the significant impact of the recession it was pleased with the recovery seen since the fourth quarter of 2009.

The group's shares fell 4.6 per cent to 198.6p last night on worries that the heavy snow in January and February will hit first quarter profits, but IPF chief executive John Harnett said the company should claw back losses later in the year.

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"We saw extremely cold weather in January and February, especially in Poland," he said. "It was minus 5 degrees during the day and it snowed all but two days in the first six weeks. Agents couldn't get out and there were a lot of missed payments. Now the snow has gone we expect collections to return to normal."

Of the six countries it operates in, the recession was much less of an issue in Poland, the Czech Republic and Slovakia. These three countries reported a pre-tax profit of 83.7m, down from 89.9m in 2008.

Throughout the year the developing markets of Mexico and Romania made good progress despite the economic downturn.

Mexico produced a maiden profit of 300,000 against a loss of 8.7m in 2008.

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In Romania start-up losses reduced from 7.8m to 2.4m and the country is expected to make a profit this year.

However Hungary was severely hit by the recession which led to a sharp drop in credit quality.

Impairment levels rose sharply and the market became loss-making, which led to a 3m restructuring which included the loss of 90 central jobs.

Hungary saw profits of 16.1m in 2008 fall to a loss of 7.2m in 2009, although the business swung back to profitability in the second half.

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The group is not planning any new pilot operations this year but it will open new branches in the Guadalajara and Puebla regions of Mexico and it also has plans to enter the Monterrey region.

Mexico offers a huge opportunity for the group. it currently has 500,000 customers in the country but the target is to reach three million over the next five years. Next year it may look at launching a pilot in India or Bulgaria, but no decisions have been made yet.

In the year to December 31, the group made a pre-tax profit of 61.7m, above expectations of around 58m, but down 19 per cent on last year's 76.3m profit.

Revenue fell 1.2 per cent to 550.2m.

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.

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The money is collected in weekly payments by doorstep debt agents.

Mr Harnett said the outlook for the economy is significantly better than what it was 12 months ago and the group will see improving conditions as the year progresses.

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

"I'd be very disappointed if we do less than 85m," he said.

Impairment charges, which reflect bad loans, are expected to be about 25 per cent of revenue this year, compared with about 30 per cent of revenue in 2009.

IPF maintained its total dividend at 5.70p per share.

Going for world growth

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International Personal Finance was formed in 1997 as a division of Bradford-based Provident Financial, the UK's leading provider of home credit.

The group, which was the former international division, split from Provident Financial in July 2007.

International Personal Finance established its first operations in Poland and the Czech Republic in 1997.

Operations in Hungary and Slovakia were set up in 2001 and in 2003 the group crossed the Atlantic to set up operations in the Puebla region of Mexico.

In 2005 the Mexican business was expanded into the Guadalajara region of Mexico. The Romanian business was set up in 2006.

The group now serves 2.1 million customers in six countries overseas.