Currency volatility set to hit IPF’s 2012 profits

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EMERGING markets lender International Personal Finance warned that a downturn in eastern European currencies could hit 2012 profits, sending its shares down 9 per cent last night.

Leeds-based International Personal Finance offers home credit to consumers in Poland, Czech Republic, Slovakia, Hungary, Mexico and Romania.

The company said its earnings could be hit due to the weakness of many eastern European currencies against sterling.

“The current state of the global economy continues to make the outlook for 2012 unusually uncertain,” said the company.

“In addition, there has been significant volatility in foreign exchange markets in 2011 and more recently a weakening of our trading currencies against sterling.”

The group’s shares closed down 16.8p at 165p.

The company estimated that compared to the effective rates used to translate overseas profits in 2011, current foreign exchange rates could negatively hit reported profits by 14 per cent.

Analyst Gary Greenwood, at Shore Capital, said: “Overall it was a disappointing statement, representing a second profit warning for the company in a similar number of months.

“Not unexpectedly, currency is the main culprit this time, but credit issued growth is also slower than we had expected.”

IPF said that with three important weeks of trading to complete before the year end, it remains on track to deliver “a good result” for 2011.

It added that despite reduced consumer confidence its credit issued has continued to grow, up by four per cent for the quarter to date.

Mr Greenwood said: “The company has reported four per cent constant currency growth in credit issued so far in the fourth quarter of 2011, which is a sharp slowdown from the 14 per cent rate of growth that was achieved in the first nine months of the year.

“While we had anticipated a slowdown in growth following recent credit tightening by the company, this is perhaps a little more acute than we had expected.”

IPF had previously indicated that it expected slowing credit growth to take one to two per cent off the growth rate for the full year relative to the nine months stage, implying fourth quarter growth of around seven per cent, by Shore Capital’s estimates.

The company puts this down to a more cautious attitude by both customers and agents.

IPF said that by carefully balancing growth with a prudent policy on credit, it has maintained good credit quality. Changes to the Hungarian corporation tax resulted in a one-off increase in the group’s effective tax rate for 2010.

A decision to return to the old tax regime means the group expects a one-off reduction in its effective tax rate in 2011 of between four and 24 per cent.

IPF has been hit by a number of external factors outside its control and it could be affected by the eurozone debt crisis.

Feeling Eurozone effects

International Personal Finance has said its growth could be hit by the eurozone debt crisis, as problems in more established economies threaten to spill over into neighbouring countries.

The Leeds-based group, which lends small sums to households, has said the economies of its target markets are performing well.

In terms of exposure to the eurozone, Hungary is the market with the highest exposure to exports, particularly Germany.

Poland, the group’s strongest country, is the least exposed with small exposure to exports.