Doorstep lender has eyes on Spanish market

Gerard Ryan, CEO of  International Personal Finance
Gerard Ryan, CEO of International Personal Finance
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DOORSTEP lender International Personal Finance reported record underlying half-year profits, but its shares fell over six per cent on the news that it is expanding into Spain where it won’t break even until 2018.

Its entry into the Spanish market early next year will be the Leeds-based company’s first foray into Western Europe.

The group, one of Yorkshire’s top ten PLCs, said Spain could become a major market for the company as it has a population of 47 million people, many of whom have been turned down by the high street banks.

IPF’s chief executive Gerard Ryan said: “Spain has been through the mill. It’s had a really tough time.

“As a result Spanish banks are disinclined to lend to our target group. They won’t serve this market in future. We did a lot of consumer testing which was very favourable.”

IPF looked at several European markets, but Spain was the only one that fulfilled its criteria.

“In Greece, there is demand to borrow, but not the same willingness to repay. The Greek people feel aggrieved by what has happened,” said Mr Ryan.

“Spain came out well ahead of all the other countries.”

IPF hopes to build up to 400,000 Spanish customers once the operation becomes mature in five to eight years’ time, making it a significant new market for the group.

Mr Ryan said the Spanish market will require a higher level of investment and a longer period to break-even compared with its latest launches in Lithuania and Bulgaria due to the sheer scale of the country.

This spooked the market and the shares closed down 6.4 per cent, a fall of 37.5p to 548.5p.

RBC Capital Markets analysts said the Spanish expansion, while positive, is likely to cause consensus downgrades until the country starts contributing to profit.

Mr Ryan argued that Spain will generate substantially greater returns and will become a significant engine of growth in the future.

He expects to invest £3m in Spain in 2014 and a further £8m in 2015, with a targeted break-even in 2018.

Mr Ryan was speaking yesterday as the group announced an 11 per cent rise in underlying pre-tax profits to £47.1m following a seven per cent increase in customer numbers to 2.6 million people.

After new market investment costs and weaker foreign exchange rates, profits fell 55 per cent to £24.5m.

“We are pleased with the 
performance. These are a very good set of results and we are making good progress on our journey to grow the business,” said Mr Ryan.

The group said its strategy of issuing larger, longer-term loans to well-established customers is working well.

Extending the term of the loan allows customers to borrow larger sums of money while paying the same affordable, weekly instalment.

Following the success of 
longer-term loans in Poland, the Czech Republic and Slovakia, IPF launched a 100-week loan in Hungary during the first quarter of 2014 and rolled out loan 
terms of up to 78 weeks in Romania.

Mr Ryan said it has seen strong demand for the new offers, which are boosting revenue whilst maintaining credit quality.

A pilot in Romania to reward good quality, loyal customers with preferential pricing will be rolled out in the second half of 2014.

IPF already offers preferential pricing in Poland, the Czech Republic, Slovakia and Hungary.