IPF looks to new markets as profits take off

The Leeds-based group, which operates in Poland, Hungary, the Czech Republic, Slovakia, Romania and Mexico, reported profits at the top end of market expectations.

Underlying pre-tax profits rose 20 per cent to £95.1m in the year to December 31.

This was before the impact of higher early settlement rebates and weaker foreign exchange rates. Analysts had forecast profits between £89m and £95m.

The group’s shares rose 16.5 per cent to close up 67p at 473.4p. The shares have risen by almost 60 per cent over the past year.

IPF’s chief executive Gerard Ryan said that entry into Bulgaria and Lithuania will give the group the opportunity to expand into new markets adjacent to its existing operations.

The new Bulgarian operation will be managed by the team in Romania and the Lithuanian set-up will be managed by the team in Poland.

IPF will invest between £4m and £5m in the expansion.

“It usually takes four years to get into profit in a new country, but if we leverage existing infrastructure we think it will take two to two and a half years,” said Mr Ryan.

“All the management teams were asked to examine countries next to theirs. They looked at the ease of entry, competition and whether our set-up is acceptable in the market. In Bulgaria and Lithuania we felt we could step in and take market share.”

He said that Bulgaria has an established doorstep lending market.

“We can get in there and do what we do best,” he said.

“We lend in a transparent and ethical way. If it takes a customer twice as long to repay we don’t hit them with extra charges. The only time we will take action is if they can pay and they won’t.

“If customers can’t pay we agree a new schedule. The vast majority of our customers miss at least one payment so our word of mouth recommendation is very strong. The regulators are very warm to us coming in.”

He said that Lithuania is very different to Bulgaria and is much more orientated to payday lending.

“This gives us the opportunity to get in and offer a longer term, affordable loan.”

As well as expanding into new markets, IPF is also piloting a number of new products.

It has also begun to offer more long-term loans, launching a 90-week loan in Poland and a 100-week loan in the Czech Republic and Slovakia.

IPF said these longer loans are only being offered to high quality customers and the initial results are promising.

“We were asked by analysts: ‘Why offer customers a discount?’, but it can be good for the customers and good for ourselves,” said Mr Ryan.

“We offered the discounted rate to six per cent of customers in the pilot. Instead of opting for lower weekly instalments they chose the same instalment but a higher loan.” Customers borrow an average of between £350 and £400 a year.

Discounted rates have been rolled out in Slovakia after a successful pilot. A pilot has now been launched in Poland and Hungary and further pilots are planned for Romania and the Czech Republic later this year.

The company is paying a final dividend of 4.5p per share, making a total payout for the year of 7.7p, an increase of nine per cent on the year before.

Underlying revenues rose nine per cent to £652m, after discounting exchange rate fluctuations.

In the past, people settling their debts early had to pay an administrative penalty, but this has been reduced to a very small charge.

This means IPF is earning less revenue than it did historically. By this time next year this negative effect will have worked its way through the compara- tives.

Credit issued rose by 13 per cent to £882m.

The group reported record profits in Mexico and a reduction in impairments from 30.2 per cent to 28.3 per cent.

IPF is now funded until 2015 at a cheaper rate than previous funding.

The group is to list on the Warsaw Stock Exchange to enable Polish shareholders, particularly pension funds, to invest in the business more easily.

This will be a technical listing with no new equity.

Life will get worse, say customers

THE rising cost of food, petrol and heating is the biggest worry for customers of doorstep lender International Personal Finance and the majority believe life will get worse.

IPF commissioned new research by YouGov to highlight the concerns of its customers, who often feel they are ignored by society.

IPF said the majority of its customers are from socio-economic groups that are poorly served and often excluded from mainstream financial services.

They tend to have lower levels of social influence, disposable income and political power and can feel marginalised. More than two thirds of customers said the cost of living is their main concern.