International Personal Finance slumps nearly 20% on Mexican problems

Discussion in 'Market News' started by Lily, Jul 28, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
    Likes Received:
    Emerging market lender reports disappointing results in country

    Amid a deluge of company results, emerging markets lender International Personal Finance stands out by losing nearly a fifth of its value.

    The company said first half profits fell from £43.3m a year ago to £30.7m, hit by tougher legislation in Poland and a disappointing performance in Mexico which has prompted a restructuring in the country. It saw a strong performance in southern Europe and continued to invest in its digital business.

    Our business is undergoing significant change as we address competition and regulation but our strategy reflects this changing dynamic and we are well placed to take advantage of growing demand within our target segmnent of consumers for digital loans.

    Although profits are broadly as expected, there is a relatively mixed underlying picture for IPF. The guidance on Poland remains unchanged, but performance in Mexico has remained disappointing and profits have fallen materially. This will offset, to some extent, the likely benefit from recent sterling weakness.

    The reduction in profitability in the first half largely reflects two specific issues. Firstly, profits in Poland were significantly affected, as expected, by the new legislation which was implemented in March. Profits fell by around 25%, with the guidance on the likely full-year impact unchanged at £30m (of which half is expected to be mitigated). The statement reports that there has been little change in the competitive landscape in Poland, with the customer response to the new rule still unclear.

    Given the valuation and ongoing concerns around competition and regulation in Eastern Europe as well as the sharp deterioration in performance in Mexico, we downgrade our recommendation to hold (from buy).

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