International Personal Finance Plc (LON: IPF)

Business Overview
International Personal Finance Plc provides unsecured consumer credit to customers across eleven markets. The company offers consumer finance products, channels and brands through home credit and digital. The company operates in 5 home credit markets and 8 IPF digital markets with its 21,000 agents.

Recent News
On 31^st October 2019, the company announced its trading update for the third quarter of the financial year 2019 ended on 30^th September 2019.

Trading Update for Q3 FY2019
The company expected full-year 2019 profit before tax in line with consensus expectations. It has delivered a 1 per cent increase in credit issued with a continued strong operational performance. The company’s impairment as a percentage of revenue was 27.8 per cent, reflecting a combination of very strong credit quality in European home credit and more challenging performances in Mexico home credit and IPF Digital's new markets. In IPF Digital, the company expected to deliver a maiden profit in 2019.

Financial Highlights – H1 Financial year 2019 (30^th June 2019, GBP, million)

(Source: Interim Report, Company Website)

In the first half of the financial year 2019, the company’s revenue increased by 7 per cent to GBP 446.9 million as compared to GBP 418.9 million in the H1 FY2018 due to growth in issued credit in IPF digital business. The company’s revenue less impairment increased to GBP 323.10 million as against GBP 316.40 million in the H1 FY2018. The reported total costs increased to GBP 267 million in H1 FY2019 from GBP 259.9 million in the H1 FY2018. The reported profit before tax declined to GBP 56.1 million in H1 FY2019 from GBP 56.5 million in the H1 FY2018. The company’s basic earnings per share were 14.80 pence in H1 FY2019 as compared to basic earnings per share of 16.70 pence in H1 FY2018. The company’s diluted earnings per share was 14 pence in H1 FY2019 as compared to diluted earnings per share of 15.90 pence in H1 FY2018. The company’s interim dividend stood at 4.6 pence for the period.

Share Price Performance  

Daily Chart as on 18^thDecember 2019, before the market closed (Source: Thomson Reuters)

On December 18^th, 2019, International Personal Finance Plc shares were trading at GBX 163.29 at the time of writing before the market close (at 1:30 PM GMT), down by 3.95 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 225/GBX 86.80. The stock price has declined 17.40 per cent in the last one year. However, the stock price is recovering, giving 16.63 per cent in the last one month and 57.90 per cent return in the last three months.

Conclusion
The company has delivered a decent financial performance in the first half of the fiscal year 2019. There is a challenging macroeconomic landscape in the Mexican home credit market, due to which the company’s reported profit before tax declined. Total customers also decreased by 2 per cent in H1 FY 2019 as compared to H1 FY 2018. However, there is an increase in the credit issued. Its European home credit business is doing well. IPF digital business is also on the verge of generating profit. The management outlook is positive, and the company looks promising for a long term sustainable growth.

The company has a dividend yield of 7.29 per cent, and its revenue has grown from GBP 735.4 million in FY2015 to GBP 866.4 million in FY2018 giving 5.60 per cent growth on a CAGR basis.

Based on the above rationale, we have given a "HOLD" recommendation at the current price of GBX 163 (as on 18th December 2019, before the market close at 11:50 AM GMT).

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