International Personal Finance upgrades expectations

IPF said that since its update in April, the group’s operational performance has continued to be positive.

Credit issued has been broadly in line with its expectations despite tighter Covid-19 restrictions in a number of its markets.

"As we highlighted in the Q1 trading update, our business plan assumed a weakening in collections performance due to subsequent waves of the pandemic in the first half of 2021. In contrast, our actual collections performance has continued to be very strong resulting in a faster-than-anticipated improvement in impairment as a percentage of revenue," the company said.

"While we remain cautious given the dynamic Covid-19 environment, the faster-than-anticipated improvement in impairment in April and May is expected to result in a further improvement in the full-year impairment charge and a significantly stronger rebound in profitability in 2021 than was expected at the time of our Q1 trading update."

At 0915 BST, the shares were up 11.5% at 141.60p.

Broker Shore Capital, which reiterated its ‘hold’ rating on the stock, said: "Following this update, we upgrade our FY21F profit before tax forecast by 45% to £66.5m, which in turn drives an upgrade to our earnings per share forecast of 72% to 16.0p, with the increase to earnings being greater than that for pre-tax profit due to an anticipated reduction in the forecast effective rate of corporation tax to 46.5% (from 55%).

"We continue to assume full year dividend payout ratio of 40% and so our dividend per share forecast also increases by 72% to 6.4p. Our earnings/dividend forecasts for FY22F and FY23F are unchanged at 20.1p / 8.0p and 28.2p/11.3p respectively."

Numis, which rates the shares at ‘buy’, said: "We believe that as the vaccine becomes more widely implemented, restrictions will be lifted and IPF will be able to return to delivering strong growth and collections.

"In that environment we would expect a greater proportion of the population to be addressed by IPF, there will be a strong demand for credit and fewer competitors. We do, however, expect credit quality to normalise as IPF continues to expand the amount of credit issued. The improvement in profitability is also expected to see the group tax charge decline, as some of the banking taxes paid by IPF are not profit related."

As a result, Numis lifted its pre-tax profit forecast for this year by 40% to £66.1m, and its EPS forecast by 67% to 15.9p. For next year, its EPS forecast was upped by 12% to 23.3p, "as credit quality normalises and loan growth builds".