Financial services firm IFG has warned that profits will be at the bottom end of expectations as it exits its loss-making pension release business in Britain.
Analysts say the company is now likely to report earnings per share somewhere between 10 cents and 10½ cents. Previously, profits of between 10 and 13 cents had been expected. The stock shed more than 22 per cent of its value in the immediate aftermath of the news but recovered some ground later to close almost 14 per cent weaker.
The company has decided to sell or close down Berkeley Jacobs, the pensions release business acquired in 2000 that has been struggling to stem losses.
The business was fined £175,000 (€250,000) earlier this year by the British regulator, the Financial Services Authority, for over-aggressive advertising. At the time, IFG agreed to a review of the units business over the previous two years, an exercise that closed the business for two months.
At the company's annual general meeting in July, group chief executive Mr Richard Hayes said IFG remained committed to the Berkeley Jacobs business despite the £175,000 fine.
However, in a statement yesterday, the company said following management changes and a full review of all UK operations, it had decided "in order to eliminate further losses, to exit the pension release business".
"We were providing a service much needed by people who have got themselves in trouble, but the cost of doing that business has gone way up," said Mr Hayes yesterday. "To be honest, it is a losing battle."
The company also announced that while its independent financial advisory (IFA) business in Britain had now stabilised after a turbulent period, it had received a number of customer complaints this year relating to business sold over the past five years.
"Complaints are now part of the scene for the UK IFA business and while we have not had any up to now, we have had several this year," said Mr Hayes. "Going forward, it is something we will budget for."
IFG said Irish business activity continued to grow but warned that investment in its title insurance business (in demand with people remortgaging their property) and lower policy trading margins would affect its performance this year.
Davy analyst Mr Scott Rankin said the market would adopt a wait-and-see approach to the company as this was not its first profit warning. However, he welcomed news that the company's debt, which threatened its future as recently as a year ago, was likely to fall further to between €37.5 million and €39.5 million by year end.
