IPF's Q4 Beat: Was the Stock's Move Above the Offer Priced In?

The core question for IPF investors is whether the market's reaction to the full-year results was about the financial beat or the deal dynamics. The numbers themselves were a clear beat. The Group's pre-exceptional profit before tax of £88.6m for 2025 topped the consensus estimate of £86.9m. That's a solid operational print, showing the Next Gen strategy is driving growth and credit quality. Yet the stock's move tells a more complex story.

The market's immediate reaction was to push the share price 7% higher, to 250.5p. That's a critical detail. It's not just a beat-and-raise pop; it's a move that now sits fractionally above the 250p total offer price from BasePoint Capital. This is the expectation gap in action. The whisper number for the year was met, but the stock price has already priced in more than that.

Viewed another way, the move above the offer suggests the market is looking past the operational beat to the deal's forward premium. The consensus PBT estimate was £86.9m; the print was £88.6m. That's a beat, but it's a modest one. The stock's jump to 250.5p indicates investors are now pricing in the potential for a competing bid or further sweetening, not just the slightly better financial result. The market is playing the deal game, not just the earnings game.

Operational Drivers: Sustainable Growth or One-Time Boost?

The operational metrics behind the profit beat tell a story of solid, if not spectacular, execution. They support the sustainability of the underlying business but also highlight why the market's focus has shifted decisively to the deal.

Customer numbers grew 4.7% year on year to 1.7 million, a clear sign of robust demand. This expansion, coupled with closing net receivables increasing by 13.9% across all three divisions, shows strong lending momentum. The 11.8% growth in customer lending to £1.34 billion confirms this is not a one-off boost but a sustained ramp-up in the core business. For the market, this is good news that validates the Next Gen strategy's traction. It provides a floor for the stock, showing the company is growing its asset base and customer base.

Yet, the numbers also reveal a subtle pressure. The impairment rate improved to 9.0% from 9.6% last year, a positive credit quality signal. However, the Group absorbed higher up-front IFRS 9 impairment charges, which the CEO noted were "absorbed." This suggests the reported profit growth of 4.0% was achieved even as the Group took on more cautious accounting for future credit losses. In other words, the beat was earned, but not without a cost to near-term earnings visibility.

The final dividend was raised to 9.0 pence per share, a 12.5% increase from the prior year. This move signals management's confidence in the financial position and cash flow generation. For investors, it's a tangible return on the stock, but it also raises the bar for future payouts. The company is committing to a higher dividend, which could limit its flexibility if credit costs or growth investments intensify.

The bottom line is that the operational story is one of steady, disciplined growth. It's not a story of explosive acceleration that would justify a massive premium over the offer price. Instead, it's a story of a company executing its plan, growing its customer base, and maintaining credit discipline. That's what the stock was already priced for before the deal announcement. The expectation gap now isn't about the operational beat-it's about whether the deal will deliver more than that steady growth.

The Deal Context: Acquisition Premium vs. Forward Guidance

The earnings beat now sits squarely within the acquisition calculus. The revised offer from BasePoint Capital is clear: 235 pence in cash plus a 15 pence special dividend, bringing the total consideration to 250p per share. That's a 40% premium to where the stock sat before the deal was announced. The market's move to 250.5p, half a penny above that figure, is a direct challenge to that premium. It suggests some investors are pricing in a potential competing bid or a further sweetener, not just the slightly better financial result.

Analysts see a path for the business to grow. The consensus projects 2026 profit before tax of £97.6m, implying a 12% growth rate from the 2025 beat. That's a solid forward view, but it's also a key benchmark. The current stock price above the offer price implies the market is valuing the company based on that 2026 outlook, not just the 2025 result. In other words, the stock is trading on the expectation of growth, while the offer is a fixed price for the present.

The bottom line is that the earnings print strengthens the deal's foundation but doesn't fundamentally alter the valuation debate. The board has credible grounds for backing an exit at 250p, as the numbers show the strategy is working. Yet the market's reaction shows it's already looking ahead to the next chapter. The expectation gap has shifted from "Will they beat?" to "What's the next bid?" The stock's premium to the offer is the market's bet that the deal will be more valuable than the current offer suggests.

Catalysts and Risks: The Path to Completion

The thesis now hinges on a clear timeline and a set of binary outcomes. The critical catalyst is shareholder approval at meetings scheduled for 11 March. With court sanction also required, completion is anticipated by the end of the second quarter of 2026. This is the near-term event that will either validate the market's premium pricing or force a sharp re-rating.

The main risk is straightforward: the deal failing to gain approval. While two institutional shareholders have already lined up behind the scheme, the board's unanimous recommendation and the 40% premium offer provide strong support. Yet, any significant dissent could trigger a sell-off. In that scenario, the stock would likely reprice sharply below the 250p offer, as the premium is only justified if the deal closes. The market's current position above the offer price is a bet on completion; a failure would make that bet a losing one.

A secondary, more gradual risk is that the forward growth expectations are too optimistic. The consensus projects 2026 profit before tax of £97.6m, a 12% jump from the 2025 beat. This outlook is baked into the stock price above the offer. If execution falters-whether from increased credit costs, economic headwinds in its nine markets, or slower customer growth-the company may need to reset guidance downward. That would pressure the valuation based on future earnings, undermining the rationale for paying above the fixed offer price.

On the positive side, the company has strong operational headroom. It carries a funding headroom of £129m, which provides a buffer for ongoing lending and credit risk management. This financial strength supports the current growth trajectory and gives management flexibility to navigate near-term uncertainties without jeopardizing the deal's stability.

The bottom line is that the path to completion is now a race against time. The market is pricing in a successful close and a smooth transition to the next chapter. The risks are clear: a shareholder vote gone wrong, or a forward growth story that fails to materialize. For now, the stock's premium to the offer is a bet on both.