Warning hits Intrum shares

The share price of Intrum Justitia, the largest debt collection business in Europe, plunged by almost 27 per cent yesterday after the company issued a profits warning.

Intrum's shares dropped from 125.5p to 92p at the close of trading, after the company said its first half profits would come in at around two-thirds of last year's level of pounds 8.2m. Full year profit would also be below expectations, the company said.

The company said that the UK's emergence from the recession had reduced the opportunities available to debt collectors. In Intrum's French and German operations, the sluggish economy had caused problems. The strength of sterling also contributed to the difficulties.

Pressures on trading would be eased if the Government introduced legislation to allow creditors a statutory right to interest on debt, the company added. John Langhorn, UK group managing director, said he was much more confident of new laws now that Labour was in power.

He added: "The market place has been very tough for some time, which is a feature of the fact that there are too many collection agencies chasing not enough work."

He said that in the UK the company had also been hampered by charging too little for the difficulty of the work. However, he added: "We're being much more selective about the work we're taking on. We've got to stop being busy fools and we've got to take on contracts at the right prices."

Intrum is seeking improvements in its consumer division by appointing a new managing director. The previous managing director, Peter Wilson, resigned earlier this year.

In France, Intrum is optimistic of changing its fortunes with the recent acquisition of GRC, a French debt collector. Meanwhile, in Germany, the arrival last April of a new managing director, Joachim Ost, is expected to improve the situation.