Strong performance in mortgage business and international trustee andcorporate services is reported.

Profits at financial services group IFG fell back by 15 per cent in the first half, with most of the fall blamed on a compliance-driven restructuring at the company's UK pension release business.

The firm saw pre-tax profits on continuing activities fall from €5.1 million in the first half of 2002 to €4.3 million this year.

Operating profits on retained businesses also weakened, declining by 14 per cent to €6.3 million. Within this, the UK pension release division saw profits drop from €2.5 million last year to just €34,000 in the first six months of 2002.

IFG chief executive, Mr Richard Hayes attributed the performance to regulatory changes in the UK, which led to the closure of the pensions release operation for two months and triggered new costs of €663,000.

Elsewhere, IFG reported a strong performance in its Irish mortgage business and in international trustee and corporate services.

Profits also grew within the company's UK actuarial business, but its UK independent financial advisory division was much less buoyant. Profits in the business dropped from €1.4 million to €791,000 as consumers remained shy of investment.

The bright spot in the results was IFG's continuing progress in reducing its high debt levels. Debt at the end of June stood at €57 million, down from €66 million at the end of December and €79 million at the same point of 2002.

Mr Hayes said he hoped to shave another €20 or €30 million off borrowings over the coming 18 months.

IFG shares closed two cents higher at 72 cents last night as investors focused on the decline in borrowings and the company's completion of a restructuring which saw it exit the UK endowment market and dispose of other non-performing operations.

These decisions led to a pre-tax loss of €21.3 million in the first half last year.

Mr Hayes said IFG's focus was now on growing the business while getting debt down.

He said neither divestments nor acquisitions were on the near-term horizon but acknowledged that a recent pilot with GE on the provision of mortgages to Irish customers who may not qualify for homeloans from other courses had been "very successful".

The company now looks likely to officially expand into this area, which accounts for 12 per cent of all new mortgages in the UK.

Mr Hayes rejected persistent market speculation on IFG's appeal as a management buyout (MBO) target, describing the company's shareholders as "very strong and supportive".

He accepted however that if the share price remains in the doldrums over the next few years, an MBO could become a prospect.