Pepper goes for growth 27 August 2015 3:45PM John Kavanagh With its initial public offering out of the way, lender and loan servicer Pepper Group is working on the expansion of its business in a number of areas that are taking it into direct mortgage sales, asset finance and lending operations in several overseas markets.Pepper reported net profit of A$3.8 million for the six months to June. After making a large number of adjustments related to the IPO, acquisition costs and changes to its funding arrangements the company declared a pro forma net profit of $16.7 million.Pepper's prospectus forecast a pro forma net profit of $47 million for the full year. Chief executive Mike Culhane said the December half was seasonally stronger for the company and it was on track to meet its target.Assets under management grew by 29 per cent over the six months to June to $36.8 billion. AUM is made up of a $4.5 billion loan portfolio and a $32.3 billion asset servicing portfolio.The loan book grew by 7.4 per cent during the half and the asset servicing portfolio grew by 32 per cent.The company has forecast that assets under management will grow by 44 per cent to $41.3 billion over the full year.Last November Pepper launched Pepper Asset Finance, offering automobile and equipment finance. Culhane said it was writing $30 million to $40 million of business a month and would be writing $50 million a month by the end of the year.It has also launched a direct sales channel. Culhane said the project was an investment in brand development and would have benefits in the broker market as well as opening up a new distribution channel.Internationally Pepper is establishing or expanding mortgage and personal lending businesses in South Korea, Spain, the United Kingdom, Hong Kong and Spain.Culhane said Pepper sells through 1500 brokers in Australia and there was plenty of scope to establish more broker relationships (there are more than 10,000 in the market).The company has always been associated with non-conforming lending and this still makes up the bulk of its lending. The split is about 65 per cent non-conforming and the rest prime lending.Credit quality was sound. Loans past due but not impaired rose 6.9 per cent to $183.8 million during the half and impaired loans fell 23.8 per cent to $22.5 million.On the servicing side of the business, Pepper took on servicing contracts in Ireland, Spain and the United Kingdom during the June half.Culhane said the effects of the financial crisis were still working their way through a number of European markets, where governments that had taken over "bad bank" portfolios from struggling banks were looking to sell them. He said the pipeline of servicing opportunities was strong.