Operational review
Developing markets
Our two developing markets, Mexico and Romania, are progressing well.
J-curve for Mexico
(£m)
J-curve for Puebla
(£m)
J-curve for Guadalajara
(£m)
J-curves are described in more detail in the well financed section.
Customer numbers 370,000
+18.6%
Average net receivables
£28.9 million
+20.9%
Impairment as a % of revenue
35.5%
Mexico
Mexico made significant progress in 2008, reporting a much reduced loss of £8.7 million which, at constant exchange rates, is 37.4% lower than the loss reported in 2007. Importantly, we reported reduced losses in both the Puebla and Guadalajara regions with both very close to break even for the second half of the year.
| 2008 £m |
Pro forma 2007 £m |
Change £m |
Change % |
Change at CER % |
|
|---|---|---|---|---|---|
| Customer numbers (000s) | 370 | 312 | 58 | 18.6 | 18.6 |
| Credit issued | 67.4 | 58.1 | 9.3 | 16.0 | 8.1 |
| Average net receivables | 28.9 | 22.3 | 6.6 | 29.6 | 20.9 |
| Revenue | 48.4 | 38.8 | 9.6 | 24.7 | 16.2 |
| Impairment | (17.2) | (18.4) | 1.2 | 6.5 | 12.7 |
| Revenue less impairment | 31.2 | 20.4 | 10.8 | 52.9 | 42.0 |
| Finance costs | (4.0) | (3.0) | (1.0) | (33.3) | (24.1) |
| Agent commission | (5.5) | (4.6) | (0.9) | (19.6) | (12.2) |
| Other operating costs | (30.4) | (26.1) | (4.3) | (16.5) | (9.5) |
| Loss before taxation | (8.7) | (13.3) | 4.6 | 34.6 | 37.4 |
Loss before taxation analysed as:
| 2008 £m |
2007 £m |
Change £m |
Change % |
Change at CER % |
|
|---|---|---|---|---|---|
| Puebla | (2.1) | (6.2) | 4.1 | 66.1 | 67.6 |
| Guadalajara | (0.9) | (1.9) | 1.0 | 52.6 | 54.7 |
| Head office | (5.7) | (5.2) | (0.5) | (9.6) | (4.9) |
| (8.7) | (13.3) | 4.6 | 34.6 | 37.4 |
Having improved credit quality in 2007, we were able to resume our focus on growth in 2008. As a result, customer numbers grew by 18.6% to 370,000 with significantly stronger growth in the second half of the year.
Credit issued increased by 8.1% to £67.4 million. This growth was slower than the growth in customer numbers because a higher proportion of credit was issued to new customers who receive smaller value loans. During 2008 we introduced slightly longer-term products (40 and 50 week loans) for better quality customers. This will subsequently drive stronger growth in credit issued and brings the product structure more closely into line with that in Central Europe.
The increase in customer numbers and credit issued resulted in strong growth in average net receivables and revenue which increased by 20.9% and 16.2% respectively.
Credit quality continues to improve and impairment as a percentage of revenue stands at 35.5% for the year ended 31 December 2008 compared with 47.4% in 2007.
Overall, revenue less impairment increased by 42.0% to £31.2 million.
Other operating costs in Mexico have increased by 9.5% compared with 2007, well below the growth in revenue.
In 2009, we expect revenue less impairment to continue to grow faster than costs allowing the country to report its maiden full year profit.