Key performance indicators
- Financial
-
- Customer numbers
-
The total number of customers across the Group. At the end of 2008 we had 2.03 million customers.
Strategic link
- Quality customers drive the business, generating revenue and ultimately profit. Increasing the number of high-quality customers serves to support our long-term growth strategy in both new and existing markets.
- Credit issued per customer
-
The value of money loaned to customers – normally measured over the previous 12 months.
Strategic link
- The main driver of profit per customer is the amount of credit issued per customer.
- Credit issued per customer should increase over time and is partly driven by inflationary increases in customers’ disposable incomes, in line with responsible lending. We adopt a ‘low and grow’ strategy and only issue more credit to a customer once their creditworthiness is proven.
- Net customer receivables
-
The amount outstanding from customers for loans issued less impairment provisions calculated in accordance with our accounting policies. At the end of 2008 net customer receivables were £574.4 million.
Strategic link
- The revenues we earn are calculated by reference to the effective interest rates of the loans we issue and the value of the net customer receivables outstanding.
- Revenue
-
Income generated from customer receivables. In 2008 revenue was £557.1 million.
Strategic link
- Most of the business costs are relatively fixed.
- As revenues increase, in line with customer numbers and receivables, developing markets move up the J-curve into profitability and grow profits and margins rapidly.
- Impairment
-
The amount charged as a cost to the income statement as a result of customers defaulting on contractual loan agreements – a default is classified as the failure to make any weekly payment in full. The cost includes the value of repayments written off as irrecoverable as well as provisions for the expected future default.
Strategic link
- Profitability is maximised by optimising the balance between growth and credit quality.
- We find impairment as a percentage of revenue is a good measure for comparing performance across markets.
- Gross cash loss
-
The expected total value of contractual customer repayments that will not be collected and will ultimately be written off for any loan or group of loans.
Strategic link
- A leading-edge measure of the quality of credit issued. Forecasts are based on the actual performance of previous lending.
- The higher the expected gross cash loss, the higher the impairment charge will be in the periods after the loans are issued.
- Given the unfavourable global economic outlook, it is likely that the forecast at the end of 2008 will be understated.
The graph shows forecast gross cash loss for loans issued in 2008.
- Expenses
-
The costs of servicing customers – including agents’ commissions, funding costs and the direct expenses of running the business. We find expressing expenses as a percentage of revenue is useful for comparing performance across markets.
Strategic link
- The lower our expenses to revenue ratio, the more efficient we are and the more profit we make.
- Our funding costs represent 5% to 6% of our revenues.
- Commission costs represent around 13% of revenues.
The graph shows direct expenses as a percentage of revenue.
- Non-financial
-
- Agent numbers
-
The number of agents in the business. At the end of 2008 we had 28,900 agents.
Strategic link
- Agents are central to the success of the business model and customer service. They recruit customers and make collections from them.
- More agents generally means more customers can be recruited and managed.
- Employee and agent stability
-
The proportion of employees and agents who remain with us a year after joining.
Strategic link
- Our business model requires us to select and train large numbers of new employees and agents. High levels of turnover are costly and lead to the customer and agent relationship being broken which in turn leads to higher impairment.
- Engaged employees and agents are crucial to achieving excellent business performance.
Employee stability
75%
Agent stability
59%
- Brand awareness
-
The proportion of the adult population who recognise our brand.
Strategic link
- The higher the level of awareness, the higher the potential customer base becomes.
- The brand also plays a key role in attracting agents and employees.
- Conversion rates
-
The proportion of potential new customers interested in having a loan, who actually receive one.
Strategic link
- The recruitment of new customers is a key driver of total customers. A high conversion rate may indicate that we are recruiting too many high risk customers. A low rate may mean that we are not providing an effective service.
Call centre lead to loan
c50%
- Customer retention
-
A measure of customers eligible to take out repeat home credit loans, because their repayment performance has been of a high standard, who actually do so.
Strategic link
- After allowing for the cost of recruitment and higher levels of impairment, little profit is made on new customers.
- Our aim is to retain good customers, build lasting relationships and increase their lifetime value.
- Higher customer retention drives higher customer numbers.
Customer retention
c70%
- Customer satisfaction
-
The degree to which customers are satisfied with the home credit service. Regular customer research is undertaken to obtain feedback and measure satisfaction levels.
Strategic link
- Satisfied customers are likely to take out further loans or recommend us to their family and friends.
- Dissatisfied customers may indicate poor service and will lead to poor customer retention.
Customer satisfaction
68%
- Percentage of servable population
-
The proportion of the country population that we can serve through our branch network and agency force.
Strategic link
- The higher the proportion of the population that can be reached, the more customers can be served.
- The scale and speed of building the branch network determines the duration and depth of the J-curve.
