Operational review

 

Pre-tax profits from our established businesses, net of central costs, increased by 36.3% to £92.8 million. Earnings per share attributable to established businesses were 26.04 pence, up by 40.4%.

 

Central costs increased by 5.6% to £13.2 million.

Pre-tax profits from our established businesses, net of central costs, increased by 36.3% to £92.8 million. Earnings per share attributable to established businesses were 26.04 pence, up by 40.4%.

We made good progress in Mexico with losses reducing by £4.6 million to £8.7 million. Customer numbers increased by 18.6% to 370,000 and credit issued rose by 8.1% to £67.4 million. Average net customer receivables increased strongly, up by 20.9% to £28.9 million and this caused revenue to increase by 16.2% to £48.4 million. The tightening of credit controls implemented at the end of 2007 was effective and, despite strong growth in customers and receivables, credit quality remained good and stable in both the Puebla and Guadalajara regions with impairment as a percentage of revenue reducing to 35.5% (2007: 47.4%).

Romania continues to progress in line with expectations. Losses of £7.8 million reflect the costs of expanding our number of branches from 7 at the end of 2007 to 16 at the end of 2008. Customer numbers and credit issued grew strongly, up by 157.6% and 244.1% respectively, with credit quality remaining good.

We also commenced pilot operations in Russia during the third quarter of the year from a single branch in Moscow. It is too early to draw conclusions from our experience to date. Start-up losses of £6.0 million were incurred in 2008 (2007: £0.5 million).

Regulation and legislation

During the year we responded to the introduction of an interest rate cap in our smallest established market, Slovakia. This became effective from July 2008 and, as we had previously done in Poland, we successfully modified our product offering, with minimal impact on operational performance. In recent months there has also been some debate about the possible introduction of rate caps in both Mexico and Hungary.

We continue to monitor the implementation of the EU Consumer Credit Directive which will pass into law in each of our Central European markets and Romania over the course of the next two years. The new Directive focuses on fairness to customers and transparency. There are some areas where the precise details of the law will only be clear when the Directive is enacted in each member state and, in due course, we may need to make some adjustments, but overall we welcome the changes it will bring.

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