Improving our core business

We believe that our core home credit model is robust. It has operated successfully in our international markets for 11 years, and in the UK for over 100 years. As we continue to expand our operations in both our new and existing markets, we are seeking new ways to make our business more profitable.

 

 

We recognise that we need a strong pipeline of potential senior managers who will be able to develop large and profitable new markets. We are developing new senior recruits through a fast-track development programme with participants from all our markets.

 

Excellence in Execution

We believe that our core home credit model is robust. It has operated successfully in our international markets for 11 years, and in the UK for over 100 years. As we continue to expand our operations in both our new and existing markets, we are seeking new ways to make our business more resilient and more profitable. We recognise the importance to shareholders of minimising the operational risk as we roll-out new branches in new markets and aim to ensure that we execute the model as consistently as possible. If we do this well, shareholders will have greater confidence that, once a pilot has been approved and moved into the development phase which is characterised by an increase in start-up losses, it will move up the J-curve and generate shareholder value.

During 2008 we identified a number of potential performance improvement initiatives that we grouped under the banner of ‘Excellence in Execution’. This includes a number of key initiatives geared towards improving the systems we use, developing our employees and agents and making business processes more effective. Our main priorities for 2009 are:

The Home Credit Blueprint

We are now introducing precisely defined and documented operating processes and procedures to ensure that, as we open in new territories or employ new people, we deliver a consistently good service to customers and agents. Review of compliance with this blueprint will be integrated within our internal audit plan from 2009. This also supports our approach to TCF.

Tailored operational management

In the last few years we have significantly improved our credit management and marketing systems. This enables us to segment the performance and potential of all markets, which enables us to devolve more control of the business to local branches. We will tailor our sales, marketing and credit strategies according to the potential and performance of individual branches rather than at country level. We have successfully implemented this approach in Mexico and are now rolling it out in all our markets. We expect this will improve the profit performance of all branches and also narrow the range of performance across branches.

Improving the performance of agents

Making small improvements in agent effectiveness can make a significant improvement in the overall performance of the Group. We also know from detailed analysis that the retention of agents and building their levels of experience is a major driver of profit. Clearly the agent is central to us delivering a quality service to our customers. We therefore intend to improve our selection and performance management of agents in all markets during 2009.

People development

Improving engagement and reducing levels of employee turnover can result in significant improvements in operational performance. We also recognise that we need a strong pipeline of potential senior managers who will be able to develop large and profitable new markets. We are developing senior management through a fast-track development programme with participants from all our markets. In 2007 we also began identifying potential leaders within the business and are giving them broad experience of all aspects of the home credit business. Many of our senior managers in Central Europe are taking senior positions in other markets. For example, our country manager in Poland is Hungarian, our second in command in Romania is a Polish national, while one of our two regional managers in Mexico is from the Czech Republic.

New product development

In Poland and Slovakia we have adapted our product structure so that customers can elect to pay for the agent service or to make repayments themselves. Following pilots in all our markets we have decided to roll-out flexible products in 2009. This new product will replace the existing offering.

We have also started our Russian pilot by delivering loans on pre-paid Visa cards. This addresses the cash handling regulations in Russia but could offer attractive opportunities to remove cash from circulation in other markets to reduce fraud and crime risk, along with opportunities to top up customer loans rapidly.

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