Notes to the financial statements
31. Pro forma income statement (unaudited)
On 16 July 2007 the international home credit businesses of Provident Financial plc (the international businesses) were demerged, effected by a dividend in specie. IPF plc acquired the international businesses by issuing one IPF plc share to the shareholders of Provident Financial plc for each Provident Financial plc share held by them. On the same day the shares of IPF plc were admitted to trading on the main market of the London Stock Exchange.
An unaudited pro forma income statement and earnings per share for the year ended 31 December 2007 are presented below in order to present a consolidated position as if the Group had existed as a stand alone entity throughout the periods shown.
A reconciliation of the statutory result for the years ended 31 December 2007 to the pro forma result is presented below. The pro forma adjustments do not form part of the Group’s financial statements.
| Group | Statutory £m |
Exceptional demerger costs £m |
Pro forma adjustments £m |
Pro forma £m |
|---|---|---|---|---|
| 31 December 2007 | ||||
| Revenue | 409.8 | – | – | 409.8 |
| Impairment | (83.2) | – | – | (83.2) |
| Revenue less impairment | 326.6 | – | – | 326.6 |
| Finance costs | (22.3) | – | 3.1 | (19.2) |
| Other operating costs | (81.6) | – | – | (81.6) |
| Administrative expenses | (175.7) | 2.8 | (2.8) | (175.7) |
| Total costs | (279.6) | 2.8 | 0.3 | (276.5) |
| Profit before taxation | 47.0 | 2.8 | 0.3 | 50.1 |
Analysed as: |
||||
| Central Europe | 79.3 | – | 1.3 | 80.6 |
| UK-central costs | (11.6) | – | (0.9) | (12.5) |
| Established businesses | 67.7 | – | 0.4 | 68.1 |
| Mexico | (13.2) | – | (0.1) | (13.3) |
| Romania | (4.2) | – | – | (4.2) |
| Russia | (0.5) | – | – | (0.5) |
| Exceptional demerger costs | (2.8) | 2.8 | – | – |
| Profit before taxation | 47.0 | 2.8 | 0.3 | 50.1 |
| Taxation | (14.5) | (0.4) | (0.1) | (15.0) |
| Profit after taxation | 32.5 | 2.4 | 0.2 | 35.1 |
The exceptional demerger costs can be analysed as follows:
| Group | 2007 £m |
|---|---|
| IT separation costs | 2.3 |
| Defined benefit pension credit | (3.5) |
| Accelerated share-based payment charge | 2.4 |
| Other | 1.6 |
| 2.8 | |
| Tax credit | (0.4) |
| 2.4 |
The pro forma adjustments can be analysed as follows:
| Group | Notes | 2007 £m |
|---|---|---|
| Additional interest charge due to higher interest rates | a | (0.8) |
| Interest credit on capital contribution | b | 1.9 |
| Corporate office costs | c | (2.8) |
| Group interest payable | d | 2.0 |
| 0.3 | ||
| Tax credit | (0.1) | |
| 0.2 |
The pro forma adjustments can be explained as follows:
a) An adjustment has been included to increase finance costs to reflect the fact that the Group is subject to higher interest rates now that borrowings are no longer guaranteed by Provident Financial plc.
b) As part of the demerger, the Group received a capital contribution of £70.0m from Provident Financial plc (see note 26). This pro forma adjustment reflects the interest that would have been earned on this capital contribution had it been received prior to the start of 2007.
c) An adjustment in respect of additional corporate office costs is included to reflect that as a stand alone entity with its own corporate office the Group incurs additional costs compared with when it was a division of Provident Financial plc.
d) While the Group was part of the Provident Financial plc group it was subject to certain interest charges that would not have been incurred if it was a stand alone entity. These interest charges (which were not included in the reported profit for the international division in the Provident Financial plc segmental analysis) have therefore been reversed.