This year we have returned to growth, carefully managing the business through difficult times and delivering a strong performance. Despite the economic downturn, we have continued to invest in the future and we are making good progress in our journey towards creating a sustainable, global business. Our Global Change Management Programme is driving operational excellence and creating a platform for future growth.

2010 results

In 2010 pre-tax profit increased to a record £92.1 million, an uplift of 49.3% driven by good growth in credit issued, better credit quality and improved cost efficiency. This result is particularly pleasing because it is in line with the strategic plan which we developed in advance of IPF’s stock market listing in 2007. It also demonstrates the resilience of our business model during a challenging period for the global economy.

During the year, we saw progressive improvement in economic conditions across all our markets with the exception of Romania and, whilst maintaining tight credit control, we were able to shift our focus towards growth, particularly in the final quarter of the year. All markets delivered growth in customer numbers which increased overall by 7.5% to 2.2 million. As expected, the rate of growth was strongest in our developing markets of Mexico, where customers grew by 14.1%, and Romania, where customers grew by 26.2%.

Growth in the first quarter was flattered by comparison to the heavily recession affected first quarter of 2009 and it was not until the second half of 2010 that we felt sufficiently confident in the economic outlook to push for growth. In Quarter 3 we found caution amongst agents and managers remained a key factor inhibiting growth. In Quarter 4 we tackled this with an additional £2.8 million of investment in marketing, communication and incentives. This proved successful resulting in a 9.0% increase in credit issued in the fourth quarter, providing a strong platform for further growth as we enter 2011.

Overall, the amount of credit issued to customers grew by 5.6% and, as a result, the value of average customer receivables grew by 6.0%. This produced an 8.1% increase in revenue to £608.7 million, reflecting the benefit of the mid-2009 increase in service charge. Improvements in credit quality and collections performance, driven by improving external conditions and our focus on these areas, caused the impairment charge to reduce as a percentage of revenue by 2.3 percentage points from 29.9% in 2009 to 27.6%. Together these factors produced an increase in net revenue of 11.9% to £440.6 million.

On funding, credit market conditions remained challenging during 2010 and so we were particularly pleased to conclude our refinancing during the year with a diversification of sources and extension of maturity of debt financing: this included two successful five-year bond issues and the agreement of new three-year committed banking facilities. This gives security of funding and allows us to progress our growth plans. However, as we had expected, our borrowing margins increased and this led to a rise in finance costs which rose faster than revenue, up by 10.4% to £33.9 million.

Market overview

We operate in the consumer credit sector of the financial services industry which includes credit cards, unsecured personal loans, retail credit, overdrafts, home credit, home shopping catalogues and pawnbroker lending. The sector has been affected severely by the recession but the outlook continues to be positive with moderate economic growth predicted in all our markets for 2011.

We focus on emerging markets where consumer lending is relatively under developed and demand for credit is rising. The global economic downturn has also resulted in reduced levels of competition.

While concerns over the global economy continued during 2010, we saw a return to economic growth across the majority of our markets. Over the course of 2010, consumer confidence levels have improved although conditions do vary by market.

Government fiscal austerity plans will be one of the biggest economic challenges particularly in Romania and Hungary. The effects are being closely monitored and, consequently, our credit controls remain prudently set.

We expect continued economic growth in our markets in 2011. As a result we aim to grow both customer numbers and credit issued at higher levels than in 2010 and we have made an encouraging start in the opening weeks of the year.

We will continue to maintain a strong focus on controlling our overall cost base, but as previously indicated there will be two material changes in 2011: funding costs will increase by approximately 2% of revenue following our successful refinancing and we will also bear higher customer rebate costs of around £15 million as a result of the EU Consumer Credit Directive.

Overall the Group is confident of further good progress.