Group

Percentage change figures for all performance measures, other than profit or loss before taxation and earnings per share, unless otherwise stated, are quoted after restating prior year figures at a constant exchange rate (CER) for 2010 in order to present the underlying performance variance. Profit before taxation in 2010 reflects continuing operations and is stated before an exceptional charge of £3.9 million.

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.

Profit before taxation

The Group results are set out below:

*From continuing operations and stated before exceptional charge.

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%.

The profile of growth through 2010 is illustrated by the growth of credit issued split by quarter, shown in the table below:

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 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.

Agents’ commission costs increased by 4.0% to £68.0 million, in line with the growth of the business. Costs were managed tightly and as a result the ratio of other costs to revenue improved by 1.2 percentage points to 40.5% in 2010 despite incurring £5.3 million of incremental performance related pay and the additional £2.8 million of costs to drive growth, as noted above.

On funding, credit market conditions remained challenging during 2010 and so we were particularly pleased to conclude our refinancing in 2010 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.

The quarterly profit performance compared with 2009, set out in the table below, demonstrates the good progress made through the course of 2010:

The pattern of profit increase relative to 2009 shows the impact of the strong recovery from the recession-impacted first quarter of 2009 followed by slightly lower growth in the second and third quarters. In Quarter 4 2010, the £2.8 million investment in additional marketing spend to accelerate customer and receivables growth slowed profit growth in that quarter but provides a sound platform for further and stronger receivables growth in 2011.