Final Results

RNS Number : 9674H

International Personal Finance Plc

03 March 2010

 



International Personal Finance plc

Annual results announcement and statement of dividends

Year ended 31 December 2009

Operating and financial highlights

 

·    Profit before tax from continuing operations of £61.7 million (2008: £76.3 million)

 

·    Our strong focus on credit control and cost reduction delivered a resilient performance and a rapid recovery from the global recession, with Quarter 4 profit up by 9%

 

PBT £m	Q1	Q2	Q3	Q4	Full year
2009	(8.5)	17.6	18.0	34.6	61.7
2008	6.3	20.0	18.2	31.8	76.3

 

·    We have reduced borrowings by £101.7 million, reflecting tight management of working capital and capital expenditure; we have good headroom on all banking covenants and committed bank facilities sufficient to fund the business through to October 2011

 

·    Our Hungarian business, which had been the most severely impacted by recession, returned to profitability in the second half by significantly reducing costs and downsizing to a core of good quality customers

 

·    Mexico delivered its first annual profit, as planned, reflecting a combination of strong customer growth, stable credit quality and an improved cost-income ratio. Third region to be opened in Monterrey in 2010

 

·    Earnings per share from continuing operations were 17.78 pence (2008: 21.48 pence)

 

·    Proposed final dividend maintained at 3.40 pence per share, making full year dividend 5.70 pence (2008 full year dividend: 5.70 pence)

Chief Executive Officer, John Harnett, commented:

"Whilst 2009 was a challenging year, the rapid recovery from the recession and the improved performance during the second half demonstrate the resilience of our business model, the effectiveness of our credit risk management systems, and our ability to reduce costs and generate cash. The achievement of our first annual profit in Mexico is an important milestone, and we continue to make good progress in Romania.

Economic conditions, whilst uncertain, are continuing to improve and although severe weather in Central Europe has affected performance in January and early February, we expect the impact of this to unwind later in the year and so aim to carry the momentum achieved in the second half of 2009 into 2010, and to deliver improved results."

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 2009 in order to present the underlying performance variance.

Summary

We had predicted the global downturn would negatively impact the markets in which we operate and our performance in 2009, although the exact timing and scale of impact was uncertain. We commenced our preparations in the second half of 2008, well before any visible impact of the recession in our markets: Credit controls were substantially tightened, management were focused on collections rather than growth and costs and borrowings were reduced.

The outturn for the year clearly reflects both the recessionary external environment and the focus of management action: Customer numbers, receivables and revenue remained relatively flat but profit before tax from continuing operations reduced by 19% to £61.7 million (2008: £76.3 million). Impairment costs increased by £37.1 million (31%) but were largely offset by a reduction in agents' commission costs of £8.0 million (9%) and other costs of £23.2 million (5%). Finance costs increased by 5% reflecting the increase in funding costs since October 2008.

The result for the year benefited by approximately £10 million, as a result of our decision to change product terms and pricing in the second half. This benefit will continue into the first half of 2010 but will be offset by increased early settlement rebates on the introduction of the EU Consumer Credit Directive in 2010.

Our developing markets in Mexico and Romania, progressed as planned, with Mexico achieving a maiden profit and Romania a much reduced loss.

The Group results are set out below:

	2009 £m	2008 £m	Change £m	Change %	Change at CER %
Customer numbers (000s)	2,056	2,029	27	1.3	1.3
Credit issued	710.0	791.0	(81.0)	(10.2)	(8.2)
Average net receivables	481.1	504.9	(23.8)	(4.7)	(2.0)
Revenue	550.2	557.1	(6.9)	(1.2)	1.2
Impairment	(164.3)	(127.2)	(37.1)	(29.2)	(30.6)
	385.9	429.9	(44.0)	(10.2)	(7.6)
Finance costs	(30.9)	(29.1)	(1.8)	(6.2)	(5.1)
Agents' commission	(64.0)	(72.0)	8.0	11.1	8.8
Other costs	(229.3)	(252.5)	23.2	9.2	4.7
Profit before taxation - continuing operations	61.7	76.3	(14.6)	(19.1)

Performance in the first quarter was heavily affected by reduced collections performance, primarily in Central Europe, leading to a rise in impairment costs and a consequent reduction in profitability. In the second, third and fourth quarters profitability was much improved as collections performance and credit quality improved, leading to more normal levels of impairment and growth in credit issued and revenue. By Quarter 4, Group profit was ahead of the previous year by 9%.

£m	Q1	Q2	Q3	Q4	Full year
2009	(8.5)	17.6	18.0	34.6	61.7
2008	6.3	20.0	18.2	31.8	76.3
Change (£m)	(14.8)	(2.4)	(0.2)	2.8	(14.6)
% Change	(234.9%)	(12.0%)	(1.1%)	8.8%	(19.1%)

Profit before taxation

The segmental split of profit before tax by market is as follows:

Profit before taxation	2009 £m	2008 £m	Change £m	Change %
Central Europe	76.5	106.0	(29.5)	(27.8)
Central Europe excluding Hungary	83.7	89.9	(6.2)	(6.9)
Hungary	(7.2)	16.1	(23.3)	(144.7)
UK - central costs	(12.7)	(13.2)	0.5	3.8
Established markets	63.8	92.8	(29.0)	(31.3)
Mexico	0.3	(8.7)	9.0	103.4
Romania	(2.4)	(7.8)	5.4	69.2
Developing markets	(2.1)	(16.5)	14.4	87.3
Profit before taxation - continuing operations	61.7	76.3	(14.6)	(19.1)

Amongst the Central European markets our customers in Hungary were the most severely affected by the recession and this led to a sharp and sustained reduction in credit quality for  almost a third of our 300,000 Hungarian customer base during the first half of 2009. As a result, impairment levels rose sharply and the market became loss-making. In response, we removed agent service from about 80,000 "poor paying" customers and passed them to our centralised debt recovery team. In June and July we substantially reduced our headcount and cost base to a level commensurate with the reduced customer base. These actions, alongside continued tight credit controls, returned the Hungarian business to profit for the second half of the year and leave it well placed to rebuild its customer numbers and profitability over the medium-term.

The impact of the recession in the rest of our established Central European markets was much less pronounced. Poland, the Czech Republic and Slovakia reported a pre-tax profit of £83.7 million compared with £89.9 million in 2008. As expected, the global recession had a sudden and sharp impact on these markets in the first quarter of the year leading to lower credit issued, reduced revenue and increased impairment charges. As the first half progressed conditions stabilised and the benefits of the actions we had taken at the end of 2008 became increasingly influential with performance improving substantially from Quarter 2, 2009.

In the second half of the year these markets returned to growth and profits recovered well, with fourth quarter profits up by 8% year on year.

Throughout the year, the developing markets of Mexico and Romania made good progress despite the economic downturn.  In particular, we were pleased that we delivered a maiden profit in Mexico, with a pre-tax profit of £0.3 million compared to a loss before tax of £8.7 million in 2008. This has been delivered through a combination of strong growth whilst maintaining credit quality at acceptable levels. During 2009, customer numbers grew by 42% from 370,000 to 524,000 whilst impairment remained stable in both the Puebla and Guadalajara regions with impairment as a percentage of revenue at 37% (2008: 36%).

We also made good progress in Romania. Although we opened no new branches in 2009, the business grew strongly with customer numbers increasing from 85,000 to 164,000 and start-up losses reduced significantly to £2.4 million (2008: £7.8 million). As previously indicated, we expect Romania to report a profit for 2010.

Taxation

The taxation charge for the year was £16.1 million (2008: £21.2 million). This excludes a £2.1 million tax charge relating to the closure of the Russian operation, which is reported as a loss on discontinued operations.  The effective tax rate on continuing operations has reduced to 26% (2008: 28%) and we expect the Group's effective rate of taxation to remain broadly at this level in 2010.

Dividend

Subject to shareholder approval, a final dividend of 3.40 pence per share will be paid on 21 May 2010 to shareholders on the register at the close of business on 16 April 2010. The shares will be marked ex-dividend on 14 April 2010. This will bring the full year dividend to 5.70 pence per share (2008: 5.70 pence per share).

Balance sheet

The Group balance sheet remains well capitalised and the level of equity compared with receivables has increased to 49% (2008: 45%). At 31 December 2009, the Group had net assets of £259.8 million (2008: £258.8 million) and receivables of £525.6 million (2008: £574.4 million). The average period of receivables outstanding at the year end was 5.1 months (2008: 5.3 months) with 98% of year end receivables due within one year (2008: 96%).

During the year we reduced total Group borrowings by £101.7 million to £332.6 million, through careful management of credit issued and costs, coupled with the cash generative nature of the business model. This compares with total facilities of £598.3 million, giving headroom on facilities of £265.7 million. On 16 March 2010, our committed bank facilities will reduce by £160.0 million to £430.0 million with £386.0 million of this committed to October 2011. This is sufficient to support our business through to that date. We plan to secure additional funding this year, but in current market conditions we expect this to result in increased borrowing costs.

Gearing, calculated as borrowings divided by shareholders' equity, has reduced to 1.3 times (2008: 1.7 times) and interest cover was 3.2 times (2008: 3.5 times). We continue to maintain good headroom on all of our banking covenants.

Foreign exchange

Our policy is to hedge the translation of reported profits only within the reporting period. In January 2010 we hedged the rates used to translate the majority of forecast profits for Central Europe, Mexico and Romania for 2010. These rates overall are similar to those used to translate the results for the 2009 financial year. For further details on the exchange rates used see note 13.

Regulation and legislation

During 2010, the new EU Consumer Credit Directive (CCD) will be implemented across member states. The most significant features will be a harmonisation of the definition of the Annual Percentage Rate (APR) to be quoted in any consumer credit agreement. In addition, the CCD will specify the method of calculation of the rebate accruing to a customer in the event of early settlement.

There continues to be debate about the possible introduction of rate caps in the Czech Republic and Mexico and there are also proposed changes to the existing cap in Slovakia. Whilst specific regulation of charges or interest rates do not exist in Hungary, amendments to the Hungarian Banking Act have been approved with effect from 1 June 2010, whereby a financial institution is permitted only to grant to an individual customer in any calendar year one consumer loan, of which the APR exceeds 65%.

We expect that these likely and potential changes will require some changes in the operational systems and product structures in certain markets and we are well prepared.

In Poland, the Office of Competition and Consumer Protection has conducted a review of practices in respect of customer early settlement rebates and has challenged the practices of a number of lenders, including ourselves. We believe that the new early settlement regime to be introduced in accordance with the CCD will address their concerns and we have explained and confirmed the legality of our current practices.

Discontinued operations

The closure of the pilot operation in Russia was completed in April 2009. In Russia, the liquidation of our businesses is progressing to plan. The loss for the year in respect of these discontinued operations is £12.8 million, including the tax charge noted above.

We closed our pilot test in Russia because of slower than anticipated growth in customer numbers. We believe this largely reflected consumer caution during a period of recession rather than a lack of underlying demand for our products and service. However, we reached the conclusion that the cost of continuing the pilot for a potentially long period until market conditions returned to normal was too great and that in the near-term our resources would be better used in the development of our existing markets.

New markets

Nonetheless, taking our business model to new, emerging markets remains a key element of our strategy and we will look to enter new markets when conditions are right. We do not plan to commence pilot operations in any new countries this year, but during 2010 we will progress our research on potential new markets with a view to possibly commencing a new market in 2011.

Prospects

Whilst 2009 was a challenging year, the rapid recovery from the recession and the improved performance during the second half demonstrate the resilience of our business model, the effectiveness of our credit risk management systems, and our ability to reduce costs and generate cash. As we enter 2010, the outlook for the global economy has improved and conditions in our markets are generally better than at the start of 2009, but uncertainty remains.

The unusually severe weather across many parts of Europe in the first weeks of the year has had a negative impact on our collections performance and impairment, particularly in Poland. We expect that this will unwind later in the year as collections performance improves, but it will impact our first quarter results.

Nevertheless, we aim to carry the momentum achieved in the second half of 2009 into 2010 and deliver improved results, with Mexico building on its maiden profit and Romania on track to achieve a full year profit for the first time.

Operating review

Central Europe

Central Europe comprises our operations in Poland, Czech-Slovakia and Hungary. At the start of 2009 we experienced difficult trading conditions in all of these markets. The worsening economic conditions were compounded by factory closures as a result of the gas dispute between Russia and the Ukraine. This led to customer repayment rates across the Central European markets being well below the same period of the previous year resulting in a significant increase in impairment charges. As a result, Central Europe was loss making in Quarter 1, 2009. However, from the end of the first quarter onwards we saw a significant divergence in performance:

·    In Poland and Czech-Slovakia we saw improved collections performance and impairment levels returned to normal. As a result, we were able to progressively relax credit controls following the blanket tightening implemented in the fourth quarter of 2008. Both markets returned to good levels of profit in the second quarter and in the third and fourth quarter profits were up year on year. In addition, both reported a return to growth in credit issued in Quarter 4.

·    Hungary was the market which experienced the most severe impact from the global recession. Although performance stabilised by May, we did not see the same improvement witnessed in the other markets and the operation continued to be loss making. To remedy this we implemented a restructuring programme focused on "good payers": From a customer base of about 300,000 we passed to our debt recovery team approximately 80,000 "poor paying" customers. This enabled a substantial reduction of the cost base of about 20%, including a reduction in the headcount. This restructuring was completed in July 2009 at a cost of £3.0 million. Credit quality and collections performance thereafter improved and the businesses returned to profit in the second half - albeit at much reduced levels compared with 2008.

Overall, therefore, Central Europe reported a pre-tax profit of £76.5 million for 2009 compared with £106.0 million for 2008. This represents a reduction in profit of £29.5 million, with £23.3 million of the reduction attributable to Hungary.  

Profit before taxation	2009 £m	2008 £m	Change £m	Change %
Central Europe excluding Hungary	83.7	89.9	(6.2)	(6.9)
Hungary	(7.2)	16.1	(23.3)	(144.7)
Central Europe	76.5	106.0	(29.5)	(27.8)

The performance of each of the Central European markets is covered in more detail below.

Central Europe excluding Hungary

During the year, the Central European markets excluding Hungary reported a pre-tax profit of £83.7 million, which is 7% lower than 2008. However, as noted above, the performance of these markets improved progressively during the year, and this is demonstrated by the split of quarterly profits shown in the table below:

Profit before taxation	Q1 £m	Q2 £m	Q3 £m	Q4 £m	Year £m
2009	4.4	23.3	23.7	32.3	83.7
2008	13.8	24.2	22.1	29.8	89.9
Variance £m	(9.4)	(0.9)	1.6	2.5	(6.2)
Variance %	(68.1%)	(3.7%)	7.2%	8.4%	(6.9%)

It is clear that the reduction in profit is almost entirely attributable to the first quarter performance, when the recession was most severe. The impact in the second quarter was much lower and by the second half, these markets had returned to year on year profit growth at rates of 7 - 8%.

The results for the year are set out below:

	2009 £m	2008 £m	Change £m	Change %	Change at CER %
Customer numbers (000s)	1,141	1,253	(112)	(8.9)	(8.9)
Credit issued	458.0	540.0	(82.0)	(15.2)	(12.9)
Average net receivables	334.5	374.2	(39.7)	(10.6)	(7.4)
Revenue	354.8	380.1	(25.3)	(6.7)	(3.8)
Impairment	(89.4)	(80.2)	(9.2)	(11.5)	(12.6)
	265.4	299.9	(34.5)	(11.5)	(8.4)
Finance costs	(19.3)	(18.4)	(0.9)	(4.9)	(6.0)
Agents' commission	(38.1)	(42.8)	4.7	11.0	8.4
Other costs	(124.3)	(148.8)	24.5	16.5	10.1
Profit before taxation	83.7	89.9	(6.2)	(6.9)

Customer numbers fell by 9% during 2009, although most of this reduction was seen in the first quarter, by the end of which customer numbers had reduced to 1,159,000. The higher levels of impairment experienced in the first quarter led to higher levels of customer write-offs, coupled with a lower level of new customer recruitment due to the tight credit controls implemented in the fourth quarter of 2008.  

Year on year growth in credit issued	Q1	Q2	Q3	Q4	Year
Central Europe excluding Hungary	(21.5%)	(21.5%)	(12.7%)	5.4%	(12.9%)
Poland	(16.9%)	(19.9%)	(10.7%)	4.6%	(10.9%)
Czech-Slovakia	(26.1%)	(23.8%)	(15.7%)	6.8%	(15.8%)

The reduction in customer numbers was the main reason for the 13% reduction in the volume of credit issued across the year. This was most pronounced in the first quarter when credit issued was down by 22% on the prior year. From the second quarter, collections performance and credit quality improved enabling a progressive relaxation of credit controls such that credit issued grew by 5% year on year in the fourth quarter. As a result of the reduction in customer numbers and credit issued, average receivables were down year on year by 7% and revenue reduced by 4%.

Impairment increased by 13% during the year, but remained at a satisfactory level of 25% of revenue (2008: 21%).

Costs were tightly controlled. Other costs were reduced year on year by £24.5 million (10%) through a combination of lower marketing costs, improvements in the efficiency of field operations and the re-negotiation of third party costs. As a result, other costs reduced to 35% of revenue, which compares favourably with a ratio of 39% in 2008.

During the period, finance costs increased by 6%, mainly reflecting changes in interest rates and borrowing margins, whereas agents' commission costs reduced by 8%, in line with the reduction in receivables.

Poland

Poland was the only market in which we operate where GDP grew in 2009, at a rate of 1.7%, although this still represents a significant slowing when compared with a growth rate of 5.0% in 2008. The economic outlook for Poland appears positive, with GDP forecast to grow in 2010 by 2.6%.

	2009 £m	2008 £m	Change £m	Change %	Change at CER %
Customer numbers (000s)	758	856	(98)	(11.4)	(11.4)
Credit issued	279.9	344.9	(65.0)	(18.8)	(10.9)
Average net receivables	215.7	255.5	(39.8)	(15.6)	(7.2)
Revenue	226.3	249.6	(23.3)	(9.3)	(0.4)
Impairment	(63.5)	(48.2)	(15.3)	(31.7)	(43.3)
	162.8	201.4	(38.6)	(19.2)	(11.0)

The impact of the economic downturn, coupled with the effects of the credit tightening implemented in October 2008, led to a fall in customer numbers to 758,000, primarily in the first quarter. For the year as a whole credit issued reduced by 11%. However, in the fourth quarter the market returned to growth and credit issued grew by 5%. As a result of the reduction in customer numbers and credit issued, average receivables fell by 7% year on year but revenue for the year was similar to that for 2008. This is partly due to the mix of receivables moving towards shorter-term products which have a higher effective interest rate, and partly due to changes to product term and price implemented in the second half.

Impairment increased by £15.3 million (43%), with the majority of this increase experienced in the first quarter, when the impairment charge grew by nearly 100% to £26.3 million (Quarter 1 2008: £13.7 million). This meant that the impairment charge in 2009 represented 28% of revenue compared with 20% in 2008.

In the opening weeks of 2010 we have experienced unusually severe weather conditions with extreme cold and substantial snowfall. This has made it more difficult for agents to reach customers and collect repayments and it also caused temporary falls in the incomes of households with outdoor employment. As a result our collections performance has reduced and impairment has risen. Whilst we expect this will negatively impact our first quarter results we expect that our collections performance will return to normal levels in the coming weeks and the negative impact will unwind over the course of the year.

We believe there remains substantial potential for profitable growth in Poland, particularly in view of the current benign competitive conditions. To better position the business for growth we have recently refreshed the Senior Management Group, appointing as Country Manager, David Parkinson, previously Country Manager for Czech Republic and Slovakia. David has worked in the International business for seven years and has over 20 years of home credit experience.

Czech Republic and Slovakia

The Czech-Slovakian business performed well during 2009 reflecting the economic recovery from the second quarter and a strong management focus on branch level performance.

	2009 £m	2008 £m	Change £m	Change %	Change at CER %
Customer numbers (000s)	383	397	(14)	(3.5)	(3.5)
Credit issued	178.1	195.1	(17.0)	(8.7)	(15.8)
Average net receivables	118.9	118.7	0.2	0.2	(7.6)
Revenue	128.5	130.5	(2.0)	(1.5)	(9.3)
Impairment	(25.9)	(32.0)	6.1	19.1	26.2
	102.6	98.5	4.1	4.2	(3.7)

The overall shape of the year was very similar to Poland. Customer numbers fell during the first quarter, and by the year end customer numbers were 4% lower than the previous year, and the volume of credit issued fell by 16%. In the fourth quarter the market returned to growth and credit issued increased by 7%.

The decrease in credit issued in the year resulted in a reduction in average receivables of 8% and this, in turn, caused revenue to fall by 9%.

Credit quality and collections improved significantly from the second quarter and the impairment charge was reduced year on year by 26%. This reflects a combination of the economic recovery and the benefits of the implementation of branch level credit management systems. As a result, impairment represented 20% of revenue for 2009 - an improvement from 25% in 2008.

David Parkinson has been replaced as Country Manager by Chris Wheeler. Chris has worked in the International business for nine years and also has over 20 years experience in home credit. He has extensive experience of the Czech and Slovakian markets and his most recent positions were as Country Manager for Russia and Regional Manager of Guadalajara.

Hungary

The impact of the global recession on our customers was much worse in Hungary than the other markets. During 2009 it reported a loss for the year of £7.2 million compared with a profit in 2008 of £16.1 million.

The results for Hungary for 2009 are set out below:

	2009 £m	2008 £m	Change £m	Change %	Change at CER %
Customer numbers (000s)	227	321	(94)	(29.3)	(29.3)
Credit issued	88.7	150.1	(61.4)	(40.9)	(41.2)
Average net receivables	69.4	89.9	(20.5)	(22.8)	(23.2)
Revenue	84.8	113.1	(28.3)	(25.0)	(25.0)
Impairment	(34.1)	(25.8)	(8.3)	(32.2)	(31.7)
	50.7	87.3	(36.6)	(41.9)	(41.9)
Finance costs	(6.5)	(6.5)	-	-	(1.5)
Agents' commission	(14.3)	(22.2)	7.9	35.6	35.6
Other costs	(37.1)	(42.5)	5.4	12.7	12.9
(Loss) / profit before taxation	(7.2)	16.1	(23.3)	(144.7)

The Hungarian economy was probably the weakest of all the European markets as it entered the recession. This exacerbated its impact with the result that during 2009 GDP contracted by 6.3%. This resulted in a sharp reduction in employment and pay cuts for many of those remaining in employment. These factors and increased taxation led to a sharp reduction in household income which, in turn, meant that our collections performance was much reduced through the first and second quarters. A large number of customers fell into arrears and despite intensive management action we were unable to return them to a reasonable level of repayment. This led to a significant increase in impairment and reductions in the volume of credit issued, and therefore revenue, with lower collections performance driving a reduction in the number of customers qualifying for the offer of further credit.

Our response was swift and in May we decided to write off approximately 80,000 customers who were paying very poorly and to downsize the operation accordingly. This entailed reducing the number of agents by approximately a third and reducing employee numbers by approximately a quarter. As a result of these remedial actions, the Hungarian business made an underlying profit of £2.8 million in the second half: 

	H2 2009 £m	H2 2008 £m	Change at CER %	H1 2009 £m	H1 2008 £m	Change at CER %
Customer numbers (000s)	227	321	(29.3)	280	323	(13.3)
Credit issued	45.1	74.9	(39.6)	43.6	75.2	(42.7)
Average net receivables	61.5	92.4	(33.4)	77.2	87.6	(12.6)
Revenue	37.6	57.3	(34.3)	47.2	55.8	(16.3)
Impairment	(6.4)	(8.9)	28.9	(25.1)	(16.9)	(45.9)
	31.2	48.4	(35.3)	22.1	38.9	(43.2)
Finance costs	(3.1)	(3.2)	3.1	(3.4)	(3.3)	(3.0)
Agents' commission	(6.6)	(11.6)	42.6	(7.7)	(10.6)	28.0
Other costs	(18.7)	(22.4)	15.8	(18.0)	(20.1)	11.8
Profit / (loss) before taxation*	2.8	11.2		(7.0)	4.9

*excluding £3.0 million of one-off restructuring costs

The Hungarian business ended 2009 with 227,000 customers, a reduction of just under a third, with similar reductions in average receivables and revenue. The reduction in the volume of credit issued was higher at 41%. This reflects the tight credit controls we maintained throughout the year, with a lower proportion of new and existing customers qualifying for loan offers. This has resulted in a significant improvement in credit quality and collections performance throughout the second half of the year with credit quality on new loans granted in 2010 at levels significantly better than our benchmark levels. We have maintained these very tight controls at the expense of growth whilst we stabilised the business following the mid-year restructuring. However, we are now in a position to ease credit controls at the start of 2010.

As a result of the tight credit controls, impairment returned to more normal levels in the second half and was 29% lower than the second half of 2008. Agents' commission costs reduced by 43% and other costs reduced by 16% compared with the second half of last year, reflecting the downsizing of the business.

Mexico

Mexico reported a pre-tax profit of £0.3 million, an improvement of £9.0 million compared with start-up losses of £8.7 million in 2008. This reflects a good second half performance, with a pre-tax profit of £3.8 million compared with losses in the second half of 2008 of £3.3 million.

Both the Puebla and Guadalajara regions reported improvements in profitability, whilst the increase in head office costs was carefully controlled, despite the strong volume growth in both regions. The profit / (loss) before taxation is analysed by region as follows:

	2009 £m	2008 £m	Change £m	Change %
Puebla	2.9	(2.1)	5.0	238.1
Guadalajara	3.9	(0.9)	4.8	533.3
Head office	(6.5)	(5.7)	(0.8)	(14.0)
Profit / (loss) before taxation	0.3	(8.7)	9.0	103.4

The results for the year are set out below:

	2009 £m	2008 £m	Change £m	Change %	Change at CER %
Customer numbers (000s)	524	370	154	41.6	41.6
Credit issued	99.2	67.4	31.8	47.2	53.1
Average net receivables	48.6	28.9	19.7	68.2	73.6
Revenue	74.8	48.4	26.4	54.5	60.2
Impairment	(27.7)	(17.2)	(10.5)	(61.0)	(65.9)
	47.1	31.2	15.9	51.0	57.0
Finance costs	(4.5)	(4.0)	(0.5)	(12.5)	(15.4)
Agents' commission	(8.2)	(5.5)	(2.7)	(49.1)	(57.7)
Other costs	(34.1)	(30.4)	(3.7)	(12.2)	(14.4)
Profit / (loss) before taxation	0.3	(8.7)	9.0	103.4

Mexico's progression to profit has been delivered through a combination of strong growth whilst maintaining credit quality at acceptable levels. During 2009 customer numbers grew by 42% from 370,000 to 524,000 and this drove similar increases in credit issued, receivables and revenues. At 31 December 2009 we had 302,000 customers in the Puebla region, managed from 23 branches and 222,000 customers in the Guadalajara region, managed from 16 branches, six of which were opened during 2009.

The Mexican economy, which is heavily linked with that of the USA, contracted by 6.7% in 2009, although we did not see this resulting in a significant reduction in customers' disposable income in the areas and demographic segments we serve. Collections performance and credit quality remained relatively stable throughout the year. As a result, despite rapid growth and a higher proportion of new customers in the mix, impairment as a percentage of revenue was 37%, only slightly up on the figure for 2008.

Finance costs increased by £0.5 million (15%) to £4.5 million, and agents' commission increased by 58% to £8.2 million, in line with the increase in revenues. Other costs increased at a much lower rate of 14% to £34.1 million. As a result the cost to income ratio improved from 63% in 2008 to 46% in 2009.

We intend to open new branches in the Guadalajara and Puebla regions in 2010 and to enter a further region in Monterrey. In total this will increase our branch infrastructure from 39 to 51 branches giving further operating leverage in the business as country costs are spread over a greater revenue base.

Romania

Romania was badly affected by the recession although the impact was felt later in the year than in Central Europe. Against this backdrop the Romanian business performed well. Through a combination of strong growth in customers and receivables and lower, controlled growth in costs, start-up losses have reduced to £2.4 million (2008: £7.8 million), a reduction of £5.4 million. We remain cautious on the economic outlook, and as a precautionary measure, implemented a credit tightening in November 2009. Nonetheless, providing economic conditions remain stable, we expect Romania to report a profit for 2010.

The results of our Romanian operation for the year are set out below:

	2009 £m	2008 £m	Change £m	Change %	Change at CER %
Customer numbers (000s)	164	85	79	92.9	92.9
Credit issued	64.1	33.5	30.6	91.3	99.7
Average net receivables	28.6	11.9	16.7	140.3	150.9
Revenue	35.8	15.5	20.3	131.0	140.3
Impairment	(13.1)	(4.0)	(9.1)	(227.5)	(244.7)
	22.7	11.5	11.2	97.4	104.5
Finance costs	(1.9)	(2.4)	0.5	20.8	32.1
Agents' commission	(3.4)	(1.5)	(1.9)	(126.7)	(126.7)
Other costs	(19.8)	(15.4)	(4.4)	(28.6)	(36.6)
Loss before taxation	(2.4)	(7.8)	5.4	69.2

During 2008, we expanded the branch infrastructure in Romania from 7 branches to 16, which largely completed our national infrastructure. During 2009 no new branches were opened and, instead, we focused on increasing customer numbers and receivables from the existing branch infrastructure. This strategy was successful and the business continued to grow rapidly. Customer numbers nearly doubled from 85,000 to 164,000, an increase of 93% and this has driven an increase in credit issued of 100% and average receivables of 151%. As a result of this strong growth, revenue increased by 140%.

Credit controls were tightened in Romania in the fourth quarter of 2008 as in other markets. During 2009, credit quality was good, albeit worse than in 2008 as rapid growth in the business was partially offset by a weaker economy affecting collections performance. The net impact during 2009 was an increase in impairment from £4.0 million to £13.1 million and an increase in impairment as a percentage of revenue from 26% to 37%, which is not unusual for a country at this stage of its development and is comparable with Mexico.

At the end of 2008, the Romanian business received an equity injection of £14.7 million partly in response to a temporary dislocation in the local funding market, and partly to strengthen the local balance sheet. As a result, finance costs reduced by £0.5 million to £1.9 million.

During 2009, revenues increased by 140%. Agents' commission increased by £1.9 million to £3.4 million, in line with the increase in revenues, but other costs increased at a much lower rate of 37% to £19.8 million. As a result the cost to income ratio improved from 99% in 2008 to 55% in 2009.

 International Personal Finance plc

Consolidated income statement for the year ended 31 December

		2009	2008
Notes		£m	£m
Revenue*	4	550.2	557.1
Impairment	4	(164.3)	(127.2)
Revenue less impairment		385.9	429.9
Finance costs		(30.9)	(29.1)
Other operating costs		(86.0)	(111.8)
Administrative expenses		(207.3)	(212.7)
Total costs		(324.2)	(353.6)
Profit before taxation - continuing operations	4	61.7	76.3
Tax expense - UK		(3.8)	(1.3)
- Overseas		(12.3)	(19.9)
Total tax expense	5	(16.1)	(21.2)
Profit after taxation from continuing operations		45.6	55.1
Loss after taxation from discontinued operations	8	(12.8)	(4.5)
Profit after taxation attributable to equity shareholders		32.8	50.6

* All amounts included in revenue are defined as finance income under IFRS 7

Earnings per share - continuing operations

		2009	2008
Notes		pence	pence
Basic	6	17.78	21.48
Diluted	6	17.67	21.45

Earnings per share

		2009	2008
Notes		pence	pence
Basic	6	12.78	19.73
Diluted	6	12.70	19.70

Dividend per share

		2009	2008
Notes		pence	pence
Interim dividend	7	2.30	2.30
Final dividend	7	3.40	3.40
Total dividend		5.70	5.70

Dividends paid

		2009	2008
Notes		£m	£m
Interim dividend of 2.30 pence per share (2008: 2.30 pence per share)	7	5.9	5.9
Final 2008 dividend of 3.40 pence per share (2008: final 2007 dividend 2.85 pence per share)	7	8.6	7.3
Total dividends paid		14.5	13.2

Consolidated statement of comprehensive income for the year ended 31 December

	2009	2008
	£m	£m
Profit after taxation attributable to equity shareholders	32.8	50.6
Other comprehensive income:
Exchange (losses)/gains on foreign currency translations	(16.2)	30.2
Net fair value gains/(losses) - cash flow hedges	1.5	(8.9)
Actuarial losses on retirement benefit obligation	(5.9)	(3.3)
Tax credit on items taken directly to equity	1.3	3.4
Other comprehensive (expense)/income, net of taxation	(19.3)	21.4
Total comprehensive income for the year attributable to equity shareholders	13.5	72.0

Consolidated balance sheet as at 31 December

		2009	2008
Notes		£m	£m
Assets
Non-current assets
Intangible assets		11.4	17.5
Property, plant and equipment	9	39.5	52.4
Deferred tax assets		46.5	37.5
		97.4	107.4
Current assets
Amounts receivable from customers
- due within one year		514.9	552.2
- due in more than one year		10.7	22.2
	10	525.6	574.4
Derivative financial instruments		-	1.7
Cash and cash equivalents		31.2	62.2
Trade and other receivables		16.3	19.2
		573.1	657.5
Total assets		670.5	764.9
Liabilities
Current liabilities
Bank borrowings	11	(111.6)	(1.2)
Derivative financial instruments		(7.9)	(14.4)
Trade and other payables		(47.1)	(53.4)
Current tax liabilities		(15.6)	(2.5)
		(182.2)	(71.5)
Non-current liabilities
Retirement benefit obligation	12	(7.5)	(1.5)
Bank borrowings	11	(221.0)	(433.1)
		(228.5)	(434.6)
Total liabilities		(410.7)	(506.1)
Net assets		259.8	258.8
Shareholders' equity
Called-up share capital		25.7	25.7
Other reserves		8.3	23.4
Retained earnings		225.8	209.7
Total equity		259.8	258.8

Consolidated statement of changes in shareholders' equity for the year ended 31 December

	Called-up share capital £m	Other reserve £m	Other  reserves* £m	Retained earnings £m	Total £m
Balance at 1 January 2008	25.7	(22.5)	27.8	172.6	203.6
Comprehensive income:
Profit after taxation for the year	-	-	-	50.6	50.6
Other comprehensive income:
Exchange gains on foreign currency translations	-	-	30.2	-	30.2
Net fair value losses - cash flow hedges	-	-	(8.9)	-	(8.9)
Actuarial losses on retirement benefit obligation	-	-	-	(3.3)	(3.3)
Tax credit on items taken directly to equity	-	-	2.5	0.9	3.4
Total other comprehensive income / (expense)	-	-	23.8	(2.4)	21.4
Total comprehensive income for the year	-	-	23.8	48.2	72.0
Transactions with owners:
Purchase of shares by employee trust	-	-	(5.7)	-	(5.7)
Share-based payment adjustment to reserves	-	-	-	2.1	2.1
Dividends paid to Company shareholders	-	-	-	(13.2)	(13.2)
Balance at 31 December 2008	25.7	(22.5)	45.9	209.7	258.8
Balance at 1 January 2009	25.7	(22.5)	45.9	209.7	258.8
Comprehensive income:
Profit after taxation for the year	-	-	-	32.8	32.8
Other comprehensive income:
Exchange losses on foreign currency translation	-	-	(16.2)	-	(16.2)
Net fair value gains - cash flow hedges	-	-	1.5	-	1.5
Actuarial losses on retirement benefit obligation	-	-	-	(5.9)	(5.9)
Tax (charge)/credit on items taken directly to equity	-	-	(0.4)	1.7	1.3
Total other comprehensive expense	-	-	(15.1)	(4.2)	(19.3)
Total comprehensive (expense) / income for the year	-	-	(15.1)	28.6	13.5
Transactions with owners:
Share-based payment adjustment to reserves	-	-	-	2.0	2.0
Dividends paid to Company shareholders	-	-	-	(14.5)	(14.5)
Balance at 31 December 2009	25.7	(22.5)	30.8	225.8	259.8

* Includes foreign exchange reserve, hedging reserve and amounts paid to acquire shares by employee trust.

Consolidated cash flow statement for the year ended 31 December

	2009	2008
	£m	£m
Cash flows from operating activities
Continuing operations
Cash generated from operations	122.1	70.4
Finance costs paid	(32.6)	(25.6)
Income tax paid	(14.6)	(23.9)
Discontinued operations	(8.6)	(5.1)
Net cash generated from operating activities	66.3	15.8
Cash flows from investing activities
Continuing operations
Purchases of property, plant and equipment	(7.9)	(20.5)
Proceeds from sale of property, plant and equipment	2.9	3.6
Purchases of intangible assets	(1.9)	(3.2)
Discontinued operations	1.0	(1.0)
Net cash used in investing activities	(5.9)	(21.1)
Net cash from operating and investing activities
Established businesses	109.0	45.9
Start-up businesses	(41.0)	(45.1)
Discontinued operations	(7.6)	(6.1)
Net cash generated from / (used) in operating and investing activities	60.4	(5.3)
Cash flows from financing activities
Continuing operations
Repayment of bank borrowings	(72.6)	(9.1)
Purchase of shares by employee trust	-	(5.7)
Dividends paid to company shareholders	(14.5)	(13.2)
Discontinued operations	-	-
Net cash used in financing activities	(87.1)	(28.0)
Net decrease in cash and cash equivalents	(26.7)	(33.3)
Cash and cash equivalents at beginning of year	62.2	88.8
Exchange (losses)/gains on cash and cash equivalents	(4.3)	6.7
Cash and cash equivalents at the end of the year	31.2	62.2

Reconciliation of profit after taxation to cash flows from continuing operations

	2009	2008
	£m	£m
Profit after taxation from continuing operations	45.6	55.1
Adjusted for:
Tax charge	16.1	21.2
Finance costs	30.9	29.1
Share-based payment charge	2.0	2.0
Defined benefit pension charge	0.6	0.3
Depreciation of property, plant and                                 equipment	13.4	13.3
Profit on sale of property, plant and equipment	(0.3)	(0.1)
Amortisation of intangible assets	5.0	4.4
Changes in operating assets and liabilities:
Amounts receivable from customers	5.4	(40.9)
Trade and other receivables	1.7	(8.4)
Trade and other payables	4.9	(9.0)
Retirement benefit obligation	(0.5)	(0.4)
Derivative financial instruments	(2.7)	3.8
Cash generated from continuing operations	122.1	70.4

Cash generated from continuing operations can be analysed by business unit as follows:

	2009	2008
	£m	£m
Established markets	155.7	105.5
Developing markets	(33.6)	(35.1)
Continuing operations	122.1	70.4

The notes to the condensed consolidated financial information form an integral part of this consolidated financial information.

Notes to the financial information for the year ended 31 December 2009

1.  Basis of preparation

The financial information, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in shareholders' equity, consolidated cash flow statement and related notes, is derived from the full Group financial statements for the year ended 31 December 2009, which have been prepared under International Financial Reporting Standards as adopted by the European Union (IFRS) and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. It does not constitute full accounts within the meaning of section 434 of the Companies Act 2006. This financial information has been agreed with the auditors for release.

The Group Annual Report and Accounts for the year ended 31 December 2009 on which the auditors have given an unqualified report and which does not contain a statement under section 498 of the Companies Act 2006, will be delivered to the Registrar of Companies in due course, and made available to shareholders from 17 March 2010.

The accounting policies used in completing this financial information have been consistently applied in all periods shown.  These accounting policies are detailed in the Group's financial statements for the year ended 31 December 2008 which can be found on the Group's website (www.ipfin.co.uk).

The following standards have been adopted in 2009 with no significant impact:

IAS 1 (revised), 'Presentation of Financial Statements' - the revised standard brings new disclosure requirements regarding 'non-owner changes in equity' and 'owner changes in equity', which are now required to be shown separately. Under this revised guidance the Group has elected to continue to present two performance statements: an income statement and a statement of comprehensive income (previously the 'statement of recognised income and expense'). This financial information has been prepared under the revised disclosure requirements.

IFRS 8, 'Operating segments' - IFRS 8 replaces IAS 14, 'Segment reporting'. IFRS 8 requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. This has not resulted in a change to reported segments, which remain as Central Europe, Mexico and Romania.

IFRS 7 (amendment) 'Financial Instruments: Disclosures' - the amendment requires enhanced disclosures about fair value measurement and liquidity risk.

The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009, but do not have any impact on the Group:

·    IFRIC 13 'Customer loyalty programmes'

·    IFRIC 15 'Agreements for the construction of real estate'

·    IFRIC 16 'Hedges of a net investment in a foreign operation'

·    IAS 39 (amendment) 'Financial instruments: Recognition and measurement'

·    IFRS 2 (amendment) 'Share-based payments - vesting conditions and cancellations'

·    IAS 23 (revised) 'Borrowing costs'

·    IAS 32 and IAS 1 (amendment) 'Puttable financial instruments and obligations arising on liquidation'

The following standards, interpretations and amendments to existing standards are not yet effective and have not been adopted early by the Group:

·    IFRIC 17 'Distribution of non-cash assets to owners'

·    IFRS 3 (revised) 'Business combinations'

·    IAS 38 (amendment) 'Intangible assets'

·    IFRS 5 (amendment) 'Non-current assets held for sale and discontinued operations'

·    IAS 1 (amendment) 'Presentation of financial statements'

·    IAS 27 (revised) 'Consolidated and separate financial statements'

·    IFRS 2 (amendment) 'Group cash-settled share-based payment transactions'

The standards and interpretations listed above are not expected to have a material impact on the financial information.

2. Principal risks

In accordance with the Disclosure and Transparency Rules, a description of the principal risks (and the mitigating factors in place in respect of these) is included below:

Strategic risk	Mitigation
Economic downturn
The condition of the economies in which we operate and in particular changes in general levels of unemployment is likely to have a significant impact on business performance. Customers may face increasing difficulty, such as reduced incomes or unemployment and may be less able to repay loans and/ or less willing to borrow.  Reduced demand, reduced revenue and increased impairment may result.	We have a resilient business model. Our loan book is short-term, on average just under six months repayments are outstanding, which means we can quickly change the risk-return profile of our lending.  Our close customer relationships and flexible credit scoring system allow us to detect rapidly, and respond to, changes in customers' circumstances at local branch level.
Competition
Increased competition may reduce market share leading to increased costs of customer acquisition and retention or reduced credit issued, lower revenue and lower profitability.	There are few providers of home credit in our markets. Our distinctive operating model engenders high levels of customer satisfaction.  Market research is continually undertaken to monitor satisfaction levels, identify usage of other financial products and monitor competitor activity. In addition, this risk has been reduced by diversification of customer acquisition channels, less competition and reducing costs of media as a result of the economic downturn.
Business development
Failure to develop effectively the business and achieve strategic aims because management resources, IT and operational systems prove inadequate or insufficient.	A formal talent development programme aimed at delivering sufficient high-quality managers to meet future plans is in place. A learning and development framework has been implemented. We have a clear strategy for the development of our IT systems and operational processes.

Funding
Insufficient liquid funds to meet the short-term or strategic requirements of the business. This is particularly relevant following the significant reduction in the general availability of bank and capital markets funding. At its extreme this could lead to a breach of banking covenants causing all outstanding facilities to fall due for repayment or the going concern status of the business being called into question.	The business is well capitalised with equity to receivables of 49%.  At 31 December 2009 there was headroom of £265.7 million on £598.3 million of syndicated and bilateral banking facilities. On 16 March 2010 our committed facilities will reduce by £160.0 million to £430.0 million with £386.0 million of this committed to October 2011. We have committed funding sufficient for our business plan until October 2011 and have clear plans to secure additional long-term funding.
Counterparty risk
The risk that a key supplier or operational partner ceases to operate. Banks: Funding lines or cash balances for withdrawal by agents to use in providing loans to customers are unavailable. Other: Business failure of a counterparty, such as an IT services outsourcer, that causes significant disruption or impact on our ability to operate.	Cash is held generally with A3 rated financial institutions. Institutions with lower credit ratings can only be used with full board approval. There are regular risk assessments of other key counterparties. All of the banks who provide us with funding or other services have continued to function.
Currency risk
Reported results and related assets and liabilities are at risk of adverse exchange rate fluctuations. Earnings are adversely affected by currency movements.	The foreign exchange rates used to translate the majority of reported earnings within a financial reporting period are hedged. No loans are issued in a currency other than the functional currency of the relevant market. Funds are borrowed in, or swapped into, the same local currencies as net customer receivables so far as possible.

Tax risk
Adverse changes in, or conflicting interpretations of, the different countries' tax legislation and practice may lead to an increase in the Group's taxation liabilities and effective tax rate.	A tax committee is in place to monitor tax risks across the Group. External professional advice for all material transactions is taken and supported by strong internal tax experts both in-country and in the UK. Where possible, tax treatments are agreed in advance with relevant authorities.  Provision against adverse tax rulings is included in the balance sheet.
Financial services regulation and legislation
Changes to the regulation of credit or the sale of credit by intermediaries or other laws may impact the operation of the business and/or result in higher costs. Breaches of regulation may result in fines or the withdrawal of operating licences.	It is important that regulators and governments understand our business and its positive role within the consumer credit market.  We foster open relationships with regulatory bodies and closely monitor developments in all our markets, and in respect of the EU as a whole.  We have well established and experienced corporate affairs teams in all our markets. We work proactively with opinion formers to ensure the business is well understood. This is facilitated by membership of the British Chamber of Commerce and/or relevant local trade bodies along with Eurofinas in Brussels. An international legal committee operates to oversee legal risks across the Group and take external legal advice to ensure we remain compliant.

Reputation risk
Our reputation is adversely affected by ill-informed comment or malpractice. Damage to our brand and customer satisfaction ratings reduces customer demand.	We have an established corporate responsibility programme in place. We have voluntarily taken proactive steps to align the business to the FSA's Treating Customers Fairly principles. We have clear operating guidelines and policies to ensure consistency and compliance with our values. An active communications programme aims to foster a better understanding of the Company.
Credit risk and responsible lending
The failure to respond appropriately to changes in the credit risk profile of our target market and existing customer base. Performance not optimised through failure to lend to good quality customers. Increased impairment impacts profitability and employee and agent engagement leading to increased turnover.	We have effective credit management systems in place for evaluating and controlling the risk from lending to new and existing customers - these are managed at branch level. This is supplemented by the weekly contact between our agents and customers allowing a regular assessment of credit risk. Our agents are incentivised primarily to collect not lend. Group and country level credit committees review credit controls at country and branch level each month allowing rapid response to the changing market. Performance is monitored against benchmarks set for each product term and loan sequence.
Service disruption
Day-to-day operations disrupted in the event of damage to, or interruption or failure of, information and communication systems. Failure to provide quality service to customers and loss of data. Disruption of activities increases costs or reduces potential net revenues.	Robust business continuity process, procedures and reporting framework in place to enable us to continue trading in the event of such an occurrence.  These are regularly tested and reviewed.  Strategies are revised where necessary. Continuous investment in, and development of, IT platforms.
Health and safety
The failure to provide an appropriate working environment for our employees and agents. Employees and agents have safety concerns that impact engagement and productivity.	A health and personal safety committee and policies are in place. Formal safety guidance provided to employees and agents as part of their induction programme together with ongoing safety awareness refreshers. We continually seek to improve our processes to ensure high standards of safety.

3. Related parties

The Group has not entered into any material transactions with related parties during the year ended 31 December 2009. 

4.  Segmental information

Operating segments

	2009	2008
	£m	£m
Revenue
Central Europe	439.6	493.2
Mexico	74.8	48.4
Romania	35.8	15.5
	550.2	557.1
Impairment
Central Europe	123.5	106.0
Mexico	27.7	17.2
Romania	13.1	4.0
	164.3	127.2

Profit before taxation
Central Europe	76.5	106.0
UK - central costs*	(12.7)	(13.2)
Established markets	63.8	92.8
Mexico	0.3	(8.7)
Romania	(2.4)	(7.8)
Developing markets	(2.1)	(16.5)
Profit before taxation - continuing operations	61.7	76.3
Discontinued operations	(10.7)	(6.0)
Profit before taxation	51.0	70.3
Total assets
Central Europe	518.1	602.4
Mexico	76.2	52.1
Romania	48.5	36.3
UK	27.7	68.8
Continuing operations	670.5	759.6
Discontinued operations	-	5.3
	670.5	764.9

* Although the UK central costs are not classified as a separate segment in accordance with IFRS 8 'Operating Segments' they are shown separately above in order to provide a reconciliation to profit before taxation.

The segments shown above (Central Europe, Mexico and Romania) are the segments for which management information is presented to the board which is deemed to be the Group's chief operating decision maker. The board considers the business from a geographic perspective. Although they review the performance of all markets separately, Poland, Czech-Slovakia and Hungary are considered to be one reportable segment, on the basis of their similarities (in products, customer profile and collection methods).

5.  Tax expense

The tax expense for the year in respect of continuing operations is 26% (2008: 28%).

The tax charge in respect of discontinued operations is £2.1 million (2008: credit of £1.5 million) and is included in the cost of discontinued operations, as detailed in note 8.

6.  Earnings per share

Basic earnings per share (EPS) from continuing operations is calculated by dividing the earnings attributable to shareholders of £45.6 million (31 December 2008: £55.1 million) by the weighted average number of shares in issue during the period of 256.5 million which has been adjusted to exclude the weighted average number of shares held by the employee trust (2008: 256.5 million). 

	2009	2008
	pence	pence
Basic EPS - continuing operations	17.78	21.48
Dilutive effect of options	(0.11)	(0.03)
Diluted EPS - continuing operations	17.67	21.45

Basic EPS analysed as:

	2009	2008
	pence	pence
Central Europe	22.04	29.85
UK central costs	(3.66)	(3.72)
Established markets	18.38	26.13
Mexico	0.09	(2.45)
Romania	(0.69)	(2.20)
EPS from continuing operations	17.78	21.48

For diluted EPS the weighted average number of shares has been adjusted to 258.1 million to take account of all potentially dilutive shares (2008: adjusted to 256.9 million).

Earnings / loss per share - including discontinued operations

	2009	2008
	pence	pence
Basic EPS - including discontinued operations	12.78	19.73
Dilutive effect of options	(0.08)	(0.03)
Diluted EPS - including discontinued operations	12.70	19.70

The earnings / loss per share including discontinued operations has been calculated by dividing the profit in respect of continuing and discontinued operations of £32.8 million (2008: profit of £50.6 million) by the same number of shares as in the EPS from continuing operations calculation.

7.  Dividends

The directors are recommending a final dividend in respect of the financial year ended 31 December 2009 of 3.40 pence per share which will amount to a dividend payment of £8.6 million.  If approved by the shareholders at the annual general meeting, this dividend will be paid on 21 May 2010 to shareholders who are on the register of members at 16 April 2010.  This dividend is not reflected as a liability in the balance sheet as at 31 December 2009 as it is subject to shareholder approval.

8. Discontinued operations

On 29 April 2009 the board took the decision to close the Russian pilot operation and withdraw from that market.  The operation has not traded since that date and has therefore been classified as a discontinued operation in this condensed financial information. Total costs of £12.8 million are included in the income statement in respect of Russia for the twelve months ended 31 December 2009.  These costs can be analysed as follows:

	2009	2008
	£m	£m
Trading losses to end of April 2009	3.0	6.0
Write-off of goodwill	3.0	-
Write-off of other assets including customer receivables and property, plant and equipment	0.9	-
Other closure costs	3.8	-
Loss before taxation	10.7	6.0
Taxation	2.1	(1.5)
Loss from discontinued operations	12.8	4.5

We do not expect to incur any further costs in relation to Russia in 2010.

9. Property, plant and equipment

	2009	2008
	£m	£m
Net book value at start of year	52.4	40.8
Exchange adjustments	(3.8)	7.0
Additions	7.9	21.5
Disposals	(3.6)	(3.5)
Depreciation	(13.4)	(13.4)
Net book value at end of year	39.5	52.4

As at 31 December 2009 the Group had £2.9 million of capital expenditure commitments with third parties that were not provided for (2008: £2.2 million).

10.  Amounts receivable from customers

	2009	2008
	£m	£m
Central Europe	426.3	513.6
Mexico	60.7	38.1
Romania	38.6	22.7
Total receivables	525.6	574.4

Amounts receivable from customers are held at amortised cost and are equal to the expected future cash flows receivable discounted at the average effective interest rate (EIR) of 126% (2008: 120%). All amounts receivable from customers are at fixed interest rates. The average period to maturity of the amounts receivable from customers is 5.1 months (2008: 5.3 months).

The Group only has one class of loan receivable and no collateral is held in respect of any customer receivables. The Group does not use an impairment provision account for recording impairment losses and therefore no analysis of gross customer receivables less provision for impairment is presented.

Revenue recognised on amounts receivable from customers which have been impaired was £335.8 million (2008: £328.8 million).

11.  Borrowings

The maturity of the Group's external bank facilities and borrowings is as follows:

	2009		2008
	Borrowings	Facilities	Borrowings	Facilities
	£m	£m	£m	£m
Due in less than one year	111.6	188.4	1.2	38.2
Due between one and two years	221.0	409.9	134.9	187.2
Due between two and five years	-	-	298.2	438.4
	221.0	409.9	433.1	625.6
Total borrowings	332.6	598.3	434.3	663.8

12.  Retirement benefit obligation

The amounts recognised in the balance sheet in respect of the retirement benefit obligation are as follows:

	2009	2008
	£m	£m
Equities	16.8	14.7
Bonds	6.9	5.9
Index-linked gilts	4.7	4.0
Other	2.5	2.1
Total fair value of scheme assets	30.9	26.7
Present value of funded defined benefit obligation	(38.4)	(28.2)
Net obligation recognised in the balance sheet	(7.5)	(1.5)

The charge recognised in the income statement in respect of defined benefit pension costs is £0.6 million (2008: charge of £0.3 million).

In common with many businesses, in January 2010, the Group's final salary pension scheme was closed to further accrual of defined benefit obligations, with all members being transferred into an existing money purchase scheme.

13.  Average and closing foreign exchange rates

The table below shows the average exchange rates, including the impact of hedging, for the relevant reporting periods, closing exchange rates at the relevant period ends, together with the rates at which the Group has contracts in place for 2010.

	Hedged	Average	Closing	Average	Closing
	2010	2009	2009	2008	2008
Poland	4.7	4.6	4.6	4.5	4.3
Czech Republic	29.5	29.5	29.7	32.9	27.9
Slovakia	1.1	1.1	1.1	1.4	1.0
Hungary	313.6	323.1	303.6	329.5	274.8
Mexico	21.2	21.1	21.1	21.3	20.1
Romania	5.0	4.6	4.8	4.7	4.2

14. Fair value adjustments

At 31 December 2009 the Group had net liabilities of £7.9 million (2008: £12.7 million) in respect of derivative financial instruments comprising current assets of £nil (2008: £1.7 million) and current liabilities of £7.9 million (2008: £14.4 million). Liabilities include £7.3 million in respect of interest rate swaps, designed to fix the rate of interest payable on Group borrowings. In accordance with IFRS, these have been recorded at their fair value. As the majority of interest rate swaps are effective hedges, in accordance with IFRS, movements in the fair value are taken directly to reserves. A small proportion of our hedges were deemed to be ineffective, and £1.3 million (2008: £nil) has been taken to the income statement in the year.

A further liability of £0.6 million is included on the balance sheet in respect of the fair value of foreign currency contracts which are mainly held to fix the exchange rate on intercompany loans between International Personal Finance plc and one of its subsidiary undertakings. The movement in the fair value is taken to the Group income statement but is offset by an equal and opposite amount in respect of the re translation of intercompany balances. The net impact on the Group income statement is therefore nil.

15. Responsibility statement

This statement is given pursuant to Rule 4 of the Disclosure and Transparency Rules. It is given by each of the directors: namely, Christopher Rodrigues, Chairman; John Harnett, Chief Executive Officer; David Broadbent, Finance Director; Craig Shannon, Development Director; Charles Gregson, non-executive director; Tony Hales, non-executive director; Edyta Kurek, non-executive director; Ray Miles, non-executive director; and Nick Page, non-executive director.

To the best of each director's knowledge:

a)      the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole; and

b)      the management report contained in this report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Information for shareholders

1.   The shares will be marked ex-dividend on 14 April 2010.

2.   The final dividend, which is subject to shareholder approval, will be paid on 21 May 2010 to shareholders on the register at the close of business on 16 April 2010. Dividend warrants/vouchers will be posted on 19 May 2010.

3.   A dividend reinvestment scheme is operated by Capita Registrars. For further information contact them at The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU (telephone [phone] - calls cost 10 pence per minute plus network extras. Lines are open 8.30am - 5.30pm Monday - Friday).

4.   The Annual Report and Financial Statements 2009, the notice of the annual general meeting and a proxy card will be posted on Tuesday 16 March 2010 to shareholders who have elected to continue receiving documents from the Company in hard copy form. All other shareholders will be sent a proxy card and a letter explaining how to access the documents on the Company's website from Wednesday 17 March 2010 or an email with the equivalent information.

5.   The annual general meeting will be held at 10.30 am on Wednesday 12 May 2010 at  International Personal Finance plc, Number Three, Leeds City Office Park, Meadow Lane, Leeds, LS11 5BD.

Investor relations and media contacts:

For further information contact:

Finsbury                                                                  James Leviton

                                                                                    Charles Watenphul    

                                                                                    [phone]

International Personal Finance plc              Helen Spivey - Investor relations

                                                                                    [phone]

                                                                                    Victoria Richmond - Media                            
                                                                                    [phone]

 

END

 

 

FR UUUNRRNAORAR