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Notes 1 to 10

Download Notes to the financial statements Excel 0.12Mb

1 Segmental reporting

Group Revenue   Profit/(loss) before taxation
2009
£m
2008
£m
  2009
£m
2008
£m
Consumer Credit Division 681.6 651.8   121.2 126.1
Vanquis Bank 131.3 94.6   14.1 8.0
Yes Car Credit 2.7 4.8   0.2 (2.9)
  815.6 751.2   135.5 131.2
Central:          
– costs   (7.0) (5.5)
– interest receivable   1.6 3.1
Total central   (5.4) (2.4)
Total group before exceptional finance cost 815.6 751.2   130.1 128.8
Exceptional finance cost (note 3)   (4.4)
Total group 815.6 751.2   125.7 128.8

The Consumer Credit Division profit of £121.2m (2008: £126.1m) comprises a profit of £128.9m in respect of the home credit business (2008: £128.8m) and a loss of £7.7m in respect of Real Personal Finance (2008: loss of £2.7m).

All of the above activities relate to continuing operations as defined in IFRS 5. Consistent with the treatment in prior years, the Yes Car Credit operation has been classified as part of continuing operations on the basis that revenue and impairment has continued to be generated from the loan book up until full collect-out of the loan book and closure of the collections operation in 2009.

Revenue between business segments is not material.

All of the group’s operations operate in the UK and Republic of Ireland.

Group Segment assets   Segment liabilities   Net assets(liabilities)
2009
£m
2008
£m
  2009
£m
2008
£m
  2009
£m
2008
£m
Consumer Credit Division 967.9 949.7   (734.3) (719.6)   233.6 230.1
Vanquis Bank 269.5 215.8   (217.8) (175.0)   51.7 40.8
Yes Car Credit 6.0   (46.2)   (40.2)
Central 167.5 121.7   (184.4) (74.5)   (16.9) 47.2
Total before intra-group elimination 1,404.9 1,293.2   (1,136.5) (1,015.3)   268.4 277.9
Intra-group elimination (129.1) (66.7)   129.1 66.7  
Total group 1,275.8 1,226.5   (1,007.4) (948.6)   268.4 277.9

The residual assets, liabilities and share of group borrowings of Yes Car Credit have been transferred to central activities following closure of the collections operation in 2009.

Segment net assets are based on the statutory accounts of the companies forming the group’s business segments adjusted to assume repayment of intra-group balances and rebasing the borrowings of the Consumer Credit Division to reflect a borrowings to receivables ratio of 80%. The impact of this is an increase in the notional allocation of group borrowings to the Consumer Credit Division of £129.1m (2008: £66.7m) and an increase in the notional cash allocated to central activities of the same amount. The intra-group elimination adjustment removes this notional allocation to state borrowings and cash on a consolidated group basis.

Group Capital expenditure   Depreciation   Amortisation
2009
£m
2008
£m
  2009
£m
2008
£m
  2009
£m
2008
£m
Consumer Credit Division 11.5 12.0   6.8 6.4   3.6 1.4
Vanquis Bank 1.5 2.1   1.0 0.7   0.2 0.3
Yes Car Credit    
Central 0.4 0.6   0.4 0.4  
Total group 13.4 14.7   8.2 7.5   3.8 1.7

Capital expenditure in 2009 comprises expenditure on intangible assets of £6.2m (2008: £6.2m) and property, plant and equipment of £7.2m (2008: £8.5m).

2 Revenue

  Group
2009
£m
2008
£m
Interest income 770.4 721.1
Fee income 45.2 30.1
Total revenue 815.6 751.2

All fee income earned relates to Vanquis Bank.

3 Finance costs

  Group
2009
£m
2008
£m
Interest payable on bank borrowings 33.4 23.2
Interest payable on senior public bonds 3.8
Interest payable on private placement loan notes 11.3 14.8
Interest payable on subordinated loan notes 5.8 7.3
Net hedge ineffectiveness and other fair value movements (0.5) 0.4
Total finance costs before exceptional finance cost 53.8 45.7
Exceptional finance cost 4.4
Total finance costs 58.2 45.7

The exceptional finance cost of £4.4m in 2009 comprises:

  • a £6.8m charge in respect of the fair value movements on interest rate swaps which were previously deferred in equity as cash flow hedges but became ineffective following the issue of the group’s fixed rate £250m senior public bonds on 23 October 2009 and the consequent repayments on the group’s revolving floating rate bank facilities (see note 16); and
  • a £2.4m credit reflecting the 2.5% discount in respect of the repurchase of £94.0m of the group’s subordinated loan notes on 23 October 2009 (see note 21(f)).

The credit of £0.5m (2008: charge of £0.4m) in respect of net hedge ineffectiveness and other fair value movements comprises:

  • a charge of £0.5m (2008: credit of £0.3m) in respect of the fair value movement on the fair value portion of the 2004 cross-currency swaps (see note 16(b)); and
  • a credit of £1.0m (2008: charge of £0.7m) relating to derivatives that became ineffective in the year (see note 16(b)).

4 Profit before taxation

  Group
2009
£m
2008
£m
Profit before taxation is stated after charging/(crediting):    
Amortisation of other intangible assets:    
– computer software (note 11) 3.8 1.7
Depreciation of property, plant and equipment (note 12) 8.2 7.5
Loss on disposal of property, plant and equipment (note 12) 0.3 0.3
Operating lease rentals:    
– property 8.5 6.3
Share-based payment charge (note 25) 6.1 4.7
Employment costs (note 9(c)) 122.6 114.5
Retirement benefit charge/(credit) (note 18) 2.7 (1.2)
Impairment of amounts receivable from customers (note 14) 283.4 237.7
Auditors’ remuneration    
Fees payable to the company’s auditor for the audit of parent company and consolidated financial statements 0.1 0.1
Fees payable to the company’s auditor and its associates for other services:    
– audit of company’s subsidiaries pursuant to legislation 0.2 0.2
– other services pursuant to legislation 0.2 0.1
– tax services 0.1
Total auditors’ remuneration 0.5 0.5

5 Tax charge

Tax charge in the income statement Group
2009
£m
2008
£m
Current tax (34.8) (32.6)
Deferred tax (note 19) (2.3) (4.1)
Total tax charge (37.1) (36.7)

The tax charge includes a charge of £0.7m in respect of the exceptional finance cost (see note 3).

Tax credit on items taken directly to equity Group
2009
£m
2008
£m
Current tax credit on cash flow hedges 0.2 4.9
Deferred tax credit on actuarial movements on retirement benefit asset 10.4 4.8
Total tax credit on items taken directly to equity 10.6 9.7

The rate of tax charge on the profit before taxation and exceptional finance cost for the year is in line with (2008: in line with) the average standard rate of corporation tax in the UK of 28.0% (2008: 28.5%). This can be reconciled as follows:

  Group
2009
£m
2008
£m
Profit before taxation and exceptional finance cost 130.1 128.8
Profit before taxation and exceptional finance cost multiplied by the average standard rate of corporation tax in the UK of 28.0% (2008: 28.5%) (36.4) (36.7)
Effects of:    
– adjustment in respect of prior years 0.1 0.1
– expenses not deductible for tax purposes (0.1) (0.1)
Total tax charge before exceptional finance cost (36.4) (36.7)

6 Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, excluding own shares held, which are treated, for this purpose, as being cancelled.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. For share options and awards, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company’s shares) based on the monetary value of the subscription rights attached to outstanding share options and awards. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options and awards.

Reconciliations of basic and diluted earnings per share are set out below:

Group 2009   2008
Earnings
£m
Weighted average number of shares
m
Per share amount
pence
  Earnings
£m
Weighted average number of shares
m
Per share amount
pence
Earnings per share      
Shares in issue during the year   133.1       131.3  
Own shares held   (1.9)       (1.4)  
Basic earnings per share 88.6 131.2 67.5   92.1 129.9 70.9
Dilutive effect of share options and awards 0.4 (0.2)   0.7 (0.4)
Diluted earnings per share 88.6 131.6 67.3   92.1 130.6 70.5

The directors have elected to show an adjusted earnings per share prior to the exceptional finance cost incurred on issue of the senior public bonds on 23 October 2009 (see note 3). This is presented to show the earnings per share generated by the group’s underlying operations. A reconciliation of basic and diluted earnings per share to adjusted basic and diluted earnings per share is as follows:

Group 2009   2008
Earnings
£m
Weighted average number of shares
m
Per share amount
pence
  Earnings
£m
Weighted average number of shares
m
Per share amount
pence
Basic earnings per share 88.6 131.2 67.5   92.1 129.9 70.9
Exceptional finance cost including tax charge 5.1 3.9  
Adjusted basic earnings per share 93.7 131.2 71.4   92.1 129.9 70.9
               
Diluted earnings per share 88.6 131.6 67.3   92.1 130.6 70.5
Exceptional finance cost including tax charge 5.1 3.9  
Adjusted diluted earnings per share 93.7 131.6 71.2   92.1 130.6 70.5

7 Dividends

  Group and company
2009
£m
2008
£m
2007 final – 38.1p per share 50.0
2008 interim – 25.4p per share 33.4
2008 final – 38.1p per share 50.6
2009 interim – 25.4p per share 33.5
Dividends paid   84.1 83.4

The directors are recommending a final dividend in respect of the financial year ended 31 December 2009 of 38.1p per share which will amount to a dividend payment of £51.2m. If approved by the shareholders at the annual general meeting on 5 May 2010, this dividend will be paid on 21 June 2010 to shareholders who are on the register of members at 14 May 2010. This dividend is not reflected in the balance sheet as at 31 December 2009 as it is subject to shareholder approval.

8 Directors’ remuneration

The remuneration of the directors, who are the key management personnel of the group, is set out below in aggregate for each of the categories specified in IAS 24, ‘Related party disclosures’. Further information in respect of directors’ remuneration, share options and awards, pension contributions and pension entitlements is set out in the directors’ remuneration report.

  Group and company
2009
£m
2008
£m
Short-term employee benefits 2.3 3.6
Post-employment benefits 0.5 0.4
Share-based payment charge 2.4 1.6
Total 5.2 5.6

Short-term employee benefits comprise salary/fees, bonus and benefits earned in the year. Post-employment benefits represent the sum of: (i) the increase in the transfer value of the accrued pension benefits (less directors’ contributions) for those directors who are members of the group’s defined benefit pension scheme; and (ii) company contributions into personal pension arrangements for all other directors. The share-based payment charge is the proportion of the group’s share-based payment charge that relates to those options and awards granted to the directors.

9 Employee information

(a) The average monthly number of persons employed by the group (including directors) was as follows:

  Group
2009
Number
2008
Number
Consumer Credit Division 3,192 2,959
Vanquis Bank 446 358
Yes Car Credit 9 22
Central 51 45
Total group 3,698 3,384
     
Analysed as:    
Full-time 3,154 2,856
Part-time 544 528
Total group 3,698 3,384

(b) The average monthly number of persons employed by the company (including directors) was as follows:

  Company
2009
Number
2008
Number
Total company 51 45

(c) Employment costs all employees (including directors)

  Group   Company
2009
£m
2008
£m
  2009
£m
2008
£m
Aggregate gross wages and salaries paid to the group’s employees 100.4 98.9   4.9 5.1
Employers’ National Insurance contributions 10.2 10.5   0.6 0.6
Pension charge/(credit) 5.9 0.4   1.1 (0.2)
Share-based payment charge (note 25) 6.1 4.7   2.9 2.1
Total 122.6 114.5   9.5 7.6

The pension charge comprises the retirement benefit charge for defined benefit schemes, contributions to the stakeholder pension plan and contributions to personal pension arrangements.

10 Goodwill

  Group
2009
£m
2008
£m
Cost    
At 1 January 94.1 94.1
Disposals (3.1)
Additions 2.1
At 31 December 93.1 94.1
     
Accumulated amortisation    
At 1 January and 31 December 91.0 91.0
     
Net book value at 31 December 2.1 3.1
     
Net book value at 1 January 3.1 3.1

The cost of goodwill at 1 January 2009 comprised £91.0m in respect of the closed Yes Car Credit business and £2.1m in respect of Cheque Exchange Limited, a small subsidiary undertaking within the Consumer Credit Division involved in cheque cashing and money transfer. The goodwill in respect of Yes Car Credit was fully impaired following the announcement of the closure of the business in December 2005.

On 30 January 2009, the group completed the disposal of Cheque Exchange Limited to Hertford International Group plc for a total consideration of £3.0m less the value of the Section 75 pension contribution made into the group’s defined benefit pension scheme. There was no gain or loss on disposal as follows:

Group £m
Cash consideration 0.7
Section 75 pension contribution 0.4
Deferred consideration 1.9
Total consideration 3.0
Net liabilities on disposal 0.1
Goodwill written off (3.1)
Profit/(loss) on disposal

The Section 75 pension contribution represented a payment by Cheque Exchange Limited of £0.6m, less tax relief of £0.2m, into the group’s defined benefit pension scheme as a reduction in the total consideration received (see note 18).

The deferred consideration of £1.9m comprised £1.4m payable on 31 July 2009 with the remaining £0.5m due in equal instalments on 31 January 2010 and 31 January 2011. The group held a legal charge over the ordinary shares in Cheque Exchange Limited in the event of non-payment of the amount due on 31 July 2009.

Following non-payment of the first instalment of the deferred consideration, the group exercised its charge over the ordinary shares and regained control of Cheque Exchange Limited on 1 November 2009. The goodwill arising on reacquisition can be analysed as follows:

Group £m
Deferred consideration foregone 1.9
Fair value of net liabilities acquired 0.2
Goodwill on reacquisition 2.1

The trading results and cashflows of Cheque Exchange Limited prior to its disposal and following its reacquisition are not material to the group.