Notes 21 to 30

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21 Bank and other borrowings

(a) Borrowing facilities and borrowings

Borrowing facilities principally comprise syndicated and bilateral bank facilities arranged for periods of up to five years, together with overdrafts and uncommitted loans which are repayable on demand, senior public bonds (see note 21(d)), loan notes privately placed with US and UK institutions (see note 21(e)) and subordinated loan notes (see note 21(f)).

As at 31 December 2009, borrowings under these facilities amounted to £890.3m (2008: £828.5m).

(b) Maturity profile of bank and other borrowings

The maturity of borrowings, together with the maturity of facilities, is as follows:

The weighted average period to maturity of the group's committed facilities was 3.5 years (2008: 3.0 years) and for the company's committed facilities was 3.9 years (2008: 2.8 years). On 26 February 2010, the group secured an extension to its syndicated bank facilities due to expire on 9 March 2011 and 9 March 2012. Of the £213.2m due to expire on 9 March 2011, £135.7m has been extended to 9 May 2013 and £4.8m has been extended to 9 March 2012, and of the £436.8m due to expire on 9 March 2010, £243.8m has been extended to 9 May 2013. Including this extension, the weighted average period to maturity of the group's committed facilities was 4.0 years and the weighted average period to maturity of the company's committed facilities was 4.1 years.

(c) Interest rate and currency profile of bank and other borrowings

Before taking account of the various interest rate swaps and cross-currency swap arrangements entered into by the group and company, the interest rate and foreign exchange rate exposure on borrowings is as follows:

As detailed in note 16, the group and company have entered into various interest rate swaps and cross-currency swap arrangements to hedge the interest rate and foreign exchange rate exposures on borrowings. After taking account of the aforementioned interest rate swaps, the group's fixed rate borrowings are £789.6m (2008: £704.1m) and the company's fixed rate borrowings are £510.8m (2008: £421.8m). After taking account of cross-currency swaps, the group and company have no foreign exchange rate exposure to borrowings denominated in US dollars (2008: £nil).

(d) Senior public bonds

On 23 October 2009, the company issued £250m of senior public bonds. The bonds have an annual coupon of 8.0% and are repayable on 23 October 2019.

(e) Private placement loan notes

On 10 May 2001, the company issued private placement loan notes as follows:

1. £42m of 7.21% loan notes repayable on 10 May 2011;
2. US$64m of 7.40% loan notes repayable on 10 May 2008 *; and
3. US$24m of 7.60% loan notes repayable on 10 May 2011.

* Matured and repaid as scheduled on 10 May 2008.

On 24 April 2003, the group issued loan notes as follows:

1. US$44m of 5.81% loan notes repayable on 24 April 2010; and
2. US$76m of 6.34% loan notes repayable on 24 April 2013.

On 12 August 2004, the group issued loan notes as follows:

1. US$30m of 6.02% loan notes repayable on 12 August 2011;
2. US$67m of 6.45% loan notes repayable on 12 August 2014; and
3. £2m of 7.01% loan notes repayable on 12 August 2014.

As set out in note 21(c), cross-currency swaps have been put in place to swap the proceeds and liabilities for principal and interest under the US dollar denominated loan notes into sterling.

(f) Subordinated loan notes

On 15 June 2005, the company issued £100.0m of subordinated loan notes. The rights to repayment of holders of the loan notes are subordinated to all other borrowings and liabilities of the company upon a winding up of the company and, in certain circumstances, upon its administration. The debt accrues interest at 7.125% and is repayable on 15 June 2015. The company has an option to redeem the loan notes at par on 15 June 2010.

On 23 October 2009, in conjunction with the issue of the senior public bonds, Provident Financial Investments Limited (PFIL), a subsidiary undertaking of the company, purchased £94.0m of the subordinated loan notes at 97.5% following a tender offer. The 2.5% discount on the re-purchased subordinated loan notes, amounting to £2.4m, has been credited to the group income statement in 2009 following the extinguishment of the existing liability and its replacement with a new debt instrument of substantially different terms (see note 3).

The purchase of the subordinated loan notes by PFIL was funded by an intra-group loan from the company. On 23 December 2009, the company and PFIL agreed to waive the respective amounts owed to each other under the intra-group loan and the subordinated loan notes. Accordingly, the outstanding amount of subordinated loans in both the company and group balance sheet as at 31 December 2009 amounts to £6.0m (2008: £100.0m)

(g) Loan notes issued to vendors on acquisition of Yes Car Credit

As part of the consideration for the acquisition of Yes Car Credit, the group issued loan notes of £6.7m to certain vendors which carried interest rates linked to LIBOR and were due for repayment on 30 June 2009. The residual outstanding loan notes were fully repaid on their maturity and, accordingly, £nil of the loan notes remain outstanding as at 31 December 2009 (2008: £1.4m).

(h) Undrawn committed borrowing facilities

The undrawn committed borrowing facilities at 31 December were as follows:

(i) Weighted average interest rates and periods to maturity

Before taking account of the various interest rate swaps and cross-currency swap arrangements entered into by the group and company, the weighted average interest rate and the weighted average period to maturity of the group and company's fixed rate borrowings is as follows:

After taking account of interest rate swaps and cross-currency swaps, the sterling weighted average fixed interest rate for the group is 6.37% (2008: 5.57%) and for the company is 6.94% (2008: 5.78%). The sterling weighted average period to maturity on the same basis is 4.5 years (2008: 2.0 years) for the group and 6.0 years (2008: 2.7 years) for the company. There is £nil foreign exchange or interest rate risk denominated in US dollars after taking account of cross-currency swaps (2008: £nil).

(j) Fair values

The fair values of the group and company's bank and other borrowings are compared to their book values as follows:

The fair value of the sterling private placement loan notes and the US dollar private placement loan notes has been calculated by discounting the expected future cash flows at the relevant market interest rate yield curves prevailing at the balance sheet date. The fair value of the senior public bonds and subordinated loan notes equates to their publicly quoted market price at the balance sheet date.

22 Trade and other payables

The fair value of trade and other payables equates to their book value (2008: fair value equalled book value). The amounts owed to group undertakings are unsecured, due for repayment in less than one year and accrue interest at rates linked to LIBOR.

The amounts owed to group undertakings are unsecured, due for repayment in more than one year and accrue interest at rates linked to LIBOR.

23 Provisions

The onerous property provision was originally created on closure of Yes Car Credit and related to the estimated costs of exiting the Yes Car Credit property portfolio. The provision was calculated by taking into account the full lease term, any sublet income that was recoverable and the potential for lease assignment. As at 31 December 2009, two properties await disposal and the remaining provision of £0.8m is expected to be fully utilised during 2010.

24 Called-up share capital

The movement in the number of shares in issue during the year was as follows:

The shares issued pursuant to the exercise of options comprised 2,825,147 ordinary shares (2008: 392,502) with a nominal value of £585,576 (2008: £81,355) and an aggregate consideration of £8.4m (2008: £2.0m).

Provident Financial plc sponsors the Provident Financial plc 2007 Employee Benefit Trust (EBT) which is a discretionary trust established for the benefit of the employees of the group. The company has appointed Kleinwort Benson (Jersey) Trustees Limited to act as trustee of the EBT. The trustee has waived the right to receive dividends on the shares it holds. As at 31 December 2009, the EBT held 2,452,799 (2008: 1,507,849) shares in the company with a nominal value of £508,398 (2008: £312,536), a cost of £13.7m (2008: £13.0m) and a market value of £23.0m (2008: £13.0m). The shares have been acquired by the EBT to meet obligations under the Provident Financial Long Term Incentive Scheme 2006.

In addition to the EBT, Provident Financial plc also sponsors the Provident Financial Qualifying Employee Share Ownership Trust (the QUEST) which is also a discretionary trust established for the benefit of the employees of the group. The company established Provident Financial Trustees Limited to act as trustee of the QUEST. The trustee has waived the right to receive dividends on the shares it holds. As at 31 December 2009 and 31 December 2008, the QUEST did not hold any ordinary shares in the company.

Provident Financial plc also sponsors the Performance Share Plan Trust which was established to operate in conjunction with the Performance Share Plan (PSP). As at 31 December 2009, awards under the PSP were 635,033 (2008: 285,195) ordinary shares with a nominal value of £131,625 (2008: £59,113), a cost of £2.4m (2008: £2.3m) and a market value of £5.9m (2008: £2.5m).

All costs relating to the EBT, the QUEST and the PSP are dealt with in the income statement as they accrue. The net of the consideration paid to acquire shares by the EBT, the QUEST and in respect of the PSP and the consideration received on exercise of share options is held in a separate treasury shares reserve.

25 Share-based payments

The group operates four share schemes: the Long-Term Incentive Scheme (LTIS), employee savings-related share option schemes (typically referred to as Save As You Earn schemes (SAYE)), senior executive share option schemes (ESOS/SESO) and the Performance Share Plan (PSP). During 2009, awards/options have been granted under the LTIS, PSP and SAYE schemes (2008: awards/options granted under the LTIS, PSP and SAYE schemes).

For the purposes of assessing the income statement charge under IFRS 2, the options/awards under the SAYE, ESOS/SESO and PSP schemes were valued using a binomial option pricing model. The awards made under the LTIS in 2006, 2007 and 2008 were valued using a Monte Carlo option pricing model and the awards under the LTIS in 2009 were valued using a combination of the Monte Carlo and binomial option pricing models.

The charge to the income statement in 2009 was £6.1m for the group (2008: £4.7m) and £2.9m for the company (2008: £2.1m).

The fair value per award/option granted and the assumptions used in the calculation of the share-based payment charge are as follows:

The expected volatility is based on historical volatility over the last three years. The expected life is the average expected period to exercise. The risk-free rate of return is the yield on zero coupon UK government bonds.

A reconciliation of award/share option movements during the year is shown below:

Share awards outstanding under the LTIS scheme at 31 December 2009 had an exercise price of £nil (2008: £nil) and a weighted average remaining contractual life of 1.4 years (2008: 1.8 years). Share options outstanding under the ESOS/SESO schemes at 31 December 2009 had exercise prices ranging from 577p to 709p (2008: 522p to 979p) and a weighted average remaining contractual life of nil years (2008: 0.4 years). Share options outstanding under the SAYE schemes at 31 December 2009 had exercise prices ranging from 453p to 716p (2008: 453p to 716p) and a weighted average remaining contractual life of 2.7 years (2008: 2.5 years). Share awards outstanding under the PSP schemes at 31 December 2009 had an exercise price of £nil (2008: £nil) and a weighted average remaining contractual life of 1.7 years (2008: 2.1 years).

Share awards outstanding under the LTIS scheme at 31 December 2009 had an exercise price of £nil (2008: £nil) and a weighted average remaining contractual life of 1.4 years (2008: 1.6 years). Share options outstanding under the ESOS/SESO schemes at 31 December 2009 had exercise prices ranging from 577p to 709p (2008: 577p to 979p) and a weighted average remaining contractual life of nil years (2008: 0.4 years). Share options outstanding under the SAYE schemes at 31 December 2009 had exercise prices ranging from 491p to 716p (2008: 453p to 716p) and a weighted average remaining contractual life of 2.6 years (2008: 3.2 years). Share awards outstanding under the PSP schemes at 31 December 2009 had an exercise price of £nil (2008: £nil) and a weighted average remaining contractual life of 1.8 years (2008: 2.1 years).

26 Other reserves

The capital redemption reserve represents profits on the redemption of preference shares arising in prior years, together with the capitalisation of the nominal value of shares purchased and cancelled, net of the utilisation of this reserve to capitalise the nominal value of shares issued to satisfy scrip dividend elections.

The non-distributable reserve was created as a result of an intra-group reorganisation to create a more efficient capital structure that more accurately reflects the group's management structure.

27 Commitments

Commitments under operating leases are as follows:

Other group commitments are as follows:

The company has £nil capital expenditure commitments contracted with third parties but not provided for at 31 December 2009 (2008: £nil).

The company has £nil unused committed credit card facilities at 31 December 2009 (2008: £nil).

28 Related party transactions

The company recharges the pension scheme referred to in note 18 with a proportion of the costs of administration and professional fees incurred by the company. The total amount recharged during the year was £0.9m (2008: £1.1m) and the amount due from the pension scheme at 31 December 2009 was £0.4m (2008: £0.5m).

Details of the transactions between the company and its subsidiary undertakings, which comprise management recharges and interest charges or credits on intra-group balances, along with any balances outstanding at 31 December are set out below:

During 2009, the company received the following dividends from subsidiary companies forming part of the Consumer Credit Division:

• £30.0m from Provident Financial Management Services Limited (2008: £40.0m).
• £nil from N&N Cheque Encashment Limited (2008: £0.6m).

There are no transactions with directors other than those disclosed in the directors' remuneration report.

29 Contingent liabilities

As part of the demerger of the international business, the company agreed, subject to the application of a floor, to indemnify International Personal Finance plc (IPF) against a specified proportion of corporate income tax liabilities, and related interest and penalties, in respect of the tax returns of Provident Polska for certain periods ended prior to completion. In addition, subject to certain exceptions, the company has indemnified IPF against tax liabilities arising as a result of the demerger and certain pre-demerger reorganisation steps and against tax liabilities arising as a result of a member of the Provident Financial group making a chargeable payment within the meaning of Section 214 Income and Corporations Taxes Act 1988. No material liabilities are currently expected to arise under these indemnities.

The company has a contingent liability for guarantees given in respect of borrowing facilities of certain subsidiaries to a maximum of £672.0m (2008: £602.2m). At 31 December 2009, the fixed and floating rate borrowings in respect of these guarantees amounted to £340.8m (2008: £359.3m). No loss is expected to arise. These guarantees are defined as financial guarantees under IAS 39 and their fair value at 31 December 2009 was £nil (2008: £nil).

30 Reconciliation of profit after taxation to cash generated from operations