Doing Business in the Czech Republic

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Doing Business in the Czech Republic
24 April 2006
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Provident Financial Our presentation today

• Introduction
• Group overview
• Developing the business
• Expansion in emerging markets
• Future prospects

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Provident Financial Czech Republic Country
Manager
Kenny McPartland

• Over 22 years service with Provident Financial
• 1984- 1998 UK Home Credit
• 1998 2000 Czech Republic
• 2000 2002 Slovakia
• 2002- Czech Republic
• 2006 - Czech Republic Slovakia

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Provident Financial Group overview
1996
2006
UK consumer credit
UK consumer credit
UK home credit
International
 
Motor insurance
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Provident Financial What is Home Collected
Credit?

• Unsecured, short term cash loans
• Simple process with minimal formalities
• Direct to the customers homes
• Repaid in weekly or monthly instalments
• Agents provide home service
• Min 100
• Max 1,200
• Typical Loan 300

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Provident Financial Group overview
2005 PBT
2005 REVENUE
MARKET CAPITALISATION
FROM ON-GOING OPERATIONS
1,110m
1.6bn
206.0m
CUSTOMERS
EMPLOYEES
ESTABLISHED
1880
3.9m
7,700
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Provident Financial Developing the business
Profit before tax
UK GAAP
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Provident Financial Emerging markets

• Initial market entry
• Poland 1997
• Czech Republic 1998
• Second phase
• Slovakia 2001
• Hungary 2001
• Third phase
• Mexico 2003
• Fourth phase
• Romania 2006 (pilot)

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Provident Financial International success
A significant and profitable business established
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Provident Financial Why international
expansion?
Background to international development

• Strategic move mid-1990s to develop home credit
  overseas
• Opportunity for diversification
• Home credit well suited to early entry

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Provident Financial Why international
expansion?
Benefits of international markets

• Fast growing demand for credit
• Underdeveloped supply of consumer credit
• Strong economic growth
• Consumer markets have grown rapidly in recent
  years

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Provident Financial Application of the
Business Model

• The business model is exactly as in the UK
• Delivery and collection of loans through
  agents/representatives
• Regional networks of branches
• Operational management structures similar to the
  UK model
• In-country management teams include a few
  experienced UK expatriates
• Measured approach taken, with markets tested
  through pilot operations
• Central divisional team ensure
• Proper co-ordination of activities and standards
  enforced
• Robust systems of control and risk management
• Financial exposures are closely monitored with
  involvement of tax treasury experts

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Provident Financial Home credit in emerging
markets

• Most consumer lenders require customers to
  provide
• security and / or guarantor
• history of formal employment
• payment via local offices or at a bank
• time to process application
• Provident customers value
• simple, transparent products
• fast, personal application process
• weekly visit from an agent
• supportive friendly approach

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Provident Financial Why Central Europe?

• Population similar to that of the UK
• Customers concentrated in urban areas
• Fast growing economies
• Growing demand for consumer credit
• Growth in consumer confidence and consumer
  spending
• Responsible attitude to borrowing

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Provident Financial Why Czech Republic?

• Stable and prosperous country post-Communism
• Largest recipient of foreign direct investment in
  CE on a per capita basis
• Transparent and safe investment environment
• Positive projected GPD growth
• Two thirds of population live in urban areas
• Under-developed consumer credit market
• Expected E.U.membership

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Provident Financial Czech Republic
Country information

• Population 10.2 million
• of population in cities gt 20.000 44
• GDP per capita 11,922
• Moodys rating A
• Economic growth rate 2005 (GDP) 6
• Inflation 2.8
• Interest rate 2.0

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Provident Financial Working living in CR
Ex-pat view

• Stable safe environment
• Good standard of living for ex-pats
• Large, diverse ex-pat community
• High standard of international schooling
• English widely spoken
• Czech people and local culture
• Sports facilities leisure activities
• Easy access from most UK airports

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Provident Financial Czech business climate

• Highly educated and enthusiastic workforce
• Good infrastructure
• Incentives for foreign investors
• British Chamber very active and well respected
• Good support for business from the British
  Embassy
• All the major advisors are represented
• High standard of office space
• Favourable cost base

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Provident Financial Czech Republic
Established
Employees
Agents
1997
565
3,000
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Provident Financial Lessons learned

• UK home credit model can be successfully
  introduced overseas
• Customer and agent relationship similar in all
  countries
• Good quality, well educated workforce essential
• Key early skills - recruitment, training,
  advertising, brand building
• Awareness of salary levels
• Network of advisors, use the best advice!
• Need to balance growth, costs and bad debt

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Provident Financial Prospects

• Further growth of the international businesses
• Broaden the range of credit products offered
• Use Central European expertise in our other
  markets
• Build on past success!

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Provident Financial
Thank you for your attention