Money which a company owes to vendors for products and services purchased on credit.
Money which is owed to a company by a customer for products and services provided on credit. Treated as a current asset on a balance sheet.
The gradual paying off of a debt in regular instalments over a period of time or the depreciation of the 'book value' of an asset over a period of time.
The meeting of shareholders held to approve the accounts and to reappoint directors and the auditors. It is held once a year and must be held within 15 months of the previous AGM.
The directors' report to shareholders setting out, both in text and financial terms, details of the company's performance during the last year and the state of its finances and assets as at the reporting date.
The origination of the company.
Fixed assets include land, equipment, vehicles, buildings and machinery current assets consist of cash, debtors, stock, investments and work in progress intangible assets are goodwill, trade marks, patents, etc. liquid assets are funds kept in cash or in a form that can be quickly and easily turned into cash. See also current assets, intangible assets and tangible assets.
The statement featured in the accounts that indicates the value of the company's assets and liabilities as at the end of the financial period and the ways that these have been financed through external debt, internal profit generation and funds raised from the issue of shares.
Interest rate on which interest charges are based by British banks.
A person who expects prices of shares and/or stock markets to fall.
A period of falling share prices a pessimistic state of affairs.
The price for your shares when you sell.
The term used to define a company regarded as being a solid, and generally safe, investment.
A certificate of debt issued to raise funds. Bonds typically pay a fixed rate of interest and are repayable at a fixed date.
Gradings by debt rating agencies such as Standard & Poor's or Moody's Investors Services to classify the investment-worthiness of a company's debt.
A person who carries out stock market transactions as the agent of a client.
Estimates of future company performance issued by stockbrokers and analysts.
A person who expects the price of shares, and/or stock markets, to rise.
A period of rising share prices an optimistic state of affairs.
Compound Annual Growth Rate. The year-on-year growth rate applied to an investment or other part of a company's activities over a multiple-year period.
The funds employed by a company in its activities. This represents the value in the balance sheet of the company's share capital, reserves and debt.
The statement in the accounts that indicates, for the financial period, the sources of all cash, both from operations and from external sources of finance, and how this cash has been used for trading, capital preservation and taxation purposes.
The period after the end of the company's financial year or half year but prior to the company's release of its Preliminary or Interim results, during which directors and certain employees are not permitted to trade in the shares of the company.
A market average of stockbrokers' and bank analysts' forecasts of the future financial performance of a company.
The record the investor receives from their broker giving details of a sale or purchase of shares.
This is the total amount of the transaction. The amount required to purchase the shares and pay the commission and stamp duty.
A bond that can be converted into shares of the issuing company.
The term used to describe the policies and procedures which the company's directors employ in their conduct of the company's affairs.
A settlement system that allows you to hold share certificates in an electronic form.
The value of the assets held at the balance sheet date that are represented by cash or can be expected to be converted into cash within the next 12 months.
The value of the liabilities at the balance sheet date that the company is required to pay, either on demand or within the next 12 months.
A ratio which describes the leverage or gearing of the company and is calculated as total debt divided by common shareholders' equity, expressed as a percentage.
The reduction in the balance sheet value of a company asset to reflect its loss of value through age and wear and tear.
The people who have been appointed as directors of a company.
The sum paid by the company to its shareholders as their direct financial reward from holding the company's shares.
The indicator as to the rate that the company may be paying its dividends out of earnings and its ability to continue to pay dividends at that rate.
This is the income a registered shareholder receives on each share invested in a company.
Stands for Dividend Reinvestment Plan. These schemes are more common in the US but some UK companies operate them as well. As the name suggests, they allow you to automatically reinvest your dividends with low transaction costs.
Profit available to ordinary shareholders, after all operating expenses, interest charges, taxes and preference dividends have been deducted.
The profit after tax of the company divided by the weighted average number of shares in issue during the year.
Earnings Before Interest and Corporation Tax. A measure of a company's earning power from ongoing operations, equal to earnings before deduction of interest payments and Corporation Tax. EBIT excludes income and expenditure from unusual, non-recurring or discontinued activities.
Earnings Before Interest, Corporation Tax, Depreciation and Amortisation. An approximate measure of a company's operating cash flow based on data from the company's income statement. Calculated by looking at earnings before the deduction of Interest expenses, Corporation Tax, Depreciation, and Amortisation.
Extraordinary General Meeting. A meeting of shareholders which may be called to approve special events such as a take-over, or major acquisition.
Stands for Exchange Price Information Code. Also referred to as a 'symbol' or 'ticker'. This is a three or four letter code, unique to each company. Provident Financial is PFG.
That part of the company's shares represented by ordinary shares.
If you buy a share that is ex-dividend then you are not entitled to the last dividend it declared. There is normally a gap of a few weeks or even months between the time a company declares and pays its dividends. The cut-off date as to who gets the dividend, should the share change hands, is known as the ex-dividend date.
Physical elements and items used in the operation of the business. It includes all fixtures and equipment, motor vehicles and land and buildings.
The proportion of a company's capital that is publicly owned.
Financial Times Stock Exchange, the joint operation for the compilation and maintenance of the indices used as the key performance benchmarks based on share prices.
For UK companies, the key indices are the FTSE 100 and the FTSE Mid 250
Is used to describe the relationship between debt and equity and is calculated by dividing the company debt by common shareholders' equity. A highly geared company is one that carries a lot of debt.
Reducing exposure to risk of loss resulting from fluctuations in exchange rates, commodity prices, interest rates, etc.
Company whose main assets are shareholdings (usually controlling) in other companies.
Large financial institutions such as pension funds, unit or investment trusts and insurance companies.
Describes assets that do not have a physical, tangible existence. Examples of intangible assets could include goodwill, brand value or patents, etc.
This is the interest that is due to be paid within one year and as such falls within current liabilities on the company balance sheet.
Unaudited first-half figures that provide an indication of the company's trading and profit performance since the last full-year accounting period.
Individual Savings Account - a tax free investment vehicle for private investors. There are limits on the amounts which can be invested each year.
The debts of a company and other financial obligations - the opposite of assets.
The proportion of cash or cash equivalents in a company's assets. Sometimes used as a measure of the near term financial health of a company. Also a measure of the volume of shares being traded, which may affect the ability of buyers or sellers to build/unwind large holdings without a substantial impact on the price.
All interest-bearing financial obligations which mature in more than a year.
When you ask a broker to buy or sell shares you can set a limit price. This will represent a maximum price you want to pay, if you are buying, or the minimum you would like to receive, if you are selling. It's best to check with your broker how they handle limit prices. For example, some will cancel your trade after a certain time if they can't do better than your limit price.
Profit margin is profit as a percentage of turnover. It is calculated either before or after interest charges.
The price at which a share can currently be traded in the market.
The number of shares in issue multiplied by the share price at the time of the calculation.
These are the people who ensure that there is a market in a particular share. They are the people who set the bid and offer prices.
The mid price is the price you see quoted in the financial pages and in your portfolio. It is the halfway point between the bid and offer prices.
Income (profit) shown after all operating and non-operating income and expense, reserves, income taxes, minority interest and extraordinary items but before preferred and ordinary dividends.
The most common type of account for holding shares, especially with online brokerages. Essentially the broker will hold everyone's shares rather than issuing certificates for each individual holding.
The price for shares when you buy.
The difference between turnover and the costs incurred during operations (total operating expenses) - profit generated before interest and tax have been taken into account.
The most common class of share representing the owner's interest in a company.
Price / earnings ratio - the ratio of a company's ordinary share price over its earnings per share.
The face, or nominal value, attributed to each of the company's shares. This has no relationship to the value of the company or to the quoted price.
Personal Equity Plans - these are no longer available to new investors, although the existing tax-free equity plans continue.
Shares with a fixed dividend. The holders of preference shares are entitled to their dividend before ordinary shareholders and rank above ordinary shareholders should the company be wound up. Preference shares are share capital but not equity share capital.
The figure reported by the company in its profit and loss account reflecting the results of all business activities and decisions for the financial period before taxation.
The first announcement made by the company each year to the Stock Exchange of its annual results, earnings and proposed dividend, which is made prior to the publication of its annual report.
The surplus of revenue generated over expenses incurred for a particular accounting period.
Return adjusted to take account of inflation.
Ratio which measures the return a company generates from its total assets.
A method by which a company raises cash for an acquisition or expansion. If you already hold shares in a company you will be entitled to buy more at a set price, on a pro rata basis.
Return on Capital Employed. This is a key statistic reflecting the rate of return that the company's management has obtained, on the shareholders' behalf, by its management of the company's assets.
Return on Invested Capital. A measure of how effectively a company uses the money (borrowed or owned) invested in its operations.
The Stock Exchange automated electronic trading system.
A financial instrument issued by a company and traded on a stock exchange.
The statutory body that regulates the US securities industry.
US equivalent or brief description: Charge-offs
The number of shares that are currently in issue.
The portion of debt that is payable within one year. Falls under current liabilities on the company balance sheet.
A tax which is payable at approximately 0.5% on the purchase price of shares.
If you sell a share for which you have the share certificates, then the broker will send you this form, which you sign to authorise the transaction.
Tangible fixed assets represent property, plant and equipment, after the deduction of depreciation.
Professional investment funds that seek to emulate the investment performance of a specific share index by investing in the companies that make up the index in the same proportion that each company comprises of the index.
The annual dividend or interest income relative to the underlying security on which it is received. This is expressed as the percentage the income per share bears to the share price.
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Maintaining the flow of credit through turbulent times.
The group's strategy is focused on lending responsibly and maintaining the flow of small-sum, unsecured credit to non-standard consumers who are typically less able to access credit from other lenders and may otherwise face financial exclusion.
John van Kuffeler Chairman
The group has produced a solid performance in 2009, as a result of the careful management of growth, impairment and costs against the backdrop of a worsening economic environment. As planned, the rate of growth in customer numbers in both businesses has been slower than in 2008. Underwriting criteria were tightened further in the first half of the year in order to maintain credit quality during a period when the economy was deteriorating quite sharply. During the second half of the year, the pressure on customers’ incomes from a weak employment market did not abate and both businesses maintained a tight stance on the granting of credit. In addition, existing customers exhibited increasingly cautious behaviour during 2009 which tempered demand for credit and was exacerbated by the adverse weather conditions during the peak trading weeks in December.
The investments made towards the end of 2008 in creating an additional 120 field management roles to increase the home credit collections capacity and in expanding contact centre capacity at Vanquis Bank have proved to be the right approach to managing through these difficult market conditions. As a result, both businesses have maintained good collections performances during 2009.
The market test of Real Personal Finance has been completed and a decision made to focus direct repayment business solely on known prospects generated through the home credit branch network and customer database.
Group profit before tax and exceptional costs was up 1.0% to £130.1m (2008: £128.8m) and basic earnings per share, as adjusted for exceptional costs, was 71.4p (2008: 70.9p).
The group’s funding and liquidity positions have been further enhanced, with the balance sheet showing modest gearing in comparison to bank covenants and a significant surplus of regulatory capital. The group has successfully diversified its funding sources during 2009 through the issue of its £250m 10-year senior bonds. Undrawn committed bank facilities at the year end amounted to £331.0m. The group has also recently entered into forward-starting arrangements which extend syndicated bank facilities totalling £380m to May 2013 and has ample funding to execute its growth plans and meet contractual maturities for at least 18 months.
The proposed final dividend is maintained at 38.1p per share (2008: 38.1p) reflecting the company’s policy set out at the time of the demerger to at least maintain a full-year payment of 63.5p per share whilst moving to a target payout ratio of 80% of post-tax profit in the medium term.
“The group has reported a solid performance in 2009 against the backdrop of pressure on customers' household budgets.”
The group’s strategy is focused on lending responsibly and maintaining the flow of small-sum unsecured credit to non-standard consumers who are typically less able to access credit from other lenders and may otherwise face financial exclusion.
Household incomes in those segments of the non-standard lending market served by the group’s businesses have been and remain under pressure from the impact of rising unemployment and, more importantly, under-employment resulting from restrictions on working hours and wage rates.
Management have carefully positioned the group’s businesses since the middle of 2007 in anticipation of a material deterioration in the economic environment. Underwriting standards have been progressively tightened to maintain credit quality which, together with the investments made to enhance collections capacity, have been successful in mitigating the impact of the deteriorating economic environment on the group’s impairment charge.
The group’s planning assumptions do not anticipate that employment conditions will improve for some time. Accordingly, a tight stance to underwriting will be maintained throughout 2010.
During the second half of 2009, there was an increase in the level of caution exhibited by some consumers who are experiencing pressure on their household incomes and face uncertainty over their future prospects. This increased caution, exacerbated by adverse weather conditions in the run-up to Christmas, tempered the demand for credit from established home credit customers during the peak fourth quarter trading period. Cautious consumer behaviour is expected to persist through 2010, resulting in relatively modest growth in receivables. As a result, there will be a strong focus on cost efficiency.
The competitive landscape for home credit providers has remained largely unchanged throughout the economic downturn. Whilst Provident Financial continues to be the largest operator in this segment, there are some 500 other home credit businesses that compete actively, many of whom operate in a single town or region.
In contrast, most businesses which operated in the direct repayment or credit card segment of the UK non-standard lending market have either failed, withdrawn or restructured. This presents a strong market opportunity for Vanquis Bank as an established participant in the non-standard credit card market. At present, the direct repayment unsecured lending market has become dislocated by the collapse of the primary broker distribution channel and it is apparent from the market test of Real Personal Finance that many potential customers are carrying far too much debt. Accordingly, direct repayment loans will be restricted to customers already known through the home credit branch network.
The group is assisting with the Office of Fair Trading’s review of the £35bn high-cost consumer credit market which it announced in July 2009. The review, which covers a broad range of lending activities of which home credit represents less than 5%, published its interim findings in December 2009 and is expected to conclude in April 2010.
The EU Directive on Consumer Credit has to be implemented in the UK by 31 January 2011. The regulations are still in draft form but the group has already commenced work to ensure it is able to comply with the new requirements by the implementation date.
The Department for Business Innovation and Skills is nearing its conclusion of the consultation on the future regulation of credit and store cards. The measures being debated centre upon transparency and putting the customer in control. Vanquis Bank is working closely with the UK Cards Association which is leading the industry’s response to the consultation.
The group has reported a solid performance in 2009 against the backdrop of pressure on customers’ household budgets from rising unemployment and reduced working hours. The group’s plans assume that these conditions will continue during 2010 and credit standards will be maintained to underpin the quality of new lending.
In 2010, the Consumer Credit Division is planning for relatively low receivables growth coupled with tight cost control. Accordingly, the business has recently implemented an efficiency programme across its central functions whilst leaving field collections and arrears management capacity unaffected. In addition, following the completion of the market test of Real Personal Finance, the decision has been made to focus direct repayment lending solely on known prospects sourced through the home credit business. This will result in a significant overhead reduction and losses will not continue through 2010.
Vanquis Bank is generating excellent growth and strong returns which leave it well placed to achieve its target of a 30% post-tax return on equity by the end of 2010.
Overall, the group’s balance sheet and liquidity are extremely sound and it has positioned itself to deliver good quality growth for 2010 in market conditions that are unlikely to improve in the near term.
John van Kuffeler
Chairman
2 March 2010
“The group's funding and liquidity positions have been further enhanced, with the balance sheet showing modest gearing.”